FORM 8-K

 

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): May 9, 2014

 

ON-AIR IMPACT, INC.

(Exact name of registrant as specified in its charter)

 

Nevada   333-168413   27-2692640
(State or other jurisdiction   (Commission   (IRS Employer
of incorporation)   File Number)   Identification No.)

 

420 Jericho Turnpike, Suite 110 Jericho, NY   11753
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (516) 465-3964

 

130 Maple Avenue, Suite 6D, Red Bank, NJ 07701

(Former name or former address, if changed since last report)

 

With a copy to:

Philip Magri, Esq.

The Magri Law Firm, PLLC

2642 NE 9th Avenue

Fort Lauderdale, FL 33334

T: 646.502.5900

F: 646.826.9200

pmagri@magrilaw.com

www.SEClawyerFL.com

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

[  ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
     
[  ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
     
[  ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
     
[  ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

 
 

 

Table of Contents

 

  PAGE:
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS  
     
Item 1.01 Entry into a Material Definitive Agreement 3
     
Item 2.01 Completion of Acquisition or Disposition of Assets  4
     
  The Merger and Related Transactions 4
     
  Description of Business 7
     
  Risk Factors 11
     
  Management’s Discussion and Analysis of Financial Condition and Results of Operations 21
     
  Security Ownership of Certain Beneficial Owners and Management 27
     
  Directors, Executive Officers, Promoters and Control Persons 28
     
  Executive Compensation 30
     
  Certain Relationships and Related Transactions 32
     
  Market Price of and Dividends on Common Equity and Related Stockholder Matters 33
     
  Description of Securities 34
     
  Legal Proceedings 37
     
  Indemnification of Directors and Officers 37
     
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. 38
     
Item 3.02 Unregistered Sales of Equity Securities 38
     
Item 4.01 Changes in Registrant’s Certifying Accountant 39
     
Item 5.01 Changes in Control of Registrant 40
     
Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers; Compensatory Arrangements of Certain Officers 40
     
Item 5.06 Change in Shell Company Status 40
     
Item 9.01 Financial Statements and Exhibits 40
     
SIGNATURES 42

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Current Report contains forward-looking statements, including, without limitation, in the sections captioned “Description of Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Plan of Operations,” and elsewhere. Any and all statements contained in this Report that are not statements of historical fact may be deemed forward-looking statements. Terms such as “may,” “might,” “would,” “should,” “could,” “project,” “estimate,” “pro-forma,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,” “plan,” “help,” “believe,” “continue,” “intend,” “expect,” “future,” and terms of similar import (including the negative of any of the foregoing) may be intended to identify forward-looking statements. However, not all forward-looking statements may contain one or more of these identifying terms. Forward-looking statements in this Report may include, without limitation, statements regarding (i) the plans and objectives of management for future operations, (ii) a projection of income (including income/loss), earnings (including earnings/loss) per share, capital expenditures, dividends, capital structure or other financial items, (iii) our future financial performance, including any such statement contained in a discussion and analysis of financial condition by management or in the results of operations included pursuant to the rules and regulations of the SEC, (iv) the assumptions underlying or relating to any statement described in points (i), (ii) or (iii) above.

 

The forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks and uncertainties and other influences, many of which we have no control over. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties. Factors that may influence or contribute to the inaccuracy of the forward-looking statements or cause actual results to differ materially from expected or desired results may include, without limitation, our inability to obtain adequate financing, the significant length of time and resources associated with the development of our products and related insufficient cash flows and resulting illiquidity, our inability to expand our business, significant government regulation of medical devices and the healthcare industry, the results of clinical studies or trials, lack of product diversification, volatility in the price of our raw materials, existing or increased competition, results of arbitration and litigation, stock volatility and illiquidity, and our failure to implement our business plans or strategies. A description of some of the risks and uncertainties that could cause our actual results to differ materially from those described by the forward-looking statements in this Report appears in the section captioned “Risk Factors” and elsewhere in this Report.

 

Readers are cautioned not to place undue reliance on forward-looking statements because of the risks and uncertainties related to them and to the risk factors. We disclaim any obligation to update the forward-looking statements contained in this Report to reflect any new information or future events or circumstances or otherwise.

 

Readers should read this Report in conjunction with the discussion under the caption “Risk Factors,” our financial statements and the related notes thereto in this Report, and other documents which we may file from time to time with the Securities and Exchange Commission (the “SEC”).

 

Item 1.01 Entry into a Material Definitive Agreement.

The information contained in Item 2.01 below relating to the various agreements described therein is incorporated herein by reference.

 

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Item 2.01 Completion of Acquisition or Disposition of Assets.

 

THE MERGER AND RELATED TRANSACTIONS

 

Merger Agreement

 

On May 9, 2014, On-Air Impact, Inc., a Nevada corporation (“On-Air Impact,” the “Company,” “we,” “us,” “our” and similar expressions), Eco Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of On-Air Impact (“Merger Sub”), and Eco-Logical Concepts, Inc., a Delaware corporation (“Eco-Logical”) entered into that certain Agreement and Plan of Merger and Reorganization, dated May 9, 2014 (the “Merger Agreement”), which closed on the same date (the “Closing Date”).

 

Pursuant to the terms of the Merger Agreement:

 

Merger Sub merged with and into Eco-Logical;
   
Merger Sub ceased to exist as a separate entity;
   
Eco-Logical survived the merger and became the Company’s subsidiary (the “Surviving Corporation”); and
   
The business and operations of Eco-Logical became the business and operations of the Company.

 

At the closing of the Merger:

 

Every one hundred (100) shares of common stock, par value $0.0001 per share, of Eco-Logical issued and outstanding immediately prior to the closing of the Merger was converted into one (1) share of common stock, par value $0.0001 per share (the “Common Stock”), of the Company, rounding up to the nearest whole number for resulting fractional shares; and

   
Each share of Series A Non-Convertible Preferred Stock, par value $0.0001 per share, of Eco-Logical issued and outstanding immediately prior to the closing of the Merger was converted into one share of Series B Non-Convertible Preferred Stock, par value $0.0001 per share (the “Series B Non-Convertible Preferred Stock), of the Company.

 

As a result of the foregoing, an aggregate of 550,003 shares of our Common Stock and 200,000 shares of the Company’s Series B Non-Convertible Preferred Stock (together, the “Merger Shares”) were issued to the holders of the Eco-Logical’s common stock and Series A Non-Convertible Preferred Stock.

 

Of the 550,003 shares of Common Stock issued as part of the Merger Shares, 500,003 shares were issued to Joel Falitz, the Chief Executive Officer and President of Eco-Logical, in exchange for his 50,000,250 shares of Eco-Logical’s Common Stock (rounded up to the nearest whole number). The remaining 50,000 shares of Common Stock and all of the 200,000 shares of our Series B Preferred Stock were issued to Maverick, LLC (“Maverick”) in exchange for its 5,000,000 shares of Eco-Logical’s Common Stock and 200,000 shares of Eco-Logical’s Series A Preferred Stock. Ester Barrios is a Managing Member of Maverick.

 

Maverick had received the 5,000,000 shares of Eco-Logical’s common stock and 200,000 shares of Eco-Logical’s Series A Preferred Stock pursuant to the conversion of a promissory note issued by Eco-Logical to Maverick on May 8, 2014 for the principal amount of $25,000 and bearing interest at rate of 8% per annum. Pursuant to the terms of the promissory note, simultaneously with the sale of all or substantially all of the assets of Eco-Logical, upon the merger or combination of Eco-Logical with another entity (other than for changing domicile), or change of control of Eco-Logical, the outstanding principal and accrued interest thereon under the promissory note automatically converted, without any action being taken by Eco-Logical or Maverick, into a number of shares of common stock and/or preferred stock of Eco-Logical which would enable Maverick to have voting and dispositive control of Eco-Logical. On May 9, 2014, the Company notified Maverick that the secured obligations would be converted into 5,000,000 shares of Eco-Logical’s common stock and 200,000 shares of Eco-Logical’s Series A Preferred Stock. Pursuant to Eco-Logical’s Series A Certificate of Designation filed with the Secretary of State of the State of Delaware, the outstanding shares of Series A Non-Convertible Preferred Stock voted together with the shares of Common Stock and other voting securities of Eco-Logical as a single class and, regardless of the number of shares of Series A Non-Convertible Preferred Stock outstanding and as long as at least one of such shares of Series A Non-Convertible Preferred Stock is outstanding, represented eighty percent (80%) of all votes entitled to be voted at any annual or special meeting of stockholders of Eco-Logical or action by written consent of stockholders. Each outstanding share of the Series A Non-Convertible Preferred Stock shall represent its proportionate share of the 80% which is allocated to the outstanding shares of Series A Non-Convertible Preferred Stock. The voting rights of shares of our Series B Non-Convertible Preferred Stock are identical to the voting rights Eco-Logical’s Series A Preferred Stock. Therefore, as a result of the Merger, Maverick has voting control over On-Air Impact.

 

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In addition, pursuant to the Merger Agreement:

 

The certificate of incorporation, including any amendments and certificates of designation thereto, of Eco-Logical became the certificate of incorporation and the certificates of designations of the Surviving Corporation until thereafter amended in accordance with the terms thereof or as provided by applicable law; and the bylaws of Eco-Logical in effect immediately prior to the Effective Time became the bylaws of the Surviving Corporation until thereafter amended in accordance with the terms thereof, the certificate of incorporation of the Surviving Corporation or as provided by applicable law.

   

The directors and officers of Merger Sub became the directors and officers, respectively, of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the certificate of incorporation and bylaws of the Surviving Corporation.

 

The Merger Agreement contained customary representations, warranties and covenants. A Certificate of Merger was filed with the Secretary of State of the State of Delaware in accordance with the Delaware General Corporation Law which became effective upon filing on May 9, 2014 (the effective time of the Merger being hereinafter referred to as the “Effective Time”).

 

The Merger will be treated as a recapitalization of the Company for financial accounting purposes. Eco-Logical will be considered the acquirer for accounting purposes, and our historical financial statements before the Merger will be replaced with the historical financial statements of Eco-Logical before the Merger in all future filings with the SEC.

 

The Merger is intended to be treated as a tax-free reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended.

 

The issuance of the Merger Shares to the holders of Eco-Logical’s capital stock in connection with the Merger was not registered under the Securities Act and made in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act, which exempts transactions by an issuer not involving any public offering, promulgated by the SEC under that section. These securities may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirement.

 

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The form of the Merger Agreement is filed as an exhibit to this Report. All descriptions of the Merger Agreement herein are qualified in their entirety by reference to the text thereof filed as an exhibit hereto, which is incorporated herein by reference.

 

Departure and Appointment of Directors and Officers

 

On the Closing Date, the Board of Directors of the Company increased the size of the Board to three (3) persons and appointed Joel Falitz, the President and Chief Executive Officer of Eco-Logical, to fill such vacancy and to serve as the Chairman of our Board of Directors for a one-year period until the next annual stockholders’ meeting or until his successor is elected and qualified.

 

Also on the Closing Date, Dorothy Whitehouse, our Chief Executive Officer and President before the Merger, and Edward Whitehouse, our Secretary and Treasurer before the Merger, resigned from these executive officer positions, and Joel Falitz was appointed as our Chief Executive Officer, President, Secretary and Treasurer. Dorothy Whitehouse and Edward Whitehouse also resigned as members of the Board of Directors of Merger Sub. Joel Falitz is the sole member of the Board of Directors of the Surviving Corporation and serves as its Chief Executive Officer, President, Secretary and Treasurer.

 

Share Exchange and Share Redemption

 

On May 12, 2014, On-Air Impact entered into a Share Exchange Agreement with Edward Whitehouse, a director of the Company, pursuant to which the Company exchanged 10,000,000 shares of Common Stock held by Mr. Whitehouse for 2,000,000 shares of Series A Convertible Preferred Stock (the “Share Exchange”). Pursuant to our Amended and Restated Certificate of Designation for the Series A Convertible Preferred Stock, each share of Series A Convertible Preferred Stock is convertible by the holder thereof into twenty (20) shares of our Common Stock; provided, however, each holder of Series A Convertible Preferred Stock may not convert any part of the Series A Convertible Preferred Stock if such conversion would cause such holder or any of its assignees to beneficially own more than 4.99% of the Common Stock of the Company.

 

After the Share Exchange, the Company then redeemed 131,370 shares of Series A Convertible Preferred Stock from Mr. Whitehouse for an aggregate redemption price of $26,274 pursuant to a Share Redemption Agreement, dated May 12, 2014, between the Company and Mr. Whitehouse (the “Share Redemption”).

 

The Share Exchange Agreement and Share Redemption Agreement are filed as exhibits to this Report and are incorporated by reference herein.

 

Pro Forma Ownership

 

The table below reflects the capitalization of the Company before and after giving effect to the Merger, the Share Exchange and the Share Redemption:

 

Securities  Pre-Merger   Post-Merger   Post-Share
Exchange
   Post-Share Redemption   Currently Issued and Outstanding 
Common Stock, par value $0.0001 per share (100,000,000 authorized)   10,123,500    10,673,503    673,503    673,503    673,503 
Series A Preferred Stock, par value $0.0001 (3,000,000 authorized)   0    0    2,000,000    1,868,630    1,868,630 
Series B Preferred Stock, par value $0.0001 (200,000 authorized)   0    200,000    200,000    200,000    200,000 

 

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No other securities convertible into or exercisable or exchangeable for our securities are outstanding.

 

Our Common Stock is quoted on the OTC Markets’ OTCQB under the symbol “OAIR.”

 

Accounting Treatment; Change of Control

 

The Merger is being accounted for as a “reverse merger,” and Eco-Logical is deemed to be the acquirer in the reverse merger. Consequently, the assets and liabilities and the historical operations that will be reflected in the financial statements prior to the Merger will be those of Eco-Logical and will be recorded at the historical cost basis of Eco-Logical, and the consolidated financial statements after completion of the Merger will include the assets and liabilities of Eco-Logical, historical operations of Eco-Logical and operations of the Company and its subsidiaries from the closing date of the Merger. As a result of the issuance of the shares of our Common Stock and Series B Non-Convertible Preferred Stock pursuant to the Merger, a change in control of the Company occurred as of the date of consummation of the Merger. Except as described in this Current Report, no arrangements or understandings exist among present or former controlling stockholders with respect to the election of members of our Board of Directors and, to our knowledge, no other arrangements exist that might result in a change of control of the Company.

 

We continue to be a “smaller reporting company,” as defined under the Exchange Act, following the Merger.

 

DESCRIPTION OF BUSINESS

 

Immediately following the Merger, the business of Eco-Logical became our business.

 

As used in this discussion, Eco-Logical Concepts Inc. (the “Company,” “we,” “us,” “Eco,” “Eco-Logical,” “our,” and similar terms) was incorporated in the State of Delaware on November 30, 2011.

 

Prior to the Merger, we were a “shell company” (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). As a result of the Merger, we have ceased to be a shell company. The information contained in this Current Report constitute the current “Form 10 information” necessary to satisfy the conditions contained in Rule 144(i)(2) under the Securities Act of 1933, as amended (the “Securities Act”).

 

Business Overview

 

Located in Jericho, New York, Eco-Logical provides bio-remediation services for sewers, sludge ponds, septic tanks, lagoons, farms, car washes, portable sanitation facilities, grease tanks, lakes and ponds. We provide a suite of tablet-based products that can be added to waste systems. The active ingredients in our tablets oxygenate wastewater, remove hydrogen sulfide odors, prevent corrosion in wastewater systems and initiate aerobic biological breakdown of organic sludge including fats, oils and grease. The tablets are non-toxic to the environment, non-caustic and comprised of natural ingredients that do not require any special permitting for use and disposal. The product is simple to use directly by the end consumer.

 

The Company has formulated a business model that management believes can help it grow and achieve economies of scale over time. We have undertaken the necessary due diligence and prepared a business that will enable us to compete in the market for bio-remediation services.

 

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Product Development

 

We have developed a variety of products to serve various market segments:

 

Tank-Eze Wastewater Tablets. These are solid, sustained release tablets which provide active oxygen, nutrients, buffers and safe aerobic microorganisms to help clean, control odor and keep wastewater systems running efficiently with reduced downtime. These tablets can be used in pump and lift stations, septic tank systems and other waste-water treatment systems.
  
Trap-Eze Grease Trap Tablets. These are solid, sustained release tablets which provide active oxygen, nutrients, buffers and safe aerobic microorganisms to help clean, deodorize and keep grease traps running efficiently with reduced downtime. These tablets can be used by a wide variety of food service industry customers.
  
Wash-Eze Car Wash Tablets. These are solid, sustained release tablets that reduce noxious odors, spotting and other problems associated with the use of reclaimed (e.g., recycled) water. Environmentally safe, non-toxic, micro-fine components and aerobic and anaerobic microorganisms, help clean and mitigate odors, while providing nutrients, buffers and active oxygen to increase efficiency and reduce maintenance.

 

Revenue Model

 

We are in the process of establishing a network of master distributors, full line distributors and sales representatives to service a diverse group of end users. Our target markets include municipalities, retail consumers, commercial and industrial users, food processors, hospitals, supermarkets, restaurants and the janitorial supply industry as follows:

 

1.Municipalities:

 

a.Sewage treatment plants
   
b.Pump and Lift Stations
   
c.Ponds and small lakes (golf courses typically have odor and algae issues in their water hazards)

 

2.Commercial Foods Industry: Facilities with grease traps including restaurants, supermarkets and other facilities with commercial kitchens.

 

3.Hospitals and Medical Facilities: Our products are used in the breakdown of organic material such as blood and tissue which typically clogs hospital drains and causes odor problems.

 

4.Industrial Food Processing Plants

 

5.Retail: A significant percentage of homes and other facilities throughout the country operate with septic tanks. Our tablets are designed to treat the waste material that builds up in the tanks and prevent the buildup of methane and sulfuric acid from compacted solids which leads to the degradation and potential collapse of the septic system.

 

We intend to target sales for municipalities, the commercial foods industry, hospital and medical facilities and industrial food processing plants using a network of master distributorships, full-line distributors and other sales representatives who will work with us on a commission basis. We intend to reach the retail market through info-commercials to build awareness of our products and brand, internet marketing and eventual placement in chain retail locations and small retailers directly or through distributors with traditional retailer/wholesaler relationships.

 

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Competitive Analysis

 

Our competition does not come from other tablets as we are unique in the market. However, within this category there are other alternatives. They include pumping which is costly, intrusive and has a negative impact on the environment. There are powders and liquids that contain bacteria. Neither contain any oxygenating elements nor do they resolve issues with accumulated and compacted solid material. Our tablets embed themselves into the compacted mass and effervesce disturbing the material and infusing oxygen into the area so aerobic bacteria can go to work. Grease traps, lift stations, septic systems are all designed to allow for the flow of liquid through the systems. Therefore, powders and liquids will simply flow through the system and not establish bacteria colonies.

