nvstrr_s1
As filed with the Securities and Exchange Commission on
December 8, 2021
Registration No. 333- 259924
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
AMENDMENT NO. 8
to
Form S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
Novusterra Inc.
(Exact
name of registrant as specified in its charter)
Florida
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3990
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85-3129871
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(State
or other jurisdiction of
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(Primary
Standard Industrial
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(IRS
Employer
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incorporation
or organization)
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Classification
Code Number)
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Identification
No.)
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561 NE 79th Street, Suite 325
Miami, FL 33138
(786) 473-6233
(Address,
including zip code, and telephone number,
including
area code, of registrant’s principal executive
offices)
I. Andrew Weeraratne
Chief Executive Officer
561 NE 79th Street, Suite
325
Miami, FL 33138
(786) 473-6233
(Name,
address, including zip code, and telephone number,
including
area code, of agent for service)
Please send copies of all communications to:
Clifford J. Hunt
Law Office of Clifford J. Hunt, P.A.
8200 Seminole Boulevard
Seminole, Florida 33772
(727) 471-0444
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M. Ali Panjwani, Esq.
Pryor Cashman LLP
7 Times Square
New York, New York 10036
(212) 421-4100
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As soon as practicable after this registration statement becomes
effective
(Approximate
date of commencement of proposed sale to the public)
If any
of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933 check the following box:
☑
If this
Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering. ☐
If this
Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier
effective registration statement for the same offering.
☐
If this
Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier
effective registration statement for the same offering.
☐
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated
filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the
Securities Exchange Act of 1934.
Large
accelerated filer
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☐
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Accelerated
filer
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☐
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Non-accelerated
filer
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☐
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Smaller
reporting company
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☑
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Emerging
Growth Company
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☑
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If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 7(a)(2)(B) of the Securities
Act.☐
CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities to be Registered
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Proposed Maximum Aggregate Offering
Price (1)
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Amount of Registration fees
(7)
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Units (2)
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$ 19,166,665.00
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$ 1,776.75
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Common stock at no par value per share (3) (4)
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Warrants to purchase shares of
common stock, no par value per share
(3)(4)(5)
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Common Stock underlying the
warrants included in the units (8)
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$ 23,958,331.25
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$ 2,220.94
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Underwriters’ Warrants to
purchase Common Stock (5)
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Common Stock issuable upon exercise of the Underwriter’s
Warrants to purchase Common Stock
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$ 1,041,668.75
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$ 96.56
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Total
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$ 44,166,665.00
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$ 4,094.25
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(1)
Estimated
solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933
as amended.
(2)
Each
unit consists of one share of common stock, no par value per share,
and one warrant to purchase one share of common stock, no par value
per share.
(3)
Included in the price of the units. No fee required pursuant to
rule 457(g) under the Securities Act.
(4)
Includes shares of common stock and/or
warrants that the underwriter has the option to purchase to cover
over-allotments, if any.
(5)
In
accordance with Rule 457(i) under the Securities Act, no separate
registration fee is required with respect to the warrants
registered hereby.
(6)
We have
agreed to issue to our underwriter warrants to purchase the number
of shares of common stock (the “underwriter warrants”)
in the aggregate equal to five percent (5%) of the shares of common
stock to be issued and sold in this offering. The underwriter
warrants are exercisable at a per share exercise price equal to
125% of the public offering price of one unit. As estimated solely
for the purpose of recalculating the registration fee pursuant to
Rule 457(g) under the Securities Act, the proposed maximum
aggregate offering price of the underwriter warrants is equal to
125% of $750,000 (5% of
$15,000,000).
(7)
All
of which was previously paid.
(8)
The
warrants are exercisable at a price of $6.25 per share, an exercise
price equal to 125% of the public offering price per share of
common stock (the high point of the range set forth on the cover
page of the prospectus included as part of this registration
statement). The proposed maximum aggregate public offering price of
the shares of common stock issuable upon the exercise of the
warrants was calculated to be $23,958,331.25.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL
THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY
STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME
EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF
1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES
AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED __________, 2021
PROSPECTUS
Units Consisting of 3,333,333 Shares of Common Stock
and Warrants to purchase up to 3,333,333 Shares of
Common Stock
Novusterra Inc.
This is
a firm commitment initial offering of units (the
“Units”) of Novusterra Inc. (the “Company,”
“we,” “us” or “our”), each Unit
consisting of one share of common stock, no par value and an
accompanying warrant to purchase one share of our common stock.
Each warrant will have an exercise price of $5.625 per share (equal
to 125% of the offering price per Unit based on an assumed
public offering price of $4.50 per Unit, which is the midpoint of
the range set forth herein), will be
exercisable upon issuance and will expire five years from issuance.
It is currently estimated that the combined initial public offering
price per Unit will be between $4.00 and $5.00. An assumed
initial public offering price of $4.50 (which is the midpoint of
the range set forth herein) is used throughout this
prospectus. The Units will have no stand-alone rights and
will not be issued or certificated as stand-alone securities.
Purchasers will receive only shares of common stock and warrants.
The shares of common stock and warrants may be transferred
separately, immediately upon issuance. The offering also includes
the shares of common stock issuable from time to time upon exercise
of the warrants. All proceeds received by us from the sale of the
shares of Common Stock and accompanying warrants offered hereby
will be deposited into our corporate account and will immediately
be available for our use (See “Use of
Proceeds”).
Prior to this offering, there
has been no public market for our common stock or warrants. We have
applied to list our common stock and warrants on The Nasdaq Global
Market (the “Exchange”) under the symbol
“NOVS” and “NOVSW," respectively. There is no
assurance that our listing application will be approved by the
Exchange. If our common stock and warrants are not listed on the
Exchange, we will not consummate this offering. On April 15, 2021,
our Board of Directors, and on April 16, 2021, stockholders holding
a majority of our outstanding voting shares, authorized a reverse
stock split of the outstanding shares of our common stock in a
range of up to one-for-three (1:3), which became effective as of
April 16, 2021. All share numbers in this prospectus have thus been
adjusted to give effect to such reverse stock split.
Investing in our Common Stock involves a high degree of risk. See
“Risk Factors” beginning on page 4 of this
prospectus. Neither the U.S.
Securities and Exchange Commission (the “SEC”) nor any
state securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
We are
an “emerging growth company,” as defined in Section
2(a) of the Securities Act of 1933, as amended (the
“Securities Act”), and will be subject to reduced
public company reporting requirements. This prospectus complies
with the requirements that apply to an issuer that is an emerging
growth company. See “Summary—Implications of Being an
Emerging Growth Company.”
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Public offering
price
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$
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$
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Underwriting
discounts and commissions (1)
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$
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$
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Proceeds to us,
before expenses
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$
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$
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(1)
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Does
not include a non-accountable expense allowance equal to 1% of the
gross proceeds of this offering payable to EF Hutton, the
representative of the underwriters. We have also agreed to issue
warrants to the representative of the underwriters. See
“Underwriting”
for additional information regarding underwriter
compensation.
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We have
granted the underwriters the option for a period of 45 days to
purchase up to an additional 500,000 shares of our
common stock and/or additional warrants in any combination thereof,
at the initial public offering price less the underwriting
discounts and commissions, solely to cover over-allotments, if
any.
The
underwriter expects to deliver the shares of common stock and
warrants against payment on or about , 2021.
Sole Book-Running Manager
EF HUTTON
division
of Benchmark Investments, LLC
The date of this prospectus is __________, 2021
TABLE OF CONTENTS
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You
should only rely on the information contained in this document or
to which we have referred you. We have not authorized anyone to
provide you with information otherwise. If anyone provides you with
different or inconsistent information, you should not rely on it.
We are not making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted.
On April 15, 2021, our Board of Directors, and on April 16, 2021,
stockholders holding a majority of our outstanding voting shares,
authorized a reverse stock split of the outstanding shares of our
common stock in a range of up to one-for-three (1:3), which became
effective as of April 16, 2021. All share numbers in this
prospectus have thus been adjusted to give effect to such reverse
stock split, except for the financial statements and notes
thereto.
OTHER INFORMATION
We
maintain our web site at www.novusterrainc.com. Information on such web site
is not considered a part of this prospectus. Unless specifically
set forth to the contrary, when used in this prospectus the terms
“Novusterra”, “we”, “us”,
“our” and similar terms refer to Novusterra Inc., a
Florida corporation.
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PROSPECTUS
SUMMARY
Basis of Presentation
Certain monetary amounts, percentages and other figures included in
this prospectus have been subject to rounding adjustments.
Accordingly, figures shown as totals in certain tables or charts
may not be the arithmetic aggregation of the figures that precede
them, and figures expressed as percentages in the text may not
total 100% or, as applicable, when aggregated may not be the
arithmetic aggregation of the percentages that precede
them.
Market, Industry and Other Data
This prospectus includes estimates regarding market and industry
data and forecasts, which are based on publicly available
information, industry publications and surveys, reports from
government agencies and our own estimates based on our
management’s knowledge of, and experience in, the industry
and markets in which we compete.
In presenting this information, we have made certain assumptions
that we believe to be reasonable based on such data and other
similar sources, and on our knowledge of, and our experience to
date in, the markets for our products. Market data is subject to
change and may be limited by the availability of raw data, the
voluntary nature of the data gathering process and other
limitations inherent in any statistical survey of market data. In
addition, customer preferences are subject to change. Accordingly,
you are cautioned not to place undue reliance on such market data.
References herein to our being a leader in a market or product
category refer to our belief that we have a leading market share
position in such specified market based on sales dollars, unless
the context otherwise requires.
About Us
The
Company, sometimes referred to herein as "we," "us,”
“our," and the "Company" and/or "Novusterra Inc.” was
incorporated on September 21, 2020, in the State of Florida. Our
fiscal year-end date is December 31. Our address is 561 NE
79th
Street Suite 325, Miami FL 33138 our telephone number to
786-473-6233 and our website is www.novusterrainc.com. However, you
should not consider any information on, or that can be accessed
through, our website a part of this Registration
Statement.
We
began with the objective to build a Rare Earth Elements
(“REE”) Processing Facility to process REE for
commercial use. However, as approved by a Board of Directors
meeting held on March 19, 2021, we changed our objective to
developing Graphene since we discovered research illustrating that
Graphene, similar to an REE, is a versatile commodity that could be
helpful in solving major global problems with the potential for
attractive earnings.
Our
decision to begin the process of producing Graphene was made easier
due to the relationship the Company’s management team has
with American Resources Corporation (NASDAQ: AREC)
(“ARC”) as a result of prior business activities. ARC
through its wholly owned subsidiary,
Advanced Carbon Material LLC (“ACM”), signed an
exclusive license agreement with Ohio University (the
“License Agreement”) to manufacture Graphene using
carbon as a raw material using patented technology owned by Ohio
University. The suite of patents was originally developed by Dr.
Gerardine Botte, the current Whitacre Department Chair in Chemical
Engineering at Texas Tech University, an independent board member
of ARC and Chief Technical Officer of ACM. Dr. Botte developed and
patented these technologies when she served as Ohio University's
Distinguished Professor and Russ Professor of Chemical and
Biomolecular Engineering.
On
March 31, 2021, we entered into a Graphene Development Agreement
with ARC that provides us with a nonexclusive sublicense from ARC
(the “Sublicense”) of certain patents ARC currently has
licensed from Ohio University pursuant to the License Agreement
relating to the manufacture of Graphene using coal byproducts.
Pursuant to such agreement, we agreed to raise funds via an initial
public offering in order to build a manufacturing facility to
produce and market Graphene commercially. The agreement also
provides that the Company and ARC are each entitled to receive
fifty percent (50%) of the operating profits from our Graphene
manufacturing and marketing business. This profit sharing
arrangement is limited to only the operating profits from the
Graphene factory using the rights provided by the Sublicense and
will not apply to any other activities in which the Company may
engage in the future, including the production of Graphene using
any other technology. Hence, the Company has been researching
alternative methods to produce Graphene. The Company also plans to
look into acquiring companies that use or can use Graphene as raw
material for other applications. As part of the above two
agreements, Andrew Weeraratne was replaced by Mark Jensen, the
Chief Executive Officer and the Chairman of the Board of ARC, as
the Chairman of the Company’s Board of
Directors.
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As approved at a
special shareholders meeting attended by major shareholders on
March 19, 2021, we signed an agreement with ARC on March 31, 2021,
to issue ARC 10,000,000 shares of Class B common stock (with 10
votes each) plus 5,700,000 shares of Class A common stock (with one
vote each) of the Company, comprising 51.14% of total shares giving
87.57% of voting power to ARC, who plans to distribute such shares
to ARC’s shareholders as stock dividends after the completion
of this offering. At a special shareholders meeting held on April
4, 2021, attended by majority of shareholders, including ARC, the
Company voted to eliminate the Class B shares and increase the
Class A shares by the number of Class B shares then outstanding,
and designate the Class A shares as “Common Shares.”
Further, at a special stockholders meeting held on April 16, 2021,
attended by a majority of shareholders, the Company voted to
effectuate a one-for-three (1:3) reverse stock split, which became
effective as of April 16, 2021. As a consequence of eliminating the
Class B shares on April 4, 2021, as of July 30, 2021, ARC holds
5,233,333 Class A common shares, or 49.93% of the Company’s
voting stock, and Andrew Weeraratne holds 4,082,389 common shares,
or 38.95% of the Company’s voting stock, based on 10,481,347
common shares outstanding.
In order to
manufacture and market Graphene using the technology we have
sublicensed from ARC, we have signed a lease agreement with ARC to
lease land and a building ARC owns in Kentucky to build our
Graphene manufacturing factory, with such lease payments to be paid
after we have received the proceeds from this offering. Once we
have received the proceeds from this offering, we plan to hire
experts in the Graphene industry to help us select, purchase and
install the necessary equipment needed to begin the process of
making Graphene from carbon.
Graphene has been
unknowingly produced in small quantities for centuries, through the
use of pencils and other similar applications of graphite. However,
only in the recent years have the valuable qualities of Graphene
has been discovered. In 1947, Canadian physicist Philip
Wallace wrote a pioneering paper about the electronic behavior
of graphite that sparked considerable interest in the
field.1
Further, in 1960, Nobel Prize winning chemist Linus
Pauling speculated about how flat, single layers of Carbon
atoms would behave. In 1962, such materials were named "Graphene"
by German chemist Hanns-Peter Boehm, who had spotted them
under his electron microscope the year
before.
We have listed
detailed uses of Graphene, marketing and commercialization strategy
elsewhere in this registration statements. However, to briefly
outline, Graphene can be used for energy storage to water
filtration, to solidify various productions through mixing with
other raw materials to maintaining body temperature by lacing
Graphene in wearables among many other uses of
Graphene.
Emerging
Growth Company
We are an
“emerging growth company” as defined under the federal
securities laws and, as such, may elect to comply with certain
reduced public company reporting requirements for future filings.
As an emerging growth company, we are exempt from certain financial
disclosure and governance requirements for up to five years as
defined in the Jumpstart Our Business Startups Act (“the JOBS
Act”), that eases restrictions on the sale of securities; and
increases the number of shareholders a company must have before
becoming subject to the SEC’s reporting and disclosure rules.
We shall continue to be deemed an emerging growth company until the
earliest of:
(a) our annual gross
revenue exceeds $1.07 billion;
(b) the last day of our
fiscal year following the fifth anniversary of the completion of
this offering;
(c) we issue more than
$1.0 billion of non-convertible debt in any three-year period;
or
(d) we become a
“large accelerated filer,” as defined in Rule 12b-2
under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”).
As an emerging
growth company we are exempt from Section 404(b) of Sarbanes Oxley.
Section 404(a) requires Issuers to publish information in their
annual reports concerning the scope and adequacy of the internal
control structure and procedures for financial reporting. This
statement shall also assess the effectiveness of such internal
controls and procedures. Section 404(b) requires that the
registered accounting firm shall, in the same report, attest to and
report on the assessment on the effectiveness of the internal
control structure and procedures for financial
reporting.
As an emerging
growth company we are also exempt from Section 14A (a) and (b) of
the Exchange Act, which requires the shareholder approval of
executive compensation and golden parachutes.
We have elected to
use the extended transition period for complying with new or
revised accounting standards under Section 102(b)(2) of the JOBS
Act, which allows us to delay the adoption of new or revised
accounting standards that have different effective dates for public
and private companies until those standards apply to private
companies. As a result of this election, our financial statements
may not be comparable to companies that comply with public company
effective dates.
Exchange
Listing
We intend to file
an application to list our common stock and warrants on the
Exchange under the symbol “NOVS” and
“NOVSW,” respectively. No assurance can be given that
our application will be approved. If our application to the
Exchange is not approved or we otherwise determine that we will not
be able to secure the listing of the common stock and warrants on
the Exchange, we will not complete the offering.
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SUMMARY
OF THE OFFERING
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Securities
Offered:
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3,333,333
Units, each Unit consisting of one share of our common stock and
one warrant to purchase one share of our common stock. Each warrant
will have an exercise price of $5.625 per share (125% of the
assumed public offering price of $4.50 per Unit, which is the
midpoint of the estimated offering range set forth on the cover
page of this prospectus), is exercisable immediately and will
expire five years from the date of issuance. The Units will not be
certificated or issued in stand-alone form. The shares of our
common stock and the warrants comprising the Units are immediately
separable upon issuance and will be issued separately in this
offering.
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Common
Stock Offered (1):
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Up to
3,333,333 shares of the Company’s Common
Stock.
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Warrants
Offered:
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Warrants
to purchase up to 3,333,333 shares of the
Company’s common stock. The warrants are exercisable
immediately, and will be issued separately in this offering, but
will be purchased together in this offering. The exercise price of
the warrants is $5.625 per share (125% of the public offering price
of one Unit stock based on assumed offering price of $4.50 per
Unit, which is the midpoint of the estimated offering range set
forth on the cover page of this prospectus). Each warrant is
exercisable for one share of common stock, subject to adjustment in
the event of stock dividends, stock splits, stock combinations,
reclassifications, reorganizations or similar events affecting our
common stock as described herein. A holder may not exercise any
portion of a warrant to the extent that the holder, together with
its affiliates and any other person or entity acting as a group,
would own more than 4.99% of the outstanding common stock after
exercise, as such percentage ownership is determined in accordance
with the terms of the warrants, except that upon notice from the
holder to us, the holder may waive such limitation up to a
percentage, not in excess of 9.99%. Each warrant will be
exercisable immediately upon issuance and will expire years after
the initial issuance date. The terms of the warrants will be
governed by a Warrant Agreement, dated as of the effective date of
this offering, between us and VStock Transfer, LLC, as the warrant
agent (the “Warrant Agent”). This prospectus also
relates to the offering of the common stock issuable upon exercise
of the warrants. For more information regarding the Warrants, you
should carefully read the section titled “Description of
Securities to be Registered — Warrants” in this
prospectus.
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Gross
proceeds to us, net of underwriting discounts and commissions but
before expenses:
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$13,800,000,
or $15,869,999 if the underwriters exercise their
option to purchase additional shares and/or warrants in full, based
on an assumed public offering price of $4.50 per Unit, which is the
midpoint of the estimated offering range set forth on the cover
page of this prospectus.
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Use of
Proceeds:
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We will
use the net proceeds, for which there is no guarantee of receipt,
of this offering to build a manufacturing plant to make Graphene,
and for working capital purposes (see “Use of Proceeds”
on page 12).
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Common
Stock Outstanding Prior to the Offering:
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10,481,347
shares of Common Stock.
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Common
Stock Outstanding After the Offering (2):
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$13,814,680
shares of Common Stock (14,314,680 shares of Common
Stock, if the underwriter exercises the over-allotment option in
full).
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Over-allotment
option:
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We have granted an option to the
underwriters to purchase up to 500,000 additional
shares of common stock and/or warrants in any combination thereof
at the public offering price less the underwriting discount. The
underwriters may exercise this option for 45 days from the
date of this prospectus solely to cover any
over-allotments.
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Proposed
Exchange Symbol:
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We have
applied to list our common stock and warrants on the Exchange under
the symbol “NOVS” and “NOVSW,”
respectively.
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Risk
Factors:
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Investing
in our Common Stock involves a high degree of
risk. Please refer to the section entitled “Risk
Factors” before making an investment in our Common
Stock.
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Representative’s
Warrants
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We will
issue to EF Hutton, division of Benchmark Investments, LLC, as
representative of the underwriters or its designees at the closing
of this offering warrants purchasing the number of shares of common
stock equal to 5% of the aggregate number of shares of Common Stock
sold in this offering. The representative’s warrant will be
exercisable immediately and will expire five years after the
effective date of the registration statement for this offering. The
exercise price of the representative’s warrant will equal
125% of the public offering price per Unit. See
“Underwriting.”
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Lock-up
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We, our
directors, officers and all of our existing shareholders have
agreed with the underwriter not to offer for sale, issue, sell,
contract to sell, pledge or otherwise dispose of any of our common
stock or securities convertible into common stock as described in
further detail in the prospectus, for a period of 180 days after
the date of this prospectus. See
“Underwriting.”
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(1)
In
addition, the underwriter has been granted an over-allotment option
pursuant to which it may purchase an additional
500,000 shares of Common Stock and/or
warrants.
(2)
The
number of shares of Common Stock outstanding immediately following
this offering is based on 10,481,347 shares outstanding as of
December 8, 2021 and excludes up to shares of Common
Stock issuable upon the exercise of the representative’s
warrants issued in connection with this offering.
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SUMMARY FINANCIAL INFORMATION |
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The
following summary financial data should be read in conjunction with
the “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and the Financial
Statements and Notes thereto, included elsewhere in this
prospectus.
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For the Period from
Sept 21, 2020
through Dec 31, 2020
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Statement of Operations
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Revenues
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$-0-
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Cost
of Revenues
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$-0-
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General
and Administrative Expenses
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$2,538
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Total
Operating Expenses
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$2,538
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Other
Income
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$-0-
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Net
Loss
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$2,538
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Balance Sheet Data
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Cash
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$12,347
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Total
Assets
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$12,347
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Total
Liabilities
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$6,538
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Stockholders’
Equity
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$5,809
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An investment in our Common Stock involves a significant degree of
risk. You should not invest in our Common Stock unless you can
afford to lose your entire investment. You should consider
carefully the following risk factors and other information in this
prospectus before deciding to invest in our Common
Stock.
Risks Related to our Securities and this Offering
There is no public market for our shares and warrants.
Currently, there is
no public market for our shares and warrants. We have applied to
list our common stock and warrants on the Exchange under the symbol
“NOVS” and
“NOVSW,” respectively. There is no assurance
that the trading market for our common stock and warrants will
become more active or liquid. Furthermore, there can be no
assurance any broker will be interested in trading our stock and
warrants. Therefore, it may be difficult to sell your shares of
common stock and warrants if you desire or need to sell
them.
Our management has full discretion as to the use of proceeds from
this offering.
We
presently anticipate that the net proceeds from this offering will
be used for the purposes set forth under “Use of
Proceeds” appearing elsewhere in this Offering Memorandum. We
reserve the right, however, to use the net proceeds from this
offering for other purposes not presently contemplated which we
deem to be in our best interests in order to address changed
circumstances and opportunities. As a result of the foregoing,
purchasers of the securities offered hereby will be entrusting
their funds to our management, upon whose judgment and discretion
the investors must depend, with only limited information concerning
management's specific intentions.
If our shares of common stock become subject to the penny stock
rules, it would become more difficult to trade our
shares.
The SEC
has adopted rules that regulate broker-dealer practices in
connection with transactions in penny stocks. Penny stocks are
generally equity securities with a price of less than $5.00, other
than securities registered on certain national securities exchanges
or authorized for quotation on certain automated quotation systems,
provided that current price and volume information with respect to
transactions in such securities is provided by the exchange or
system. If we do not obtain or retain a listing on the Exchange or
another national securities exchange and if the price of our common
stock is less than $5.00, our common stock could be deemed a penny
stock. The penny stock rules require a broker-dealer, before a
transaction in a penny stock not otherwise exempt from those rules,
to deliver a standardized risk disclosure document containing
specified information. In addition, the penny stock rules require
that before effecting any transaction in a penny stock not
otherwise exempt from those rules, a broker-dealer must make a
special written determination that the penny stock is a suitable
investment for the purchaser and receive (i) the purchaser’s
written acknowledgment of the receipt of a risk disclosure
statement; (ii) a written agreement to transactions involving penny
stocks; and (iii) a signed and dated copy of a written suitability
statement. These disclosure requirements may have the effect of
reducing the trading activity in the secondary market for our
common stock, and therefore stockholders may have difficulty
selling their shares.
We have effected a reverse stock split of our outstanding common
stock.
We
expect that the reverse stock split will increase the market price
of our common stock while our stock is trading and enable us to
meet the minimum market price requirement of the listing rules of
the Exchange. However, the effect of a reverse stock split upon the
market price of our common stock cannot be predicted with
certainty, and the results of reverse stock splits by companies in
similar circumstances have been varied. It is possible that the
market price of our common stock following the reverse stock split
will not increase sufficiently for us to be in compliance with the
minimum market price requirement of the Exchange, or if it does,
that such price will be sustained. If we are unable to meet the
minimum market price requirement, we may be unable to list our
shares on the Exchange, in which case such an offering may not be
completed.
Even if the reverse stock split achieves the requisite increase in
the market price of our common stock, there can be no assurance
that we will be approved for listing on the Exchange or able to
comply with other continued listing standards of the
Exchange.
Even if
the market price of our common stock increases sufficiently so that
we comply with the minimum market price requirement, we cannot
assure you that we will be able to comply with the other standards
that we are required to meet in order to be approved for listing on
the Exchange or maintain a listing of our common stock on the
Exchange. Our failure to meet these requirements may result in our
common stock being delisted from the Exchange.
Even after the reverse stock split, the trading price of our common
stock may not be high enough to attract new investors, including
institutional investors, and may not satisfy the investing
requirements of those investors. Consequently, the trading
liquidity of our common stock may not improve.
There
can be no assurance that the reverse stock split results in a share
price that will attract new investors, including institutional
investors, or that the share price will satisfy the investing
requirements of those investors. As a result, the trading liquidity
of our common stock may not necessarily improve, our share price
may decline and you may lose all or part of your
investment.
Our stock price may be volatile, which could result in substantial
losses to investors and litigation.
In
addition to changes to market prices based on our results of
operations and the factors discussed elsewhere in this “Risk
Factors” section, the market price of and trading volume for
our common stock may change for a variety of other reasons, not
necessarily related to our actual operating
performance. The capital markets have experienced
extreme volatility that has often been unrelated to the operating
performance of particular companies. These broad market
fluctuations may adversely affect the trading price of our common
stock. In addition, the average daily trading volume of
the securities of small companies can be very low, which may
contribute to future volatility. Factors that could
cause the market price of our common stock to fluctuate
significantly include:
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the
results of operating and financial performance and prospects of
other companies in our industry;
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strategic
actions by us or our competitors, such as acquisitions or
restructurings;
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announcements
of innovations, increased service capabilities, new or terminated
customers or new, amended or terminated contracts by our
competitors;
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the
public’s reaction to our press releases, other public
announcements, and filings with the Securities and Exchange
Commission;
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lack of
securities analyst coverage or speculation in the press or
investment community about us or market opportunities in the smart
glass industry;
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changes
in government policies in the United States and, as our
international business increases, in other foreign
countries;
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changes
in earnings estimates or recommendations by securities or research
analysts who track our common stock or failure of our actual
results of operations to meet those expectations;
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market
and industry perception of our success, or lack thereof, in
pursuing our growth strategy;
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changes
in accounting standards, policies, guidance, interpretations or
principles;
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any
lawsuit involving us, our services or our products;
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arrival
and departure of key personnel;
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sales
of common stock by us, our investors or members of our management
team; and
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changes
in general market, economic and political conditions in the United
States and global economies or financial markets, including those
resulting from natural or man-made disasters.
