AN OFFERING STATEMENT PURSUANT TO REGULATION A RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. INFORMATION CONTAINED IN THIS PRELIMINARY OFFERING CIRCULAR IS SUBJECT TO COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED BEFORE THE OFFERING STATEMENT FILED WITH THE COMMISSION IS QUALIFIED. THIS PRELIMINARY OFFERING CIRCULAR SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR MAY THERE BE ANY SALES OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL BEFORE REGISTRATION OR QUALIFICATION UNDER THE LAWS OF SUCH STATE. THE COMPANY MAY ELECT TO SATISFY ITS OBLIGATION TO DELIVER A FINAL OFFERING CIRCULAR BY SENDING YOU A NOTICE WITHIN TWO BUSINESS DAYS AFTER THE COMPLETION OF THE COMPANY’S SALE TO YOU THAT CONTAINS THE URL WHERE THE FINAL OFFERING CIRCULAR OR THE OFFERING STATEMENT IN WHICH SUCH FINAL OFFERING CIRCULAR WAS FILED MAY BE OBTAINED.
PRELIMINARY OFFERING CIRCULAR DATED OCTOBER 1, 2020
EPILOG IMAGING SYSTEMS, INC.
75 E. Santa Clara Street, Suite 600
San Jose, CA 95003
www.epilog.com
UP TO 3,448,276 SHARES OF COMMON STOCK
Price to Public | Underwriting discount and commissions* | Proceeds to issuer | ||||||||||
Price Per share | $ | 1.40 | $ | 0.049 | $ | 1.351 | ||||||
Start Engine investor fee per share ** | 0.049 | $ | -- | $ | -- | |||||||
Price per share plus investor fee | $ | 1.449 | $ | -- | $ | -- | ||||||
Total Minimum with investor fee | $ | 51,750 | $ | 1,750 | 48,250 | |||||||
Total Maximum with investor fee | $ | 5,175,000 | 175,000 | 4,825,000 |
**The company has engaged StartEngine Primary, LLC (“StartEngine Primary”) to act as an underwriter of this offering as set forth in “Plan of Distribution and Selling Securityholders” and its affiliate StartEngine Crowdfunding, Inc. to perform administrative and technology-related functions in connection with this offering. The company and the selling stockholders will pay a cash commission of 3.5% to StartEngine Primary on sales of the Common Stock. In addition, StartEngine Primary will be issued the number of shares of Common Stock equal to 2% of the gross proceeds sold through StartEngine Primary in this offering, divided by $1.40 per share, rounded to the nearest whole share. The company will also pay a $15,000 advance fee for reasonable accountable out of pocket expenses actually anticipated to be incurred by StartEngine Primary. Any unused portion of this fee not actually incurred by StartEngine Primary will be returned to the company. FINRA fees will be paid by the company. This does not include processing fees paid directly to StartEngine Primary by investors. See “Plan of Distribution and Selling Securityholders” on page 15 for details of compensation payable to third parties in connection with the offering.
**Investors will be required to pay directly to StartEngine Primary a processing fee equal to [3.5%] of the investment amount at the time of the investors’ subscription. This fee will be refunded in the event the company does not raise any funds in this offering. See “Plan of Distribution and Selling Securityholders” for additional discussion of this processing fee. Assuming the offering is fully subscribed, investors would pay StartEngine Primary total processing fees of $175,000. This amount is included in the Total Maximum offering amount since it counts towards the rolling 12-month maximum offering amount that the company is permitted to raise under Regulation A. However, it is not included in Proceeds to Issuer Before Expenses.
The company expects that the amount of expenses of the offering that it will pay will be approximately $175,000, not including commissions or state filing fees.
The company has engaged PrimeTrust, LLC as an escrow agent (the “Escrow Agent”) to hold funds tendered by investors, and may hold a series of closings on a rolling basis at which we receive the funds from the escrow agent and issue the shares to investors. The offering will terminate at the earlier of: the date at which the maximum offering amount has been sold or the date at which the offering is earlier terminated by the company in its sole discretion. After each closing, funds tendered by investors will be available to the company.
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS UPON THE MERITS OR GIVE ITS APPROVAL OF ANY SECURITIES OFFERED OR THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SOLICITATION MATERIALS. THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE COMMISSION; HOWEVER THE COMMISSION HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED ARE EXEMPT FROM REGISTRATION
GENERALLY NO SALE MAY BE MADE TO YOU IN THIS OFFERING IF THE AGGREGATE PURCHASE PRICE YOU PAY IS MORE THAN 10% OF THE GREATER OF YOUR ANNUAL INCOME OR NET WORTH. DIFFERENT RULES APPLY TO ACCREDITED INVESTORS AND NON-NATURAL PERSONS. BEFORE MAKING ANY REPRESENTATION THAT YOUR INVESTMENT DOES NOT EXCEED APPLICABLE THRESHOLDS, THE COMPANY ENCOURAGES YOU TO REVIEW RULE 251(d)(2)(i)(C) OF REGULATION A. FOR GENERAL INFORMATION ON INVESTING, THE COMPANY ENCOURAGES YOU TO REFER TO www.investor.gov.
This offering is inherently risky. See “Risk Factors” on page 6.
Sales of these securities will commence on approximately [date].
The company is following the “Offering Circular” format of disclosure under Regulation A.
In the event that the company becomes a reporting company under the Securities Exchange Act of 1934, the company intends to take advantage of the provisions that relate to “Emerging Growth Companies” under the JOBS Act of 2012. See “Summary -- Implications of Being an Emerging Growth Company.”
TABLE OF CONTENTS
In this Offering Circular, the term “Epilog” or “the company” refers to Epilog Imaging Systems, Inc.
THIS OFFERING CIRCULAR MAY CONTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION RELATING TO, AMONG OTHER THINGS, THE COMPANY, ITS BUSINESS PLAN AND STRATEGY, AND ITS INDUSTRY. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF, ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY’S MANAGEMENT. WHEN USED IN THE OFFERING MATERIALS, THE WORDS “ESTIMATE,” “PROJECT,” “BELIEVE,” “ANTICIPATE,” “INTEND,” “EXPECT” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS, WHICH CONSTITUTE FORWARD-LOOKING STATEMENTS. THESE STATEMENTS REFLECT MANAGEMENT’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN THE FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE. THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO REVISE OR UPDATE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER SUCH DATE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
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Implications of Being an Emerging Growth Company
The company is not subject to the ongoing reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) because it is not registering its securities under the Exchange Act. Rather, it will be subject to the more limited reporting requirements under Regulation A, including the obligation to electronically file:
● | annual reports (including disclosure relating to the company’s business operations for the preceding three fiscal years, or, if in existence for less than three years, since inception, related party transactions, beneficial ownership of the issuer’s securities, executive officers and directors and certain executive compensation information, management’s discussion and analysis (“MD&A”) of the issuer’s liquidity, capital resources, and results of operations, and two years of audited financial statements), |
● | semi-annual reports (including disclosure primarily relating to the issuer’s interim financial statements and MD&A) and |
● | current reports for certain material events. |
In addition, at any time after completing reporting for the fiscal year in which this offering statement was qualified, if the securities of each class to which this offering statement relates are held of record by fewer than 300 persons and offers or sales are not ongoing, the company may immediately suspend the company’s ongoing reporting obligations under Regulation A.
If and when the company becomes subject to the ongoing reporting requirements of the Exchange Act, as an issuer with less than $1.07 billion in total annual gross revenues during its last fiscal year, it will qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and this status will be significant. An emerging growth company may take advantage of certain reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. In particular, as an emerging growth company it:
● | will not be required to obtain an auditor attestation on its internal controls over financial reporting pursuant to the Sarbanes-Oxley Act of 2002; |
● | will not be required to provide a detailed narrative disclosure discussing its compensation principles, objectives and elements and analysing how those elements fit with its principles and objectives (commonly referred to as “compensation discussion and analysis”); |
● | will not be required to obtain a non-binding advisory vote from its shareholders on executive compensation or golden parachute arrangements (commonly referred to as the “say-on-pay,” “say-on-frequency” and “say-on-golden-parachute” votes); |
● | will be exempt from certain executive compensation disclosure provisions requiring a pay-for-performance graph and CEO pay ratio disclosure; |
● | may present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A; and |
● | will be eligible to claim longer phase-in periods for the adoption of new or revised financial accounting standards. |
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The company intends to take advantage of all of these reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption of new or revised financial accounting standards under Section 107 of the JOBS Act. The company’s election to use the phase-in periods may make it difficult to compare its financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the phase-in periods under Section 107 of the JOBS Act.
Under the JOBS Act, the company may take advantage of the above-described reduced reporting requirements and exemptions for up to five years after the company’s initial sale of common equity pursuant to a registration statement declared effective under the Securities Act of 1933, as amended, or such earlier time should it no longer meet the definition of an emerging growth company. Note that this offering, while a public offering, is not a sale of common equity pursuant to a registration statement, since the offering is conducted pursuant to an exemption from the registration requirements. In this regard, the JOBS Act provides that the company would cease to be an “emerging growth company” if the company has more than $1.07 billion in annual revenues, has more than $700 million in market value of its common stock held by non-affiliates, or issues more than $1 billion in principal amount of non-convertible debt over a three-year period.
Certain of these reduced reporting requirements and exemptions are also available to the company due to the fact that it may also qualify, once listed, as a “smaller reporting company” under the Commission’s rules. For instance, smaller reporting companies are not required to obtain an auditor attestation on their assessment of internal control over financial reporting; are not required to provide a compensation discussion and analysis; are not required to provide a pay-for-performance graph or CEO pay ratio disclosure; and may present only two years of audited financial statements and related MD&A disclosure.
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OFFERING CIRCULAR SUMMARY
This Offering Circular Summary highlights information contained elsewhere and does not contain all of the information that you should consider in making your investment decision. Before investing in the company’s Common Stock, you should carefully read this entire Offering Circular, including the company’s financial statements and related notes. You should also consider, among other information, the matters described under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
The Company
Epilog was founded by Michael and Lance Mojaver with the goal of using robotics and computer vision to help humans with repetitive/robotic tasks. Specifically, the company develops artificial intelligence (“AI”) vision products related to automobiles, self-driving, and the transportation industry. The company is seeking to bring human quality, AI based vision driver-assistance technology to millions of cars already on the road today (mobile solution) as well as queue management systems for monitoring the flow of people and vehicles (stationary solution). The company’s products offer exceptionally high-quality AI in compact and cost-efficient devices, best suited for monitoring large spaces, for example, highways, transportation hubs, parking lots and arenas.
Epilog was originally founded as Biotronix Corporation in 2010 as a Delaware holding company. It changed its name to Epilog Imaging Systems, Inc. on July 27, 2015 at which point it began operations.
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Through extensive innovation, Epilog has developed a human-level AI vision system cost-effective for commercial use. The company calls this “an IMAX in your pocket”, it has a cost-performance improvement of about 100x compared to ordinary High-Definition television systems. The technology portfolio includes 8 patents granted (more pending) and made affordable with the advent of fast AI chips and a $100M precision robotic system (owned by Jabil with whom the company has partnered) that can assemble the company’s products in minutes.
Epilog currently addresses three main markets in which to deploy its human-level AI vision systems, listed in order of importance:
● | Autonomous vehicles (driver assistance) | |
● | Queue management (flow of people and vehicles) | |
● | Gigapixel video (Sports & entertainment, remote inspection) |
To date, the company has sold over $20,000 in products. A brief timeline of the company’s history and performance is listed below.
● | January 2015 | |
o | The company began operations. | |
o | The initial concept was a product Michael Mojaver licensed from his previous startup. It was a type of outdoor camera with built in computer vision | |
● | January 2016 | |
o | First prototypes and key patents were filed | |
o | The original concept was bulky and limited to tracking a single object at a time so a new solid-state concept based on new AI chips from Nvidia was developed and patented | |
● | March 2017 | |
o | Word’s first 12K AI Camera was developed | |
o | The company demonstrated 100MP prototype at ISCW17 and the made a lower cost 12K version | |
o | The company began test-marketing VR and automotive concepts | |
● | May 2018 | |
o | Jabil product sample was produced | |
o | The company partnered with Jabil, developed production samples in Jena Germany, using DSLR type lenses and Nvidia GPUs with the goal to customize for OEMs | |
● | January 2019 | |
o | The company exhibited at CES and the Jabil VIP suite, then developed Sherpa (full self-driving solution) based on feedback from major automotive OEMs | |
● | February 2020 | |
o | Launched StartEngine Reg CF campaign | |
o | Development of production driver assistance and queue management devices begins |
The Company’s Current Products
Epilog has completed two pre-production devices leveraging its ground-breaking 8K optics with integrated AI. The two products, Sherpa and Luma have been available for pre-order since 2019. The company believes the products will ship to consumers in 2021
● | Sherpa | |
o | A driver assistance retrofit designed to enable self-driving capabilities in existing cars | |
o | Can be added to millions of cars equipped with Lane Keeping Assist Systems (“LKAS”) technology. Approximately 50 million cars that are on the road in 2020 are equipped with LKAS |
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● | Luma |
o | Is designed to assist with queue management in large spaces like airports, terminals, industrial and government buildings. Tens of millions of currently installed cameras in need of retrofitting and other sites require new cameras. Luma can assist with this upgrade |
o | Early customers are engaged at major airports, transit stations, and metro areas |
The company believes that both products, the Sherpa and Luma, demonstrate Epilog’s ability to replace or update complicated systems of cameras, fiber optics links and computational devices with fully integrated solutions at a fraction of what it would otherwise cost to update antiquated systems. The proceeds from this offering will be used to reduce the physical size of these products, weatherproof them, complete compliance testing, expand customer trials and expand testing.
The Company’s Plans for New Products:
The Covid-19 pandemic has created new opportunity for Epilog queue management system technology to screen people with Elevated Body Temperatures (EBT). Epilogs’ EBT system combines highest resolution intelligent visual tracking with thermal imaging to help detect potentially infected individuals. Two versions of the EBT product are currently in development, specifically, a large area system for detecting EBT in public areas, such as transportation hubs, theme parks and shopping centers and a low-cost small-area system is also being developed for application in lobbies/receptions, elevators, mass transit and ride sharing vehicles.
The company believes its thermal vision systems will be able to:
o | Attain the highest accuracy radiometric measurements |
o | Measure at short and long distances |
o | Have a fast response |
o | Provide programmable people tracking |
o | Can alert an attendant via text messaging, mobile or desktop apps to take action |
An initial version of the EBT system has been fully developed with dual thermal + visual smart AI sensors that scan multiple people simultaneously and test marketed
Cinapse
Cinapse is being developed as the highest resolution digital video camera system in the world. The goal is an AI based cinematic quality system with 16K x 16K (250MP) image quality exceeding an IMAX theater or over 100x High Definition TV screens. Epilog has already completed a proof-of-concept system for a customer demonstrating an image quality of 560 Megapixels, far exceeding the requirement and the highest in the world. Th Cinapse system has approximately 20x higher resolution than the closest competitor (the Red Helium 8K S35) and 65x higher than a typical iPhone.
The Epilog Cinapse is suitable for cost-effective IMAX quality sports & entertainment productions as well as remote monitoring and inspection in airborne and drone applications.
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The Current Offering
Securities offered | Maximum of 3,571,429 shares of Common Stock ($5,000,000) | |
Common Stock outstanding before the offering (1) | 13,732,845 shares | |
Preferred Stock outstanding before the offering | 0 shares | |
Use of proceeds | The net proceeds of this offering will be primarily used to further develop and produce Sherpa, Luma, Thermion and Cinapse into production systems. See “Use of Proceeds.” |
Summary Financial Information
To date, Epilog has completed and managed the following:
● | Raised $1.07M to support business operations |
● | Has engaged several key customers |
● | Has over 100 pre-orders for Sherpa devices |
● | Has a pipeline of approximately 10 potential business opportunities |
● | Preparing production versions of Thermion, Luma, Sherpa and developing the Cinapse prototype |
● | Raising additional funds to prepare 1K units of inventory and increasing personnel to sell and support product |
Selected Risks
The company’s business is subject to a number of risks and uncertainties, including those highlighted in the section titled “Risk Factors” immediately following this summary. These risks include, but are not limited to, the following:
● | The company has a limited operating history upon which you can evaluate its performance, and has not yet generated profits. Accordingly, the company’s prospects must be considered in light of the risks that any new company encounters. |
● | The company anticipates sustaining continued operating losses |
● | The company is reliant on offering and producing limited products. |
● | The company has only manufactured a prototype for the Sherpa and Luma and may fail to release the products. |
● | Delays and cost overruns could materially and adversely affect the company’s operations. |
● | The company relies on third parties to provide services essential to the success of its business. |
● | The company’s ability to sell its product or service is dependent on outside government regulation which can be subject to change at any time. |
● | The company may not be able to protect its intellectual property. |
● | The company’s success will depend on its ability to secure additional patent protection for its core technologies and be able to enforce those patents. |
● | The company’s trademarks, copyrights and other intellectual property could be unenforceable or ineffective. |
● | The company’s business projections are only projections. |
● | If the company cannot raise sufficient funds, it will not succeed. |
● | Future fundraising may affect the rights of investors. |
● | The company’s future success is dependent on the continued service of a small executive management team. |
● | Management discretion as to use of proceeds. |
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● | The company faces significant market competition. |
● | The company could be adversely affected by product liability, personal injury, or other health and safety issues. |
● | Any valuation at this stage is difficult to assess. |
● | The company’s Consolidated Financial Statements include a going concern opinion. |
● | There is no current market for any shares of the company’s stock. |
● | Investors will hold minority interests in the company. |
● | Risks related to forum selection and jury waivers |
● | Investors will be subject to the terms of the Subscription Agreement. |
● | Investors in this offering may not be entitled to a jury trial with respect to claims arising under the Subscription Agreement, which could result in less favourable outcomes to the plaintiff(s) in any action under the Agreement. |
● | The company’s results of operations may be negatively impacted by the coronavirus outbreak. |
● | Actual or threatened epidemics, pandemics, outbreaks, or other public health crises may adversely affect Epilog’s business. |
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The SEC requires the company to identify risks that are specific to its business and its financial condition. The company is still subject to all the same risks that all companies in its business, and all companies in the economy, are exposed to. These include risks relating to economic downturns, political and economic events and technological developments (such as cyber-attacks and the ability to prevent those attacks). Additionally, early-stage companies are inherently more risky than more developed companies. You should consider general risks as well as specific risks when deciding whether to invest.
Risks Related to the Company
The company has a limited operating history upon which you can evaluate its performance, and has not yet generated profits. Accordingly, the company’s prospects must be considered in light of the risks that any new company encounters. Epilog was incorporated under the laws of the State of Delaware on June 28, 2010, but did not begin operations until July 2015. The company has not yet generated sustained profits. The likelihood of its creation of a viable business must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with the growth of a business, operation in a competitive industry, and the continued development of its technology and products. The company anticipates that its operating expenses will increase for the near future, and there is no assurance that it will be profitable in the near future. The company will only be able to pay dividends on any shares once its directors determine that it is financially able to do so. Epilog Imaging Systems, Inc has incurred a net loss and has had limited revenues generated since inception. There is no assurance that the company will be profitable in the next 3 years or generate sufficient revenues to pay dividends to the holders of the shares. You should consider the business, operations and prospects in light of the risks, expenses and challenges faced as an emerging growth company.
The company anticipates sustaining continued operating losses. It is anticipated that the company will continue to sustain operating losses. Epilog’s ability to become profitable depends on success in licensing and selling of products. There can be no assurance that this will occur. Unanticipated problems and expenses are often encountered in offering new products, which may impact whether the company is successful. Furthermore, the company may encounter substantial delays and unexpected expenses related to development, technological changes, marketing, regulatory requirements and changes to such requirements or other unforeseen difficulties. There can be no assurance that the company will ever become profitable. If the company sustains losses over an extended period of time, it may be unable to continue in business.
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The company is reliant on offering and producing limited products. All of the company’s current services are variants on one type of service, providing products related to artificial intelligence (AI) vision systems. The company’s revenues are therefore dependent upon the market for customers and corporations interested in AI vision systems and related technology. The company may never have an operational product or service. It is possible that there may never be an operational Sherpa or Luma or that the products may never be used to engage in transactions. It is possible that the failure to release the product is the result of a change in business model upon the company making a determination that the business model, or some other factor, will not be in the best interest of company and its stockholders/members/creditors.
The company has only manufactured a prototype for the Sherpa and Luma and may fail to release the products. The company is currently in the research and development stage and has only manufactured a prototype for its Sherpa and Luma. It is possible that these products might never be operation products or that the product may never be used to engage in transactions. It is possible that the failure to release the product is the result of a change in business model upon the company’s making a determination that the business model, or some other factor, will not be in the best interest of the company and its stockholders.
Delays and cost overruns could materially and adversely affect the company’s operations. Delays or cost overruns in the development of the company’s Sherpa and/or Luma and failure of the product to meet the company’s performance estimates may be caused by, among other things, unanticipated technological hurdles, difficulties in manufacturing, changes to design and regulatory hurdles. Any of these events could materially and adversely affect the company’s operating performance and results of operations.
The company relies on third parties to provide services essential to the success of its business. The company relies on third parties to provide a variety of essential business functions for it, including manufacturing, shipping, accounting, legal work, public relations, advertising, retailing, and distribution. It is possible that some of these third parties will fail to perform their services or will perform them in an unacceptable manner. It is possible that the company will experience delays, defects, errors, or other problems with their work that will materially impact its operations and it may have little or no recourse to recover damages for these losses. A disruption in these key or other suppliers’ operations could materially and adversely affect the company’s business. As a result, your investment could be adversely impacted by the company’s reliance on third parties and their performance.
The company’s ability to sell its product or service is dependent on outside government regulation which can be subject to change at any time. The company’s ability to sell product is dependent on the outside government regulation such as the NHTSA (National Highway Traffic Safety Administration), FTC (Federal Trade Commission) and other relevant government laws and regulations. The laws and regulations concerning the selling of product may be subject to change and if they do then the selling of product may no longer be in the best interest of the company. At such point the company may no longer want to sell product and therefore your investment in the company may be affected.
The company may not be able to protect its intellectual property. Trademark and copyright litigation have become extremely expensive. Even if the company believes that a competitor is infringing on one or more of its trademarks or copyrights, the company might choose not to file suit because it lacks the cash to successfully prosecute a multi-year litigation with an uncertain outcome; or because it believes that the cost of enforcing its trademark(s) or copyright(s) outweighs the value of winning the suit in light of the risks and consequences of losing it; or for some other reason. Choosing not to enforce its trademark(s) or copyright(s) could have adverse consequences for the company, including undermining the credibility of its intellectual property, reducing its ability to enter into sublicenses, and weakening the company’s attempts to prevent competitors from entering the market. As a result, if the company is unable to enforce its trademark(s) or copyright(s) because of the cost of enforcement, your investment in the company could be significantly and adversely affected.
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The company’s success will depend on its ability to secure additional patent protection for its core technologies and be able to enforce those patents. Some patent applications that are pending may not result in issued patents. If any patent application results in an issued patent, that patent may later be invalidated or held unenforceable as patent law changes. Further, the outsourcing of the manufacture of the company’s product may result in the unauthorized exposure of the intellectual property of the company.
The company’s trademarks, copyrights and other intellectual property could be unenforceable or ineffective. Intellectual property is a complex field of law in which few things are certain. It is possible that competitors will be able to design around the company’s intellectual property, find prior art to invalidate it, or render the patents unenforceable through some other mechanism. If competitors are able to bypass the company’s trademark and copyright protection without obtaining a sublicense, it is likely that the company’s value will be materially and adversely impacted. This could also impair the company’s ability to compete in the marketplace. Moreover, if the trademarks and copyrights are deemed unenforceable, the company will almost certainly lose any potential revenue it might be able to raise by entering into sublicenses. This would cut off a significant potential revenue stream for the company.
The company’s business projections are only projections. There can be no assurance that the company will meet its projections. There can be no assurance that the company will be able to find sufficient demand for its product, that people think it’s a better option than a competing product, or that the company will able to provide the service at a level that allows it to make a profit and still attract business.
If the company cannot raise sufficient funds, it will not succeed. Epilog is offering Common Stock in the amount of 3,571,429 shares and up to $5,000,000 million in this offering on a best-efforts basis and may not raise the complete amount. Even if the maximum amount is raised, the company is likely to need additional funds in the future in order to grow, and if it cannot raise those funds for whatever reason, including reasons relating to the company itself or to the broader economy, it may not survive. If the company manages to raise a substantially lesser amount than the Maximum Raise, it will have to find other sources of funding for some of the plans outlined in “Use of Proceeds.”
Future fundraising may affect the rights of investors. In order to expand, the company is likely to raise funds again in the future, either by offerings of securities or through borrowing from banks or other sources. The terms of future capital-raising, such as loan agreements, may include covenants that give creditors greater rights over the financial resources of the company.
The company’s future success is dependent on the continued service of a small executive management team. The company depends on the skill and experience of two individuals, Michael and Lance Mojaver. Each has a different skill set. The company’s success is dependent on their ability to manage all aspects of the business effectively. Because the company is relying on its small executive management team, it lacks certain business development resources that may hurt its ability to grow its business. Any loss of key members of the executive team could have a negative impact on the company’s ability to manage and grow its business effectively. The company does not maintain a key person life insurance policy on any of the members of its senior management team. As a result, the company would have no way to cover the financial loss if it were to lose the services of its directors or officers. In addition, if the company is unable to attract, hire and retain the right talent or make too many hiring mistakes, it is likely the business will suffer from not having the right employees in the right positions at the right time. This would likely adversely impact the value of your investment.
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Management discretion as to use of proceeds. The company’s success will be substantially dependent upon the discretion and judgment of its management team with respect to the application and allocation of the proceeds of this Offering. The use of proceeds described in “Use of Proceeds” is an estimate based on the company’s current business plan. The company, however, may find it necessary or advisable to re-allocate portions of the net proceeds reserved for one category to another, and it will have broad discretion in doing so.
The company faces significant market competition. The company will compete with larger, established companies who currently have products on the market and/or various respective product development programs. They may have much better financial means and marketing/sales and human resources than Epilog. They may succeed in developing and marketing competing equivalent products earlier than Epilog, or superior products than those developed by the company. There can be no assurance that competitors will render the company’s technology or products obsolete or that the products developed by the company will be preferred to any existing or newly developed technologies. It should further be assumed that competition will intensify.
The company could be adversely affected by product liability, personal injury, or other health and safety issues. Manufacturing or design defects, unanticipated use of the company’s products, or inadequate disclosure of risks relating to the use of the products could lead to injury or other adverse events. These events could lead to recalls or safety alerts relating to its products (either voluntary or required by governmental authorities) and could result, in certain cases, in the removal of a product from the market. Any recall could result in significant costs as well as negative publicity that could reduce demand for its products. Personal injuries relating to the use of its products could also result in product liability claims being brought against the company. In some circumstances, such adverse events could also cause delays in new product approvals. Similarly, negligence in performing its services can lead to injury or other adverse events.
Any valuation at this stage is difficult to assess. The valuation for this Offering was established by the company. Unlike listed companies that are valued publicly through market-driven stock prices, the valuation of private companies, especially early-stage companies, is difficult to assess and you may risk overpaying for your investment.
The Company’s Consolidated Financial Statements include a Going Concern Opinion. The company’s consolidated financial statements were prepared on a “going concern” basis.
Certain matters, as described in the accompanying financial statements, indicate there may be substantial doubt about the company’s ability to continue as a going concern. Specifically, the company had a total stockholder’s deficit of $195,751 and an accumulated deficit of $777,826 as of December 31, 2019. Therefore, there is substantial doubt about the ability of the company to continue as a going concern. There can be no assurance that the company will achieve its goals and reach profitable operations and is still dependent upon its ability to obtain sufficient debt and/or equity capital and/or to generate positive cash flow from operations.
Risks Related to Securities in this Offering
There is no current market for any shares of the company’s stock. You should be prepared to hold this investment for several years or longer. More importantly, there is no established market for these securities and there may never be one. As a result, if you decide to sell these securities in the future, you may not be able to find a buyer. Investors should assume that they may not be able to liquidate their investment for some time, or be able to pledge their shares as collateral.
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Investors will hold minority interests in the company. The company. has already issued 13,732,845 shares of its Common Stock. Investors will hold minority interests in the company and will not be able to direct its operations.
Risks related to forum selection and jury waivers
Investors will be subject to the terms of the Subscription Agreement. As part of this investment, each investor will be required to agree to the terms of the Subscription Agreement included as Exhibit 4 to the Offering Statement of which this Offering Circular is part. The Subscription Agreement requires investors to indemnify the company for any claim of brokerage commissions, finders’ fees, or similar compensation. All legal conflicts relating to the Subscription Agreement will be heard in Delaware courts under Delaware law.
Investors in this offering may not be entitled to a jury trial with respect to claims arising under the Subscription Agreement, which could result in less favourable outcomes to the plaintiff(s) in any action under the Agreement. Investors in this offering will be bound by the Subscription Agreement, which includes a provision under which investors waive the right to a jury trial of any claim they may have against the company arising out of or relating to the Agreement, including any claims made under the federal securities laws. By signing the Agreement, the investor warrants that the investor has reviewed this waiver with his or her legal counsel, and knowingly and voluntarily waives the investor’s jury trial rights following consultation with the investor’s legal counsel.
If the company opposed a jury trial demand based on the waiver, a court would determine whether the waiver was enforceable based on the facts and circumstances of that case in accordance with the applicable state and federal law. To the company’s knowledge, the enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by a federal court. However, the company believes that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under the laws of the State of Delaware, which governs the Agreement, by a federal or state court in the State of Delaware. In determining whether to enforce a contractual pre-dispute jury trial waiver provision, courts will generally consider whether the visibility of the jury trial waiver provision within an agreement is sufficiently prominent such that a party knowingly, intelligently, and voluntarily waived the right to a jury trial. The company believes that this is the case with respect to the Subscription Agreement. You should consult legal counsel regarding the jury waiver provision before entering into the Subscription Agreement.
If you bring a claim against the company in connection with matters arising under the Agreement, including claims under the federal securities laws, you may not be entitled to a jury trial with respect to those claims, which may have the effect of limiting and discouraging lawsuits against the company. If a lawsuit is brought against the company under the Agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have had, including results that could be less favourable to the plaintiff(s) in such an action.
Nevertheless, if the jury trial waiver provision is not permitted by applicable law, an action could proceed under the terms of the Agreement with a jury trial. No condition, stipulation or provision of the Subscription Agreement serves as a waiver by any holder of the company’s securities or by the company of compliance with any substantive provision of the federal securities laws and the rules and regulations promulgated under those laws.
In addition, when the shares are transferred, the transferee is required to agree to all the same conditions, obligations, and restrictions applicable to the shares or to the transferor with regard to ownership of the shares, that were in effect immediately prior to the transfer of the shares, including but not limited to the Subscription Agreement.
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Risks Related to Covid-19
The company’s results of operations may be negatively impacted by the coronavirus outbreak. In December 2019, a novel strain of coronavirus, or COVID-19, was reported to have surfaced in Wuhan, China. COVID-19 has spread to many countries, including the United States, and was declared to be a pandemic by the World Health Organization. Efforts to contain the spread of COVID-19 have intensified, and the U.S., Europe, and Asia have implemented severe travel restrictions and social distancing. The impacts of the outbreak are unknown and rapidly evolving. A widespread health crisis has adversely affected and could continue to affect the global economy, resulting in an economic downturn that could negatively impact the value of the Shares and investor demand for the Shares generally.