 

The Company’s primary competitors in the environmental bio-remediation services industry are Spartan Chemical, Zep, Arrow Chemical. We consider the competition to be competent, experienced, and they have greater financial and marketing resources than we do at the present time. Our ability to compete may be adversely affected by the ability of these competitors to devote greater resources to the marketing of their services than are available to our Company. Some of the Company’s competitors also offer a wider scope of services and have greater name recognition. Our competitors include large firms that also have extensive existing customer bases and established distribution channels

 

Sources and Availability of Raw Materials and the Names of Principal Suppliers

 

We purchase our raw materials as bulk dry bacterial enzymes from Biocat. Biocat ships the bulk biomaterial to Integral Processing who press and package the tablets. Large orders of our finished product are then shipped directly from Integral to our major customers. Smaller orders are shipped to our office.

 

Within our industry there are a number of manufacturers and pressers, giving us flexibility and options.

 

Dependence on One or a Few Major Customers

 

We currently have a few major customers. We are dependent on them for the majority of our sales.

 

Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or Labor Contracts

 

We do not currently own any patents or trademarks nor are we a party to any licenses, franchises, concessions, royalty agreements or labor contracts.

 

Need for any Government Approval of Products or Services

 

There are no government regulations for our product or any powder or liquid enzyme products.

 

Effect of Existing or Probable Governmental Regulations on the Company

 

We will be subject to federal laws and regulations that relate directly or indirectly to our operations including securities laws. We will also be subject to common business and tax rules and regulations pertaining to the operation of our business.

 

Research and Development Activities

 

We have not spent any money on research and development activities during the last two fiscal years.

 

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Costs and Effect of Compliance with Environmental Laws

 

Our operations are regulated under a number of federal, state, local and foreign environmental, health and safety laws, and regulations that govern, among other things, the discharge of hazardous materials into the air, soil and water, as well as the use, handling, storage and disposal of these materials. These laws and regulations include, but are not limited to, the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, and the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), as well as analogous state, local and foreign laws. Environmental laws may also become more stringent over time, which could increase our compliance costs.

 

We are subject to various federal, state, local and foreign laws and regulations governing the production, transport and import of industrial chemicals. Notably, the Toxic Substances Control Act gives the U.S. Environmental Protection Agency (“EPA”), the authority to track, test and/or ban chemicals that may pose an environmental or human-health hazard. We are required to comply with certification, testing, labeling and transportation requirements associated with regulated chemicals.

 

In the ordinary course of our business, we are subject to environmental inspections and monitoring by governmental enforcement authorities. In addition, our production facilities, warehouse facilities and operations require operating permits that are subject to renewal, modification and revocation.

 

Employees

 

We have a total of one full-time employee, our President, and three part-time employees. The Company currently plans to hire one more employee within the next three months, whose principal responsibilities will be as a sales representative.

 

Dividend Policy

 

We have never paid or declared dividends on our securities. The payment of cash dividends, if any, in the future is within the discretion of our Board and will depend upon our earnings, our capital requirements, financial condition and other relevant factors. We intend, for the foreseeable future, to retain future earnings for use in our business.

 

Description of Properties

 

Our principal executive offices are located at 420 Jericho Turnpike, Suite 110, Jericho, NY, 11753. Our telephone number is (516) 465-3964. Our executive offices are currently provided to us for no charge by our President. In the future, as we expand, we expect to execute a lease agreement with our President or lease other office space.

 

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RISK FACTORS

 

AN INVESTMENT IN OUR SECURITIES IS HIGHLY SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. WE FACE A VARIETY OF RISKS THAT MAY AFFECT OUR OPERATIONS OR FINANCIAL RESULTS AND MANY OF THOSE RISKS ARE DRIVEN BY FACTORS THAT WE CANNOT CONTROL OR PREDICT. BEFORE INVESTING IN THE SECURITIES YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISKS, TOGETHER WITH THE FINANCIAL AND OTHER INFORMATION CONTAINED IN THIS REPORT. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCURS, OUR BUSINESS, PROSPECTS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS COULD BE MATERIALLY ADVERSELY AFFECTED. IN THAT CASE, THE TRADING PRICE OF OUR COMMON STOCK WOULD LIKELY DECLINE AND YOU MAY LOSE ALL OR A PART OF YOUR INVESTMENT. ONLY THOSE INVESTORS WHO CAN BEAR THE RISK OF LOSS OF THEIR ENTIRE INVESTMENT SHOULD CONSIDER AN INVESTMENT IN OUR SECURITIES.

 

THIS REPORT CONTAINS CERTAIN STATEMENTS RELATING TO FUTURE EVENTS OR THE FUTURE FINANCIAL PERFORMANCE OF OUR COMPANY. PROSPECTIVE INVESTORS ARE CAUTIONED THAT SUCH STATEMENTS ARE ONLY PREDICTIONS AND INVOLVE RISKS AND UNCERTAINTIES, AND THAT ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY. IN EVALUATING SUCH STATEMENTS, PROSPECTIVE INVESTORS SHOULD SPECIFICALLY CONSIDER THE VARIOUS FACTORS IDENTIFIED IN THIS REPORT, INCLUDING THE MATTERS SET FORTH BELOW, WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS.

 

If any of the following or other risks materialize, the Company’s business, financial condition, and results of operations could be materially adversely affected which, in turn, could adversely impact the value of our securities. In such a case, investors in our securities could lose all or part of their investment.

 

Prospective investors should consider carefully whether an investment in the Company is suitable for them in light of the information contained in this Report and the financial resources available to them. The risks described below do not purport to be all the risks to which the Company could be exposed. This section is a summary of certain risks and is not set out in any particular order of priority. They are the risks that we presently believe are material to the operations of the Company. Additional risks of which we are not presently aware or which we presently deem immaterial may also impair the Company’s business, financial condition or results of operations.

 

Risks Associated with Our Business

 

We have a limited operating history upon which investors can evaluate our future prospects.

 

Eco-Logical Concepts was incorporated in the State of Delaware on November 30, 2011. Therefore, we have limited operating history upon which an evaluation of our business plan or performance and prospects can be made. The business and prospects of the Company must be considered in the light of the potential problems, delays, uncertainties and complications encountered in connection with a newly established business. The risks include, but are not limited to, the possibility that we will not be able to develop functional and scalable products and services, or that although functional and scalable, our products and services will not be economical to market; that our competitors hold proprietary rights that preclude us from marketing such products; that our competitors market a superior or equivalent product; that we are not able to upgrade and enhance our technologies and products to accommodate new features and expanded service offerings; or the failure to receive necessary regulatory clearances for our products. To successfully introduce and market our products at a profit, we must establish brand name recognition and competitive advantages for our products. There are no assurances that the Company can successfully address these challenges. If it is unsuccessful, the Company and its business, financial condition and operating results could be materially and adversely affected.

 

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Given the limited operating history, management has little basis on which to forecast future demand for our products from our existing customer base, much less new customers. The current and future expense levels of the Company are based largely on estimates of planned operations and future revenues rather than experience. It is difficult to accurately forecast future revenues because the business of the Company is new and its market has not been developed. If the forecasts for the Company prove incorrect, the business, operating results and financial condition of the Company will be materially and adversely affected. Moreover, the Company may be unable to adjust its spending in a timely manner to compensate for any unanticipated reduction in revenue. As a result, any significant reduction in revenues would immediately and adversely affect the business, financial condition and operating results of the Company.

 

We are not currently profitable and may not become profitable.

 

At December 31, 2013, we had $4,205 in cash on hand and an accumulated deficit of $48,276 and had $19,530 in revenues to date ($37,069 since inception on November 30, 2011). In their report for the fiscal year ended December 31, 2013, our auditors have expressed that there is substantial doubt as to our ability to continue as a going concern. We have incurred operating losses since our formation and expect to incur losses and negative operating cash flows for the foreseeable future. We expect to incur substantial losses for the foreseeable future and may never become profitable. We also expect to continue to incur significant operating and capital expenditures for the next several years and anticipate that our expenses will increase substantially in the foreseeable future. We also expect to experience negative cash flow for the foreseeable future as we fund our operating losses and capital expenditures. As a result, we will need to generate significant revenues in order to achieve and maintain profitability. We may not be able to generate these revenues or achieve profitability in the future. Our failure to achieve or maintain profitability could negatively impact the value of our Common Stock.


Our success is highly dependent on Joel Falitz, our President and CEO.

 

In the early stages of development, the Company’s business will be significantly dependent on the Company’s Management team. The Company’s success will be particularly dependent upon Joel Falitz, our sole executive officer and director, the loss of who would have a material adverse effect on the Company.

 

We may not be able to compete successfully with current and future competitors.

 

Eco has many potential competitors in the bio-remediation services industry. We will compete, in our current and proposed businesses, with other companies, most of which have far greater marketing and financial resources and experience than we do. We cannot guarantee that we will be able to penetrate our intended market and be able to compete profitably, if at all. In addition to established competitors, there is ease of market entry for other companies that choose to compete with us. Effective competition could result in price reductions, reduced margins or have other negative implications, any of which could adversely affect our business and chances for success. Competition is likely to increase significantly as new companies enter the market and current competitors expand their services. Many of these potential competitors are likely to enjoy substantial competitive advantages, including, but not limited to, larger staffs, greater name recognition, larger and established customer bases and substantially greater financial, marketing, technical and other resources. To be competitive, we must respond promptly and effectively to industry dynamics, evolving standards and competitors’ innovations by continuing to enhance our services and sales and marketing channels. Any pricing pressures, reduced margins or loss of market share resulting from increased competition, or our failure to compete effectively, could fatally damage our business and chances for success.


We may not be able to manage our growth effectively.

 

We must continually implement and improve our products and/or services, operations, operating procedures and quality controls on a timely basis, as well as expand, train, motivate and manage our work force in order to accommodate anticipated growth and compete effectively in our market segment. Successful implementation of our strategy also requires that we establish and manage a competent, dedicated work force and employ additional key employees in corporate management, product design, client service and sales. We can give no assurance that our personnel, systems, procedures and controls will be adequate to support our existing and future operations. If we fail to implement and improve these operations, there could be a material, adverse effect on our business, operating results and financial condition.

 

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If we do not continually update our services, they may become obsolete and we may not be able to compete with other companies.

 

We cannot assure you that we will be able to keep pace with advances or that our services will not become obsolete. We cannot assure you that competitors will not develop related or similar services and offer them before we do, or do so more successfully, or that they will not develop services and products more effective than any that we have or are developing. If that happens, our business, prospects, results of operations and financial condition will be materially adversely affected.

 

We may be required to borrow funds in the future.

 

If the Company incurs indebtedness, a portion of its cash flow will have to be dedicated to the payment of principal and interest on such indebtedness. Typical loan agreements also might contain restrictive covenants, which may impair the Company’s operating flexibility. Such loan agreements would also provide for default under certain circumstances, such as failure to meet certain financial covenants. A default under a loan agreement could result in the loan becoming immediately due and payable and, if unpaid, a judgment in favor of such lender which would be senior to the rights of members of the Company. A judgment creditor would have the right to foreclose on any of the Company’s assets resulting in a material adverse effect on the Company’s business, operating results or financial condition.

 

Failure to establish or enhance our brand recognition could have a material adverse effect on our business and results of operations.

 

We believe we will need to expend significant time, effort and resources to enhance the recognition of our brands. We believe developing our brand will be important to our sales and marketing efforts. If we fail to establish or enhance the recognition of our brands, it could have a material adverse effect on our ability to sell our products and adversely affect our business and results of operations. If we fail to develop a positive public image and reputation, our business with our existing customers could decline and we may fail to develop additional business, which could adversely affect our results of operations.

 

Defects in our products or failures in quality control could impair our ability to sell our products or could result in product liability claims, litigation and other significant events involving substantial costs.

 

Detection of any significant defects in our products or failure in our quality control procedures may result in, among other things, delay in time-to-market, loss of sales and market acceptance of our products, diversion of development resources, and injury to our reputation. The costs we may incur in correcting any product defects may be substantial. Additionally, errors, defects or other performance problems could result in financial or other damages to our customers, which could result in litigation. Product liability litigation, even if we prevail, would be time consuming and costly to defend, and if we do not prevail, could result in the imposition of a damages award. We presently maintain product liability insurance; however, it may not be adequate to cover any claims.

 

There can be no assurances of protection for proprietary rights or reliance on trade secrets.

 

In certain cases, the Company may rely on trade secrets to protect intellectual property, proprietary technology and processes, which the Company has acquired, developed or may develop in the future. There can be no assurances that secrecy obligations will be honored or that others will not independently develop similar or superior products or technology. The protection of intellectual property and/or proprietary technology through claims of trade secret status has been the subject of increasing claims and litigation by various companies both in order to protect proprietary rights as well as for competitive reasons even where proprietary claims are unsubstantiated. The prosecution of proprietary claims or the defense of such claims is costly and uncertain given the uncertainty and rapid development of the principles of law pertaining to this area. The Company, in common with other firms, may also be subject to claims by other parties with regard to the use of intellectual property, technology information and data, which may be deemed proprietary to others.

 

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Our ability to become profitable and continue as a going concern will be dependent on our ability to attract, employ and retain highly skilled individuals to serve our clients.

 

The nature of our business requires that we employ skilled persons to perform highly skilled and specialized tasks for our Company. Our failure to retain such personnel could have a material adverse effect on our ability to offer services to clientele, and could potentially have a negative effect on our business. There is no guarantee that skilled persons will be available and willing to work for us in the future, nor is there any guarantee that we could afford to retain them if they are available at a future time.

 

Our projections and forward-looking information may prove to be incorrect.

 

Management has prepared projections regarding the Company’s anticipated financial performance. The Company’s projections are hypothetical and based upon a presumed financial performance of the Company, the addition of a sophisticated and well-funded marketing plan, and other factors influencing the business of the Company. The projections are based on Management’s best estimate of the probable results of operations of the Company, based on present circumstances, and have not been reviewed by the Company’s independent accountants. These projections are based on several assumptions, set forth therein, which Management believes are reasonable. Some assumptions upon which the projections are based, however, invariably will not materialize due to the inevitable occurrence of unanticipated events and circumstances beyond Management’s control. Therefore, actual results of operations will vary from the projections, and such variances may be material. Assumptions regarding future changes in sales and revenues are necessarily speculative in nature. In addition, projections do not and cannot take into account such factors as general economic conditions, unforeseen regulatory changes, the entry into the Company’s market of additional competitors, the terms and conditions of future capitalization, and other risks inherent to the Company’s business. While Management believes that the projections accurately reflect possible future results of the Company’s operations, those results cannot be guaranteed.

 

We may not be able to manage our growth effectively.

 

We must continually implement and improve our products and/or services, operations, operating procedures and quality controls on a timely basis, as well as expand, train, motivate and manage our work force in order to accommodate anticipated growth and compete effectively in our market segment. Successful implementation of our strategy also requires that we establish and manage a competent, dedicated work force and employ additional key employees in corporate management, product development, client service and sales. We can give no assurance that our personnel, systems, procedures and controls will be adequate to support our existing and future operations. If we fail to implement and improve these operations, there could be a material, adverse effect on our business, operating results and financial condition.

 

If we make any acquisitions or enter into a merger or similar transaction, our business may be negatively impacted.

 

We have no present plans for any specific acquisition. However, in the event that we make acquisitions in the future, we could have difficulty integrating the acquired companies’ personnel and operations with our own. In addition, the key personnel of the acquired business may not be willing to work for us. We cannot predict the effect expansion may have on our core business. Regardless of whether we are successful in making an acquisition, the negotiations could disrupt our ongoing business, distract our management and employees and increase our expenses. In addition to the risks described above, acquisitions, mergers and other similar transactions are accompanied by a number of inherent risks, including, without limitation, the following:

 

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the difficulty of integrating acquired products, services or operations;
   
the potential disruption of the ongoing businesses and distraction of our Management and the management of acquired companies;
   
the difficulty of incorporating acquired rights or products into our existing business;
   
difficulties in disposing of the excess or idle facilities of an acquired company or business and expenses in maintaining such facilities;
   
difficulties in maintaining uniform standards, controls, procedures and policies;
   
the potential impairment of relationships with employees and customers as a result of any integration of new management personnel;
   
the potential inability or failure to achieve additional sales and enhance our customer base through cross-marketing of the products to new and existing customers;
   
the effect of any government regulations which relate to the business acquired; and
   
potential unknown liabilities associated with acquired businesses or product lines, or the need to spend significant amounts to retool, reposition or modify the marketing and sales of acquired products or the defense of any litigation, whether or not successful, resulting from actions of the acquired company prior to our acquisition.

 

Our business could be severely impaired if and to the extent that we are unable to succeed in addressing any of these risks or other problems encountered in connection with these acquisitions, many of which cannot be presently identified, these risks and problems could disrupt our ongoing business, distract our management and employees, increase our expenses and adversely affect our results of operations.

There might be unanticipated obstacles to the execution of our business plan.

 

The Company’s business plans may change significantly. The Company’s potential business endeavors are capital intensive. Management believes that the Company’s chosen activities and strategies are achievable in light of current economic and legal conditions with the skills, background, and knowledge of the Company’s principals and advisors. Management reserves the right to make significant modifications to the Company’s stated strategies depending on future events.

 

We may engage in transactions that present conflicts of interest.

 

The Company’s officers and directors may enter into agreements with the Company from time to time which may not be equivalent to similar transactions entered into with an independent third party. A conflict of interest arises whenever a person has an interest on both sides of a transaction. While we believe that it will take prudent steps to ensure that all transactions between the Company and any officer or director is fair, reasonable, and no more than the amount it would otherwise pay to a third party in an “arms’-length” transaction, there can be no assurance that any transaction will meet these requirements in every instance.


We have agreed to indemnify our officers and directors against lawsuits to the fullest extent of the law.

 

On-Air is a Nevada corporation. Nevada law permits the indemnification of officers and directors against expenses incurred in successfully defending against a claim. Nevada law also authorizes Nevada corporations to indemnify their officers and directors against expenses and liabilities incurred because of their being or having been an officer or director. Our organizational documents provide for this indemnification to the fullest extent permitted by law.

 

We currently do not maintain any insurance coverage. In the event that we are found liable for damage or other losses, we would incur substantial and protracted losses in paying any such claims or judgments. Although we intend to acquire such coverage immediately upon resources becoming available, there is no guarantee that we can secure such coverage or that any insurance coverage would protect us from any damages or loss claims filed against it.

 

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Risks Relating to Ownership of Our Common Stock

 

The shares of Common Stock issued to the former Eco-Logical stockholders pursuant to the Merger Agreement are “restricted securities” and, as such, may not be sold except in limited circumstances.

 

The shares of Common Stock of On-Air Impact, Inc. issued to the former stockholders of Eco-Logical in exchange for their shares of common stock of Eco-Logical pursuant to the Merger Agreement have not been registered under the Securities Act or any state securities law. As a result, the shares will be “restricted securities” under the Securities Act and they may not be sold, transferred, pledged or otherwise disposed of unless they are registered under the Securities Act and applicable state securities laws, except in a transaction which, to our satisfaction and that of our counsel, is exempt from such registration requirements. We are not currently required to register the resale of the shares of Common Stock to enable those shares to be freely tradable and even if we were, we cannot assure you that the SEC will declare the registration statement effective, or that once declared effective, that the SEC will not take action to suspend such effectiveness.

 

In addition, Rule 144 promulgated under the Securities Act, which permits the resale of the shares of Common Stock, subject to various terms and conditions, until one year has elapsed since we have filed this Current Report containing “Form 10 information” and only if we are current in meeting our SEC filing requirements. As a result, your ability to sell your shares may be limited.