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Any of
these factors, as well as broader market and industry factors, may
result in large and sudden changes in the trading volume of our
common stock and could seriously harm the market price of our
common stock, regardless of our operating performance. This may
prevent you from being able to sell your shares at or above the
price you paid for your shares, if at all. In addition, following
periods of volatility in the market price of a company’s
shares, stockholders often institute securities class action
litigation against that company. Our involvement in any
class action suit or other legal proceeding could divert our senior
management’s attention and could adversely affect our
business, financial condition, results of operations and
prospects.
Our warrants attached to our stock in our offering may be
speculative.
The
warrants offered in this offering do not confer any rights of
common stock ownership on their holders, such as voting rights or
the right to receive dividends, but rather merely represent the
right to acquire shares of our common stock at a fixed price for a
limited period of time. Specifically, commencing on the date of
issuance, holders of the warrants may exercise their right to
acquire the common stock and pay an exercise price of $5.625 per
share (125% of the assumed public offering price per Unit), prior
to five years from the date of issuance, after which
date any unexercised warrants will expire and have no further
value. Moreover, following this offering, the market value of the
warrants is uncertain and there can be no assurance that the market
value of the warrants will equal or exceed their public offering
price. There can be no assurance that the market price of the
common stock will ever equal or exceed the exercise price of the
warrants, and consequently, whether it will ever be profitable for
holders of the warrants to exercise the warrants.
If equity research analysts do not publish research or reports
about our business, or if they issue unfavorable commentary or
downgrade our common stock, the market price of our common stock
will likely decline.
The
trading market for our common stock will rely in part on the
research and reports that equity research analysts, over whom we
have no control, publish about us and our business. We
may never obtain research coverage by securities and industry
analysts. If no securities or industry analysts commence coverage
of our company, the market price for our common stock could
decline. In the event we obtain securities or industry analyst
coverage, the market price of our common stock could decline if one
or more equity analysts downgrade our common stock or if those
analysts issue unfavorable commentary, even if it is inaccurate, or
cease publishing reports about us or our business.
Assuming we obtain an Exchange listing, we will incur material
increased costs and become subject to additional regulations and
requirements.
As a
newly Exchange-listed public company, we will incur material
additional legal, accounting and other expenses including
recruiting and retaining qualified independent directors, payment
of annual Exchange fees, and satisfying Exchange standards for
companies listed with it. If our common stock is listed on an
Exchange, we must meet certain financial and liquidity criteria to
maintain such listing. If we violate Exchange listing requirements,
our common stock may be delisted. If we fail to meet any of the
Exchange’s listing standards, our common stock may be
delisted. In addition, our board of directors may determine that
the cost of maintaining our listing on a national securities
exchange outweighs the benefits of such listing. A delisting of our
common stock from the Exchange may materially impair our
stockholders’ ability to buy and sell our common stock and
could have an adverse effect on the market price of, and the
efficiency of the trading market for, our common stock. The
delisting of our common stock could significantly impair our
ability to raise capital and the value of your
investment.
We may acquire certain synergistic businesses already in operation
in exchange for stock of our company and such acquisition efforts
in future periods may be dilutive to our then current
shareholders.
Our
business model may result in the issuance of our securities to
consummate certain acquisitions in the future. As a result, the
percentage ownership of our Company held by existing shareholders
will be reduced and those shareholders may experience significant
dilution. In addition, new securities may contain certain rights,
preferences or privileges that are senior to those of our common
stock. As we will generally not be required to obtain the consent
of our shareholders before entering into acquisition transactions,
shareholders are dependent upon the judgment of our management in
determining the number of, and characteristics of stock issued as
consideration in an acquisition.
Risks Related to Our Business
Our Company is a newly started business and may contain the
ordinary risks all new businesses have to go through in the early
years.
We were
formed on September 21, 2020, and our objective is to build a
Graphene manufacturing Facility. Our business prospects are
difficult to predict because of the early stage of development, our
unproven business strategy, and our capital needs. Like most newly
begun companies, we have incurred losses since we began and may
continue to incur losses. As a development stage company, we face
numerous risks and uncertainties in implementing our business plan
and there are no assurances that we will be
successful.
Ownership and control of our Company is concentrated in our
management.
As of
the date of this Prospectus, our officers and directors
beneficially own or control approximately 90.43% of our outstanding
shares of common stock. Following this offering, our directors and
officers will own approximately 63.50% of our common stock. As a
result, they will be able to influence or control matters requiring
approval by our stockholders, including the election of directors
and the approval of mergers, acquisitions or other extraordinary
transactions. These stockholders may have interests that differ
from yours and may vote in a way with which you disagree and that
may be adverse to your interests. This concentration of ownership
may have the effect of delaying, preventing or deterring a change
of control of our company, could deprive our stockholders of an
opportunity to receive a premium for their stock as part of a sale
of our company, and might ultimately affect the potential market
price of our stock. Conversely, this concentration may facilitate a
change in control at a time when you and other investors may prefer
not to sell.
We have no history of manufacturing Graphene and will be conducting
the process based on experiments made in a lab.
We are
an early-stage company and have no history of manufacturing and
marketing Graphene. Our joint venture partner ARC has bought the
rights to patents based on tests done in a lab to make Graphene
using Carbon. As such, any future revenues and profits are
uncertain until we can make them commercially and begin marketing
them.
Our planned Graphene production facility in Kentucky depends on
patented technology that we have sublicensed from ARC, which has
licensed it from a third party. If the license agreement between
ARC and the third party is terminated, we may lose our ability to
use such patented technology.
Our
Graphene manufacturing facility will use production methods that
have been patented by Ohio University, which have been licensed to
ARC and sublicensed to us on a non-exclusive basis from ARC. The
rights and obligations of our Sublicense will be governed by
ARC’s rights and obligations under the License Agreement with
Ohio University. We believe it is a standard patent/technology
license agreement with typical, boilerplate termination provisions
and as in all standard agreements, it could be terminated due to
any disputes and if any such termination happened, we may lose our
ability to use such patented technology
The
License Agreement is between Ohio University and ACM and was
effective on February 10, 2021. The term of the License Agreement
runs from February 10, 2021, until such time as the last of the
Patent Rights as identified in the License Agreement expires
pursuant to federal patent law. The License Agreement allows ACM to
utilize the patent rights and/or technology rights identified
therein to facilitate the extraction, refinement and processing of
Critical Elements, Rare Earth Elements and Graphene, as such terms
are defined in the License Agreement. A copy of the License
Agreement is included as an exhibit to this prospectus and each
prospective investor is encouraged to thoroughly review the License
Agreement.
The
License Agreement requires, among other things, that ACM maintain a
bona fide, funded, ongoing and active research, development,
manufacturing, marketing and sales program to diligently make,
offer for sale and sell Licensed Products so that Licensed Products
are currently available to the public as soon as commercially
practicable; and, fulfill various Diligence Milestone events
identified in the License Agreement. The Diligence Milestones
include developing a final design for a pilot facility to exploit
the Licensed Product; completion of construction of the pilot
facility; developing a final design for a commercial facility to
exploit the Licensed Product; identifying feedstock material
sources for the Licensed Product; completing construction of the
commercial facility; obtaining the first commercial sale of product
exploiting the Licensed Product; and obtaining net sales of a
minimum of $1,000,000.00. The deadlines for these various Diligence
Milestones run from January 1, 2022, through January 1, 2026. There
can be no assurances that ACM will meet any of the Diligence
Milestones identified in the License Agreement. The failure to meet
any one or more of the Diligence Milestones may be treated as a
breach of the License and could result in termination of the
License Agreement and our corresponding Sublicense.
Consideration for
granting of the License Agreement consisted of a nonrefundable
payment of $99,773. Additionally, the License Agreement provides
for the payment of royalties in amounts ranging from 1.5% to 2% of
Net Sales of the Licensed Products. The License Agreement also
provides for payment of minimum royalties by ACM in amounts ranging
from $7,500 beginning in calendar year 2025 up to $125,000
beginning in calendar year 2027 and predicated upon the three
Fields of Use involving Critical Elements, Rare Earth Elements and
Graphene. There can be no assurances that ACM will be able to pay
the royalties due under the License Agreement on a timely basis.
The failure to make any of the royalty payments may be deemed a
breach of the License Agreement and could result in termination of
the License Agreement and our corresponding
Sublicense.
The
License Agreement also provides that ACM shall pay all costs and
expenses associated with the Patent Rights within 30 days after
receipt of each invoice by ACM. The licensor may also require ACM
to prepay costs and expenses predicated for certain Patent Rights
upon written request by the licensor. The failure of ACM to make
any required payment shall be considered a payment default under
the terms of the License Agreement. There can be no assurances that
ACM will be able to pay the intellectual property management
expenses due under the License Agreement on a timely basis. The
failure to make any of these payments could result in termination
of the License Agreement and our corresponding
Sublicense.
On
March 31, 2021 we entered into the “Sublicense regarding the
building and commercialization of graphene related technologies as
identified in the License Agreement. The term of the Sublicense
shall continue to run until such time as the License Agreement is
terminated. Consideration for the Sublicense shall consist of
payment to ARC of fifty percent (50%) of the positive operating
income of our Company. Under the terms of the Sublicense, the
phrase “positive operating income” is defined as all
revenue to our Company less the direct operating costs of the
Company from manufacturing and sale of graphene in the operating
facilities. The Sublicense requires our Company to raise the
capital needed to complete the design, build, and operation of any
facility utilizing the Graphene Technologies owned or operated by
us. A copy of the Sublicense is included as an exhibit to this
prospectus and each prospective investor is encouraged to
thoroughly review the Sublicense. There can be no assurances that
we will be able to raise the necessary capital to commercially
exploit the Graphene Technologies. Our failure to do so could
result in the failure of ACM to meet its Diligence Milestones and
payment obligations under the terms of the License Agreement. The
breach of any Diligence Milestones and/or payment obligations could
result in termination of the License Agreement and our
corresponding Sublicense.
We plan to look for and seek out joint venture partners in the
early years of our business and we may fail to identify joint
venture partners or may fail to successfully manage joint
ventures.
Since
we are at the early stage of Graphene manufacturing industry, we
plan to hire personnel, and also, focus on doing joint venture with
other companies already operating in the industry. However, there
can be no assurance that the Company will be able to identify joint
venture candidates or that we will succeed at effectively managing
the operation of any joint venture. Unprofitable joint ventures may
negatively affect the Company's results of operations and our
ability to continue as an ongoing concern. We plan to allocate
approximately $4 million to build a factory for our joint venture
with ARC, pursuant to which we plan to use the patented technology
owned by Ohio University to manufacture Graphene from Carbon and
coal byproducts. We plan to allocate approximately $4 million to
either acquire or joint venture with one or more other companies to
make Graphene using alternative methods and approximately $5
million to begin, acquire or joint venture with one or more
companies to make synergistic products made from Graphene. We plan
to use about $1 million to hire sales, marketing, finance, and
administrative staff. The rest of the funds we plan to use for
general working capital purposes. Although we believe we may be
able to acquire or enter into joint ventures on fair and reasonable
terms with companies for alternative methods of graphene production
and to make synergistic products from graphene, there is no
assurance that we will be able to negotiate and execute such
agreements.
We may need additional financing which we may not be able to obtain
on acceptable terms. Additional capital raising efforts in future
periods may be dilutive to our then current shareholders or result
in increased interest expenses in future periods.
It may
require us to raise additional working capital to continue to
implement our business model. Our future capital requirements,
however, depend on a number of factors, including our operations,
the financial condition of an acquisition target and its needs for
capital, our ability to grow revenues from other sources, our
ability to manage the growth of our business and our ability to
control our expenses. If we raise additional capital through the
issuance of debt, this will result in increased interest expense.
If we raise additional funds through the issuance of equity or
convertible debt securities, the percentage ownership of our
Company held by existing shareholders will be reduced and those
shareholders may experience significant dilution. In addition, new
securities may contain certain rights, preferences or privileges
that are senior to those of the Shares. We cannot assure that we
will be able to raise the working capital as needed in the future
on terms acceptable to us, if at all. If we do not raise funds as
needed, we will be unable to fully implement our business model,
fund our ongoing operations or grow our company.
We may experience difficulty attracting and retaining qualified
management to meet the needs of our anticipated growth, and the
failure to manage our growth effectively could have a material
adverse effect on our business and financial
condition.
We
currently do not have enough management with experience in
operating a Graphene manufacturing and marketing facility. We
intend to use the funds we raise from this offering to hire such
management and/or engage in joint venture activities with others
already operating processing facilities. Competition for additional
qualified management is intense, and we may be unable to attract
and retain additional key personnel, or to attract and retain
personnel on terms acceptable to us and our failure to do so could
have a material adverse effect on our business, results of
operations and financial condition.
The success of our business model is dependent upon our ability to
identify products and applications using Graphene that we plan to
manufacture for commercial use. We may not be able to attract
enough companies who may agree to substitute Graphene as the raw
materials to produce their products and applications.
Once we
begin producing Graphene for commercial use, we will need to look
for manufacturers that will use Graphene to make their products. At
the current time, there are not many products using Graphene as the
raw material. Thus, there is no guarantee that using Graphene as
much as their substitutes will be common in the future and as such
we face uncertainties as to the successful commercialization of our
product.
Changes in the market price of Graphene, which in the past has
fluctuated widely, will affect the profitability of our operations
and financial condition.
Commodity prices
have been volatile in the past and may continue to be volatile in
the future. Future price may depend on the actions of dominant
producers of global supply. If producers restrict supply, prices
may increase or, if such producers decide to release stockpiles
accumulated during a period, or due to government regulations,
prices may fall. Our business depends on the price of our product
to become profitable. We may not be able to weather any volatile
price fluctuations, which may affect the profitability of our
operations and financial condition.
Commodity manufacturing and sales may be subject to significant
governmental regulations, which affect our operations and costs of
conducting our business.
Our
patented production method requires the use of various commodities
and minerals. Mineral extraction and processing are governed by
laws and regulations governing mineral concessions, acquisitions,
development, and processing. There are also laws regulating exports
and taxes on such exports, as well as occupational health and
safety standards by which we must abide. These will increase our
cost of operation and may delay production. Existing and possible
future laws, regulations and permits governing operations and
activities of exploration and processing companies, or more
stringent implementation, could have a material adverse impact on
our business and cause increases in capital expenditures or require
abandonment or delays in production.
Our facilities and operations may be subject to a wide variety of
federal, state, local and foreign environment laws and regulation
which affect our operations and cost of conducting our
business.
Our
facilities and operations may be subject to a wide variety of
federal, state, local and foreign environmental laws and
regulations. These laws and regulations relate to air emissions,
water discharges and solid and hazardous waste generation,
treatment, storage, handling, transportation and disposal; the
presence of wastes and other substances; the reporting of,
responses to and liability for, releases of hazardous substances
into the environment; and the import, production, packaging,
labeling and transportation of products that are defined as
hazardous or toxic or otherwise believed to have potential to harm
the environment or human health. These laws and regulations (and
the enforcement thereof) are periodically updated and are becoming
increasingly stringent. Our joint venture partner, ARC, has
incurred substantial costs in the past and will continue to incur
additional costs in the future, to comply with these legal
requirements. We expect to incur costs in an estimated amount of
approximately $50,000 to comply with these legal requirements as
well.
We are dependent on certain key personnel and the loss of these key
personnel could have a material adverse effect on our business,
financial condition, and results of operations.
Our
success, to a certain extent, could be attributable to the
management, sales and marketing, and operational expertise of key
personnel, that we currently have and may hire and will perform key
functions in the operation of our business. The loss of one or more
of these key employees could have a material adverse effect upon
our business, that could result in our financial condition, and the
results of operations to be adversely impacted.
We face increasing competition from other established companies,
small enterprises, and other organizations that have far greater
resources and brand awareness than we have.
A
significant number of established businesses, including major
commodity manufacturing companies and their affiliates, and other
organizations have entered or are planning to enter the Graphene
manufacturing and marketing business. Many of these current and
potential competitors have substantially greater financial,
marketing, research and other resources than we have.
Our management has limited experience operating a public company
and are subject to the risks commonly encountered by early-stage
companies.
Although our
management has experience in operating small companies, current
management has not had to manage expansion while being a public
company. Many investors may treat us as an early-stage company. In
addition, management has not overseen a company with large growth.
Because we have a limited operating history, our operating
prospects should be considered in light of the risks and
uncertainties frequently encountered by early-stage companies in
rapidly evolving markets. These risks include:
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risks
that we may not have sufficient capital to achieve our growth
strategy;
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risks
that we may not develop our product and service offerings in a
manner that enables us to be profitable and meet our
customers’ requirements;
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risks
that our growth strategy may not be successful; and
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risks
that fluctuations in our operating results will be significant
relative to our revenues.
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These
risks are described in more detail below. Our future growth will
depend substantially on our ability to address these, and the other
risks described in this section. If we do not successfully address
these risks, our business could be significantly
harmed.
We may be unable to manage growth, which may impact our potential
profitability.
Successful
implementation of our business strategy requires us to manage our
growth. Growth could place an increasing strain on our management
and financial resources. To manage growth effectively, we will need
to:
|
●
|
Establish
definitive business strategies, goals and objectives;
|
|
●
|
Maintain
a system of management controls; and
|
|
●
|
Attract
and retain qualified personnel, as well as develop, train, and
manage management-level and other employees.
|
If we
fail to manage our growth effectively, our business, financial
condition, or operating results could be materially harmed, and our
stock price may decline.
We plan to become a public company soon after this offering and
expect to incur substantial expenses to meet our reporting
obligations as a public company. In addition, failure to maintain
adequate financial and management processes and controls could lead
to errors in our financial reporting and could harm our ability to
manage our expenses.
We
estimate that it will cost approximately $150,000 annually to
maintain the proper management and financial controls for our
filings required as a public reporting company that we hope to
become soon after this offering. In addition, if we do not maintain
adequate financial and management personnel, processes and
controls, we may not be able to accurately report our financial
performance on a timely basis, which could cause a decline in our
stock price and adversely affect our ability to raise
capital.
We may not pay dividends in the future; any return on investment
may be limited to the value of our common stock.
We do
not currently anticipate paying cash dividends in the foreseeable
future. The payment of cash dividends on our common stock will
depend on earnings, financial condition and other business and
economic factors affecting it at such time as the board of
directors may consider relevant. Our current intention is to apply
net earnings, if any, in the foreseeable future to increasing our
capital base and development and marketing efforts. There can be no
assurance that the Company will ever have sufficient earnings to
declare and pay cash dividends to the holders of our common stock,
and in any event, a decision to declare and pay dividends is at the
sole discretion of our board of directors. If we do not pay
dividends, our common stock may be less valuable because a return
on your investment will only occur if its stock price
appreciates.
The elimination of monetary liability against our directors,
officers and employees under our Articles of Incorporation and the
existence of indemnification rights to our directors, officers and
employees may result in substantial expenditures by our company and
may discourage lawsuits against our directors, officers and
employees.
Our
Articles of Incorporation contains provisions that eliminate the
liability of our directors for monetary damages to our company and
shareholders. Our bylaws also require us to indemnify our officers
and directors. We may also have contractual indemnification
obligations under our agreements with our directors, officers and
employees. The foregoing indemnification obligations could result
in our company incurring substantial expenditures to cover the cost
of settlement or damage awards against directors, officers and
employees that we may be unable to recoup. These provisions and
resulting costs may also discourage our company from bringing a
lawsuit against directors, officers and employees for breaches of
their fiduciary duties, and may similarly discourage the filing of
derivative litigation by our shareholders against our directors,
officers and employees even though such actions, if successful,
might otherwise benefit our company and shareholders.
We are classified as an “emerging growth company” as
well as a “smaller reporting company” and we cannot be
certain if the reduced disclosure requirements applicable to
emerging growth companies and smaller reporting companies will make
our common stock less attractive to investors.
We are
an “emerging growth company,” as defined in the JOBS
Act, and we may take advantage of certain exemptions from various
reporting requirements that are applicable to other public
companies, including, but not limited to, not being required to
comply with the auditor attestation requirements of Section 404 of
the Sarbanes-Oxley Act, reduced disclosure obligations regarding
executive compensation in our periodic reports and proxy
statements, and exemptions from the requirements of holding a
nonbinding advisory vote on executive compensation and shareholder
approval of any golden parachute payments not previously approved.
We cannot predict if investors will find our common stock less
attractive because we may rely on these exemptions. If some
investors find our common stock less attractive as a result, there
may be a less active trading market for our common stock and our
stock price may be more volatile.
Section
107 of the JOBS Act provides that an “emerging growth
company” can take advantage of the extended transition period
provided in Section 7(a)(2)(B) of the Securities Act for complying
with new or revised accounting standards. In other words, an
“emerging growth company” can delay the adoption of
certain accounting standards until those standards would otherwise
apply to private companies. We have irrevocably opted out of the
extended transition period for complying with new or revised
accounting standards pursuant to Section 107(b) of the JOBS
Act.
We
could remain an “emerging growth company” for up to
five years, or until the earliest of (i) the last day of the first
fiscal year in which our annual gross revenues exceed $1 billion,
(ii) the date that we become a “large accelerated
filer” as defined in Rule 12b-2 under the Exchange Act, which
would occur if the market value of our common stock that is held by
non-affiliates exceeds $1.07 billion as of the last business day of
our most recently completed second fiscal quarter, and (iii) the
date on which we have issued more than $1 billion in
non-convertible debt during the preceding three-year
period.
Notwithstanding the
above, we are also currently a “smaller reporting
company.” Specifically, similar to “emerging growth
companies,” “smaller reporting companies” are
able to provide simplified executive compensation disclosures in
their filings; are exempt from the provisions of Section 404(b) of
the Sarbanes-Oxley Act requiring that independent registered public
accounting firms provide an attestation report on the effectiveness
of internal control over financial reporting; and have certain
other decreased disclosure obligations in their SEC filings.
Decreased disclosures in our SEC filings due to our status as an
“emerging growth company” or “smaller reporting
company” may make it harder for investors to analyze our
results of operations and financial prospects.
The ongoing COVID-19 pandemic could adversely impact our business,
including our potential production facilities.
In
December 2019, a novel strain of coronavirus, SARS-CoV-2, was
reported to have surfaced in Wuhan, China and to cause a severe
respiratory illness now known as COVID-19. Since then, COVID-19 has
spread to multiple countries. In March 2020, the World Health
Organization declared the COVID-19 outbreak a pandemic, and the
U.S. government-imposed travel restrictions on travel between the
United States, Europe, Canada and other countries. Further, the
President of the United States declared the COVID-19 pandemic a
national emergency, invoking powers under the Stafford Act, the
legislation that directs federal emergency disaster response. We
may experience disruptions due to the COVID-19 pandemic that could
severely impact our business and potential production
facilities.
The
global COVID-19 pandemic continues to rapidly evolve. The extent to
which COVID-19 may impact our business will depend on future
developments that are highly uncertain and cannot be predicted with
confidence, such as the ultimate geographic spread of the disease,
the duration of the outbreak, travel restrictions and social
distancing in the United States and other countries, business
closures or business disruptions and the effectiveness of actions
taken in the United States and other countries to contain and treat
the disease.
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING INFORMATION
Various
statements in this prospectus contain or may contain
forward-looking statements that are subject to known and unknown
risks, uncertainties and other factors which may cause actual
results, performance or achievements to be materially different
from any future results, performance or achievements expressed or
implied by such forward-looking statements. These forward-looking
statements were based on various factors and were derived from
utilizing numerous assumptions and other factors that could cause
our actual results to differ materially from those in the
forward-looking statements. These statements are only
predictions and involve known and unknown risks, uncertainties and
other factors, including those discussed under “Risk
Factors,” which could cause our actual results to differ from
those projected in any forward-looking statements we
make.
Most of
these factors are difficult to predict accurately and are generally
beyond our control. You should consider the areas of risk described
in connection with any forward-looking statements that may be made
herein. Readers are cautioned not to place undue reliance on these
forward-looking statements and readers should carefully review this
prospectus in its entirety, including the risks described in
“Risk Factors.” Except for our ongoing obligations to
disclose material information under the Federal securities laws, we
undertake no obligation to release publicly any revisions to any
forward-looking statements, to report events or to report the
occurrence of unanticipated events. These forward-looking
statements speak only as of the date of this prospectus, and you
should not rely on these statements without also considering the
risks and uncertainties associated with these statements and our
business.
USE OF PROCEEDS
After
deducting the estimated underwriting discounts and commissions and
offering expenses payable by us, we expect to receive net proceeds
of approximately $12,800,000 from this offering (or
approximately $14,869,999 if the underwriters’
option to purchase additional shares and/or warrants in this offering are
exercised in full), based on an assumed public offering price of
$4.50 per Unit (the midpoint of the range set forth on the cover
page of this prospectus). This
estimate excludes the proceeds, if any, from the exercise of the
166,667 representative’s warrants issued in
connection with this offering We cannot predict when, or if, these
warrants will be exercised. It is possible that these warrants may
expire and may never be exercised.
We plan
to allocate approximately $4 million to build a factory for our
joint venture with ARC, pursuant to which we plan to use the
patented technology owned by Ohio University to manufacture
Graphene from Carbon and coal byproducts. We plan to allocate
approximately $3.5 million to either acquire or joint
venture with one or more other companies to make Graphene using
alternative methods and approximately $1.5 million to
begin, acquire or joint venture with one or more companies to make
synergistic products made from Graphene. We plan to use about $1
million to hire sales, marketing, finance, and administrative
staff. The rest of the funds we plan to use for general working
capital purposes. Although we believe we may be able to acquire or
enter into joint ventures on fair and reasonable terms with
companies for alternative methods of graphene production and to
make synergistic products from graphene, there is no assurance that
we will be able to negotiate and execute such
agreements.
Each
$1.00 increase or decrease in the assumed public offering price of
$4.50 per Unit would increase (decrease) the net proceeds that we
receive from this offering by approximately
$3,066,667, assuming that the number of shares of
common stock offered by us, as set forth on the cover page of this
prospectus, remains the same and after deducting the estimated
underwriting discounts and commissions and estimated offering
expenses payable by us. Similarly, each increase (decrease) of
1,000,000 shares of common stock and accompanying warrants offered
by us in this offering would increase (decrease) the net proceeds
that we receive from this offering by approximately $4,140,000
assuming the assumed public offering price remains the same and
after deducting the estimated underwriting discounts and
commissions and estimated offering expenses payable by
us.
The
following table shows how we currently expect to use our proceeds
from the Units being offered (after our estimated offering expenses
of up to $1,000,000).
These
estimates are presented for illustrative purposes only and the
actual amount of proceeds received may differ. As there is no
minimum offering, we cannot estimate how much in proceeds we will
receive from the sale of the Units offered hereby.
|
|
Factory
build out
|
$4,000,000
|
Alternative
Graphene production acquisition/joint venture
|
$3,500,000
|
Synergistic
product acquisition/joint venture
|
$1,500,000
|
Management
recruitment
|
$1,000,000
|
Underwriting
discounts and commissions and other offering expenses
|
$2,200,000
|
Working
capital (1)
|
$2,800,000
|
Total
use of proceeds (2)
|
$15,000,000
|
(1)
|
Includes
funds for general overhead and operating expenses including
ordinary
|
|
and
fair compensation for officers and directors as well as fees and
costs associated
|
|
with an
application to list our common stock on the
Exchange.
|
(2)
|
In the
event that the underwriter exercises the over-allotment option, we
intend to use
|
|
Such
additional net proceeds for additional acquisitions, working
capital and general corporate purposes.
|
|
|
The
precise amounts that we will devote to each of the foregoing items,
and the timing of expenditures, will vary depending on numerous
factors.
The
expected use of net proceeds from this offering represents our
intentions based upon our current plans and business conditions,
which could change in the future as our plans and business
conditions evolve and change. The amounts and timing of our actual
expenditures, specifically with respect to working capital, may
vary significantly depending on numerous factors. The precise
amounts that we will devote to each of the foregoing items, and the
timing of expenditures, will vary depending on numerous factors. As
a result, our management will retain broad discretion over the
allocation of the net proceeds from this offering.