The continued spread of COVID-19 has also led to severe disruption and volatility in the global capital markets, which could increase the company’s cost of capital and adversely affect its ability to access the capital markets in the future. It is possible that the continued spread of COVID-19 could cause a further economic slowdown or recession or cause other unpredictable events, each of which could adversely affect Epilog’s business, results of operations, or financial condition.
The extent to which COVID-19 affects the company’s financial results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the COVID-19 outbreak and the actions to contain the outbreak or treat its impact, among others. Moreover, the COVID-19 outbreak has had and may continue to have indeterminable adverse effects on general commercial activity and the world economy, and the company’s business and results of operations could be adversely affected to the extent that COVID-19 or any other pandemic harms the global economy generally.
Actual or threatened epidemics, pandemics, outbreaks, or other public health crises may adversely affect Epilog’s business. Epilog’s business could be materially and adversely affected by the risks, or the public perception of the risks, related to an epidemic, pandemic, outbreak, or other public health crisis, such as the recent outbreak of novel coronavirus, or COVID-19. The risk, or public perception of the risk, of a pandemic or media coverage of infectious diseases could adversely affect the value of the Common Stock and the financial condition of our investors or prospective investors, resulting in reduced demand for the Common Stock generally. “Shelter-in-place” or other such orders by governmental entities could also disrupt the company’s operations, if employees, who cannot perform their responsibilities from home, are not able to report to work.
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Dilution means a reduction in value, control, or earnings of the shares the investor owns.
Immediate dilution
An early-stage company typically sells its shares (or grants options over its shares) to its founders and early employees at a very low cash cost, because they are, in effect, putting their “sweat equity” into the company. When the company seeks cash investments from outside investors, like you, the new investors typically pay a much larger sum for their shares than the founders or earlier investors, which means that the cash value of your stake is diluted because all the shares are worth the same amount, and you paid more than earlier investors for your shares.
The following table compares the price that new investors are paying for their shares with the effective cash price paid by existing shareholders assuming that the shares are sold at $1.40 per share. The schedule presents shares and pricing as issued and reflects all transactions since inception, which gives investors a better picture of what they will pay for their investment compared to the company’s insiders than just including such transactions for the last 12 months, which is what the SEC requires.
The following table presents the approximate effective cash price paid for all shares and potential shares issuable by the company as of October 1, 2020.
Issued Shares | Potential Shares |
Total Issued and Potential Shares |
Effective Cash Price per Share
at Issuance or Potential Conversion |
|||||||||||||
Common Stock: | 13,724,361 | - | 13,724,361 | $ | .0780 | |||||||||||
Reg CF campaign | 1,426,665 | 1,426,665 | $ | 0.75 | ||||||||||||
2018 Issue | 12,297,696 | 12,297,696 | $ | 0.0001 | ||||||||||||
Preferred Stock: | - | - | - | - | ||||||||||||
Preferred Stock | ||||||||||||||||
Warrants: | 1,340,000 | 111,429 | 1,451,429 | $ | 1.075 | |||||||||||
2020 | 670,000 | 111,429 | 781,429 | $ | 1.40 | |||||||||||
2019 | 670,000 | 670,000 | $ | 0.75 | ||||||||||||
Total Common Share Equivalents | 15,175,790 | $ | 0.1666 | |||||||||||||
Investors in this offering, assuming $5 Million raised | 3,571,429 | 3,571,429 | $ | 1.40 | ||||||||||||
Total After Inclusion of this Offering | 18,867,131 | $ | 0.3467 |
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The following table illustrates the dilution that new investors will experience upon investment in the company relative to existing holders of Epilog’s securities. Because this calculation is based on the net tangible assets of the company, Epilog is calculating based on its net tangible book value of $(524,612 ) as of December 31, 2019, as included in its audited financial statements.
The offering costs assumed in the following table includes up to $350,000 in commissions to StartEngine Primary, LLC as well as legal and accounting fees incurred for this Offering.
The table presents four scenarios for the convenience of the reader: a $1.25M raise from this offering (the minimum offering), a $2.5M raise from this offering, a $3.75M raise from this offering, and a fully subscribed $5M raise from this offering (the maximum offering).
Percentage of funding | 100% | 75% | 50% | 25% | ||||||||||||
Offering price | $ | 1.400 | $ | 1.400 | $ | 1.400 | $ | 1.400 | ||||||||
Offering shares at different percentage | 3,571,429 | 2,678,572 | 1,785,715 | 892,857 | ||||||||||||
Total Gross Proceeds | $ | 5,000,000 | $ | 3,750,000 | $ | 2,500,000 | $ | 1,250,000 | ||||||||
Total Shares outstanding Prior to the Offering as of December 31, 2019 | 13,684,696 | 13,684,696 | 13,684,696 | 13,684,696 | ||||||||||||
Net Tangible Book value as of December 31, 2019 | $ | (524,612 | ) | $ | (524,612 | ) | $ | (524,612 | ) | $ | (524,612 | ) | ||||
Net Tangible Book value per share Prior to the offering | $ | (0.038336 | ) | $ | (0.038336 | ) | $ | (0.038336 | ) | $ | (0.038336 | ) | ||||
Proforma outstanding Shares after offering | 17,256,125 | 16,363,268 | 15,470,411 | 14,577,553 | ||||||||||||
Offering Expense | $ | 350,000 | $ | 262,500 | $ | 175,000 | $ | 87,500 | ||||||||
Proceed from the offering (net of expenses) | $ | 4,650,000 | $ | 3,487,500 | $ | 2,325,000 | $ | 1,162,500 | ||||||||
Proforma Net Tangible book value after offering | $ | 4,125,388 | $ | 2,962,888 | $ | 1,800,388 | $ | 637,888 | ||||||||
Increase in book value | $ | 4,650,000 | $ | 3,487,500 | $ | 2,325,000 | $ | 1,162,500 | ||||||||
Proforma Net tangible book value per share after offering | $ | 0.23907 | $ | 0.18107 | $ | 0.11638 | $ | 0.04376 | ||||||||
Increase in book value per share | $ | 0.27740 | $ | 0.21941 | $ | 0.15471 | $ | 0.08209 | ||||||||
Offering price | $ | 1.4000 | $ | 1.4000 | $ | 1.4000 | $ | 1.4000 | ||||||||
Proforma per share after offering | $ | 0.2391 | $ | 0.1811 | $ | 0.1164 | $ | 0.0438 | ||||||||
Dilution per share to new investors | $ | 1.1609 | $ | 1.2189 | $ | 1.2836 | $ | 1.3562 | ||||||||
Percent dilution | 83 | % | 87 | % | 92 | % | 97 | % |
Future dilution
Another important way of looking at dilution is the dilution that happens due to future actions by the company. The investor’s stake in a company could be diluted due to the company issuing additional shares. In other words, when the company issues more shares, the percentage of the company that you own will go down, even though the value of the company may go up. You will own a smaller piece of a larger company. This increase in number of shares outstanding could result from a stock offering (such as an initial public offering, another crowdfunding round, a venture capital round, or an angel investment), employees exercising stock options, or by conversion of certain instruments (e.g. convertible bonds, preferred shares or warrants) into stock.
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If the company decides to issue more shares, an investor could experience value dilution, with each share being worth less than before, and control dilution, with the total percentage an investor owns being less than before. There may also be earnings dilution, with a reduction in the amount earned per share (though this typically occurs only if the company offers dividends, and most early-stage companies are unlikely to offer dividends, preferring to invest any earnings into the company).
The type of dilution that hurts early-stage investors most occurs when the company sells more shares in a “down round,” meaning at a lower valuation than in earlier offerings. An example of how this might occur is as follows (numbers are for illustrative purposes only):
● | In June 2019 Jane invests $20,000 for shares that represent 2% of a company valued at $1 million. |
● | In December 2019 the company is doing very well and sells $5 million in shares to venture capitalists on a valuation (before the new investment) of $10 million. Jane now owns only 1.3% of the company but her stake is worth $200,000. |
● | In June 2020 the company has run into serious problems, and in order to stay afloat it raises $1 million at a valuation of only $2 million (the “down round”). Jane now owns only 0.89% of the company and her stake is worth only $26,660. |
This type of dilution might also happen upon conversion of convertible notes into shares. Typically, the terms of convertible notes issued by early-stage companies provide that in the event of another round of financing, the holders of the convertible notes get to convert their notes into equity at a “discount” to the price paid by the new investors, i.e., they get more shares than the new investors would for the same price. Additionally, convertible notes may have a “price cap” on the conversion price, which effectively acts as a share price ceiling. Either way, the holders of the convertible notes get more shares for their money than new investors. In the event that the financing is a “down round” the holders of the convertible notes will dilute existing equity holders, and even more than the new investors do, because they get more shares for their money. Investors should pay careful attention to the amount of convertible notes that the company has issued (and may issue in the future), and the terms of those notes.
If you are making an investment expecting to own a certain percentage of the company or expecting each share to hold a certain amount of value, it’s important to realize how the value of those shares can decrease by actions taken by the company. Dilution can cause drastic changes to the value of each share, ownership percentage, voting control, and earnings per share.
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PLAN OF DISTRIBUTION AND SELLING SECURITYHOLDERS
Plan of Distribution
The company is offering up to 3,571,429 shares of Common Stock, as described in this Offering Circular. The company has engaged StartEngine Primary, LLC (“StartEngine Primary”) as its placement agent to assist in the placement of its securities in those states it is registered to undertake such activities, including soliciting potential investors on a best efforts basis. As such, StartEngine Primary is an “underwriter” within the meaning of Section 2(a)(11) of the Securities Act. StartEngine Primary is under no obligation to purchase any securities or arrange for the sale of any specific number or dollar amount of securities. Persons who desire information about the offering may find it at www.startengine.com. This Offering Circular will be furnished to prospective investors via download 24 hours per day, 7 days per week on the startengine.com website.
Commissions and Discounts
The following table shows the total discounts and commissions payable to StartEngine Primary in connection with this offering by the company and the selling stockholders:
Per Share | Total | |||||||
Public offering price | $ | 1.40 | $ | 5,000,000 | ||||
StartEngine Processing Fee | $ | 0.10 | $ | 350,000 | ||||
Proceeds, before expenses | $ | 1.30 | $ | 4,650,000 |
In addition, StartEngine Primary will be issued the number of shares of Common Stock equal to 2% of the gross proceeds raised through StartEngine Primary in this offering, divided by $1.40 per share, rounded to the nearest whole share. If Epilog raises the maximum amount in this offering, it would issue 71,429 shares of Common Stock to StartEngine Primary.
Other Terms
StartEngine Primary has also agreed to perform the following services in exchange for the compensation discussed above:
● | design, build, and create the company’s campaign page, | |
● | provide the company with a dedicated account manager and marketing consulting services, | |
● | provide a standard purchase agreement to execute between the company and investors, which may be used at company’s option and | |
● | coordinate money transfers to the company. |
In addition to the commission described above, the company will also pay $15,000 to StartEngine Primary for out of pocket accountable expenses paid prior to commencing. This fee will be used for the purpose of coordinating filings with regulators and conducting a compliance review of the company’s offering. Any portion of this amount not expended and accounted for will be returned to the company. Assuming the full amount of the offering is raised, the company estimates that the total fees and expenses of the offering payable by the company and the selling stockholders to StartEngine Primary will be approximately $365,000.
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StartEngine Primary will charge you a non-refundable processing fee equal to 3.5% of the amount you invest at the time you subscribe for the company’s securities, equivalent to $.05 per share. This fee will be refunded in the event the company does not raise any funds in this offering.
StartEngine Primary intends to use an online platform provided by StartEngine Crowdfunding, Inc. (“StartEngine Crowdfunding”), an affiliate of StartEngine Primary, at the domain name www.startengine.com (the “Online Platform”) to provide technology tools to allow for the sales of securities in this offering. In addition, StartEngine Crowdfunding will assist with the facilitation of credit and debit card payments through the Online Platform. Fees for credit and debit card payments will be passed onto investors at cost and the company will reimburse StartEngine Crowdfunding for transaction fees and return fees that it incurs for returns and chargebacks, pursuant to a Credit Card Services Agreement.
Subscription Procedures
After the Offering Statement has been qualified by the Commission, the company will accept tenders of funds to purchase the Common Stock. The company may close on investments on a “rolling” basis (so not all investors will receive their shares on the same date). Investors may subscribe by tendering funds via wire, credit or debit card, or ACH only, checks will not be accepted, to the escrow account to be setup by the Escrow Agent. Tendered funds will remain in escrow until a closing has occurred. StartEngine Crowdfunding will assist with the facilitation of credit and debit card payments through the Online Platform. The company estimates that processing fees for credit card subscriptions will be approximately 3.5% of total funds invested per transaction, although credit card processing fees may fluctuate. The company intends to pay these fees and will reimburse StartEngine Crowdfunding for transaction fees and return fees that it incurs for returns and chargebacks. The company estimates that approximately 70% of the gross proceeds raised in this offering will be paid via credit card. This assumption was used in estimating the payment processing fees included in the total offering expenses set forth in “Use of Proceeds to Issuer.” Upon closing, funds tendered by investors will be made available to the company and the selling stockholders for their use.
The minimum investment in this offering is 179 shares of Common Stock, or $250, plus the StartEngine processing fee of 3.5%.
In order to invest you will be required to subscribe to the offering via the Online Platform and agree to the terms of the offering, Subscription Agreement, and any other relevant exhibit attached thereto.
Investors will be required to complete a subscription agreement in order to invest. The subscription agreement includes a representation by the investor to the effect that, if the investor is not an “accredited investor” as defined under securities law, the investor is investing an amount, including the StartEngine processing fee, that does not exceed the greater of 10% of his or her annual income or 10% of your net worth (excluding the investor’s principal residence).
The company has entered into an Escrow Services Agreement with Prime Trust LLC (the “Escrow Agent”) and StartEngine Primary. Investor funds will be held by the Escrow Agent pending closing or termination of the offering. All subscribers will be instructed by the company or its agents to transfer funds by wire, credit or debit card, or ACH transfer directly to the escrow account established for this offering. The company may terminate the offering at any time for any reason at its sole discretion. Investors should understand that acceptance of their funds into escrow does not necessarily result in their receiving shares; escrowed funds may be returned.
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Prime Trust is not participating as an underwriter or placement agent or sales agent of this offering and will not solicit any investment in the company, recommend the company’s securities or provide investment advice to any prospective investor, and no communication through any medium, including any website, should be construed as such, or distribute this Offering Circular or other offering materials to investors. The use of Prime Trust’s technology should not be interpreted and is not intended as an endorsement or recommendation by it of the company or this offering. All inquiries regarding this offering or escrow should be made directly to the company.
In the event that the company terminates the offering while investor funds are held in escrow, those funds will promptly be refunded to each investor without deduction or interest and in accordance with Rule 10b-9 under the Exchange Act.
Pursuant to the company’s agreement with StartEngine Primary, the company agrees that 6% of the total funds received into escrow will be held back as a deposit hold in case of any ACH refunds or credit card chargebacks. The hold will remain in effect for 180 days following the close of the offering. 60 days after the close of the offering, 4% of the deposit hold will be released to the company. The remaining 2% will be held for the final 120 days of the deposit hold. After such further 120 days, the remaining 2% will be released to the company. Based on the assumed maximum amount that Epilog might owe StartEngine Primary, it estimates the deposit hold could be for up to $300,000.
Startengine Secure LLC, an affiliate of StartEngine Primary, will serve as transfer agent to maintain stockholder information on a book-entry basis. The company will not issue shares in physical or paper form. Instead, its shares will be recorded and maintained on the company’s stockholder register.
In the event that it takes some time for the company to raise funds in this offering, the company will rely on income from sales, funds raised in any offerings from accredited investors.
Selling Security holders
No securities are being sold for the account of security holders; all net proceeds of this offering will go to the company.
Perks
At stepped investment levels, the company plans to offer the following benefits at various levels of investment:
Early Bird
● | First week after launch get 10% bonus shares |
● | Second week after launch get 5% bonus shares |
Volume Perks
● | $250+ | Receive a free exclusive owners T-shirt |
● | $500+ | Above + Early access to Sherpa |
● | $1,000+ | Above + 50% off any purchase through 2025 (limit 1 item) |
● | $5,000+ | Above + Early access free Sherpa and extra 10% bonus shares |
● | $10,000+ | Above + additional early access free Sherpa |
● | $25,000+ | Above + Video call with founding team |
● | $50,000+ | Above + dinner with founding team in San Francisco |
● | Provisions of Note in the company’s Subscription Agreement |
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Restrictions on Transfer
The subscription agreement contains a “market stand-off” provision in the event of a proposed public offering. During the period, not to exceed 180 days, commencing on the effective date of a registration statement relating to the initial public offering IPO and ending on the date specified by the company and the managing underwriter of the IPO, investors agree not to transfer any shares of Common Stock, or other securities of the company held by the investor, or securities convertible or exercisable or exchangeable for Common Stock without the prior written consent of the managing underwriter. Investors agree to execute any agreements as may be reasonably requested by the underwriters of the IPO to effect the market stand-off.
Proxy
The subscription agreement grants an irrevocable proxy to the company’s CEO to (i) vote all securities held of record by the investor (including any shares of the company’s capital stock that the investor may acquire in the future), (ii) give and receive notices and communications, (iii) execute any written consent, instrument or document that the CEO determines is necessary or appropriate at the CEO’s complete discretion, and (iv) take all actions necessary or appropriate in the judgment of the CEO for the accomplishment of the foregoing. The proxy will survive the death, incompetency and disability of an individual investor and, if an investor is an entity, will survive the merger or reorganization of the investor or any other entity holding the shares of Common Stock. The proxy will also be binding upon the heirs, estate, executors, personal representatives, successors and assigns of an investor (including any transferee of the investor). Any transferee of the investors party to the subscription agreement must agree to be bound by the terms of the proxy. The proxy will terminate upon the closing of a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act covering the offer and sale of Common Stock or the effectiveness of a registration statement under the Exchange Act covering the Common Stock.
Inspection Rights
The subscription agreement provides a waiver for inspection rights granted under Delaware law. Delaware law specifies that shareholders have the right to inspect and to make copies and extracts from, the company’s stock ledger, a list of its stockholders, and its other books and records, and the books and records of subsidiaries of the company, if any. Delaware law specifies the circumstances and manner that these rights can be exercised, including requiring that the shareholder must provide under oath a proper purpose for the exercises of these rights. This waiver will be in effect until the initial sale of the company’s securities in any future IPO.
Forum Selection Provision
The Subscription Agreement that investors will execute in connection with the offering includes a forum selection provision that requires any claims against the company based on the Agreement to be brought in a state or federal court of competent jurisdiction in the State of Delaware, for the purpose of any suit, action or other proceeding arising out of or based upon the Agreement. Although the company believes the provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies and in limiting the company’s litigation costs, to the extent it is enforceable, the forum selection provision may limit investors’ ability to bring claims in judicial forums that they find favourable to such disputes and may discourage lawsuits with respect to such claims. The company has adopted the provision to limit the time and expense incurred by its management to challenge any such claims. As a company with a small management team, this provision allows its officers to not lose a significant amount of time travelling to any particular forum so they may continue to focus on operations of the company. Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. The company believes that the exclusive forum provision applies to claims arising under the Securities Act, but there is uncertainty as to whether a court would enforce such a provision in this context. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. Investors will not be deemed to have waived the company’s compliance with the federal securities laws and the rules and regulations thereunder.
Jury Trial Waiver
The Subscription Agreement that investors will execute in connection with the offering provides that subscribers waive the right to a jury trial of any claim they may have against us arising out of or relating to the Agreement, including any claim under federal securities laws. By signing the Subscription Agreement, an investor will warrant that the investor has reviewed this waiver with the investor’s legal counsel, and knowingly and voluntarily waives his or her jury trial rights following consultation with the investor’s legal counsel. If the company opposed a jury trial demand based on the waiver, a court would determine whether the waiver was enforceable given the facts and circumstances of that case in accordance with applicable case law. In addition, by agreeing to the provision, subscribers will not be deemed to have waived the company’s compliance with the federal securities laws and the rules and regulations promulgated thereunder.
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Assuming a maximum raise of $5,000,000 the net proceeds of this offering would be approximately $4,580,000 after subtracting estimated offering costs of $350,000 to StartEngine in commissions, $10,000 in audit fees, $13,000 in Edgarization fees, and $60,000 in legal fees. If Epilog successfully raises the maximum amount under this raise the company intends to use the proceeds to bring multiple products to market.
Assuming a raise of $3,750,000, representing 75% of the maximum offering amount, the net proceeds would be approximately $3,417,500 after subtracting estimated offering costs of $262,500 to StartEngine in commissions, $10,000 in audit fees, $13,000 in Edgarization fees, and $60,000 in legal fees. If Epilog successfully raises the maximum amount under this raise the company intends to use the proceeds to bring multiple products to market.
Assuming a raise of $2,500,000, representing 50% of the maximum offering amount, the net proceeds would be approximately $2,255,000 after subtracting estimated offering costs of $175,000 to StartEngine in commissions, $10,000 in audit fees, $13,000 in Edgarization fees, and $60,000 in legal fees. If Epilog successfully raises the maximum amount under this raise the company intends to use the proceeds to bring multiple products to market.
Assuming a raise of $1,250,000, representing 25% of the maximum offering amount, the net proceeds would be approximately $1,092,500 after subtracting estimated offering costs of $87,500 to StartEngine in commissions, $10,000 in audit fees, $13,000 in Edgarization fees, and $60,000 in legal fees. If Epilog successfully raises the maximum amount under this raise the company intends to use the proceeds to bring multiple products to market.
Please see the table below for a summary the company’s intended use of proceeds from this offering:
$1.25M Raise | $2.5M Raise | $3.75M Raise | $5M Raise | Percent | ||||||||||||||||
Start Engine Fees | $ | 87,500 | $ | 175,000 | $ | 262,500 | $ | 350,000 | 7 | % | ||||||||||
Development of Production Sample | $ | 125,000 | $ | 250,000 | $ | 375,000 | $ | 500,000 | 10 | % | ||||||||||
Marketing | $ | 250,000 | $ | 500,000 | $ | 750,000 | $ | 1,000,000 | 20 | % | ||||||||||
Research and Development | $ | 125,000 | $ | 250,000 | $ | 375,000 | $ | 500,000 | 10 | % | ||||||||||
Company employment | $ | 187,500 | $ | 375,000 | $ | 562,500 | $ | 750,000 | 15 | % | ||||||||||
Operations | $ | 125,000 | $ | 250,000 | $ | 375,000 | $ | 500,000 | 10 | % | ||||||||||
Inventory | $ | 350,000 | $ | 700,000 | $ | 1,050,000 | $ | 1,400,000 | 28 | % |
The company reserves the right to change the above use of proceeds if management believes it is in the best interests of the company.
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Overview
Epilog was originally founded as Biotronix Corporation in 2010 as a Delaware holding company. It changed its name to Epilog Imaging Systems, Inc. on July 27, 2015 at which point it began operations.
Epilog develops advanced robotics and computer vision technology to help humans with repetitive tasks. Specifically, the company develops artificial intelligence (“AI”) vision products related to automobiles, self-driving, and the transportation industry. The company is seeking to bring human-quality, AI based vision driver-assistance technology to millions of cars already on the road today (mobile solutions) as well as queue management systems for monitoring the flow of people and vehicles (stationary solutions). The company’s products offer exceptionally high image quality AI in the form of compact and cost-efficient devices. Epilog products were designed for and best suited to monitoring large spaces such as highways, transportation hubs, parking lots and arenas.
Epilog’s unique vision technology can clearly see the world around us with 10x-100x times better cost-performance than other systems on the market today. The technology has eight patents granted and several others pending. The company believes that it has an estimated 10-year lead over competing companies. Currently, the company is accepting orders on Luma in the transportation sector and pre-orders on Sherpa in the automotive sector. The company intends to achieve full production of these products in 2021.
The Company’s Vision
The company intends to be the brand leader in high-quality fixed and mobile AI computer vision systems. The company believes that it has a head start in AI high-definition vision systems and intends to become the leading company in that space, starting with fixed and mobile 8K AI vision systems. Research and innovation have driven the company to this point and it will continue to grow as a team and a brand as it leads the industry forward. Specifically, the company believes that it is poised to dominate the market for both mobile and fixed high-resolution AI vision systems for the following reasons:
● | 10 years ahead of competition. |
● | 8 patents granted and more pending. |
● | Three fully developed AI powered products. |
● | Ready to disrupt billion-dollar industries. |
The Problem Epilog is solving
Epilog believes that current vision systems miss vital details in many important machine vision applications. People live in a complex world and take for granted their seamless ability to process thousands of objects around them of all sizes and shapes in wide-open spaces like highways, parking lots, warehouses, etc. Current vision systems are limited in capability to detecting large objects within restricted fields of view. For example, most vision systems can detect people in a corridor or cars nearby on the road ahead, however covering larger spaces or detecting smaller objects is far too expensive and challenging.
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*This image is computer generated to provide an example of typical machine vision systems detection capabilities.
The leading competing solutions use a complex web of sensors, dozens of cameras, radar and unproven Lidar technologies. The company believes that this approach results in systems that are too costly, bulky, complex and unreliable for the mass markets.
The Epilog Solution
Epilog disruptive AI technology is poised to solve real-world problems. Over the past five years, Epilog has developed and has test marketed a disruptive new vision technology specifically designed to efficiently recognize intricate details in large spaces like roads, parking lots, airports, train stations, etc. The company believes its products have 10x-100x better cost-performance than other similar technologies on the market today.
On April 24, 2018 the company entered into technology development agreement representing a partnership with Jabil to efficiently mass produce the Luma concept. Using Jabil’s $100 million precision optical robotic manufacturing process the company is poised to offer an industrial- grade vision device that is cost-effective for commercial use.
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In 2017, Epilog completed the world’s first handheld 12K AI camera prototype - the same quality as an IMAX theater. Epilog then quickly transitioned this technology to two closely related products, Sherpa and Luma, that serve massive emerging markets.
The first product, Luma, retrofits standard camera installations with the company’s 8K AI vision to help manage the flow of vehicles and pedestrians at transportation hubs, parking lots and other similar large spaces.
The second product, Sherpa, is a driver-assistance system that can be added into millions of existing cars to make them self-driving.
Most recently, in 2020, Epilog developed large-space thermal imaging capability (Thermion) as well as the world’s first 16Kx16K 250MegaPixel imaging system proof of concept (Cinapse).
Principal Products and Services
SHERPA
The company has developed Sherpa, offering cutting-edge AI and optical capabilities in a small, windshield-mounted device that taps into a car’s computer in order to take control of gas, steering and brake, serving as a driver-assisting device. Specifically, Sherpa is a self-driving addon for your car that enables hands-free driving on most roads with driver monitoring to ensure the driver is still aware of their surroundings. Sherpa also allows the user to remotely adjust climate controls and unlock/lock their car when parked, as well as serving as a security device to monitor the car’s surroundings.
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The company believes that Sherpa will assist with the following:
● | Safer Driving | |
o | More than 94 percent of traffic accidents are caused by human error. Sherpa always monitors the road and you, and never gets tired or distracted. | |
● | Less Stress | |
o | With Sherpa at the wheel, you can sit back and relax on your drive. It handles the tedious acts of freeway driving and stop-and-go traffic. | |
● | Connected Ecosystem | |
o | Sherpa allows you to remotely monitor your car’s location, vitals such as tire pressure, and temperature. It also has security features such as live feeds of the car’s external cameras. |
Sherpa’s compact design combines Epilog 8K optics with the world’s most advanced AI processer to safely drive your car in all conditions. The company’s multi-layer AI is trained with thousands of hours of driving data, and the company’s secondary safety and prediction AIs ensure a smooth experience.
Special emphasis goes into making Sherpa as safe as possible. Sherpa features will be rolled out in incremental steps as they are fully proven. The initial release only has a driver monitoring system to make sure the driver is engaged at all times. The driver monitoring system may qualify the driver for insurance discounts.
Using a combination of simulation and deep learning gained from video footage contributed by each driver on a daily basis, full confidence in the system will be established prior to enabling driver assistance features. In addition, driver assistance will be rolled out in phases. It will be initially be limited to extended traffic jams (up to 45MPH). Similar to the Tesla driver assistance system, Sherpa learns from each mile and each driver adding to the collective driving intelligence additional capability.
The immediate market for Sherpa is driver assistance and retrofitting of approximately 50 million cars on the road today, and a future market is direct integration of our technology in cars 2023 and later. Operation is expected to be effectively “plug-and-play” with at least 5 million cars that already have Lane Keep Assist Systems (LKAS) already installed in the vehicle.
On Feb 29, 2020 the company began accepting Sherpa reservations at $995 (pricing subject to change). Comparatively, the cost to buy a self-driving car is approximately $50K-$100K or the estimated $3K-$5K option price that can be seen in Tesla Models.
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LUMA
Using DSLR-quality optics to cover huge areas with great precision and AI, Luma is ready to change queue management. Luma will assist with traffic queue management in large spaces like airports, terminals, industrial and government buildings. Tens of millions of currently installed cameras need retrofitting and other sites require new cameras. Luma is poised to assist with the upgrading and updating of these systems. Further, reducing camera count in spaces like airports, terminals, industrial and government buildings, improves aesthetics, reduces maintenance costs and increases the overall system performance.
The production version of Luma will compete favorably on price with the competition. Competing products sell for approximately $10,000-$50,000. In addition, the production version will include built-in AI processing with the image quality to replace as many as ten standard cameras. Reducing camera count improves aesthetics, reduces maintenance costs and increases the overall system performance.
Since January 2019 the Luma evaluation system (EVK) has been available for purchase for $4,995. A smaller, harsh-weather ready production version of Luma is currently in development. The company intends this product to cost $2,495 (for the full AI version) and $995 (for an entry level AI device), all pricing may be subject to change.
In addition, the company has lead customers engaged in the transportation sector (airports, train stations, metro areas) to deploy Luma in queue management trials. The company anticipates that these trials will begin Q1 2021.
THE COMPANY’S PLANS FOR NEW PRODUCTS
Thermion
The Covid-19 pandemic has created a mass-market opportunity to expand Epilog high-resolution technology to thermal imaging systems. Epilogs’ Thermion system combines highest resolution intelligent visual tracking with thermal imaging to assist help screen people with Elevated Body Temperatures.
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Two versions of Thermion product are currently in development.
● | A large area system for detecting EBT in public areas, such as transportation hubs, theme parks and shopping centers. The prototype is depicted below, on the left. |
● | A low-cost small-area system is also being developed for application in lobbies/receptions, elevators, mass transit and ride sharing vehicles. A depiction of its application is shown below, on the right. |
The Thermion software (right) has been developed and test-marketed with dual thermal + visual smart AI sensors that scan multiple people simultaneously.
Beyond EBT application, the company believes its Thermion vision systems will have superior performance for detection of flames in large areas as well as standard security and military applications. The Thermion system is expected to have the following:
● | Attain the highest accuracy radiometric measurements on the market. |
● | Offer the largest coverage area of any system in the market. |
● | Does not require blackbody calibrators for precision readings. |
● | Detection speed is measured in milliseconds. |
● | Provide programmable people and vehicle tracking. |
● | AI system can intelligently message an operator via a network. |
Cinapse
Cinapse is being developed for a client as the highest-resolution digital camera system in the world. The company’s goal is to build an AI based cinematic quality system with 16K x 16K (250MP) image capture quality, exceeding an IMAX theater or over 100x High Definition TV screens.