 

Because the Merger Agreement with On-Air Impact, Inc. was deemed a reverse acquisition, we may not be able to attract the attention of major brokerage firms, which may limit the liquidity of our Common Stock and may make it more difficult for us to raise additional capital in the future.

 

Additional risks may exist because the Merger Agreement was considered a “reverse acquisition” under accounting and securities regulations. Certain SEC rules are more restrictive when applied to reverse acquisition companies, such as the ability of stockholders to resell their shares of Common Stock pursuant to Rule 144. In addition, securities analysts of major brokerage firms may not provide coverage of our Common Stock because there may be little incentive for brokerage firms to recommend the purchase of our Common Stock. As a result, our Common Stock may have limited liquidity and investors may have difficulty selling their shares. In addition, we cannot assure you that brokerage firms will want to conduct any secondary offerings on our behalf if we seek to raise additional capital in the future. Our inability to raise additional capital may have a material adverse effect on our business.

 

There is not now, and there may not ever be, an active market for the Company’s Common Stock.

 

The Company’s Common Stock is currently quoted on the OTCQB under the symbol “OAIR”. If and when our stock does begin to trade, such trading may be extremely sporadic. For example, several days may pass before any shares may be traded. As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations of the price of, our Common Stock. Accordingly, investors must assume they may have to bear the economic risk of an investment in our Common Stock for an indefinite period of time. There can be no assurance that a more active market for the Common Stock will develop, or if one should develop, there is no assurance that it will be sustained. This severely limits the liquidity of our Common Stock, and would likely have a material adverse effect on the market price of our Common Stock and on our ability to raise additional capital.

 

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We cannot assure you that the Common Stock will become liquid.

 

Until our Common Stock is listed on a national securities exchange such as the New York Stock Exchange or the Nasdaq Stock Market, we expect our Common Stock to remain eligible for quotation on the OTCQB. In those venues, however, an investor may find it difficult to obtain accurate quotations as to the market value of our Common Stock. In addition, if we fail to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established customers and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling our Common Stock, which may further affect the liquidity of the Common Stock. This would also make it more difficult for us to raise capital.

 

Our Common Stock is subject to the “penny stock” rules of the SEC and the trading market in the securities is limited, which makes transactions in the stock cumbersome and may reduce the value of an investment in the stock.

 

The SEC has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:

 

that a broker or dealer approve a person’s account for transactions in penny stocks; and
   
the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

 

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:

 

Obtain financial information and investment experience objectives of the person; and
   
make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

 

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form sets forth:

 

the basis on which the broker or dealer made the suitability determination; and
   
that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

 

Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of common stock and cause a decline in the market value of stock.

 

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

 

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The price of our Common Stock may become volatile, which could lead to losses by investors and costly securities litigation.

 

The trading price of our Common Stock is likely to be highly volatile and could fluctuate in response to factors such as:

 

actual or anticipated variations in our operating results;
   
announcements of developments by us or our competitors;
   
announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
   
adoption of new accounting standards affecting our Company’s industry;
   
additions or departures of key personnel;
   
sales of our Common Stock or other securities in the open market; and
   
other events or factors, many of which are beyond our control.

 

The stock market is subject to significant price and volume fluctuations. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been initiated against the company. Litigation initiated against us, whether or not successful, could result in substantial costs and diversion of our management’s attention and resources, which could harm our business and financial condition.

 

We do not anticipate dividends to be paid on our Common Stock, and investors may lose the entire amount of their investment.

 

Cash dividends have never been declared or paid on the Common Stock, and we do not anticipate such a declaration or payment for the foreseeable future. We expect to use future earnings, if any, to fund business growth. Therefore, stockholders will not receive any funds absent a sale of their shares. We cannot assure stockholders of a positive return on their investment when they sell their shares, nor can we assure that stockholders will not lose the entire amount of their investment.

 

If securities analysts do not initiate coverage or continue to cover our Common Stock or publish unfavorable research or reports about our business, this may have a negative impact on the market price of our Common Stock.

 

The trading market for the Common Stock will depend on the research and reports that securities analysts publish about our business and the Company. We do not have any control over these analysts. There is no guarantee that securities analysts will cover the Common Stock. If securities analysts do not cover the Common Stock, the lack of research coverage may adversely affect its market price. If we are covered by securities analysts, and our stock is the subject of an unfavorable report, our stock price and trading volume would likely decline. If one or more of these analysts ceases to cover the Company or fails to publish regular reports on the Company, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.

 

You may experience dilution of your ownership interests because of the future issuance of additional shares of the Common Stock

 

In the future, we may issue our authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of our present stockholders and the purchasers of Common Stock. We are currently authorized to issue an aggregate of 110,000,000 shares of capital stock consisting of 100,000,000 shares of Common Stock and 10,000,000 shares of preferred stock with preferences and rights to be determined by the our Board of Directors. As of the closing of the Merger Agreement and the date hereof, there were a total of 673,503 shares of our Common Stock, 1,868,630 shares of Series A Convertible Preferred Stock and 200,000 shares of our Series B Non-Convertible Preferred Stock outstanding. We may also issue additional shares of our Common Stock or other securities that are convertible into or exercisable for our Common Stock in connection with hiring or retaining employees, future acquisitions, future sales of its securities for capital raising purposes, or for other business purposes. The future issuance of any such additional shares of our Common Stock may create downward pressure on the trading price of the Common Stock. There can be no assurance that we will not be required to issue additional shares, warrants or other convertible securities in the future in conjunction with any capital raising efforts, including at a price (or exercise prices) below the price at which shares of the Common Stock will be initially quoted on the OTCQB.

 

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The outstanding Series B Non-Convertible Preferred Stock has 80% voting control, rendering your voting powers meaningless.

 

Generally, the outstanding shares of Series B Non-Convertible Preferred Stock shall vote together with the shares of Common Stock and other voting securities of the Company as a single class and, regardless of the number of shares of Series B Non-Convertible Preferred Stock outstanding and as long as at least one of such shares of Series B Non-Convertible Preferred Stock is outstanding, shall represent eighty percent (80%) of all votes entitled to be voted at any annual or special meeting of stockholders of the Company or action by written consent of stockholders. Each outstanding share of the Series B Non-Convertible Preferred Stock shall represent its proportionate share of the 80% which is allocated to the outstanding shares of Series B Non-Convertible Preferred Stock. Pursuant to the Merger, the Company issued 200,000 shares of Series B Non-Convertible Preferred Stock to Maverick, LLC. The voting power of your Common Stock is essentially meaningless due to the Series B Non-Convertible Preferred Stock 80% voting power.

 

 

Material weaknesses in our internal control over financial reporting may adversely affect our Common Stock.

 

We are subject to the reporting requirements of the Exchange Act, and the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition, proxy statement, and other information. The Sarbanes-Oxley Act requires, among other things, that we establish and maintain effective disclosure controls and procedures and internal controls and procedures for financial reporting. Section 404 of the Sarbanes-Oxley Act requires that we include a report of management on our internal control over financial reporting in our annual report on Form 10-K. That report must contain an assessment by management of the effectiveness of our internal control over financial reporting and must include disclosure of any material weaknesses in internal control over financial reporting that we have identified. Effective internal control is necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation with investors may be harmed. As a result, our small size and any current internal control deficiencies may adversely affect our financial condition, results of operation and access to capital. We have not performed an in-depth analysis to determine if historical un-discovered failures of internal controls exist, and may in the future discover areas of our internal control that need improvement. Any inability to report and file our financial results accurately and timely could harm our reputation and adversely impact the trading price of our Common Stock.

 

Our undesignated preferred stock may inhibit potential acquisition bids; this may adversely affect the market price for our Common Stock and the voting rights of holders of our Common Stock.

 

Our certificate of incorporation provides our Board of Directors with the authority to issue up 10,000,000 shares of undesignated preferred stock and to determine or alter the rights, preferences, privileges and restrictions granted to or imported upon these shares without further vote or action by our stockholders. As of the date of the Merger, there were 3,000,000 shares of Series A Convertible Preferred Stock designated, none of which were issued and outstanding and 200,000 shares of Series B Non-Convertible Preferred Stock designated, all of which are issued and outstanding. The issuance of shares of preferred stock may delay or prevent a change in control transaction without further action by our stockholders. As a result, the market price of our Common Stock may be adversely affected. In addition, if we issue preferred stock in the future that has preference over our Common Stock with respect to the payment of dividends or upon our liquidation, dissolution or winding up, or if we issue preferred stock with voting rights that dilute the voting power of our Common Stock, the rights of holders of our Common Stock or the market price of our Common Stock could be adversely affected.

 

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The Financial Industry Regulatory Authority (FINRA) sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.

 

In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority, which we refer to as FINRA, has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, the FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our Common Stock, which may limit your ability to buy and sell our Common Stock and have an adverse effect on the market for shares of our Common Stock.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 

AND RESULTS OF OPERATIONS

 

The following management’s discussion and analysis should be read in conjunction with the historical financial statements and the related notes thereto contained in this Report. The management’s discussion and analysis contains forward-looking statements, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect” and the like, and/or future tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including those under “Risk Factors” in this Form 8-K, that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the filing date of this Form 8-K.

 

Overview

 

The following discussion highlights Eco-Logical’s results of operations and the principal factors that have affected our consolidated financial condition as well as our liquidity and capital resources for the periods described, and provides information that management believes is relevant for an assessment and understanding of our consolidated financial condition and results of operations presented herein. The following discussion and analysis is based on Eco-Logical’s audited financial statements contained in this Report, which have been prepared in accordance with generally accepted accounting principles in the United States. You should read the discussion and analysis together with such financial statements and the related notes thereto.

 

As a result of the Merger and the change in our business and operations, a discussion of the past financial results of On-Air Impact, Inc. is not pertinent, and under generally accepted accounting principles in the United States, the historical financial results of Eco-Logical, the accounting acquirer, prior to the Merger are considered the historical financial results of the Company.

 

Located in Jericho, New York, Eco-Logical provides bio-remediation services for sewers, sludge ponds, septic tanks, lagoons, farms, car washes, portable sanitation facilities, grease tanks, lakes and ponds. We provide a suite of tablet-based products that can be added to waste systems. The active ingredients in our tablets oxygenate wastewater, remove hydrogen sulfide odors, prevent corrosion in wastewater systems and initiate aerobic biological breakdown of organic sludge including fats, oils and grease. The tablets are non-toxic to the environment, non-caustic and comprised of natural ingredients that do not require any special permitting for use and disposal. The product is simple to use directly by the end consumer.

 

The Company has formulated a business model that management believes can help it grow and achieve economies of scale over time. We have undertaken the necessary due diligence and prepared a business that will enable us to compete in the market for bio-remediation services.

 

Eco-Logical Concepts Inc. (hereinafter referred to as the “Company,” “Eco,” “Eco-Logical,” “our,” we,” “us,” and similar terms) was incorporated in the State of Delaware on November 30, 2011.

 

Prior to the Merger, On-Air Impact, Inc. was a “shell company” (as such term is defined in Rule 12b-2 under the Exchange Act. As a result of the Merger, On-Air Impact, Inc. ceased to be a shell company.

 

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Growth Strategy of the Company

 

Our mission is to maximize stockholder value through expanding the scope of products offered. We intend to conduct research and development to bring new, improved products to market to ensure we are competitive in our market space. We intend to focus on growing our distribution channels using master-distributor relationships, full-line distributors and other similar sales channels. We intend to build product and brand awareness through a direct retail channel using online marketing and info-commercials, which we believe will provide a feedback benefit for the growth of our other distribution channels as well as to establish opportunities for indirect retail sales channels, such as through chain stores and small retailers.

 

We have been working to set up regional distributors in several different market segments, such as septic systems, grease traps, ponds, agricultural and wastewater. Sales have been growing rapidly overseas with business in Mexico, Costa Rica, New Zealand and South Africa.

 

Critical Accounting Policies, Estimates, and Judgments

 

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. We continually evaluate our estimates and judgments, our commitments to strategic alliance partners and the timing of the achievement of collaboration milestones. We base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known. Besides the estimates identified above that are considered critical, we make many other accounting estimates in preparing our financial statements and related disclosures. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenues and expenses, as well as disclosures of contingent assets and liabilities. These estimates and judgments are also based on historical experience and other factors that are believed to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known, even for estimates and judgments that are not deemed critical.

 

Results of Operations

 

The following table presents our results of operations for the periods indicated and as a percentage of total revenue. The year-to-year comparison of results is not necessarily indicative of results for future periods.

 

   Years ended December 31, 
   2013   2013(1)   2012   2012(1) 
                 
Revenue:   19,530    100.00%   17,539    100.00%
Cost of sales:   (5,328)   27.28%   (4,967)   28.32%
Gross profit   14,202    72.72%   12,572    71.68%
                     
Operating expenses:                    
Advertising and Promotion   5,342    27.35%   3,602    20.54%
General and administrative   5,489    28.11%   5,016    28.60%
Professional fees   5,214    26.70%   44,848    255.70%
Research and development        0.00%        0.00%
Total operating expenses   16,045    82.16%   53,466    304.84%
                     
Net loss before other expenses:   (1,843)   9.44%   (40,894)   233.16%
                     
Other expenses:                    
Interest expense   (2,167)   11.10%   (1,461)   8.33%
Net loss  $(4,010)   20.53%   (42,355)   241.49%

 

(1) Amounts may not sum due to rounding.

 

22
 

 

The following tables present our revenue and operating expenses for the periods indicated.

 

Revenue

 

   Years Ended
December 31,
     
   2013   2012   $ Change 
Revenue  $19,530   $17,539   $1,991 

 

Our revenue increased from $17,539 for the fiscal year ended December 31, 2012 to $19,530 for the fiscal year ended December 31, 2013 primarily because of increased advertising and promotion.

 

Costs and Expenses

 

Cost of Sales

 

   Years Ended
December 31,
     
   2013   2012   $ Change 
Cost of Sales  $5,328   $4,967   $361 

 

Cost of Sales increased from $4,967 for the fiscal year ended December 31, 2012 to $5,328 for the fiscal year ended December 31, 2013 primarily due to increased sales.

 

Advertising and Promotion

 

   Years Ended
December 31,
     
   2013   2012   $ Change 
Advertising and Promotion  $5,342   $3,602   $1,740 

 

Advertising and promotion increased from $3,602 for the fiscal year ended December 31, 2012 to $5,342 for the fiscal year ended December 31, 2013. We decided to increase our advertising and promotion activities to increase sales.

 

General and Administrative

 

   Years Ended
December 31,
     
   2013   2012   $ Change 
General and Administrative  $5,489   $5,016   $473 

 

General and administrative costs increased from $5,016 for the fiscal year ended December 31, 2012 to $5,489 for the fiscal year ended December 31, 2013 primarily due to increase in advertising and sales.
 

23
 

 

Professional fees

 

   Years Ended
December 31,
     
   2013   2012   $ Change 
Professional fees  $5,214   $44,848   $(39,634)

 

Professional fees decreased from $44,848 for the fiscal year ended December 31, 2012 to $5,214 for the fiscal year ended December 31, 2013 primarily due to a decrease in legal fees and consulting fees incurred in connection with the Company’s engagement of a financeial consultant and preliminary preparation of a Form S-1 registration statement which was subsequently suspended

 

Research and Development

 

   Years Ended
December 31,
     
   2013   2012   $ Change 
Research and development  $0   $0   $0 

 

Other Income (Expense)

 

   Years Ended
December 31,
     
   2013   2012   $ Change 
Interest expense  $2,167   $1,461   $706 

 

Interest expense increased from $1,461 for the fiscal year ended December 31, 2012 to $2,167 for the fiscal year ended December 31, 2013.

 

Financial Condition, Liquidity and Capital Resources

 

We are an early stage development company. At December 31, 2013, we had $4,205 in cash on hand and an accumulated deficit of $48,276 and had $19,530 in revenues to date ($37,069 since inception on November 30, 2011). In their report for the fiscal year ended December 31, 2013, our auditors have expressed that there is substantial doubt as to our ability to continue as a going concern. We have incurred operating losses since our formation and expect to incur losses and negative operating cash flows for the foreseeable future. We expect to incur substantial losses for the foreseeable future and may never become profitable. We also expect to continue to incur significant operating and capital expenditures for the next several years and anticipate that our expenses will increase substantially in the foreseeable future. We also expect to experience negative cash flow for the foreseeable future as we fund our operating losses and capital expenditures. As a result, we will need to generate significant revenues in order to achieve and maintain profitability. We may not be able to generate these revenues or achieve profitability in the future. Our failure to achieve or maintain profitability could negatively impact the value of our Common Stock.

 

24
 

 

To date, we have financed our operations primarily through the sale of Convertible Promissory Notes to Joel Falitz and other non-affiliated third parties and the issuance and sale of equity securities for cash consideration.

 

On December 28, 2011, the Company entered into a Convertible Promissory Note agreement of $5,000 with the President of the Company. On October 27, 2012, the Company issued 50,000,000 shares of common stock upon the conversion of a $5,000 convertible note due to the President of the Company.
   
On October 23, 2012, the Company issued 250 shares of common stock pursuant to the conversion of $25 of debt owed to the President of the Company.
   
On December 22, 2011, the Company entered into two Convertible Promissory Note agreements for an aggregate of $4,000. The Notes bear interest at 10% per annum, and the principal amount and any interest thereon are due 60 days following demand. Pursuant to the agreements, the Notes are convertible into shares of common stock at a conversion price equal to $0.01 per share. At December 31, 2013 and 2012, the Company recognized accrued interest of $795 and $402, respectively. The outstanding balance on the two notes was $4,000 for each of the years ended December 31, 2013 and 2012.
   
On December 22, 2011, the Company entered into a Convertible Promissory Note agreement for $10,000. The Note bears interest at 10% per annum, and the principal amount and any interest thereon are due 60 days following demand. Pursuant to the agreement, the Note is convertible into shares of common stock at a conversion price equal to $0.01 per share. In addition, as a condition precedent to the right to convert the debt to common stock of the Company, the holder must purchase 3,000,000 shares of common stock at $0.01 per share. On December 27, 2012, the Company repaid $4,005 towards the principal balance and $995 towards accrued interest. On April 19, 2013, the Company repaid $4,818 towards the principal balance and $182 towards accrued interest. At December 31, 2013 and 2012, the Company recognized accrued interest of $80 and $25, respectively. The outstanding balance for the years ended December 31, 2013 and 2012 was $1,177 and $5,995, respectively.
   
On December 28, 2011, the Company entered into two Convertible Promissory Note agreements for an aggregate of $6,000, of which $5,000 is due to the President of the Company. The Notes bear interest at 10% per annum, and the principal amount and any interest thereon are due 60 days following demand. Pursuant to the agreements, the Notes are convertible into shares of common stock at a conversion price equal to $0.0001 per share. On October 27, 2012, the Company issued 50,000,000 shares of common stock to the President of the Company upon the conversion of the principal amount of $5,000. At December 31, 2013 and 2012, the Company recognized accrued interest of $197 and $99, respectively. The outstanding balance on the two notes was $1,000 for each of the years ended December 31, 2013 and 2012.
   