Dilution
represents the difference between the offering price and the net
tangible book value per share of common equity immediately after
completion of this offering. Net tangible book value is the amount
that results from subtracting our total liabilities and intangible
assets from our total assets. Dilution arises mainly as a result of
our arbitrary determination of the offering price of the shares of
Common Stock being offered. Dilution of the value of the shares of
Common Stock you purchase is also a result of the lower net
tangible book value of the shares held by our existing
shareholders.
As of
September 30, 2021, the net tangible book value of our shares of
common equity was approximately $158,139 based upon 10,481,347
shares of Common Stock outstanding, or approximately $0.0151 per
share. The following table provides information
regarding:
|
●
|
the net
tangible book value per share of common equity before and after
this offering;
|
|
●
|
the
amount of the increase in the net tangible book value per share of
common equity attributable to the purchase of the shares of Common
Stock being offered hereby; and
|
|
●
|
the
amount of the immediate dilution from the public offering price
which will be absorbed by purchasers in this offering.
|
This
dilution scenario below is presented for illustrative purposes only
and the actual amount of dilution to purchasers in this offering
may differ based upon the number of Units sold in this
offering.
Assumed
Initial Public Offering price per Unit
|
$4.5000
|
Net
tangible book value per share of common equity as of September 30,
2021
|
$0.0151
|
Increase
in net book value per share of common equity due to
offering
|
$ 0.865
|
Pro
forma net tangible book value per share of common equity after
offering
|
$ 0.8801
|
Dilution
per share to investors purchasing shares of Common Stock in this
offering.
|
$ 3.6199
|
The
following table sets forth on a pro forma basis, at September 30,
2021, the number of shares of common stock purchased or to be
purchased from us, the total consideration paid or to be paid and
the average price per share paid or to be paid by existing holders
of common stock and by the new investors, before deducting
estimated offering expenses payable by us.
|
|
|
|
|
|
|
|
|
|
Existing
stockholders
|
10,481,347
|
75.87%
|
629,139(1)
|
4.03%
|
$0.0600
|
New
investors
|
3,333,333
|
24.13%
|
$ 15,000,000
|
95.97%
|
$4.500
|
Total
|
|
100.00%
|
|
100.00%
|
$
|
(1)
Includes intangible assets valued at $471,000 that were included as
consideration for shares of common stock issued by the
Company.
The
following table sets forth our capitalization as of September 30,
2021:
|
●
|
on an
actual basis; and
|
|
●
|
on a
pro forma basis to reflect the sale of 3,333,333 Units
by us in this offering at an assumed price to the public of $4.50
per Unit (the midpoint of the range listed on the cover page of
this prospectus), resulting in net proceeds to us of
$12,800,000 after deducting (i) underwriting discounts
and commissions of $1,200,000 and (ii) our estimated
other offering expenses of $1,000,000.
|
The pro
forma information below is illustrative only and our capitalization
following the completion of this offering is subject to adjustment
based on the public offering price of the shares of common stock
and other terms of this offering determined at pricing. You should
read this table together with our consolidated financial statements
and the related notes included elsewhere in this prospectus and the
information under “Management’s Discussion and Analysis of
Financial Statements and Results of
Operations”.
Offering (3,333,333 Units)
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
$236,545
|
$ 13,036,545
|
|
|
|
Stockholders (deficit) equity:
|
|
|
Preferred Stock, no par value per share, 400,000,000 shares
authorized(1)(2)
|
$-
|
$
|
Common Stock, no par value per share, 2,600,000,000 shares
authorized(1)(2)
|
$801,359
|
$ 13,601,359
|
Treasury Stock
|
$-
|
$
|
Accumulated deficit
|
$(172,220)
|
$ (172,220)
|
Total Stockholders’ Equity (Deficit)
|
$629,139
|
$ 13,429,139
|
(1)
|
10,481,347
shares of Common Stock and 0 shares of preferred stock issued and
outstanding as of September 30, 2021.
|
(2)
|
13,814,680
shares of Common Stock and 0 shares of preferred stock issued and
outstanding (pro forma) as of September 30 ,2021 after
the completion of this offering.
|
Each
$1.00 increase (decrease) in the assumed offering price per Unit of
$4.50, assuming no change in the number of Units of
3,333,333 to be sold, would increase (decrease) the
net proceeds that we receive in this offering and each of total
stockholders’ equity and total capitalization by
approximately $3,066,667, after deducting (i)
estimated underwriting discounts and commissions and (ii) offering
expenses, in each case, payable by us. Similarly, an increase
(decrease) of 1,000,000 Units offered by us in this offering of
3,333,333, assuming no change in the offering price,
would increase (decrease) the net proceeds that we receive in this
offering and each of total stockholders’ equity and total
capitalization by approximately $4,140,000 after deducting (i)
estimated underwriting discounts and commissions and (ii) offering
expenses, in each case, payable by us.
The
table above excludes up to 3,333,333 shares of Common
Stock issuable upon the exercise of the warrants issued as part of
the Units in connection with this offering and 166,667
shares of Common Stock issuable upon the exercise of the
representative’s warrants issued in connection with this
offering.
EF Hutton, division of Benchmark Investments, LLC (“EF
Hutton”) is acting as representative of each of the
underwriters named below. Subject to the terms and conditions set
forth in an underwriting agreement among us and the underwriters,
we have agreed to sell to the underwriters, and each of the
underwriters has agreed, severally and not jointly, to purchase
from us, the number of Units set forth opposite its name
below.
|
|
EF Hutton, division of Benchmark Investments, LLC
|
3,333,333
|
Total
|
3,333,333
|
Subject to the terms and conditions set forth in the underwriting
agreement, the underwriters have agreed, severally and not jointly,
to purchase all of the Units sold under the underwriting agreement
if any of these Units are purchased. If an underwriter defaults,
the underwriting agreement provides that the purchase commitments
of the non-defaulting underwriters may be increased, or the
underwriting agreement may be terminated.
We have agreed to indemnify the underwriters against specified
liabilities, including some liabilities under the Securities Act,
or to contribute to payments the underwriters may be required to
make in respect of those liabilities.
The underwriters are offering the Units, subject to prior sale,
when, as and if issued to and accepted by them, subject to approval
of legal matters by their counsel, including the validity of the
shares and warrants, and other conditions contained in the
underwriting agreement, such as the receipt by the underwriters of
officer’s certificates and legal opinions. The underwriters
reserve the right to withdraw, cancel or modify offers to the
public and to reject orders in whole or in part.
Commissions and Discounts
The representatives have advised us that they propose initially to
offer the Units to the public at the public offering price set
forth on the cover page of this prospectus and to dealers at that
price less a concession not in excess of $[ ] per Unit. After the
initial public offering, the public offering price, concession and
discount may be changed.
The following table shows the per Unit and total underwriting
discounts and commissions to be paid to the underwriters. Such
amounts are shown assuming both no exercise and full exercise of
the underwriters’ option to purchase additional shares and/or
warrants.
|
|
Total
Without Exercise of
Over-Allotment Option
|
Total With Exercise of
Over-Allotment Option
|
Public
offering price
|
$
|
$
|
$
|
Underwriting
discount and commissions
|
$
|
$
|
$
|
Nonaccountable
expense allowance (1%)
|
$
|
$
|
$
|
Proceeds,
before expenses, to the Company
|
$
|
$
|
$
|
The total expenses of the offering, not including the underwriting
discount, commissions and the nonaccountable expense, are estimated
at approximately $
million and are payable by us. We have also agreed to pay all of
the expenses relating to the offering, including, but not limited
to, all filing fees and communication expenses relating to the
registration of the common stock and the warrants to be sold in
this offering (including the over-allotment); all fees and expenses
relating to the listing of the common stock and warrants on the
Exchange; if the offering requires “blue sky”
registration, fees of legal counsel performing such work; the costs
of all mailing and printing of the underwriting documents,
registration statements and prospectuses; the costs of preparing,
printing and delivering certificates representing the common stock
and warrants issued in this offering; fees and expenses of the
transfer agent for our common stock and warrants; stock transfer
taxes, if any; the fees and expenses of our accountants and of our
legal counsel and other agents and representatives; and travel
expenses relating to the “road show” marketing trips.
We will reimburse the underwriters up to $150,000 for its actual
out-of-pocket expenses incurred for this offering (including but
not limited to fees and expenses of underwriter counsel, all
reasonable fees, expenses and disbursements relating to background
checks of our officers and directors, and expenses of internet
roadshow software systems) less any advances provided for such
expenses (which shall be returned to us to the extent not offset by
actual expenses) in the event of the closing of this offering and
up to $50,000 in the event that there is not a closing of this
offering.
Underwriters’ Warrants
We have agreed to issue to EF Hutton common share purchase warrants
(the “Underwriters’ Warrants”) covering a number
of shares of common stock equal up to 166,667 shares
of our common stock (5% of the total number of Units being sold in
this offering, excluding the overallotment). The
Underwriters’ Warrants may not be exercised for
six months after the effective date of the registration
statement and will expire five years after such effective
date. The Underwriters’ Warrants will be exercisable at a
price equal to $5.625 per share (125% of the IPO per Unit price,
(based on the sale of 3,333,333 shares of our common
stock and assuming an IPO per Unit price of $4.50). The
Underwriters’ Warrants shall not be redeemable. The warrants
and the shares of common stock underlying the warrants have been
deemed compensation by FINRA and are therefore subject to a 360-day
lock-up pursuant to Rule 5110(e)(1) of FINRA. The
Underwriters’ Warrants may not be sold, transferred,
assigned, pledged or hypothecated or be the subject of any hedging,
short sale, derivative, put, or call transaction that would result
in the effective economic disposition of the securities for a
period of 360 days following the effective date of the
registration for this offering, except that they may be assigned,
in whole or in part, to any officer or partner of the Underwriter,
and to members of the underwriting syndicate or selling group (or
to officers or partners thereof), or as otherwise permitted, in
compliance with FINRA Rule 5110(e)(2). The Underwriters’
Warrants will contain provisions for one demand registration of the
sale of the underlying shares of common stock at our expense (in
the event that our registration statement covering the
Underwriters’ Warrants and the underlying common stock is no
longer effective), and unlimited “piggyback”
registration rights for a period of five (5) years after the
effective date of the registration statement for this offering at
our expense. The demand registration right provided will not be
greater than five years from the effective date of the registration
statement related to this offering in compliance with FINRA Rule
5110(g)(8)(C). The book runners will split the Underwriters’
Warrants on the same pro rata percentage of the amount of
the offering each book runner underwrites. The exercise price and
number of shares issuable upon exercise of the Underwriters’
Warrants may be adjusted in certain circumstances including in the
event of a stock split or other corporate events and as otherwise
permitted under Rule 5110(f)(2)(G) of FINRA.
Over-Allotment Option
We have granted an option to the underwriters to purchase up to
500,000 additional shares of common stock and/or
warrants at the public offering price less the underwriting
discount. The underwriters may exercise this option for
45 days from the date of this prospectus solely to cover any
over-allotments. If the underwriters exercise this option, each
will be obligated, subject to conditions contained in the
underwriting agreement, to purchase the number of additional shares
and/or warrants proportionate to that underwriter’s allotment
reflected in the above table.
No Sales of Similar Securities
Our founders, executive officers and directors, and certain
existing stockholders have agreed, subject to limited exceptions,
not to sell or transfer any common stock for one hundred eighty
days after the date of this prospectus without first obtaining the
written consent of EF Hutton. Specifically, we and these other
persons have agreed, subject to certain limitations, not to
directly or indirectly:
●
offer,
pledge, sell or contract to sell any common stock;
●
sell
any option or contract to purchase any common stock;
●
purchase
any option or contract to sell any common stock;
●
grant
any option, right or warrant for the sale of any common
stock;
●
lend
or otherwise dispose of or transfer any common stock;
●
request
or demand that we file a registration statement related to the
common stock; or
●
enter
into any swap or other agreement that transfers, in whole or in
part, the economic consequence of ownership of any common stock
whether any such swap or transaction is to be settled by delivery
of shares or other securities, in cash or otherwise.
This lockup provision applies to common stock and to securities
convertible into or exchangeable or exercisable for or repayable
with common stock. It also applies to common stock owned now or
acquired later by the person executing the agreement or for which
the person executing the agreement later acquires the power of
disposition.
The Underwriting Agreement provides that for a period of three
hundred sixty days from the effective date of the Underwriting
Agreement, the Company may not issue, enter into any agreement to
issue or announce the issuance or proposed issuance of any shares
of common stock. This prohibition does not apply to (i) equity
grants to employees, officers or directors under an equity
incentive plan established by the Company, (ii) the issuance
of securities upon the exercise or exchange of or conversion of any
securities issued under the Underwriting Agreement and/or other
securities exercisable or exchangeable for or convertible into
shares of common stock issued and outstanding on the date of the
Underwriting Agreement, (iii) shares of common stock issued as
part of the purchase price in connection with the acquisitions or
strategic transactions, provided certain conditions are met, or
(iv) the issuance of shares of our common stock upon
conversion or exercise of outstanding convertible debt, options and
warrants.
Listing on the Exchange
We have applied to list our common stock and warrants on the
Exchange under the symbol “NOVS” and
“NOVSW,” respectively.
Before this offering, there has been no public market for our
common stock or warrants. The public offering price was determined
through negotiations among us and the representatives. In addition
to prevailing market conditions, the factors considered in
determining the public offering price are:
●
the
valuation multiples of publicly traded companies that the
representatives believe to be comparable to us;
●
our
financial information;
●
the
history of, and the prospects for, our company and the industry in
which we compete;
●
an
assessment of our management, its past and present operations, and
the prospects for, and timing of, our future revenues;
●
the
present state of our development; and
●
the
above factors in relation to market values and various valuation
measures of other companies engaged in activities similar to
ours.
An active trading market for the shares may not develop. It is also
possible that after this offering the shares will not trade in the
public market at or above the public offering price. The
underwriters do not expect to confirm sales of the securities
offered hereby to accounts over which they exercise discretionary
authority.
Price Stabilization, Short Positions and Penalty Bids
Until the distribution of the shares is completed, SEC rules may
limit underwriters and selling group members from bidding for and
purchasing our common stock. However, the representatives may
engage in transactions that stabilize the price of the common
stock, such as bids or purchases to peg, fix or maintain that
price.
The underwriters may purchase and sell the common stock in the open
market. These transactions may include short sales, stabilizing
transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the underwriters of a
greater number of shares than they are required to purchase in this
offering. “Covered” short sales are sales made in an
amount not greater than the underwriters’ option to purchase
additional shares from the issuer in this offering. The
underwriters may close out any covered short position by either
exercising their option to purchase additional shares or purchasing
shares in the open market. In determining the source of shares to
close out the covered short position, the underwriters will
consider, among other things, the price of shares available for
purchase in the open market as compared to the price at which they
may purchase shares through the over-allotment option.
“Naked” short sales are any sales in excess of such
option. The underwriters must close out any naked short position by
purchasing shares in the open market. A naked short position is
more likely to be created if the underwriters are concerned that
there may be downward pressure on the price of the common shares in
the open market after pricing that could adversely affect investors
who purchase in this offering. Stabilizing transactions consist of
various bids for or purchases of common shares made by the
underwriters in the open market prior to the completion of this
offering.
The underwriters may also impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the
underwriting discount received by it because the representatives
have repurchased shares sold by or for the account of such
underwriter in stabilizing or short covering
transactions.
Similar to other purchase transactions, the underwriters’
purchases to cover the syndicate short sales may have the effect of
raising or maintaining the market price of the common stock or
preventing or retarding a decline in the market price of the common
stock. As a result, the price of the common stock may be higher
than the price that might otherwise exist in the open
market.
Neither we nor any of the underwriters make any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the common
stock. In addition, neither we nor any of the representatives make
any representation that the representatives will engage in these
transactions or that these transactions, once commenced, will not
be discontinued without notice.
Electronic Distribution
In connection with the offering, certain of the underwriters or
securities dealers may distribute prospectuses by electronic means,
such as e-mail.
Other Relationships
The underwriters and their respective affiliates are full service
financial institutions engaged in various activities, which may
include sales and trading, commercial and investment banking,
advisory, investment management, investment research, principal
investment, hedging, market making, brokerage and other financial
and non-financial activities and services. Certain of the
underwriters and their respective affiliates have provided, and may
in the future provide, a variety of these services to the Company
and to persons and entities with relationships with DBG, for which
they received or will receive customary fees and
expenses.
Notice to Prospective Investors in the European Economic
Area
In relation to each member state of the European Economic Area that
has implemented the Prospectus Directive (each, a relevant member
state), with effect from and including the date on which the
Prospectus Directive is implemented in that relevant member state
(the relevant implementation date), an offer of shares described in
this prospectus may not be made to the public in that relevant
member state other than:
●
to
any legal entity which is a qualified investor as defined in the
Prospectus Directive;
●
to
fewer than 100 or, if the relevant member state has implemented the
relevant provision of the 2010 PD Amending Directive, 150 natural
or legal persons (other than qualified investors as defined in the
Prospectus Directive), as permitted under the Prospectus Directive,
subject to obtaining the prior consent of the relevant Dealer or
Dealers nominated by us for any such offer; or
●
in
any other circumstances falling within Article 3(2) of the
Prospectus Directive,
●
provided
that no such offer of shares shall require us or any underwriter to
publish a prospectus pursuant to Article 3 of the Prospectus
Directive.
For purposes of this provision, the expression an “offer of
securities to the public” in any relevant member state means
the communication in any form and by any means of sufficient
information on the terms of the offer and the shares to be offered
so as to enable an investor to decide to purchase or subscribe for
the shares, as the expression may be varied in that member state by
any measure implementing the Prospectus Directive in that member
state, and the expression “Prospectus Directive” means
Directive 2003/71/EC (and amendments thereto, including the 2010 PD
Amending Directive, to the extent implemented in the relevant
member state) and includes any relevant implementing measure in the
relevant member state. The expression 2010 PD Amending Directive
means Directive 2010/73/EU.
The sellers of the shares have not authorized and do not authorize
the making of any offer of shares through any financial
intermediary on their behalf, other than offers made by the
underwriters with a view to the final placement of the shares as
contemplated in this prospectus. Accordingly, no purchaser of the
shares, other than the underwriters, is authorized to make any
further offer of the shares on behalf of the sellers or the
underwriters.
Notice to Prospective Investors in the United Kingdom
This prospectus is only being distributed to, and is only directed
at, persons in the United Kingdom that are qualified investors
within the meaning of Article 2(1)(e) of the Prospectus
Directive that are also (i) investment professionals falling
within Article 19(5) of the Financial Services and Markets Act
2000 (Financial Promotion) Order 2005 (the “Order”) or
(ii) high net worth entities, and other persons to whom it may
lawfully be communicated, falling within Article 49(2)(a) to
(d) of the Order (each such person being referred to as a
“relevant person”). This prospectus and its contents
are confidential and should not be distributed, published or
reproduced (in whole or in part) or disclosed by recipients to any
other persons in the United Kingdom. Any person in the United
Kingdom that is not a relevant person should not act or rely on
this document or any of its contents.
Canada
The securities may be sold in Canada only to purchasers purchasing,
or deemed to be purchasing, as principal that are accredited
investors, as defined in National Instrument 45-106 Prospectus
Exemptions or subsection 73.3(1) of the Securities Act (Ontario),
and are permitted clients, as defined in National
Instrument 31-103 Registration Requirements, Exemptions and
Ongoing Registrant Obligations. Any resale of the securities must
be made in accordance with an exemption from, or in a transaction
not subject to, the prospectus requirements of applicable
securities laws. Securities legislation in certain provinces or
territories of Canada may provide a purchaser with remedies for
rescission or damages if this prospectus (including any amendment
thereto) contains a misrepresentation, provided that the remedies
for rescission or damages are exercised by the purchaser within the
time limit prescribed by the securities legislation of the
purchaser’s province or territory. The purchaser should refer
to any applicable provisions of the securities legislation of the
purchaser’s province or territory for particulars of these
rights or consult with a legal advisor. Pursuant to section 3A.3 of
National Instrument 33-105 Underwriting Conflicts (NI 33-105), the
underwriters are not required to comply with the disclosure
requirements of NI33-105 regarding underwriter conflicts of
interest in connection with this offering.
Notice to Prospective Investors in Canada
No securities commission or similar regulatory authority in Canada
has reviewed or in any way passed upon this prospectus or on the
merits of the securities and any representation to the contrary is
an offence. The offering is being made by a non-Canadian issuer
using disclosure documents prepared in accordance with non-Canadian
securities laws. Canadian purchasers should be aware that these
requirements may differ significantly from those of requirements
under applicable Canadian securities laws. In addition, prospective
purchasers resident in a province or territory of Canada should be
aware that the financial statements and other financial information
contained and incorporated by reference herein have been prepared
in accordance with generally accepted accounting principles in the
United States (“U.S. GAAP”) and (where audited) have
been subjected to U.S. auditing and U.S. auditor independence
standards. U.S. GAAP and U.S. auditing standards differ in certain
respects from Canadian generally accepted accounting principles,
International Financial Reporting Standards (“IFRS”)
and Canadian auditing standards, and thus the consolidated
financial statements and other financial information contained or
incorporated by reference herein may not be comparable to financial
statements and financial information of Canadian
companies.
Some or all of the directors and officers of the Company, and
certain experts named herein, may be located outside of Canada and,
as a result, it may not be possible for purchasers to effect
service of process within Canada upon the Company or those persons.
All or a substantial portion of the assets of the Company and those
persons may be located outside of Canada and, as a result, it may
not be possible to satisfy a judgment against the Company or those
persons in Canada or to enforce a judgment obtained in Canadian
courts against the Company or those persons outside of
Canada.
Nova Scotia Purchasers
Under Nova Scotia securities legislation, certain purchasers who
purchase shares of common stock offered by this prospectus during
the period of distribution will have a statutory right of action
for damages against the Company and the directors of the Company as
of the date of this prospectus, or while still the owner of the
shares of common stock, for rescission against the Company if this
prospectus, or a document incorporated by reference in or deemed
incorporated into this prospectus, contains a misrepresentation
without regard to whether the purchasers relied on the
misrepresentation. The right of action for rescission or damages is
exercisable not later than 120 days from the date on which
payment is made for the shares of common stock or after the date on
which the initial payment for the shares of common stock was made
where payments subsequent to the initial payment are made pursuant
to a contractual commitment assumed prior to, or concurrently with,
the initial payment. If a purchaser elects to exercise the right of
action for rescission, the purchaser will have no right of action
for damages against the Company or the directors of the Company. In
no case will the amount recoverable in any action exceed the price
at which the shares of common stock were offered to the purchaser
and if the purchaser is shown to have purchased the shares of
common stock with knowledge of the misrepresentation, the Company
and the directors of the Company will have no liability. In the
case of an action for damages, the Company and the directors of the
Company will not be liable for all or any portion of the damages
that are proven to not represent the depreciation in value of the
shares of common stock as a result of the misrepresentation relied
upon. These rights are in addition to, and without derogation from,
any other rights or remedies available at law to a Nova Scotia
purchaser. The foregoing is a summary of the rights available to a
Nova Scotia purchaser. Not all defenses upon which the Company or
others may rely are described herein. Nova Scotia purchasers should
refer to the complete text of the relevant statutory
provisions.
Saskatchewan Purchasers
Under Saskatchewan securities legislation, certain purchasers who
purchase shares of common stock offered by this prospectus during
the period of distribution will have a statutory right of action
for damages against the Company and every director of the Company
as of the date of this prospectus, and every person or company who
sells the shares of common stock on behalf of the Company under
this prospectus, or while still the owner of the shares of common
stock, for rescission against the Company if this prospectus
contains a misrepresentation without regard to whether the
purchasers relied on the misrepresentation. The right of action for
damages is exercisable not later than the earlier of one year from
the date the purchaser first had knowledge of the facts giving rise
to the cause of action and six years from the date on which
payment is made for the shares of common stock. The right of action
for rescission is exercisable not later than 180 days from the
date on which payment is made for the shares of common stock. If a
purchaser elects to exercise the right of action for rescission,
the purchaser will have no right of action for damages against the
Company or the others listed above. In no case will the amount
recoverable in any action exceed the price at which the shares of
common stock were offered to the purchaser and if the purchaser is
shown to have purchased the shares of common stock with knowledge
of the misrepresentation, the Company and the others listed above
will have no liability. In the case of an action for damages, the
Company and the others listed above will not be liable for all or
any portion of the damages that are proven to not represent the
depreciation in value of the shares of common stock as a result of
the misrepresentation relied upon. A purchaser who receives an
amended prospectus has the right to withdraw from the agreement to
purchase the shares of common stock by delivering a notice to the
Company within two business days of receiving the amended
prospectus. These rights are in addition to, and without derogation
from any other rights or remedies available at law to a
Saskatchewan purchaser. The foregoing is a summary of the rights
available to a Saskatchewan purchaser. Not all defenses upon which
the Company or others may rely are described herein. Saskatchewan
purchasers should refer to the complete text of the relevant
statutory provisions.
Resale Restrictions
The offer and sale of the securities in Canada is being made on a
private placement basis only and is exempt from the requirement
that the Company prepares and files a prospectus under applicable
Canadian securities laws. Any resale of securities acquired by a
Canadian investor in this offering must be made in accordance with
applicable Canadian securities laws, which may vary depending on
the relevant jurisdiction, and which may require resales to be made
in accordance with Canadian prospectus requirements, pursuant to a
statutory exemption from the prospectus requirements, in a
transaction exempt from the prospectus requirements or otherwise
under a discretionary exemption from the prospectus requirements
granted by the applicable local Canadian securities regulatory
authority. These resale restrictions may under certain
circumstances apply to resales of the securities outside of Canada.
By purchasing shares of common stock under the offering and
accepting delivery of a purchase confirmation, each Canadian
purchaser is deemed to acknowledge that pursuant that it is
receiving notice that, unless permitted under applicable Canadian
securities laws, the holder of the securities offered herein must
not trade any of the securities to a resident of Canada before the
date that is four months and a day after the distribution date
(expected to be on or about [ ], 2021).
Taxation and Eligibility for Investment
Any discussion of taxation and related matters contained in this
prospectus does not purport to be a comprehensive description of
all of the tax considerations that may be relevant to a Canadian
investor when deciding to purchase the shares and, in particular,
does not address any Canadian tax considerations. No representation
or warranty is hereby made as to the tax consequences to a
resident, or deemed resident, of Canada of an investment in the
shares or with respect to the eligibility of the shares for
investment by such investor under relevant Canadian federal and
provincial legislation and regulations.
Language of Documents
Upon receipt of this document, each Canadian investor hereby
confirms that it has expressly requested that all documents
evidencing or relating in any way to the sale of the securities
described herein (including for greater certainty any purchase
confirmation or any notice) be drawn up in the English language
only. Par la réception de ce document, chaque investisseur
canadien confirme par les présentes qu’il a
expressément exigé que tous les documents faisant foi ou
se rapportant de quelque manière que ce soit à la vente
des valeurs mobilières décrites aux présentes
(incluant, pour plus de certitude, toute confirmation d’achat
ou tout avis) soient rédigés en anglais
seulement.
DESCRIPTION OF SECURITIES TO BE
REGISTERED
General
We are
authorized to issue an aggregate number of 3,000,000,000 shares of
capital stock, of which (i) 2,600,000,000 shares are Common Stock,
at no par value per share; and (ii) 400,000,000 shares of preferred
stock, at no par value per share.
Common Stock
We are
authorized to issue 2,600,000,000 shares of Common Stock. As of
December 8, 2021, 10,481,347 shares of the Common
Stock are issued and outstanding.
Each
share of Common Stock shall have one (1) vote per share for all
purposes. Our common stock does not provide a preemptive or
conversion right and there are no redemption or sinking fund
provisions or rights. Holders of our Common Stock are not entitled
to cumulative voting for election of the Company’s board of
directors.
The
holders of our Common Stock are entitled to dividends out of funds
legally available when and as declared by our board of directors.
Our board of directors has never declared a cash dividend and does
not anticipate declaring a dividend in the foreseeable
future.