The intended use of this system is producing true-to-life content for consumption by large audiences. Epilog just completed a Proof Of Concept (“POC”) system for the aforementioned client demonstrating an image quality of 560 Megapixels, the highest in the world, about 20x higher than the closest competitor (the Red Helium 8K S35) and 65x higher than a typical iPhone. The Epilog system is suitable for production of IMAX quality sports & entertainment programming as well as remote monitoring and inspection in airborne and drone applications.
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Marketing/Distribution Channels
As of October 1, 2020, Epilog intends to sell three distinct products: Sherpa, Luma and Thermion. These products will be sold through different channels. Epilog’s fast-to-market entry strategy will initially offer direct-to-customer sales over online channels while distribution channels are being setup. An optional online subscription packages (estimated $5 per stream) will offer customers more features and insight into their device. Each Epilog 8K device can generate up to 64 distinct standard-definition streams.
Competition
Epilog has different competitors that span multiple industries including, but not limited to the following:
● | Automobile manufacturers | |
● | Tech transportation companies | |
● | Thermal imaging end-product manufacturers | |
● | Manufacturers of professional digital cinematography cameras and accessories |
Epilog’s business strategy is focused on developing and patenting the core disruptive imaging technology and AI as opposed to producing and supporting the end products as some of the competitors do. For most of our products Epilog currently envisions proving the concept via direct online channels and then licensing the technology to established companies in each space. Manufacturing in most cases can be standardized via Epilog’s partner, Jabil.
Epilog believes that its technology offers a significant cost-performance advantage of 10x-100x over the competition. Where competing solutions use a complex patchwork of sensors and AI to increase the range/coverage of their products, a single Epilog device excels at lower cost because a fewer number of sensors and more efficient AI. For example, Tesla uses 8 cameras with 5 of them looking forward to navigating traffic in their vehicles. This creates significant safety holes, especially at night. Self-driving taxis (Waymo, Uber, etc.) add “Lidar” to see better at night but at a cost of hundreds of thousands of dollars more. High quality imaging at night is also possible from Hollywood type cameras, e.g. Red.com, but these lack any AI capability and cost tens to hundreds of thousand dollars each.
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Epilogs’ disruptive patented AI vision technology can see during the day or night with extremely high quality and at exceptionally low cost and minimal complexity. Epilog is collaborating with car companies to build the technology in future cars (2023+) and for immediate use, has developed Sherpa an after-market solution for existing cars, as well as devices for traffic management.
The main competitor currently offering a professional grade 8K camera is Red Cinema (red.com). Red pricing varies from $25,000 - $75,000, AI is not included. Consumer 8K cameras from Sony and Panasonic are yet to be launched now and the company believes that these products will not be automotive/industrial grade.
The company believes that other after-market solutions for self-driving will lack sufficient image quality to be safe (typically 6% of Epilog resolution) and unreliable. Traffic monitoring cameras with 8K resolution cost at least $10,000. The company believes that the current technology of traffic monitoring cameras is based on old Digital Still Camera (DSC) technology with no built-in AI capability.
Similarly, in thermal imaging applications, 4K systems have an estimated end-user price of $25,000-$100,000. Epilog’s 6K thermal imaging system, which is in development now, is expected to offer significantly better performance at a lower price point.
Production/Suppliers
The company is not currently in mass production, however, when full production begins the company believes that its key components will be supplied by four United States companies:
● | Nvidia (Arrow) | |
● | DRS technologies | |
● | FLIR Systems | |
● | Digikey |
The company’s production partner Jabil is capable of manufacturing up to an estimated 15,000 units a day and is in a position to support almost unlimited OEM partnerships. On April 24, 2018 the company entered into the Jabil Circuits Service Agreement in which Jabil will provide design services to the company in the amount of approximately $350,000 to $550,000 with the value of the services to be provided in equity or amortized over the production of the initial Epilog units. Jabil and the company have not yet finalized the percentages of equity owed and/or amortization formula.
Research and Development
Research and development costs include salaries, research material, and administrative costs. During the years ended December 31, 2019 and 2018, the company recognized $8,861 and $8,819 in research and development costs, respectively. Part of these funds were allocated to further development of Luma and Sherpa.
Employees
Epilog currently has 4 full-time employees and 5 part-time employees. The companies work at the company’s San Jose and Santa Cruz offices as well as remotely.
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Intellectual Property
The company relies on its intellectual property. As of September 2020, the company has the following patents or trademarks granted or pending:
Filing/Issue Date: | Country | Title of Invention | Application No./Patent No. | Status | Assignment Recordals | |||||
7/9/2019 9/8/2015 | US | Super Resolution Binary Imaging And Tracking System | 10,348,963 14/847,886 CON of 13/236,057 | Granted | Recorded: 10/15/2015 - Epilog Imaging Systems | |||||
9/15/2015 9/19/2011 | US | Super Resolution Binary Imaging And Tracking System | 9,137,433 13/236,057 | Granted | Recorded: 10/15/2015 - Epilog Imaging Systems | |||||
11/01/2016 10/19/2011 | US | Compound Dome Camera Assembly | 9,485,395 13/276,686 | Granted | Recorded: 10/20/2015 - Epilog Imaging Systems | |||||
12/4/2018 10/31/2016 | US | Compound Dome Camera Assembly | 10,148,916 15/338,694 CON of 13/276,686 | Granted | Recorded: 10/31/2016 - Epilog Imaging Systems | |||||
09/25/2007 12/20/2004 | US | Panoramic Imaging Display System With Canonical Magnifier | 7,274,381 11/017,628 - CON of 10/005,824 | Granted | Recorded: 5/3/2011 - Tempest Microsystems to Biotronix | |||||
08/11/2009 06/01/2007 | US | High Density Storage System | 7,573,715 11/757,042 This application claims priority to 60/810,379 which is a CIP of 10/394,964 | Granted | Recorded: 10/16/2007- Tempest Microsystems Recorded: 05/03/2011 - Microsystems to BioTronix | |||||
12/21/2004 12/3/2001 | US | Panoramic Imaging Display System With Canonical Magnifier | 6,833,843 10/005,824, claiming Benefit to PCT/US02/38720 and 11/017,628 | Granted | Recorded: 4/26/2002 - Tempest Microsystems Recorded: 5/3/2011 - Biotronix | |||||
9/3/2019 12/19/2014 | US | Super Resolution Imaging And Tracking System | 10,404,910 14/578,098 CON of 13/236,023 | Granted | Recorded: 10/15/2015 - Epilog Imaging Systems | |||||
8/4/2017 | US | Method And Apparatus For Obtaining Enhanced Resolution Images | 15/669,737 claiming priority to 62/370,875 and is a CIP of 14/847,886, which is a CON of 13/236,057 | Pending | Recorded: 08/07/2017 - Epilog Imaging Systems |
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Trademarks | Filing/Issue Date: | Country | Title of Invention | Application No./Patent No. | Status | |||||
140163.10002 | 2/2/2017 | US | Quantum Definition | 87/322,329 | Granted | |||||
140163.10001 | 2/2/2017 | US | Epilog Imaging Systems | 87/322,319 | switching to Epilog AI |
Regulation
Other than consumer product rules applicable to all companies producing products for consumer use, the company is not aware of any specific regulations that would impact or limit its current or proposed operations.
Litigation
The company has not been a party to any litigation.
On April 1, 2020, the company entered into a 19-month operating lease agreement for office space located at 155 Dubois Street, Suite D - 2nd Floor R&D Suite, Santa Cruz, CA. Lease payments under the agreement, as of August 1, 2020 are for $2,470 per month.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of the financial statements, consolidated financial statements and financial condition of Epilog and results of its operations together with its financial statements and related notes appearing at the end of this Offering Circular. This discussion contains forward-looking statements reflecting the company’s current expectations that involve risks and uncertainties. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the section entitled “Risk Factors” and elsewhere in this Offering Circular.
Overview
The company creates imaging technologies that meet and exceed the capabilities of human vision. Epilog has not generated significant revenues for the years ended December 31, 2019 and December 31, 2018.
The consolidated financial statements included in this filing as of June 30, 2020 and for the six months ended June 30, 2019 are unaudited, and may not include year-end adjustments necessary to make those consolidated financial statements comparable to audited results, although in the opinion of management all adjustments necessary to make interim consolidated statements of operations not misleading have been included.
Results of Operations
Year Ended December 31, 2019 Compared to Year Ended December 31, 2018, and the Six-Month Periods Ended June 30, 2020 and 2019
Epilog generated $9,990 in revenues for the year ended December 31, 2019 and did not generate revenues for the year ended December 31, 2018. The company’s net revenues for the six months ended June 30, 2020 (“Interim 2020”) was $10,000, compared to $9,990 for the six months ended June 30, 2019, (“Interim 2019”).
Most of Epilog’s development in 2019 was focused on software which is not capital intensive. Epilog continued to rely on an employee stock compensation program. The circumstances which led to low revenue performance on its financial statements include Epilog did not pursuit product sales opportunities where supporting the product would have be resource intensive. In addition, Epilog did not pursuit contract revenue opportunities to avoid distraction or strategic OEM misalignment.
The company is transitioning from the pure research and development phase to supporting product sales and service contracts in 2020. Historical results do not reflect future cash flows since the company was not in position to deliver products prior to 2020.
The operating expenses currently consist of General and Administrative costs, research and development, depreciation and amortization and travel. Operating expenses totalled $74,846 for the year ended December 31, 2019 compared to $56,241 for the year ended December 31, 2018, an increase of 32%, primarily due to an increase in General and Administrative expenses of approximately $10,000. In addition, the company spent $1,453 in advertising costs for the year ended December 31, 2019 and $1,000 for the year ended December 31, 2018.
For Interim 2020, operating expenses were $95,684 compared with $19,088 for Interim 2019, an increase of $76,596. Epilog attributes this change primarily due to the cost of the Ref CF offering in 2020.
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As a result of the foregoing, the company generated a net loss of $87,970 as of June 30, 2020 as compared to a net loss of $9,898 as of June 30, 2019. An increase of $78,072 in net loss in the first half.
Liquidity and Capital Resources
The company’s current capital resources come from investments and contracts. Most company employees continue to work on equity payments to conserve cash for research & development, product development and new fundraising activities. Also being strategically located in Silicon Valley and as a result of Covid-19 the company continues to have minimal expenses related to travel.
The company has relatively low overhead. As the company transitions to delivering products to customers, traditional lines of credit and inventory financing are expected to be secured as needed.
The company has conducted a successful crowdfunding campaign that has made cash available for the purpose of initial product deliveries.
On December 31, 2019 the company’s cash on hand was $30,704. The company requires the continued infusion of new capital to continue business operations. The company has recorded losses since inception, and as of December 31, 2019, had a net loss of $ (64,856) and a stockholders’ deficit of $195,751. The company plans to continue to try to raise additional capital through crowdfunding offerings, equity issuances, or any other method available to the company. Absent additional capital, the company may be forced to significantly reduce expenses and could become insolvent.
In addition, the company has a shareholder loan with the current outstanding balance of combined principal and interest, as of October 1, 2020, is of $ $223,525, with a continued interest rate of 1% per year. The company intends to have a portion of this balance repaid through Dec 31, 2020.
The company estimates that if it raised the maximum amount sought in this Offering, it could continue its current rate of operations for 12-24 months without raising additional capital. The company’s burn rate is approximately $30,000 per month.
During 2020, the company has completed the following capital raising activity:
● | During 2020, the CEO advanced the company an additional $4,000. | |
● | During 2020, the company sold a total of 1,387,231 shares of common stock to 2,774 investors for total cash proceeds of $1,040,423 pursuant to Section 4(a)(2). The company used the proceeds from that offering for general operations. | |
● | The company returned $30,000 to an investor for a convertible note that was not finalized | |
● | On June 30, 2020 signed a Reg A posting agreement with StartEngine for $15K: The agreement is to raise up to $50,000,000 with a, 7% commission based on the dollar amount received from investors, In addition 2% commission to be paid in the same securities as this offering and at the same terms. |
During 2020, the company has incurred the following expense obligations
● | On April 1, 2020 the company signed a one-year Lease agreement for its R&D suite located at 155 Dubois Street, Santa Cruz CA 95060, for $25,000. | |
● | On April 4, 2020 the company signed a promotional agreement with StartEngine for the Epilog Regulation Crowdfunding Campaign, digital marketing for approximately $60,000. |
● | On April 16, 2020 the company signed a Contract with a publicly traded company for a “Proof of Concept” design services of a 16K x 16K camera system, for $37,000. |
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Plan of Operations
Epilog intends to lead the market in two main areas: automotive vision systems and queue management. It expects the bulk of its cash-flow to come from these areas and will be supplemented by revenue from the company’s software services.
During 2018, the company entered into an agreement with Jabil, a manufacturing company to build and test prototypes. The statement of work estimates the total cost to be $541,000. Payment is through the amortization of the total cost per unit price of the product based on the forecasted volume of product to be purchased by the company during the first 24 months of full commercial production of the products. To date, no such production has occurred, and no work related to the agreement has been performed.
As of October 1, 2020, the company has achieved the following milestones:
● | Closed $1.0M in new funding. | |
● | Preparing Luma for production. | |
● | Is test-marketing the Thermion product line (3 variants). | |
● | Is developing Sherpa 2 (production version of Sherpa). | |
● | Has completed a POC for the world’s highest resolution Cinema quality camera (Cinapse). |
As part of its plan of operations, Epilog intends to execute the following milestones over the course of the next 12 months:
● | Clinical trials and regulatory approval of the Thermion product line, customer deliveries | |
● | Deployment of Luma system at mass transit and public utility trials, customer deliveries | |
● | Sherpa customer trials and deliveries | |
● | Development of the world’s highest resolution camera system (Cinapse) for existing client | |
● | Establish distribution channels and/or OEM partnership for Luma/Thermion and Sherpa |
Trend Information
The company believes that business trends are leaning towards automation and reducing laborious tasks.
● | Luma assists with reducing the laborious task of managing people and vehicle in queues. Therefore, the company believes that Luma positions the company perfectly with regards to these automation trends. | |
● | Market data suggest both young and older consumers have a preference towards driving less or not at all. Sherpa addresses this preference head on. |
● | In addition, in light of COVID-19, Thermion was specifically designed by the company to assist with long-term management of infectious diseases (people in queues). | |
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Specifically, the company believes the following consumer trends contribute to a successful launch of Sherpa, Luma and Thermion:
● | Businesses prefer to assign repetitive tasks to machines, this saves labor costs, improves efficiency and consistency. | |
● | Increasing trends of urbanization mean extended commute times and traffic jams, all this favors driver assistance systems (self-driving). | |
● | According to kbb.com the estimated average transaction price for a light vehicle in the US was $37,876 in February 2020 (up 30% since 2010). | |
● | Advanced driving features are increasingly being bundled with electric cars. Not everyone wants an electric car and most everyone stuck in traffic jams could use driver assistance. | |
● | Thanks to Sherpa it is much cheaper to upgrade the capability of an existing newer model car than replacing it. |
Recent Offerings of Securities and Outstanding Debt
● | In October 2018 the company sold 2,199,608 shares of Common Stock at par value for $220 pursuant to Section 4(a)(2). The company used the proceeds from that offering for general operations. | |
● | In October 2018 the company sold 61,531 shares of Common Stock at par value for $6.00 pursuant to Section 4(a)(2). The company used the proceeds from that offering for general operations. | |
● | Starting on February 27, 2020 the company initiated an offering to raise up to $1,070,000 through the issuance of Common Stock on StartEngine pursuant to Rule 506(c) of Regulation D under the Securities Act of 1933. The company intends to use the proceeds from this offering for general operations. |
Previous Regulation CF Offering in 2019
In 2019, Epilog conducted a crowd fundraising campaign with SeedInvest to raise $1.5M. The proceeds were intended to develop and market Sherpa (the self-driving product). The company conducted a side-by-side Regulation CF and Regulation D offering with a combined minimum target of $600,000. While the company reached its Regulation CF target of $25,000, the overall campaign minimum target of $600,000 was not reached. The company decided to not take the funds as it didn’t raise enough money overall to help develop and market Sherpa.
Relaxed Ongoing Reporting Requirements
If the company becomes a public reporting company in the future, it will be required to publicly report on an ongoing basis as an “emerging growth company” (as defined in the Jumpstart Our Business Startups Act of 2012, which the company refers to as the JOBS Act) under the reporting rules set forth under the Exchange Act. For so long as the company remains an “emerging growth company,” the company may take advantage of certain exemptions from various reporting requirements that are applicable to other Exchange Act reporting companies that are not “emerging growth companies,” including but not limited to:
● | not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act; |
● | taking advantage of extensions of time to comply with certain new or revised financial accounting standards; |
● | being permitted to comply with reduced disclosure obligations regarding executive compensation in the company’s periodic reports and proxy statements; and |
● | being exempt from the requirement to hold a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. |
If the company becomes a public reporting company in the future, the company expects to take advantage of these reporting exemptions until it is no longer an emerging growth company. The company would remain an “emerging growth company” for up to five years, although if the market value of its Common Stock that is held by non-affiliates exceeds $700 million as of any June 30 before that time, the company would cease to be an “emerging growth company” as of the following December 31.
If the company does not become a public reporting company under the Exchange Act for any reason, the company will be required to publicly report on an ongoing basis under the reporting rules set forth in Regulation A for Tier 2 issuers. The ongoing reporting requirements under Regulation A are more relaxed than for “emerging growth companies” under the Exchange Act. The differences include, but are not limited to, being required to file only annual and semi-annual reports, rather than annual and quarterly reports. Annual reports are due within 120 calendar days after the end of the issuer’s fiscal year, and semi-annual reports are due within 90 calendar days after the end of the first six months of the issuer’s fiscal year.
In either case, the company will be subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not “emerging growth companies,” and its shareholders could receive less information than they might expect to receive from more mature public companies.
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DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The following table sets out the company’s officers and directors. All work with the company on a full-time basis.
Name | Position | Age | Term of Office (if indefinite, give date appointed) | Full Time/Part Time | ||||
Executive Officers | ||||||||
Michael Mojaver | Co-Founder/CEO/ Secretary/Treasurer | 58 | June 28, 2010 until Present | Full Time | ||||
Lance Mojaver | Co-Founder/CTO | 26 | June 1, 2015 until Present | Full Time | ||||
Marc Munford | Business Development | 58 | Secretary, September 16, 2020 until present | Full Time | ||||
Dieter Koller | R&D | 57 | Not an officer | Part Time | ||||
Board of Directors | ||||||||
Michael Mojaver | Director | 58 | January 1, 2015 until Present | |||||
Rony Greenberg | Director | 60 | September 16, 2020 until present |
Michael Mojaver: Co-Founder, CEO, Treasurer and Director
Michael Mojaver is currently Epilog’s Chief Executive Officer. He has served in that position for ten years, from June 2010 to the present date. Michael’s background is in starting, funding and leading technology companies in the United States and internationally. Michael has studied and worked at UC San Diego, Cornell University from 1989-1996, Fermilab and CERN (Switzerland). Michael’s first venture in 1996 was a microchip design company for vision products. Michael’s primary area of interest and continuing research is Neural Networks, AI, AR/VR. Prior to founding Epilog, he was the CEO of GIG from 2008 until 2010. Michael holds a BS in engineering and physics from University of California San Diego, obtained in 1989.
Lance Mojaver: Co-founder, CTO
Lance Mojaver is currently Epilog’s Chief Technology Officer. He has served in that position for five years, from January 2015 to the present date. Lance is the principal architect and developer for device, client, and server software at Epilog. He has more than six years of experience in real-time video software, creating video cameras from initial hardware design to user-facing product. Lance is passionate about creating cutting-edge vision solutions for robotic and consumer use cases.
Marc Munford: Business Development
Marc Munford is Epilog’s Consumer OEM Market Channel Development. He has served in that position since 2017. Marc comes to Epilog from an extensive career in Silicon Valley startups. Previously, Marc was co-founder of NetDrive — the first Internet personal storage service (before it was called Cloud) from 1999 to 2000. Marc has built and run sales and business development for early stage companies such as Visto/Good Technology from 2000 to 2004, Funambol from 2005 to 2012, Germain Software from 2013 to 2014, Treasure Data from 2015 to 2017 , and Wollongong/Attachmate from 1995 to 1996. Marc learned to evangelize breakthrough technology when he was a software engineer early in his career working for Steve Jobs at NeXT. Marc’s younger days in football also brings Epilog connections to major sports franchise leagues.
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Dieter Koller: Research & Algorithm Development
Dieter Koller oversees Epilog’s science program. He has served in that position since 2017. Dieter has over a decade of management experience at various levels, including VP of Engineering, CTO, and Managing Director. He has a strong technical background within all facets of imaging technologies and computer vision, with applications in biometrics, multimedia, video compression and video processing, computer graphics, embedded technologies, as well as internet applications and new emerging technologies.
Dieter finished his Post Doctorate studies in the field of video tracking at University of California at Berkeley and California Institute of Technology 1992-1997, after studying computer science and physics at Karlsruhe Institute of Technology (KIT) in Germany. Dieter currently supports Epilog remotely from Germany.
Rony Greenberg, Director
Rony Greenberg is currently a member of the board of directors of Epilog. He was appointed in September 2020. From 2011 until present, Rony has been the Vice President of business development at eyeSight Technologies. In addition, Rony was formerly the director of Intel Capital from 2000 to 2001. Rony is a business leader with a consistent track record of delivering dramatically increased revenues, gross margin and profits. He is also experienced at efficiently orchestrating and navigating complex organizations with cross functional teams located worldwide. Rony graduated from Tel Aviv University in 1990.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
For the fiscal year ended December 31, 2019 the company compensated its three highest paid directors and executive officers as follows:
Name | Capacities in which compensation was received | Cash compensation ($) | Other compensation (shares) | Total compensation ($) | ||||||||
Michael Mojaver | Salary | $ | 0 | 250,000 shares | $ | 187,500 | ||||||
Lance Mojaver | Salary | $ | 0 | 200,000 shares | $ | 150,000 |
For the fiscal year ended December 31, 2019, the company paid its directors and executive officers as a group 450,000 shares. As of December 31, 2019, these shares have been allocated to the applicable directors and executives, however, the shares have not yet been issued to them. There is one director in this group.
The compensation package was determined based on market rates.
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SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS
The following table displays, as of October 1, 2020 the voting securities beneficially owned by (1) any individual director or officer who beneficially owns more than 10% of any class of the company’s capital stock, (2) all executive officers and directors as a group and (3) any other holder who beneficially owns more than 10% of any class of the company’s capital stock:
Beneficial owner | Title of class | Name and address of beneficial owner | Amount and nature of beneficial ownership | Amount and nature of beneficial ownership acquirable | Percent of class (1) | Percent of voting power | ||||||||||||||
Michael Mojaver | Common Stock | Michael Mojaver 318 Cliff Drive, Aptos, CA 95003 | 10,000,000 | 500,000 | 72.8 | % | 72.8 | % | ||||||||||||
Lance Mojaver | Common Stock | Lance Mojaver 318 Cliff Drive, Aptos, CA 95003 | 1,722,865 | 400,000 | 12.6 | % | 12.6 | % |
(1) | The column “Percent of Class” includes a calculation of the amount the person owns now, plus the amount that person is entitled to acquire. That amount is then shown as a percentage of the outstanding amount of securities in that class if no other people exercised their rights to acquire those securities. The result is a calculation of the maximum amount that person could ever own based on their current and acquirable ownership, which is why the amounts in this column will not add up to 100%. |
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INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
● | During the years ending December 31, 2018 and 2017, Michael Mojaver advanced funds to the company for use with regards to operations. As of December 31, 2019 and 2018, the amount of advances outstanding is $223,525 and $186,375, respectively, and are recorded under ‘Advances – related party’ on the balance sheets. These advances accrue interest at the minimum federal statutory rate to comply with related party rules and Section 7872. The accrued interest balance at December 31, 2019 and 2018 was $94,101 and $94,101, respectively. |
● | During October 2018, the company’s chief technology officer, Lance Mojaver, purchased 1,716,528 common shares, at par value, for $172.29. |
● | As of October 2018, Nina Mojaver was awarded 123,062 shares of Common Stock. From July 1, 2016 until June 30, 2019, Epilog occupied office space at a building owned by Nina Mojaver in downtown San Diego. The equivalent rent, based on the current offering price of 75 cents a share would be approximately $92K. The shares were purchased at par value of 0.0001 for a total purchase price of $12.31. |
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General
The company is offering Common Stock to investors in this offering.
The following description summarizes important terms of the company’s capital stock. This summary does not purport to be complete and is qualified in its entirety by the provisions of the Certificate of Incorporation and its Amended and Restated Bylaws, copies of which will be filed as Exhibits to the Offering Statement of which this Offering Circular is a part. For a complete description of Epilog’s capital stock, you should refer to its Certificate of Incorporation, Amended and Restated Bylaws, and applicable provisions of the Delaware General Corporation Law.
Epilog’s authorized capital stock consists of 25,000,000 shares of Common Stock, $0.0001 par value per share, and 5,000,000 shares of Preferred Stock, $0.0001 par value per share.
As of August 28, 2020, the outstanding shares of Epilog. included:
● | 13,732,845 shares of Common Stock. | |
● | 0 shares of Preferred Stock. |
Common Stock
The amount of the Common Stock authorized is 25,000,000. A total of 13,732,845 is outstanding.
Voting Rights: Each share is entitled to 1 vote.
Material Rights: Dividends, upon the capital stock of the corporation, subject to the applicable provisions, if any, of the Certificate of Incorporation, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property or in shares of capital stock, subject to the provisions of the Certificate of Incorporation. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the Board of Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purposes as the board of directors shall think conducive to the interest of the corporation, and the board of directors may modify or abolish any such reserve in the manner in which it was created.
Preferred Stock
The amount of Preferred Stock authorized is 5,000,000. A total of 0 are outstanding.
Voting Rights: The voting rights of the Preferred Stock may be determined at time of designation of any such series of Preferred Stock.
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Material Rights: The board of directors is expressly authorized to fix by resolution the designations and the powers, preferences and rights, and the qualifications, limitations and restrictions of any series of preferred stock which are permitted by the Delaware General Corporation Law.
ONGOING REPORTING AND SUPPLEMENTS TO THIS OFFERING CIRCULAR
The company will be required to make annual and semi-annual filings with the SEC. The company will make annual filings on Form 1-K, which will be due by the end of April each year and will include audited financial statements for the previous fiscal year. The company will make semi-annual filings on Form 1-SA, which will be due by September 28 each year, which will include unaudited financial statements for the six months to June 30. The company will also file a Form 1-U to announce important events such as the loss of a senior officer, a change in auditors, or certain types of capital-raising. The company will be required to keep making these reports unless it files a Form 1-Z to exit the reporting system, which it will only be able to do if it has less than 300 shareholders of record and have filed at least one Form 1-K.
At least every 12 months, the company will file a post-qualification amendment to the Offering Statement of which this Offering Circular forms a part, to include the company’s recent financial statements.
The company may supplement the information in this Offering Circular by filing a Supplement with the SEC.
All these filings will be available on the SEC’s EDGAR filing system. You should read all the available information before investing.
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Epilog Imaging Systems, Inc.
75 E. Santa Clara Ave
Suite 600
San Jose, CA 95113
EPILOG IMAGING SYSTEMS, INC.
Financial Statements
For the Six Months Ended June 30, 2020
Table of Contents | |
Balance Sheets | F-2 |
Statements of Operations | F-3 |
Statements of Changes in Stockholders’ Equity | F-4 |
Statements of Cash Flows | F-5 |
Notes to the Financial Statements | F-6 - F-13 |
F-1
BALANCE SHEETS
June 30, 2020 | December 31, 2019 | |||||||
(unaudited) | (audited) | |||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 715,506 | $ | 30,704 | ||||
Inventory | 3,732 | - | ||||||
Total Current Assets | 719,238 | 30,704 | ||||||
Furniture and Equipment | 11,448 | - | ||||||
Security Deposit | 2,170 | - | ||||||
Intangible assets net | 317,361 | 328,861 | ||||||
TOTAL ASSETS | $ | 1,050,217 | $ | 359,565 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | 214,490 | $ | 197,408 | ||||
Accrued interest related party | 94,101 | 94,101 | ||||||
Advances - related party | 10,282 | 10,282 | ||||||
Convertible Notes | 30,000 | 30,000 | ||||||
Notes payable related party | 197,524 | 223,525 | ||||||
Total Current Liabilities | 546,397 | 555,316 | ||||||
TOTAL LIABILITIES | 546,397 | 555,316 | ||||||
Commitments and Contingencies | ||||||||
STOCKHOLDERS’ DEFICIT | ||||||||
Common Stock, 0.001 par value, authorized 345,000,000 shares 12,260,913 and 10,000,000 shares issued and outstanding as of December 31, 2019 and 2018 respectively | 1,365 | 1,226 | ||||||
Additional Paid in Capital | 1,369,133 | 580,849 | ||||||
Accumulated deficit | (866,678 | ) | (777,826 | ) | ||||
TOTAL STOCKHOLDERS’ DEFICIT | 503,820 | (195,751 | ) | |||||
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 1,050,217 | $ | 359,565 |
The accompanying footnotes are an integral part of these financial statements
F-2
STATEMENTS OF OPERATIONS
For the six months ended
2019 | 2018 | |||||||
Revenue | $ | 10,000 | $ | 9,990 | ||||
Cost of goods sold | 3,168 | - | ||||||
Gross profit | 6,832 | 9,990 | ||||||
Expenses | ||||||||
General and Administrative Expenses | 42,401 | 14,020 | ||||||
Payroll Expense | 15,909 | - | ||||||
Professional Fees | 18,677 | 4,942 | ||||||
Research and development | 5,815 | 109 | ||||||
Depreciation and Amortization | 12,882 | - | ||||||
Total operating expenses | 95,684 | 19,071 | ||||||
Net income (loss) from operations | (88,852 | ) | (9,081 | ) | ||||
Other Income (expenses) | ||||||||
Interest expense | - | - | ||||||
Total other income (expenses) | - | - | ||||||
Net income (loss) before ncome taxes | (88,852 | ) | (9,081 | ) | ||||
Provision for income taxes | - | - | ||||||
Net income (loss) | $ | (88,852 | ) | $ | (9,081 | ) | ||
Net income (loss) per common share basic and diluted | $ | (0.01 | ) | $ | (0.00 | ) | ||
Weighted averagenumber of common shares basic and diluted | 13,684,927 | 12,297,696 |
The accompanying footnotes are an integral part of these consolidated financial statements
F-3
STATEMENT OF CHANGES IN SHAREHOLDERS’ DEFICIT
For the years ended December 31, 2018 and 2019
Common Stock | Additional Paid in | Accumulated | ||||||||||||||||||
Shares | Amount | Capital | Deficit | TOTAL | ||||||||||||||||
Balance, December 31, 2017 | 10,000,000 | $ | 1,000 | $ | 580,849 | $ | (650,216 | ) | $ | (68,367 | ) | |||||||||
Shares issued for cash | 2,236,391 | 220 | - | - | 220 | |||||||||||||||
Shares issued for services | 61,305 | 6 | - | - | 6 | |||||||||||||||
Prior period adjustment | - | - | ||||||||||||||||||
Net income (loss) | - | - | - | (62,754 | ) | (62,754 | ) | |||||||||||||
Balance December 31, 2018 | 12,297,696 | $ | 1,226 | $ | 580,849 | $ | (712,970 | ) | $ | (130,895 | ) | |||||||||
Net income (loss) | - | - | - | (64,856 | ) | (64,856 | ) | |||||||||||||
Balance December 31, 2019 | 12,297,696 | 1,226 | 580,849 | (777,826 | ) | (195,751 | ) | |||||||||||||
New Shares issued | 1,387,231 | 139 | 788,284 | - | 788,423 | |||||||||||||||
Net income (loss) | - | - | - | (88,852 | ) | (88,852 | ) | |||||||||||||
Balance June 30, 2020 | 13,684,927 | 1,365 | 1,369,133 | (866,678 | ) | 503,820 |
The accompanying footnotes are an integral part of these financial statements
F-4
CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended June 30,
2020 | 2019 | |||||||
OPERATING ACTIVITIES | ||||||||
Net Income (Loss) | $ | (88,852 | ) | $ | (9,081 | ) | ||
Amortization | 12,882 | - | ||||||
Stock based compensation | - | 6 | ||||||
Change in inventory | (3,732 | ) | - | |||||
Change in accounts payable | 17,082 | 29,363 | ||||||
Change in accrued expenses | - | - | ||||||
Net Cash Used by Operating Activities | (62,620 | ) | 20,288 | |||||
Cashflow from investing activities | ||||||||
Patent filings | (12,329 | ) | (35,279 | ) | ||||
Total Net Cash Used by Operating Activities | (12,329 | ) | (35,279 | ) | ||||
FINANCING ACTIVITIES: | ||||||||
Proceed from issuance of common stock | 788,423 | 220 | ||||||
Proceed from convertible notes | - | |||||||
Proceeds from Paymnets to - Related Party | (28,672 | ) | 18,223 | |||||
Net Cash Provided by Financing Activities | 759,751 | 18,443 | ||||||
NET INCREASE (DECREASE) IN CASH | 684,802 | 3,452 | ||||||
CASH AT BEGINNING OF PERIOD | 30,704 | 527 | ||||||
CASH AT END OF PERIOD | $ | 715,506 | $ | 3,979 | ||||
Supplemental Cashflow Information | ||||||||
Interest Paid | $ | - | $ | - | ||||
Taxes Paid | $ | - | $ | - |
The accompanying footnotes are an integral part of these consolidated financial statements
F-5
NOTES TO THE FINANCIAL STATEMENTS
For the six months ended June 30, 2020
NOTE 1 – NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Epilog Imaging Systems, Inc. (“the Company”) was incorporated on June 28, 2010 under the laws of the State of Delaware, and is headquartered in San Jose, CA. The Company is creating imaging technologies that meet and exceed the capabilities of human vision.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are normal and recurring in nature. The Company’s fiscal year-end is December 31.