On May 8, 2014, the Company sold a one-year promissory note to Maverick, LLC (“Maverick”) for the principal amount of $25,000 and bearing interest at rate of 8% per annum. Pursuant to the terms of the promissory note, simultaneously with the sale of all or substantially all of the assets of Eco-Logical, upon the merger or combination of Eco-Logical with another entity (other than for changing domicile), or change of control of Eco-Logical, the outstanding principal and accrued interest thereon under the promissory note automatically converted, without any action being taken by Eco-Logical or Maverick, into a number of shares of common stock and/or preferred stock of Eco-Logical which would enable Maverick to have voting and dispositive control of Eco-Logical. On May 9, 2014, the promissory note issued to Maverick was converted into 5,000,000 shares of Eco-Logical’s common stock and 200,000 shares of Eco-Logical’s Series A Preferred Stock.
   
On May 9, 2014, the Company entered into that certain Master Loan Agreement, dated May 9, 2014 (the “Loan Agreement”), with Baccarat Holdings, Inc., an unaffiliated third party lender (“Baccarat” or the “Lender”). Subject to the terms and conditions set forth in the Loan Agreement, Baccarat agreed, from time to time to purchase from the Company, and the Company agreed to sell and issue to Baccarat, one or more Promissory Notes for the account of the Company, provided, however, that the aggregate principal amount of all Promissory Notes then outstanding shall not exceed the $500,000 and that no Event of Default has occurred and has remained uncured. Amounts borrowed under the Loan Agreement shall be evidenced by an unsecured, non-recourse Promissory Note, bear interest at a rate of 8% per annum, mature on the first anniversary date thereof, and may be prepaid by the Company before the maturity date thereof. Amounts borrowed under the Loan Agreement and repaid or prepaid may not be re-borrowed. The Loan Agreement shall automatically terminate and be of no further force and effect upon the earlier to occur of (i) the satisfaction of all indebtedness, including the promissory notes and any additional indebtedness issued thereafter, between the Company and Baccarat and (ii) written termination notice is delivered by the Company or Baccarat to the other party. On May 9, 2014, the Company borrowed $50,000 under the Loan Agreement. There can be no assurances that any additional funds will be available to us under the Loan Agreement since it provides that the Lender may terminate this Agreement at any time.

 

25
 

 

Working Capital

 

Since the Company’s inception, we have incurred recurring net losses and negative cash flows from operations. As of December 31, 2013, we had a working capital deficit of $43,251, an accumulated deficit of $48,276 and a stockholders’ deficit of $43,251. We have incurred net losses of $4,010 and $42,355 for the fiscal years ended December 31, 2013 and 2012, respectively, and $48,276 since our inception on November 30, 2011 to December 31, 2013.

 

At December 31, 2013 and 2012, the Company was indebted to the President of the Company and a company controlled by the President of the Company for $10,600 and $10,227, respectively for expenses paid on behalf of the Company. The amount is unsecured, non-interest bearing and due on demand.

 

Notwithstanding our Loan Agreement with Baccarat that may be terminated upon an uncured Event of Default or by Baccarat at any time, we do not believe our cash resources are sufficient to implement our current business plan, support operations and meet current obligations for the next 12 months. We plan to raise additional capital to finance our operations. There can be no assurance that financing will be available when required in sufficient amounts, on acceptable terms or at all. In the event that the necessary additional financing is not obtained, we may be required to reduce our discretionary overhead costs substantially, including research and development, general and administrative and sales and marketing expenses or otherwise curtail operations.

 

Cash and Cash Equivalents

 

The following table summarizes the sources and uses of cash for the periods stated. The Company held no cash equivalents for any of the periods presented.

 

   Years Ended 
   December 31, 
   2013   2012 
         
Cash, beginning of period  $735   $19,000 
Net cash provided by (used in) operating activities   478    (39,936 
Net cash used in investing activities   0    0 
Net cash provided by financing activities   2,992    21,671 
Cash, end of period  $4,205   $735 

 

Off-Balance Sheet Arrangements

 

Our liquidity is not dependent on the use of off-balance sheet financing arrangements (as that term is defined in Item 303(a) (4) (ii) of Regulation S-K) and as of December 31, 2013 we had no such arrangements. There has been no material change in our contractual obligations other than in the ordinary course of business since our fiscal year ended December 31, 2013.

 

26
 

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. In accordance with Securities and Exchange Commission rules, shares of our Common Stock which may be acquired upon exercise of stock options or warrants which are currently exercisable or which become exercisable within 60 days of the date of the applicable table below are deemed beneficially owned by the holders of such options and warrants and are deemed outstanding for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage of ownership of any other person. Subject to community property laws, where applicable, the persons or entities named in the tables below have sole voting and investment power with respect to all shares of our Common Stock indicated as beneficially owned by them.

 

The following table sets forth information with respect to the beneficial ownership of our Common Stock as of the filing date of this Form 8-K, by (i) each stockholder known by us to be the beneficial owner of more than 5% of our Common Stock, (ii) each of our directors and executive officers, and (iii) all of our directors and executive officers as a group. To the best of our knowledge, except as otherwise indicated, each of the persons named in the table has sole voting and investment power with respect to the shares of our Common Stock beneficially owned by such person, except to the extent such power may be shared with a spouse. To our knowledge, none of the shares listed below are held under a voting trust or similar agreement, except as noted. Other than the Merger, to our knowledge, there is no arrangement, including any pledge by any person of securities of the Company or any of its parents, the operation of which may at a subsequent date result in a change in control of the Company.

 

Unless otherwise indicated in the following table, the address for each person named in the table is c/o Eco-Logical Concepts, Inc. 420 Jericho Turnpike, Suite 110, Jericho, NY 17753.

 

   On-Air Impact, Inc. Voting Securities 
Stockholder  Common Stock   Series A
Convertible
Preferred Stock
  

Series B

Non-Convertible
Preferred Stock

 
   Amount   %(1)   Amount   %(2)   Amount   %(3) 
Joel Falitz, CEO, Pres., Sec, Treas. & Chairman   500,003    74.24%   -    0%   -    0%
Dorothy Whitehouse, Director   10,000(4)   1.48%   1,868,630    100%   -    0%
Edward Whitehouse, Director   10,000(4)(5)   1.48%   1,868,630    100%   -    0%
All Directors & Officers (3 persons)   510,003    75.72%   1,868,630    100%   -    0%
Maverick, LLC (6)   50,000    7.42%   -    0%   200,000    100%

 

(1) Applicable percentage ownership is based on 673,503 shares of Common Stock outstanding as of May 15, 2014.
   
(2) Applicable percentage ownership is based on 1,868,630 shares of Series A Convertible Preferred Stock outstanding as of May 15, 2014. The Holders of the Series A Convertible Preferred Stock shall vote only on a share for share basis with our Common Stock on any matter, including but not limited to, the election of directors, name changes, increases in the authorized common shares and for which such preferred stock or series has such rights and as otherwise provided by the Nevada Business Corporation Act.
   
(3)

Applicable percentage ownership is based on 200,000 shares of Series B Non-Convertible Preferred Stock outstanding as of May 15, 2014. The outstanding shares of Series B Non-Convertible Preferred Stock shall vote together with the shares of Common Stock and other voting securities of the Company as a single class and, regardless of the number of shares of Series B Non-Convertible Preferred Stock outstanding and as long as at least one of such shares of Series B Non-Convertible Preferred Stock is outstanding, shall represent eighty percent (80%) of all votes entitled to be voted at any annual or special meeting of stockholders of the Company or action by written consent of stockholders. Each outstanding share of the Series B Non-Convertible Preferred Stock shall represent its proportionate share of the 80% which is allocated to the outstanding shares of Series B Non-Convertible Preferred Stock.

   
(4)

Jointly held by Dorothy Whitehouse and Edward Whitehouse. The business address for Mr. and Ms. Whitehouse is 130 Maple Avenue, Suite 6D, Red Bank, NJ 07701.

   
(5)

Excludes 37,372,600 shares of Common Stock issuable upon the conversion of 1,868,630 shares of Series A Convertible Preferred Stock. Each share of Series A Convertible Preferred Stock is convertible by the holder thereof into twenty (20) shares of Common Stock; provided, however, each holder of Series A Convertible Preferred Stock may not convert any part of the Series A Convertible Preferred Stock if such conversion would cause such holder or any of its assignees to beneficially own more than 4.99% of the Common Stock of the Company.

   
(6) Ester Barrios is the Managing Member of Maverick, LLC and has voting and dispositive control over these securities.

 

27
 

 

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

 

Directors and Executive Officers

 

Below are the names of and certain information regarding the Company’s current executive officers and directors who were appointed effective as of the closing of the Merger:

 

Name:   Age:   Position:   Director Since:
             
Joel Falitz   66   Chief Executive Officer, Chairman,   May 9, 2014
        President, Secretary and Treasurer    
             
Dorothy Whitehouse   41   Director   May 26, 2010
             
Edward Whitehouse   42   Director   May 26, 2010

 

Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Directors are elected by a plurality of the votes cast at the annual meeting of stockholders and hold office until the expiration of the term for which he or she was elected and until a successor has been elected and qualified.

 

A majority of the authorized number of directors constitutes a quorum of the Board of Directors for the transaction of business. The directors must be present at the meeting to constitute a quorum. However, any action required or permitted to be taken by the Board of Directors may be taken without a meeting if all members of the Board of Directors individually or collectively consent in writing to the action.

 

Executive officers are appointed by, and serve at the pleasure of, the Board of Directors of the Company, subject to any contractual arrangements.

 

28
 

 

Business Experience

 

Joel Falitz – Chief Executive, President, Secretary, Treasurer and Chairman of the Board of Directors

 

Joel Falitz is the Chief Executive Officer and founder of Eco-Logical Concepts, Inc. (November 30, 2011). Under his leadership since 2011, Eco has developed and introduced its first line of bacterial tablets and powders, including Trap-Eze and Tank -Eze.

 

Prior to founding Eco-Logical Concepts Inc. in November 2011, Joel was the director of purchasing and the VP of marketing for APO Health, Inc., a health products company, from 2001 to 2006 and from 2006 to 2011, the President of Preferred Distribution, Inc., a medical and dental supply company.

 

Mr. Falitz’s combination of management, procurement and distribution skills have been central to Eco’s growth in the United States’ and international markets. Mr. Falitz has emphasized strong product development and highly controlled use of financial resources as the Company continues the ongoing domestic and international launch of Eco-Logical’s new product lines.

 

Dorothy Whitehouse - Director

 

From May 26, 2010 to May 9, 2014, Dorothy served as the Chief Executive Officer and President of On-Air Impact, Inc. From 2000 to 2006, Dorothy served as Vice President of Sports and On-Air Management at ESPN ABC Sports. While at ESPN ABC Sports, Dorothy was charged with overseeing all aspects of the Company’s partnership with the leagues they had associations with and generating major sponsorship related revenues across the various media divisions. Dorothy is a graduate of the University of Michigan (1993), Emerson College (1994) and Rutgers University School of Law (1998).

 

Edward Whitehouse - Director

 

From May 26, 2010 to May 9, 2014, Edward served as the Secretary and Treasurer of On-Air Impact, Inc. Since, Edward has been working for Sourlis International Realty as a Sales Associate handling various commercial and residential real estate transactions such as the listing and leasing of properties and property management. Edward is a graduate of Kean University (1993).

 

Director Independence

 

We are not currently subject to listing requirements of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the board of directors be “independent” and, as a result, we are not at this time required to have our Board of Directors comprised of a majority of “independent directors.” Nevertheless, our Board has determined that none of our current directors qualify as independent directors under the applicable standards of the SEC and the NASDAQ stock market.

 

Family Relationships

 

Dorothy Whitehouse and Edward Whitehouse are spouses.

 

Involvement in Certain Legal Proceedings

 

None of our directors or executive officers has been involved in any of the following events during the past ten years:

 

any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
   
any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
   
being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; or
   
being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

 

29
 

 

Audit Committee

 

We currently do not have a separately standing Audit Committee due to our limited size and our Board performs the functions that would otherwise be performed by an Audit Committee.

 

Compensation Committee; Compensation Committee Interlocks and Insider Participation

 

The Company does not have a Compensation Committee due to our limited size and our Board performs the functions that would otherwise be performed by a Compensation Committee. Our Board intends to form a Compensation Committee when needed.

 

No executive officer of the Company has served as a director or member of the compensation committee (or other committee serving an equivalent function) of any other entity, one of whose executive officers served as director of the Company during 2013.

 

Other Committees

 

We do not currently have a separately-designated standing nominating committee. Further, we do not have a policy with regard to the consideration of any director candidates recommended by security holders. To date, no security holders have made any such recommendations. The entire Board of Directors performs all functions that would otherwise be performed by committees. Given the present size of our Board, it is not practical for us to have committees other than those described above, or to have more than two directors on such committees. If we are able to grow our business and increase our operations, we intend to expand the size of our board and our committees and allocate responsibilities accordingly.

 

EXECUTIVE COMPENSATION

 

Summary Compensation Table

 

The following table sets forth information concerning the total compensation paid or accrued by us and by Eco-Logical during the last two fiscal years indicated to (i) all individuals that served as On-Air Impact’s our or Eco-Logical’s principal executive officer or acted in a similar capacity for On-Air Impact or Eco-Logical at any time during the most recent fiscal year indicated; (ii) the two most highly compensated executive officers who were serving as executive officers of On-Air Impact or Eco-Logical at the end of the most recent fiscal year indicated; and (iii) up to two additional individuals for whom disclosure would have been provided pursuant to clause (ii) above but for the fact that the individual was not serving as an executive officer of On-Air Impact or Eco-Logical at the end of the most recent fiscal year indicated.

 

On-Air Impact, Inc.

 

Name & Principal Position   Fiscal Year ended May 31,    Salary ($)    Bonus ($)    Stock Awards ($)    Option Awards($)    Non-Equity Incentive Plan Compensation ($)    Non-Qualified Deferred Compensation Earnings ($)    All Other Compensation ($)    Total ($) 
Dorothy Whitehouse
Former Chief Executive Officer and President (1)
   2013    -    -    -    -    -    -    -    - 
    2012    -    -    -    -    -    -    -    - 
                                              
Edward Whitehouse
Former Secretary and Treasurer (2)
   2013                                         
   2012    -    -    -    -    -    -    -    - 

 

(1) Dorothy Whitehouse resigned as an executive officer of On-Air Impact, Inc. on May 9, 2014.
   
(2) Edward Whitehouse resigned as an executive officer of On-Air Impact, Inc. on May 9, 2014.

 

30
 

  

Eco-Logical Concepts, Inc.:

 

Name &
Principal
Position
   Fiscal
Year
ended
December 31,
    Salary
($)
    Bonus
($)
    Stock
Awards
($)
    Option
Awards($)(2)
    Non-Equity
Incentive Plan
Compensation
($)
    Non-Qualified
Deferred
Compensation
Earnings ($)
    All Other
Compensation
($)
    Total
($)
 
Joel Falitz
Chief Executive Officer and President of Eco-Logical Concepts, Inc.
   2013    -    -    -    -    -    -    -    - 
    2012    -    -    -    -    -    -    -    - 

 

We have no plans in place and have never maintained any plans that provide for the payment of retirement benefits or benefits that will be paid primarily following retirement including, but not limited to, tax qualified deferred benefit plans, supplemental executive retirement plans, tax-qualified deferred contribution plans and nonqualified deferred contribution plans.

 

We have no contracts, agreements, plans or arrangements, whether written or unwritten, that provide for payments to the named executive officers listed above.

 

Outstanding Equity Awards at Fiscal Year-End

 

There were no outstanding equity awards as of December 31, 2013. The Company does not currently have an equity incentive plan but intends to adopt one in the future.

 

Employment Agreements

 

There are currently no employment agreements in place.

 

Retirement or Similar Benefit Plans

 

There are no arrangements or plans in which we provide retirement or similar benefits for our directors or executive officers.

 

Resignation, Retirement, Other Termination, or Change in Control Arrangements

 

We have no contract, agreement, plan or arrangement, whether written or unwritten, that provides for payments to our directors or executive officers at, following, or in connection with the resignation, retirement or other termination of our directors or executive officers, or a change in control of our company or a change in our directors’ or executive officers’ responsibilities following a change in control.

 

31
 

 

Director Compensation

 

No director received or accrued any compensation for his or her services as a director since our inception.

 

We have no formal plan for compensating our directors for their services in their capacity as directors. Our directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our Board of Directors. Our Board of Directors may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director.

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

SEC rules require us to disclose any transaction or currently proposed transaction in which the Company is a participant and in which any related person has or will have a direct or indirect material interest involving the lesser of $120,000 or one percent (1%) of the average of the Company’s total assets as of the end of last two completed fiscal years. A related person is any executive officer, director, nominee for director, or holder of 5% or more of the Company’s Common Stock, or an immediate family member of any of those persons.

 

Eco-Logical Concepts, Inc.

 

  On December 28, 2011, Eco sold a Convertible Promissory Note to Joel Falitz for a principal amount of $5,000, bearing interest at a rate of 10% per annum and due within 60 days of demand. The Note is convertible into shares of common stock of Eco at a rate of $0.0001 per share. On October 27, 2012, the holder of the Note converted the $5,000 of the outstanding principal into 50,000,000 shares of Eco common stock.
     
  On October 23, 2012, Eco issued 250 shares of common stock pursuant to the conversion of $25 of debt owed the President of the Company.
     
  At December 31, 2013 and 2012, Eco-Logical was indebted to its President and a company controlled by the President for $10,600 and $10,227, respectively, for expenses paid on behalf of Eco-Logical. The amount was borrowed pursuant to a verbal agreement and is unsecured, non-interest bearing and due on demand.
     
  On May 8, 2014, the Company sold a one-year promissory note to Maverick, LLC (“Maverick”) for the principal amount of $25,000 and bearing interest at rate of 8% per annum. Pursuant to the terms of the promissory note, simultaneously with the sale of all or substantially all of the assets of Eco-Logical, upon the merger or combination of Eco-Logical with another entity (other than for changing domicile), or change of control of Eco-Logical, the outstanding principal and accrued interest thereon under the promissory note automatically converted, without any action being taken by Eco-Logical or Maverick, into a number of shares of common stock and/or preferred stock of Eco-Logical which would enable Maverick to have voting and dispositive control of Eco-Logical. On May 9, 2014, the promissory note issued to Maverick was converted into 5,000,000 shares of Eco-Logical’s common stock and 200,000 shares of Eco-Logical’s Series A Preferred Stock. . Pursuant to Eco-Logical’s Series A Certificate of Designation filed with the Secretary of State of the State of Delaware, the outstanding shares of Series A Non-Convertible Preferred Stock voted together with the shares of Common Stock and other voting securities of Eco-Logical as a single class and, regardless of the number of shares of Series A Non-Convertible Preferred Stock outstanding and as long as at least one of such shares of Series A Non-Convertible Preferred Stock is outstanding, represented eighty percent (80%) of all votes entitled to be voted at any annual or special meeting of stockholders of Eco-Logical or action by written consent of stockholders. Each outstanding share of the Series A Non-Convertible Preferred Stock shall represent its proportionate share of the 80% which is allocated to the outstanding shares of Series A Non-Convertible Preferred Stock. The voting rights of shares of our Series B Non-Convertible Preferred Stock are identical to the voting rights Eco-Logical’s Series A Preferred Stock. Therefore, as a result of the Merger, Maverick has voting control over On-Air Impact.