Preferred Stock
We are
authorized to issue up to 400,000,000 shares of preferred stock, at
no par value per share, in one or more classes or series within a
class as may be determined by our board of directors, who may
establish, from time to time, the number of shares to be included
in each class or series, may fix the designation, powers,
preferences and rights of the shares of each such class or series
and any qualifications, limitations or restrictions thereof. Any
preferred stock so issued by the board of directors may rank senior
to other existing classes of capital stock with respect to the
payment of dividends or amounts upon liquidation, dissolution or
winding up of us, or both. Moreover, while providing desirable
flexibility in connection with possible acquisitions and other
corporate purposes, under certain circumstances, the issuance of
preferred stock or the existence of the unissued preferred stock
might tend to discourage or render more difficult a merger or other
change of control. Currently, no shares of our preferred stock have
been designated any rights and we have no shares of preferred stock
issued and outstanding.
Warrants
General. There are presently no outstanding warrants to
purchase our securities. However, we are offering up to a total of
3,333,333 warrants for the purchase of our Common
Stock.
Exercisability. The warrants are exercisable at
any time after their original issuance and at any time up to the
date that is five years after their original issuance. The warrants
will be exercisable, at the option of each holder, in whole or in
part by delivering to us a duly executed exercise notice and, at
any time a registration statement registering the issuance of the
shares of common stock underlying the warrants under the Securities
Act is effective and available for the issuance of such shares, or
an exemption from registration under the Securities Act is
available for the issuance of such shares, by payment in full in
immediately available funds for the number of shares of common
stock purchased upon such exercise. If a registration statement
registering the issuance of the shares of common stock underlying
the warrants under the Securities Act is not effective or available
and an exemption from registration under the Securities Act is not
available for the issuance of such shares, the holder may, in its
sole discretion, elect to exercise the warrant through a cashless
exercise, in which case the holder would receive upon such exercise
the net number of shares of Common Stock determined according to
the formula set forth in the warrant. No fractional shares of
common stock will be issued in connection with the exercise of a
warrant. In lieu of fractional shares, we will pay the holder an
amount in cash equal to the fractional amount multiplied by the
exercise price.
Exercise Limitation. A holder
will not have the right to exercise any portion of the warrant if
the holder (together with its affiliates) would beneficially own
more than 4.99% of the outstanding Common Stock after exercise, as
such percentage ownership is determined in accordance with the
terms of the warrants, except that upon notice from the holder to
us, the holder may waive such limitation up to a percentage, not in
excess of 9.99% of the number of shares of our Common Stock
outstanding immediately after giving effect to the exercise, as
such percentage ownership is determined in accordance with the
terms of the warrants.
Exercise
Price. The
exercise price per whole share of Common Stock purchasable upon
exercise of the warrants is $5.625 per share or
125% of the public offering price per Unit. The
exercise price is subject to appropriate adjustment in the event of
certain stock dividends and distributions, stock splits, stock
combinations, reclassifications or similar events affecting our
Common Stock and also upon any distributions of assets, including
cash, stock or other property to our
stockholders.
Transferability. Subject to applicable laws, the
warrants may be offered for sale, sold, transferred or assigned
without our consent.
Exchange Listing. We have applied for the listing
of the warrants offered in this offering on the Exchange under the
symbol “NOVS”. No assurance can be given that such
listing will be approved or that a trading market will
develop.
Warrant Agent. The warrants will be issued in
registered form under a warrant agency agreement between VStock
Transfer, LLC, as warrant agent, and us. The warrants shall
initially be represented only by one or more global warrants
deposited with the warrant agent, as custodian on behalf of The
Depository Trust Company (DTC) and registered in the name of Cede
& Co., a nominee of DTC, or as otherwise directed by
DTC.
Fundamental Transactions. In the event of a fundamental
transaction, as described in the warrants and generally including
any reorganization, recapitalization or reclassification of our
Common Stock, the sale, transfer or other disposition of all or
substantially all of our properties or assets, our consolidation or
merger with or into another person, the acquisition of more than
50% of our outstanding Common Stock, or any person or group
becoming the beneficial owner of 50% of the voting power
represented by our outstanding Common Stock, the holders of the
warrants will be entitled to receive upon exercise of the warrants
the kind and amount of securities, cash or other property that the
holders would have received had they exercised the warrants
immediately prior to such fundamental
transaction.
Rights as a Stockholder. Except as otherwise provided in
the warrants or by virtue of such holder’s ownership of
shares of our Common Stock, the holder of a warrant does not have
the rights or privileges of a holder of our Common Stock, including
any voting rights, until the holder exercises the
warrant.
Governing Law. The warrants and the warrant
agency agreement are governed by New York law.
Options
At a board of directors (the “Board”) meeting held on
June 12, 2021, the Board approved the following stock options to
the officers and directors of the Company: (i) options for three
directors to purchase 25,000 shares of common stock each at a
strike price of $5.00 per share within five years from June 12,
2021, (ii) options for the Chief Executive Officer to buy 25,000
shares of common stock at a strike price of $5.00 per share within
five years from June 12, 2021 and (iii) options for the Chairman of
the Board to purchase 50,000 shares of common stock at a strike
price of $5.00 per share within five years from June 12,
2021.
There
are no other outstanding options to purchase our
securities.
Transfer Agent and Registrar
Our
Transfer Agent and Registrar is VStock Transfer, LLC, 18 Lafayette
Place, Woodmere, New York 11598. Phone: (212)
828-8436.
INFORMATION WITH RESPECT TO THE
REGISTRANT
DESCRIPTION OF BUSINESS
Company Overview
The
Company, sometimes referred to herein as "we," "us,”
“our," and the "Company" and/or "Novusterra Inc.” was
incorporated on September 21, 2020, in the State of Florida. Our
fiscal year-end date is December 31. Our address is 561 NE 79th
Street, Suite 325, Miami, FL 33138, our telephone number to
786-473-6233 and our website is www.novusterrainc.com. However, you
should not consider any information on, or that can be accessed
through, our website a part of this Registration
Statement.
We
began with the objective to build a Rare Earth Elements
(“REE”) Processing Facility to process REE for
commercial use. However, as approved by a Board of Directors
meeting held on March 19, 2021, we changed our objective to
developing Graphene since we discovered research illustrating that
Graphene, similar to an REE, is a versatile commodity that could be
helpful in solving major global problems with the potential for
attractive earnings.
Our
decision to begin the process of producing Graphene was made easier
due to the relationship the Company’s management team has
with ARC as a result of prior business activities. ARC through its
wholly-owned subsidiary, ACM, signed the License Agreement with
Ohio University to manufacture Graphene using carbon as a raw
material using patented technology owned by Ohio University. The
suite of patents was originally developed by Dr. Gerardine Botte,
the current Whitacre Department Chair in Chemical Engineering at
Texas Tech University, an independent board member of ARC and Chief
Technical Officer of ACM. Dr. Botte developed and patented these
technologies when she served as Ohio University's Distinguished
Professor and Russ Professor of Chemical and Biomolecular
Engineering.
The
underlying License Agreement between Ohio University and ACM was
effective on February 10, 2021. The term of the License Agreement
runs from February 10, 2021, until such time as the last of the
Patent Rights as identified in the License Agreement expires
pursuant to federal patent law. The License Agreement allows ACM to
utilize the patent rights and/or technology rights identified
therein to facilitate the extraction, refinement and processing of
Critical Elements, Rare Earth Elements and Graphene, as such terms
are defined in the License Agreement. A copy of the License
Agreement is included as an exhibit to this prospectus and each
prospective investor is encouraged to thoroughly review the License
Agreement.
The
License Agreement requires, among other things, that ACM maintain a
bona fide, funded, ongoing and active research, development,
manufacturing, marketing and sales program to diligently make,
offer for sale and sell Licensed Products so that Licensed Products
are currently available to the public as soon as commercially
practicable; and, fulfill various Diligence Milestone events
identified in the License Agreement. The Diligence Milestones
include developing a final design for a pilot facility to exploit
the Licensed Product; completion of construction of the pilot
facility; developing a final design for a commercial facility to
exploit the Licensed Product; identifying feedstock material
sources for the Licensed Product; completing construction of the
commercial facility; obtaining the first commercial sale of product
exploiting the Licensed Product; and obtaining net sales of a
minimum of $1,000,000.00. The deadlines for these various Diligence
Milestones run from January 1, 2022, through January 1,
2026.
Consideration
for granting of the License Agreement consisted of a nonrefundable
payment of $99,773. Additionally, the License Agreement provides
for the payment of royalties in amounts ranging from 1.5% to 2% of
Net Sales of the Licensed Products. The License Agreement also
provides for payment of minimum royalties by ACM in amounts ranging
from $7,500 beginning in calendar year 2025 up to $125,000
beginning in calendar year 2027 and predicated upon the three
Fields of Use involving Critical Elements, Rare Earth Elements and
Graphene.
The
License Agreement also provides that ACM shall pay all costs and
expenses associated with the Patent Rights within 30 days after
receipt of each invoice by ACM. The licensor may also require ACM
to prepay costs and expenses predicated for certain Patent Rights
upon written request by the licensor. The failure of ACM to make
any required payment shall be considered a payment default under
the terms of the License Agreement.
On
March 31, 2021, we signed the Sublicense Agreement with ARC that
provides us with a nonexclusive sublicense from ARC of certain
patents ARC has licensed from Ohio University pursuant to the
License Agreement relating to the manufacture of Graphene using
coal byproducts. Pursuant to such agreement, we agreed to raise
funds via an initial public offering in order to build a
manufacturing facility to produce and market Graphene commercially.
The agreement with ARC provides that the Company and ARC are each
entitled to receive fifty percent (50%) of the operating profits
from our Graphene manufacturing and marketing business. This profit
sharing arrangement is limited to only the operating profits from
the Graphene factory using the rights provided by the Sublicense
and will not apply to any other activities in which the Company may
engage in the future, including the production of Graphene using
any other technology. Hence the Company has been researching
alternative methods to produce Graphene. The Company also plans to
look into acquiring companies that use or can use Graphene as raw
material for other applications. As part of the above two
agreements, Andrew Weeraratne was replaced by Mark Jensen, the
Chief Executive Officer and the Chairman of the Board of ARC, as
the Chairman of the Company’s Board of
Directors.
As
approved at a special shareholders meeting attended by major
shareholders on March 19, 2021, we signed an agreement with ARC on
March 31, 2021, to issue ARC 10,000,000 shares of Class B common
stock (with 10 votes each) plus 5,700,000 shares of Class A common
stock (with one vote each) of the Company, comprising 51.14% of
total shares giving 87.57% of voting power to ARC, who plans to
distribute such shares to ARC’s shareholders as stock
dividends after the completion of this offering. At a special
shareholders meeting held on April 4, 2021, attended by majority of
shareholders, including ARC, the Company voted to eliminate the
Class B shares and increase the Class A shares by the number of
Class B shares then outstanding, and designate the Class A shares
as “Common Shares.”. Further, at a special stockholders
meeting held on April 16, 2021 attended by a majority of
shareholders, the Company voted to effectuate a one-for-three (1:3)
reverse stock split, which became effective as of April 16, 2021.
As a consequence of eliminating the Class B shares on April 4,
2021, as of October 28, 2021 ARC holds 5,233,333 Class A common
shares, or 49.93% of the Company’s voting stock, and Andrew
Weeraratne holds 4,082,389 common shares, or 38.95% of the
Company’s voting stock, based on 10,481,347 common shares
outstanding.
Business Opportunity
According
to Nanografi Nanotechnology AS (“Nanografi”), a
producer and supplier of nano and micro particles such as Graphene,
Fullerene, Carbon Nanotubes as well as 3D printer materials,
discussed herein are additional potential applications of Graphene
(Please note Nanografi claims these are only for information
purposes, and not to be used as medical or technical
advice).2
Graphene in Solar Cells
The
idea of developing lighter, flexible and transparent solar cells
has been around for a while but finding a material which has all
the necessary properties and is able to carry the current posed an
issue. Indium Tin Oxide (“ITO”) has been used
because it is transparent, however it is not flexible, meaning the
cell had to remain stiff.
According
to Nanografi, in 2017, researchers from MIT managed to apply
Graphene successfully on a solar cell. When they compared the
Graphene solar cell with others made of Aluminum and ITO,
they saw that it was as good as the ITO cell, but a little worse
than Aluminum cell in terms of current densities and power
conversion efficiencies. However, it is expected for a transparent
cell to perform lower than Aluminum-based cells, which are
nontransparent. Although electrical properties were not a
breakthrough, a solar cell that can be installed on any kind of
surface (cars, clothes, paper, cell phones, etc.) which is flexible
and transparent was developed. Moreover, other scientists are
trying to determine if Graphene solar cells can generate
energy from raindrops, which theoretically appears as if it may be
possible.
Graphene in Thermoelectric
The
Seebeck effect is defined as the thermoelectric effect occurring
when heat is applied to one of the two dissimilar electric
conductors (or semiconductors) to move the electrons from the hot
part to the cooler part of an electric conductor and produce
electricity. However, the energy generated by this method is very
small, usually quantified by microvolts. Still, it is believed that
it can be used to benefit from the heat generated by the engines,
which is practically wasted. Graphene can be used to increase the
Seebeck effect created by Strontium Titanate, almost up to 5
times.
Graphene in Fuel Cells
Even
hydrogen atoms, known as the smallest atom, cannot pass through
Graphene. In other research, Sir Andre Geim and his team have
tested whether or not protons would be blocked by Graphene.
Surprisingly, it has been shown that protons can pass through
Graphene. This property would improve fuel cell performance by
lowering the fuel crossover, which is a major problem with fuel
cells that decreases durability and efficiency.
Graphene in Drug Delivery
In cancer patients, functionalized Graphene can be used to carry
chemotherapy drugs to tumors. Graphene based
carriers targeted cancer cells better and reduced and
decreased toxicity of the effected healthy cells. However, drug
delivery is not limited to cancer treatment. Anti-inflammatory
drugs have also been carried by Graphene & chitosan
combinations and yielded promising results.
Graphene in Diabetes Monitoring
Scientists
from the University of Bath have developed a blood glucose
monitoring test which does not pierce the skin, unlike currently
finger prick tests. This patch, including a Graphene sensor, is
able to work on a small area containing at least one hair follicle.
It detects the glucose by pulling it from the fluid present between
the cells. This does not only end the painful methods of blood
sugar monitoring, but is also expected to increase the accuracy of
results.
Graphene in Dialysis
Graphene membranes are not only useful for the energy, nuclear and
food industries. A group of researchers from MIT showed
that Graphene can be used to filter blood from various types of
waste, drugs and chemicals. Graphene’s superiority in this
function lies in the fact that it is 20 times thinner than
traditional membranes, which leads to significant decrease in the
time spent in the dialysis for the patients.
Graphene in Bone and Teeth Implantation
Hydroxyapatite, a form of calcium apatite, is a material used as a
synthetic bone substitute for regenerated bone and dental tissues.
Graphene, when combined with Hydroxyapatite and Chitosan, has shown
increases in the strength, corrosion resistance, flexibility and
mechanical & osteogenic properties of synthetic bone
substitutes.
__________________________
Graphene in Body Scans
Unlike X-rays, T-waves can be used for body scanning and are
harmless to the human body. However, T-waves, or THZ radiation, are
hard to both detect and to generate.3 However,
with the help of certain modifications and other
materials, CVD Graphene can detect THZ
radiation successfully. This has the potential to lead to
safer body scans in the future.
Graphene in Waterproof Electronics
One of the main problems with electronic devices is people’s
fear of dropping them in water and damaging the device. Instead of
covering the device with tight-fitted screws, Graphene presents a
solution to this problem. Engineers from Iowa State University have
printed circuits for electronic devices with Graphene flakes
because Graphene is transparent, strong and conducts electricity.
The Graphene flakes are arranged in a specific order and
non-conductive binders are used to combine them, which improves
their conductivity.
Graphene in Elastic Robots
A team of researchers has developed a gel that is sensitive to near
infrared light so that it can be used in numerous applications when
creating flexible or elastic robotic parts. The snake-like
robots created using this method are able to change form
without any external forces. Future applications for such robots
can vary from search-and-rescue to medical operations.
Graphene in Food Packaging
Graphene can also be used as a coating material because it prevents
the transfer of water and oxygen. Graphene membranes can
be used in food and pharmaceutical packaging to keep food and
medicines fresh for longer periods of time. This has the potential
to dramatically reduce the amount of food waste created each
day.
Graphene in Water Purification
Normally, water purification is not a simple process and its
feasibility depends on how heavily the water is contaminated. An
Australian scientist has found a low-cost technique to purify water
in one step. Soybean-based Graphene, which is also called
‘GrapHair’, is used as a filter. This filter can make
the dirtiest water drinkable and it is more efficient, cheaper and
environmentally friendly as compared to other methods.
Graphene in Desalination
Approximately 97.5% of the total water present on the planet is
salinized. Regardless of how many wells are excavated, only 2.5% of
the planet’s total water is fresh water. Mesh-based water
filters using Graphene have yielded amazing results. The University
of Manchester employed Graphene to make a higher density filtering
sieve that permits water particles, but not salt, to pass
through.
Graphene in Shoes
It is claimed that a sole made of pure Graphene can last hundreds
of years. The University of Manchester and sports
brand Inov-8 developed a shoe using Graphene which
increases the outsoles’ strength and flexibility properties
by 50%. These shoes are more durable and absorbs the impacts which
could damage the bones and joints.
Graphene in Speakers and Headphones
A speaker converts electricity into sound by vibrating a membrane
in the air. Graphene is used to make lightweight and great rigidity
membranes. Moreover, headphones use a small diaphragm reinforced
with Graphene. GrapheneQ, a headphone developed by the
company ORA Sound, is lighter and smaller, and at the
same time, can produce louder and higher quality sounds with less
energy.
Graphene in Airplanes
Scientists from the United Kingdom have designed an airplane that
includes Graphene in the carbon-fiber coating of the
aircraft’s wings. The model plane, Prospero, is lighter
since it was sufficient to cover the wings with only one layer of
the improved composite. Prospero consumes less fuel, resists impact
better, and has lower environmental costs as well.
____________________________
Graphene in Radiation Shielding
Scientists have been attempting to minimize radiation since its
danger to human health was uncovered. A variety of materials have
been used as a shield from radiation, but there are many parameters
that impact the efficiency of shielding. Graphene is known as a
weak radiation absorber, but scientists have found that it can be a
great shielding material when it is used in multi-layered Graphene
slab form. Graphene is a promising material for this purpose thanks
to its low manufacturing cost, light weight and high efficiency
compared to other shielding materials.
Sources of Revenue
We anticipate our source of revenue to be derived from the
manufacturing and sale of Graphene.
Capital Requirements
We plan to use part of the proceeds from this offering to pay for
the expenses of building a manufacturing plant to make Graphene
from coal byproducts, for which we have sublicensed patented
technology from ARC. In order to manufacture and market Graphene
using the technology we have sublicensed from ARC, we have signed a
lease agreement with ARC to lease land and a building ARC owns in
Kentucky to build our Graphene manufacturing factory, with such
lease payments to be paid after we have received the proceeds from
this offering. We estimate that we will require approximately
$4,000,000 of capital to build a manufacturing plant to make
Graphene, which we anticipate will take 12 months to build. Once we
have received the proceeds from this offering, we plan to hire
experts in the Graphene industry to help us select, buy and install
the necessary equipment to begin the process of producing Graphene
from Carbon.
Graphene Production Process
“Hindawi,” an online research portal, explains the two
primary production methods of Graphene as
follows.4
Top-Down Production Process
Top-down approaches commence with an existing form of the bulk
material and process it to create the final product. This approach
may be cost efficient, depending on the material used. In general,
it is limited to a lab scale and has limited quality control. In
this approach, Graphene or altered Graphene sheets are produced by
either separation, peeling, cleaving, or exfoliation of graphite or
its derivatives (graphite oxide (“GO”) and graphite
fluoride (“GF”)). Researchers have been successful in
fabricating a few layers of free-standing Graphene sheets on both
micro- and nanoscales. However, since this approach involves great
investment and produces relatively low yields, the need remains for
mass scaled-up processes to address the needs of industries
economically. Various mechanical processes have been involved in
producing high-quality, defect-free Graphene: mechanical
exfoliation of graphite, sonication, functionalization,
electrochemical exfoliation, super acid dissolution of graphite,
alkylation of Graphene derivatives, chemical reduction of
aqueous/organically treated GO, thermal exfoliation, and chemical
reduction of GO. A detailed account of synthesis of Graphene by the
exfoliation method, functionalization, and reduction along with its
utilization in the fabrication of nanocomposites has been
extensively reviewed by Potts et al. (2011)5, providing
thorough insight into the procedures followed by various authors.
Similarly, Daniel et al. (2012)6 reviewed
and extensively outlined the synthesis of Graphene from various
sources using several similar approaches.
The Bottom-up Production Process
The bottom-up approach consists of standard techniques such as
epitaxial growth using metallic substrates by means of CVD (defined
below) or organic synthesis, which depend on the choice of
precursor chemicals and thermal degradation and decomposition.
Several other processes, such as arc discharge, chemical conversion
(“CO”) reduction, Carbon nanotubes (“CNT”)
unzipping and self-organization of surfactants have also been tried
for synthesis of Graphene and its derivatives. Of all these
processes, CVD and epitaxial growth, which produce bantam
quantities of flawless Graphene sheets with larger size, may in the
future be attractive for mass-scale Graphene production, in
contrast to mechanical cleaving. Using CVD and epitaxial methods,
Graphene sheets find their way into fundamental research with a
multitude of applications, ranging from electronics to polymeric
nanocomposites. Also, production of large quantities of Graphene
sheets is dependent on the chemical precursors used during
synthesis. In particular, GO, chemically reduced graphite
(“CRG”), and thermally reduced graphite
(“TRG”) are ideal candidates for polymer nanocomposite
applications. In the bottom-up approach, as discussed earlier, the
small molecule chemicals and catalysts are determining factors for
the specific control of morphology, crystallinity, and structure of
Graphene. There are several accounts of using hydrocarbons as the
source of Graphene production and using metal catalysts through the
CVD process. Currently, a Nickel surface is considered the best
template for deposition of Graphene due to the small variance in
its lattice heterogeneity. The control and stability in the
Graphene scale are potentially high, which makes CVD the most
appealing method for device assembly and fabrication. Nevertheless,
this method faces a major challenge in the control of edge
structure and topology. Epitaxial growth of Graphene on a substrate
is another common technique, in which decomposition results in the
formation of Graphene layers. The silicon is desorbed off the
surface leaving highly pure defect-free Graphene sheets. This
process has several advantages, including (i) there is no
transition or transportation of the resulting material from the
metal substrate to the dielectric-type substrate; (ii) the
resultant Graphene film is free from impurities; and (iii)
controlled initiation and growth of the product can be tailored
through the correct choice of substrate. Recently, self-assembly
processes, such as layer-by-layer assembly (LLB), have been
extensively employed to fabricate nanocomposite thin films using
Graphene. The resulting composite structure is expected to have
well-aligned components. Though the bottom-up approach to Graphene
synthesis presents less defects compared to the top-down approach,
the operation and procedures are much more difficult and expensive,
making it challenging to realize mass production for practical
applications. Still, the most commonly chosen route of Graphene
synthesis is a bottom-up strategy because it offers incredible
possibilities to tailor the atomic size, composition, shape,
stability, and edge structure in Graphene. Researchers around the
globe are making strong efforts to develop a reliable strategy to
produce defect-free, high functional quality and large quantity
Graphene using synthetic and processing protocols compatible with
standard fabrication procedures at low cost.
___________________________
Research on Production Methods
According to an article entitled “Mass-Producing
Graphene” by Les Johnson and Joseph E. Means published
in American
Scientist, a bimonthly
publication about science, engineering, and technology, it may be
easy to isolate little flakes of this one-atom-thick carbon
material (Graphene) but it is surprisingly difficult to produce
large sheets for commercial use.7
The article further states that Graphene is elegant. It is created
from a single element, carbon, formed by just one type of bond.
Despite Graphene’s apparent simplicity, isolating the
material was elusive for chemists and physicists alike. Graphene
excels at hiding in plain sight, and the techniques and
instrumentation perfected in the last two decades have played a
pivotal role in its discovery. The sole constituent of Graphene is
Carbon, which is the fourth most common element in the universe.
All materials are made of atoms and molecules, but with Graphene,
counting carbon atoms is immaterial since what matters is the way
in which constituent carbons are bound to one another. It is with
this feature that Graphene is separated from other wholly carbon
materials such as diamonds and graphite.
Early methods of manufacturing have been too simplistic and time
consuming, making them only good for lab results. One technology
being studied is Additive Manufacturing (“AM”), more
commonly known as 3D printing. Many early generation AM devices
used only plastic to make interesting 3D renditions of various
objects, but the technology has grown significantly more
capable.
The article notes that researchers at Rutgers University are making
sheets of Graphene out of ordinary graphite flakes and some
sulfuric or nitric acid. The addition of the acid oxidizes the
Graphene sheets that make up the graphite and forcing oxygen atoms
between the sheets of Graphene causes them to split apart, forming
Graphene oxide sheets suspended in acid and water. Next, the liquid
is filtered out, leaving flakes of Graphene oxide to clog up the
filter. The sum of all the clogs across the filter eventually makes
up a paper-like sheet of Graphene oxide. This paper-like sheet can
then be removed from the filter by dissolving the filter away using
a solvent that does not react with Graphene oxide. The last step is
to remove the oxygen, which is done using hydrazine, leaving only a
pure Graphene coating. The resulting material is
called reduced Graphene oxide (“RGO”). In this
instance, “reduced” refers to a chemical use of the
word, where the oxidation state of each Graphene carbon has been
decreased through the removal of the oxygen by hydrazine. Hydrazine
is a reducing agent, which is oxidized by its reaction with the
Graphene oxide.
Methane, a carbon-rich gaseous compound, can be reacted with copper
at high temperatures to produce Graphene. Simply heating the copper
to about 1,000 degrees Celsius and exposing it to the methane gas
results in the formation of layers of Graphene on the
copper’s surface from the plentiful carbon atoms in the
methane gas, a process called chemical vapor
deposition (“CVD”). There are two primary problems
with this method: (i) it takes a long time to produce even a small
amount of Graphene and (ii) the resulting Graphene is of low
quality.
For an alternative production method, Jonathan Coleman of Trinity
College, Dublin, and his team put graphite in a blender and added
an over-the-counter dishwashing liquid. With only a little more
processing required to separate the newly formed Graphene sheets,
Coleman and his colleagues found that they could produce several
hundred grams per hour using a fairly modest set of mixing
equipment in a 10,000-liter vat. However, the article states that
it remains unclear whether this method can provide high-quality
Graphene.
At the moment, NASA is researching ways to process waste carbon
dioxide from astronauts’ breath on the International Space
Station into Graphene. This improvement to the life-support system
would have a twofold bonus. A waste material such as carbon dioxide
otherwise requires sequestration with special chemicals that need
to be shipped up with special deliveries from Earth. Accordingly,
processing carbon dioxide into Graphene would mean that fewer
resupply missions would be necessary.
Proposed Initial Graphene Processing Facility
We plan to lease for $5,000 per month land and a building with
approximately 40,000 square feet located at 1845 KY-15, Hazard, KY
41701, owned by Perry County Resources which is an affiliated
company of ARC. Following are the features of the
location:
●
40,000 square foot
(3,716 square meter) facility to house the technology, located in
Hazard, Kentucky;
●
Significant
additional developable area for expansion needs;
●
Fully connected to
industrial power grid and utilities; and
●
Located adjacent to
an operating coal processing facility, allowing for consistent and
abundant feedstock and established infrastructure and
resources.
With
existing processing and coal fine separation facilities, along with
consistent feedstock, this Graphene production facility has all the
components required for testing and producing commercial-grade
Graphene and REE / critical element concentrate, including (i) an
underground mine providing consistent production and feedstock to
Graphene production and (ii) a coal preparation plant with fine
coal production and a segregated Graphene processing facility. We
have entered into an agreement with ARC pursuant to which ARC has
agreed to sell us carbon at a 5% discount to the market
price.