Going Concern
The financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the normal course of business. The Company had a total accumulated deficit of $866,678 as of December 31, 2019. Therefore, there is substantial doubt about the ability of the Company to continue as a going concern. There can be no assurance that the Company will achieve its goals and reach profitable operations and is still dependent upon its ability (1) to obtain sufficient debt and/or equity capital and/or (2) to generate positive cash flow from operations.
In December 2019, a novel strain of coronavirus (COVID-19) was reported in Wuhan, China and has spread throughout the United States and the rest of the world. The World Health Organization has declared the outbreak to constitute a “Public Health Emergency of International Concern.” This contagious disease outbreak, which has not been contained, and is disrupting supply chains and affecting production and sales across a range of industries in United States and other companies as a result of quarantines, facility closures, and travel and logistics restrictions in connection with the outbreak, as well as the worldwide adverse effect to workforces, economies and financial markets, leading to a global economic downturn. Therefore, the Company expects this matter to negatively impact its operating results. However, the related financial impact and duration cannot be reasonably estimated at this time.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates may be materially different from actual financial results. Significant estimates include the recoverability of long-lived assets, the collection of accounts receivable and valuation of inventory and reserves.
Risks and Uncertainties
As of December 31, 2019, the Company has not commenced full scale operations. The Company’s activities since inception have consisted of service and business development. Once the Company commences its planned full-scale operations, it will incur significant additional expenses. The Company is dependent upon additional capital resources for the commencement of its planned principal operations and is subject to significant risks and uncertainties; including failing to secure funding to operationalize the Company’s plans or failing to profitably operate the business; recessions, downturns, changes in local competition or market conditions; governmental policy changes; or a host of other factors beyond the Company’s control. Any of these adverse conditions could negatively impact the Company’s financial position
F-6
Cash and Cash Equivalents
We maintain the majority of our cash accounts at a commercial bank. The total cash balance is insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 per commercial bank, at times we may exceed the FDIC limits. For purposes of the statement of cash flows we consider all cash and highly liquid investments with initial maturities of one year or less to be cash equivalents.
Accounts Receivable
We grant credit to our customers and do not require collateral. Our ability to collect receivables is affected by economic fluctuations in the geographic areas and industries served by us. Reserves for un-collectable amounts are provided, based on past experience and a specific analysis of the accounts. Although we expect to collect amounts due, actual collections may differ from the estimated amounts.
Inventory
Inventory is stated at the lower of cost or market value and is account for using the first-in-first-out method (“FIFO”). The Company analyzes inventory per any potential obsolescence, and records impairment and obsolescence reserve against inventory as deemed necessary. During the year ended December 31, 2018, the remaining inventory balance was written off.
Long –Lived Assets
Our management assesses the recoverability of its long-lived assets by determining whether the depreciation and amortization of long-lived assets over their remaining lives can be recovered through projected undiscounted future cash flows. The amount of long-lived asset impairment if any, is measured based on fair value and is charged to operations in the period in which long-lived assets impairment is determined by management. There can be no assurance however, that market conditions will not change or demand for our services will continue, which could result in impairment of long-lived assets in the future.
Advertising costs
The Company’s advertising costs are expensed as incurred. During the six months ended June 30, 2020 and 2019, the Company recognized $8,689 and $272 in advertising costs, respectively, recorded under the heading ‘General and administrative’ in the statements of operations
Intangibles
Intangible assets purchased or developed by the Company are recorded at cost. Amortization is recognized over the estimated useful life of the asset using the straight-line method for financial statement purposes. The Company reviews the recoverability of intangible assets, including the related useful lives, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. No impairment was considered necessary at December 31, 2019 or 2018.
Convertible Notes
The Company received $30,000 from an investor in December 2019 for a convertible note as part of a funding campaign. The loan was never finalized, and the funds were returned to the investor in January 2020. There was no actual note signed and therefore no specific terms.
F-7
Revenue Recognition
The Company recognizes revenue under ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” (“ASC 606”).
Performance Obligations Satisfied Over Time
FASB ASC 606-10-25-27 through 25-29, 25-36 through 25-37, 55-5 through 55-10
An entity transfers control of a good or service over time and satisfies a performance obligation and recognizes revenue over time if one of the following criteria is met:
a. The customer receives and consumes the benefits provided by the entity’s performance as the entity performs (as described in FASB ASC 606-10-55-5 through 55-6).
b. The entity’s performance creates or enhances an asset (for example, work in process) that the customer controls as the asset is created or enhanced (as described in FASB ASC 606-10-55-7).
c. The entity’s performance does not create an asset with an alternative use to the entity (see FASB ASC 606-10-25-28), and the entity has an enforceable right to payment for performance completed to date (as described in FASB ASC 606-10-25-29).
Performance Obligations Satisfied at a Point in Time
FASB ASC 606-10-25-30
If a performance obligation is not satisfied over time, the performance obligation is satisfied at a point in time. To determine the point in time at which a customer obtains control of a promised asset and the entity satisfies a performance obligation, the entity should consider the guidance on control in FASB ASC 606-10-25-23 through 25-26. In addition, it should consider indicators of the transfer of control, which include, but are not limited to, the following:
a. The entity has a present right to payment for the asset
b. The customer has legal title to the asset
c. The entity has transferred physical possession of the asset
d. The customer has the significant risks and rewards of ownership of the asset
e. The customer has accepted the asset
The core principle of the revenue standard 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 Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods and services transferred to the customer. In Addition a) the company also does not have an alternative use for the asset if the customer were to cancel the contract, and b.) has a fully enforceable right to receive payment for work performed (i.e., customers are required to pay as various milestones and/or timeframes are met)
For the six months ended Jun 30, 2020 and 2019 the company recognized $10,000 and $9,990 respectively. The revenue in 2019 was derived solely from one customer
Epilog was founded with the goal of using robotics and computer vision to help humans with repetitive/robotic tasks. Specifically, the company develops artificial intelligence (“AI”) vision products related to automobiles, self-driving, and the transportation industry. The company is seeking to bring human quality, AI based vision driver assistance technology to millions of cars already on the road today (mobile solution) as well as queue management system for monitoring the flow of people and vehicles (stationary solution). The company’s products offer exceptionally high image quality AI in compact and cost-efficient devices, best suited to monitoring large spaces, for example, highways, transportation hubs, parking lots and arenas.
F-8
The Company is unable to reasonably estimate future costs that will be incurred under its warranty program on revenue recognized as of June 30, 2020 and the Company anticipates the amounts associated with revenues recognized as of June 30, 2020 to be immaterial to the financial statements.
Fair Value of Financial Instruments
The Financial Accounting Standards Board issued ASC (Accounting Standards Codification) 820-10 (SFAS No. 157), “Fair Value Measurements and Disclosures” for financial assets and liabilities. ASC 820-10 provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. FASB ASC 820-10 defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. FASB ASC 820-10 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required by the standard that the Company uses to measure fair value:
● | Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as exchange-traded instruments and listed equities. |
● | Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (e.g., quoted prices of similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active). |
● | Level 3 - Unobservable inputs for the asset or liability. Financial instruments are considered Level 3 when their fair values are determined using pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable. |
The Company’s financial instruments consist of cash, prepaid expenses, inventory, accounts payable, convertible notes payable, advances from related parties. The estimated fair value of cash, prepaid expenses, investments, accounts payable, convertible notes payable and advances from related parties approximate their carrying amounts due to the short-term nature of these instruments.
The carrying amount of accounts payable and accrued expenses are considered to be representative of their respective fair values because of the short-term nature of these financial instruments.
Other Comprehensive Income
We have no material components of other comprehensive income (loss) and accordingly, net loss is equal to comprehensive loss in all periods.
Net Profit (Loss) per Common Share
Basic profit / (loss) per share is computed on the basis of the weighted average number of common shares outstanding. At June 30, 2020, we had outstanding common shares of 13,684,927 used in the calculation of basic earnings per share. Basic Weighted average common shares and equivalents for the year ended June 30, 2020 and 2019 were 13,684,927 and 12,297,696, respectively. As of December 31, 2019, had convertible note convertible in into additional common shares. Fully diluted weighted average common shares and equivalents were withheld from the calculation as they were considered anti-dilutive.
F-9
Research and Development
Research and development costs, including salaries, research material, and administrative costs are expensed as incurred. During the six months ended June 30, 2020 and 2019, the Company recognized $5,815 and $109 in research and development costs, respectively.
Share-Based Compensation
The Company accounts for stock-based compensation in accordance with ASC Section 718 Compensation – Stock Compensation. Under the fair value recognition provisions of ASC 718, stock-based compensation cost is measured at the grant date based on the fair value of the award.
Income Taxes
Federal Income taxes are not currently due since we have had losses since inception.
On December 22, 2018 H.R. 1, originally known as the Tax Cuts and Jobs Act, (the “Tax Act”) was enacted. Among the significant changes to the U.S. Internal Revenue Code, the Tax Act lowers the U.S. federal corporate income tax rate (“Federal Tax Rate”) from 35% to 21% effective January 1, 2018. The Company will compute its income tax expense for the six months ended June 30, 2020 using a Federal Tax Rate of 21%.
Income taxes are provided based upon the liability method of accounting pursuant to ASC 740-10-25 Income Taxes – Recognition. Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the “more likely than not” standard required by ASC 740-10-25-5.
Deferred income tax amounts reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting purposes.
As of June 30, 2020, we had a net operating loss carry-forward of approximately $(866,678) and a deferred tax asset of $182,002 using the statutory rate of 21%. The deferred tax asset may be recognized in future periods, not to exceed 20 years. However, due to the uncertainty of future events we have booked valuation allowance of $(182,002). FASB ASC 740 prescribes recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FASB ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. At June 30, 2020 the Company had not taken any tax positions that would require disclosure under FASB ASC 740.
December 31, 2020 | December 31, 2019 | |||||||
Deferred Tax Asset | $ | 182,002 | $ | 163,343 | ||||
Valuation Allowance | (182,002 | ) | (163,343 | ) | ||||
Deferred Tax Asset (Net) | $ | - | $ | - |
F-10
Recently Issued Accounting Standards
The Company is reviewing the effects of following recent updates. The Company has no expectation that any of these items will have a material effect upon the financial statements.
In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments—Credit Losses [codified as Accounting Standards Codification Topic (ASC) 326]. ASC 326 adds to US generally accepted accounting principles (US GAAP) the current expected credit loss (CECL) model, a measurement model based on expected losses rather than incurred losses. Under this new guidance, an entity recognizes its estimate of expected credit losses as an allowance, which the FASB believes will result in more timely recognition of such losses. This will become effective in January 2023 and the impact on the company is under evaluation.
Update 2020-06—Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This was issued in August of 2020 and will become effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. We are in the process of evaluating the impact to the company.
NOTE 2 – PLANT AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. Additions and improvements are capitalized while routine repairs and maintenance are charged to expense as incurred. Upon sale or disposition, the recorded asset cost and accumulated depreciation are removed from accounts and the net amount, less proceeds received from disposal, is charged or credited to other income or expense. The Company reviews the recoverability of all long-lived assets, including the related useful lives, whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset might not be recoverable. No impairment was considered necessary at December 31, 2019 or 2018. Assets were fully depreciated at December 31, 2019 and 2018. Depreciation expense for the years ended December 31, 2019 and 2018 was $0.
Plant and Equipment | June 30, 2019 | December 31, 2019 | ||||||
Furniture and Equipment | $ | 68,264 | $ | 55,935 | ||||
Warehouse Equipment | 2,488 | 2,488 | ||||||
Total Plant and Equipment (Gross) | 70,752 | 58,423 | ||||||
Accumulated Depreciation | (59,304 | ) | (58,423 | ) | ||||
Total Plant and Equipment (Net) | $ | 11,448 | $ | - |
F-11
NOTE 3 – INTANGIBLE ASSETS
December 31, 2019 | December 31, 2018 | |||||||
Patent/Super Resolution Imaging | $ | 215,187 | $ | 171,064 | ||||
Epilog Name Purchase | 12,000 | 12,000 | ||||||
Intangibles - Patent # 7274381 | 130,000 | 130,000 | ||||||
Intangibles - Patent # 7573715 | 130,000 | 130,000 | ||||||
Intangibles - Patent #6833843 | 130,000 | 130,000 | ||||||
Intangibles - Website | 10,000 | 10,000 | ||||||
Total Intangible Assets (Gross) | 627,187 | 583,064 | ||||||
Accumulated Amortization | (309,826 | ) | (275,384 | ) | ||||
Total Intangible Assets (Net) | $ | 317,361 | $ | 307,680 |
Amortization expense for the years ended December 31, 2019 and 2018, was $22,942 and $22,941, respectively. Other intangible assets in the table above consist of the purchase of the website and the company name. Patent filings are for patents that have not yet been issued and therefore have not yet begun being amortized.
The patents that are being amortized were purchased and recorded at cost.
Management periodically considers the need for impairment of the intangible assets and currently has no need for impairment.
NOTE 4 – COMMITMENTS AND CONTINGENCIES
During 2018, the Company entered into an agreement with a manufacturing company to build and test the prototypes. The statement of work estimates the total cost to be $541,000. Payment is through the amortization of the total cost per unit price of the product based on the forecasted volume of product to be purchased by the Company during the first 24 months of full commercial production of the products. To date, no such production has occurred and no work related to the agreement has been performed.
NOTE 5 – RELATED PARTY TRANSACTIONS
During the 2020 and, a shareholder of the Company advanced funds for operations. At June 30, 2020 and December 31, 2019, the amount of advances outstanding is $197,524 and $223,525, respectively, and are recorded under ‘notes payable related party’ on the balance sheets. These advances accrue interest at the minimum federal statutory rate to comply with related party rules and Section 7872. The accrued interest balance at December 31, 2019 and 2018 was $94,101 and $94,101, respectively. During October 2018, the Company’s chief technology officer purchased 1,716,528 common shares, and a family member of the CEO purchased 122,609 common shares. There were no stock issuances in 2020 or 2019.
NOTE 6 – STOCKHOLDERS’ EQUITY
The Company has authorized 25,000,000 shares of common stock at $0.0001 par value. During 2010, the Company issued 10,000,000 founders shares to the CEO at par value. In October 2018, the Company sold 2,236,391 common shares to a number of investors at par value. In October 2018, the Company issued 61,305 common shares to an advisor for services at par value. In 2020, the Company issued a total of 480,000 common shares to 731 investors for total cash proceeds of $360,000.
F-12
NOTE 7 – SUBSEQUENT EVENTS
The Company has evaluated subsequent events through August 30, 2020, the date these financial statements were available to be issued and noted the following: During 2020, the CEO advanced the Company an additional $4,000. The Company sold a total of 1,387,231 shares of common stock to 2,774 investors for total cash proceeds of $1,040,423. The Company returned $30,000 to an investor for a convertible note that was not finalized.
In 2020 the board of directors authorized compensation of 670,000 shares to key employees for 2019 services at $0.0001 par value, to be granted once the company has a stocks options plan in place.
On April 16, 2020 the company signed a Contract with confidential client for a “Proof of Concept” design services for client by Epilog for a 16K x 16K camera system, for $37,000.
On April 4, 2020 the company signed a promotional agreement with StartEngine for the Epilog Regulation Crowdfunding Campaign, digital marketing for approximately $60,000.
On June 30, 2020 signed a Reg A posting agreement with StartEngine for $15K: The agreement is to raise up to $50,000,000 with a, 7% commission based on the dollar amount received from investors, In addition 2% commission to be paid in the same securities as this offering and at the same terms.
On April 1, 2020 the company signed a one-year Lease agreement for its R&D suite located at 155 Dubois Street, Santa Cruz CA 95060, for $25,000.
In accordance with ASC 855, the Company has analyzed its operations subsequent to December 31, 2019 through the date these financial statements were issued, and has determined that it does not have any other material subsequent events to disclose in these financial statements.
F-13
Epilog Imaging Systems, Inc.
75 E. Santa Clara Ave
Suite 600
San Jose, CA 95113
EPILOG IMAGING SYSTEMS, INC.
Financial Statements
For the Years Ended December 31, 2019 and 2018
Table of Contents | |
Independent Accountants’ Audit Report | F-2 |
Balance Sheets | F-3 |
Statements of Operations | F-4 |
Statements of Changes in Stockholders’ Equity | F-5 |
Statements of Cash Flows | F-6 |
Notes to the Financial Statements | F-7 - F-14 |
F-1
|
To the Board of Directors and Management
We have audited the accompanying financial statements of Epilog Imaging Systems, Inc. (“the Company”), which comprise the balance sheets as of December 31, 2019 and 2018, and the related statements of operations, changes in shareholders’ deficit, and cash flows for the years ended December 31, 2019 and 2018, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. |
Members of: WSCPA AICPA PCPS
802 N. Washington PO Box 2163 Spokane, Washington 99210-2163
P 509-624-9223 TF 1-877-264-0485 mail@fruci.com www.fruci.com
|
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Emphasis of Matter Regarding Going Concern
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 has incurred losses from inception and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our conclusion is not modified with respect to this matter.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for the years ended December 31, 2019 and 2018 in accordance with accounting principles generally accepted in the United States of America.
Spokane, Washington September 3, 2020 |
F-2
BALANCE SHEETS
December 31, 2019 | December 31, 2018 | |||||||
(audited) | (audited) | |||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 30,704 | $ | 528 | ||||
Other Assets | ||||||||
Intangible assets net | 328,861 | 307,680 | ||||||
TOTAL ASSETS | $ | 359,565 | $ | 308,208 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | 197,408 | $ | 151,065 | ||||
Accrued interest related party | 94,101 | 94,101 | ||||||
Advances - related party | 10,282 | 7,562 | ||||||
Convertible Notes | 30,000 | - | ||||||
Notes payable related party | 223,525 | 186,375 | ||||||
Total Current Liabilities | 555,316 | 439,103 | ||||||
TOTAL LIABILITIES | 555,316 | 439,103 | ||||||
Commitments and Contingencies | - | - | ||||||
STOCKHOLDERS’ DEFICIT | ||||||||
Common Stock, 0.001 par value, authorized 345,000,000 shares 12,297,696 and 12,297,696 shares issued and outstanding as of December 31, 2019 and 2018 respectively | 1,226 | 1,226 | ||||||
Additional Paid in Capital | 580,849 | 580,849 | ||||||
Accumulated deficit | (777,826 | ) | (712,970 | ) | ||||
TOTAL STOCKHOLDERS’ DEFICIT | (195,751 | ) | (130,895 | ) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 359,565 | $ | 308,208 |
The accompanying footnotes are an integral part of these financial statements
F-3
STATEMENTS OF OPERATIONS
For the years ended December 31,
2019 | 2018 | |||||||
Revenue | $ | 9,990 | $ | - | ||||
Cost of goods sold | - | - | ||||||
Gross profit | 9,990 | - | ||||||
Expenses | ||||||||
General and Administrative Expenses | 18,902 | 11,864 | ||||||
Professional fees | 24,141 | 12,616 | ||||||
Research and development | 8,861 | 8,819 | ||||||
Depreciation and Amortization | 22,942 | 22,942 | ||||||
Total operating expenses | 74,846 | 56,241 | ||||||
Net income (loss) from operations | (64,856 | ) | (56,241 | ) | ||||
Other Income (expenses) | ||||||||
Loss on Inventory write down | - | (4,584 | ) | |||||
Interest expense | - | (1,929 | ) | |||||
Total other income (expenses) | - | (6,513 | ) | |||||
Net income (loss) before income taxes | (64,856 | ) | (62,754 | ) | ||||
Provision for income taxes | - | - | ||||||
Net income (loss) | $ | (64,856 | ) | $ | (62,754 | ) | ||
Net income (loss) per common share basic and diluted | $ | (0.01 | ) | $ | (0.01 | ) | ||
Weighted average number of common shares basic and diluted | 12,260,913 | 10,477,914 |
The accompanying footnotes are an integral part of these consolidated financial statements
F-4
STATEMENT OF CHANGES IN SHAREHOLDERS’ DEFICIT
For the years ended December 31, 2018 and 2019
Common Stock | Additional Paid in | Accumulated | ||||||||||||||||||
Shares | Amount | Capital | Deficit | TOTAL | ||||||||||||||||
Balance, December 31, 2017 | 10,000,000 | $ | 1,000 | $ | 580,849 | $ | (650,216 | ) | $ | (68,367 | ) | |||||||||
Shares issued for cash | 2,236,391 | 220 | - | - | 220 | |||||||||||||||
Shares issued for services | 61,305 | 6 | - | - | 6 | |||||||||||||||
Net income (loss) | - | - | - | (62,754 | ) | (62,754 | ) | |||||||||||||
Balance December 31, 2018 | 12,297,696 | $ | 1,226 | $ | 580,849 | $ | (712,970 | ) | $ | (130,895 | ) | |||||||||
Net income (loss) | - | - | - | (64,856 | ) | (64,856 | ) | |||||||||||||
Balance December 31, 2019 | 12,297,696 | 1,226 | 580,849 | (777,826 | ) | (195,751 | ) |
The accompanying footnotes are an integral part of these financial statements
F-5
STATEMENT OF CASH FLOWS
For the years ended December 31,
2019 | 2018 | |||||||
OPERATING ACTIVITIES | ||||||||
Net Income (Loss) | $ | (64,856 | ) | $ | (62,754 | ) | ||
Amortization | 22,942 | 22,942 | ||||||
Stock based compensation | - | 6 | ||||||
Change in inventory | - | 4,584 | ||||||
Change in accounts payable | 46,343 | 29,363 | ||||||
Change in accrued expenses | 2,720 | 1,929 | ||||||
Net Cash Provided (Used) by Operating Activities | 7,149 | (3,930 | ) | |||||
Cashflow from investing activities | ||||||||
Patent filings | (44,123 | ) | (15,167 | ) | ||||
Total Net Cash Used by Operating Activities | (44,123 | ) | (15,167 | ) | ||||
FINANCING ACTIVITIES: | ||||||||
Proceed from issuance of common stock | - | 220 | ||||||
Proceed from convertible notes | 30,000 | - | ||||||
Proceeds from advances - Related Party | 37,150 | 18,800 | ||||||
Net Cash Provided by Financing Activities | 67,150 | 19,020 | ||||||
NET INCREASE (DECREASE) IN CASH | 30,176 | (77 | ) | |||||
CASH AT BEGINNING OF PERIOD | 528 | 605 | ||||||
CASH AT END OF PERIOD | $ | 30,704 | $ | 528 | ||||
Supplemental Cashflow Information | ||||||||
Interest Paid | $ | - | $ | - | ||||
Taxes Paid | $ | - | $ | - |
The accompanying footnotes are an integral part of these consolidated financial statements
F-6
NOTES TO THE FINANCIAL STATEMENTS
For the years ended December 31, 2019 and 2018
NOTE 1 – NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Epilog Imaging Systems, Inc. (“the Company”) was incorporated on June 28, 2010 under the laws of the State of Delaware, and is headquartered in San Jose, CA. The Company is creating imaging technologies that meet and exceed the capabilities of human vision.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are normal and recurring in nature. The Company’s fiscal year-end is December 31.
Going Concern
The financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the normal course of business. The Company had a total stockholder’s deficit of $195,751 and an accumulated deficit of $777,826 as of December 31, 2019. Therefore, there is substantial doubt about the ability of the Company to continue as a going concern. There can be no assurance that the Company will achieve its goals and reach profitable operations and is still dependent upon its ability (1) to obtain sufficient debt and/or equity capital and/or (2) to generate positive cash flow from operations.
In December 2019, a novel strain of coronavirus (COVID-19) was reported in Wuhan, China and has spread throughout the United States and the rest of the world. The World Health Organization has declared the outbreak to constitute a “Public Health Emergency of International Concern.” This contagious disease outbreak, which has not been contained, and is disrupting supply chains and affecting production and sales across a range of industries in United States and other companies as a result of quarantines, facility closures, and travel and logistics restrictions in connection with the outbreak, as well as the worldwide adverse effect to workforces, economies and financial markets, leading to a global economic downturn. Therefore, the Company expects this matter to negatively impact its operating results. However, the related financial impact and duration cannot be reasonably estimated at this time.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates may be materially different from actual financial results. Significant estimates include the recoverability of long-lived assets, the collection of accounts receivable and valuation of inventory and reserves.
Risks and Uncertainties
As of December 31, 2019, the Company has not commenced full scale operations. The Company’s activities since inception have consisted of service and business development. Once the Company commences its planned full-scale operations, it will incur significant additional expenses. The Company is dependent upon additional capital resources for the commencement of its planned principal operations and is subject to significant risks and uncertainties; including failing to secure funding to operationalize the Company’s plans or failing to profitably operate the business; recessions, downturns, changes in local competition or market conditions; governmental policy changes; or a host of other factors beyond the Company’s control. Any of these adverse conditions could negatively impact the Company’s financial position
F-7
Cash and Cash Equivalents
We maintain the majority of our cash accounts at a commercial bank. The total cash balance is insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 per commercial bank, at times we may exceed the FDIC limits. For purposes of the statement of cash flows we consider all cash and highly liquid investments with initial maturities of one year or less to be cash equivalents.
Accounts Receivable
We grant credit to our customers and do not require collateral. Our ability to collect receivables is affected by economic fluctuations in the geographic areas and industries served by us. Reserves for un-collectable amounts are provided, based on past experience and a specific analysis of the accounts. Although we expect to collect amounts due, actual collections may differ from the estimated amounts.
Inventory
Inventory is stated at the lower of cost or market value and is account for using the first-in-first-out method (“FIFO”). The Company analyzes inventory per any potential obsolescence, and records impairment and obsolescence reserve against inventory as deemed necessary. During the year ended December 31, 2018, the remaining inventory balance was written off.
Long –Lived Assets
Our management assesses the recoverability of its long-lived assets by determining whether the depreciation and amortization of long-lived assets over their remaining lives can be recovered through projected undiscounted future cash flows. The amount of long-lived asset impairment if any, is measured based on fair value and is charged to operations in the period in which long-lived assets impairment is determined by management. There can be no assurance however, that market conditions will not change or demand for our services will continue, which could result in impairment of long-lived assets in the future.
Advertising costs
The Company’s advertising costs are expensed as incurred. During the years ended December 31, 2019 and 2018, the Company recognized $1,453 and $1,000 in advertising costs, respectively, recorded under the heading ‘General and administrative’ in the statements of operations
Intangibles
Intangible assets purchased or developed by the Company are recorded at cost. Amortization is recognized over the estimated useful life of the asset using the straight-line method for financial statement purposes. The Company reviews the recoverability of intangible assets, including the related useful lives, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. No impairment was considered necessary at December 31, 2019 or 2018.
Convertible Notes
The Company received $30,000 from an investor in December 2019 for a convertible note as part of a funding campaign. The loan was never finalized and the funds were returned to the investor in January 2020. There was no actual note signed and therefore no specific terms.
F-8
Revenue Recognition
The Company recognizes revenue under ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” (“ASC 606”).
Performance Obligations Satisfied Over Time
FASB ASC 606-10-25-27 through 25-29, 25-36 through 25-37, 55-5 through 55-10
An entity transfers control of a good or service over time and satisfies a performance obligation and recognizes revenue over time if one of the following criteria is met:
a. The customer receives and consumes the benefits provided by the entity’s performance as the entity performs (as described in FASB ASC 606-10-55-5 through 55-6).
b. The entity’s performance creates or enhances an asset (for example, work in process) that the customer controls as the asset is created or enhanced (as described in FASB ASC 606-10-55-7).
c. The entity’s performance does not create an asset with an alternative use to the entity (see FASB ASC 606-10-25-28), and the entity has an enforceable right to payment for performance completed to date (as described in FASB ASC 606-10-25-29).
Performance Obligations Satisfied at a Point in Time
FASB ASC 606-10-25-30
If a performance obligation is not satisfied over time, the performance obligation is satisfied at a point in time. To determine the point in time at which a customer obtains control of a promised asset and the entity satisfies a performance obligation, the entity should consider the guidance on control in FASB ASC 606-10-25-23 through 25-26. In addition, it should consider indicators of the transfer of control, which include, but are not limited to, the following:
a. The entity has a present right to payment for the asset
b. The customer has legal title to the asset
c. The entity has transferred physical possession of the asset
d. The customer has the significant risks and rewards of ownership of the asset
e. The customer has accepted the asset
The core principle of the revenue standard 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 Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods and services transferred to the customer. In Addition a) the company also does not have an alternative use for the asset if the customer were to cancel the contract, and b.) has a fully enforceable right to receive payment for work performed (i.e., customers are required to pay as various milestones and/or timeframes are met)
For the years ended December 31, 2019 and 2018 the company recognized $9,990 and $0 respectively. The revenue in 2019 was derived solely from one customer
F-9
Epilog was founded with the goal of using robotics and computer vision to help humans with repetitive/robotic tasks. Specifically, the company develops artificial intelligence (“AI”) vision products related to automobiles, self-driving, and the transportation industry. The company is seeking to bring human quality, AI based vision driver assistance technology to millions of cars already on the road today (mobile solution) as well as queue management system for monitoring the flow of people and vehicles (stationary solution). The company’s products offer exceptionally high image quality AI in compact and cost-efficient devices, best suited to monitoring large spaces, for example, highways, transportation hubs, parking lots and arenas.