 

32
 

 

On-Air Impact, Inc.:

 

  On May 12, 2014, On-Air Impact entered into a Share Exchange Agreement with Edward Whitehouse pursuant to which the Company exchanged 10,000,000 shares of Common Stock held by Mr. Whitehouse for 2,000,000 shares of Series A Convertible Preferred Stock. The Company relied upon Section 3(a)(9) of the Securities Act because the securities were exchanged by the same issuer with its existing security holders exclusively and no commission or other remuneration was paid or given directly or indirectly for soliciting such exchange. The Share Exchange Agreement is filed as an exhibit to this Report and is incorporated by reference herein.
     
  On May 12, 2014, On-Air Impact entered into a Share Redemption Agreement with Edward Whitehouse pursuant to which the Company redeemed 131,370 shares of Series A Convertible Preferred Stock for $26,274.00. The Share Redemption Agreement is filed as an exhibit to this Report and is incorporated by reference herein.

 

MARKET PRICE OF AND DIVIDENDS ON COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

 

Since March 8, 2012, our Common Stock has been quoted on the OTCQB under the ticker symbol “OAIR.” On March 8, 2012, 2,000 shares traded. Since that date, there has been no trading in our Common Stock.

 

As of the filing date of this Report, we have 673,503 shares of Common Stock outstanding held by approximately 17 stockholders of record.

 

The Securities and Exchange Commission 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 quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or quotation system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of securities’ laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type, size and format, as the Securities and Exchange Commission shall require by rule or regulation. The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with: (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a suitably written statement.

 

If and when a public trading market develops for our Common Stock, it most likely will be a penny stock. The penny stock disclosure requirements could have the effect of reducing the trading activity in the secondary market for our Common Stock. Therefore, if our Common Stock becomes subject to the penny stock rules, stockholders may have difficulty selling those securities.

 

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Issuer Purchases of Equity Securities

 

On May 12, 2014, On-Air Impact entered into a Share Redemption Agreement with Edward Whitehouse pursuant to which the Company redeemed 131,370 shares of Series A Convertible Preferred Stock for $26,274.00. The Share Redemption Agreement is filed as an exhibit to this Report and is incorporated by reference herein.

 

DESCRIPTION OF SECURITIES

 

General

 

Under our Certificate of Incorporation, we are authorized to issue an aggregate of 110,000,000 shares of capital stock, of which 100,000,000 are shares of Common Stock, par value $0.0001 per share, or Common Stock and 10,000,000 are preferred stock, par value $0.0001 per share, or Preferred Stock.

 

Common Stock

 

Pursuant to our Bylaws, our Common Stock is entitled to one vote per share on all matters submitted to a vote of the stockholders, including the election of directors. Except as otherwise required by law or provided in any resolution adopted by our board of directors with respect to any series of preferred stock, the holders of our Common Stock possess all voting power. Generally, all matters to be voted on by stockholders must be approved by a majority (or, in the case of election of directors, by a plurality) of the votes entitled to be cast by all shares of our Common Stock that are present in person or represented by proxy, subject to any voting rights granted to holders of any preferred stock. Holders of our Common Stock representing one-percent (1%) of our capital stock issued, outstanding and entitled to vote, represented in person or by proxy, are necessary to constitute a quorum at any meeting of our stockholders. A vote by the holders of a majority of our outstanding shares is required to effectuate certain fundamental corporate changes such as liquidation, merger or an amendment to our Certificate of Incorporation. Our Certificate of Incorporation does not provide for cumulative voting in the election of directors.

 

Subject to any preferential rights of any outstanding series of preferred stock created by our board of directors from time to time, the holders of shares of our Common Stock will be entitled to such cash dividends as may be declared from time to time by our board of directors from funds available therefore.

 

Subject to any preferential rights of any outstanding series of preferred stock created from time to time by our board of directors, upon liquidation, dissolution or winding up of our company, the holders of shares of our Common Stock will be entitled to receive, on a pro rata basis, all assets of our company available for distribution to such holders.

 

In the event of any merger or consolidation of our company with or into another company in connection with which shares of our Common Stock are converted into or exchangeable for shares of stock, other securities or property (including cash), all holders of our Common Stock will be entitled to receive the same kind and amount of shares of stock and other securities and property (including cash), on a pro rata basis.

 

Holders of our Common Stock have no pre-emptive rights, no conversion rights and there are no redemption provisions or sinking fund rights applicable to our Common Stock. There are also no provisions discriminating against any existing or prospective holders of our Common Stock as a result of such security holders owning a substantial amount of securities.

 

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Preferred Stock

 

Our Certificate of Incorporation authorizes our board of directors to issue up to 10,000,000 shares of “blank check” preferred stock in one or more designated series, each of which shall be so designated as to distinguish the shares of each series of preferred stock from the shares of all other series and classes. Our board of directors is authorized, without stockholders’ approval, within any limitations prescribed by law and our Certificate of Incorporation, to fix and determine the designations, rights, qualifications, preferences, limitations and terms of the shares of any series of preferred stock including but not limited to the following:

 

(a) the rate of dividend, the time of payment of dividends, whether dividends are cumulative, and the date from which any dividends shall accrue;
   
(b) whether shares may be redeemed, and, if so, the redemption price and the terms and conditions of redemption;
   
(c) the amount payable upon shares of preferred stock in the event of voluntary or involuntary liquidation;
   
(d) sinking fund or other provisions, if any, for the redemption or purchase of shares of preferred stock;
   
(e) the terms and conditions on which shares of preferred stock may be converted, if the shares of any series are issued with the privilege of conversion;
   
(f) voting powers, if any, provided that if any of the preferred stock or series thereof shall have voting rights, such preferred stock or series shall vote only on a share for share basis with our Common Stock on any matter, including but not limited to the election of directors, for which such preferred stock or series has such rights; and
   
(g) subject to the above, such other terms, qualifications, privileges, limitations, options, restrictions, and special or relative rights and preferences, if any, of shares or such series as our board of directors may, at the time so acting, lawfully fix and determine under the laws of the State of New Jersey.

 

Amended and Restated Series A Convertible Preferred Stock

 

On May 7, 2014, our Board decided to amend and restate the Company’s Series A Convertible Preferred Stock Certificate of Designation originally filed with the Secretary of State of the State of Nevada on December 10, 2012; and we filed an Amended and Restated Certificate of Designation with the Secretary of State of the State of Nevada on May 8, 2014, therein re-designating the class. Under the Amended and Restated Certificate of Designation, 3,000,000 shares of Preferred Stock have been designated as “Series A Convertible Preferred Stock.” Generally, each holder of Series A Convertible Preferred Stock shall have the right, at such holder’s option, at any time or from time to time from and after the day immediately following the date the Series A Convertible Preferred Stock is first issued, to convert each share of Series A Convertible Preferred Stock into twenty (20) fully-paid and non-assessable shares of Common Stock of the Company. In connection with any conversion thereunder, each holder of Series A Convertible Preferred Stock may not convert any part of the Series A Convertible Preferred Stock if such conversion would cause such holder or any of its assignees to beneficially own more than 4.99% of the Common Stock of the Company. The Amended and Restated Certificate of Designation for the Series A Convertible Preferred Stock is filed as an exhibit to this Report and is incorporated by referenced herein.

 

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Series B Non-Convertible Preferred Stock

 

On May 7, 2014, our Board designated 200,0000 shares of Preferred Stock as “Series B Non-Convertible Preferred Stock” and we filed a Certificate of Designation with the Secretary of State of the State of Nevada on May 8, 2014, therein designating the class. Generally, the outstanding shares of Series B Non-Convertible Preferred Stock shall vote together with the shares of Common Stock and other voting securities of the Company as a single class and, regardless of the number of shares of Series B Non-Convertible Preferred Stock outstanding and as long as at least one of such shares of Series B Non-Convertible Preferred Stock is outstanding, shall represent eighty percent (80%) of all votes entitled to be voted at any annual or special meeting of stockholders of the Company or action by written consent of stockholders. Each outstanding share of the Series B Non-Convertible Preferred Stock shall represent its proportionate share of the 80% which is allocated to the outstanding shares of Series B Non-Convertible Preferred Stock. The Certificate of Designation for the Series B Non-Convertible Preferred Stock is filed as an exhibit to this Report and is incorporated by referenced herein.

 

Holders of Our Common Stock

 

As of the filing date of this Report, we had 17 record holders of our Common Stock.

 

Transfer Agent

 

Below is the name, mailing address, phone and fax numbers, website and email address of our transfer agent:

 

VStock Transfer, LLC

77 Spruce Street, Suite 201

Cedarhurst, NY 11516

Phone: 212-828-8436

Toll-Free: 855-9VSTOCK

Fax: 646-536-3179

info@vstocktransfer.com

www.VstockTransfer.com

 

There are no restrictions in our Articles of Incorporation or Bylaws that prevent us from declaring dividends. We have not declared any dividends and we do not plan to declare any dividends in the foreseeable future. We currently intend to retain future earnings, if any, to finance the expansion of our business. As a result, we do not anticipate paying any cash dividends in the foreseeable future.

 

Options

 

There are no outstanding options to purchase our securities. We may, however, grant such options and/or establish an incentive stock option plan for our directors, executive officers, employees and consultants in the future.

 

Convertible Securities

 

Other than our Series A Convertible Preferred Stock, there are no outstanding securities convertible into shares of our Common Stock or rights convertible or exchangeable into shares of our Common Stock.

 

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Change in Control

 

There are no provisions in our Articles of Incorporation or Bylaws that would delay, defer or prevent a change in control of our Company and that would operate only with respect to an extraordinary corporate transaction involving our Company or subsidiary, such as merger, reorganization, tender offer, sale or transfer of substantially all of our assets, or liquidation.

 

Dividend Policy

 

We have never paid any cash dividends on our capital stock and do not anticipate paying any cash dividends on our Common Stock in the foreseeable future. We intend to retain future earnings to fund ongoing operations and future capital requirements. Any future determination to pay cash dividends will be at the discretion of our Board of Directors and will be dependent upon financial condition, results of operations, capital requirements and such other factors as the Board of Directors deems relevant.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

The Company had no equity compensation plans as of the end of fiscal year 2013.

 

LEGAL PROCEEDINGS

 

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

 

We are currently not aware of any pending legal proceedings to which we are a party or of which any of our property is the subject, nor are we aware of any such proceedings that are contemplated by any governmental authority.

 

INDEMNIFICATION OF DIRECTORS AND OFFICERS

 

The Nevada Revised Statutes and our Articles of Incorporation allow us to indemnify our officers and directors from certain liabilities and our By-Laws state that we shall indemnify every (i) present or former director or officer of us, (ii) any person who while serving in any of the capacities referred to in clause (i) served at our request as a director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, and (iii) any person nominated or designated by (or pursuant to authority granted by) the Board of Directors or any committee thereof to serve in any of the capacities referred to in clauses (i) or (ii) (each an “Indemnitee”).

 

Our By-Laws provide that we shall indemnify an Indemnitee against all judgments, penalties (including excise and similar taxes), fines, amounts paid in settlement and reasonable expenses actually incurred by the Indemnitee in connection with any proceeding in which he was, is or is threatened to be named as defendant or respondent, or in which he was or is a witness without being named a defendant or respondent, by reason, in whole or in part, of his serving or having served, or having been nominated or designated to serve, if it is determined that the Indemnitee (a) conducted himself in good faith, (b) reasonably believed, in the case of conduct in his official capacity, that his conduct was in our best interests and, in all other cases, that his conduct was at least not opposed to our best interests, and (c) in the case of any criminal proceeding, had no reasonable cause to believe that his conduct was unlawful; provided, however, that in the event that an Indemnitee is found liable to us or is found liable on the basis that personal benefit was improperly received by the Indemnitee, the indemnification (i) is limited to reasonable expenses actually incurred by the Indemnitee in connection with the proceeding and (ii) shall not be made in respect of any proceeding in which the Indemnitee shall have been found liable for willful or intentional misconduct in the performance of his duty to us.

 

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Other than in the limited situation described above, our By-Laws provide that no indemnification shall be made in respect to any proceeding in which such Indemnitee has been (a) found liable on the basis that personal benefit was improperly received by him, whether or not the benefit resulted from an action taken in the Indemnitee’s official capacity, or (b) found liable to us. The termination of any proceeding by judgment, order, settlement or conviction, or on a plea of nolo contendere or its equivalent, is not of itself determinative that the Indemnitee did not meet the requirements set forth in clauses (a) or (b) above. An Indemnitee shall be deemed to have been found liable in respect of any claim, issue or matter only after the Indemnitee shall have been so adjudged by a court of competent jurisdiction after exhaustion of all appeals therefrom. Reasonable expenses shall, include, without limitation, all court costs and all fees and disbursements of attorneys for the Indemnitee. The indemnification provided shall be applicable whether or not negligence or gross negligence of the Indemnitee is alleged or proven.

 

In addition to our By-Laws and our Articles of Incorporation, we may to enter into an indemnification agreement with each of our directors pursuant to which we will be required to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law and our governing documents. We believe that entering into these agreements may help us to attract and retain highly competent and qualified persons to serve the Company.

 

Other than discussed above, none of our By-Laws, our Articles of Incorporation or any indemnification agreement with any director of the Company includes any specific indemnification provisions for our officers or directors against liability under the Securities Act. Additionally, insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

 

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

On May 9, 2014, the Company entered into that certain Master Loan Agreement, dated May 9, 2014 (the “Loan Agreement”), with Baccarat Holdings, Inc., an unaffiliated third party lender (“Baccarat” or the “Lender”). Subject to the terms and conditions set forth in the Loan Agreement, Baccarat agreed, from time to time to purchase from the Company, and the Company agreed to sell and issue to Baccarat, one or more Promissory Notes for the account of the Company, provided, however, that the aggregate principal amount of all Promissory Notes then outstanding shall not exceed the $500,000 and that no Event of Default has occurred and has remained uncured. Amounts borrowed under the Loan Agreement shall be evidenced by an unsecured, non-recourse Promissory Note, bear interest at a rate of 8% per annum, mature on the first anniversary date thereof, and may be prepaid by the Company before the maturity date thereof. Amounts borrowed under the Loan Agreement and repaid or prepaid may not be re-borrowed. The Loan Agreement shall automatically terminate and be of no further force and effect upon the earlier to occur of (i) the satisfaction of all indebtedness, including the promissory notes and any additional indebtedness issued thereafter, between the Company and Baccarat and (ii) written termination notice is delivered by the Company or Baccarat to the other party. On May 9, 2014, the Company borrowed $50,000 under the Loan Agreement. There can be no assurances that any additional funds will be available to us under the Loan Agreement since it provides that the Lender may terminate this Agreement at any time.

 

Item 3.02 Unregistered Sales of Equity Securities.

 

Shares Issued in Connection with the Merger

 

On May 9, 2014, pursuant to the terms of the Merger Agreement, an aggregate of 55,000,250 shares of common stock and 200,000 of Series A Convertible Preferred Stock of Eco-Logical, constituting all of the outstanding stock of Eco-Logical, were exchanged by the holders thereof for an aggregate of 550,003 restricted shares of our Common Stock and 200,000 shares of our Series B Non-Convertible Preferred Stock, respectively. The foregoing issuances were exempt from registration under Section 4(a)(2) of the Securities Act as not involving any public offering. None of the securities were sold through an underwriter and, accordingly, there were no underwriting discounts or commissions involved.

 

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Sales of Unregistered Securities of Eco-Logical Concepts, Inc.

 

  On December 28, 2011, Eco-Logical entered into two Convertible Promissory Note agreements for an aggregate of $6,000, of which $5,000 is due to the President of Eco-Logical. The Notes bear interest at 10% per annum, and the principal amount and any interest thereon are due 60 days following demand. Pursuant to the agreements, the Notes are convertible into shares of common stock at a conversion price equal to $0.0001 per share. On October 27, 2012, Eco-Logical issued 50,000,000 shares of common stock to the President of Eco-Logical upon the conversion of the principal amount of $5,000.
     
  On October 23, 2012, Eco-Logical issued 250 shares of common stock to Joel Falitz with a fair value of $25 to settle debt owed to Mr. Falitz.
     
  On May 8, 2014, Eco-Logical sold a one-year promissory note to Maverick, LLC (“Maverick”) for the principal amount of $25,000 and bearing interest at rate of 8% per annum. Pursuant to the terms of the promissory note, simultaneously with the sale of all or substantially all of the assets of Eco-Logical, upon the merger or combination of Eco-Logical with another entity (other than for changing domicile), or change of control of Eco-Logical, the outstanding principal and accrued interest thereon under the promissory note automatically converted, without any action being taken by Eco-Logical or Maverick, into a number of shares of common stock and/or preferred stock of Eco-Logical which would enable Maverick to have voting and dispositive control of Eco-Logical.
     
  On May 9, 2014, the promissory note issued to Maverick was converted into 5,000,000 shares of Eco-Logical’s common stock and 200,000 shares of Eco-Logical’s Series A Preferred Stock.

 

The above issuances were exempt from registration under Section 4(a)(2) of the Securities Act as not involving any public offering. None of the securities were sold through an underwriter and, accordingly, there were no underwriting discounts or commissions involved.

 

Share Exchange Agreement

 

On May 12, 2014, On-Air Impact entered into a Share Exchange Agreement with Edward Whitehouse pursuant to which the Company exchanged 10,000,000 shares of Common Stock held by Mr. Whitehouse for 2,000,000 shares of Series A Convertible Preferred Stock. The Company relied upon Section 3(a)(9) of the Securities Act because the securities were exchanged by the same issuer with an existing security holder exclusively and no commission or other remuneration was paid or given directly or indirectly for soliciting such exchange.

 

Item 4.01 Changes in Registrant’s Certifying Accountant.

 

On May 9, 2014, W.T. Uniack & Co. CPA’s P.C. (“Uniack”) was dismissed as our independent registered public accounting firm. On May 15, 2014, Friedman, LLP (“Friedman”) was engaged as our new independent registered public accounting firm. The Board of Directors of the Company approved the dismissal of Uniack and approved the engagement of Friedman, LLP as our independent registered public accounting firm.

 

None of the reports of Uniack on our financial statements for either of the two most recent fiscal years or subsequent interim period contained an adverse opinion or disclaimer of opinion, or was qualified or modified as to uncertainty, audit scope or accounting principles, except that our audited financial statements contained in our Annual Reports on Form 10-K for the fiscal years ended May 31, 2013 and 2012, filed with the SEC, included a going concern qualification in the report of Uniack.

 

39
 

 

During the Company’s two most recent fiscal years ended March 31, 2013 and 2012, and the subsequent interim periods preceding their dismissal, there were no disagreements with Uniack whether or not resolved, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to the satisfaction of Uniack, would have caused them to make reference to the subject matter of the disagreement in connection with their report on the Company’s financial statements.

 

The Company provided Uniack with a copy of the disclosures it is making in this Report and has requested that Uniack, furnish it with a letter addressed to the SEC stating whether they agree with the above statements. The letter has been filed as Exhibit 16.1 to this Form 8-K.