_____________________________
Intellectual Property
We believe that our intellectual property, consisting primarily of
patents and proprietary know-how, for which we have been given a
non-exclusive Sublicense, provides us with competitive advantages
and is important to our growth opportunities. We have obtained this
Sublicense to manufacture Graphene using carbon as raw material
from ARC, which holds the License Agreement to such technology
through one of its wholly owned subsidiaries, ACM. The patented
technology is owned by Ohio University. The suite of patents was
originally developed by Dr. Gerardine Botte, the current Whitacre
Department Chair in Chemical Engineering at Texas Tech University,
an independent board member of American Resources Corporation and
Chief Technical Officer of Advanced Carbon Materials, a subsidiary
of American Resources Corporation. Dr. Botte developed and patented
these technologies when she served as Ohio University's
Distinguished Professor and Russ Professor of Chemical and
Biomolecular Engineering.
Pursuant to ARC’s License Agreement with Ohio University, ARC
has the exclusive domestic rights, and the exclusive option on
international rights, for the following patents:
●
Coal
Electrolysis: Hydrogen, Liquid Fuels, and Carbon Nanotubes
Production;
●
Simultaneous
Removal of Ammonia, Urea, and Metals from Water;
●
Methods
for the Synthesis of Graphene from Coal, Carbon Chars, and Carbon
Solid Sources; and
●
Roll-to-Roll
Transfer of Graphene and Substrate Recovery.
The Sublicense gives us non-exclusive rights to commercially
produce Graphene using Carbon and coal byproducts using this
patented technology. This patent is to produce Graphene from the
byproducts formed during electrolysis of coal. These byproducts may
be electrolyzed coal particles, gelatinous film formed on the
electrolyzed coal particles, or the electrolyzed coal particles
together with the gelatinous film. The electrolyzed coal byproduct
is deposited as a thin layer onto a surface, or carrier substrate,
which is heated to a temperature effective to form graphite while a
reductant gas, such as hydrogen, flows over the heated coal
product. The reductant gas flow carries the carbon particles and
deposits them onto a surface, forming a layer of Graphene thereon.
The premise of this invention is that Graphene can be made
inexpensively using coal byproduct. More particularly that char,
which is the byproduct of electrolysis of an aqueous coal slurry,
can be used to form Graphene.
We rely on patent, trademark, copyright and trade secret laws, as
well as appropriate agreements to protect our intellectual
property. Among other things, we seek to protect our proprietary
know-how and information, by requiring employees, consultants,
strategic partners and others who have access to such proprietary
information and know-how to enter into confidentiality or
restricted use agreements.
Regulatory Matters
Environmental
Our facilities and operations may be subject to a wide variety of
federal, state, local and foreign environmental laws and
regulations. These laws and regulations relate to air emissions,
water discharges and solid and hazardous waste generation,
treatment, storage, handling, transportation and disposal; the
presence of wastes and other substances; the reporting of,
responses to and liability for, releases of hazardous substances
into the environment; and the import, production, packaging,
labeling and transportation of products that are defined as
hazardous or toxic or otherwise believed to have potential to harm
the environment or human health. These laws and regulations (and
the enforcement thereof) are periodically updated and are becoming
increasingly stringent. Our joint venture partner, ARC, has
incurred substantial costs in the past and will continue to incur
additional costs in the future, to comply with these legal
requirements. To our knowledge, ARC is in compliance with all
federal and state statutes and regulations at the site that has
been leased to us to build our Graphene manufacturing
factory.
We believe that we are able to comply in all material respects with
the federal, state, local and foreign environmental laws and
regulations to which we are subject. Our joint venture partner,
ARC, has experienced some level of regulatory scrutiny and, in some
cases, has been required to take or are continuing to take
corrective or remedial actions and incur related costs, and may
experience further regulatory scrutiny, and may be required to take
further corrective or remedial actions and incur additional costs,
in the future. Although it has not been the case in the past, these
costs could have a material adverse effect on us in the
future.
International accords, foreign laws and regulations, and U.S.
federal, state and local laws and regulations have been enacted to
address concerns about the effects that CO2 emissions and other
identified Green House Gases ("GHGs") may have on the environment
and climate worldwide. These effects are widely referred to as
climate change. The international community has taken actions to
address climate change issues on a global basis. In particular, in
December 2015, the 21st Conference of Parties for the UNFCC
concluded with more than 190 countries adopting the Paris
Agreement, which then came into force and was legally binding on
the parties in November 2016. The Paris Agreement sets a goal of
limiting the increase in global average temperature and consists of
two elements: a legally binding commitment by each participating
country to set an emissions reduction target, referred to as
“nationally determined contributions”
(“NDCs”), with a review of the NDCs that could lead to
updates and enhancements every five years beginning in 2023, and a
transparency commitment requiring participating countries to
disclose in full their progress.
In the EU, the ETS, which was initially enacted under the
provisions of the 1997 Kyoto Protocol, requires certain listed
energy-intensive industries to participate in an international
“cap and trade” system of GHG emission allowances. A
third phase of the EU ETS under Directive 2009/29/EC, covers the
period from 2013 to 2020 and instituted a number of program
changes. EU Member States brought into force the necessary laws,
regulations and administrative provisions to comply with this EU
Directive. Carbon and graphite manufacturing is still not a covered
industry sector in the revised Annex 1 of directive 2009/29/EC. On
November 9, 2017, to implement the EU’s NDC under the Paris
Agreement and other GHG commitments, the European Parliament and
Council announced a provisional agreement to revise and make more
stringent the ETS during the Phase 4 period of 2021 to 2030. Among
other changes, the Phase 4 provisions would further accelerate
reduction in the current oversupply of allowances in the ETS market
and establish further protections against the risks of carbon
leakage. After extensive negotiations, the European Parliament and
the Council formally supported the revision in February 2018. The
revised EU ETS Directive (Directive (EU) 2018/410) entered into
force on April 8, 2018. The EU’s current target for 2030 is
to achieve a GHG reduction of at least 40% compared to 1990 levels.
In addition, in December 2019, the European Commission presented
the Communication on The European Green Deal announcing several
upcoming legislative proposals for the EU 2050 climate neutrality
objective and for increasing the EU 2030 GHG emissions reduction
target to at least 50% and towards 55% compared to 1990
levels.
Future Trends
Mazdak
Taghioskoui, a member of the Department of Electrical and Computer
Engineering at George Washington University, writes that the limits
of silicon’s capabilities are being reached. Coincidently,
the discovery of Graphene with its unique nano-scale properties is
paving the way for possible substitutes to be used in the next
generation of faster and smaller electronics in 21st
Century.8 As a result of the promising properties
of Graphene, research in the field is attracting large grants and
sponsors, with an incremental rise in the number of academic
papers. Taghioskoui writes that in 2004, the feasibility of
isolating a single layer of graphite with a thickness of one-atom,
so-called Graphene, was experimentally demonstrated by mechanical
exfoliation of graphite, which is considered a breakthrough in the
nanotechnology era, bringing the concept of single atomic
components closer to reality.
The
article notes that Carbon is the sixth element of the periodic
table and the first element of the Group 14. Diamond and Graphite
are the most famous allotropes of Carbon, which have long histories
of many applications due to their hardness and softness,
respectively. Carbon can also generate long chains, so-called
catenation,
resulting in the formation of diverse organic compounds, including
biomolecules. The next congener to Carbon in Group 14 is silicon,
with the same valance band electronic structure. In contrast to
Carbon, silicon does not catenate as readily.
The small size of Carbon and its electronic
structure make
Carbon an exceptional element capable of producing versatile
structures with appealing properties. Having the title of the
strongest material ever measured, Graphene is a two-dimensional
(one-atom-thick) allotrope of carbon with a planar honeycomb
lattice. It is regarded as the basic building-block of carbon
nanotubes and large fullerenes. The properties of carbon nanotubes
originate from Graphene sheets. Despite the fact that Graphene was
discovered somewhat recently, its potential exploitation can be
foreseen in many fields, ranging from hydrogen storage devices to
batteries. A revolutionary application of Graphene might also be in
electronics. Graphene has the potential to enable faster and
smaller transistors consuming less energy and dissipating heat
faster than comparable silicon-based devices.
Other
applications of Graphene, according to Taghioskoui, include
fabrication of chemical sensors and transparent conducting films
for solar cells and liquid crystal devices. Graphene-based chemical
sensors have been applied to detect gaseous molecules, such as
nitrogen dioxide and ammonia. They have shown superior
sensitivities capable of detecting single molecules. Chemically
modified Graphene sheets have been used to fabricate single
bacterium biodevices and label-free DNA sensors. The high
surface-to-mass ratio of Graphene makes it suitable for
ultracapacitors and batteries. Composite materials requiring high
strength can be made from Graphene. Graphene also shows great
promise in handling terahertz frequency signals. It might be a
possible material for filling the “terahertz gap.” This
provides a bridge for moving from where silicon is currently at
gigahertz to higher frequencies required in photonics.
The
article did however cite certain challenges related to the
production and commercialization of Graphene as well.
For
one, how long will it take to see the first generation of
Graphene-based electronics in the market? That is the most
fundamental question, which one may ask after learning the
promising properties that Graphene offers. Despite the fact that
scientific results show superb advantages of Graphene for faster
electronics, the technology is still immature. Only preliminary
steps have been taken, and there is still a long way to go for
possible exploitation of Graphene-based commercial
products.
The
most essential technological challenge that Graphene faces is the
hurdle of controlled production of large sheets. Solving the
dilemma of mass-producing high quality Graphene sheets is the main
focus in the field. This would be the first step towards
commercially available Graphene-based electronic devices. Several
approaches have been utilized to produce Graphene sheets, but still
there remains the question of robustness and reproducibility of the
methods. Considering the current infrastructure of the
semiconductor industry, electronics technology is very dependent on
silicon. Any approach should be able to adapt itself to the current
silicon-based technology.
Patentability
of the discoveries in Graphene research is another core issue. Many
patents are being filed to address the novel methods in production
and novel approaches for applications. The
“obviousness” of structural similarity between Carbon
nanotubes and Graphene is of immense concern, since Carbon
nanotubes might be considered as “prior art” against
Graphene in the patent application. Almost all of the candidate
materials for the post-silicon era have failed. Graphene still
remains at the stage of uncertainty, so more research is required
to determine if Graphene might be a substitute for
silicon.
_______________________
Operating Strategy
We plan
to use the funds we receive from this offering to build a
manufacturing plant to begin the commercial production of Graphene
from coal byproducts using the patented technology that we have
sublicensed form ARC. We hope to sell Graphene to major
manufacturers, as well as acquire synergistic manufacturing
businesses that would benefit from our production of
Graphene.
Marketing Strategy
According
to Grand View Research, an India & U.S. based market research
and consulting company,9 the global Graphene
market size is anticipated to reach $1.08 billion by 2027,
exhibiting a revenue based CAGR of 38.7% over the forecast period.
Rise in awareness regarding the superior characteristics of
Graphene, such as excellent electrical conductivity and heat
resistance, is expected to aid the growth.
We are
focused on producing the raw product while building sales channels
through our relationships in the battery and water filtration
market. Upon commercialization, we will further refine our sales
channels to produce specific outputs based on customer demand. ARC
has had numerous discussions within its sales channel focusing on
current collaboration partners for commercial uses in the future,
however, there is no assurance that any such collaborations will
come to fruition.
Competition
According
to the research we have performed, there are no public companies
that are focused solely on producing Graphene. This may be due to
the novelty of Graphene in the commercial market, especially in
commercial production. There are a few private companies that claim
to produce and sell Graphene, but we did not come across sufficient
information to establish their production capacity or potential. It
is possible such private companies may become our competitors.
There are also major global innovators and producers in the Carbon
and Coke industry such as Phillips, Seadrift, Petrocokes Japan and
JX Nippon who may set up their own divisions to make Graphene in
the near future or may already have formed such divisions. In
addition, companies in China and India that dominate Graphite
production market may begin their own Graphene
divisions.
According to one article,10 companies such as IBM
(NYSE:IBM), Samsung and Nokia (NYSE:NOK) are rushing to tap the
incredible properties of Graphene. In 2011, IBM was the
first company to use the material to create Graphene-based
integrated circuits, having created in 2010 a
Graphene processor that could execute 100 billion cycles per
second (100GHz). Intel and Samsung are now looking
into Graphene-based processors, while Nokia is part of a
consortium of 74 companies that received a grant of $1.35 billion
from the European Union to determine how to use Graphene to
"improve the world." This consortium is experimenting in
electronics and mobile communications. The Motely Fool adds that
perhaps a better route to understand Graphene is to look at
producers of graphite, as that is the material from which Graphene
is made. Unfortunately, most of the mineral is produced in China.
It produces some 800,000 metric tonnes annually, with the next
closest producer being India at 130,000 metric tonnes. Graphite is
not mined in the United States.
According
to the article, GrafTech International (NYSE:GTI.DL) is
the leading producer of graphite electrodes and was one of the top
20 Graphene patent holders at one time, ahead of such giants
as General Electric Company (NYSE:GE) and Bayer.
According to its Quarterly Report on Form 10-Q for the quarter
ending March 31, 2020, filed with the SEC on March 6, 2020,
GrafTech
International notes that it “is a leading manufacturer of
high-quality graphite electrode products essential to the
production of electric arc furnace ("EAF") steel and other ferrous
and non-ferrous metals. We believe that we have the most
competitive portfolio of low-cost ultra-high power
(“UHP”) graphite electrode manufacturing facilities in
the industry, including three of the highest capacity facilities in
the world. We are the only large scale graphite electrode producer
that is substantially vertically integrated into petroleum needle
coke, a key raw material for graphite electrode
manufacturing.”
Another
international company that is expanding into Graphene is
Germany-based Aixtron SE (NASDAQ:AIXG). In its Report of
a Foreign issuer on Form 6-K filed with the SEC on August 11,
2016, it wrote: "One focus of AIXTRON's [research] involves
researching processes and systems technology for the deposition of
optically active 2D semiconductor materials such as ... Graphene
.... AIXTRON offers a Plasma Enhanced Chemical Vapor Phase
Deposition ('PECVD') technology ... employed for the deposition of
complex Carbon Nanostructures (Carbon Nanotubes, Nanowires or
Graphene)."
It is
possible that the above enterprises have more resources than we do
and thus make it hard for us to compete with them.
Employees
As of
December 8, 2021, we have one full-time employee and
three part-time employees. We plan to hire additional full-time
employees upon the completion of this offering.
_________________________________
Our Offices
Our
offices are located at 561 NE 79th Street, Suite 325,
Miami, FL 33138 and our telephone number is
786-473-6233.
LEGAL PROCEEDINGS
We are
currently not involved in litigation that we believe will have a
materially adverse effect on our financial condition or results of
operations. There is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government
agency, self- regulatory organization or body pending or, to the
knowledge of the executive officers of our company or any of our
subsidiaries threatened against or affecting our company, our
common stock, any of our subsidiaries or of our company’s or
our company’s subsidiaries’ officers or directors in
their capacities as such, in which an adverse decision is expected
to have a material adverse effect
WHERE COMMON STOCK IS BEING OFFERED AND MARKET PRICE OF AND
DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Exchange Listing
There
is presently no public market for our shares of common stock or
warrants. It is currently estimated that the combined initial
public offering price per Unit will be between $4.00 and $5.00. We
have applied to list our common stock and warrants on the Exchange
under the symbol “NOVS” and “NOVSW,”
respectively.
Holders
As of
December 8, 2021, the Company had 48 shareholders of
its common stock.
Dividends
We have
never paid cash dividends on our Common Stock. Payment of dividends
will be within the sole discretion of our board of directors and
will depend, among other factors, upon our earnings, capital
requirements and our operating and financial condition. In
addition, under Florida law, we may declare and pay dividends on
our common stock either out of our surplus, as defined in the
relevant Florida statutes, or if there is no such surplus, out of
our net profits for the fiscal year in which the dividend is
declared and/or the preceding fiscal year. If, however, the capital
of our company, computed in accordance with the relevant Florida
statutes, has been diminished by depreciation in the value of our
property, or by losses, or otherwise, to an amount less than the
aggregate amount of the capital represented by the issued and
outstanding stock of all classes having a preference upon the
distribution of assets, we are prohibited from declaring and paying
out of such net profits any dividends upon any shares of our
capital stock until the deficiency in the amount of capital
represented by the issued and outstanding stock of all classes
having a preference upon the distribution of assets shall have been
repaired.
MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL STATEMENTS AND RESULTS OF
OPERATIONS
THE
FOLLOWING DISCUSSION OF OUR PLAN OF OPERATION SHOULD BE READ IN
CONJUNCTION WITH THE FINANCIAL STATEMENTS AND RELATED NOTES TO THE
FINANCIAL STATEMENTS INCLUDED ELSEWHERE IN THIS REGISTRATION
STATEMENT. THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT
RELATE TO FUTURE EVENTS OR OUR FUTURE FINANCIAL PERFORMANCE. THESE
STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER
FACTORS THAT MAY CAUSE OUR ACTUAL RESULTS, LEVELS OF ACTIVITY,
PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY
FUTURE RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS
EXPRESSED OR IMPLIED BY THESE FORWARD-LOOKING STATEMENTS. THESE
RISKS AND OTHER FACTORS INCLUDE, AMONG OTHERS, THOSE LISTED UNDER
“FORWARD-LOOKING STATEMENTS” AND “RISK
FACTORS” AND THOSE INCLUDED ELSEWHERE IN THIS REGISTRATION
STATEMENT.
Overview
The
Company, sometimes referred to herein as "we," "us,”
“our," and the "Company" and/or "Novusterra Inc.” was
incorporated on September 21, 2020, in the State of Florida. Our
fiscal year-end date is December 31. Our address is 561 NE
79th
Street, Suite 325, Miami, FL 33138, our telephone number to
786-473-6233 and our website is www.novusterrainc.com. However, you
should not consider any information on, or that can be accessed
through, our website a part of this Registration
Statement.
We
began with the objective to build a Rare Earth Elements
(“REE”) Processing Facility to process REE for
commercial use. However, as approved by a Board of Directors
meeting held on March 19, 2021, we changed our objective to
developing Graphene since we discovered research illustrating that
Graphene, similar to an REE, is a versatile commodity that could be
helpful in solving major global problems with the potential for
attractive earnings.
Our
decision to begin the process of producing Graphene was made easier
due to the relationship the Company’s management team has
with ARC as a result of prior business activities. ARC,
through its wholly-owned subsidiary,
ACM, signed the License Agreement with Ohio University to
manufacture Graphene using carbon as a raw material using patented
technology owned by Ohio University. The suite of patents was
originally developed by Dr. Gerardine Botte, the current Whitacre
Department Chair in Chemical Engineering at Texas Tech University,
an independent board member of ARC and Chief Technical Officer of
ACM. Dr. Botte developed and patented these technologies when she
served as Ohio University's Distinguished Professor and Russ
Professor of Chemical and Biomolecular
Engineering.
On
March 31, 2021, we signed the Sublicense with ARC that provides us
with a nonexclusive sublicense from ARC of certain patents ARC has
sublicensed from Ohio University pursuant to the License Agreement
relating to the manufacture of Graphene using coal byproducts.
Pursuant to such agreement, we agreed to raise funds via an initial
public offering in order to build a manufacturing facility to
produce and market Graphene commercially. The agreement with ARC
also provides that the Company and ARC are each entitled to receive
fifty percent (50%) of the operating profits from our Graphene
manufacturing and marketing business. This profit sharing
arrangement is limited to only the operating profits from the
Graphene factory using the rights provided by the Sublicense and
will not apply to any other activities in which the Company may
engage in the future, including the production of Graphene using
any other technology. Hence the Company has been researching
alternative methods to produce Graphene. The Company also plans to
look into acquiring companies that use or can use Graphene as raw
material for other applications. As part of the above two
agreements, Andrew Weeraratne was replaced by Mark Jensen, the
Chief Executive Officer and the Chairman of the Board of ARC, as
the Chairman of the Company’s Board of
Directors.
As approved at a special shareholders meeting attended by major
shareholders on March 19, 2021, we signed an agreement with ARC on
March 31, 2021, to issue ARC 10,000,000 shares of Class B common
stock (with 10 votes each) plus 5,700,000 shares of Class A common
stock (with one vote each) of the Company, comprising 51.14% of
total shares giving 87.57% of voting power to ARC, who plans to
distribute such shares to ARC’s shareholders as stock
dividends after the completion of this offering. At a special
shareholders meeting held on April 4, 2021, attended by majority of
shareholders, including ARC, the Company voted to eliminate the
Class B shares and increase the Class A shares by the number of
Class B shares then outstanding, and designate the Class A shares
as “Common Shares.”. Further, at a special stockholders
meeting held on April 16, 2021 attended by a majority of
shareholders, the Company voted to effectuate a one-for-three (1:3)
reverse stock split, which became effective as of April 16, 2021.
As a consequence of eliminating the Class B shares on April 4,
2021, as of September 30, 2021 ARC holds 5,233,333 Class A common
shares, or 49.93% of the Company’s voting stock, and Andrew
Weeraratne holds 4,082,389 common shares, or 38.95% of the
Company’s voting stock, based on 10,481,347 common shares
outstanding.
In
order to manufacture and market Graphene using the technology we
have sublicensed from ARC, we have signed a lease agreement with
ARC to lease land and a building ARC owns in Kentucky to build our
Graphene manufacturing factory, with such lease payments to be paid
after we have received the proceeds from this offering. Once we
have received the proceeds from this offering, we plan to hire
experts in the Graphene industry to help us select, buy and install
the necessary equipment to begin the process of making Graphene
from carbon.
Plan of Operation
We are
leasing for $5,000 per month land and a building with approximately
40,000 square feet located at 1845 KY-15, Hazard, Kentucky 41701,
owned by Perry County Resources, an affiliate of ARC. We plan to
accrue the rental expenses to be paid only after we receive the
proceeds from this offering. Following are features of the
location:
●
40,000 square foot
(3,716 square meter) facility to house the technology, located in
Hazard, Kentucky;
●
Significant
additional developable area for expansion needs;
●
Fully connected to
industrial power grid and utilities; and
●
Located adjacent to
an operating coal processing facility, allowing for consistent and
abundant feedstock and established infrastructure and
resources.
We have
been informed that it will take 12 months for us to build a factory
ready to produce Graphene for commercial use and to begin producing
Graphene from Carbon using the patented technology that we
sublicense from ARC. We estimate that it will take an additional 12
months to sell Graphene commercially.
In
addition to preparing to make Graphene using this technology and
building the factory in Kentucky, the Company’s management
team has been engaged in discussions with others in the industry
who claim to make Graphene from other sources. Once we receive the
proceeds from this offering, we plan to look further into
alternative methods of making Graphene.
We
expect that our plan of operation, once we have received the funds
from this offering, will be as follows:
1.
Hire experts in the
Graphene industry to visit our warehouse in Kentucky and help us
formulate a budget to acquire equipment and budget the working
capital needed to operate such equipment.
2.
Locate companies
making such equipment and negotiate to acquire and install the
needed equipment.
3.
Acquire the raw
material needed to make Graphene from ARC and other sources and
begin the production process.
4.
Continue to look
for other companies who make Graphene through alternative methods
and, if needed, enter into joint ventures with or acquire such
companies.
5.
Explore expanding
our operation to other applications using Graphene through joint
ventures or acquisitions.
Liquidity and Capital Resources
Since
what we currently have is a Sublicense to make Graphene using
carbon, using patented technology licensed by ARC, it is difficult
to accurately estimate the cost to build the Graphene production
factory, since that will require us to hire experts in the industry
who will assist us in building the Graphene factory and locating
and installing the necessary equipment. Once we have received the
proceeds from this offering, we will begin to hire such experts.
ARC’s preliminary discussions with the University of Ohio
suggest that we will require approximately $4,000,000 to build a
Graphene manufacturing plant. ARC has estimated the working capital
needs to be $310,000 per month to begin building our Graphene
manufacturing plant. Meanwhile, we also plan to explore producing
Graphene through alternative methods.
After
we have the proceeds from this offering, we estimate our
administration fee to be approximately $30,000 per month. We plan
to hire additional staff, including industry experts, and also to
seek out other sources of producing Graphene. We estimate such
additional cost to be about $50,000 per month.
As of September 30, 2021, we have $236,545 in cash and cash
equivalents, which we expect will be sufficient to carry on our
operations of preparing to build our factory. We do not anticipate
receiving any revenue from Graphene sales for at least 24 months.
However, we believe the proceeds we plan to raise from this
offering will be sufficient to build a factory and begin producing
revenue from the sale of Graphene.
In
addition, if we find a potentially synergistic business that has
positive operating cash flow, we plan to explore acquisitions of
such businesses.
Currently,
we have no written or oral communication from stockholders,
directors or any officers to provide us any forms of cash advances,
loans or sources of liquidity to meet our working capital needs or
long-term or short-term financial needs.
Off Balance Sheet Arrangements
We do
not have any off-balance sheet arrangements that we are required to
disclose pursuant to these regulations. In the ordinary course of
business, we enter into operating lease commitments, purchase
commitments and other contractual obligations. These transactions
are recognized in our financial statements in accordance with
generally accepted accounting principles in the United
States.
Critical Accounting Policies
The
preparation of financial statements requires management to utilize
estimates and make judgments that affect the reported amounts of
assets, liabilities, revenues and expenses and related disclosure
of contingent assets and liabilities. These estimates are based on
historical experience and on various other assumptions that
management believes to be reasonable under the circumstances. The
estimates are evaluated by management on an ongoing basis, and the
results of these evaluations form a basis for making decisions
about the carrying value of assets and liabilities that are not
readily apparent from other sources. Although actual results may
differ from these estimates under different assumptions or
conditions, management believes that the estimates used in the
preparation of our financial statements are reasonable. The
critical accounting policies affecting our financial reporting are
summarized in Note 2 to the financial statements included elsewhere
in this prospectus.
Recent Accounting Pronouncements
We have
determined that all other issued, but not yet effective accounting
pronouncements are inapplicable or insignificant to us and once
adopted are not expected to have a material impact on our financial
position.
DIRECTORS AND EXECUTIVE
OFFICERS
The
following individuals serve as our executive officers and members
of our board of directors:
Mark C. Jensen, age 41, Chairman of Board
Mark Jensen has been our Chairman of the board of directors since
March 28, 2021. In 2015, Mr. Jensen founded Quest Energy, Inc.
(“Quest”) to operate coal mines and process metalogical
Carbon to provide as raw materials to make steel for various
infrastructure projects. In January 2017, Quest undertook a reverse
merger with NGFC Equities Inc. (“NGFC”), pursuant to
which Quest’s shareholders received the majority of
NGFC’s equity. NGFC’s name was subsequently changed to
American Resources Corporation, with Mr. Jensen taking over the
role of Chief Executive Officer and the Chairman of the Board. He
has been instrumental in all aspects of acquiring, restructuring
and building mining operations over the past decade. Having managed
through 2009 and 2015 downturns, he has been able to work with his
team to significantly expand ARC’s asset base through
strategic acquisitions and organic growth in a very accretive
manner. Mr. Jensen also is the Chairman and Chief Executive Officer
of American Acquisition Opportunity Inc., (Nasdaq: AMAO), a blank
check company formed in January 2021 for the purpose of acquiring,
engaging in a share exchange, share reconstruction and amalgamation
with, purchasing all or substantially all of the assets of,
entering into contractual arrangements with, or engaging in any
other similar business combination with one or more businesses or
entities. Mr. Jensen is also the founder and Executive Chairman of
Land Betterment Corp., a Benefit Corporation incorporated on
February 13, 2020, focused on fostering a positive impact through
upcycling former coal mining sites to create sustainable community
development and job creation. Mr.
Jensen is a graduate from Kelley School of Business at Indiana
University with Bachelor degrees in Finance and International
Studies.