The Company is unable to reasonably estimate future costs that will be incurred under its warranty program on revenue recognized as of December 31, 2019 and the Company anticipates the amounts associated with revenues recognized as of December 31, 2019 to be immaterial to the financial statements.
Fair Value of Financial Instruments
The Financial Accounting Standards Board issued ASC (Accounting Standards Codification) 820-10 (SFAS No. 157), “Fair Value Measurements and Disclosures” for financial assets and liabilities. ASC 820-10 provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. FASB ASC 820-10 defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. FASB ASC 820-10 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required by the standard that the Company uses to measure fair value:
● | Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as exchange-traded instruments and listed equities. |
● | Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (e.g., quoted prices of similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active). |
● | Level 3 - Unobservable inputs for the asset or liability. Financial instruments are considered Level 3 when their fair values are determined using pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable. |
The Company’s financial instruments consist of cash, prepaid expenses, inventory, accounts payable, convertible notes payable, advances from related parties. The estimated fair value of cash, prepaid expenses, investments, accounts payable, convertible notes payable and advances from related parties approximate their carrying amounts due to the short-term nature of these instruments.
The carrying amount of accounts payable and accrued expenses are considered to be representative of their respective fair values because of the short-term nature of these financial instruments.
Other Comprehensive Income
We have no material components of other comprehensive income (loss) and accordingly, net loss is equal to comprehensive loss in all periods.
Net Profit (Loss) per Common Share
Basic profit / (loss) per share is computed on the basis of the weighted average number of common shares outstanding. At December 31, 2019 and 2018, we had outstanding common shares of 12,297,696 used in the calculation of basic earnings per share. Basic Weighted average common shares and equivalents for the year ended December 31, 2019 and 2018 were 12,297,696 and 10,477,914, respectively. As of December 31, 2019, had convertible note convertible in into additional common shares. Fully diluted weighted average common shares and equivalents were withheld from the calculation as they were considered anti-dilutive.
F-10
Research and Development
Research and development costs, including salaries, research material, and administrative costs are expensed as incurred. During the years ended December 31, 2019 and 2018, the Company recognized $8,861 and $8,819 in research and development costs, respectively.
Share-Based Compensation
The Company accounts for stock-based compensation in accordance with ASC Section 718 Compensation – Stock Compensation. Under the fair value recognition provisions of ASC 718, stock-based compensation cost is measured at the grant date based on the fair value of the award.
Income Taxes
Federal Income taxes are not currently due since we have had losses since inception.
On December 22, 2018 H.R. 1, originally known as the Tax Cuts and Jobs Act, (the “Tax Act”) was enacted. Among the significant changes to the U.S. Internal Revenue Code, the Tax Act lowers the U.S. federal corporate income tax rate (“Federal Tax Rate”) from 35% to 21% effective January 1, 2018. The Company will compute its income tax expense for the months ended December 31, 2020 using a Federal Tax Rate of 21%.
Income taxes are provided based upon the liability method of accounting pursuant to ASC 740-10-25 Income Taxes – Recognition. Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the “more likely than not” standard required by ASC 740-10-25-5.
Deferred income tax amounts reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting purposes.
As of December 31, 2020, we had a net operating loss carry-forward of approximately $(777,826) and a deferred tax asset of $163,343 using the statutory rate of 21%. The deferred tax asset may be recognized in future periods, not to exceed 20 years. However, due to the uncertainty of future events we have booked valuation allowance of $(163,343). FASB ASC 740 prescribes recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FASB ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. At December 31, 2020 the Company had not taken any tax positions that would require disclosure under FASB ASC 740.
December 31, 2020 | December 31, 2019 | |||||||
Deferred Tax Asset | $ | 163,343 | $ | 149,724 | ||||
Valuation Allowance | (163,343 | ) | (149,724 | ) | ||||
Deferred Tax Asset (Net) | $ | - | $ | - |
F-11
Recently Issued Accounting Standards
The Company is reviewing the effects of following recent updates. The Company has no expectation that any of these items will have a material effect upon the financial statements.
In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments—Credit Losses [codified as Accounting Standards Codification Topic (ASC) 326]. ASC 326 adds to US generally accepted accounting principles (US GAAP) the current expected credit loss (CECL) model, a measurement model based on expected losses rather than incurred losses. Under this new guidance, an entity recognizes its estimate of expected credit losses as an allowance, which the FASB believes will result in more timely recognition of such losses. This will become effective in January 2023 and the impact on the company is under evaluation.
Update 2020-06—Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This was issued in August of 2020 and will become effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. We are in the process of evaluating the impact to the company.
NOTE 2 – PLANT AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. Additions and improvements are capitalized while routine repairs and maintenance are charged to expense as incurred. Upon sale or disposition, the recorded asset cost and accumulated depreciation are removed from accounts and the net amount, less proceeds received from disposal, is charged or credited to other income or expense. The Company reviews the recoverability of all long-lived assets, including the related useful lives, whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset might not be recoverable. No impairment was considered necessary at December 31, 2019 or 2018. Assets were fully depreciated at December 31, 2019 and 2018. Depreciation expense for the years ended December 31, 2019 and 2018 was $0.
Plant and Equipment | December 31, 2019 | December 31, 2018 | ||||||
Furniture and Equipment | $ | 55,935 | $ | 55,935 | ||||
Warehouse Equipment | 2,488 | 2,488 | ||||||
Total Plant and Equipment (Gross) | 58,423 | 58,423 | ||||||
Accumulated Depreciation | (58,423 | ) | (58,423 | ) | ||||
Total Plant and Equipment (Net) | $ | - | $ | - |
F-12
NOTE 3 – INTANGIBLE ASSETS
December 31, 2019 | December 31, 2018 | |||||||
Patent/Super Resolution Imaging | $ | 215,187 | $ | 171,064 | ||||
Epilog Name Purchase | 12,000 | 12,000 | ||||||
Intangibles - Patent # 7274381 | 130,000 | 130,000 | ||||||
Intangibles - Patent # 7573715 | 130,000 | 130,000 | ||||||
Intangibles - Patent #6833843 | 130,000 | 130,000 | ||||||
Intangibles - Website | 10,000 | 10,000 | ||||||
Total Intangible Assets (Gross) | 627,187 | 583,064 | ||||||
Accumulated Amortization | (298,326 | ) | (275,384 | ) | ||||
Total Intangible Assets (Net) | $ | 328,861 | $ | 307,680 |
Amortization expense for the years ended December 31, 2019 and 2018, was $22,942 and $22,941, respectively. Other intangible assets in the table above consist of the purchase of the website and the company name. Patent filings are for patents that have not yet been issued and therefore have not yet begun being amortized.
The patents that are being amortized were purchased and recorded at cost.
Management periodically considers the need for impairment of the intangible assets and currently has no need for impairment.
NOTE 4 – COMMITMENTS AND CONTINGENCIES
During 2018, the Company entered into an agreement with a manufacturing company to build and test the prototypes. The statement of work estimates the total cost to be $541,000. Payment is through the amortization of the total cost per unit price of the product based on the forecasted volume of product to be purchased by the Company during the first 24 months of full commercial production of the products. To date, no such production has occurred and no work related to the agreement has been performed.
NOTE 5 – RELATED PARTY TRANSACTIONS
During the years ended December 31, 2019 and 2018, a shareholder of the Company advanced funds for operations. At December 31, 2019 and 2018, the amount of advances outstanding is $223,525 and $186,375, respectively, and are recorded under ‘notes payable related party’ on the balance sheets. These advances accrue interest at the minimum federal statutory rate to comply with related party rules and Section 7872. The accrued interest balance at December 31, 2019 and 2018 was $94,101 and $94,101, respectively. During October 2018, the Company’s chief technology officer purchased 1,716,528 common shares, and a family member of the CEO purchased 122,609 common shares. There were no stock issuances in 2019.
NOTE 6 – STOCKHOLDERS’ EQUITY
The Company has authorized 25,000,000 shares of common stock at $0.0001 par value. During 2010, the Company issued 10,000,000 founders shares to the CEO at par value. In October 2018, the Company sold 2,236,391 common shares to a number of investors at par value. In October 2018, the Company issued 61,305 common shares to an advisor for services at par value. In 2020, the Company issued a total of 480,000 common shares to 731 investors for total cash proceeds of $360,000.
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NOTE 7 – SUBSEQUENT EVENTS
The Company has evaluated subsequent events through August 30, 2020, the date these financial statements were available to be issued and noted the following: During 2020, the CEO advanced the Company an additional $4,000. The Company sold a total of 1,387,231 shares of common stock to 2,774 investors for total cash proceeds of $1,040,423. The Company returned $30,000 to an investor for a convertible note that was not finalized.
In 2020 the board of directors authorized compensation of 670,000 shares to key employees for 2019 services at $0.0001 par value, to be granted once the company has a stocks options plan in place.
On April 16, 2020 the company signed a Contract with confidential client for a “Proof of Concept” design services for client by Epilog for a 16K x 16K camera system, for $37,000.
On April 4, 2020 the company signed a promotional agreement with StartEngine for the Epilog Regulation Crowdfunding Campaign, digital marketing for approximately $60,000.
On June 30, 2020 signed a Reg A posting agreement with StartEngine for $15K: The agreement is to raise up to $50,000,000 with a, 7% commission based on the dollar amount received from investors, In addition 2% commission to be paid in the same securities as this offering and at the same terms.
On April 1, 2020 the company signed a one-year Lease agreement for its R&D suite located at 155 Dubois Street, Santa Cruz CA 95060, for $25,000.
In accordance with ASC 855, the Company has analyzed its operations subsequent to December 31, 2019 through the date these financial statements were issued, and has determined that it does not have any other material subsequent events to disclose in these financial statements.
F-14
PART III
INDEX TO EXHIBITS
The documents listed in the Exhibit Index of this report are incorporated by reference or are filed with this report, in each case as indicated below.
1.1 | Issuer Agreement with StartEngine Primary, LLC | |
2.1 | Certificate of Incorporation | |
2.2 | Amended and Restated Bylaws | |
4.1 | Form of Subscription Agreement* | |
4.2 | Epilog and Jabil Ultimax Prototype Statement of Work dated September 12, 2018 | |
6.1 | Lease Agreement dated August 1, 2020 | |
8.1 | Escrow Agreement | |
11.1 | Auditor’s Consent | |
12.1 | Opinion of CrowdCheck Law, LLP* | |
13. | Testing the waters materials* |
* | To be filed by amendment |
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SIGNATURES
Pursuant to the requirements of Regulation A, the issuer certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form 1-A and has duly caused this Offering Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in State of Delaware, on October 1, 2020.
Epilog Imaging Systems, Inc.
By | /s/ Michael Mojaver | |
Michael Mojaver, Chief Executive Officer of | ||
Epilog Imaging Systems, Inc. |
This Offering Statement has been signed by the following persons in the capacities and on the dates indicated.
/s/ Michael Mojaver | |
Michael Mojaver, Chief Executive Officer, Cheief Financial Officer and Director | |
Date: October 1, 2020 |
/s/ Lance Mojaver | |
Lance Mojaver, CTO | |
Date: October 1, 2020 |
/s/ Rony Greenberg | |
Rony Greenberg, Director | |
Date: October 1, 2020 |
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Exhibit 1.1
POSTING AGREEMENT
[06/30/2020]
StartEngine Primary LLC
8687 Melrose Ave 7th Floor - Green
Los Angeles, CA 90069
Dear Ladies and Gentlemen:
[Epilog Imaging Systems, Inc.] [COMPANY], a Delaware [STATE] [C Corp] [ENTITY] located at [75 E. Santa Clara Ave. Suite 600, San Jose CA 95113] [ADDRESS] (the “Company”), proposes, subject to the terms and conditions contained in this Posting Agreement (this “Agreement”), to issue and sell shares of its [ common stock ] [SECURITIES], $XXX par value per share (the “Shares”) to investors (collectively, the “Investors”) in a public offering (the “Offering”) on the online website provided by StartEngine Crowdfunding, Inc. (the “Platform”) pursuant to Regulation A through StartEngine Primary LLC (“StartEngine”), acting on a best efforts basis only, in connection with such sales. The Shares are more fully described in the Offering Statement (as hereinafter defined).
The Company hereby confirms its agreement with StartEngine concerning the purchase and sale of the Shares, as follows:
1. ENGAGEMENT. Company hereby engages StartEngine to provide the services set out herein upon the subject to the terms and conditions set out in this Agreement, Terms of Use (“Platform Terms”), and Privacy Policy; each of which is hereby incorporated into this Agreement. Company has read and agreed to the Terms of Use and Company understands that this Posting Agreement governs Company’s use of the Site and the Services. Terms not defined herein are as defined in Platform Terms.
2. SERVICES AND FEES.
● | OFFERING SERVICE: Company agrees that StartEngine shall provide the services below for a fee of $15,000 for out of pocket accountable expenses paid prior to StartEngine commencing. |
Any portion of this amount not expended and accounted for shall be returned to the Company at the end of the engagement.
● | OTHER FEES: |
Company will pay, or reimburse if paid by StartEngine, out of pocket expenses for (i) the preparation and delivery of certificates representing the Shares (if any), (ii) FINRA filing fees, (iii) notice filing requirements under the securities or Blue Sky laws, (iv) all transfer taxes, if any, with respect to the sale and delivery of the Shares by the Company to the Investors. These expenses are not considered an item of value per FINRA Rule 5110(c)(3).
● | OTHER SERVICES: |
○ | Campaign Page Design: design, build, and create Company’s campaign page. |
○ | Support: provide Company with dedicated account manager and marketing consulting services. |
○ | Standard Subscription Agreement: provision of a standard purchase agreement to execute between Company and Investors, which may be used at Company’s option. |
○ | Multiple Withdrawals (Disbursements): money transfers to Company |
● | DISTRIBUTION: As compensation for the services provided hereunder by StartEngine Primary, Company shall pay to StartEngine at each closing of the Offering a fee consisting of the following: |
○ | 7% commission based on the dollar amount received from investors. |
○ | In addition 2% commission paid in the same securities as this offering and at the same terms. |
Check this box for selecting the split fee option (see below)
● | If the “split fee” option is selected then the following provision shall apply: In each case StartEngine Capital may charge investors a fee of 3.5%, in which case the commission set forth above shall be reduced commensurately. In the event an investor invests in excess of $20,000, such investor fee shall be limited to $700 and Company shall pay commissions with respect to any amount in excess of $20,000, in accordance with the commission schedule set forth above. |
The fee shall be paid in cash upon disbursement of funds from escrow at the time of each closing. Payment will be made to StartEngine directly from the escrow account maintained for the Offering. The Company acknowledges that StartEngine is responsible for providing instructions to the escrow agent for distribution of funds held pending completion or termination of the Offering.
The fee does not include the escrow fees, transaction fees, AML review and cash management fee to be negotiated directly with third party or EDGARization services or any services other than set out above.
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● | PROMOTE SERVICE: StartEngine Primary will design with the Company’s approval the digital ads and manage the digital advertising platform accounts for Company for no additional fee. |
● | The Issuer is expressly forbidden from bidding on any StartEngine branded keywords, misspellings, and similar terms in advertising campaigns on the Google, Bing, and Facebook platforms. Some of these keywords include but are not limited to: |
○ | StartEngine |
○ | Start Engine |
○ | StartEngine Crowdfunding |
○ | StartEngine Stock |
○ | Invest in StartEngine |
○ | StartEngine Shares |
The Offering is subject to termination if the Company violates these targeting and bidding requirements.
3. DEPOSIT HOLD. Company agrees that 6% of the total funds committed will be held back as a deposit hold in case of any ACH refunds or credit card chargebacks. The hold will remain in effect for 180 days following the close of the Offering. 75% of this hold back will be released back to the company after 60 days and the remaining 25% shall be held for the remaining 120 days.
4. CREDIT CARD FEES. [OPTIONAL] Company agrees that fees payable to Vantiv, LLC with respect to the use of credit cards to purchase the Securities are for the account of the Company and to reimburse StartEngine Crowdfunding Inc. for any such fees incurred, upon each closing held with respect to the Offering detailed in the Credit Card Services Agreement.
5. DELIVERY AND PAYMENT.
(a) On or after the date of this Agreement, the Company and selected escrow agent (the “Escrow Agent”) will enter into an Escrow Agreement (the “Escrow Agreement”), pursuant to which escrow accounts will be established, at the Company’s expense (the “Escrow Accounts”).
(b) Prior to the initial Closing Date (as hereinafter defined) of the Offering or, as applicable, any subsequent Closing Date, (i) each Investor will execute and deliver a Subscription Agreement (each, an “Investor Subscription Agreement”) to the Company through the facilities of the Platform; (ii) each Investor will transfer to the Escrow Account funds in an amount equal to the price per Share as shown on the cover page of the Final Offering Circular (as hereinafter defined) multiplied by the number of Shares subscribed by such Investor and as adjusted by any discounts or bonuses applicable to certain Investors; (iii) subscription funds received from any Investor will be promptly transmitted to the Escrow Accounts in compliance with Rule 15c2-4 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and (iv) the Escrow Agent will notify the Company and StartEngine in writing as to the balance of the collected funds in the Escrow Accounts.
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(c) If the Escrow Agent shall have received written notice from StartEngine on or before 9 a.m. Pacific time on such o date(s) as may be agreed upon by the Company and StartEngine (each such date, a “Closing Date”), the Escrow Agent will release the balance of the Escrow Accounts for collection by the Company and StartEngine as provided in the Escrow Agreement and the Company shall deliver the Shares purchased on such Closing Date to the Investors, which delivery may be made via book entry with the Company’s securities registrar and transfer agent, [TBD] (the “Transfer Agent”). The initial closing (the “Closing”) and any subsequent closing (each, a “Subsequent Closing”) shall be effected through the Platform. All actions taken at the Closing shall be deemed to have occurred simultaneously on the date of the Closing and all actions taken at any Subsequent Closing shall be deemed to have occurred simultaneously on the date of any such Subsequent Closing.
(d) If the Company and StartEngine determine that the offering will not proceed, then the Escrow Agent will promptly return the funds to the investors without interest.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants and covenants to StartEngine that, as of the Qualification Date (unless a representation, warranty or covenant in this Section 6 specifically references another date), the following representations and warranties are true and correct and/or the Company shall be bound by the following covenants1:
(a) Prior to the Qualification Date, the Company will file with the Securities and Exchange Commission (the “Commission”) an offering statement on Form 1-A (collectively, with the various parts of such offering statement, each as amended as of the Qualification Date for such part, including any Offering Circular and all exhibits to such offering statement, the “Offering Statement”) relating to the Shares pursuant to Regulation A as promulgated under the Securities Act of 1933, as amended (the “Act”), and the other applicable rules, orders and regulations (collectively referred to as the “Rules and Regulations”) of the Commission promulgated under the Act. As used in this Agreement:
(1) “Final Offering Circular” means the offering circular relating to the public offering of the Shares as filed with the Commission pursuant to Rule 253(g)(2) of Regulation A of the Rules and Regulations, as amended and supplemented by any further filings under Rule 253(g)(2);
(2) “Preliminary Offering Circular” means the offering circular relating to the Shares included in the Offering Statement pursuant to Regulation A of the Rules and Regulations in the form on file with the Commission on the Qualification Date;
1 | To be updated upon due diligence review; additional provisions may be added. |
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(3) “Qualification Date” means the date as of which the Offering Statement was or will be qualified with the Commission pursuant to Regulation A, the Act and the Rules and Regulations; and
(4) “Testing-the-Waters Communication” means any website post, broadcast or cable radio or internet communication, email, social media post, video or written communication with potential investors undertaken in reliance on Rule 255 of the Rules and Regulations.
(b) The Offering Statement has been filed with the Commission in accordance with the Act and Regulation A of the Rules and Regulations; no stop order of the Commission preventing or suspending the qualification or use of the Offering Statement, or any amendment thereto, has been issued, and no proceedings for such purpose have been instituted or, to the Company’s knowledge, are contemplated by the Commission.
(c) The Offering Statement, at the time it becomes qualified, and as of each Closing Date, will conform in all material respects to the requirements of Regulation A, the Act and the Rules and Regulations.
(d) The Offering Statement, at the time it became qualified and as of each Closing Date, will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading.
(e) The Preliminary Offering Circular will not, as of its date, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representation or warranty with respect to the statements contained in the Preliminary Offering Circular as provided by StartEngine in Section 10(ii).
(f) The Final Offering Circular will not, as of its date and on each Closing Date, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representation or warranty with respect to the statements contained in the Final Offering Circular as provided by StartEngine in Section 10(ii).
(g) Each Testing-the-Waters Communication, if any, when considered together with the Final Offering Circular or Preliminary Offering Circular, as applicable, did not not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, provided, however, that the Company makes no representation or warranty with respect to the statements contained in the Preliminary Offering Circular as provided by StartEngine in Section 10(ii).
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(h) As of each Closing Date, the Company will be duly organized and validly existing as a corporation in good standing under the laws of the State of Delaware. As of the date hereof and as of each Closing date, (i) the Company has full power and authority to conduct all the activities conducted by it, to own and lease all the assets owned and leased by it and to conduct its business as presently conducted and as described in the Offering Statement and the Final Offering Circular, and (ii) the Company is duly licensed or qualified to do business and in good standing as a foreign organization in all jurisdictions in which the nature of the activities conducted by it or the character of the assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so qualified or in good standing or have such power or authority would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on or affecting the business, prospects, properties, management, financial position, stockholders’ equity, or results of operations of the Company (a “Material Adverse Effect”). Complete and correct copies of the certificate of incorporation and of the bylaws of the Company and all amendments thereto have been made available to StartEngine, and no changes therein will be made subsequent to the date hereof and prior to any Closing Date except as disclosed in the Offering Statement.
(i) As of the date hereof and as of each Closing date, t (i) the Company has no subsidiaries, nor does it own a controlling interest in any entity other than those entities set forth on Schedule 2 to this Agreement (each a “Subsidiary” and collectively the “Subsidiaries”), (ii) each Subsidiary has been duly organized and is validly existing and in good standing under the laws of its jurisdiction of formation, (iii) each Subsidiary is duly qualified and in good standing as a foreign company in each jurisdiction in which the character or location of its properties (owned, leased or licensed) or the nature or conduct of its business makes such qualification necessary, except for those failures to be so qualified or in good standing which would not be reasonably expected to have a Material Adverse Effect, and (iv) all of the shares of issued capital stock of each corporate subsidiary, and all of the share capital, membership interests and/or equity interests of each subsidiary that is not a corporation, have been duly authorized and validly issued, are fully paid and non-assessable and are owned directly or indirectly by the Company, free and clear of any lien, encumbrance, claim, security interest, restriction on transfer, shareholders’ agreement, proxy, voting trust or other defect of title whatsoever.
(j) As of the date hereof and as of each Closing date, the Company is organized in, and its principal place of business is in, the United States.
(k) As of the date hereof and as of each Closing date, the Company is not subject to the ongoing reporting requirements of Section 13 or 15(d) of the Exchange Act and has not been subject to an order by the Commission denying, suspending, or revoking the registration of any class of securities pursuant to Section 12(j) of the Exchange Act that was entered within five years preceding the date the Offering Statement was originally filed with the Commission.
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(l) The Company is not, as of the date hereof, nor upon completion of the transactions contemplated herein will it be, (i) an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended (the “Investment Company Act”). The Company is not a development stage company or a “business development company” as defined in Section 2(a)(48) of the Investment Company Act. The Company is not a blank check company and is not an issuer of fractional undivided interests in oil or gas rights or similar interests in other mineral rights. The Company is not an issuer of asset-backed securities as defined in Item 1101(c) of Regulation AB.
(m) As of the date hereof and as of each Closing date, neither the Company, nor any predecessor of the Company; nor any other issuer affiliated with the Company; nor any director or executive officer of the Company or other officer of the Company participating in the offering, nor any beneficial owner of 20% or more of the Company’s outstanding voting equity securities, nor any promoter connected with the Company, is subject to the disqualification provisions of Rule 262 of the Rules and Regulations.
(n) As of the date hereof and as of each Closing date, the Company is not a “foreign private issuer,” as such term is defined in Rule 405 under the Act.
(o) As of the date hereof and as of each Closing date, (i) the Company has full legal right, power and authority to enter into this Agreement, the Escrow Agreement and perform the transactions contemplated hereby and thereby, and (ii) this Agreement and the Escrow Agreement each have been or will be authorized and validly executed and delivered by the Company and are or will be each a legal, valid and binding agreement of the Company enforceable against the Company in accordance with its terms, subject to the effect of applicable bankruptcy, insolvency or similar laws affecting creditors’ rights generally and equitable principles of general applicability.
(p) The issuance and sale of the Shares have been duly authorized by the Company, and, when issued and paid for in accordance with the Investor Subscription Agreement, will be duly and validly issued, fully paid and nonassessable and will not be subject to preemptive or similar rights. The holders of the Shares will not be subject to personal liability by reason of being such holders. The Shares, when issued, will conform to the description thereof set forth in the Final Offering Circular in all material respects.
(q) As of the date hereof and as of each Closing date, (i) the Company has not authorized anyone other than the management of the Company and StartEngine to engage in Testing-the-Waters Communications, (ii) the Company reconfirms that StartEngine has been authorized to act on its behalf in undertaking Testing-the-Waters Communications and (iii) the Company has not distributed any Testing-the-Waters Communications other than those listed on Schedule 1 hereto.
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(r) The financial statements and the related notes included in the Offering Statement and the Final Offering Circular present fairly, in all material respects, the financial condition of the Company and its Subsidiaries as of the dates thereof and the results of operations and cash flows at the dates and for the periods covered thereby in conformity with United States generally accepted accounting principles (“GAAP”), except as may be stated in the related notes thereto. No other financial statements or schedules of the Company, any Subsidiary or any other entity are required by the Act or the Rules and Regulations to be included in the Offering Statement or the Final Offering Circular. There are no off-balance sheet arrangements (as defined in Regulation S-K Item 303(a)(4)(ii)) that may have a material current or future effect on the Company’s financial condition, changes in financial condition, results of operations, liquidity, capital expenditures or capital resources.
(s) [Fruci & Associates ] (the “Accountants”), who will report on the financial statements and schedules described in Section 6(r), are registered independent public accountants with respect to the Company as required by the Act and the Rules and Regulations. The financial statements of the Company and the related notes and schedules included in the Offering Statement and the Final Offering Circular comply as to form in all material respects with the requirements of the Act and the Rules and Regulations and present fairly the information shown therein.
(t) Since the date of the most recent financial statements of the Company included or incorporated by reference in the Offering Statement and the most recent Preliminary Offering Circular and prior to the Closing and any Subsequent Closing, other than as described in the Final Offering Circular (A) there has not been and will not have been any change in the capital stock of the Company or long-term debt of the Company or any Subsidiary or any dividend or distribution of any kind declared, set aside for payment, paid or made by the Company on any class of capital stock or equity interests, or any Material Adverse Effect, or any development that would reasonably be expected to result in a Material Adverse Effect; and (B) neither the Company nor any Subsidiary has sustained or will sustain any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor disturbance or dispute or any action, order or decree of any court or arbitrator or governmental or regulatory authority, except in each case as otherwise disclosed in the Offering Statement and the Final Offering Circular.
(u) Since the date as of which information is given in the most recent Preliminary Offering Circular, neither the Company nor any Subsidiary has entered or will before the Closing or any Subsequent Closing enter into any transaction or agreement, not in the ordinary course of business, that is material to the Company and its Subsidiaries taken as a whole or incurred or will incur any liability or obligation, direct or contingent, not in the ordinary course of business, that is material to the Company and its Subsidiaries taken as a whole, and neither the Company nor any Subsidiary has any plans to do any of the foregoing.
(v) The Company and each Subsidiary has good and valid title in fee simple to all items of real property and good and valid title to all personal property described in the Offering Statement or the Final Offering Circular as being owned by them, in each case free and clear of all liens, encumbrances and claims except those that (1) do not materially interfere with the use made and proposed to be made of such property by the Company and its Subsidiaries or (2) would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. Any real property described in the Offering Statement or the Final Offering Circular as being leased by the Company or any Subsidiary that is material to the business of the Company and its Subsidiaries taken as a whole is held by them under valid, existing and enforceable leases, except those that (A) do not materially interfere with the use made or proposed to be made of such property by the Company and its Subsidiaries or (B) would not be reasonably expected, individually or in the aggregate, to have a Material Adverse Effect.
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(w) There are no legal, governmental or regulatory actions, suits or proceedings pending, either domestic or foreign, to which the Company is a party or to which any property of the Company is the subject, nor are there, to the Company’s knowledge, any threatened legal, governmental or regulatory investigations, either domestic or foreign, involving the Company or any property of the Company that, individually or in the aggregate, if determined adversely to the Company, would reasonably be expected to have a Material Adverse Effect or materially and adversely affect the ability of the Company to perform its obligations under this Agreement; to the Company’s knowledge, no such actions, suits or proceedings are threatened or contemplated by any governmental or regulatory authority or threatened by others.
(x) The Company and each Subsidiary has, and at each Closing Date will have, (1) all governmental licenses, permits, consents, orders, approvals and other authorizations necessary to carry on its business as presently conducted except where the failure to have such governmental licenses, permits, consents, orders, approvals and other authorizations would not be reasonably expected to have a Material Adverse Effect, and (2) performed all its obligations required to be performed, and is not, and at each Closing Date will not be, in default, under any indenture, mortgage, deed of trust, voting trust agreement, loan agreement, bond, debenture, note agreement, lease, contract or other agreement or instrument (collectively, a “contract or other agreement”) to which it is a party or by which its property is bound or affected and, to the Company’s knowledge, no other party under any material contract or other agreement to which it is a party is in default in any respect thereunder. The Company and its Subsidiaries are not in violation of any provision of their organizational or governing documents.
(y) The Company has obtained all authorization, approval, consent, license, order, registration, exemption, qualification or decree of any court or governmental authority or agency or any sub-division thereof that is required for the performance by the Company of its obligations hereunder, in connection with the offering, issuance or sale of the Shares under this Agreement or the consummation of the transactions contemplated by this Agreement as may be required under federal, state, local and foreign laws, the Act or the rules and regulations of the Commission thereunder, state securities or Blue Sky laws, and the rules and regulations of FINRA.
(z) There is no actual or, to the knowledge of the Company, threatened, enforcement action or investigation by any governmental authority that has jurisdiction over the Company, and the Company has received no notice of any pending or threatened claim or investigation against the Company that would provide a legal basis for any enforcement action, and the Company has no reason to believe that any governmental authority is considering such action.
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(aa) Neither the execution of this Agreement, nor the issuance, offering or sale of the Shares, nor the consummation of any of the transactions contemplated herein, nor the compliance by the Company with the terms and provisions hereof or thereof will conflict with, or will result in a breach of, any of the terms and provisions of, or has constituted or will constitute a default under, or has resulted in or will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any Subsidiary pursuant to the terms of any contract or other agreement to which the Company or any Subsidiary may be bound or to which any of the property or assets of the Company or any Subsidiary is subject, except such conflicts, breaches or defaults as may have been waived or would not, in the aggregate, be reasonably expected to have a Material Adverse Effect; nor will such action result in any violation, except such violations that would not be reasonably expected to have a Material Adverse Effect, of (1) the provisions of the organizational or governing documents of the Company or any Subsidiary, or (2) any statute or any order, rule or regulation applicable to the Company or any Subsidiary or of any court or of any federal, state or other regulatory authority or other government body having jurisdiction over the Company or any Subsidiary.