 

During the two most recent fiscal years and the interim periods preceding the engagement, and through the filing date of this Report, neither the Company nor anyone on its behalf has previously consulted with Friedman regarding either (a) the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report was provided nor oral advice was provided to the Company that Friedman concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (b) any matter that was either the subject of a disagreement (as defined in paragraph 304(a)(1)(iv) of Regulation S-K and the related instructions thereto) or a reportable event (as described in paragraph 304(a)(1)(v)) of Regulation S-K).

 

Item 5.01 Changes in Control of Registrant.

 

The information regarding change of control of the Company in connection with the Merger set forth in Item 2.01, is incorporated herein by reference.

 

Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers; Compensatory Arrangements of Certain Officers.

 

The information regarding departure and appointment of the principal executive officers of On-Air Impact, Inc. in connection with the Merger set forth in Item 2.01 is incorporated herein by reference.

 

Item 5.06 Change in Shell Company Status.

 

Prior to the Merger, On-Air Impact was “shell company” (as such term is defined in Rule 12b-2 under the Exchange Act). As a result of the Merger, the Company ceased to be a shell company. The information contained in this Current Report, as filed with the SEC, constitute the current “Form 10 information” necessary to satisfy the conditions contained in Rule 144(i)(2) under the Securities Act.

  

Item 9.01 Financial Statements and Exhibits.

 

(a) Financial statements of business acquired.

 

In accordance with Item 9.01(a) of Form 8-K, Eco-Logical’s audited consolidated financial statements as of, and for the fiscal years ended, December 31, 2013 and 2012, and the accompanying notes, are included in this Report beginning on Page F-1.

 

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(d) Exhibits

 

Exhibit
Number:
  Description:
     
2.1*   Agreement and Plan of Merger and Reorganization, dated as of May 9, 2014, by and among the On-Air Impact, Inc., Eco-Logical Merger Sub, Inc. and Eco-Logical Concepts, Inc.
     
3.1(1)   Articles of Incorporation of On-Air Impact, Inc.
     
3.2(1)   Supplement to the Articles of Incorporation of On-Air Impact, Inc.
     
3.3(1)   On-Air Impact, Inc. Certificate of Designations for Series A Convertible Preferred Stock, filed December 10, 2012
     
3.4(2)   Amendment to Articles of Incorporation of On-Air Impact, Inc. re Distribution, filed January 25, 2013 and effective February 14, 2013
     
3.5(2)   Amendment to Articles of Incorporation of On-Air Impact, Inc. re Reverse Split, filed January 25, 2013 and effective February 14, 2013
     
3.6(2)   Amendment to Articles of Incorporation of On-Air Impact, Inc. re Forward Split, filed January 25, 2013 and effective February 14, 2013
     
3.7*   On-Air Impact, Inc. Amended and Restated Certificate of Designation for Series A Convertible Preferred Stock, filed May 8, 2014
     
3.8*   On-Air Impact, Inc. Certificate of Designation for Series B Non-Convertible Preferred Stock, filed May 8, 2014
     
3.9*   Certificate of Incorporation of Eco-Logical Concepts, Inc. filed on November 30, 2011
     
3.10*   Certificate of Amendment to Certificate of Incorporation of Eco-Logical Concepts, Inc. filed on December 13, 2012
     
3.11*   Eco-Logical Concepts, Inc. Series A Certificate of Designation filed on May 7, 2014
     
3.12*   Eco-Merger Sub, Inc. Certificate of Incorporation filed on May 6, 2014
     
3.13*   Certificate of Merger of Eco-Logical Concepts, Inc. and Eco-Merger Sub, Inc. filed on May 9, 2014
     
3.14*   Bylaws of Eco-Merger Sub, Inc.
     
3.15*   Bylaws of Eco-Logical Concepts, Inc.
     
10.1(1)   Series A Convertible Preferred Stock Subscription Agreement, dated December 18, 2012, between Virginia K. Sourlis and On-Air Impact, Inc.
     
10.2(4)   Exchange Agreement, dated February 12, 2013, between On-Air Impact, Inc. and Virginia K. Sourlis
     
10.3(4)   Non-Convertible Promissory Note, dated February 12, 2013, by On-Air Impact, Inc. F/B/O Virginia K. Sourlis
     
10.4*   Master Loan Agreement, dated May 9, 2014, between On-Air Impact, Inc. and Baccarat Holdings, Inc.
     
10.5*   Share Exchange Agreement, dated May 12, 2014, between On-Air Impact, Inc. and Edward Whitehouse
     
10.6*   Share Redemption Agreement, dated May 12, 2014, between On-Air Impact, Inc. and Edward Whitehouse
     
14.1(1)   On-Air Impact, Inc. Code of Ethics
     
14.2(1)   On-Air Impact, Inc. Code of Business Conduct
     
16.1*   Letter, dated May 14, 2014, from W.T. Uniack & Co. CPA’s P.C.

 

* Filed herewith
   
(1) Filed as an Exhibit to the Company’s Registration Statement on Form S-1 (File No: 333-168413) filed with the Securities and Exchange Commission on July 30, 2010 and incorporated by reference herein.
   
(2) Filed as an Exhibit to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 21, 2012 and incorporated by reference herein.
   
(3) Filed as an Exhibit to the Company’s Form 10-Q for the fiscal quarter ended February 28, 2012 filed with the Securities and Exchange Commission on April 15, 2013 and incorporated by reference herein.
   
(4) Filed as an Exhibit to the Company’s Form 8-K filed with the Securities and Exchange Commission on February 12, 2013 and incorporated by reference herein.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  ON-AIR IMPACT, INC.
     
Dated: May 15, 2014 By: /s/ Joel Falitz
    Joel Falitz
    Chief Executive Officer, President, Secretary & Treasurer
    (Principal Executive Officer)
    (Principal Financial and Accounting Officer)

 

42
 

 

Eco-Logical Concepts, Inc.

 

(A Development Stage Company)

 

Financial Statements

 

    Index
     
Table of Contents    
     
Report of Independent Registered Public Accounting Firm   F-1
     
Balance Sheets   F-2
     
Statements of Operations   F-3
     
Statement of Stockholder’s Deficit   F-4
     
Statements of Cash Flows   F-5
     
Notes to the Financial Statements   F-6

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and

Stockholder of Eco-Logical Concepts, Inc.

 

We have audited the accompanying balance sheets of Eco-Logical Concepts, Inc. (the “Company”) as of December 31, 2013 and 2012, and the related statements of operations, changes in stockholder’s deficiency, and cash flows for each of the two years in the period ended December 31, 2013 and from November 30, 2011 (inception) to December 31, 2013. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, audits of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Eco-Logical Concepts, Inc. as of December 31, 2013 and 2012, and the results of its operations, stockholder’s deficiency and cash flows for each of the two years in the period ended December 31, 2013 and from November 30, 2011 (inception) to December 31, 2013 in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has recurring losses and a working capital deficiency. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.

 

/s/ Friedman LLP  
East Hanover, NJ  
May 9, 2014  

 

 

F-1
 

 

Eco-logical Concepts, Inc.

(A Development Stage Company)

Balance Sheets

 

   December 31, 2013   December 31, 2012 
   $   $ 
         
ASSETS          
           
Current Assets          
Cash   4,205    735 
Accounts receivable, less allowance for doubtful accounts of $2,437 and $nil   8,226    11,443 
Prepaid expenses   2,500     
Inventory   997    1,149 
Total Assets   15,928    13,327 
           
LIABILITIES AND STOCKHOLDER’S DEFICIT          
           
Current Liabilities          
Accounts payable and accrued liabilities   18,670    15,051 
Due to related parties   10,600    10,227 
Loans payable   23,732    16,295 
Convertible notes payable   6,177    10,995 
Total Liabilities   59,179    52,568 
           
Commitments          
           
Stockholder’s Deficit          
Preferred Stock 50,000,000 shares authorized, $0.0001 par value; no shares issued and outstanding        
Common Stock 500,000,000 shares authorized, $0.0001 par value; 50,000,250 shares issued and outstanding   5,000    5,000 
Additional Paid-in Capital   25    25 
Deficit Accumulated During the Development Stage   (48,276)   (44,266)
Total Stockholder’s Deficit   (43,251)   (39,241)
Total Liabilities and Stockholder’s Deficit   15,928    13,327 

 

The accompanying notes are an integral part of these financial statements.

 

F-2
 

 

Eco-logical Concepts, Inc.

(A Development Stage Company)

Statements of Operations

 

           Period from 
           November 30, 2011 
   Year Ended   Year Ended   (Inception) to 
   December 31, 2013   December 31, 2012   December 31, 2013 
  $   $   $ 
             
Revenue   19,530    17,539    37,069 
Cost of sales   (5,328)   (4,967)   (10,295)
    14,202    12,572    26,774 
Expenses               
Advertising and promotion   5,342    3,602    8,944 
General and administrative   5,489    5,016    10,776 
Professional fees   5,214    44,848    50,062 
Research and development           1,600 
Total Expenses   16,045    53,466    71,382 
Net Loss Before Other Expenses   (1,843)   (40,894)   (44,608)
Other Expenses               
Interest expense   (2,167)   (1,461)   (3,668)
Net Loss   (4,010)   (42,355)   (48,276)

 

The accompanying notes are an integral part of these financial statements.

 

F-3
 

 

Eco-logical Concepts, Inc.

(A Development Stage Company)

Statement of Stockholder’s Deficit

For the Period from November 30, 2011 (Inception) to December 31, 2013

 

               Deficit     
               Accumulated     
           Additional   During the     
   Common Stock   Paid-in   Development     
      Amount   Capital   Stage   Total 
    Shares   $   $   $   $ 
                     
Balance – November 30, 2011 (Inception)                    
Net loss               (1,911)   (1,911)
Balance – December 31, 2011               (1,911)   (1,911)
Issuance of common stock for debt   250    *   25        25 
Issuance of common stock pursuant to the conversion of convertible debt   50,000,000    5,000            5,000 
Net loss               (42,355)   (42,355)
Balance – December 31, 2012   50,000,250    5,000    25    (44,266)   (39,241)
Net loss               (4,010)   (4,010)
Balance – December 31, 2013   50,000,250    5,000    25    (48,276)   (43,251)

 

* Less than $1

 

The accompanying notes are an integral part of these financial statements.

 

F-4
 

 

Eco-logical Concepts, Inc.

(A Development Stage Company)

Statements of Cash Flows

 

   Year Ended
December 31, 2013
$
   Year Ended
December 31, 2012
$
   Period from
November 30, 2011
(Inception) to
December 31, 2013
$
 
             
Cash Flows from Operating Activities               
Net loss   (4,010)   (42,355)   (48,276)
Adjustments to reconcile net loss to net cash provided by operating activities:               
Provision for doubtful accounts   2,437        2,437 
Changes in operating assets and liabilities:               
Accounts receivable   780    (11,443)   (10,663)
Prepaid expenses   (2,500)       (2,500)
Inventory   152    (1,149)   (997)
Accounts payable and accrued liabilities   1,634    14,546    16,180 
Accrued interest   1,985    465    2,490 
Net Cash Provided by (Used in) Operating Activities   478    (39,936)   (41,329)
Cash Flows from Financing Activities               
Advances from related parties   373    10,252    10,625 
Proceeds from notes payable   25,317    14,424    41,612 
Repayment of notes payable   (17,880)       (17,880)
Proceeds from convertible notes payable       1,000    20,000 
Repayment of convertible notes payable   (4,818)   (4,005)   (8,823)
Net Cash Provided by Financing Activities   2,992    21,671    45,534 
Change in Cash   3,470    (18,265)   4,205 
Cash - Beginning of Period   735    19,000     
Cash - End of Period   4,205    735    4,205 
Non-cash financing activities:               
Common stock issued for debt       25    25 
Common stock issued pursuant to the conversion of convertible debt       5,000    5,000 
Supplemental disclosures of cash flow information:               
Interest paid   182    995    1,177 
Income taxes paid            

 

The accompanying notes are an integral part of these financial statements.

 

F-5
 

 

Eco-logical Concepts, Inc.

(A Development Stage Company)

Notes to the Financial Statements

For the Years Ended December 31, 2013 and 2012

 

1.Nature of Operations

 

Eco-logical Concepts, Inc. (the “Company”) was incorporated in the State of Delaware on November 30, 2011. The Company is a Development Stage Company, as defined by Accounting Standards Codification (“ASC”) 915, Development Stage Entities. The Company’s principal business is the development, production and sale of environmentally focused wastewater products. It currently produces organic tablets and powders to be used regularly and in lieu of harmful chemical cleaning products in grease trap and septic tank systems. The Company intends to generate revenue through the sale of tablets and powders to domestic and international customers in the food and sanitation industries as well as residential consumers.

 

These financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated significant revenue since inception and has not generated significant earnings. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. As of December 31, 2013, the Company has accumulated losses during the development stage of $48,276 and a working capital deficit of $43,251. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

2.Summary of Significant Accounting Policies

 

  a)Development Stage

 

The Company is considered to be a development stage company, as defined by Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 915-10, in that the Company is devoting substantially all of its efforts to establishing a new business where planned principal operations have commenced, but no significant revenues have been derived from these operations.

 

The Company expects to continue to incur losses through commercialization and beyond as it anticipates significant expenditures on continued development and marketing of organic tablets and powders. The Company cannot predict when, if ever, it will become profitable.

 

  b)Basis of Presentation

 

These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in U.S. dollars. The Company’s fiscal year-end is December 31.

 

c)Use of Estimates

 

The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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 revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

d)Cash and Cash Equivalents

 

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.

 

e)Accounts Receivable and Allowance for Doubtful Accounts

 

Accounts receivable are stated at the amount billed to customers and are ordinarily due upon receipt. The Company provides an allowance for doubtful accounts, which is based upon a review of outstanding receivables, historical collection information and existing economic conditions. Provisions for doubtful accounts are recorded when it is deemed probable that the customer will not make the required payments at either the contractual due dates or in the future. At December 31, 2013 and 2012, the Company recognized a provision for doubtful accounts of $2,437 and $nil, respectively.

 

f)Inventories

 

Inventories are stated at the lower of cost or market. Cost is determined on a standard cost basis that approximates the first-in, first-out (FIFO) method. Market is determined based on net realizable value. Appropriate consideration is given to obsolescence, excessive levels, deterioration, and other factors in evaluating net realizable value. At December 31, 2013 and 2012, inventory consisted of water purification tablets and ingredients required to manufacture water purification tablets.

 

F-6
 

 

Eco-logical Concepts, Inc.

(A Development Stage Company)

Notes to the Financial Statements

For the Years Ended December 31, 2013 and 2012

 

g)Shipping and Handling Costs

 

Shipping and handling costs of $718 and $1,407 are included in general and administrative expenses for the years ended December 31, 2013, and 2012, respectively.

 

h)Advertising Costs

 

The Company expenses advertising costs as incurred. Such costs totaled approximately $5,342 and $3,602 for the years ended December 31, 2013, and 2012, respectively.

 

i)Fair Value of Financial Instruments

 

The Company measures and discloses the estimated fair value of financial assets and liabilities using the fair value hierarchy prescribed by US generally accepted accounting principles. The fair value hierarchy has three levels, which are based on reliable available inputs of observable data. The hierarchy requires the use of observable market data when available. The three-level hierarchy is defined as follows:

 

Level 1 – quoted prices for identical instruments in active markets.

 

Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations in which significant inputs and significant value drivers are observable in active markets; and.

 

Level 3 – fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

 

Financial instruments consist principally of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, due to related parties, loans payable and convertible notes payable. There were no transfers into or out of “Level 3” during the years ended December 31, 2013 and 2012. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations.

 

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial statement. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

 

j)Revenue Recognition

 

The Company recognizes revenue when persuasive evidence of an arrangement exists, services have been rendered, the sales price is fixed or determinable, and collectability is reasonably assured which is typically when title transfers upon shipment.

 

k)Research and Development

 

Research and development costs are expensed as incurred.

 

l)Income Taxes

 

The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

 

F-7
 

 

Eco-logical Concepts, Inc.

(A Development Stage Company)

Notes to the Financial Statements

For the Years Ended December 31, 2013 and 2012

 

3.Inventory

 

Inventory consists of the following:

 

   December 31, 2013
$
   December 31, 2012
$
 
Raw Materials   92    1,149 
Finished Goods   905     
Total   997    1,149 

 

4.Related Party Transactions

 

a)On December 28, 2011, the Company entered into a Convertible Promissory Note agreement of $5,000 with the President of the Company. On October 27, 2012, the Company issued 50,000,000 shares of common stock upon the conversion of a $5,000 convertible note due to the President of the Company (Note 6(c)).
   
b)On October 23, 2012, the Company issued 250 shares of common stock pursuant to the conversion of $25 of debt owed to the President of the Company.
   
c)At December 31, 2013 and 2012, the Company was indebted to the President of the Company and a company controlled by the President of the Company for $10,600 and $10,227, respectively for expenses paid on behalf of the Company. The amount is unsecured, non-interest bearing and due on demand.

 

5.Loans Payable

 

Loans payable consist of the following:  December 31, 2013
$
   December 31, 2012
$
 
a)  Loans payable that are unsecured, non-guaranteed, non-interest bearing and due on demand.   3,732    16,295 
              
b)  Note payable which is unsecured, non-guaranteed, and bears interest at 10% per annum. The note is due 60 days following demand. At December 31, 2013, the Company recognized accrued interest of $1,419.   20,000     
       23,732    16,295 

 

6.Convertible Notes Payable

 

a)On December 22, 2011, the Company entered into two Convertible Promissory Note agreements for an aggregate of $4,000. The Notes bear interest at 10% per annum, and the principal amount and any interest thereon are due 60 days following demand. Pursuant to the agreements, the Notes are convertible into shares of common stock at a conversion price equal to $0.01 per share. At December 31, 2013 and 2012, the Company recognized accrued interest of $795 and $402, respectively. The outstanding balance on the two notes was $4,000 for each of the years ended December 31, 2013 and 2012.
   
b)On December 22, 2011, the Company entered into a Convertible Promissory Note agreement for $10,000. The Note bears interest at 10% per annum, and the principal amount and any interest thereon are due 60 days following demand. Pursuant to the agreement, the Note is convertible into shares of common stock at a conversion price equal to $0.01 per share. In addition, as a condition precedent to the right to convert the debt to common stock of the Company, the holder must purchase 3,000,000 shares of common stock at $0.01 per share. On December 27, 2012, the Company repaid $4,005 towards the principal balance and $995 towards accrued interest. On April 19, 2013, the Company repaid $4,818 towards the principal balance and $182 towards accrued interest. At December 31, 2013 and 2012, the Company recognized accrued interest of $80 and $25, respectively. The outstanding balance for the years ended December 31, 2013 and 2012 was $1,177 and $5,995, respectively.
   
c)On December 28, 2011, the Company entered into two Convertible Promissory Note agreements for an aggregate of $6,000, of which $5,000 is due to the President of the Company. The Notes bear interest at 10% per annum, and the principal amount and any interest thereon are due 60 days following demand. Pursuant to the agreements, the Notes are convertible into shares of common stock at a conversion price equal to $0.0001 per share. On October 27, 2012, the Company issued 50,000,000 shares of common stock to the President of the Company upon the conversion of the principal amount of $5,000. At December 31, 2013 and 2012, the Company recognized accrued interest of $197 and $99, respectively. The outstanding balance on the two notes was $1,000 for each of the years ended December 31, 2013 and 2012.