I. Andrew Weeraratne, age 71, Chief Executive Officer,
Director
I Andrew Weeraratne has served as our Chief
Executive Officer and member of our board of directors since
inception. Andrew has been an entrepreneur in many parts of the
world, including Asia, the Middle East, Europe and the U.S., in a
variety of industries. From April 2019 to August 2020, Andrew was
the Chief Executive Officer and Chief Financial Officer for
Acqusalut Inc., that filed a Regulation A offering to raise funds
from the public to produce live entertainment shows. Due to
COVID-19, the business plan could not be executed. Thus, in August
2020, Acqusalut Inc., merged with a biotech company called XEME
Biopharma Inc., and changed its name to XEME Biopharma Holdings
Inc. In August 2018, Mr. Weeraratne founded Mfusion Corp. also to
produce live entertainment shows, focusing on raising funds via
selling a Digital Coin of Mfusion, which is convertible into shares
of Mfusion Corp. In August of 2020, Mfusion Corp. was sold to two
entrepreneurs who are in the process of beginning a CBD-Coffee
business using the Mfusion corporate structure. Currently, Mr.
Weeraratne works as a consultant for Mfusion Corp. He founded Capax
Inc. in February 2017 and worked as its Chief Executive Officer
from February 2017 to May 2018, during which time he filed a
prospectus with the SEC to take Capax Inc. public. In May 2018,
Capax Inc. merged with Reborn Global Holdings Inc., a business in
the wholesale and retail coffee sales industry, in a reverse merger
and changed its name to Reborn Coffee Inc. From October 2013 to
January 2017, Mr. Weeraratne served as the Chief Executive Officer
and Chief Financial Officer for NGFC Equities Inc.
(“NGFC”) a public company that was listed on the OTCQB
under the ticker “NGFF.” NGFC was reverse merged with
ARC. Mr. Weeraratne has been a
Florida licensed Certified Public Accountant since 1981. He is also
an author, and wrote a book entitled Uncommon Commonsense Steps to
Super Wealth, where he
illustrates how some people beginning with very little ended up in
the list of richest people by focusing on only one out of four ways
to make their wealth. Mr. Weeraratne devotes approximately 90% of
his time to our business and
affairs.
Farai L. Gundan, age 46, Chief Financial
Officer
Farai Lorraine Gundan, M.B.A, M.P.A was appointed as
our Chief Financial Officer on November 22, 2021. Prior to joining
Novusterra, from 2015 to October 2021, she served as Managing
Partner for Ivyard Group, a private limited partnership based in
South Africa where she had oversight for client engagements
including financial reporting, cash management, legal and corporate
matters and served as liaison between clients and stakeholders and
maintained business and financial operations for organic and
inorganic growth for the company. Ms. Gundan worked at KMPG from
2004 to 2007 where she participated in the successful turnaround of
a distressed Big Three auto firm and divestiture of a large
multinational automotive maker of trucks and luxury cars from its
subsidiary, one of the Big Three automotive
companies.
She earned her Master’s in Public Administration from Harvard
Kennedy School of Government in May 2017 and her Master’s in
Business Administration from Florida A & M University in May
2004. She also earned a certificate in Sarbanes Oxley Compliance
from KPMG in 2014. She is also a prolific writer and has covered
Africa extensively for Forbes and Essence. Ms. Gundan has been
listed as the #1 Forbes Contributing Writer amongst the top 10
writers for Forbes.com. Some of her work on Forbes include the
following: “Billionaires Aliko Dangote, Strive Masiyiwa,
Patrice Motsepe Join Fight Against Ebola”, “Meet Wale
Tinubu, The Man Building Africa’s Largest Energy
Company”, “Sim Shagaya: On Building The Next Big Thing,
Konga, Africa’s Version of Alibaba”. She has also
written for CNN, covering the continent of Africa as well. Ms.
Gundan was named a Young Global Leader by the World Economic Forum
and is a Dangote Fellow and is the recipient of the Temple
University, Emerging African Leader Award. Ms. Gundan is an Edward
S. Mason Fellow at the Harvard Kennedy School of Government. Ms.
Gundan serves on the board of advisers for the Harvard Africa
Policy Journal and is the Africa Zone Chair for the Alumnae Network
of Harvard Women. In 2019, she was named LadyBrille Woman of the
Month and in 2015 she was the recipient of the African Women Awards
for Media Excellence.
Byron Eugene Price, age 58, member of the Board of
Directors
Dr.
Byron Price joined the Company as a director on April 15, 2021. He
is currently a professor at the Department of Public Administration
at Medgar Evers College of the City University of New York (CUNY),
where he has been teaching since 2012. Dr. Price has had an
impressive career both in business and in public administration
both in the U.S. and internationally that he pursues to this day.
He has lectured on public and private partnerships in 45 countries.
Before beginning his academic career, Dr. Price served in the
United States Army as Deputy Commander, Executive Officer, and
Training Officer at Fort Sill during Operating Desert Storm. He
honorably separated in 1991 and achieved the rank of Captain. His
research focuses on social impact investment with particular
emphasis on long-term investment in strategic sectors of the
economy that create economic prosperity and social wealth. He is a
published and respected author in the area of public-private
partnerships.
Since
2019, he has conducted business development activities for various
companies looking to engage governments and organizations that use
ammonia, fuel cells, hydrogen, and hydrogen combustion technology.
Corollary activities included driving growth organically and
through the strategic acquisition of utility-scale renewable energy
assets in the United States and abroad over the next five
years.
Eugene Nichols, age 74, member of the Board of Directors,
Secretary, Treasurer
Eugene Nichols has served as a director of our Company since
inception. Mr. Nichols has 27 years of sales, management, and
marketing experience with Abbot Laboratories (NYSE:ABT). From April
2019 to August 2020, Mr. Nichols was a Director for Acqusalut Inc.,
that filed a Regulation A offering to raise funds from the public
to produce live entertainment shows. Due to COVID-19, the business
plan could not be executed. Thus, in August 2020, Acqusalut Inc.,
merged with a biotech company called XEME Biopharma Inc., and
changed its name to XEME Biopharma Holdings Inc. In August 2018 he
joined as a Director for Mfusion Corp. that was also set up to
produce live entertainment shows, focusing on raising funds via
selling a Digital Coin of Mfusion, which is convertible into shares
of Mfusion Corp. In August of 2020, Mfusion Corp. was sold to two
entrepreneurs who are in the process of beginning a CBD-Coffee
business. He was also a Director for Capax Inc. from February 2017
to May 2018, during which time Capax filed a prospectus with the
SEC to take Capax Inc. public. In May 2018, Capax Inc. merged with
Reborn Global Holdings Inc., a business in the wholesale and retail
coffee industry, in a reverse merger and changed its name to Reborn
Coffee Inc as part of that merger with Reborn Global Holdings Inc.,
management taking over the management of Reborn Coffee Inc. From
October 2013 to January 2017, Mr. Nichols served as the President
and a member of the Board of Directors for NGFC Equities Inc.
(“NGFC”) a public company that was listed on the OTCQB
under the ticker “NGFF.” In January 2017, NGFC was
reverse merged with ARC.
Goran Antic, age 47, Member of the Board of Directors
Goran Antic has been a director of our Company since inception. He
began his career with Getinge Sterilization factory (division of
Getinge Group), a public company based in Sweden which is one of
the largest medical supply companies in the world in 1990 as an
assembler and then moved to the testing department of Getinge Group
in 1995. He worked in that division till 1999 and then was promoted
to be an international service engineer of Getinge Sweden which is
another subsidiary of Getinge Group. In 2005, Mr. Antic was
transferred to Getinge International branch in Miami, Florida as a
service manager for Latin America and Caribbean islands. Mr. Antic
began ECI-LATAM Inc. in April of 2014 with an agreement with
Getinge International to serve the same client base through his own
company, ECI-LATAM Inc., Mr. Antic had his education as an
electronic engineer at Kattegat Institution in Halmstad,
Sweden.
From April 2019 to August 2020, Mr. Antic was a Director for
Acqusalut Inc., that filed a Regulation A offering to raise funds
from the public to produce live entertainment shows. Due to
COVID-19, the business plan could not be executed. Thus, in August
2020, Acqusalut Inc., merged with a biotech company called XEME
Biopharma Inc., and changed the name to XEME Biopharma Holdings
Inc. In August 2018 he joined as a Director for Mfusion Corp. that
was also set up to do live entertainment shows focusing on raising
funds via selling a Digital Coin of Mfusion which is convertible to
the shares of Mfusion Corp., that in August of 2020, the management
of Mfusion Corp., sold to two entrepreneurs who are in the process
of beginning CBD-Coffee business. He was also a Director for Capax
Inc. from February 2017 to May 2018 during which time Capax filed a
prospectus with the SEC to take Capax Inc. public. In May 2018,
Capax Inc. merged with Reborn Global Holdings Inc. in the business
of wholesale and retail coffee sales in a reverse merge and changed
its name to Reborn Coffee Inc as part of that merger with Reborn
Global Holdings Inc., management taking over the management of
Reborn Coffee Inc.
Director Qualifications
The
following is a discussion for each director of the specific
experience, qualifications, attributes or skills that lead our
board of directors to conclude that each individual is qualified to
serve as a director of our Company.
Mark C. Jensen – Mr. Jensen’s experience in
founding ARC and completing a successful listing on NASDAQ were
factors considered by the board of directors. Specifically, the
board of directors viewed favorably his role in setting up a
Special Purpose Acquisition Company “American Acquisition
Opportunity” (NASDAQ: AMAOU) in reaching its
conclusion.
Andrew Weeraratne – Mr. Weeraratne’ s experience
in founding and filing a prospectus to take public NGFC Equities
Inc. before merging it successfully with ARC, founding Capax Inc.
and filing a prospectus with the SEC before merging it with Reborn
Coffee Inc. and his experience founding additional companies
engaged in securities offerings and his previous public company
Chief Financial Officer experience were factors considered by the
board of directors. Specifically, the board of directors viewed
favorably his roles at China Direct, Inc., and J2 Communication Inc
(with the brand name National Lampoon) as a financial advisor
working with the Embassy of the United States of America in Iraq,
and as a CPA in private practice in reaching its
conclusion.
Eugene Nichols – Mr. Nichols’s career as an
entrepreneur and his involvement in various start-ups were factors
considered by the board of directors. Specifically, the board of
directors viewed favorably his role as a founder of publicly-traded
companies, including NGFC Equities Inc., taking it public and
merging with a bigger private company, along with his roles at
Communication Exchange Inc., Visa Exchange Inc., Foxfire Golf
Course, Power Management Electrical Consultants in reaching its
conclusion.
Goran Antic – Mr. Antic’s long career with one
major Swedish public company Getinge group in Sweden that is a
leader in international market and his fluency in various languages
and cultures were factors considered by the board of directors.
Specifically, the board of directors viewed his entrepreneurial
skills in setting up ECI Latam Inc., merging with NGFC Equities
Inc. in reaching its conclusion.
Byron E. Price – Mr. Price’s long career in
public service as professor of public administration, his service
in the U.S. Army as Deputy Commander, Executive and Training
Officer, international travels in the lecture circuit regarding
public/private partnerships and his experience in business
development activities were taken into consideration by the board
of directors in reaching its conclusion.
In
addition to each of the individual skills and backgrounds described
above, the board of directors also concluded that each of these
individuals will continue to provide knowledgeable advice to our
other directors and to senior management on numerous issues facing
our Company and on the development and execution of our
strategy.
We
expect to expand our board of directors in the future to include
additional independent directors. In adding additional members to
our board of directors, we will consider each candidate’s
independence, skills and expertise based on a variety of factors,
including the person’s experience or background in
management, finance, regulatory matters and corporate governance.
Further, when identifying nominees to serve as a director, we
expect that our board of directors will seek to create a board of
directors that is strong in its collective knowledge and has a
diversity of skills and experience with respect to accounting and
finance, management and leadership, vision and strategy, business
operations, business judgment, industry knowledge and corporate
governance.
Director Compensation
We have
not established standard compensation arrangements for our
directors and the compensation payable to each individual for their
service on our Board will be determined from time to time by our
board of directors based upon the amount of time expended by each
of the directors on our behalf. Currently, executive officers of
our company who are also members of the board of directors do not
receive any compensation specifically for their services as
directors.
The
following table sets forth information concerning the annual and
long-term compensation of our Chief Executive Officer, and the
executive officers who served at the end of the periods of
September 30, 2020 to September 30, 2021, for services rendered in
all capacities to us. The listed individuals shall hereinafter be
referred to as the “Named Executive Officers.”
Currently, we have no employment agreements with any of our
Directors or Officers. Compensation for the future will be
determined when and if additional funding is obtained.
Summary
Compensation Table – Officers
(a)
|
(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-equity
Incentive plan
compensation
|
Change in
Pension Value and Nonqualified deferred compensation
earnings
|
|
|
Name and
principal position
|
|
|
|
|
|
|
|
|
|
I. Andrew
Weeraratne (1),CEO
|
2020
|
-0
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0
|
I. Andrew
Weeraratne, CEO
|
2021
|
25,000
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
25,000
|
(1)
There is no
employment contract with Mr. Andrew Weeraratne at this time. Nor
are there any agreements for compensation in the future. A salary
and stock options and/or warrants program may be developed in the
future. The amount of value for the services of Mr. Weeraratne was
determined by agreement for shares in which he received as a
founders for (1) control, (2) willingness to serve on the Board of
Directors and (3) participation in the foundational days of the
Company. The amount
received by Mr. Weeraratne is not reflective of the true value of
the contributed efforts by Mr. Weeraratne and was arbitrarily
determined by the Company.
(2)
Does not include
4,079,980 shares of Common Stock purchased by Mr. Weeraratne for
$0.0001 per share when he founded the Company in September
2020.
Director
Compensation Table
(a)
|
|
|
|
|
|
|
|
|
Fees earned or
paid in cash
|
|
|
Non-equity
Incentive plan
compensation
|
Change in
Pension Value and Nonqualified deferred compensation
earnings
|
|
|
Name and
principal position
|
|
|
|
|
|
|
|
Mark C. Jensen
Chairman of the Board of Directors
|
12,500-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
12,500
|
I. Andrew
Weeraratne CEO
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
Eugene Nichols
Director
|
4,000
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
4,000
|
Goran Antic
Director
|
4,000
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
4,000
|
Byron E. Price
Director
|
4,000-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
4,000
|
Code of Business Conduct and Ethics
We have
adopted a Code of Business Conduct and Ethics that applies to our
executive officers and any other persons performing similar
functions. This Code provides written standards that we believe are
reasonably designed to deter wrongdoing and promote honest and
ethical conduct, including the ethical handling of actual or
apparent conflicts of interest between personal and professional
relationships, and full, fair, accurate, timely and understandable
disclosure in reports we file with the SEC. A copy of our Code of
Business Conduct and Ethics has been filed with the SEC as an
exhibit to the registration statement of which this prospectus is a
part.
Committees of our Board of Directors and the Role of our Board in
Risk Oversight
Our
board of directors has determined to facilitate the oversight and
the communication between senior management and the board of
directors regarding risk of operations and management, which the
board of directors believes strengthens its risk oversight
activities.
Mr.
Weeraratne has served as our Chief Executive Officer as well as our
Chairman of the Board of Directors until March of 2021, at which
point Mark Jensen took over the role of Chairman of the Board of
Directors. Mr. Weeraratne served as our Chief Financial Officer
from March of 2021 until November 22, 2021.
Three
directors of the Company, Mr. Nichols, Mr. Price and Mr. Antic, are
considered independent directors under the rules of the Exchange.
The board of directors oversees our business affairs and monitors
the performance of management. In accordance with our corporate
governance principles, the board of directors does not involve
itself in day-to-day operations. Our independent directors keep
informed through discussions with our executive officers and by
reading the reports and other materials that we may send them and
by participating in board of directors meetings.
We have
established an Audit Committee and a Compensation Committee,
appointing Eugene Nichols and Gorant Antic to chair each of the
Committees, respectively, in compliance with the Exchange’s
rules.
We do
not have a policy regarding the consideration of any director
candidates which may be recommended by our shareholders, including
the minimum qualifications for director candidates, nor has our
board of directors established a process for identifying and
evaluating director nominees. Further, when identifying nominees to
serve as director, while we do not have a policy regarding the
consideration of diversity in selecting directors, however, at such
time as we expand our board of directors, our board of directors
will seek to create a board of directors that is strong in its
collective knowledge and has a diversity of skills and experience
with respect to accounting and finance, management and leadership,
vision and strategy, business operations, business judgment,
industry knowledge and corporate governance. We have not adopted a
policy regarding the handling of any potential recommendation of
director candidates by our shareholders, including the procedures
to be followed. Our board of directors has not considered or
adopted any of these policies as we have never received a
recommendation from any shareholder for any candidate to serve on
our board of directors. Given our relative size and lack of
directors and officers insurance coverage, we do not anticipate
that any of our shareholders will make such a recommendation in the
near future. While there have been no nominations of additional
directors proposed, in the event such a proposal is made, all
members of our board of directors will participate in the
consideration of director nominees. In considering a director
nominee, it is likely that our board of directors will consider the
professional and/or educational background of any nominee with a
view towards how this person might bring a different viewpoint or
experience to our board of directors.
Currently,
our Audit Committee has only one member. In order to comply with
the Exchange’s rule, prior to the consummation of this
offering. we will appoint two additional independent directors as
members of the Audit Committee, including an audit committee
financial expert within the meaning of Item 401(e) of Regulation
S-K. In general, an “audit committee financial expert”
is an individual member of the audit committee or board of
directors who:
|
●
|
understands
generally accepted accounting principles and financial
statements;
|
|
●
|
is able
to assess the general application of such principles in connection
with accounting for estimates, accruals and reserves;
|
|
●
|
has
experience preparing, auditing, analyzing or evaluating financial
statements comparable to the breadth and complexity to our
financial statements;
|
|
●
|
understands
internal controls over financial reporting; and
|
|
●
|
understands
audit committee functions.
|
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The
following table presents information concerning the beneficial
ownership of the shares of our Common Stock as of September 30,
2021, by: (i) each of our named executive officers and current
directors, (ii) all of our current executive officers and directors
as a group and (iii) each person we know to be the beneficial owner
of 5% of more of our outstanding shares of common stock. Unless
otherwise specified, the address of each beneficial owner listed in
the table is c/o Novusterra Inc., 561 NE 79th Street, Suite 325,
Miami, FL 33138.
Name
|
Number of Common
Stock Stock Beneficially Owned (1)
|
Percent of
Common Stock Owned (2)
|
Voting Control
by Officers & Directors
|
Percent of
Voting Control by Officers & Directors (3)
|
Officers and Directors
|
|
|
|
|
|
|
|
|
|
Mark
C Jensen
|
-
|
0%
|
0
|
0.00%
|
|
|
|
|
|
Andrew
Weeraratne
|
4,082,389
|
38.95%
|
4,082,389
|
38.95%
|
|
|
|
|
|
Farai
Gundan
|
-
|
-%
|
-
|
-%
|
|
|
|
|
|
Eugene
Nichols
|
118,530
|
1.13%
|
118,530
|
1.13%
|
|
|
|
|
|
Goran
Antic
|
43,712
|
0.42%
|
43,712
|
0.42%
|
|
|
|
|
|
Byron
E Price
|
-
|
-%
|
-
|
-%
|
|
|
|
|
|
All Directors and Officers as a Group (6 persons)
|
4,244,631
|
40.50%
|
4,244,631
|
40.50%
|
|
|
|
|
|
5% Holders
|
|
|
|
|
|
|
|
|
|
American
Resources Corp
|
5,233,333
|
49.93%
|
5,233,333
|
50%
|
|
|
|
|
|
All Directors, Officers and 5% Holders as a Group (7
persons)
|
9,477,964
|
90.43%
|
9,477,964
|
90.43%
|
|
(1)
|
A
person is deemed to be the beneficial owner of securities that can
be acquired by such a person within 60 days from July 30, 2021,
upon exercise of options, warrants or convertible securities. Each
beneficial owner’s percentage ownership is determined by
assuming that options, warrants and convertible securities that are
held by such a person (but not those held by any other person) and
are exercisable within 60 days from that date have been
exercised.
|
|
(2)
|
Percentage
is based on the 10,481,347 common shares outstanding as of
September 30, 2021.
|
|
(3)
|
Percentage
is based on the 10,481,347 common shares outstanding as of
September 30, 2021.
|
|
(4)
|
Includes
6,667 common shares held by Mr. Weeraratne’s
spouse.
|
|
(5)
|
Includes
8,151 common shares held by Mr. Nichols's spouse
|
|
(6)
|
The individuals who
exercise voting or investment control over the common stock held by
ARC are Mark Jensen, CEO; Thomas Sauve, President; and Kirk Taylor,
CFO. |
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
I.
Andrew Weeraratne (“AW”), who founded the Company in
September 2020, bought 3,666,667 shares of common stock from the
Company at a price of $0.0003 per share. AW also purchased an
additional 762,667 shares of common stock for $0.0003 per share,
which he distributed to certain of his business associates that he
believed could assist with the Company’s operations. Kazuko
Kusunoki (“KK”), AW’s spouse, was given 6,667
common shares from the above-mentioned share distribution, as she
joined the Company part-time as its Vice President of
Administration. On January 12, 2021, AW and KK received an
additional 408,314 and 742 common shares, respectively, as the
Company gave all shareholders a stock dividend.
Mr.
Eugene Nichols (“EN”), is a founder and organizer of
the Company and our Secretary and Treasurer and a Director. Mr.
Nichols received 23,333 common shares in September 2020, which are
included in the 762,667 common shares mentioned above that were
distributed by AW. Evelyn Nichols, EN’s spouse, purchased
6,667 common shares at a price of $0.003 per share when she joined
the Company as the part-time marketing director in September 2020.
On January 12, 2021, EN and Evelyn Nichols received an additional
1,856 and 742 common shares, respectively, as the Company gave all
shareholders a stock dividend.
Mr.
Goran Antic (“GA”), is a founder and organizer of the
Company and a Director. Mr. Antic has received no compensation for
his role as a founder. He received 6,667 common shares in September
2020, which are included in the 762,667 common shares mentioned
above that were distributed by AW. On January 12, 2021, GA received
an additional 742 common shares as the Company gave all
shareholders a stock dividend.
In a
private placement transaction completed by the Company in October
2020, EN and GA purchased 16,667 and 26,667 shares of common stock,
respectively, at a price of $0.09 per share. In connection with the
Company’s stock dividend paid on January 2021, EN and GA
received an additional1,856 and 2,970 common shares, respectively.
In a private placement transaction completed by the Company in
April 2021, EN purchased an additional 66,667 shares at $1.50 per
share. In the same private placement, GA purchased an additional
6,667 shares of common stock at $1.50 per share.
On
September 21, 2020, AW loaned the Company $5,000 at 4% interest to
be accrued and compounded quarterly. He continued to pay certain
expenses of the Company personally and as of December 31, 2020, has
a loan principal balance of $6,482. The Company has accrued
interest expenses of $56 for the period ending December 31, 2020.
For the quarter ending March 31, 2021, interest of $64.49 was
accrued on this loan and for the month of April interest of $21.50
was accrued. AW also paid $91.13 on behalf of the company in April
2021, making the balance to be $6,715.43. The principal balance of
the loan was paid in full on April 30, 2021.
Director Independence
Mr.
Nichols, Mr. Antic and Mr. Price are considered independent within
the Exchange’s director independence standards.
LEGAL MATTERS
The
validity of the securities offered by this prospectus will be
passed upon for us by Law Office of Clifford J. Hunt, P.A. Pryor
Cashman LLP, New York, New York, is acting as counsel to the
underwriters.
EXPERTS
Our
financial statements as of December 31, 2020, and for the period of
September 21, 2020 to December 31, 2020 included in this prospectus
have been audited by Benjamin & Ko, independent registered
public accounting firm, as indicated in their report with respect
thereto, and have been so included in reliance upon the report of
such firm given on their authority as experts in accounting and
auditing.
WHERE YOU CAN FIND ADDITIONAL
INFORMATION
We have
filed with the SEC the registration statement on Form S-1 under the
Securities Act for the Units offered by this prospectus. This
prospectus, which is a part of the registration statement, does not
contain all of the information in the registration statement and
the exhibits filed with it, portions of which have been omitted as
permitted by SEC rules and regulations. For further information
concerning us and the Units offered by this prospectus, we refer to
the registration statement and to the exhibits filed with it.
Statements contained in this prospectus as to the content of any
contract or other document referred to are not necessarily
complete. In each instance, we refer you to the copy of the
contracts and/or other documents filed as exhibits to the
registration statement.
This
registration statement on Form S-1, including exhibits, is
available over the Internet at the SEC’s web site at
http://www.sec.gov. You may also read and copy any document we file
with the SEC at its public reference facilities:
Public
Reference Room Office
100 F.
Street, N.E., Room 1580
Washington, D.C.
20549
You may
also obtain copies of the documents at prescribed rates by writing
to the Public Reference Section of the SEC at 100 F Street, N.E.,
Room 1580, Washington D.C. 20549. Callers in the United States can
also call 1-202-551-8090 for further information on the operations
of the public reference facilities.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our
directors and officers are indemnified as provided by Florida law
and our bylaws. We have agreed to indemnify each of our directors
and certain officers against certain liabilities, including
liabilities under the Securities Act. Insofar as indemnification
for liabilities arising under the Securities Act may be permitted
to our directors, officers and controlling persons pursuant to the
provisions described above, or otherwise, we have been advised that
in the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than our payment of expenses
incurred or paid by our director, officer or controlling person in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, we will, unless in
the opinion of our counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
We have
been advised that in the opinion of the SEC indemnification for
liabilities arising under the Securities Act is against public
policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities is asserted by one of our directors,
officers, or controlling persons in connection with the securities
being registered, we will, unless in the opinion of our legal
counsel the matter has been settled by controlling precedent,
submit the question of whether such indemnification is against
public policy to a court of appropriate jurisdiction. We will then
be governed by the court’s decision.
Limitation on Liability
The
Florida Business Corporation Act permits, but does not require,
corporations to indemnify a director, officer or control person of
the corporation for any liability asserted against him or her and
liability and expenses incurred by him or her in their capacity as
a director, officer, employee or agent, or arising out of her
status as such, if he or she acted in good faith and in a manner he
or she reasonably believed to be in, or not opposed to, the best
interests of the corporation, and, unless the articles of
incorporation provide otherwise, whether or not the corporation has
provided for indemnification in its articles of incorporation. Our
articles of incorporation have no separate provision for
indemnification of directors, officers, or control
persons.
Insofar
as the limitation of, or indemnification for, liabilities arising
under the Securities Act of 1933, as amended (the “Securities
Act”), may be permitted to directors, officers, or persons
controlling us pursuant to the foregoing, or otherwise, we have
been advised that, in the opinion of the SEC, such limitation or
indemnification is against public policy as expressed in the
Securities Act, and is, therefore, unenforceable.
NOVUSTERRA INC.
(a development stage company)
Period December 31, 2020
CONTENTS
|
Index
|
|
|
|
F-2
|
|
|
|
|
|
|
|
F-3
|
|
|
|
F-4
|
|
|
|
F-5
|
|
|
|
F-6
|
|
|
|
F-7
|
Report of Independent Registered
Public Accounting Firm
To the
Board of Directors
and
Stockholders of Novusterra, Inc.
Opinion on the Financial Statements
We have
audited the accompanying balance sheet of Novusterra, Inc. (the
“Company”) as of December 31, 2020, and the related
statement of operations, stockholders’ equity, and cash flows
for the period September 21, 2020 (date of formation) to December
31, 2020. 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, 2020, and the results of
its operations and its cash flows for the period September 21, 2020
(date of formation) to December 31, 2020 in conformity with
accounting principles generally accepted in the United States of
America.
Basis for Opinion
These
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a
public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required
to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the
PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting.
As part of our audits, we are required to obtain an understanding
of internal control over financial reporting, but not for the
purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis
for our opinion.
Critical Audit Matters
The
critical audit matters communicated below are matters arising from
the current period audit of the financial statements that were
communicated or required to be communicated to the audit committee
and that: (1) relate to accounts or disclosures that are material
to the financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of
critical audit matters does not alter in any way our opinion on the
financial statements, taken as a whole, and we are not, by
communicating the critical audit matters below, providing separate
opinions on the critical audit matters or on the accounts or
disclosures to which they relate.