(bb) There is no document or contract of a character required to be described in the Offering Statement or the Final Offering Circular or to be filed as an exhibit to the Offering Statement which is not described or filed as required. All such contracts to which the Company or any Subsidiary is a party have been authorized, executed and delivered by the Company or any Subsidiary, and constitute valid and binding agreements of the Company or any Subsidiary, and are enforceable against the Company in accordance with the terms thereof, subject to the effect of applicable bankruptcy, insolvency or similar laws affecting creditors’ rights generally and equitable principles of general applicability. None of these contracts have been suspended or terminated for convenience or default by the Company or any of the other parties thereto, and the Company has not received notice of any such pending or threatened suspension or termination.
(cc) The Company and its directors, officers or controlling persons have not taken, directly or indirectly, any action intended, or which might reasonably be expected, to cause or result, under the Act or otherwise, in, or which has constituted, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Company’s Common Stock.
(dd) Other than as previously disclosed to StartEngine in writing, the Company, or any person acting on behalf of the Company, has not and, except in consultation with StartEngine, will not publish, advertise or otherwise make any announcements concerning the distribution of the Shares, and has not and will not conduct road shows, seminars or similar activities relating to the distribution of the Shares nor has it taken or will it take any other action for the purpose of, or that could reasonably be expected to have the effect of, preparing the market, or creating demand, for the Shares.
(ee) No holder of securities of the Company has rights to the registration of any securities of the Company as a result of the filing of the Offering Statement or the transactions contemplated by this Agreement, except for such rights as have been waived or as are described in the Offering Statement.
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(ff) No labor dispute with the employees of the Company or any Subsidiary exists or, to the knowledge of the Company, is threatened, and the Company is not aware of any existing or threatened labor disturbance by the employees of any of its or any Subsidiary’s principal suppliers, manufacturers, customers or contractors.
(gg) The Company and each of its Subsidiaries: (i) are and have been in material compliance with all laws, to the extent applicable, and the regulations promulgated pursuant to such laws, and comparable state laws, and all other local, state, federal, national, supranational and foreign laws, manual provisions, policies and administrative guidance relating to the regulation of the Company and its subsidiaries except for such non-compliance as would not be reasonably expected, individually or in the aggregate, to have a Material Adverse Effect; (ii) have not received notice of any ongoing claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other action from any Regulatory Agency or third party alleging that any product operation or activity is in material violation of any laws and has no knowledge that any such Regulatory Agency or third party is considering any such claim, litigation, arbitration, action, suit, investigation or proceeding; and (iii) are not a party to any corporate integrity agreement, deferred prosecution agreement, monitoring agreement, consent decree, settlement order, or similar agreements, or has any reporting obligations pursuant to any such agreement, plan or correction or other remedial measure entered into with any Governmental Authority.
(hh) The business and operations of the Company, and each of its Subsidiaries, have been and are being conducted in compliance with all applicable laws, ordinances, rules, regulations, licenses, permits, approvals, plans, authorizations or requirements relating to occupational safety and health, or pollution, or protection of health or the environment (including, without limitation, those relating to emissions, discharges, releases or threatened releases of pollutants, contaminants or hazardous or toxic substances, materials or wastes into ambient air, surface water, groundwater or land, or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of chemical substances, pollutants, contaminants or hazardous or toxic substances, materials or wastes, whether solid, gaseous or liquid in nature) of any governmental department, commission, board, bureau, agency or instrumentality of the United States, any state or political subdivision thereof, or any foreign jurisdiction (“Environmental Laws”), and all applicable judicial or administrative agency or regulatory decrees, awards, judgments and orders relating thereto, except where the failure to be in such compliance would not be reasonably expected, individually or in the aggregate, to have a Material Adverse Effect; and neither the Company nor any of its Subsidiaries has received any notice from any governmental instrumentality or any third party alleging any material violation thereof or liability thereunder (including, without limitation, liability for costs of investigating or remediating sites containing hazardous substances and/or damages to natural resources).
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(ii) There has been no storage, generation, transportation, use, handling, treatment, Release or threat of Release of Hazardous Materials (as defined below) by or caused by the Company or any of its Subsidiaries (or, to the knowledge of the Company, any other entity (including any predecessor) for whose acts or omissions the Company or any of its Subsidiaries is or could reasonably be expected to be liable) at, on, under or from any property or facility now or previously owned, operated or leased by the Company or any of its Subsidiaries, or at, on, under or from any other property or facility, in violation of any Environmental Laws or in a manner or amount or to a location that could reasonably be expected to result in any liability under any Environmental Law, except for any violation or liability which would not, individually or in the aggregate, have a Material Adverse Effect. “Hazardous Materials” means any material, chemical, substance, waste, pollutant, contaminant, compound, mixture, or constituent thereof, in any form or amount, including petroleum (including crude oil or any fraction thereof) and petroleum products, natural gas liquids, asbestos and asbestos containing materials, naturally occurring radioactive materials, brine, and drilling mud, regulated or which can give rise to liability under any Environmental Law. “Release” means any spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, dispersing, or migrating in, into or through the environment, or in, into from or through any building or structure.
(jj) The Company and its Subsidiaries own, possess, license or have other adequate rights to use, on reasonable terms, all material patents, patent applications, trade and service marks, trade and service mark registrations, trade names, copyrights, licenses, inventions, trade secrets, technology, know-how and other intellectual property necessary for the conduct of the Company’s and each of its Subsidiary’s business as now conducted (collectively, the “Intellectual Property”), except to the extent such failure to own, possess or have other rights to use such Intellectual Property would not result in a Material Adverse Effect. Except as set forth in the Final Offering Circular: (a) no party has been granted an exclusive license to use any portion of such Intellectual Property owned by the Company or its Subsidiaries; (b) to the knowledge of the Company, there is no infringement by third parties of any such Intellectual Property owned by or exclusively licensed to the Company or its Subsidiaries; (c) the Company is not aware of any defects in the preparation and filing of any of patent applications within the Intellectual Property; (d) to the knowledge of the Company, the patents within the Intellectual Property are being maintained and the required maintenance fees (if any) are being paid; (e) there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or claim by others challenging the Company’s or any of its Subsidiaries’ rights in or to any Intellectual Property, and the Company and its Subsidiaries are unaware of any facts which would form a reasonable basis for any such claim; (f) there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or claim by others challenging the validity or scope or enforceability of any such Intellectual Property, and the Company and its Subsidiaries are unaware of any facts which would form a reasonable basis for any such claim; and (g) there is no pending, or to the knowledge of the Company, threatened action, suit, proceeding or claim by others that the Company’s or any of its Subsidiaries’ business as now conducted infringes or otherwise violates any patent, trademark, copyright, trade secret or other proprietary rights of others, and the Company and its Subsidiaries are unaware of any other fact which would form a reasonable basis for any such claim. To the knowledge of the Company, no opposition filings or invalidation filings have been submitted which have not been finally resolved in connection with any of the Company’s patents and patent applications in any jurisdiction where the Company has applied for, or received, a patent.
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(kk) Except as would not have, individually or in the aggregate, a Material Adverse Effect, the Company and each Subsidiary (1) has timely filed all federal, state, provincial, local and foreign tax returns that are required to be filed by such entity through the date hereof, which returns are true and correct, or has received timely extensions for the filing thereof, and (2) has paid all taxes, assessments, penalties, interest, fees and other charges due or claimed to be due from the Company, other than (A) any such amounts being contested in good faith and by appropriate proceedings and for which adequate reserves have been provided in accordance with GAAP or (B) any such amounts currently payable without penalty or interest. There are no tax audits or investigations pending, which if adversely determined could have a Material Adverse Effect; nor to the knowledge of the Company is there any proposed additional tax assessments against the Company or any Subsidiary which could have, individually or in the aggregate, a Material Adverse Effect. No transaction, stamp, capital or other issuance, registration, transaction, transfer or withholding tax or duty is payable by or on behalf of StartEngine to any foreign government outside the United States or any political subdivision thereof or any authority or agency thereof or therein having the power to tax in connection with (i) the issuance, sale and delivery of the Shares by the Company; (ii) the purchase from the Company, and the initial sale and delivery of the Shares to purchasers thereof; or (iii) the execution and delivery of this Agreement or any other document to be furnished hereunder.
(ll) On each Closing Date, all stock transfer or other taxes (other than income taxes) which are required to be paid in connection with the sale and transfer of the Shares to be issued and sold on such Closing Date will be, or will have been, fully paid or provided for by the Company and all laws imposing such taxes will be or will have been fully complied with.
(mm) The Company and its Subsidiaries are insured with insurers with appropriately rated claims paying abilities against such losses and risks and in such amounts as are prudent and customary for the businesses in which they are engaged; all policies of insurance and fidelity or surety bonds insuring the Company, each Subsidiary or their respective businesses, assets, employees, officers and directors are in full force and effect; and there are no claims by the Company or its Subsidiary under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause; neither the Company nor any Subsidiary has been refused any insurance coverage sought or applied for; and neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that is not materially greater than the current cost.
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(nn) Neither the Company nor its Subsidiaries, nor any director, officer, agent or employee of either the Company or any Subsidiary has directly or indirectly, (1) made any unlawful contribution to any federal, state, local and foreign candidate for public office, or failed to disclose fully any contribution in violation of law, (2) made any payment to any federal, state, local and foreign governmental officer or official, or other person charged with similar public or quasi-public duties, other than payments required or permitted by the laws of the United States or any jurisdiction thereof, (3) violated or is in violation of any provisions of the U.S. Foreign Corrupt Practices Act of 1977, or (4) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment.
(oo) The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance in all material respects with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Money Laundering Laws”) and no material action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its Subsidiaries with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.
(pp) Neither the Company nor any of its Subsidiaries nor, to the knowledge of the Company, any director, officer, agent or employee of the Company or any of its Subsidiaries is currently subject to any U.S. sanctions (the “Sanctions Regulations”) administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will not directly or indirectly use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC or listed on the OFAC Specially Designated Nationals and Blocked Persons List. Neither the Company nor, to the knowledge of the Company, any director, officer, agent or employee of the Company, is named on any denied party or entity list administered by the Bureau of Industry and Security of the U.S. Department of Commerce pursuant to the Export Administration Regulations (“EAR”); and the Company will not, directly or indirectly, use the proceeds of the offering of the Shares hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any Sanctions Regulations or to support activities in or with countries sanctioned by said authorities, or for engaging in transactions that violate the EAR.
(qq) The Company has not distributed and, prior to the later to occur of the last Closing Date and completion of the distribution of the Shares, will not distribute any offering material in connection with the offering and sale of the Shares other than each Preliminary Offering Circular and the Final Offering Circular, or such other materials as to which StartEngine shall have consented in writing.
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(rr) Each employee benefit plan, within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and all stock purchase, stock option, stock-based severance, employment, change-in-control, medical, disability, fringe benefit, bonus, incentive, deferred compensation, employee loan and all other employee benefit plans, agreements, programs, policies or other arrangements, whether or not subject to ERISA, that is maintained, administered or contributed to by the Company or any of its affiliates for employees or former employees, directors or independent contractors of the Company or its Subsidiaries, or under which the Company or any of its Subsidiaries has had or has any present or future obligation or liability, has been maintained in material compliance with its terms and the requirements of any applicable federal, state, local and foreign laws, statutes, orders, rules and regulations, including but not limited to ERISA and the Code; no prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975 of the Code, has occurred which would result in a material liability to the Company with respect to any such plan excluding transactions effected pursuant to a statutory or administrative exemption; no event has occurred (including a “reportable event” as such term is defined in Section 4043 of ERISA) and no condition exists that would subject the Company to any material tax, fine, lien, penalty, or liability imposed by ERISA, the Code or other applicable law; and for each such plan that is subject to the funding rules of Section 412 of the Code or Section 302 of ERISA, no “accumulated funding deficiency” as defined in Section 412 of the Code has been incurred, whether or not waived, and the fair market value of the assets of each such plan (excluding for these purposes accrued but unpaid contributions) exceeds the present value of all benefits accrued under such plan determined using reasonable actuarial assumptions.
(ss) No relationship, direct or indirect, exists between or among the Company or any Subsidiary, on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company or any Subsidiary, on the other, which would be required to be disclosed in the Offering Statement, the Preliminary Offering Circular and the Final Offering Circular and is not so disclosed.
(tt) The Company has not sold or issued any securities that would be integrated with the offering of the Shares contemplated by this Agreement pursuant to the Act, the Rules and Regulations or the interpretations thereof by the Commission or that would fail to come within the safe harbor for integration under Regulation A.
(uu) Except as set forth in this Agreement, there are no contracts, agreements or understandings between the Company and any person that would give rise to a valid claim against the Company or StartEngine for a brokerage commission, finder’s fee or other like payment in connection with the offering of the Shares.
(vv) To the knowledge of the Company, there are no affiliations with FINRA among the Company’s directors, officers or any five percent or greater stockholder of the Company or any beneficial owner of the Company’s unregistered equity securities that were acquired during the 180-day period immediately preceding the initial filing date of the Offering Statement.
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(ww) There are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees of indebtedness by the Company to or for the benefit of any of the officers or directors of the Company or any of their respective family members. The Company has not directly or indirectly, including through its Subsidiaries, extended or maintained credit, arranged for the extension of credit, or renewed any extension of credit, in the form of a personal loan to or for any director or executive officer of the Company or any of their respective related interests, other than any extensions of credit that ceased to be outstanding prior to the initial filing of the Offering Statement. No transaction has occurred between or among the Company and any of its officers or directors, stockholders, customers, suppliers or any affiliate or affiliates of the foregoing that is required to be described or filed as an exhibit to in the Offering Statement, the Preliminary Offering Circular or the Final Offering Circular and is not so described.
7. AGREEMENTS OF THE COMPANY.
(a) The Company will file the Final Offering Circular, subject to the prior approval of StartEngine, pursuant to Rule 253 and Regulation A, within the prescribed time period.
(b) Upon effectiveness of this agreement, the Company will not, during such period as the Final Offering Circular would be required by law to be delivered in connection with sales of the Shares in connection with the offering contemplated by this Agreement (whether physically or through compliance with Rules 251 and 254 under the Act or any similar rule(s)), file any amendment or supplement to the Offering Statement or the Final Offering Circular unless a copy thereof shall first have been submitted to StartEngine within a reasonable period of time prior to the filing thereof and StartEngine shall not have reasonably objected thereto in good faith.
(c) The Company will notify StartEngine promptly, and will, if requested, confirm such notification in writing: (1) when any amendment or supplement to the Offering Statement is filed; (2) of any request by the Commission for any amendments to the Offering Statement or any amendment or supplements to the Final Offering Circular or for additional information; (3) of the issuance by the Commission of any stop order preventing or suspending the qualification of the Offering Statement or the Final Offering Circular, or the initiation of any proceedings for that purpose or the threat thereof; and (4) of becoming aware of the occurrence of any event that in the judgment of the Company makes any statement made in the Offering Statement, the Preliminary Offering Circular or the Final Offering Circular untrue in any material respect or that requires the making of any changes in the Offering Statement, the Preliminary Offering Circular or the Final Offering Circular in order to make the statements therein, in light of the circumstances in which they are made, not misleading. If the Company has omitted any information from the Offering Statement, it will use its best efforts to comply with the provisions of and make all requisite filings with the Commission pursuant to Regulation A, the Act and the Rules and Regulations and to notify StartEngine promptly of all such filings.
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(d) If, at any time when the Final Offering Circular relating to the Shares is required to be delivered under the Act, the Company becomes aware of the occurrence of any event as a result of which the Final Offering Circular, as then amended or supplemented, would, in the reasonable judgment of counsel to the Company or counsel to StartEngine, include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or the Offering Statement, as then amended or supplemented, would, in the reasonable judgment of counsel to the Company or counsel to StartEngine, include any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading, or if for any other reason it is necessary, in the reasonable judgment of counsel to the Company or counsel to StartEngine, at any time to amend or supplement the Final Offering Circular or the Offering Statement to comply with the Act or the Rules and Regulations, the Company will promptly notify StartEngine and will promptly prepare and file with the Commission, at the Company’s expense, an amendment to the Offering Statement and/or an amendment or supplement to the Final Offering Circular that corrects such statement and/or omission or effects such compliance. The Company consents to the use of the Final Offering Circular or any amendment or supplement thereto by StartEngine, and StartEngine agrees to provide to each Investor, prior to the Closing and, as applicable, any Subsequent Closing, a copy of the Final Offering Circular and any amendments or supplements thereto.
(e) If at any time following the distribution of any Testing-the-Waters Communication there occurred or occurs an event or development as a result of which such Testing-the-Waters Communication included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company has or will promptly notify StartEngine in writing and has or will promptly amend or supplement and recirculate, at its own expense, such Testing-the-Waters Communication to eliminate or correct such untrue statement or omission.
(j) The Company will apply the net proceeds from the offering and sale of the Shares in the manner set forth in the Final Offering Circular under the caption “Use of Proceeds.”
9. CONDITIONS OF THE OBLIGATIONS OF STARTENGINE. The obligations of StartEngine hereunder are subject to the following conditions:
(i) No stop order suspending the qualification of the Offering Statement shall have been issued, and no proceedings for that purpose shall be pending or threatened by any securities or other governmental authority (including, without limitation, the Commission), (b) no order suspending the effectiveness of the Offering Statement shall be in effect and no proceeding for such purpose shall be pending before, or threatened or contemplated by, any securities or other governmental authority (including, without limitation, the Commission), (c) any request for additional information on the part of the staff of any securities or other governmental authority (including, without limitation, the Commission) shall have been complied with to the satisfaction of the staff of the Commission or such authorities and (d) after the date hereof no amendment or supplement to the Offering Statement or the Final Offering Circular shall have been filed unless a copy thereof was first submitted to StartEngine and StartEngine did not object thereto in good faith, and StartEngine shall have received certificates of the Company, dated as of the Closing Date (and at the option of StartEngine, any Subsequent Closing Date) and signed by the Chief Executive Officer of the Company, and the Chief Financial Officer of the Company, to the effect of clauses (a), (b) and (c).
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(ii) Since the respective dates as of which information is given in the Offering Statement and the Final Offering Circular, (a) there shall not have been a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business, in each case other than as set forth in or contemplated by the Offering Statement and the Final Offering Circular and (b) the Company shall not have sustained any material loss or interference with its business or properties from fire, explosion, flood or other casualty, whether or not covered by insurance, or from any labor dispute or any court or legislative or other governmental action, order or decree, which is not set forth in the Offering Statement and the Final Offering Circular, if in the reasonable judgment of StartEngine any such development makes it impracticable or inadvisable to consummate the sale and delivery of the Shares to Investors as contemplated hereby.
(iii) Since the respective dates as of which information is given in the Offering Statement and the Final Offering Circular, there shall have been no litigation or other proceeding instituted against the Company or any of its officers or directors in their capacities as such, before or by any federal, state or local or foreign court, commission, regulatory body, administrative agency or other governmental body, domestic or foreign, which litigation or proceeding, in the reasonable judgment of StartEngine, would reasonably be expected to have a Material Adverse Effect.
(iv) Each of the representations and warranties of the Company contained herein shall be true and correct as of each Closing Date in all respects for those representations and warranties qualified by materiality and in all material respects for those representations and warranties that are not qualified by materiality, as if made on such date, and all covenants and agreements herein contained to be performed on the part of the Company and all conditions herein contained to be fulfilled or complied with by the Company at or prior to such Closing Date shall have been duly performed, fulfilled or complied with in all material respects.
(v) At the Closing, and at any Subsequent Closing at the option of StartEngine, there shall be furnished to StartEngine a certificate, dated the date of its delivery, signed by each of the Chief Executive Officer and the Chief Financial Officer of the Company, in form and substance satisfactory to StartEngine to the effect that each signer has carefully examined the Offering Statement, the Final Offering Circular, and that to each of such person’s knowledge:
(a) As of the date of each such certificate, (x) the Offering Statement does 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 not misleading and (y) the Final Offering Circular does 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, not misleading and (2) no event has occurred as a result of which it is necessary to amend or supplement the Final Offering Circular in order to make the statements therein not untrue or misleading in any material respect.
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(b) Each of the representations and warranties of the Company contained in this Agreement were, when originally made, and are, at the time such certificate is delivered, true and correct in all respects for those representations and warranties qualified by materiality and in all material respects for those representations and warranties that are not qualified by materiality.
(c) Each of the covenants required herein to be performed by the Company on or prior to the date of such certificate has been duly, timely and fully performed and each condition herein required to be complied with by the Company on or prior to the delivery of such certificate has been duly, timely and fully complied with.
(d) No stop order suspending the qualification of the Offering Statement or of any part thereof has been issued and no proceedings for that purpose have been instituted or are contemplated by the Commission.
(e) Subsequent to the date of the most recent financial statements in the Offering Statement and in the Final Offering Circular, there has been no Material Adverse Effect.
(vi) FINRA shall not have raised any objection with respect to the fairness or reasonableness of the plan of distribution, or other arrangements of the transactions, contemplated hereby.
10. INDEMNIFICATION.
(i) The Company shall indemnify and hold harmless StartEngine, each selling group participant, and each of their directors, officers, employees and agents and each person, if any, who controls StartEngine or such selling group participant within the meaning of Section 15 of the Act or Section 20 of the Exchange Act (each an “Indemnified Party”), from and against any and all losses, claims, liabilities, expenses and damages, joint or several (including any and all investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted (whether or not such Indemnified Party is a party thereto)), to which it, or any of them, may become subject under the Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, liabilities, expenses or damages arise out of or are based on (a) any untrue statement or alleged untrue statement made by the Company in Section 6 of this Agreement, (b) any untrue statement or alleged untrue statement of any material fact contained in (1) any Preliminary Offering Circular, the Offering Statement or the Final Offering Circular or any amendment or supplement thereto, (2) any Testing-the-Waters Communication or (3) any application or other document, or any amendment or supplement thereto, executed by the Company based upon written information furnished by or on behalf of the Company filed with the Commission or any securities association or securities exchange (each, an “Application”), or (c) the omission or alleged omission to state in any Preliminary Offering Circular, the Offering Statement, the Final Offering Circular, or any Testing-the-Waters Communication, or any amendment or supplement thereto, or in any Application a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading; provided, however, that the Company will not be liable to the extent that such loss, claim, liability, expense or damage arises from the sale of the Shares in the offering to any person and is based solely on an untrue statement or omission or alleged untrue statement or omission made in reliance on and in conformity with written information furnished to the Company by any Indemnified Party through StartEngine expressly for inclusion in the Offering Statement, any Preliminary Offering Circular, the Final Offering Circular, or Testing-the- Waters Communication, or in any amendment or supplement thereto or in any Application, it being understood and agreed that the only such information furnished by any Indemnified Party consists of the information described as such in subsection (ii) below. This indemnity agreement will be in addition to any liability which the Company may otherwise have.
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(ii) StartEngine will indemnify and hold harmless the Company against any losses, claims, damages or liabilities to which the Company may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) that arise out of or are based solely upon an untrue statement or alleged untrue statement of a material fact contained in the Offering Statement, any Preliminary Offering Circular or the Final Offering Circular, or any amendment or supplement thereto, or any Testing- the-Waters Communication, or arise out of or are based solely upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Offering Statement, any Preliminary Offering Circular or the Final Offering Circular, or any amendment or supplement thereto, or any Written Testing-the-Waters Communication, in reliance upon and in conformity with written information furnished to the Company by StartEngine expressly for use therein; and will reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending any such action or claim as such expenses are incurred. The Company acknowledges that, for all purposes under this Agreement, the statements set forth under the caption “Plan of Distribution” in any Preliminary Offering Circular and the Final Offering Circular constitute the only information relating to StartEngine furnished in writing to the Company by StartEngine expressly for inclusion in the Offering Statement, any Preliminary Offering Circular or the Final Offering Circular.
(iii) Promptly after receipt by an Indemnified Party under subsection (i) or (ii) above of notice of the commencement of any action, such Indemnified Party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any Indemnified Party otherwise than under such subsection. In case any such action shall be brought against any Indemnified Party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such Indemnified Party (who shall not, except with the consent of the Indemnified Party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such Indemnified Party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such Indemnified Party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such Indemnified Party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the written consent of the Indemnified Party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the Indemnified Party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (a) includes an unconditional release of the Indemnified Party from all liability arising out of such action or claim and (b) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any Indemnified Party.
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(iv) If the indemnification provided for in this Section 10 is unavailable or insufficient to hold harmless an Indemnified Party under subsection (i) or (ii) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and StartEngine on the other from the offering of the Shares. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the Indemnified Party failed to give the notice required under subsection (iii) above, then each indemnifying party shall contribute to such amount paid or payable by such Indemnified Party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and StartEngine on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and StartEngine on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bears to the Fee received by StartEngine. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or StartEngine on the other and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and StartEngine agree that it would not be just and equitable if contribution pursuant to this subsection (iv) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (iv). The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (iv) shall be deemed to include any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (iv), each StartEngine will not be required to contribute any amount in excess of the Fee received by such StartEngine. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
11. TERMINATIONS.
(i) Either party may terminate this Agreement at any time by written notice to the other party. The Services and Fees are non-refundable. Any unpaid fees due to StartEngine are due immediately upon termination.
(ii) The obligations of StartEngine under this Agreement may be terminated at any time prior to the initial Closing Date, by notice to the Company from such StartEngine, without liability on the part of StartEngine to the Company if, prior to delivery and payment for the Shares, in the sole judgment of StartEngine: (a) there has occurred any material adverse change in the securities markets or any event, act or occurrence that has materially disrupted, or in the opinion of StartEngine, will in the future materially disrupt, the securities markets or there shall be such a material adverse change in general financial, political or economic conditions or the effect of international conditions on the financial markets in the United States is such as to make it, in the judgment of StartEngine, inadvisable or impracticable to market the Shares or enforce contracts for the sale of the Shares; (b) there has occurred any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions, including without limitation as a result of terrorist activities, such as to make it, in the judgment of StartEngine, inadvisable or impracticable to market the Shares or enforce contracts for the sale of the Shares; (c) trading on the New York Stock Exchange, Inc., NYSE American or NASDAQ Stock Market has been suspended or materially limited, or minimum or maximum ranges for prices for securities shall have been fixed, or maximum ranges for prices for securities have been required, by any of said exchanges or by such system or by order of the Commission, FINRA, or any other governmental or regulatory authority; (d) a banking moratorium has been declared by any state or Federal authority; or (e) in the judgment of StartEngine, there has been, since the time of execution of this Agreement or since the respective dates as of which information is given in the Final Offering Circular, any Material Adverse Effect of the Company and its Subsidiaries considered as a whole, whether or not arising in the ordinary course of business;
(iii) If this Agreement is terminated pursuant to this Section 11, such termination shall be without liability of any party to any other party except as provided in Sections 8 and 10 hereof.
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12. NOTICES. Notice given pursuant to any of the provisions of this Agreement shall be in writing and, unless otherwise specified, shall be mailed or delivered (i) if to the Company, at [75 E. Santa Clara Ave. San Jose ] [address], Attention: Michael MoJaver, or (ii) if to StartEngine to 8687 Melrose Ave 7th Floor - Green, Los Angeles, CA 90069, Attention: CEO. Any such notice shall be effective only upon receipt. Any notice under Section 12 may be made by facsimile or telephone, but if so made shall be subsequently confirmed in writing.
13. SURVIVAL. The respective representations, warranties, agreements, covenants, indemnities and other statements of the Company and StartEngine set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement shall remain in full force and effect, regardless of (i) any investigation made by or on behalf of the Company, any of its officers or directors, StartEngine or any controlling person referred to in Section 10 hereof and (ii) delivery of and payment for the Shares. The respective agreements, covenants, indemnities and other statements set forth in Sections 6, 7, 8 and 10 hereof shall remain in full force and effect, regardless of any termination or cancellation of this Agreement.
14. SUCCESSORS. This Agreement shall inure to the benefit of and shall be binding upon StartEngine, the Company and their respective successors, and nothing expressed or mentioned in this Agreement is intended or shall be construed to give any other person any legal or equitable right, remedy or claim under or in respect of this Agreement, or any provisions herein contained, this Agreement and all conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of such persons and for the benefit of no other person except that (i) the indemnification and contribution contained in Sections 10(i) and (iv) of this Agreement shall also be for the benefit of the directors, officers, employees and agents of StartEngine and any person or persons who control such StartEngine within the meaning of Section 15 of the Act or Section 20 of the Exchange Act and (ii) the indemnification and contribution contained in Sections 10(ii) and (iv) of this Agreement shall also be for the benefit of the directors of the Company, the officers of the Company who have signed the Offering Statement and any person or persons who control the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act. No purchaser of Shares shall be deemed a successor because of such purchase.
15. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the internal laws of the State of California applicable to agreements made and to be performed in such state. Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby may be instituted in the California Courts, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. Service of any process, summons, notice or document by mail to such party’s address set forth above shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or other proceeding in the California Courts and irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such suit, action or other proceeding brought in any such court has been brought in an inconvenient forum.
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16. ACKNOWLEDGEMENT. The Company acknowledges and agrees that StartEngine is acting solely in the capacity of an arm’s length contractual counterparty to the Company with respect to the offering of Shares contemplated hereby. Additionally, StartEngine is not advising the Company or any other person as to any legal, tax, investment, accounting or regulatory matters in any jurisdiction with respect to the offering contemplated hereby or the process leading thereto (irrespective of whether StartEngine has advised or is advising the Company on other matters). The Company has conferred with its own advisors concerning such matters and shall be responsible for making its own independent investigation and appraisal of the transactions contemplated hereby, and StartEngine shall have no responsibility or liability to the Company or any other person with respect thereto. The StartEngine advises that it and its affiliates are engaged in a broad range of securities and financial services and that it or its affiliates may have business relationships or enter into contractual relationships with purchasers or potential purchasers of the Company’s securities. Any review by StartEngine of the Company, the transactions contemplated hereby or other matters relating to such transactions will be performed solely for the benefit of StartEngine and shall not be on behalf of, or for the benefit of, the Company.
17. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
18. ENTIRE AGREEMENT. This Agreement constitutes the entire understanding between the parties hereto as to the matters covered hereby and supersedes all prior understandings, written or oral, relating to such subject matter.
[signature page follows]
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IN WITNESS WHEREOF, the parties have executed this Agreement on the date set forth below.
[COMPANY] | ||
By: | /s/ Michael Mojver | |
Name: | Michael Mojver | |
Title: | President/CEO | |
Accepted as of the date hereof: 06 / 30 / 2020 |
STARTENGINE PRIMARY, LLC | ||
By: | /s/ Howard Marks | |
Name: | Howard Marks | |
Title: | CEO |
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SCHEDULE 1
SCHEDULE 2
SUBSIDIARIES
[TBD]
Exhibit 2.1
State of Delaware
Secretary of State
Division of Corporations
DELIVERED 11:52 11M 06/28/2010
FILED 11:52 11M 06/28/2010
SRV 100694905 - 4825424 FILE
CERTIFICATE OF INCORPORATION OF
Biotronix Corporation
FIRST. The name of the corporation is Biotronix Corporation.
SECOND. Its registered office in the State of Delaware is located at 1521 Concord Pike, Suite 301, in the City of Wilmington, County of New Castle, Zip Code 19803. The registered agent in charge thereof is United States Corporation Agents, Inc, THIRD The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of Delaware.
FOURTH.: The total number of shares of all classes of stock which the corporation shall have authority to issue is 30,000,000, of which 25,000,000 shares of par value $0.0001 per share shall be designated as Common Stock and 5,000,000 shares of par value $0.0001 per share shall be designated Preferred Stock. Shares of Preferred Stock may be issued one or more series from time to time by the board of directors, and the board of directors is expressly authorized to fix by resolution the designations and the powers, preferences and rights, and the qualifications limitation and restrictions thereof, which are permitted by the Delaware General Corporation Law, or the share of each series of Preferred Stock.