 

F-8
 

 

Eco-logical Concepts, Inc.

(A Development Stage Company)

Notes to the Financial Statements

For the Years Ended December 31, 2013 and 2012

 

7.Common Stock

 

a)On October 23, 2012, the Company issued 250 shares of common stock with a fair value of $25 to settle debt owed to the President of the Company.
   
b)On October 27, 2012, the Company issued 50,000,000 shares of common stock upon the conversion of a $5,000 convertible note due to the President of the Company (Note 6(c)).

 

8.Concentrations

 

The Company’s revenues and receivables were concentrated among three customers as of December 31, 2013 and 2012:

 

2012:

 

Customer  2013 Revenue   2013 Receivables 
1   62%   96%
2   20%   * 
3   12%   * 

 

2013:

 

Customer  2013 Revenue   2013 Receivables 
1   53%   81%
2   25%   * 
3   16%   * 

 

* not greater than 10%

 

9.Income Taxes

 

The potential benefit of net operating losses have not been recognized in the financial statements because the Company cannot be assured that it is more likely than not that it will utilize the net operating losses carried forward in future years. The Company did not incur any income tax expense for the years ended December 31, 2013 and 2012. At December 31, 2013, approximately $45,800 of federal and state net operating losses were available to the Company to offset future taxable income, which will expire commencing in 2031. Given the short history of the Company and the uncertainty as to the likelihood of future taxable income, the Company has recorded a 100% valuation reserve against the anticipated recovery from the use of the net operating losses created at the inception or generated thereafter. The Company will evaluate the appropriateness of the valuation allowance on an annual basis and adjust the allowance as considered necessary.

 

10.Subsequent Events

 

a)On May 8, 2014, the Company entered into a Convertible Promissory Note agreement for $25,000. The Note bears interest at 8% per annum, and the principal amount and any interest thereon are due on May 8, 2015. On May 9, 2014, the Company issued 5,000,000 shares of common stock and 200,000 shares of Series A preferred stock upon the conversion of the principal amount of $25,000.
   
b)On May 9, 2014, the Company entered into a Plan of Merger and Reorganization (“Merger Agreement”) with On-Air Impact, Inc. (“On-Air”), a Nevada corporation, whereby every 100 shares of common stock of the Company will be converted into 1 share of common stock of On-Air and each share of Series A Convertible preferred stock of the Company will be converted into 1 share of Series B non-convertible preferred stock of On-Air. As a result of the Merger Agreement, stockholders of the Company received 550,003 shares of common stock and 200,000 shares of Series B non-convertible preferred stock of On-Air in exchange for 55,000,250 shares of common stock and 200,000 shares of Series A preferred stock of the Company. The Merger Agreement will be treated as a recapitalization of the Company for financial accounting purposes.
   
c)On May 9, 2014, the Company entered into a Master Loan Agreement (the “Loan Agreement”), whereby the lender agreed, from time to time, to purchase from the Company one or more Promissory Notes for the account of the Company, provided, however, that the aggregate principal amount of all Promissory Notes then outstanding shall not exceed the $500,000 and that no Event of Default has occurred and remains uncured. Amounts borrowed under the Loan Agreement are evidenced by an unsecured, non-recourse Promissory Note, bearing interest at a rate of 8% per annum, maturing on the first anniversary date thereof, and may be prepaid by the Company before the maturity date. Amounts borrowed under the Loan Agreement and repaid or prepaid may not be re-borrowed. The Loan Agreement will automatically terminate and be of no further force and effect upon the earlier to occur of (i) the satisfaction of all indebtedness, including the promissory notes and any additional indebtedness issued thereafter, between the Company and the lender and (ii) written termination notice is delivered by the Company or the lender to the other party. On May 9, 2014, the Company borrowed $50,000 under the Loan Agreement.

 

F-9
 

EXHIBIT 2.1

 

AGREEMENT AND PLAN OF MERGER

 

among

 

ECO-LOGICAL CONCEPTS, INC.

 

and

 

ON-AIR IMPACT, INC.

 

and

 

ECO-MERGER SUB, INC.

 

dated as of

 

MAY 9, 2014

 

 
 

 

AGREEMENT AND PLAN OF MERGER

 

This Agreement and Plan of Merger (this “Agreement”), is entered into as of May 9, 2014, by and among ECO-LOGICAL CONCEPTS, INC., a Delaware corporation (the “Company”), ON-AIR IMPACT, INC., a Nevada corporation (“Parent”), and ECO-MERGER SUB, INC., a Delaware corporation and a wholly-owned Subsidiary of Parent (“Merger Sub”). Capitalized terms used herein (including in the immediately preceding sentence) and not otherwise defined herein shall have the meanings set forth in Section 8.01 hereof.

 

RECITALS

 

WHEREAS, the parties intend that Merger Sub be merged with and into the Company, with the Company surviving that merger on the terms and subject to the conditions set forth herein (the “Merger”);

 

WHEREAS, the board of directors of the Company (the “Company Board”) has unanimously (a) determined that this Agreement and the transactions contemplated hereby, including the Merger, are in the best interests of the Company and its stockholders, (b) approved and declared advisable this Agreement and the transactions contemplated hereby, including the Merger, and (c) resolved to recommend adoption of this Agreement by the stockholders of the Company in accordance with the Delaware General Corporation Law (the “DGCL”);

 

WHEREAS, in accordance with Section 228 of the DGCL, a written consent of the stockholders of the Company has been executed, therein approving this Agreement, the Merger and the transactions contemplated hereby in accordance with Section 251 of the DGCL; and

 

WHEREAS, the respective boards of directors of Parent and Merger Sub have unanimously (a) determined that this Agreement and the transactions contemplated hereby, including the Merger, are in the best interests of Parent, Merger Sub and their respective stockholders, and (b) approved and declared advisable this Agreement and the transactions contemplated hereby, including the Merger.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

 
 

 

Article I

The Merger

 

Section 1.01 The Merger. On the terms and subject to the conditions set forth in this Agreement, and in accordance with the DGCL, at the Effective Time, (a) Merger Sub will merge with and into the Company (the “Merger”), and (b) the separate corporate existence of Merger Sub will cease and the Company will continue its corporate existence under the DGCL as the surviving corporation in the Merger (sometimes referred to herein as the “Surviving Corporation”).

 

Section 1.02 Closing. Upon the terms and subject to the conditions set forth herein, the closing of the Merger (the “Closing”) will take place within three (3) Business Days after satisfaction or, to the extent permitted hereunder, waiver of all conditions to the Merger set forth in Article VI (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or, to the extent permitted hereunder, waiver of all such conditions), unless this Agreement has been terminated pursuant to its terms or unless another time or date is agreed to in writing by the parties hereto. The Closing shall be held at the offices of The Magri Law Firm, PLLC in Fort Lauderdale, FL, unless another place is agreed to in writing by the parties hereto, and the actual date of the Closing is hereinafter referred to as the “Closing Date”.

 

Section 1.03 Effective Time. Subject to the provisions of this Agreement, at the Closing, the Company, Parent and Merger Sub will cause a certificate of merger (the “Certificate of Merger”) to be executed, acknowledged and filed with the Secretary of State of the State of Delaware in accordance with the relevant provisions of the DGCL and shall make all other filings or recordings required under the DGCL. The Merger will become effective at such time as the Certificate of Merger has been duly filed with the Secretary of State of the State of Delaware or at such later date or time as may be agreed by the Company and Parent in writing and specified in the Certificate of Merger in accordance with the DGCL (the effective time of the Merger being hereinafter referred to as the “Effective Time”).

 

Section 1.04 Effects of the Merger. The Merger shall have the effects set forth herein and in the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, from and after the Effective Time, all property, rights, privileges, immunities, powers, franchises, licenses and authority of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions and duties of each of the Company and Merger Sub shall become the debts, liabilities, obligations, restrictions and duties of the Surviving Corporation.

 

Agreement and Plan of MergerPage 2
 

 

Section 1.05 Certificate of Incorporation; Bylaws. At the Effective Time, (a) the certificate of incorporation, including any amendments and certificates of designation thereto, of the Company shall be the certificate of incorporation and the certificates of designations of the Surviving Corporation until thereafter amended in accordance with the terms thereof or as provided by applicable Law, and (b) the bylaws of the Company as in effect immediately prior to the Effective Time shall be the bylaws of the Surviving Corporation until thereafter amended in accordance with the terms thereof, the certificate of incorporation of the Surviving Corporation or as provided by applicable Law.

 

Section 1.06 Directors and Officers. The directors and officers of Merger Sub, in each case, immediately prior to the Effective Time shall, from and after the Effective Time, be the directors and officers, respectively, of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the certificate of incorporation and bylaws of the Surviving Corporation.

 

Article II

Effect of the Merger on Capital Stock

 

Section 2.01 Effect of the Merger on Capital Stock. At the Effective Time, by virtue of the Merger and without any action on the part of any party or the holder of any of the following securities:

 

(a) Conversion of Company Common Stock. Each share of common stock, par value $0.0001 per share, of the Company (“Company Common Stock”) issued and outstanding immediately prior to the Effective Time (other than any Company Common Stock owned beneficially by the Parent or the Merger Sub and other than Dissenting Shares (as defined below)), shall be converted into and represent the right to receive such number of shares of common stock par value $0.0001 per share, of the Parent (“Parent Common Stock”), subject to the applicable “Conversion Ratio” specified with respect to such class or series on Schedule A hereto.

 

(b) Each share of Series A Non-Convertible Preferred Stock, par value $0.0001 per share, of the Company (“Company Preferred Stock” and, together with the Company Common Stock, the “Company Stock”) issued and outstanding immediately prior to the Effective Time, shall be converted into and represent the right to receive such number of shares of Series B Non-Convertible Preferred Stock, par value $0.0001 per share, of the Parent (“Parent Preferred Stock,” and, together with the Parent Common Stock, the “Parent Stock), subject to the applicable “Conversion Ratio” specified with respect to such class or series on Schedule A hereto (the “Company Preferred Stock Applicable Conversion Ratio”).

 

(c) Cancellation of Certain Company Common Stock. Each share of Company Stock that is owned by Parent, Merger Sub or the Company (as treasury stock or otherwise) will automatically be cancelled and retired and will cease to exist, and no consideration will be delivered in exchange therefor.

 

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(d) An aggregate of 550,003 shares of Parent Common Stock (including Dissenting Shares), rounding up for fractional shares, if any, shall be issuable to the stockholders of record of the Company immediately prior to the Effective Time (the “Company Stockholders”) in connection with the Merger. An aggregate 200,000 Parent Preferred Stock, respectively (including Dissenting Shares), rounding up for fractional shares, if any, shall be issuable to the Company Stockholders prior to the Effective Time in connection with the Merger. The shares of Parent Stock into which the shares of Company Stock are converted pursuant to this Section 2.01 shall be referred to herein as the “Merger Shares.”

 

(e) Delivery of Parent Stock. The Parent shall deliver certificates for the Parent Stock to each Company Stockholder entitled thereto who shall have presented a certificate that immediately prior to the Effective Time represented Company Stock to be converted into Merger Shares pursuant to this Section 2.01 (the “Company Stock Certificates”) to the Parent or the Surviving Corporation or the Parent’s transfer agent.

 

(f) Cancellation of Company Stock. At the Effective Time, all shares of Company Stock will no longer be outstanding and all shares of Company Stock will be cancelled and retired and will cease to exist, and, subject to Section 2.04, each holder of a certificate formerly representing any such shares (each, a “Certificate”) will cease to have any rights with respect thereto, except the right to receive the Merger Shares in accordance with Section 2.01(g) hereof.

 

(g) Conversion of Merger Sub Capital Stock. Each share of common stock, par value $0.0001 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one newly issued, fully paid and non-assessable share of common stock of the Surviving Corporation.

 

Section 2.02 Fractional Shares. No certificates or scrip representing fractional Merger Shares shall be issued to Company Stockholders on the surrender for exchange of shares of Company Stock, and such Company Stockholders shall not be entitled to any voting rights, rights to receive any dividends or distributions or other rights as a stockholder of the Parent with respect to any fractional Merger Shares that would have otherwise been issued to such Company Stockholders. In lieu of any fractional Merger Shares that would have otherwise been issuable, each former Company Stockholder that would have been entitled to receive a fractional share shall, on proper surrender of such person’s Company Stock Certificates, receive such whole number of Merger Shares as is equal to the precise number of Merger Shares to which such Company Stockholder would be entitled, rounded up to the nearest whole number.

 

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Section 2.03 Surrender and Issuance.

 

(a) Prior to the Effective Time, Parent shall appoint an exchange agent reasonably acceptable to the Company (the “Exchange Agent”) to act as the agent for the purpose of exchanging for the Merger Shares for: (i) the Certificates, or (ii) book-entry shares which immediately prior to the Effective Time represented the shares of Company Common Stock (the “Book-Entry Shares”). On and after the Effective Time, Parent shall deposit, or cause the Surviving Corporation to deposit, with the Exchange Agent, sufficient Merger Shares that is issuable in respect of all of the shares of Company Stock represented by the Certificates and the Book-Entry Shares.

 

(b) Promptly after the Effective Time, Parent shall send, or shall cause the Exchange Agent to send, to each record holder of shares of Company Stock at the Effective Time, a letter of transmittal and instructions (which shall specify that the delivery shall be effected, and risk of loss and title shall pass, only upon proper delivery of the Certificates or transfer of the Book-Entry Shares to the Exchange Agent) for use in such exchange.

 

(c) Each holder of shares of Company Stock that have been converted into the right to receive the Merger Shares shall be entitled to receive the Merger Shares in respect of the Company Stock represented by a Certificate or Book-Entry Share upon (i) surrender to the Exchange Agent of a Certificate, together with a duly completed and validly executed letter of transmittal and such other documents as may reasonably be requested by the Exchange Agent, or (ii) receipt of an “agent’s message” by the Exchange Agent (or such other evidence, if any, of transfer as the Exchange Agent may reasonably request) in the case of Book-Entry Shares. Until so surrendered or transferred, as the case may be, and subject to the terms set forth in Section 2.04, each such Certificate or Book-Entry Share, as applicable, shall represent after the Effective Time for all purposes only the right to receive the Merger Shares issuable in respect thereof.

 

(d) If any portion of the Merger Shares is to be issued to a Person other than the Person in whose name the surrendered Certificate or the transferred Book-Entry Share, as applicable, is registered, it shall be a condition to such payment that (i) such Certificate shall be properly endorsed or shall otherwise be in proper form for transfer or such Book-Entry Share shall be properly transferred, and (ii) the Person requesting such issuance shall pay to the Exchange Agent any transfer or other Tax required as a result of such issuance to a Person other than the registered holder of such Certificate or Book-Entry Share, as applicable, or establish to the reasonable satisfaction of the Exchange Agent that such Tax has been paid or is not payable.

 

(e) All Merger Shares issuable upon the surrender of Certificates or transfer of Book-Entry Shares in accordance with the terms hereof shall be deemed to have been paid in full satisfaction of all rights pertaining to the shares of Company Stock formerly represented by such Certificate or Book-Entry Shares, and from and after the Effective Time, there shall be no further registration of transfers of shares of Company Stock on the stock transfer books of the Surviving Corporation. If, after the Effective Time, Certificates or Book-Entry Shares are presented to the Surviving Corporation, they shall be cancelled and exchanged for the Merger Shares provided for, and in accordance with the procedures set forth, in this Article II.

 

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(f) Any portion of the Merger Shares made available to the Exchange Agent in respect of any Dissenting Shares shall be returned to Parent, upon demand.

 

Section 2.04 Dissenting Shares. Notwithstanding any provision of this Agreement to the contrary, including Section 2.01, shares of Company Stock issued and outstanding immediately prior to the Effective Time (other than shares cancelled in accordance with Section 2.01) and held by a holder who has not voted in favor of adoption of this Agreement or consented thereto in writing and who has properly exercised appraisal rights of such shares in accordance with Section 262 of the DGCL (such shares of Company Stock being referred to collectively as the “Dissenting Shares” until such time as such holder fails to perfect or otherwise loses such holder’s appraisal rights under the DGCL with respect to such shares) shall not be converted into a right to receive the Merger Shares, but instead shall be entitled to only such rights as are granted by Section 262 of the DGCL; provided, however, that if, after the Effective Time, such holder fails to perfect, withdraws or loses such holder’s right to appraisal pursuant to Section 262 of the DGCL or if a court of competent jurisdiction shall determine that such holder is not entitled to the relief provided by Section 262 of the DGCL, such shares of Company Stock shall be treated as if they had been converted as of the Effective Time into the right to receive the Merger Shares in accordance with this Agreement, upon surrender of such Certificate formerly representing such share or transfer of such Book-Entry Share, as the case may be. The Company shall provide Parent prompt written notice of any demands received by the Company for appraisal of shares of Company Stock, any withdrawal of any such demand and any other demand, notice or instrument delivered to the Company prior to the Effective Time pursuant to the DGCL that relates to such demand, and Parent shall have the opportunity and right to direct all negotiations and proceedings with respect to such demands. Except with the prior written consent of Parent, the Company shall not make any payment with respect to, or settle or offer to settle, any such demands.

 

Section 2.05 Adjustments. Without limiting the other provisions of this Agreement, if at any time during the period between the date of this Agreement and the Effective Time, any change in the outstanding shares of capital stock of the Company shall occur (other than the issuance of additional shares of capital stock of the Company as permitted by this Agreement), including by reason of any reclassification, recapitalization, stock split (including reverse stock split) or combination, exchange or readjustment of shares, or any stock dividend or distribution paid in stock, the Merger Shares and any other amounts payable pursuant to this Agreement shall be appropriately adjusted to reflect such change.

 

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Section 2.06 Withholding Rights. The Parent and the Surviving Corporation shall be entitled to deduct and withhold from any amounts otherwise payable to any Person pursuant to this Article II such amounts as may be required to be deducted and withheld with respect to the making of such payment under the Internal Revenue Code of 1986, as amended, and applicable Treasury Regulations issued pursuant thereto (the “Code”), or any provision of state, local or foreign Tax Law. To the extent that amounts are so deducted and withheld by the Exchange Agent, Parent, Merger Sub or the Surviving Corporation, as the case may be, such amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which the Exchange Agent, Parent, Merger Sub or the Surviving Corporation, as the case may be, made such deduction and withholding.

 

Section 2.07 Lost Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent, the posting by such Person of a bond, in such reasonable amount as Parent may direct, as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue, in exchange for such lost, stolen or destroyed Certificate, the Merger Shares to be paid in respect of the Shares formerly represented by such Certificate as contemplated under this Article II.

 

Article III

Representations and Warranties of the Company

 

Except as set forth in the correspondingly numbered Section of the disclosure letter, dated the date of this Agreement and delivered by the Company to Parent prior to the Closing Date (the “Company Disclosure Letter”), the Company hereby represents and warrants to Parent and Merger Sub as follows:

 

Section 3.01 Organization; Standing and Power; Charter Documents; Minutes; Subsidiaries.