The
report of our independent registered public accounting firm for
Novusterra, Inc. for the period September 21, 2020 (date of
formation) to December 31, 2020, included an explanatory paragraph
indicating that there is substantial doubt as to our ability to
continue as a going concern as a result of recurring losses from
operations and negative cash flows.
/s/
Paris, Kreit & Chiu CPA LLP
(formerly Benjamin
& Ko)
New York,
NY
June 2,
2021, except for Note 3 which is dated July 15, 2021
We have
served as the Company’s auditor since 2020
December 31, 2020
|
|
ASSETS
|
|
Current
assets:
|
|
Cash
|
$12,347
|
Total
current assets
|
12,347
|
Total
assets
|
$12,347
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
Current
liabilities:
|
|
Accrued
interest
|
$56
|
Total
current liabilities
|
56
|
Loan
from shareholder
|
6,482
|
Total
liabilities
|
6,538
|
Commitments
and Contingencies
|
|
Stockholders'
equity
|
|
Preferred
Stock, no par value, 400,000,000 shares authorized; 0 shares issued
and outstanding at December 31, 2020
|
-
|
Class
A Common Stock, no par value, 2,400,000,000 shares authorized;
832,667 shares issued and outstanding at December 31,
2020
|
7,247
|
Class
B Common Stock, no par value, 200,000,000 shares authorized;
3,666,667 shares issued and outstanding at December 31,
2020
|
1,100
|
Accumulated
deficit
|
(2,538)
|
Total
stockholders' equity
|
5,809
|
Total
liabilities and stockholders' equity
|
$12,347
|
|
|
See accompanying financial statements notes
September 21, 2020 (date of formation) to December 31,
2020
|
|
|
|
Operating
expenses:
|
|
General
and administrative
|
2,482
|
Total
operating costs and expenses
|
2,482
|
Loss
from operations
|
(2,482)
|
Other
expense:
|
|
Interest
expense
|
(56)
|
Total
other expense, net
|
(56)
|
Loss
before income taxes
|
(2,538)
|
Provision
for income taxes
|
-
|
Net
loss
|
$(2,538)
|
|
|
Earnings
(loss) per share:
|
|
Basic
and diluted
|
$(0.00)
|
|
|
Weighted
average number of common shares outstanding:
|
|
Basic
and diluted
|
4,351,706
|
|
|
See accompanying financial statements notes
Statement
of Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
– September 21, 2020 (date of formation)
|
-
|
$-
|
-
|
$-
|
$-
|
$-
|
Common
stock issued
|
832,667
|
7,247
|
3,666,667
|
1,100
|
-
|
8,347
|
Net
loss
|
-
|
-
|
-
|
-
|
(2,538)
|
(2,538)
|
Balance
as of December 31, 2020
|
832,667
|
$7,247
|
3,666,667
|
$1,100
|
$(2,538)
|
$5,809
|
See accompanying financial statements notes
September 21, 2020 (date of formation) to December 31,
2020
|
|
Cash
flows from operating activities:
|
|
Net
loss
|
$(2,538)
|
Adjustments
to reconcile net income to net cash provided by (used in) operating
activities:
|
|
Stock
issued for service
|
1,000
|
Changes
in operating assets and liabilities:
|
|
Accrued
interest
|
56
|
Net
cash used in operating activities
|
(1,482)
|
|
|
Cash
flows from investing activities:
|
-
|
|
|
Cash
flows from financing activities:
|
|
Proceeds
from loan on shareholder
|
6,482
|
Proceeds
from issuance of common stock
|
7,347
|
Net
cash provided by financing activities
|
13,829
|
|
|
Net increase in
cash
|
12,347
|
|
|
Cash at beginning
of period
|
-
|
|
|
Cash at end of
period
|
$12,347
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
Cash
paid during the years for:
|
|
Interest
|
$-
|
Income
taxes
|
$-
|
See accompanying financial statements notes
NOVUSTERRA, INC.
Notes to Financial
Statements
Novusterra, Inc.,
(the “Company”) was incorporated on September 21, 2020
in the State of Florida. The Company began its operation with a
plan to build a Rare Earth Element (REE) processing facility to
process & refine rare earth material to be used for various
purposes.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This
summary of significant accounting policies of the Company is
presented to assist in understanding the Company’s financial
statements. The financial statements and notes are representation
of the company’s management who are responsible for the
integrity and objectivity of the financial statements. These
accounting policies confirm to accounting principles generally
accepted in the United State of America (“GAAP”) and
have been consistently applied in the preparation of the financial
statements.
Basis of Presentation and Consolidation
The
accounting and reporting policies of the Company are in accordance
with accounting principles generally accepted in the United States
of America, which is based on the accrual method of
accounting.
Use of Estimates
The
preparation of financial statements in conformity with GAAP
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. Significant estimates may include, but are
not limited to, the estimated useful lives of property and
equipment, patent and trademark, the ultimate collection of
accounts receivable and accrued expenses. Actual results could
materially differ from those estimates.
Advertising Expense
Advertising
costs are expensed as incurred. Advertising expense amounted to $0
for the period September 21, 2020 (date of formation) to December
31, 2020.
Cash and Cash Equivalents
The
Company considers all deposits with financial institutions and all
highly liquid investments with maturities of three months or less
when acquired to be cash equivalents. There were no cash
equivalents at December 31, 2020.
Fair Value of Financial Instruments
The
Company records its financial assets and liabilities at fair value,
which is defined under the applicable accounting standards as the
exchange price that would be received for an asset or paid to
transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly
transaction between market participants on the measure date.
The Company uses valuation techniques to measure fair value,
maximizing the use of observable outputs and minimizing the use of
unobservable inputs. The standard describes a fair value
hierarchy based on three levels of inputs, of which the first two
are considered observable and the last unobservable, that may be
used to measure fair value which are the following:
Level 1
– Quoted prices in active markets for identical assets or
liabilities.
Level 2
– Inputs other than Level 1 that are observable, either
directly or indirectly, such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or other
inputs that are observable or can be corroborated by observable
market data for substantially the full term of the assets or
liabilities.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair Value of Financial Instruments (continued)
Level 3
– Inputs include management's best estimate of what market
participants would use in pricing the asset or liability at the
measurement date. The inputs are unobservable in the market
and significant to the instrument's valuation.
As
of December 31, 2020, the Company believes that the carrying value
of cash and liabilities approximate fair value due to the short
maturity of theses financial instruments. The financial statements
do not include any financial instruments at fair value on a
recurring or non-recurring basis.
Income Taxes
Income
taxes include U.S. federal and state income taxes currently payable
and deferred income taxes. Deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using
the enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in the period of
enactment. Deferred income tax expense represents the change
during the year in the deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax asset will not be
realized.
The
Company plans to file its initial tax return for December 2020.
Management believes that the Company’s income tax filing
positions will be sustained on audit and does not anticipate any
adjustments that will result in a material change. Therefore, no
reserve for uncertain income tax positions has been recorded. The
Company’s policy for recording interest and penalties, if
any, associated with income tax examinations will be to record such
items as a component of income taxes.
Related Party Policies
In accordance with FASB ASC 850 related
parties are defined as either an executive, director or nominee,
greater than 10% beneficial owner, or an immediate family member of
any of the proceeding. Transactions with related parties are
reviewed and approved by the directors of the Company, as per
internal policies.
Stock-based Compensation
Stock-based
compensation is measured at the grant date based on the fair value
of the award and is recognized as expense over the applicable
vesting period of the stock award (generally 0 to 5 years) using
the straight-line method. Stock compensation to employees is
accounted for under ASC 718 and stock compensation to non-employees
is accounted for under 2018-07.
On
April 15, 2021, the Company declared a 1-for-3 reverse stock
split of its issued and outstanding common stock to the
holders of record on that date. Such reverse stock split
was effective as of April 16, 2021. The accompanying
financial statements and related notes thereto have been adjusted
accordingly to reflect this reverse stock split.
4.
LOAN PAYABLE – RELATED PARTIES
On
September 21, 2020, the founder and major shareholder of the
Company, Andrew Weeraratne, loaned the Company $5,000 at 4%
interest to be accrued and compounded quarterly. He continued to
pay certain expenses belong to the Company and as of December 31,
2020 has a loan principal balance of $6,482. The Company has
accrued interest expenses of $56 for the period ending December 31,
2020.
The
Company calculates earnings per share in accordance with ASC 260,
“Earnings Per Share,” which requires a dual
presentation of basic and diluted earnings per share. Basic
earnings per share are computed using the weighted average number
of shares outstanding during the fiscal year. Dilutive earnings per
share is computed on the basis of the weighted average number of
shares plus potentially dilutive common shares which would consist
of stock options outstanding (using the treasury method), which was
none since the Company had net losses and any additional potential
shares would be antidilutive.
The following table sets forth the computation of basic and diluted
net income per common share:
September 21, 2020 (date of formation) to December 31,
2020
|
|
|
|
Net
loss
|
$(2,538)
|
Dividends
|
-
|
Stock
option
|
-
|
|
|
Adjusted
net income (loss) attribution to stockholders
|
$(2,538)
|
|
|
Weighted-average
shares of common stock outstanding
|
|
Basic
and Diluted
|
4,351,706
|
|
|
Net
income (loss) attribute to shareholders per share
|
|
Basic and Diluted
|
$(0.00)
|
|
|
The
Company has 3,000,000,000 authorized shares of capital stock, which
consists of (i) 2,400,000,000 shares of Class A common stock, at no
par value per share; (ii) 200,000,000 shares of Class B common
stock, at no par value per share; and (iii) 400,000,000 shares of
preferred stock, at no par value per share.
The
holders of Class A common stock shall be entitled to one vote per
share and shall be entitled to dividends as shall be declared by
the Company’s Board of Directors from time to time.
Each share of Class B common stock shall entitle the holder
thereof to 10 votes for each one vote per share of Class A common
stock, and with respect to such vote, shall be entitled,
notwithstanding any provision hereof, to notice of any
stockholders’ meeting in accordance with the bylaws of this
corporation, and shall be entitled to vote, together as a single
class with holders of Class A common stock with respect to any
question or matter upon which holders of Class A common stock have
the right to vote. Class B common stock shall also entitle the
holders thereof to vote as a separate class as set forth herein and
as required by law. Holders of Class B common stock shall be
entitled to dividends as shall be declared by its Board of
Directors from time to time at the same rate per share as the Class
A common stock. The holders of the Class B common stock shall have
the right to convert each one of their shares to one share of Class
A common stock automatically by surrendering the shares of Class B
common stock to the Company.
As of
December 31, 2020 the Company has 3,666,667 Class B common stock
outstanding 832,667 Class A common stock outstanding.
On
September 24, 2020 Andrew Weeraratne, Chief Executive Officer and
the Chief Financial Officer of the Company, bought 3,666,667 Class
B common stock at $0.0001 per share that he paid to the company
$1,100.
On
September 24, 2020 The Board of Directors approved a list of
persons who they believe could help them with the operation of the
company, issuing 756,000 Class A common shares at $0.0003 per share
with the price of $227 being paid by Andrew
Weeraratne.
On
September 30, 2020, the Company issued a newly hired officer 6,667
Class A common shares at $0.003 per shares with the price of $20
being paid by Andrew Weeraratne.
During
the month of October, the Company issued 66,667 Class A common
shares to 5 associated individuals at $0.09 per shares for a total
price of $6,000.
December 31, 2020
the Company issued 3,333 Class A common stock to the legal counsel
for legal fee of $1,000.
The
Company did not have material income tax provision (benefit)
because of net loss and valuation allowances against deferred
income tax provision for the year ended December 31,
2020.
A
reconciliation of the Company’s effective tax rate to the
statutory federal rate is as follows:
Description
|
|
|
|
Statutory
federal rate
|
21.00%
|
State
income taxes net of federal income tax benefit and
others
|
0.00%
|
Permanent
differences for tax purposes and others
|
0.00%
|
Change
in valuation allowance
|
-21.00%
|
|
|
Effective tax rate
|
0.00%
|
The
income tax benefit differs from the amount computed by applying the
U.S. federal statutory tax rate of 21%, primarily due to the change
in the valuation allowance.
Deferred
income taxes 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
purposes.
The
components of deferred tax assets and liabilities are as
follows:
September 21, 2020 (date of formation) to December 31,
2020
|
|
|
|
Deferred tax assets:
|
|
Net
operating loss
|
$533
|
Other
temporary differences
|
-
|
|
|
Total
deferred tax assets
|
533
|
Less
- valuation allowance
|
(533)
|
|
|
Total
deferred tax assets
|
$-
|
|
|
7.
INCOME TAX PROVISION (continued)
At
December 31, 2020, the Company had available net operating loss
carryovers of approximately $533. Per the Tax Cuts and Jobs Act
(TCJA) implemented in 2018, the two-year carryback provision was
removed and now allows for an indefinite carryforward period. The
carryforwards are limited to 80% of each subsequent year's net
income. As a result, net operating loss may be applied against
future taxable income and expires at various dates subject to
certain limitations. The Company has a deferred tax asset arising
substantially from the benefits of such net operating loss
deduction and has recorded a valuation allowance for the full
amount of this deferred tax asset since it is more likely than not
that some or all of the deferred tax asset may not be
realized.
At
year ending December 31, 2020, the Company had cumulative net
operating loss carryforwards for federal tax purposes of
approximately $533. In addition, the Company had state tax net
operating loss carryforwards of approximately $0. The carryforwards
may be applied against future taxable income and expires at various
dates subject to certain limitations.
8.
RELATED PARTY TRANSACTIONS
The
Company had the following related party transactions:
September 24, 2020,
the Company borrowed $5,000 from its founder and the major
shareholder at 4% annual interest to be accrued and compounded
quarterly. He added additional $1,482 to that loan at the same rate
of interest as of December 31,2020.
The
Company’s office space for its principal corporate office
located at 7135 Collins Ave No. 624, Miami, FL 33141 is provided by
Chief Executive Officer at no charge.
9.
COMMITMENTS AND CONTINGENCIES
Operating Leases
The
Company’s office space for its principal corporate office
located at 7135 Collins Ave No. 624, Miami, FL 33141 is provided by
Chief Executive Officer at no charge.
Contingencies
The
Company is subject to various legal proceedings from time to time
as part of its business. As of December 31, 2020, the Company was
not currently party to any legal proceedings or threatened legal
proceedings, the adverse outcome of which, individually or in the
aggregate, it believes would have a material adverse effect on its
business, financial condition and results of
operations.
The
financial statements has been prepared on the going concern basis
which assumes the company and consolidated entity will have
sufficient cash to pay its debts as and when they become payable
for a period of at least 12 months from the date the financial
report was authorized for issue.
The
Company was set up on September 21, 2020 and has suffered losses
from operations so far and currently has $12,347 in cash in bank.
The Company may not have any revenue until it raises funds from the
current offering. These conditions raise substantial doubt about
the Company’s ability to continue as a going concern.
However, it will need to raise the funds through sale of its
securities or through loans from third parties. The Company does
not have any commitments or arrangements from any person to provide
it with any additional capital. If additional financing is not
available when needed, the Company may need to cease operations.
The Company may not be successful in raising the capital needed to
expand or develop operations. Management believes that actions
presently being taken to obtain additional funding provide the
opportunity for the Company to continue as a going concern. The
accompanying financial statements have been prepared assuming the
Company will continue as a going concern; no adjustments to the
financial statements have been made to account for this
uncertainty.
On
March 19, 2021 the Company held a special stockholders meeting with
the majority approving a resolution to sign two agreements with
American Resources Corp (ARC) currently trading on the NASDAQ under
the stock symbol “AREC,” to issue ARC 10,000,000 Class
B shares and 5,700,000 Class A shares of the Company, comprising
51.14% of ownership and 87.57% of voting power of the Company in
exchange for ARC agreeing to form a joint venture with the Company
whereby the Company will receive 50% profits of Graphene
manufacturing that ARC owns through the ownership of patented
technology. This agreement will give the rights to ARC to change
the Board of Directors. Andrew Weeraratne (AW) will resign from the
Chairman positions but will stay on as the CEO/CFO. Upon signing of
the agreements, AW converted 11,000,000 Class B shares he owned to
Class A shares of the Company.
Also
approved was to sign a Graphene Development Agreement for the
Company to raise funds to develop and market Graphene made through
ARC owned patented technology with value of approximately $470,000
that ARC sublicensed to the Company. Due to this agreement the
Company will change its main operations from Rare Earth Element
Processing Factory building to building a manufacturing plant to
make Graphene and market them using the patented technology
currently owned by ARC. Also, this agreement provides that the
Company shares the operating profits from this Graphene
manufacturing and marketing business 50% each with
ARC.
At
a Board of Directors’ meeting held on April 4, 2021, the
Board agreed to withdraw the Reg A currently filed and file an S-1
prospectus instead to raise $10,000,000. Also agreed to do a Reg D
offering to raise $300,000 selling 600,000 common shares at $0.50
each. The Company closed that Reg D offering on the 7th of April
having received subscriptions to sell 669,023 shares for
$334,512.
The
Company had a special stockholder meeting attended by majority
shareholders of the Company to vote for the Company to amend the
Company’s Articles of Incorporation to eliminate the
designation of Class B shares and increase the Class A shares to be
2,600,000,000 with Preferred stock to remain 400,000,000 and thus
total authorized shares remaining at 3,000,000,000 was adopted by
28,191,667 votes with Class B and Class A common shareholders
voting as one group amounting to 91.83% of total votes sufficient
for the adoption of the amendments.
On
April 15, 2021, the Company signed an amendment to the Sublicense
Agreement with ARC to the Sublicense Agreement that the Company
signed with ARC on April 4, 2021, which mostly addressed the
payment process by the Company to ARC to be paid on a monthly basis
when the Company begins to make profits from Graphene
Sales.
NOVUSTERRA INC.
Condensed Financial Statements
As of September 30, 2021 and December 31, 2020, and
for the Three and Nine Months Ended September 30, 2021
Table of Contents
|
Page
|
Unaudited Condensed Financial Statements
|
|
Unaudited Condensed Balance Sheets
|
F-14
|
|
|
Unaudited Condensed Statements of Operations
|
F-15
|
|
|
Unaudited Condensed Statements of Stockholders’
Equity
|
F-16
|
Unaudited Condensed Statements of Cash Flows
|
F-17
|
|
|
Notes to Unaudited Condensed Financial Statements
|
F-18
|
NOVUSTERRA, INC.
UNAUDITED CONDENSED BALANCE SHEETS
As of
|
|
|
ASSETS
|
|
|
Current
assets:
|
|
|
Cash
|
$236,545
|
$12,347
|
Total
current assets
|
236,545
|
12,347
|
|
|
|
Intangible
assets
|
471,000
|
-
|
Operating
lease right-of-use asset
|
488,338
|
-
|
Total assets
|
$1,195,883
|
$12,347
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
Current
liabilities:
|
|
|
Accrued
interest
|
$-
|
$56
|
Other
current liabilities
|
77,000
|
-
|
Current
portion of operating lease liabilities
|
36,640
|
-
|
Total
current liabilities
|
113,640
|
56
|
|
|
|
Loan
from shareholder
|
-
|
6,482
|
Operating
lease liabilities, less current portion
|
453,104
|
-
|
Total liabilities
|
566,744
|
6,538
|
Commitments and Contingencies
|
|
|
Stockholders' equity
|
|
|
Preferred
Stock, no par value, 400,000,000 shares authorized; 0 shares issued
and outstanding at September 30, 2021 and December 31,
2020
|
-
|
-
|
Class
A Common Stock, no par value, 2,400,000,000 shares authorized;
10,481,347 shares and 832,670 shares issued and outstanding at
September 30, 2021 and December 31, 2020, respectively
|
801,359
|
7,247
|
Class
B Common Stock, no par value, 200,000,000 shares authorized; 0 and
3,666,667 shares issued and outstanding at September 30, 2021 and
December 31, 2020, respectively
|
-
|
1,100
|
Accumulated
deficit
|
(172,220)
|
(2,538)
|
Total
stockholders' equity
|
629,139
|
5,809
|
Total liabilities and stockholders' equity
|
$1,195,883
|
$12,347
|
See accompanying unaudited condensed financial statements
notes
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
|
Nine Months Ended September 30, 2021
|
Three Months Ended September 30, 2021
|
|
|
|
Operating
expenses:
|
|
|
General
and administrative
|
$169,536
|
$78,030
|
Total
operating costs and expenses
|
169,536
|
78,030
|
Loss
from operations
|
(169,536)
|
(78,030)
|
Other
expense:
|
|
|
Interest
expense
|
(146)
|
-
|
Total
other expense, net
|
(146)
|
-
|
Loss
before income taxes
|
(169,682)
|
(78,030)
|
Provision
for income taxes
|
-
|
-
|
Net
loss
|
$(169,682)
|
$(78,030)
|
|
|
|
Earnings
(loss) per share:
|
|
|
Basic
and diluted
|
$(0.02)
|
$(0.01)
|
|
|
|
Weighted
average number of common shares outstanding:
|
|
|
Basic
and diluted
|
8,858,997
|
10,481,347
|
|
|
|
See accompanying unaudited condensed financial statements
notes
NOVUSTERRA, INC.
UNAUDITED CONDENSED STATEMENTS OF STOCKHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - December 31, 2020
|
832,670
|
$7,247
|
3,666,667
|
$1,100
|
$(2,538)
|
$5,809
|
Exchange
of Class B for Class A common stock
|
3,666,667
|
1,100
|
(3,666,667)
|
(1,100)
|
-
|
-
|
Issuance
of common stock for license agreement
|
1,900,000
|
171,000
|
3,333,333
|
300,000
|
-
|
471,000
|
Stock
dividend distribution
|
500,670
|
-
|
-
|
-
|
-
|
-
|
Net
loss
|
-
|
-
|
-
|
-
|
(1,065)
|
(1,065)
|
Balance – March 31, 2021
|
6,900,006
|
$179,347
|
3,333,333
|
$300,000
|
$(3,603)
|
$475,744
|
Exchange
of Class B for Class A common stock
|
3,333,333
|
300,000
|
(3,333,333)
|
(300,000)
|
-
|
-
|
Common
stock issued for cash, net of underwriter discount
|
223,008
|
284,512
|
-
|
-
|
-
|
284,512
|
Common
stock issued for services
|
25,000
|
37,500
|
-
|
-
|
-
|
37,500
|
Net
loss
|
-
|
-
|
-
|
-
|
(90,587)
|
(90,587)
|
Balance – June 30, 2021
|
10,481,347
|
$801,359
|
-
|
-
|
$(94,190)
|
$707,169
|
Net
loss
|
-
|
-
|
-
|
-
|
(78,030)
|
(78,030)
|
Balance – September 30, 2021
|
10,481,347
|
$801,359
|
-
|
-
|
$(172,220)
|
$629,139
|
|
|
|
|
|
|
|
See accompanying unaudited condensed financial statements
notes
NOVUSTERRA,
INC.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
|
Nine Months Ended September 30,
2021
|
Cash
flows from operating activities:
|
|
Net
income (loss)
|
$(169,682)
|
Adjustments
to reconcile net income (loss) to net cash provided by (used in)
operating activities:
|
|
Operating
lease
|
1,410
|
Interest
expense
|
86
|
Stock
based compensation
|
37,500
|
Changes
in operating assets and liabilities:
|
|
Other
current liabilities
|
77,000
|
Net
cash used in operating activities
|
(53,686)
|
|
|
Cash
flows from financing activities:
|
|
Interest
expense paid
|
(146)
|
Payments
on loan from shareholder
|
(6,482)
|
Proceeds
from issuance of common stock
|
284,512
|
Net
cash provided by financing activities
|
277,884
|
|
|
Net increase in
cash
|
224,198
|
|
|
Cash at beginning
of period
|
12,347
|
|
|
Cash at end of
period
|
$236,545
|
|
|
Supplemental
disclosure of cash flow information:
|
|
Cash
paid during the period for:
|
|
Interest
|
$146
|
Income
taxes
|
$-
|
Non-cash
investing and financing activities:
|
|
Common
Stock issued for intangible assets
|
$471,000
|
Common
Stock issued for services
|
$37,500
|
Stock
dividend distributed
|
$0
|
|
|
See accompanying unaudited condensed financial statements
notes
Novusterra Inc.
Notes to Condensed Financial Statements
(Unaudited)
For Three and Nine Months Ended September 30, 2021
Novusterra Inc.,
(the “Company”) was incorporated on September 21, 2020
in the State of Florida. The Company began its operation with a
plan to build a Rare Earth Element (REE) processing facility to
process & refine rare earth material to be used for various
purposes.
On
March 19, 2021 the Company held a special stockholders meeting with
the majority approving a resolution to sign two agreements with
American Resources Corp (ARC) currently trading on the NASDAQ under
the stock symbol “AREC,” to issue ARC 10,000,000 Class
B shares and 5,700,000 Class A shares of the Company, comprising
51.14% of ownership and 87.57% of voting power of the Company in
exchange for ARC agreeing to form a joint venture with the Company
whereby the Company will receive 50% profits of Graphene
manufacturing that ARC owns through the ownership of patented
technology and to sublicense the technology to the Company. This
agreement will give the rights to ARC to change the Board of
Directors. Andrew Weeraratne (AW) will resign from the Chairman
positions but will stay on as the CEO/CFO. Upon signing of the
agreements, AW converted 11,000,000 Class B shares he owned to
Class A shares of the Company.
The
second agreement is a Graphene Development Agreement for the
Company to raise funds to develop and market Graphene made through
ARC owned patented technology. Due to this agreement the Company
will change its main operations from Rare Earth Element Processing
Factory building to building a manufacturing plant to make Graphene
and market them using the patented technology currently owned by
ARC. Also, this agreement provides that the Company shares the
operating profits from this Graphene manufacturing and marketing
business 50% each with ARC.
There
was no statement of operation for the 3 and 9 months ended
September 30, 2020.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This
summary of significant accounting policies of the Company is
presented to assist in understanding the Company’s unaudited
condensed financial statements. The unaudited condensed financial
statements and notes are representations of the company’s
management who are responsible for the integrity and objectivity of
the unaudited condensed financial statements. These accounting
policies conform to accounting principles generally accepted in the
United State of America (“GAAP”) and have been
consistently applied in the preparation of the unaudited condensed
financial statements.
Basis of Presentation
The
accounting and reporting policies of the Company are in accordance
with accounting principles generally accepted in the United States
of America, which is based on the accrual method of
accounting.
Use of Estimates
The
preparation of these unaudited condensed financial statements in
conformity with GAAP 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 unaudited condensed financial statements and the
reported amounts of revenue and expenses during the reporting
period. Significant estimates may include, but are not limited to,
the estimated useful lives of property and equipment, patent and
trademark, impairment of long lived assets, lease right-of-use
asset depreciation, and accrued expenses. Actual results could
materially differ from those estimates.
Advertising Expense
Advertising
costs are expensed as incurred. Advertising expense amounted to $0
for the three and nine months ended September 30,
2021.
Cash and Cash Equivalents
The
Company considers all deposits with financial institutions and all
highly liquid investments with maturities of three months or less
when acquired to be cash equivalents. There were no cash
equivalents at September 30, 2021 and December 31,
2020.
Impairment analysis for long-lived assets and intangible
assets
The Company’s long-lived assets and other
assets (consisting of property and equipment and purchased
intangible assets) are reviewed for impairment in accordance with
the guidance of the FASB ASC 360, Property, Plant, and
Equipment and FASB ASC
205 Presentation of Financial Statements. The Company
tests for impairment losses on long-lived assets used in operations
whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable.
Recoverability of an asset to be held and used is measured by a
comparison of the carrying amount of an asset to the future
undiscounted cash flows expected to be generated by the
asset. If such asset is considered to be impaired, the
impairment to be recognized is measured by the amount by which the
carrying amount of the asset exceeds its fair value.