Subject to the rights of the holders of any series of Preferred Stock, the number of authorized shares of any series of Preferred Stock may be increased or decreased (but not below the number of shares thereof outstanding) by the affirmative vote of the holders of a majority outstanding shares of each series, voting together as a single class
FIFTH. The incorporator of the corporations is LegalZoom.com, Inc. 7083 Hollywood Blvd, Suite 180, Los Angeles CA 90028,
SIXTH. The board of directors of the corporation is expressly authorized to adopt, amend or repeals bylaws of the corporation.
SEVENTH. Election of directors need not be written ballot except and to the extent provided in the bylaws of the corporation.
EIGHT. The personal of the liability of the directors of the corporation for monetary damages for breach of fiduciary duty shall be eliminated to the fullest extent permissible under Delaware law. The corporation is authorized to indemnify its directors and officers to the fullest extent permissible under Delaware law.
IN WITNESS WHEREOF, the undersigned incorporator has executed this Certificate of Incorporation on the date below.
Date June 25, 2010
LegalZoom, Inc. Incorporator | ||
By: | ||
Sheila Dang, Asst. Secretary |
Exhibit 2.2
AMENDED
AND RESTATED BYLAWS
OF
Epilog Imaging Systems Inc.,
a Delaware corporation
ARTICLE
I.
OFFICES
Section 1. Registered Office. The registered office shall be at the office of the Corporation Service Company, 251 Little Falls Drive, in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the corporation may require.
ARTICLE
II.
MEETINGS OF STOCKHOLDERS
Section 1. Annual Meeting. An annual meeting of the stockholders for the election of directors shall be held at such place, if any, either within or without the State of Delaware, as shall be designated on an annual basis by the Board of Directors and stated in the notice of the meeting. Meetings of stockholders for any other purpose may be held at such time and place, if any, either within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Any other proper business may be transacted at the annual meeting.
Section 2. Notice of Annual Meeting. Written notice of the annual meeting stating the place, if any, date and hour of the meeting, the means of remote communications, if any, by which stockholders may be deemed to be present in person and vote at such meeting shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting.
Section 3. Voting List. The officer who has charge of the stock ledger of the corporation shall prepare and make, or cause a third party to prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of at least ten days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.
Section 4. Special Meetings. Special meetings of the stockholders of this corporation, for any purpose or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation, shall be called by the Chief Executive Officer, President or Secretary at the request in writing of a majority of the members of the Board of Directors or holders of at least ten percent (10%) of the total voting power of all outstanding shares of stock of this corporation then entitled to vote, and may not be called absent such a request. Such request shall state the purpose or purposes of the proposed meeting.
Section 5. Notice of Special Meetings. As soon as reasonably practicable after receipt of a request as provided in Section 4 of this Article II, written notice of a special meeting, stating the place, if any, date (which shall be not less than ten nor more than sixty days from the date of the notice) and hour of the special meeting, the means of remote communications, if any, by which stockholders may be deemed to be present in person and vote at such special meeting, and the purpose or purposes for which the special meeting is called, shall be given to each stockholder entitled to vote at such special meeting.
Section 6. Scope of Business at Special Meeting. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.
Section 7. Quorum. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business, except as otherwise provided by statute or by the Certificate of Incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the chairman of the meeting or the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted that might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting as provided in Section 5 of this Article II.
Section 8. Qualifications to Vote. The stockholders of record on the books of the corporation at the close of business on the record date as determined by the Board of Directors and only such stockholders shall be entitled to vote at any meeting of stockholders or any adjournment thereof.
Section 9. Record Date. The Board of Directors may fix a record date for the determination of the stockholders entitled to notice of or to vote at any stockholders’ meeting and at any adjournment thereof, or to express consent to corporate action in writing without a meeting, or to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action. The record date shall not be more than sixty nor less than ten days before the date of such meeting, and not more than sixty days prior to any other action. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
Section 10. Action at Meetings. When a quorum is present at any meeting, the vote of the holders of a majority of the shares of stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of applicable law or of the Certificate of Incorporation, a different vote is required, in which case such express provision shall govern and control the decision of such question.
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Section 11. Voting and Proxies. Unless otherwise provided in the Certificate of Incorporation, each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period. Each proxy shall be revocable unless expressly provided therein to be irrevocable and unless it is coupled with an interest sufficient in law to support an irrevocable power.
Section 12. Action by Stockholders Without a Meeting. Unless otherwise provided in the Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action that may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the corporation by delivery to its registered office in the State of Delaware (by hand or by certified or registered mail, return receipt requested), to its principal place of business, or to an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded; provided, however, that action by written consent to elect directors, if less than unanimous, shall be in lieu of holding an annual meeting only if all the directorships to which directors could be elected at an annual meeting held at the effective time of such action are vacant and are filled by such action. Prompt notice of the taking of corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of stockholders to take the action were delivered to the corporation by delivery to its registered office in the State of Delaware (by hand or by certified or registered mail, return receipt requested), to its principal place of business, or to an officer or agent of the corporation having custody of the book in which proceedings or meetings of stockholders are recorded.
An electronic transmission consenting to an action to be taken and transmitted by a stockholder or by a person authorized to act for a stockholder, shall be deemed to be written, signed and dated for the purposes of this Section 12, provided that such electronic transmission sets forth or is delivered with information from which the corporation can determine (i) that the electronic transmission was transmitted by the stockholder or by a person authorized to act for the stockholder and (ii) the date on which such stockholder or authorized person transmitted such electronic transmission. The date on which such electronic transmission is transmitted shall be deemed to be the date on which such consent was signed. No consent given by electronic transmission shall be deemed to have been delivered until such consent is reproduced in paper form and until such paper form shall be delivered to its registered office in Delaware (by hand or by certified or registered mail, return receipt requested), to its principal place of business, or to an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Notwithstanding the foregoing limitations on delivery, consents given by electronic transmission may be otherwise delivered to the principal place of business of the corporation or to an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded if, to the extent and in the manner in which the Board of Directors may from time to time determine. Any copy, facsimile or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all purposes for which the original writing could be used, provided that such copy, facsimile or other reproduction shall be a complete reproduction of the entire original writing.
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Section 13. Meeting by Remote Communication. If authorized by the Board of Directors in its sole discretion, and subject to such guidelines and procedures as the Board of Directors may adopt, stockholders not physically present at a meeting of stockholders may, by means of remote communication participate in a meeting of stockholders and be deemed present in person and vote at a meeting of stockholders whether such meeting is to be held at a designated place or solely by means of remote communication, provided that (i) the corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at such meeting by means of remote communication is a stockholder, (ii) the corporation shall implement reasonable measures to provide such stockholders a reasonable opportunity to participate in such meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of such meeting substantially concurrently with such proceedings, and (iii) if any stockholder votes or takes other action at such meeting by means of remote communication, a record of such vote or other action shall be maintained by the corporation.
Section 14. Nominations for Board of Directors. Nominations for election to the Board of Directors must be made by the Board of Directors or by any stockholder of any outstanding class of capital stock of the corporation entitled to vote for the election of directors. Nominations, other than those made by the Board of Directors of the corporation, must be preceded by notification in writing in fact received by the Secretary of the corporation not less than sixty days prior to any meeting of stockholders called for the election of directors. Such notification shall contain the written consent of each proposed nominee to serve as a director if so elected and the following information as to each proposed nominee and as to each person, acting alone or in conjunction with one or more other persons as a partnership, limited partnership, syndicate or other group, who participates or is expected to participate in making such nomination or in organizing, directing or financing such nomination or solicitation of proxies to vote for the nominee:
(a) the name, age, residence, address, and business address of each proposed nominee and of each such person;
(b) the principal occupation or employment, the name, type of business and address of the corporation or other organization in which such employment is carried on of each proposed nominee and of each such person;
(c) the amount of stock of the corporation owned beneficially, either directly or indirectly, by each proposed nominee and each such person; and
(d) a description of any arrangement or understanding of each proposed nominee and of each such person with each other or any other person regarding future employment or any future transaction to which the corporation will or may be a party.
The presiding officer of the meeting shall have the authority to determine and declare to the meeting that a nomination not preceded by notification made in accordance with the foregoing procedure shall be disregarded.
ARTICLE
III.
DIRECTORS
Section 1. Powers. The business of the corporation shall be managed by or under the direction of its Board of Directors, which may exercise all such powers of the corporation and do all such lawful acts and things as are not by applicable law or by the Certificate of Incorporation or by these Bylaws directed or required to be exercised or done by the stockholders.
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Section 2. Number; Election; Tenure and Qualification. Unless otherwise provided in the Certificate of Incorporation, the number of directors which shall constitute the whole board shall be fixed from time to time by resolution of the Board of Directors or by the Stockholders at an annual meeting of the Stockholders (unless the directors are elected by written consent in lieu of an annual meeting as provided in Article II, Section 12). With the exception of the first Board of Directors, which shall be elected by the incorporator, and except as provided in the corporation’s Certificate of Incorporation or in Section 3 of this Article III, the directors shall be elected at the annual meeting of the stockholders by a plurality vote of the shares represented in person or by proxy and each director elected shall hold office until his or her successor is elected and qualified unless he or she shall resign, become disqualified, disabled, or otherwise removed. Directors need not be stockholders.
Section 3. Vacancies and Newly Created Directorships. Unless otherwise provided in the Certificate of Incorporation, vacancies and newly-created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director. The directors so chosen shall serve until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by applicable law. If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office.
Section 4. Location of Meetings. The Board of Directors of the corporation may hold meetings, both regular and special, either within or without the State of Delaware.
Section 5. Meeting of Newly Elected Board of Directors. The first meeting of each newly elected Board of Directors shall be held immediately following the annual meeting of stockholders and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event such meeting is not held at such time, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a written waiver signed by all of the directors.
Section 6. Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board of Directors; provided that any director who is absent when such a determination is made shall be given notice of such location.
Section 7. Special Meetings. Special meetings of the Board of Directors may be called by the Chief Executive Officer or President on two days’ notice to each director by mail, overnight courier service, electronic mail or facsimile; special meetings shall be called by the Chief Executive Officer, President or Secretary in a like manner and on like notice on the written request of two directors unless the Board of Directors consists of only one director, in which case special meetings shall be called by the Chief Executive Officer, President or Secretary in a like manner and on like notice on the written request of the sole director. Notice may be waived in accordance with Section 229 of the General Corporation Law of the State of Delaware.
Section 8. Quorum and Action at Meetings. At all meetings of the Board of Directors, a majority of the directors then in office shall constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the Certificate of Incorporation. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.
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Section 9. Action Without a Meeting. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board of Directors or committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board of Directors or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
Section 10. Telephonic Meeting. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.
Section 11. Committees. The Board of Directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.
Section 12. Committee Authority. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority in reference to (a) approving, adopting or recommending to the stockholders any action or matter expressly required by the General Corporation Law of the State of Delaware to be submitted to stockholders for approval, or (b) adopting, amending or repealing any Bylaw of the corporation. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors.
Section 13. Committee Minutes. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required to do so by the Board of Directors.
Section 14. Directors’ Compensation. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, the Board of Directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.
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Section 15. Resignation. Any director or officer of the corporation may resign at any time. Each such resignation shall be made in writing or by electronic transmission and shall take effect at the time specified therein, or, if no time is specified, at the time of its receipt by either the Board of Directors, the Chief Executive Officer, the President or the Secretary. The acceptance of a resignation shall not be necessary to make it effective unless expressly so provided in the resignation.
Section 16. Removal. Unless otherwise restricted by the Certificate of Incorporation, these Bylaws or applicable law, any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of shares entitled to vote at an election of directors.
ARTICLE
IV.
NOTICES
Section 1. Notice to Directors and Stockholders. Whenever, under the provisions of the statutes or of the Certificate of Incorporation or of these Bylaws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given (i) by electronic transmission when such director or stockholder has consented to the delivery of notice in such form, and such notice shall be deemed to be given when directed to the proper facsimile number, electronic mail address or other proper electronic destination or (ii) in writing, by mail, addressed to such director or stockholder, at his or her address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. An affidavit of the Secretary or an Assistant Secretary or of the transfer agent or other agent of the corporation that the notice has been given shall in the absence of fraud, be prima facie evidence of the facts stated therein. Notice to directors may also be given by telephone (with confirmation of receipt).
Section 2. Waiver. Whenever any notice is required to be given under the provisions of the statutes or of the Certificate of Incorporation or of these Bylaws, a written waiver thereof, signed by the person or persons entitled to said notice, or a waiver by electronic transmission by the person entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. The written or electronic waiver need not specify the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors, or members of a committee of directors. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Attendance at the meeting is not a waiver of any right to object to the consideration of matters required by the Delaware General Corporation Law to be included in the notice of the meeting but not so included, if such objection is expressly made at the meeting.
ARTICLE
V.
OFFICERS
Section 1. Enumeration. The officers of the corporation shall be chosen by the Board of Directors and shall include a Chief Executive Officer, a President, a Secretary, a Treasurer or Chief Financial Officer and such other officers with such other titles as the Board of Directors shall determine. The Board of Directors may elect from among its members a Chairman or Chairmen of the Board and a Vice Chairman of the Board. The Board of Directors may also choose one or more Vice-Presidents, Assistant Secretaries and Assistant Treasurers. Any number of offices may be held by the same person, unless the Certificate of Incorporation or these Bylaws otherwise provide.
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Section 2. Election. The Board of Directors at its first meeting after each annual meeting of stockholders shall elect a Chief Executive Officer, a President, a Secretary, a Treasurer or Chief Financial Officer and such other officers with such other titles as the Board of Directors shall determine.
Section 3. Appointment of Other Agents. The Board of Directors may appoint such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors.
Section 4. Compensation. The salaries of all officers of the corporation shall be fixed by the Board of Directors or a committee thereof. The salaries of agents of the corporation shall, unless fixed by the Board of Directors, be fixed by the Chief Executive Officer, President or any Vice-President of the corporation.
Section 5. Tenure. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the directors of the Board of Directors. Any vacancy occurring in any office of the corporation shall be filled by the Board of Directors.
Section 6. Chairman of the Board and Vice-Chairman of the Board. The Chairman of the Board, if any, shall preside at all meetings of the Board of Directors and of the stockholders at which the Chairman shall be present. The Chairman shall have and may exercise such powers as are, from time to time, assigned to the Chairman by the Board of Directors and as may be provided by law. In the absence of the Chairman of the Board, the Vice Chairman of the Board, if any, shall preside at all meetings of the Board of Directors and of the stockholders at which the Vice Chairman shall be present. The Vice Chairman shall have and may exercise such powers as are, from time to time, assigned to such person by the Board of Directors and as may be provided by law.
Section 7. Chief Executive Officer; President. The President shall be the Chief Executive Officer of the corporation unless such title is assigned to another officer of the corporation. In the absence of a Chairman and Vice Chairman of the Board, the President or the Chief Executive Officer, should there be such a person, shall preside as the chairman of meetings of the stockholders and the Board of Directors; and the President and/or the Chief Executive Officer, should there be such a person, shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. The President and/or the Chief Executive Officer, should there be such a person, or any Vice President shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the corporation.
Section 8. Vice-President. In the absence of the President or in the event of the President’s inability or refusal to act, the Vice-President, if any (or in the event there be more than one Vice-President, the Vice-Presidents in the order designated by the Board of Directors, or in the absence of any designation, then in the order of their election) shall perform the duties of the President, and when so acting shall have all the powers of and be subject to all the restrictions upon the President. The Vice-President shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.
Section 9. Secretary. The Secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all the proceedings of the meetings of the corporation and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors, Chief Executive Officer or President, under whose supervision the Secretary shall be subject. The Secretary shall have custody of the corporate seal of the corporation and the Secretary, or an Assistant Secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by the Secretary’s signature or by the signature of such Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by such officer’s signature.
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Section 10. Assistant Secretary. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election) shall, in the absence of the Secretary or in the event of the Secretary’s inability or refusal to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.
Section 11. Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the corporation as may be ordered by the Board of Directors, President or Chief Executive Officer, taking proper vouchers for such disbursements, and shall render to the President, Chief Executive Officer and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all such transactions as Treasurer and of the financial condition of the corporation. If required by the Board of Directors, the Treasurer shall give the corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of the Treasurer’s office and for the restoration to the corporation, in case of the Treasurer’s death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in the possession or under the control of the Treasurer that belongs to the corporation.
Section 12. Assistant Treasurer. The Assistant Treasurer, or if there be more than one, the Assistant Treasurers in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election) shall, in the absence of the Treasurer or in the event of the Treasurer’s inability or refusal to act, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.
ARTICLE
VI.
CAPITAL STOCK
Section 1. Certificates. The shares of the corporation shall be represented by a certificate, unless and until the Board of Directors adopts a resolution permitting shares to be uncertificated. Certificates shall be signed by, or in the name of the corporation by, (a) the Chairman of the Board, the Vice-Chairman of the Board, the Chief Executive Officer, the President or a Vice-President, and (b) the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, certifying the number of shares owned by such stockholder in the corporation. Certificates may be issued for partly paid shares and in such case upon the face or back of the certificates issued to represent any such partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be specified.
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Section 2. Class or Series. If the corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in Section 202 of the General Corporation Law of the State of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate that the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Within a reasonable time after the issuance or transfer of uncertificated stock, the corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the Delaware Corporation Law or a statement that the corporation will furnish without charge, to each stockholder who so requests, the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.
Section 3. Signature. Any of or all of the signatures on a certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue.
Section 4. Lost Certificates. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or such owner’s legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 5. Transfer of Stock. No stockholder may transfer, assign, encumber, hypothecate, pledge, convey in trust, gift, transfer by bequest, devise or descent or otherwise make the subject of disposition any shares of any class of capital stock of the corporation unless such transaction is first approved in writing by the Board of Directors or a committee or other designee thereof (which approval may be withheld for any reason). For the avoidance of doubt, the following shall be considered a transfer, encumbrance or other disposition within the scope of the immediately preceding sentence: any decoupling of any partial interests in any shares of the corporation by the stockholder to any other person (for example, a stockholder retaining the voting rights with respect to its stock while transferring the economic rights associated with the same to another party, or vice versa). Such restriction, however, shall not be applicable to: (i) any transfer by will or intestate succession upon death or any gratuitous transfer of the shares of the corporation to any spouse or member of a stockholder’s immediate family (including adopted children) or grandchildren (or the immediate family of any such person), or to a custodian, trustee (including a trustee of a voting trust), executor or other fiduciary for the account of his or her spouse or members of his or her immediate family (including adopted children) or grandchildren (or to the immediately family of any such person), or to a trust for himself or herself, or a charitable remainder trust; (ii) any sale to the public pursuant to an effective registration statement under the Securities Act of 1933, as amended; or (iii) any bona fide gift to any charitable organization as defined in Section 501(c)(3) of the Internal Revenue Code. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Upon receipt of proper transfer instructions from the registered owner of uncertificated shares such uncertificated shares shall be canceled and issuance of new equivalent uncertificated shares or certificated shares shall be made to the person entitled thereto and the transaction shall be recorded upon the books of the corporation.
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Section 6. Record Date. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholder or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
Section 7. Registered Stockholders. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE
VII.
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the corporation, subject to the applicable provisions, if any, of the Certificate of Incorporation, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property or in shares of capital stock, subject to the provisions of the Certificate of Incorporation. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the Board of Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purposes as the Board of Directors shall think conducive to the interest of the corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created.
Section 2. Checks. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors.
Section 4. Seal. The Board of Directors may adopt a corporate seal having inscribed thereon the name of the corporation, the year of its organization and the words “Corporate Seal, Delaware”. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.
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Section 5. Loans. The Board of Directors of this corporation may, without stockholder approval, authorize loans to, or guaranty obligations of, or otherwise assist, including, without limitation, the adoption of employee benefit plans under which loans and guarantees may be made, any officer or other employee of the corporation or of its subsidiary, including any officer or employee who is a director of the corporation or its subsidiary, whenever, in the judgment of the Board of Directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest, and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the corporation.
ARTICLE
VIII.
INDEMNIFICATION
Section 1. Scope. The corporation may, to the fullest extent permitted by Section 145 of the General Corporation Law of the State of Delaware, as that Section may be amended and supplemented from time to time, indemnify any director, officer, employee or agent of the corporation, against expenses (including attorneys’ fees), judgments, fines, amounts paid in settlement and/or other matters referred to in or covered by that Section, by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise.
Section 2. Advancing Expenses. Expenses (including attorneys’ fees) incurred by a present or former director or officer of the corporation in defending a civil, criminal, administrative or investigative action, suit or proceeding by reason of the fact that such person is or was a director, officer, employee or agent of the corporation (or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise) may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation as authorized by relevant provisions of the General Corporation Law of the State of Delaware; provided, however, the corporation shall not be required to advance such expenses to a director (i) who commences any action, suit or proceeding as a plaintiff unless such advance is specifically approved by a majority of the Board of Directors, or (ii) who is a party to an action, suit or proceeding brought by the corporation and approved by a majority of the Board of Directors which alleges willful misappropriation of corporate assets by such director, disclosure of confidential information in violation of such director’s fiduciary or contractual obligations to the corporation, or any other willful and deliberate breach in bad faith of such director’s duty to the corporation or its stockholders.
Section 3. Liability Offset. The corporation’s obligation to provide indemnification under this Article VIII shall be offset to the extent the indemnified party is indemnified by any other source including, but not limited to, any applicable insurance coverage under a policy maintained by the corporation, the indemnified party or any other person.
Section 4. Continuing Obligation. The provisions of this Article VIII shall be deemed to be a contract between the corporation and each director of the corporation who serves in such capacity at any time while this bylaw is in effect, and any repeal or modification thereof shall not affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any action, suit or proceeding theretofore or thereafter brought based in whole or in part upon any such state of facts.
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Section 5. Nonexclusive. The indemnification and advancement of expenses provided for in this Article VIII shall (i) not be deemed exclusive of any other rights to which those indemnified may be entitled under any bylaw, agreement or vote of stockholders or disinterested directors or otherwise, both as to action in their official capacities and as to action in another capacity while holding such office, (ii) continue as to a person who has ceased to be a director and (iii) inure to the benefit of the heirs, executors and administrators of such a person.
Section 6. Other Persons. In addition to the indemnification rights of directors, officers, employees, or agents of the corporation, the Board of Directors in its discretion shall have the power on behalf of the corporation to indemnify any other person made a party to any action, suit or proceeding who the corporation may indemnify under Section 145 of the General Corporation Law of the State of Delaware.
Section 7. Definitions. The phrases and terms set forth in this Article VIII shall be given the same meaning as the identical terms and phrases are given in Section 145 of the General Corporation Law of the State of Delaware, as that Section may be amended and supplemented from time to time.
ARTICLE
IX.
AMENDMENTS
Except as otherwise provided in the Certificate of Incorporation, these Bylaws may be altered, amended or repealed, or new Bylaws may be adopted, by the holders of a majority of the outstanding voting shares or by the Board of Directors, when such power is conferred upon the Board of Directors by the Certificate of Incorporation, at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new Bylaws be contained in the notice of such special meeting. If the power to adopt, amend or repeal Bylaws is conferred upon the Board of Directors by the Certificate of Incorporation, it shall not divest or limit the power of the stockholders to adopt, amend or repeal Bylaws.
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CERTIFICATE
OF SECRETARY OF
Epilog Imaging Systems Inc.
The undersigned certifies:
1. That the undersigned is the duly elected and acting Secretary of Epilog Imaging Systems Inc., a Delaware corporation (the “Corporation”); and
2. That the foregoing Amended and Restated Bylaws constitute the Amended and Restated Bylaws of the Corporation as duly adopted by resolution of the Board of Directors of the Corporation, as of September 28, 2018.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of the Corporation as of this _28_ day of September, 2018.
/s/ Michael Mojaver | |
Michael
Mojaver Secretary |
Exhibit 4.2
Jabil + Epilog
Ultimax Prototype SOW
September 12, 2018
September 12, 2018
MICHAEL MOJAVER
CEO
Epilog
Dear Michael,
Thank you for your interest in Jabil’s high-tech, high-value, end-to-end manufacturing services and solutions. We sincerely appreciate this opportunity to initiate a strategic business relationship with Epilog.
Jabil understands that your criteria require a comprehensive product lifecycle partner who can innovate while offering manufacturing agility and global production capabilities. We also understand that Epilog needs a design, manufacturing and supply chain partner who adheres to the highest quality and regulatory standards, while meeting time-to-market and ramp-up demands at the lowest possible total landed cost. As the most technologically advanced manufacturing solutions company, we are confident that together we can successfully accomplish your vision.
The following response contains information customized to meet your needs and solutions designed to answer the challenges you face. From our over 100 global sites, we have chosen the ones that best fit your needs from a logistics, cost and expertise perspective. Jabil’s broad, sophisticated capabilities fuel technological innovation and enable companies like you to effectively compete in a challenging marketplace.
We invite you to study the contents of this proposal carefully and to contact us with any questions. We look forward to developing a collaborative and mutually successful relationship with Epilog.
Sincerely,
Yovav Ofri
Sr. Business Unit Manager
Mobile: +1408 483 1323
Email : Yovav_Ofri@jabil.com
PAGE 1 | C O N F I D EN TI AL |
CONTENTS
Michael Mojaver | 1 | |
1. | Definitions | 3 |
2. | Scope | 3 |
3. | Jabil Responsibilities | 3 |
3.1 | Jabil Deliverables | 3 |
3.2 | Epilog Responsibilities | 3 |
3.3 | Epilog Deliverables | 4 |
4. | Assumptions | 4 |
4.1 | Assumptions with Respect to Business | 4 |
4.2 | Items NOT included in this SoW | 4 |
4.3 | Assumptions with Respect to I p Rights | 4 |
5. | Communications and Reporting | 4 |
6. | Key Project Milestones & Schedule | 5 |
7. | Cost estimate | 5 |
8. | Payment Terms | 5 |
9. | Contact | 6 |
10. | General Provisions | 6 |
12. | Exhibit 1: Development proposal | 6 |
PAGE 2 | C O N F I D EN TI AL |
1. | DEFINITIONS |
Jabil Optics | 10560 Dr. Martin Luther King Jr. St. North St. Petersburg, Florida, 33716- 3718, U.S.A. |
Epilog | 75 E Santa Clara St. San Jose, CA 95113 |
2. | SCOPE |
This document, specified as SoW, indicates the relationship, and the list of deliverables and work elements between Jabil and Epilog, as they collaborate on the prototype build and lens design of two configurations of 3-chip cameras for Epilog for security applications from initiation of the project, through the completion of the final deliverables.
Build 20pcs of U ltimax w hich includes:
● | 6pcs sensor PCBA in Taiwan | |
● | 50pcs sensor PCBA in Taiwan | |
● | 4pcs processor PCBA Rev. 1 in Taiwan | |
● | 5pcs processor PCBA Rev. 2 in Taiwan | |
● | 20pcs processor PCBA Rev. 2 in Taiwan | |
● | 20pcs U ltimax CM final assembly in Jena |
3. | JABIL RESPONSIBILITIES |
● | Overall project management | |
● | Technical / Programmatic / Contractual communication to Epilogs | |
● | Supply chain management, sourcing and qualification | |
● | Provide 5 Image lens selections | |
● | EE and ME final design | |
● | Active alignment and image test | |
● | Prototype build |
3.1 | JABIL DELIVERABLES |
● | Schematic | |
● | BOM | |
● | Layout /Gerber | |
● | Design verification test plan and test report | |
● | 20pcs Prototype samples | |
● | Build report | |
● | 5 Lens test result | |
● | Mechanical drawings | |
● | Project schedule and cost update |
3.2 | EPILOG RESPONSIBILITIES |
● | Reference EE/ME design | |
● | PCBA testing | |
● | Software and test software to drive the cameras and the image sensors | |
● | Target specification |
PAGE 3 | C O N F I D EN TI AL |
3.3 | EPILOG DELIVERABLES |
● | EE reference BOM | |
● | Schematics | |
● | Reference Mechanical 2D&3D drawings | |
● | Design and specs approval | |
● | Communication whenever needed |
4. | ASSUMPTIONS |
4.1 | ASSUMPTIONS WITH RESPECT TO BUSINESS |
● | The cost in this SOW is estimated only according to current information received. | |
● | Jabil will provide a monthly cost report | |
● | Anything change after the SOW signed will be managed by project change control process |
4.2 | ITEMS NOT INCLUDED IN THIS SOW |
● | Software and firmware | |
● | PCBA test | |
● | Electrical and software interface for camera alignment and image grabbing for test | |
● | Any cost related to mass production | |
● | Product level validation | |
● | Certification and Licensing such as: |
o | Certification costs related to regulatory and compliancy activities, (e. g. EU RoHS, WEEE) | |
o | Third party licenses or any other licenses | |
o | Firmware / Software or any other licensing fees |
● | Product development to mass production | |
● | Additional activities not covered by this SOW . |
4.3 | ASSUMPTIONS WITH RESPECT TO IP RIGHTS |
This SOW is issued and accepted in accordance with and subject to the terms and condition of the Technical Service Agreement signed between the Parties and dated as of April 16th, 2018, which is incorporated herein by reference and shall govern the serviced performed hereunder.
5. | COMMUNICATIONS AND REPORTING |
Communication and reporting will follow the proposed plan and structure below. Important issues and decisions to be communicated via email within 48 hours as they occur. I f severe enough to warrant executive attention, problems will be escalated with 48 hours.
Communication | Frequency | Owner | Deliverable | Medium | ||||
Project Review |
Weekly | Jabil PM | Weekly Project Status Report | WebEx/E-mail/Sharefolder | ||||
Project Cost |
Monthly | Jabil BU | Monthly Forecast VS Actual Report | WebEx/E-mail/Sharefolder | ||||
Technical Review |
Weekly | Jabil TPM | Open Item List | WebEx/E-mail/Sharefolder | ||||
Build Readiness |
Per build | Jabil Planner | Material status, Build report, Tracking number | WebEx/E-mail/Sharefolder | ||||
Quarterly Business Review |
Quarterly | Jabil BU | QBR Report | WebEx/E-mail/Sharefolder |
PAGE 4 | C O N F I D EN TI AL |
6. | KEY PROJECT MILESTONES & SCHEDULE |
Category | Epilog Document Release | Ship date | Sample qty | ||||
Sensor board prototype | 20-May | 13-Jul | 6pcs | ||||
Sensor Board Balance | 20-May | 7-Sep | 50pcs | ||||
Processor board Rev. 1 | 1-May | 17-Jul | 4pcs | ||||
Processor board Rev. 2 | 27-Jun | 7-Sep | 5pcs | ||||
Processor board Rev. 2 | 27-Jun | 21-Sep | 20pcs | ||||
Ultimax CM | 30-May | 29-Oct | 20pcs |
* | Schedule might be adjusted depending on product status. |
7. | COST ESTIMATE |
Cost | Budget | |||
Labor | $410,632 | |||
Overhead | $ | 15,000 | ||
Jigs | $ | 12,000 | ||
Travel | $ | 5,500 | ||
Prototypes M t l | $ | 97,873 | ||
Total | $ | 541,005 |
* | Any cost change will be managed by CR |
8. | PAYMENT TERMS |
● | Jabil shall recover an amount equal to 100% of the total incurred cost through the amortization of such amount per unit price of the Product based on the mutually agreed forecasted volume of Product to be purchased by Epilog during the first 24 months of full commercial production of the Products (“Recovery Period”). Epilog and Jabil will review the recovery on a quarterly basis to assess progress and make any adjustment to pricing adders to ensure full cost recovery of total cost within the specified period. I n the event that, for any reason, Jabil does not recover the foregoing amount within the Recovery Period, the parties shall discuss, in good-faith, a resolution for Jabil to recover the remaining balance. | |
● | ||
● | Ex-Work Inco term |
PAGE 5 | C O N F I D EN TI AL |
9. | CONTACT |
The contact person for the quotation process is:
Name: | Yovav Ofri |
Address: | Jabil Inc. 6375 San Ignacio Ave., San Jose CA 95119 U.S.A. |
Phone: | + 1-408-483- 1323 |
E-M ail: | Yovav_Ofri@Jabil.com |
10. | GENERAL PROVISIONS |
This document is valid for 30 days from its release date. Jabil reserves the right to withdraw this Statement of Work after the 30-day validity period w ith no financial, legal, or other obligation to Jabil.
Any requested variances to the information provided herein may require re-quoting.
This SOW is issued and accepted in accordance with and subject to the terms and condition of the Technical Service Agreement signed between the Parties and dated as of April 16th, 2018 which is incorporated herein by reference and shall govern the serviced performed hereunder.
11. | APPROVALS |
The signatures below shall indicate the parties’ acceptance of this project quotation and constitute authorization for Jabil to schedule and deliver work as well as issue invoices when appropriate.
Accepted By: | Accepted By: | |
Jabil | Epilog | |
/s/ Yovav Ofri | /s/ M Mojaver | |
Yovav Ofri | ||
Sr. Business Unit Manager |
||
October 22, 2018 | Dec 03, 2018 | |
Date | Date |
12. | EXHIBIT 1: DEVELOPMENT PROPOSAL |
Epilog - Jabil proposal - draft - v1.
PAGE 6 | C O N F I D EN TI AL |
Exhibit 6.1
Exhibit 8.1
SELF-DIRECTED ACCOUNT AGREEMENT
Epilog Imaging Systems Inc. (“Account Holder”, “I”, “my”, “you”, “your”)a Business hereby requests and directs that Prime Trust, LLC (“Prime Trust”, “Custodian”, “we”, “our”, “us”), a Nevada chartered financial institution and licensed trust company, establish a Business Custodial Account (“Account”) for and in the name of Account Holder, and to hold, as Custodian, all assets deposited to, or collected with respect to such Account, upon the following terms and conditions:
1. | APPOINTMENT OF CUSTODIAN: |
Account Holder hereby appoints Prime Trust to be custodian of and to hold or process as directed all securities, cash and other assets of Account Holder (hereinafter referred to as “Custodial Property”) that are delivered to Custodian by Account Holder or Account Holder’s Agent(s) as custodian for the Account, and in accordance with the terms of this Agreement.
2. | SELF-DIRECTED INVESTMENTS: |
a. | This Account is a self-directed Account. Prime Trust will act solely as custodian of your Account and will not exercise any investment discretion regarding your Account, as this is solely your responsibility. You acknowledge and agree that Prime Trust is not a “fiduciary” with respect to this Account under applicable state or federal law. If you desire to have Prime Trust act as your fiduciary and make investment decisions then you must sign the Prime Custody Agreement. |
b. | As a self-directed Account you recognize and accept the risks associated with investments in general and in private securities in particular, and that: |
i. | The value of your Account will be solely dependent upon the performance of any investment instrument chosen by you. |
ii. | Prime Trust shall have no duty or responsibility to review or perform due diligence on any investment and will make absolutely no recommendation of investments. You will perform your own due diligence on all investments and take sole responsibility for all decisions made for your Account. |
iii. | Prime Trust does not provide valuations of any securities, nor does it hire or seek valuations or appraisals on any securities held on Account, though it may, at its option and with no obligation, if available for any particular security, include recent price quotations from a nationally recognized, SEC-registered trading system on your statement for any such securities that you own, if readily available via API’s from the trading system or any custodian used by Prime Trust. If any third party which we have been enabled to receive data from does provide us with valuations or price quotations on any securities held on Account, Prime Trust will not be expected or obligated to attempt to verify the validity, accuracy or reliability of any such valuations or price quotations and you agree that Prime Trust shall in no way be held responsible nor Accountable for any such valuations or price quotations, and that we simply acted in a passive, pass-through capacity in providing these (if any) on your statements and that such valuations or price quotations are neither verified, substantiated nor to be relied upon in any way, for any purpose. |
iv. | Account Holder will always seek and rely solely on the professional assistance from properly licensed financial, legal, and Accounting professionals. Account Holder agrees that under no circumstance will it ever construe any written, oral or other communications from Prime Trust to be legal, accounting or investment advice. |
c. | Account Holder will not direct the purchase or sale of any security which is not marketable under the securities laws of the Account Holder’s place of residence, nor, without limiting the generality of the foregoing, direct any investment that would be illegal under federal, state or local law. The Account Holder hereby warrants that he will not enter into a transaction, or cause a transaction to be entered into, which is prohibited under Section 4975 of the Internal Revenue Code. Pursuant to the directors of the Account Holder or Account Holder’s Agent(s), Prime Trust shall invest and reinvest the assets of Custodial Property as directed by Account Holder or Account Holder’s Agents(s) only so long as, in the sole judgment of Prime Trust, such requested investments will not impose an unreasonable administrative burden on Prime Trust (which such determination by Prime Trust shall not to be construed in any respect as a judgment concerning the prudence or advisability of such investment). |
d. | Securities purchased may be the equity or debt securities of any legally organized and operating issuer. This includes, without limitation, investments in real estate, automotive, aerospace, technology, cannabis, gambling and other industries. However, Account Holder warrants and represents that you are not directly involved in any business or services related to the cannabis, gambling, adult or firearms industries, and if so then you agree to the Prime Trust Enhanced Services custodial agreement. |
e. | Buy and sell orders may be made orally, including via telephone, or electronically, including email and internet-enabled devices and systems. Account Holder bears complete and absolute responsibility for all buy and sell orders for this Account, and will immediately (within one day) notify Prime Trust of any unauthorized transactions. |
3. | SCHEDULE OF FEES: |
The Custodian shall receive reasonable compensation in accordance with its usual Schedule of Fees in effect. The fees and charges initially connected with this Account include:
○ | Account Fee: 0.5 basis points (“bps”) annual fee for reconciliation and account services on deposited and accumulated Custodial Property, charged at the time of deposit, not prorated nor refundable, and then annually on the anniversary of such Custodial Property on account at that time, if any. |
○ | Statement Fee: $0.00 – there are no fees for electronically delivered and available statements |
○ | Transaction Fee on Original Investments in New Offerings - $0.00 so long as the investment is conducted electronically though our technology systems or those of FundAmerica, LLC and its customers. $50 if manual, paper-based or off- platform investment, acceptance of which is at the discretion of Prime Trust. |
○ | Transaction Fee on Asset Sales & Liquidations (including redemptions) - $35 so long as the investment is conducted electronically though our technology systems or those of FundAmerica, LLC and its customers. Additional $150 if manual, paper-based or off-platform investment, acceptance of which is at the discretion of Prime Trust. |
○ | Escrow Fee on Secondary Purchases - $0.00 so long as the investment is conducted electronically though our technology systems or those of FundAmerica, LLC and its customers, AND so long as appropriate legal documentation is provided to support the transaction, if required (e.g. a 144 legal opinion on a Reg D transaction, transfer agent certification of good delivery, etc). $150 if manual, paper-based or off-platform investment, acceptance of which is at the discretion of Prime Trust. |
○ | Cash Receipts and Distributions – via: ACH, $0.50, check, $10.00, wire (domestic), $15.00, wire (international), $45, debit & credit cards, $0.35 plus 2.35%. |
○ | Customer Service – reasonable and customary charges, which vary from $50/hour to over $500 per hour depending upon the type or seniority of personnel involved in accepting and responding to email, phone calls and other communications as required by Account Holder or its agents, in minimum 15 minute increments, with no explicit or prior approval requested and no caps on amounts incurred. |
○ | Cash Arbitrage – the difference between what Custodian earns on cash deposits from its correspondent banks vs what Custodian pays as interest to Account Holder on free (uninvested) cash deposits, if any, is considered fee income to the Custodian. |
○ | Termination of Account – fees are variable and depending upon complexity of transfer or liquidation |
○ | Third-Party Fees – in the event that we are charged any fees by a third party in performing services on your behalf (e.g. transfer agent fee, legal fees, Accounting or auditor fees, notary fee, etc) then you agree to reimburse us for such reasonable charges at cost plus 25%, and that no prior approval is required from you in incurring such expense unless it is in excess of $250. Approval from you to exceed such amount may be verbal or via email. |
The Account Holder agrees to pay all fees to Prime Trust either via simple deduction from cash available in the Account, via Ach debit to Account Holders bank, or via credit card, or via liquidation of securities or investments in the Account at Prime Trust’s sole and absolute discretion. Unpaid fees are subject to interest at a rate of 1.50% per month on the outstanding balance and may be applied as a first lien on any assets in my Account.
Right to change this fee schedule.
Prime Trust reserves the right to make changes to its fees for custodial services in its sole and absolute discretion. Fees may be modified upon 60 days’ notice to you and shall become effective on the 61st day after emailing the notice of such revision to your email address on record in your Account.
4. | ASSETS AND CUSTODY: |
a. | Assets which Prime Trust will generally agree to accept and hold on Account Holders behalf include cash (USD), private equity and debt securities issued pursuant to laws and regulations of the United States, as well as equity and debt securities which are listed on any US exchange, ATS or bulletin board (e.g. OTC, NASDAQ, NYSE, AMEX, etc). Securities issued pursuant to regulations of countries other than the US or which are listed on non-US trading systems may be acceptable for custody on a case by case basis. Non-USD currency, as well as commodities, options, and non-securities assets such as art, coins, real estate, rare books, etc are generally not accepted for custody at Prime Trust. |
b. | During the term of this Agreement, Custodian is responsible for safekeeping only those documents which are delivered into its possession by the Account Holder or Account Holder’s Agent(s). Custodian may for convenience take and hold title to Custodial Property or any part thereof in its own name or in the name of its nominee (commonly known as “street name”), with ownership of assets segregated on its books and records. |
c. | Assets under custody are held for benefit of Account holders and not together with other, non-custodial funds or property of Prime Trust. Though Prime Trust may, of course, commingle the Custodial Property with assets of other Accounts and segregate each Account holder’s ownership of such assets on Prime Trusts books and records. |
d. | Custodian shall keep accurate records showing all receipts, disbursements, and other transactions involving this Account. All such records shall be the property of Custodian, but shall be available for inspection by Account Holder pursuant to Section 5 herein. |
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e. | Custodian shall collect and hold all funds when Custodial Property may mature, be redeemed or sold. Custodian shall hold the proceeds of such transaction until receipt of written or electronic (via our systems) instructions from Account Holder. |
f. | Custodian shall make any purchase, sale, exchange, investment, disbursement or reinvestment of Custodial Property under this Agreement that Account Holder may at any time in writing direct, provided that sufficient funds of Account Holder are available for such transaction. In the event that cash is received by Custodian for which there is no investment direction, the Custodian shall, and is expressly authorized by Account Holder, to handle such cash in accordance with Account Holder’s directives, if any. |
g. | Funds received in any currency other than USD shall, at your direction, which such direction is being explicitly given hereby, be converted to USD at exchange rates set by our correspondent bank and with applicable fees as are customary for such special handling (not to exceed 2.00%). |
h. | Without limiting the generality of the foregoing, Prime Trust is authorized to collect into custody all property delivered to Custodian at the time of execution of this Agreement, as well as all property which is hereafter purchased for Client’s Account or which may hereafter be delivered to Custodian for Client’s Account pursuant to this Agreement, together with the income, including but not limited to interest, dividends, proceeds of sale and all other monies due and collectable attributable to the investment of the Custodial Property. |
5. | ACCOUNT ACCESS AND COMMUNICATIONS: |
a. | Custodian shall provide access to your Account via our website at www.primetrust.com, as well as via API’s that third-party websites can write into (e.g. broker-dealers, funding portals, trading platforms, investment advisors, registered transfer agents, etc). |
b. | Statements of assets, along with receipts and disbursements if Custodial Property shall be available online at www.primetrust.com, in your Account, as well as emailed to you on not less than a quarterly basis. |
c. | Custodian shall be under no obligation to forward any proxies, financial statements or other literature received by it in connection with or relating to Custodial Property held under this agreement. Custodian shall be under no obligation to take any action with regard to proxies, stock dividends, warrants, rights to subscribe, plans of reorganization or recapitalization, or plans for exchange of securities. |
d. | Account Holder agrees that Custodian may contact you for any reason. No such contact will be deemed unsolicited. Custodian may contact Account Holder at any address, telephone number (including cellular numbers) and email addresses as Account Holder may provide from time to time. Custodian may use any means of communication, including but not limited to, postal mail, email, telephone, or other technology to reach Account Holder. |
e. | ELECTRONIC STATEMENTS ELECTION |
Account Holder agrees that Prime Trust may email statements to it on a periodic basis, at intervals and on a schedule set entirely at the Custodian’s discretion. Account Holder further agrees that it can and will log onto its Account at www.primetrust.com at its discretion to view current or historic statements, as well as transaction history, securities positions and cash balances. Account Holder understands and agrees that under no circumstances may it request to have statements printed and mailed to it. If Account Holder desires printed statements then it agrees to log onto its Account at www.primetrust.com and print them itself.
6. | TERM AND TERMINATION, MODIFICATION: |
a. | This Agreement is effective as of the date set forth below and shall continue in force until terminated as provided herein. |
b. | This Agreement may be terminated by either party at any time upon 60 days written notice to the other party (with email being an agreed upon method of such notice). |
c. | This Agreement may be amended or modified only by the Custodian, or with the written agreement from the Custodian. Such amendment or modification shall be effective on the 30th day after the Account Holder receives notice of such revision electronically via the email address shown on the records of Prime Trust. |
d. | If this Agreement is terminated then Custodian shall deliver the Custodial Property to Account Holder as soon as practicable or, at Account Holder’s request to a Successor Custodian. Account Holder acknowledges that Custodial Property held in Custodian’s own name or nominee may require a reasonable amount of time to be transferred. Upon delivery of Custodial Property, Custodian’s responsibility under this Agreement ceases. |
e. | This agreement shall also terminate upon the occurrence of any of the following events: |
i. | Upon death of the Account Holder, subsequent to which, in a reasonable timeframe at the sole discretion of Custodian, all assets in this Account will be distributed to the beneficiary or beneficiaries of the Account Holder, generally to one or more Prime Trust self-directed Accounts in their name(s). In the event that no beneficiaries claim this Account then the assets may be preserved in the Account for so long as possible, until a beneficiary makes itself known or as may be subject to “unclaimed property” regulations as promulgated by state and federal regulators (at which time assets on Account may be transferred or liquidated and proceeds forwarded to such authorities as required by law or regulation). |
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ii. | Filing of a petition in bankruptcy (by the Account Holders or by a creditor of the Account Holders). If this Agreement terminates due to the filing of a petition in bankruptcy, termination or dissolution of Account Holder, Custodian shall deliver the Custodial Property to the Court appointed representative for Account Holder. If no representative has been appointed by the Court, Custodian may deliver the Custodial Property to the person it deems to be an agent of the Account Holder and such delivery will release Custodian from any further responsibility for said Custodial Property. |
iii. | The legal incompetency of Account Holder, unless there is in existence a valid durable power of attorney or trust agreement authorizing another to succeed or act for Account Holder with respect to this agreement. |
7. | TERMS OF USE, PRIVACY POLICY: |
Except as set forth in this Agreement, Account Holder agrees to be bound by the Prime Trust the most current, then in effect, Terms of Use and Privacy Policy, as available via links at the bottom of the www.primetrust.com website. In the event of any conflict between any terms or provisions of the website Terms of Use or Privacy Policy and the terms and provisions of this Agreement, the applicable terms and provisions of this Agreement shall control.
8. | DISCLAIMER: |
EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, PRIME TRUST MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND WHETHER EXPRESS, IMPLIED (EITHER IN FACT OR BY OPERATION OF LAW). PRIME TRUST EXPRESSLY DISCLAIMS ANY AND ALL IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, QUALITY, ACCURACY, TITLE, AND NON-INFRINGEMENT. PRIME TRUST DOES NOT WARRANT AGAINST INTERFERENCE WITH THE USE OF THE SERVICES OR AGAINST INFRINGEMENT. PRIME TRUST DOES NOT WARRANT THAT THE SERVICES OR SOFTWARE ARE ERROR-FREE OR THAT OPERATION OR DATA WILL BE SECURE OR UNINTERRUPTED. PRIME TRUST EXPRESSLY DISCLAIMS ANY AND ALL LIABILITY ARISING OUT OF THE FLOW OF DATA AND DELAYS ON THE INTERNET, INCLUDING BUT NOT LIMITED TO FAILURE TO SEND OR RECEIVE ANY ELECTRONIC COMMUNICATIONS (e.g. EMAIL). ACCOUNT HOLDER DOES NOT HAVE THE RIGHT TO MAKE OR PASS ON ANY REPRESENTATION OR WARRANTY ON BEHALF OF PRIME TRUST TO ANY THIRD PARTY. ACCOUNT HOLDER’S ACCESS TO AND USE OF THE SERVICES ARE AT ACCOUNT HOLDER’S OWN RISK. ACCOUNT HOLDER UNDERSTANDS AND AGREES THAT THE SERVICES ARE PROVIDED TO IT ON AN “AS IS” AND “AS AVAILABLE” BASIS. PRIME TRUST EXPRESSLY DISCLAIMS LIABILITY TO ACCOUNT HOLDER FOR ANY DAMAGES RESULTING FROM ACCOUNT HOLDER’S RELIANCE ON OR USE OF THE SERVICES.
9. | LIMITATION OF LIABILITY: |
a. | Disclaimer of Consequential Damages. ACCOUNT HOLDER HEREBY ACKNOWLEDGES AND AGREES, NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, PRIME TRUST WILL NOT, UNDER ANY CIRCUMSTANCES, BE LIABLE TO ACCOUNT HOLDER FOR CONSEQUENTIAL, INCIDENTAL, SPECIAL, OR EXEMPLARY DAMAGES ARISING OUT OF OR RELATED TO ANY INVESTMENT OR TRANSACTION OCCURRING UNDER THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO, LOST PROFITS OR LOSS OF BUSINESS. |
b. | Cap on Liability. ACCOUNT HOLDER HEREBY ACKNOWLEDGES AND AGREES UNDER NO CIRCUMSTANCES WILL PRIME TRUST’S TOTAL LIABILITY OF ANY AND ALL KINDS ARISING OUT OF OR RELATED TO THIS AGREEMENT (INCLUDING BUT NOT LIMITED TO WARRANTY CLAIMS), REGARDLESS OF THE FORM AND REGARDLESS OF WHETHER ANY ACTION OR CLAIM IS BASED ON CONTRACT, TORT, OR OTHERWISE, EXCEED THE TOTAL AMOUNT OF FEES PAID, IF ANY, BY ACCOUNT HOLDER TO PRIME TRUST UNDER THIS AGREEMENT DURING THE TWELVE (12) MONTH PERIOD PRIOR TO THE OCCURRENCE OF THE EVENT GIVING RISE TO SUCH LIABILITY. |
c. | General Indemnification. Account Holder hereby agrees to indemnify, protect, defend and hold harmless Prime Trust and its officers, directors, members, shareholders, employees, agents, partners, vendors, successors and assigns from and against any and all third party claims, demands, obligations, losses, liabilities, damages, regulatory investigations, recoveries and deficiencies (including interest, penalties and reasonable attorneys’ fees, costs and expenses), which Prime Trust may suffer as a result of: (a) any breach of or material inaccuracy in the representations and warranties, or breach, non-fulfillment or default in the performance of any of the conditions, covenants and agreements, of Account Holder contained in this Agreement or in any certificate or document delivered by Account Holder or its agents pursuant to any of the provisions of this Agreement, or (b) any obligation which is expressly the responsibility of Account Holder under this Agreement, or (c) any other cost, claim or liability arising out of or relating to operation or use of the license granted hereunder, or, (d) any breach, action or regulatory investigation arising from Account Holder’s failure to comply with any state blue sky laws or other securities laws, and/or arising out of any alleged misrepresentations, misstatements or omissions of material fact in the Account Holders’ offering memoranda, general solicitation, advertisements and/or other offering documents. Account Holder is required to immediately defend Prime Trust including the immediate payment of all attorney fees, costs and expenses, upon commencement of any regulatory investigation arising or relating to Account Holder’s offering and/or items in this Section 6.3(a) through (d) above. Any amount due under the aforesaid indemnity will be due and payable by Account Holder within thirty (30) days after demand thereof. |
d. | Limitation on Prime Trust’s Duty to Litigate. Without limiting the foregoing, Prime Trust shall not be under any obligation to defend any legal action or engage in any legal proceedings with respect to the Account or with respect to any property held in the Account unless Prime Trust is indemnified to Prime Trust’s satisfaction. Whenever Prime Trust deems it reasonably necessary, Prime Trust is authorized and empowered to consult with its counsel in reference to the Account and to retain counsel and appear in any action, suit or proceeding affecting the Account or any of the property of the Account. All fees and expenses so incurred shall be for the Account and shall be charged to the Account. |
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e. | Third Party Claims. |
i. | Account Holder agrees to bear sole responsibility for the prosecution or defense, including the employment of legal counsel, of any and all legal actions or suits involving the Account, which may arise or become necessary for the protection of the investments in that Account, including any actions lodged against the Custodian. Account Holder also agrees to bear sole responsibility for enforcing any judgments rendered in favor of the Account, including judgments rendered in the name of Prime Trust as Custodian of the Account. |
ii. | Account Holder agrees to be responsible for any and all collection actions, including contracting with a collection agency or institutional legal action, and bringing any other suits or actions which may become necessary to protect the rights of the Account. Account Holder understands that any legal filings made on behalf of this Investment are to be made on behalf of beneficial owners for whom Prime Trust acts as custodian. Account Holder agrees not to institute legal action on behalf of the Account without Custodian’s written consent to litigate and that Account Holder shall prosecute any legal action. Account Holder agrees that any such legal action will be carried out in a manner that does not cause Custodian to incur any costs or legal exposure. |
10. | NOTICES: |
All notices permitted or required by this Agreement will be via electronic mail (“email”), and will be deemed to have been delivered and received upon sending via any SMTP delivery service chosen by Prime Trust. Notices shall be delivered to the addresses on record which, if to Prime Trust shall be to support@primetrust.com and if to Account Holder shall be to the email address on file in your Account.
11. | SEVERABILITY: |
If any provision of this Agreement is for any reason found to be ineffective, unenforceable, or illegal by any court having jurisdiction, such condition will not affect the validity or enforceability of any of the remaining portions hereof.
12. | NO LEGAL, TAX OR ACCOUNTING ADVICE: |
Account Holder agrees without reservation that Prime Trust is NOT providing any legal, tax or Accounting advice in any way, nor on any matter, regardless of the tone or content of any communication (oral, written or otherwise). Account Holder unconditionally agrees to rely solely on its own legal, tax and Accounting professionals for any such advice and on all matters.
13. | NO INVESTMENT ADVICE OR RECOMMENDATIONS: |
Account Holder agrees that Prime Trust is not providing any investment advice, nor do we make any recommendations to any Account Holder of, or investor in, any securities. Account Holder agrees that it will only rely on the advice of its attorneys, Accountants and other professional advisors, including any investment advisers or registered broker-dealers acting on its behalf.
14. | ELECTRONIC SIGNATURE AND COMMUNICATIONS NOTICE AND CONSENT: |
Digital (“electronic”) signatures, often referred to as an “e-signature”, enable paperless contracts and help speed up business transactions. The 2001 E-Sign Act was meant to ease the adoption of electronic signatures. The mechanics of this Agreements’ electronic signature include your signing this Agreement below by typing in your name, with the underlying software recording your IP address, your browser identification, the timestamp, and a securities hash within an SSL encrypted environment. This electronically signed Agreement will be emailed to Account Holder and Prime Trust and will be stored in your Account. Each of Account Holder and Prime Trust hereby consent and agree that electronically signing this Agreement constitutes each party’s signature, acceptance and agreement as if actually signed by that party in writing. Further, all parties agree that no certification authority or other third party verification is necessary to validate any electronic signature; and that the lack of such certification or third party verification will not in any way affect the enforceability of your signature or resulting contract between Account Holder and Prime Trust. Each party understands and agrees that their e-signature executed in conjunction with the electronic submission of this Agreement shall be legally binding. Each party agrees that their electronic signature is the legal equivalent of their manual signature on this Agreement consents to be legally bound by this Agreement’s terms and conditions. Furthermore, each of Account Holder and Prime Trust hereby agree that all current and future notices, confirmations and other communications regarding this Agreement specifically, and future communications in general between the parties, may be made by email, sent to the email address of record as set forth in the Notices section above or as otherwise from time to time changed or updated and disclosed to the other party, without necessity of confirmation of receipt, delivery or reading, and such form of electronic communication is sufficient for all matters regarding the relationship between the parties. If any such electronically-sent communication fails to be received for any reason, including but not limited to such communications being diverted to the recipients’ spam filters by the recipients email service provider, or due to a recipients’ change of address, or due to technology issues by the recipients’ service provider, the parties agree that the burden of such failure to receive is on the recipient and not the sender, and that the sender is under no obligation to resend communications via any other means, including but not limited to postal service or overnight courier, and that such communications shall for all purposes, including legal and regulatory, be deemed to have been delivered and received. No physical, paper documents will be sent to Account Holder, and if Account Holder desire physical documents then it agrees to be satisfied by directly and personally printing, at Account Holder’s own expense, either the electronically-sent communication(s) or the electronically available communications by logging onto Account Holder’s Account at www.primetrust.com and then maintaining such physical records in any manner or form that Account Holder desire. Account Holder’s Consent is Hereby Given: By signing this Agreement electronically, Account Holder explicitly agrees to this Agreement and to receive documents electronically, including a copy of this signed Agreement as well as ongoing disclosures, communications and notices.
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15. | ASSIGNMENT: |
No party may transfer or assign its rights and obligations under this Agreement without the prior written consent of the other parties. Notwithstanding the foregoing, without the consent of the other parties, any party may transfer or assign its rights and obligations hereunder in whole or in part (a) pursuant to any merger, consolidation or otherwise by operation of law, and (b) to the successors and assigns of all or substantially all of the assets of such assigning party, provided such entity shall be bound by the terms hereof. This Agreement will be binding upon and will inure to the benefit of the proper successors and assigns.
16. | NON-ABSOLUTE STANDARDS: |
All of the services are provided under a “reasonability” standard. This means that no service may be held to an absolute or perfect standard. All services are provided “as is” and in such a manner that they are reasonable, and not perfect or flawless. Account Holder acknowledges this and agrees that this is fair and acceptable, and that all applicable sections of this Agreement apply to this concept.
17. | BINDING ARBITRATION, APPLICABLE LAW AND VENUE, ATTORNEYS FEES: |
This Agreement is governed by, and will be interpreted and enforced in accordance with the laws of the State of Nevada without regard to principles of conflict of laws. Any claim or dispute arising under this Agreement may only be brought in arbitration, with venue in Clark County, Nevada, pursuant to the rules of the American Arbitration Association. Account Holder and Prime Trust each consent to this method of dispute resolution, as well as jurisdiction, and consent to this being a convenient forum for any such claim or dispute and waives any right it may have to object to either the method or jurisdiction for such claim or dispute. In the event of any dispute among the parties, the prevailing party shall be entitled to recover damages plus reasonable costs and attorney’s fees and the decision of the arbitrator shall be final, binding and enforceable in any court.
18. | COUNTERPARTS, FACSIMILE, EMAIL, SIGNATURES: |
This Agreement may be executed in counterparts, each of which will be deemed an original and all of which, taken together, will constitute one and the same instrument, binding on each signatory thereto. This Agreement may be executed by signatures, electronically or otherwise, delivered by facsimile or email, and a copy hereof that is properly executed and delivered by a party will be binding upon that party to the same extent as an original executed version hereof.
19. | FORCE MAJEURE: |
No party will be liable for any default or delay in performance of any of its obligations under this Agreement if such default or delay is caused, directly or indirectly, by fire, flood, earthquake or other acts of God; labor disputes, strikes or lockouts; wars, rebellions or revolutions; riots or civil disorder; accidents or unavoidable casualties; interruptions in transportation or communications facilities or delays in transit or communication; supply shortages or the failure of any person to perform any commitment to such party related to this Agreement; or any other cause, whether similar or dissimilar to those expressly enumerated in this Section, beyond such party’s reasonable control.
20. | INTERPRETATION: |
Each party to this Agreement has been represented by or had adequate time to obtain the advice and input of independent legal counsel with respect to this Agreement and has contributed equally to the drafting of this Agreement. Therefore, this Agreement shall not be construed against either party as the drafting party. All pronouns and any variation thereof will be deemed to refer to the masculine and feminine, and to the singular or plural as the identity of the person or persons may require for proper interpretation of this Agreement. And it is the express will of all parties that this Agreement is written in English and uses the font styles and sizes contained herein.
21. | CAPTIONS: |
The section headings in this Agreement are intended solely for convenience of reference and shall be given no effect in the construction or interpretation of this Agreement.
22. | ENTIRE AGREEMENT, AMENDMENTS: |
This Agreement sets forth the entire understanding of the parties concerning the subject matter hereof, and supersedes any and all prior or contemporaneous communications, representations or agreements between the parties, whether oral or written, regarding the subject matter of this Agreement, and may not be modified or amended, except by a written instrument executed after the effective date of this Agreement by the party sought to be charged by the amendment or modification.
23. | CAPACITY: |
Account Holder hereby warrants that the signer(s) of this Agreement are over the age of 18 and have all proper authority to enter into the Agreement. Furthermore, if Account Holder is an entity (e.g. corporation, trust, partnership, etc and not an individual) then the entity is in good standing in its state, region or country of formation; which Account Holder agrees to produce evidence of such authority and good standing if requested by Custodian.
24. | VESTING & CONTACT INFORMATION: |
This Account is initially vested as: Epilog Imaging Systems Inc.
MICHAEL MOJAVER
75 E. Santa Clara Street, Suite 600 San Jose, CA 95003 michael@epilog.com
This information, other than the Account vesting name, may be changed any time by Account Holder at it’s discretion by logging onto it’s Account and updating the data therein. Future changes to vesting name(s) will generally require supporting documentation and can only be accommodated directly by Prime Trust’s customer service personnel.
6
EXHIBIT A
FEES AND COSTS
CUSTODIAL ACCOUNT
The fees related to this offering are paid directly by the service platform. Please contact your service provider for details.
Misc Administrative, investment management, cash disbursement, accounting, and other services are per the most current and then in effect fee schedule for Prime Trust, a copy of which is available on www.primetrust.com
EXHIBIT A
Exhibit 11.1
802 N Washington
Spokane, WA 99201
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement on Form 1-A of our audit report dated September 3, 2020, relating to the financial statements of Epilog Imaging Systems, Inc., appearing in this Report on Form 1-A, for the years ended December 31, 2019 and 2018. Our report dated, September 3, 2020, with respect to those financial statements includes an emphasis of matter paragraph relating to the substantial doubt of Epilog Imaging Systems, Inc.’s ability to continue as a going concern.
Fruci & Associates II, PLLC
Spokane, Washington
September 24, 2020
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