Impairment evaluations involve management’s estimates on
asset useful lives and future cash flows. Actual useful lives
and cash flows could be different from those estimated by
management which could have a material effect on our reporting
results and financial positions. Fair value is determined
through various valuation techniques including discounted cash flow
models, quoted market values and third-party independent
appraisals, as considered necessary. The Company had not
experienced impairment losses on its long-lived assets and
intangible assets during any of the periods
presented.
Fair Value of Financial Instruments
The
Company records its financial assets and liabilities at fair value,
which is defined under the applicable accounting standards as the
exchange price that would be received for an asset or paid to
transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly
transaction between market participants on the measure date.
The Company uses valuation techniques to measure fair value,
maximizing the use of observable outputs and minimizing the use of
unobservable inputs. The standard describes a fair value
hierarchy based on three levels of inputs, of which the first two
are considered observable and the last unobservable, that may be
used to measure fair value which are the following:
Level 1
– Quoted prices in active markets for identical assets or
liabilities.
Level 2
– Inputs other than Level 1 that are observable, either
directly or indirectly, such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or other
inputs that are observable or can be corroborated by observable
market data for substantially the full term of the assets or
liabilities.
Level 3
– Inputs include management's best estimate of what market
participants would use in pricing the asset or liability at the
measurement date. The inputs are unobservable in the market
and significant to the instrument's valuation.
As
of September 30, 2021 and December 31, 2020, the Company believes
that the carrying value of assets and liabilities approximate fair
value due to the short maturity of theses financial instruments.
The financial statements do not include any financial instruments
at fair value on a recurring or non-recurring basis.
Leases
In accordance with ASC
842, Leases, the Company determines if an arrangement is a
lease at inception. The Company has operating leases for the
Company’s corporate offices, and warehouse. Operating leases
are included in operating lease ROU assets and operating lease
liabilities, current and noncurrent, on the interim unaudited
condensed balance sheets. Lease liabilities are calculated using
the effective interest method, regardless of classification, while
the amortization of ROU assets varies depending upon
classification. Operating lease classification results in a
straight-line expense recognition pattern over the lease term and
recognizes lease expense as a single expense component, which
results in amortization of the ROU asset that equals the difference
between lease expense and interest expense. Lease expense for
operating leases is included in cost of sales or selling and
administrative expense, based on the use of the leased asset, on
the interim unaudited condensed statements of operations. Variable
payments such as property taxes, insurance and common area
maintenance related to triple net leases, as well as certain
equipment sales taxes, licenses, fees and repairs, are expensed as
incurred, and leases with an initial term of 12 months or less are
excluded from minimum lease payments and are not recorded on the
balance sheet. The Company recognizes variable lease expense for
these short-term leases on a straight-line basis over the remaining
lease term.
ROU
assets represent the right to use an underlying asset for the lease
term and operating lease liabilities represent the obligation to
make lease payments arising from the lease. Operating lease ROU
assets and liabilities are recognized at the commencement date
based on the present value of lease payments over the reasonably
certain lease term
The
operating lease terms may include options to extend or terminate
the lease when it is reasonably certain that the Company will
exercise that option. Operating lease expense for lease payments is
recognized on a straight-line basis over the lease
term.
Income Taxes
Income taxes include U.S. federal and state income
taxes currently payable and deferred income taxes.
Under the asset and
liability method prescribed under ASC 740, Income
Taxes, the Company,
recognized deferred tax assets
and liabilities for the future tax consequences attributable to
differences between the financial statement carrying amounts of
assets and liabilities and their respective tax basis.
Deferred tax assets and liabilities are measured using the enacted
tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of
a change in tax rates is recognized in the period of enactment.
Deferred income tax expense represents the change during the
year in the deferred tax assets and liabilities. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of
the deferred tax asset will not be realized.
The
Company filed its initial tax return for the period ended December
31, 2020. As it was zero tax return, management believes that it
does not anticipate any adjustments that will result in a material
change. The Company’s policy for recording interest and
penalties, if any, associated with income tax examinations will be
to record such items as a component of income taxes.
Related Party Transactions
In accordance with FASB ASC 850 related
parties are defined as either an executive, director, or nominee,
greater than 10% beneficial owner, or an immediate family member of
any of the proceeding. Transactions with related parties are
reviewed and approved by the directors of the Company, as per
internal policies.
Stock-based Compensation
In
accordance with ASC No. 718, Compensation – Stock
Compensation (“ASC 718”), we measure the compensation
costs of share-based compensation arrangements based on the
grant-date fair value and recognize the costs in the financial
statements over the period during which employees are required to
provide services. Share-based compensation arrangements include
stock options, restricted share plans, performance-based awards,
share appreciation rights and employee share purchase plans. As
such, compensation cost is measured on the date of grant at their
fair value. Such compensation amounts, if any, are amortized over
the respective service periods of the grantee. Equity instruments
(“instruments”) issued to other than employees are
recorded on the basis of the fair value of the instruments, as
required by ASC 718. ASC No. 505, Equity Based Payments to
Non-Employees (“ASC 505”) defines the measurement date
and recognition period for such instruments. In general, the
measurement date is (a) when a performance commitment, as defined,
is reached or (b) when the earlier of (i) the non-employee
performance is complete or (ii) the instruments are vested. The
measured value related to the instruments is recognized over a
period based on the facts and circumstances of each particular
grant as defined in the ASC 505. We have no stock-based
compensation during the three and nine month periods ending
September 30, 2021.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recently Issued Accounting Pronouncements
Pronouncements Not Yet Effective
In
March 2020, the FASB issued ASU No. 2020-04, Reference Rate
Reform (Topic 848)—Facilitation of the Effects of Reference
Rate Reform on Financial Reporting. This standard provides optional
guidance for a limited time to ease the potential burden in
accounting for (or recognizing the effects of) reference rate
reform on financial reporting. The amendments in this standard
apply only to contracts and hedging relationships that reference
LIBOR or another reference rate expected to be discontinued due to
reference rate reform. The expedients and exceptions provided by
the amendments do not apply to contract modifications made and
hedging relationships entered into or evaluated after December 31,
2022. The amendments in this standard are elective and are
effective upon issuance for all entities. The Company is evaluating
the expedients and exceptions provided by the amendments in this
standard to determine their impact.
Other
recently issued accounting updates are not expected to have a
material impact on the Company’s Interim Financial
Statements.
●
Fair Value Measurements
In
August 2018, the FASB amended "Fair Value
Measurements" to modify the disclosure requirements related to
fair value. The amendment removes requirements to disclose (1) the
amount of and reasons for transfers between levels 1 and 2 of the
fair value hierarchy, (2) our policy related to the timing of
transfers between levels, and (3) the valuation processes used in
level 3 measurements. It clarifies that, for investments measured
at net asset value, disclosure of liquidation timing is only
required if the investee has communicated the timing either to us
or publicly. It also clarifies that the narrative disclosure of the
effect of changes in level 3 inputs should be based on changes that
could occur at the reporting date. The amendment adds a requirement
to disclose the range and weighted average of significant
unobservable inputs used in level 3 measurements. The guidance is
effective for the Company with the Company’s quarterly filing
for the period ended September 30, 2021 and the Company made the
required disclosure changes in that filing and going forward.
Adoption did not have an impact on the Company’s interim
unaudited condensed statement of operations, balance sheets, and
cash flows.
In
March 2016, the FASB amended "Financial Instruments" to provide
financial statement users with more decision-useful information
about the expected credit losses on debt instruments and other
commitments to extend credit held by a reporting entity at each
reporting date. During November 2018 and April 2019, the FASB made
amendments to the new standard that clarified guidance on several
matters, including accrued interest, recoveries, and various
codification improvements. The new standard, as amended, replaces
the incurred loss impairment methodology in the current standard
with a methodology that reflects expected credit losses and
requires consideration of a broader range of reasonable and
supportable information to support credit loss estimates. The new
guidance is effective for us on January 1, 2020, and in the first
nine months of 2021 and there is no material impact on the
Company’s interim unaudited condensed results of operations,
balance sheet, and cash flows.
On
March 19, 2021, the Company executed two agreements with ARC in
exchange for 5,700,000 Class A shares and 10,000,000 Class B shares
of the Company. Based on a recent sale of equity at $0.03 per share
these shares were valued at $471,000 and the entire amount is
classified as intangible assets. Due to this agreement the Company
will change its main operations from Rare Earth Element Processing
Factory building to building a manufacturing plant to make Graphene
and market them using the patented technology currently owned by
ARC.
On
September 21, 2020, the founder and major shareholder of the
Company, Andrew Weeraratne, loaned the Company $5,000 at 4%
interest to be accrued and compounded quarterly. He continued to
pay certain expenses of the Company. The Company repaid the loan on
April 29, 2021, and as of September 30, 2021 and December 31, 2020
the Company has a loan principal balance of $0 and $6,482,
respectively to him. The Company has accrued interest totaling of
$0 at September 30, 2021. Interest expense for the nine months
ended September 30, 2021 and three months ended September 30, 2021
were $146 and $0 respectively.
|
|
|
|
|
|
September
2020 - 4% interest due on
demand.
|
$-
|
$5,000
|
October
2020 - 4% interest due on
demand.
|
-
|
1,482
|
|
|
|
Total
notes payable
|
$-
|
$6,482
|
|
|
|
Less:
current portion
|
-
|
-
|
|
|
|
Loan payable, net of current portion
|
$-
|
$6,482
|
The
Company calculates earnings per share in accordance with ASC 260,
“Earnings Per Share,” which requires a dual
presentation of basic and diluted earnings per share. Basic
earnings per share are computed using the weighted average number
of shares outstanding during the fiscal year. Dilutive earnings per
share is computed on the basis of the weighted average number of
shares plus potentially dilutive common shares which would consist
of stock options outstanding (using the treasury method), which was
none since the Company had net losses and any additional potential
shares would be antidilutive.
The
following table sets forth the computation of basic and diluted net
income per common share:
|
Nine Months Ended September 30, 2021
|
Three Months Ended September 30, 2021
|
|
|
|
Net
loss
|
$(169,682)
|
$(78,030)
|
Dividends
|
-
|
-
|
Stock
options
|
-
|
-
|
|
|
|
Adjusted
net income (loss) attribution to stockholders
|
$(169,682)
|
$(78,030)
|
|
|
|
Weighted-average
shares of common stock outstanding
|
|
|
Basic
and Diluted
|
8,858,997
|
10,481,347
|
|
|
|
Net
income (loss) attribute to shareholders per share
|
|
|
Basic and Diluted
|
$(0.02)
|
$(0.01)
|
The
Company has 3,000,000,000 authorized shares of capital stock, which
consists of (i) 2,400,000,000 shares of Class A common stock, at no
par value per share; (ii) 200,000,000 shares of Class B common
stock, at no par value per share; and (iii) 400,000,000 shares of
preferred stock, at no par value per share.
The
holders of Class A common stock shall be entitled to one vote per
share and shall be entitled to dividends as shall be declared by
the Company’s Board of Directors from time to time.
Each share of Class B common stock shall entitle the holder
thereof to 10 votes for each one vote per share of Class A common
stock, and with respect to such vote, shall be entitled,
notwithstanding any provision hereof, to notice of any
stockholders’ meeting in accordance with the bylaws of this
corporation, and shall be entitled to vote, together as a single
class with holders of Class A common stock with respect to any
question or matter upon which holders of Class A common stock have
the right to vote. Class B common stock shall also entitle the
holders thereof to vote as a separate class as set forth herein and
as required by law. Holders of Class B common stock shall be
entitled to dividends as shall be declared by its Board of
Directors from time to time at the same rate per share as the Class
A common stock. The holders of the Class B common stock shall have
the right to convert each one of their shares to one share of Class
A common stock automatically by surrendering the shares of Class B
common stock to the Company.
As of
September 30, 2021 the Company has 0 Class B common stock
outstanding and 10,481,347 Class A common stock
outstanding.
On
January 12, 2021, the Company distributed stock dividends of
500,670 Class A shares to the Class A common
stockholders.
On
March 31, 2021, the Company converted 3,666,667 Class B shares to
Class A shares.
On
March 31, 2021, the Company issued 1,900,000 Class A shares and
3,333,333 Class B shares to ARC valued at $471,000 in exchange for
entering into the two agreements.
On May
3, 2021, the Company issued 25,000 Class A shares to La Verghette
valued at $37,500 for consulting service.
On June
12, 2021, the Company converted 3,333,333 Class B shares to Class A
shares.
During
the quarter ended June 30, 2021, the Company issued 223,008 Class A
shares valued at $284,512 for cash, net of underwriter discount
$50,000.
During
the quarter ended September 30, 2021, the Company issued 0 shares
of common stocks.
The
Company did not have material income tax provision (benefit)
because of the net loss and valuation allowances against deferred
income tax assets for the three and nine months ended September 30,
2021.
A
reconciliation of the Company’s effective tax rate to the
statutory federal rate is as follows:
Description
|
|
|
|
Statutory
federal rate
|
21.00%
|
State
income taxes net of federal income tax benefit and
others
|
0.00%
|
Permanent
differences for tax purposes and others
|
0.00%
|
Change
in valuation allowance
|
-21.00%
|
|
|
Effective tax rate
|
0.00%
|
The
income tax benefit differs from the amount computed by applying the
U.S. federal statutory tax rate of 21%, primarily due to the change
in the valuation allowance.
Deferred
income taxes 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
purposes.
The
components of deferred tax assets and liabilities are as
follows:
|
Nine Months Ended September 30, 2021
|
September 21, 2020 (date of formation) to December 31,
2020
|
|
|
|
Deferred tax assets:
|
|
|
Net
operating loss
|
$36,166
|
$533
|
Other
temporary differences
|
-
|
-
|
|
|
|
Total
deferred tax assets
|
36,166
|
533
|
Less
- valuation allowance
|
(36,166)
|
(533)
|
|
|
|
Total
deferred tax assets
|
$-
|
$-
|
|
|
|
At
September 30, 2021 and December 31, 2020, the Company had available
net operating loss carryovers of approximately $169,682 and $2,538,
respectively. Per the Tax Cuts and Jobs Act (TCJA) implemented in
2018, the two-year carryback provision was removed and now allows
for an indefinite carryforward period. The carryforwards are
limited to 80% of each subsequent year's net income. The Company
has a deferred tax asset arising from the benefits of such net
operating loss deduction and has recorded a valuation allowance for
the full amount of this deferred tax asset since it is more likely
than not that some or all of the deferred tax asset may not be
realized.
8.
COMMITMENTS AND CONTINGENCIES
Operating Leases
The
Company adopted ASC 842 as of December 31, 2019. The Company has an
operating lease for the Company’s corporate office and
accounts for this lease in accordance with ASC 842. Adoption of the
standard resulted in the initial recognition of operating lease ROU
asset of $488,338 and operating lease liability of $489,744 as of
September 30, 2021.
On
April 24, 2021, the Company entered into a 120-month lease for its
warehouse at $5,000 per month commencing June 1, 2021 maturing May
31, 2031.
Operating lease
right-of-use (“ROU”) assets and liabilities are
recognized at commencement date based on the present value of lease
payments over the lease term. ROU assets represent our right to use
an underlying asset for the lease term and lease liabilities
represent our obligation to make lease payments arising from the
lease. Generally, the implicit rate of interest in arrangements is
not readily determinable and the Company utilizes its incremental
borrowing rate in determining the present value of lease payments.
The Company’s incremental borrowing rate is a hypothetical
rate based on its understanding of what its credit rating would be.
The operating lease ROU asset includes any lease payments made and
excludes lease incentives. Our variable lease payments primarily
consist of maintenance and other operating expenses from our real
estate leases. Variable lease payments are excluded from the ROU
assets and lease liabilities and are recognized in the period in
which the obligation for those payments is incurred. Our lease
terms may include options to extend or terminate the lease when it
is reasonably certain that we will exercise that option. Lease
expense for minimum lease payments is recognized on a straight-line
basis over the lease term.
We have
lease agreements with lease and non-lease components. We have
elected to account for these lease and non-lease components as a
single lease component. We are also electing not to apply the
recognition requirements to short-term leases of twelve months or
less and instead will recognize lease payments as expense on a
straight-line basis over the lease term.
The
Company entered into the following operating facility
leases:
●
Corporate office -
On May 1, 2021, the Company entered into an operating facility
lease for its corporate office located in 561 NE 79 Street, Suite
325, Miami, FL with a month-to-month term. The lease starts on May
1, 2021 for $200 per month.
●
Warehouse- On April
29, 2021, the Company entered into an operating facility lease for
its warehouse located at 1845 Highway 15 South, Suite 102, Hazard,
KY with 120 months term and option to extend. The lease started on
June 1, 2021 and expires on May 31, 2031.
`
In
accordance with ASC 842, the components of lease expense were as
follows:
|
Nine Months Ended September 30, 2021
|
Three Months Ended September 30, 2021
|
Operating
lease expense
|
$21,410
|
$16,054
|
Total
lease expense
|
$21,410
|
$16,054
|
In accordance with ASC 842, other information related
to leases was as follows:
|
|
|
|
Nine Months Ended September 30, 2021
|
Three Months Ended September 30, 2021
|
Operating
cash flows from operating leases
|
$20,000
|
$15,000
|
Cash
unpaid for amounts considered in the measurement of lease
liabilities (disclosed under other current
liabilities)
|
$20,000
|
$15,000
|
|
|
|
Weighted-average
remaining lease term—operating leases
|
|
|
Weighted-average
discount rate—operating leases
|
5%
|
|
In
accordance with ASC 842, maturities of operating lease liabilities
as of September 30, 2021 were as follows:
|
|
For the years ending December 31,
|
|
2021
(remaining 3 months)
|
$15,000
|
2022
|
60,525
|
2023
|
61,433
|
2024
|
62,354
|
2025
|
63,290
|
Thereafter
|
359,561
|
Total
undiscounted cash flows
|
$622,163
|
|
|
Reconciliation
of lease liabilities:
|
|
Weighted-average
remaining lease terms
|
|
Weighted-average
discount rate
|
5%
|
Present
values
|
$489,744
|
|
|
Lease
liabilities—current
|
36,640
|
Lease
liabilities—long-term
|
453,104
|
Lease
liabilities—total
|
$489,744
|
|
|
Difference
between undiscounted and discounted cash flows
|
$132,420
|
Contingencies
The
Company is subject to various legal proceedings from time to time
as part of its business. As of September 30, 2021 and December 31,
2020, the Company was not currently party to any legal proceedings
or threatened legal proceedings, the adverse outcome of which,
individually or in the aggregate, it believes would have a material
adverse effect on its business, financial condition and results of
operations.
The
unaudited condensed financial statements has been prepared on the
going concern basis which assumes the Company will have sufficient
cash to pay its debts as and when they become payable for a period
of at least 12 months from the date the financial report was
authorized for issue.
The
Company was set up on September 21, 2020 and has suffered losses
from operations so far and currently has $236,545 of cash in bank.
The Company may not have any revenue until it raises funds from the
current offering. These conditions raise substantial doubt about
the Company’s ability to continue as a going concern. The
Company does not have any commitments or arrangements from any
person to provide it with any additional capital. If additional
financing is not available when needed, the Company may need to
cease operations. Management believes that actions presently being
taken to obtain additional funding provide the opportunity for the
Company to continue as a going concern. The accompanying unaudited
condensed financial statements have been prepared assuming the
Company will continue as a going concern; no adjustments to the
unaudited condensed financial statements have been made to account
for this uncertainty.
NOVUSTERRA INC.
Units Consisting of 3,333,333 Shares of Common Stock
and Warrants to purchase up to 3,333,333 Shares of
Common Stock
PROSPECTUS
No
dealer, sales representative or any other person has been
authorized to give any information or to make any representations
other than those contained in this prospectus and, if given or
made, such information or representation must not be relied upon as
having been authorized by the company or any of the underwriters.
This prospectus does not constitute an offer of any securities
other than those to which it relates or an offer to sell, or a
solicitation of any offer to buy, to any person in any jurisdiction
where such an offer or solicitation would be unlawful. Neither the
delivery of this prospectus nor any sale made hereunder shall,
under any circumstances, create an implication that the information
set forth herein is correct as of any time subsequent to the date
hereof.
December _, 2021
INFORMATION NOT REQUIRED IN PROSPECTUS
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The
estimated expenses of this offering in connection with the issuance
and distribution of the securities being registered, all of which
are to be paid by the Company, are as follows:
SEC registration
fee
|
$ 4,093
|
Nasdaq listing
fee
|
$225,000
|
FINRA filing
fee
|
$8,450
|
Printing
expenses
|
$50,000*
|
Legal Fees and
Expenses
|
$100,000*
|
Accounting Fees and
Expenses
|
$50,000*
|
Miscellaneous
Expenses
|
$ 50,000*
|
Total
|
$ 487,544
|
*
Estimate
INDEMNIFICATION OF DIRECTORS AND
OFFICERS
The
Florida Business Corporation Act permits, but does not require,
corporations to indemnify a director, officer or control person of
the corporation for any liability asserted against her and
liability and expenses incurred by her in her capacity as a
director, officer, employee or agent, or arising out of her status
as such, if he or she acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests
of the corporation, and, unless the articles of incorporation
provide otherwise, whether or not the corporation has provided for
indemnification in its articles of incorporation. Our articles of
incorporation have no separate provision for indemnification of
directors, officers, or control persons.
Insofar
as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling our
company pursuant to the foregoing provisions, we have been informed
that in the opinion of the SEC, such indemnification is against
public policy as expressed in the act and is therefore
unenforceable.
RECENT SALES OF UNREGISTERED SECURITIES
The
following are all issuances of securities by the registrant since
its formation in September 2020, which were not registered under
the Securities Act. In each of these issuances the recipient
represented that he or she was acquiring the shares for investment
purposes only, and not with a view towards distribution or resale
except in compliance with applicable securities laws. No general
solicitation or advertising was used in connection with any
transaction, and the certificate evidencing the securities that
were issued contained a legend restricting their transferability
absent registration under the Securities Act or the availability of
an applicable exemption therefrom. Unless specifically set forth
below, no underwriter participated in the transaction
and no
commissions were paid in connection with the
transactions.
As
shown on the table below, on September 24, 2020, the Company issued
the following common stock as founders’ shares to the
following officers and directors at $0.0003 per share for a total
of $1,111.
Name
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Title
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I. Andrew
Weeraratne
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Chief Executive
Officer
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3,666,6667
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$1,100.00
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Eugene
Nichols
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Director
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23,333
|
$7.00
|
|
|
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Groan
Antic
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Director
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6,667
|
$2.00
|
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Kazuko
Kusunoki
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Vice
President
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6,667
|
$2.00
|
Also,
on September 24, 2020 AW paid $221 to the Company to buy 762,667
shares of common stock at $0.0003 per share on behalf of a list of
affiliates (including the directors and officers above) who AW
believed could help the operations of the Company.
In
October of 2020, in a private placement transaction, the Company
sold to 5 close business associates 66,667 shares at $0.09 per
share for a total of $6,000.
In
April of 2021, in a private placement transaction, the Company sold
213,674 common shares to close business associates for a total of
$320,512.
Exhibit No.
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Description
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Filed with
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Form of Underwriting Agreement
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Previously filed
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Articles of Incorporation Novusterra Inc.
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Previously filed
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Amended Articles of Incorporation Novusterra Inc.
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Previously filed
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Bylaws of Novusterra Inc.
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Previously filed
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Form of Warrant Agency Agreement, including Form of Warrant
Certificate
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Previously filed
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Common Stock Purchase Warrant
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Previously filed
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Opinion of Counsel
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Previously filed
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Agreement dated March 31, 2021 by and between Novusterra Inc., and
American Resources Corp.
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Previously filed
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Graphene Development Agreement dated as of March 31, 2021 by and
between Novusterra Inc. and American Resources
Corporation
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Previously filed
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First Amendment to Graphene Development Agreement dated as of May
14, 2021 by and between Novusterra Inc. and American Resources
Corporation
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Previously filed
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Loan payable Agreement dated as of September 24, 2020 by and
between Novusterra Inc., and I Andrew Weeraratne
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Previously filed
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Carbon Purchase Agreement dated as of April 24, 2021 by and between
Novusterra Inc., and American Resources Corporation
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Previously filed
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The Exclusive License Agreement signed on February 10, 2021 by and
between American Resources Corporation and Ohio
University
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Previously filed
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Code of Conduct
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Previously filed
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Financial Code of Ethics
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Previously filed
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Consent
of Auditor- Paris, Kreit & Chiu CPA LLP (formerly Benjamin and
Ko)
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Filed herewith
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Consent of Counsel (included in Exhibit 5.1)
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Previously filed
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24.1
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Power of Attorney
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Previously filed
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Audit Committee Charter
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Previously filed
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Compensation Committee Charter
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Previously filed
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Nominating Committee Charter
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Previously filed
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The
undersigned registrant hereby undertakes:
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1.
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To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement,
to:
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(i)
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include
any prospectus required by Section 10(a)(3) of the Securities
Act;
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(ii)
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reflect
in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more
than 20% change in the maximum aggregate offering price set forth
in the “Calculation of Registration Fee” table in the
effective registration statement; and
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(iii)
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To
include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
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2.
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That,
for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
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3.
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To
remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
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4.
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That
insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the registrant, the registrant has been
advised that in the opinion of the SEC, such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registration of expenses incurred or paid by a director, officer or
controlling person to the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
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5.
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That,
for the purpose of determining liability under the Securities Act
to any purchaser, if the registrant is subject to Rule 430C, each
prospectus filed pursuant to Rule 424(b) as part of a registration
statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses filed in
reliance on Rule 430A, shall be deemed to be part of and included
in the registration statement as of the date it is first used after
effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the
registration statement or made in a document incorporated or deemed
incorporated by reference into the registration statement or
prospectus that is part of the registration statement will, as to a
purchaser with a time of contract of sale prior to such first use,
supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement
or made in any such document immediately prior to such date of
first use.
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6.
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That,
for the purpose of determining liability of the registrant under
the Securities Act to any purchaser in the initial distribution of
the securities, the undersigned registrant undertakes that in a
primary offering of securities of the undersigned registrant
pursuant to this registration statement, regardless of the
underwriting method used to sell the securities to the purchaser,
if the securities are offered or sold to such purchaser by means of
any of the following communications, the undersigned registrant
will be a seller to the purchaser and will be considered to offer
or sell such securities to such purchaser:
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(i)
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Any
preliminary prospectus or prospectus of the undersigned registrant
relating to the offering required to be filed pursuant to Rule 424
(§ 230.424 );
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(ii)
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Any
free writing prospectus relating to the offering prepared by or on
behalf of the undersigned registrant or used or referred to by the
undersigned registrant;
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(iii)
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The
portion of any other free writing prospectus relating to the
offering containing material information about the undersigned
registrant or its securities provided by or on behalf of the
undersigned registrant; and
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(iv)
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Any
other communication that is an offer in the offering made by the
undersigned registrant to the purchaser.
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Pursuant
to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 4 to the registration
statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the, State of Florida on December
8, 2021.
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Novusterra Inc.
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By:
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/s/ I. Andrew Weeraratne
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Name:
I. Andrew Weeraratne
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Title:
Chief Executive Officer
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Pursuant
to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed by the following persons in
the capacities and on the dates indicated.
Signature
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Title
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Date
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/s/ Mark C. Jensen
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Chairman
of the Board of Directors
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Mark
C. Jensen
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December
8 , 2021
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/s/ I. Andrew Weeraratne
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Chief
Executive Officer (Principal Executive Officer)
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I.
Andrew Weeraratne
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December
8 2021
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/s/ Farai L. Gundan
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Chief
Financial Officer (Principal Financial Officer and Principal
Accounting Officer)
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Farai
Lorraine Gundan
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December
8, 2021
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*
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Director
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December
8, 2021
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Eugene
Nichols
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*
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Director
|
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December
8, 2021
|
Goran
Antic
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*
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Director
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December
8, 2021
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Byron
E Price
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*
Pursuant to power of attorney
By:
/s/ I. Andrew Weeraratne
I.
Andrew Weeraratne
Attorney-in-Fact