 

(a) Organization; Standing and Power. The Company is a corporation duly organized, validly existing and in good standing (with respect to jurisdictions that recognize the concept of good standing) under the Laws of its jurisdiction of organization, and has the requisite corporate power and authority to own, lease and operate its assets and to carry on its business as now conducted. The Company is duly qualified or licensed to do business as a foreign corporation and is in good standing (with respect to jurisdictions that recognize the concept of good standing) in each jurisdiction where the character of the assets and properties owned, leased or operated by it or the nature of its business makes such qualification or license necessary, except where the failure to be so qualified or licensed or to be in good standing, would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

 

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(b) Charter Documents. The Company has delivered or made available to Parent a true and correct copy of the certificate of incorporation (including any certificate of designations), bylaws or like organizational documents, each as amended to date (collectively, the “Charter Documents”), of the Company. The Company is not in violation of any of the provisions of its Charter Documents.

 

(c) Minutes. The Company has made available to Parent true and correct copies of the minutes (or, in the case of minutes that have not yet been finalized, a brief summary of the meeting) of all meetings of stockholders, the Company Board and each committee of the Company Board since its inception.

 

(d) No Subsidiaries. The Company does not own, or have any interest in any shares or have an ownership interest in any other Person.

 

Section 3.02 Capital Structure.

 

(a) Capital Stock. The authorized capital stock of the Company consists of: (i) Five Hundred Million (500,000,000) shares of Company Common Stock and (ii) Fifty Million (50,000,000) shares of Company Preferred Stock. As of the date of this Agreement, (x) 55,000,250 shares of Company Common Stock were issued and outstanding, (y) 0 shares of Company Common Stock were issued and held by the Company in its treasury and (z) 200,000 shares of Company Preferred Stock were designated as Series A Preferred Stock, of which 200,000 were issued and outstanding. All of the outstanding shares of capital stock of the Company are, and all shares of capital stock of the Company which may be issued as contemplated or permitted by this Agreement will be, when issued, duly authorized and validly issued, fully paid and non-assessable and not subject to any pre-emptive rights.

 

(b) Stock Awards.

 

(i) As of the date of this Agreement, the Company had not adopted an incentive plan and no shares of Company Common Stock were subject to issuance pursuant to stock options, warrants or awards.

 

(ii) There are no Contracts to which the Company is a party obligating the Company to accelerate the vesting of any Company equity award as a result of the transactions contemplated by this Agreement (whether alone or upon the occurrence of any additional or subsequent events). There are no outstanding (A) securities of the Company convertible into or exchangeable for indebtedness or shares of capital stock of the Company, (B) options, warrants or other agreements or commitments to acquire from the Company, or obligations of the Company to issue, any indebtedness or shares of capital stock of (or securities convertible into or exchangeable for shares of capital stock of) the Company or (C) restricted shares, restricted stock units, stock appreciation rights, performance shares, profit participation rights, contingent value rights, “phantom” stock or similar securities or rights that are derivative of, or provide economic benefits based, directly or indirectly, on the value or price of, any shares of capital stock of the Company, in each case that have been issued by the Company or its Subsidiaries (the items in clauses (A), (B) and (C), together with the capital stock of the Company, being referred to collectively as “Company Securities”).

 

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(iii) There are no outstanding Contracts requiring the Company to repurchase, redeem or otherwise acquire any Company Securities.

 

(iv) The Company is not a party to any voting agreement with respect to any Company Securities.

 

Section 3.03 Authority; Non-contravention; Governmental Consents.

 

(a) Authority. The Company has all requisite corporate power and authority to enter into and to perform its obligations under this Agreement, including the adoption of this Agreement by the affirmative vote or consent of the holders of a majority of the outstanding shares of Company Stock (the “Requisite Company Vote”), to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby has been duly authorized by all necessary corporate action on the part of the Company and no other corporate proceedings on the part of the Company are necessary to authorize the execution and delivery of this Agreement or to consummate the Merger and the other transactions contemplated hereby. The Requisite Company Vote is the only vote or consent of the holders of any class or series of the Company’s capital stock necessary to approve and adopt this Agreement, approve the Merger and consummate the Merger and the other transactions contemplated hereby. This Agreement has been duly executed and delivered by the Company and, assuming due execution and delivery by Parent and Merger Sub, constitutes the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium and other similar Laws affecting creditors rights generally and by general principles of equity.

 

(b) Non-contravention. The execution, delivery and performance of this Agreement by the Company, and the consummation by the Company of the transactions contemplated by this Agreement, including the Merger, do not and will not: (i) contravene or conflict with, or result in any violation or breach of, the Charter Documents of the Company; (ii) subject to compliance with the requirements set forth in clauses (i) through (v) of Section 3.03(c) and, in the case of the consummation of the Merger, obtaining the Requisite Company Vote, conflict with or violate any Law applicable to the Company, or any of its properties or assets; (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or alter the rights or obligations of any third party under, or give to others any rights of termination, amendment, acceleration or cancellation, or require any Consent under, any Contract to which the Company is a party or otherwise bound as of the date hereof; or (iv) result in the creation of a Lien (other than Permitted Liens) on any of the properties or assets of the Company, except, in the case of each of clauses (ii), (iii) and (iv), for any conflicts, violations, breaches, defaults, alterations, terminations, amendments, accelerations, cancellations or Liens, or where the failure to obtain any Consents, in each case, would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

 

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(c) Governmental Consents. No consent, approval, order or authorization of, or registration, declaration or filing with, or notice to (any of the foregoing being a “Consent”), any supranational, national, state, municipal, local or foreign government, any instrumentality, subdivision, court, administrative agency or commission or other governmental authority, or any quasi-governmental or private body exercising any regulatory or other governmental or quasi-governmental authority (a “Governmental Entity”) is required to be obtained or made by the Company in connection with the execution, delivery and performance by the Company of this Agreement or the consummation by the Company of the Merger and other transactions contemplated hereby, except for: (i) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware; (ii) such Consents as may be required under any other Laws applicable to the transactions contemplated by this Agreement; (iii) such Consents as may be required under applicable state securities or “blue sky” Laws and the securities Laws of any foreign country or the rules and regulations of FINRA; and (iv) such other Consents which if not obtained or made would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

 

(d) Board Approval. The Company Board, by resolutions duly adopted by unanimous vote at a meeting of all directors of the Company duly called and held and, as of the date hereof, not subsequently rescinded or modified in any way, has, as of the date hereof (i) determined that this Agreement and the transactions contemplated hereby, including the Merger, are fair to, and in the best interests of, the Company’s stockholders, (ii) approved and declared advisable the “agreement of merger” (as such term is used in Section 251 of the DGCL) contained in this Agreement and the transactions contemplated by this Agreement, including the Merger, in accordance with the DGCL, (iii) directed that the “agreement of merger” contained in this Agreement be submitted to Company’s stockholders for adoption, and (iv) resolved to recommend that Company stockholders adopt the “agreement of merger” set forth in this Agreement (collectively, the “Company Board Recommendation”) and directed that such matter be submitted for consideration of the stockholders of the Company at the Company Stockholders Meeting.

 

(e) Takeover Statutes. No “fair price,” “moratorium,” “control share acquisition,” “business combination” or other similar anti-takeover statute or regulation (including Section 203 of the DGCL) enacted under any federal, state, local or foreign laws applicable to the Company is applicable to this Agreement, the Merger or any of the other transactions contemplated by this Agreement. The Company Board has taken all actions so that the restrictions contained in Section 203 of the DGCL applicable to a “business combination” (as defined in such Section 203) will not apply to the execution, delivery or performance of this Agreement and the consummation of the Merger and the other transactions contemplated hereby

 

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Section 3.04 SEC Filings; Non-Shell Status.

 

(a) SEC Filings. Prior to the Merger, the Company was not, nor was required to be, a company subject to the reporting requirements under Section 13 or 15(d) of the Exchange Act.

 

(b) Non-Shell Status. The Company is not currently a “shell company” as defined in Rule 12b-2 of the Exchange Act.

 

Section 3.05 Financial Statements.

 

(a) Financial Statements. The Company has made available to Parent the Company’s annual financial statements for the fiscal years ended December 31, 2012 and 2013 (the “Financial Statements”). Each of the Financial Statements (including, in each case, any related notes thereto): (i) was prepared in accordance with United States generally accepted accounting principles (“GAAP”) applied on a consistent basis throughout the periods involved; and (ii) fairly presented in all material respects the financial position of the Company at the respective dates thereof and the results of the Company’s operations and cash flows for the periods indicated therein, subject, in the case of unaudited interim financial statements, to normal and year-end audit adjustments as permitted by GAAP and the applicable rules and regulations of the SEC.

 

(b) Undisclosed Liabilities. The balance sheet of the Company dated as of December 31, 2013 provided to the Parent prior to the date hereof is hereinafter referred to as the “Company Balance Sheet.” The Company does not have any Liabilities other than Liabilities that (i) are reflected or recorded on the Company Balance Sheet (including in the notes thereto), (ii) were incurred since the date of the Company Balance Sheet in the ordinary course of business, (iii) are incurred in connection with the transactions contemplated by this Agreement, or (iv) would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

 

(c) Off-balance Sheet Arrangements. The Company is not a party to, nor has any commitment to become a party to, any joint venture, off balance sheet partnership or any similar Contract where the result, purpose or intended effect of such Contract is to avoid disclosure of any material transaction involving, or material liabilities of, the Company in the Company’s Financial Statements.

 

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Section 3.06 Absence of Certain Changes or Events. Since the date of the Company Balance Sheet, except in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, the business of the Company has been conducted in the ordinary course of business and there has not been or occurred:

 

(a) any Company Material Adverse Effect or any event, condition, change or effect that could reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect; or

 

(b) any event, condition, action or effect that, if taken during the period from the date of this Agreement through the Effective Time, would constitute a breach of Section 5.01.

 

Section 3.07 Taxes.

 

(a) Tax Returns and Payment of Taxes. Except as what is disclosed on Section 3.07(a) of the Company’s Disclosure Letter, the Company has duly and timely filed or caused to be filed (taking into account any valid extensions) all material Tax Returns required to be filed by them. Such Tax Returns are true, complete and correct in all material respects. Except as what is disclosed on Section 3.07(a) of the Company’s Disclosure Letter, the Company is not currently the beneficiary of any extension of time within which to file any Tax Return. All material Taxes due and owing by the Company (whether or not shown on any Tax Return) have been timely paid or, where payment is not yet due, the Company has made an adequate provision for such Taxes in the Company’s financial statements (in accordance with GAAP). The Company’s most recent Financial Statements reflect an adequate reserve (in accordance with GAAP) for all material Taxes payable by the Company through the date of such Financial Statements. The Company has not incurred any material liability for Taxes since the date of the Company’s most recent financial statements outside the ordinary course of business or otherwise inconsistent with past practice.

 

(b) Availability of Tax Returns. The Company has made available to Parent complete and accurate copies of all federal, state, local and foreign income, franchise and other material Tax Returns filed by or on behalf of the Company for any Tax period since its inception.

 

(c) Withholding. The Company has have withheld and paid each material Tax required to have been withheld and paid in connection with amounts paid or owing to any Employee, independent contractor, creditor, customer, shareholder or other party, and materially complied with all information reporting and backup withholding provisions of applicable Law.

 

(d) Liens. There are no Liens for material Taxes upon the assets of the Company other than for current Taxes not yet due and payable or for Taxes that are being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP has been made in the Company’s Financial statements.

 

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(e) Tax Deficiencies and Audits. No deficiency for any material amount of Taxes which has been proposed, asserted or assessed in writing by any taxing authority against the Company or remains unpaid. There are no waivers or extensions of any statute of limitations currently in effect with respect to Taxes of the Company. There are no audits, suits, proceedings, investigations, claims, examinations or other administrative or judicial proceedings ongoing or pending with respect to any material Taxes of the Company.

 

(f) Tax Jurisdictions. No claim has ever been made in writing by any taxing authority in a jurisdiction where the Company does not file Tax Returns that the Company may be subject to Tax in that jurisdiction.

 

(g) Tax Rulings. The Company has not requested nor is the subject of or bound by any private letter ruling, technical advice memorandum or similar ruling or memorandum with any taxing authority with respect to any material Taxes, nor is any such request outstanding.

 

(h) Ownership Changes. Without regard to this Agreement, the Company has not undergone an “ownership change” within the meaning of Section 382 of the Code.

 

Section 3.08 Intellectual Property.

 

(a) Certain Owned Company IP. Section 3.08(a) of the Company Disclosure Letter contains a true and complete list, as of the date hereof, of all: (i) Company-Owned IP that is the subject of any issuance, registration, certificate, application or other filing by, to or with any Governmental Authority or authorized private registrar, including registered Trademarks, registered Copyrights, issued Patents, domain name registrations and pending applications for any of the foregoing; and (ii) material unregistered Company-Owned IP.

 

(b) Right to Use; Title. The Company is the sole and exclusive owner of all right, title and interest in and to, or has the valid right to use all Intellectual Property used or held for use in or necessary for the conduct of the business of the Company and its Subsidiaries as currently conducted and contemplated (“Company IP”), free and clear of all Liens other than Permitted Liens, except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

 

(c) Validity and Enforceability. The Company rights in the Company-Owned IP are valid, subsisting and enforceable, except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. The Company has taken reasonable steps to maintain the Company IP and to protect and preserve the confidentiality of all Trade Secrets included in the Company IP, except where the failure to take such actions would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

 

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(d) Company IP Agreements. Section 3.08(d) of the Company Disclosure Letter contains a complete and accurate list of all Company IP Agreements other than licenses for shrinkwrap, clickwrap or other similar commercially available off-the-shelf Software that has not been modified or customized by a third party for the Company. The consummation of the transactions contemplated hereunder will not result in the loss or impairment of any rights of the Company under any of the Company IP Agreements, except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

 

(e) Non-Infringement. Except as would not be reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (i) the conduct of the businesses of the Company has not infringed, misappropriated or otherwise violated, and is not infringing, misappropriating or otherwise violating, any Intellectual Property of any other Person; and (ii) to the Knowledge of the Company, no third party is infringing upon, violating or misappropriating any Company Intellectual Property.

 

(f) IP Legal Actions and Orders. There are no Legal Actions pending or, to the Knowledge of the Company, threatened: (i) alleging any infringement, misappropriation or violation of the Intellectual Property of any Person by the Company; (ii) challenging the validity, enforceability or ownership of any Company-Owned IP or the Company’s rights with respect to any Company IP, in each case except for such Legal Actions that would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. The Company is not subject to any outstanding Order that restricts or impairs the use of any Company IP, except where compliance with such Order would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

 

Section 3.09 Compliance; Permits.

 

(a) Compliance. The Company is and, since its inception, has been in compliance with, all Laws or Orders applicable to the Company or by which the Company is bound, except for such non-compliance that would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. Since its inception, no Governmental Entity has issued any notice or notification stating that the Company is not in compliance with any Law, except where such non-compliance would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

 

(b) Permits. The Company holds, to the extent legally required to operate its business being operated as of the date hereof, all permits, licenses, clearances, authorizations and approvals from Governmental Entities (collectively, “Permits”), except for any Permits for which the failure to obtain or hold would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. No suspension or cancellation of any Permits of the Company is pending or, to the Knowledge of the Company, threatened, except for any such suspension or cancellation which would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. The Company is and, since its inception, has been in compliance with the terms of all Permits, except where the failure to be in such compliance would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

 

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Section 3.10 Litigation. As of the date hereof, there is no claim, action, suit, arbitration, proceeding or, to the Knowledge of the Company, governmental investigation (each, a “Legal Action”), pending, or to the Knowledge of the Company, threatened against the Company or any of its properties or assets or, to the Knowledge of the Company, any executive officer or director of the Company in their capacities as such, in each case by or before any Governmental Entity, other than any such Legal Action. The Company is not subject to any order, writ, assessment, decision, injunction, decree, ruling or judgment of a Governmental Entity (“Order”), whether temporary, preliminary or permanent, which would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. As of the date hereof, to the Knowledge of the Company, there are no SEC inquiries or investigations, other governmental inquiries or investigations or internal investigations pending or, to the Knowledge of the Company, threatened, in each case regarding any accounting practices of the Company \or any malfeasance by any executive officer of the Company.

 

Section 3.11 Brokers’ and Finders’ Fees. The Company has not incurred, nor will it incur, directly or indirectly, any liability for brokerage or finders’ fees or agents’ commissions or any similar charges in connection with this Agreement or any transaction contemplated hereby.

 

Section 3.12 Related Party Transactions. Except as what is disclosed on Section 3.12 of the Company Disclosure Letter, no executive officer or director of the Company or any person owning 5% or more of the shares of Company Stock (or any of such person’s immediate family members or Affiliates or associates) is a party to any Contract with or binding upon the Company or any of its assets, rights or properties or has any interest in any property owned by the Company or has engaged in any transaction with any of the foregoing within the last twelve (12) months.

 

Section 3.13 Employee Matters.

 

(a) Employee Plans. The Company does not have any plan, program, policy, agreement, collective bargaining agreement or other arrangement providing for compensation, severance, deferred compensation, performance awards, stock or stock-based awards, fringe, retirement, death, disability or medical benefits or other employee benefits or remuneration of any kind, including each employment, severance, retention, change in control or consulting plan, program arrangement or agreement, in each case whether written or unwritten or otherwise, funded or unfunded, including each “employee benefit plan,” within the meaning of Section 3(3) of ERISA, whether or not subject to ERISA, which is or has been sponsored, maintained, contributed to, or required to be contributed to, by the Company for the benefit of any current or former employee, independent contractor, consultant or director of the Company.

 

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(b) Effect of Transaction. Neither the execution of this Agreement, the consummation of the Merger, nor any of the transactions contemplated by this Agreement will (either alone or upon the occurrence of any additional or subsequent events): (i) entitle any current or former director, employee, contractor or consultant of the Company to severance pay or any other payment or (ii) accelerate the time of payment, funding, or vesting, or increase the amount of compensation due to any such individual.

 

(c) Employment Law Matters. The Company (i) is in compliance with all applicable Laws and agreements respecting hiring, employment, termination of employment, plant closing and mass layoff, employment discrimination, harassment, retaliation and reasonable accommodation, leaves of absence, terms and conditions of employment, wages and hours of work, employee health and safety, leasing and supply of temporary and contingent staff, engagement of independent contractors, including proper classification of same, payroll taxes, and immigration with respect to Company Employees and contingent workers; and (ii) is in compliance with all applicable Laws relating to the relations between it and any labor organization, trade union, work council or other body representing Company Employees, except, in the case of clauses (i) and (ii) immediately above, where the failure to be in compliance with the foregoing would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

 

(d) Labor. The Company is not a party to, or subject to, any collective bargaining agreement or other agreement with any labor organization, work council or trade union with respect to any of its or their operations. No material work stoppage, slowdown or labor strike against the Company with respect to employees who are employed within the United States is pending, threatened or has occurred since the Company’s inception, and, to the Knowledge of the Company, no material work stoppage, slowdown or labor strike against the Company or any of its Subsidiaries with respect to employees who are employed outside the United States is pending, threatened or has occurred in the last two (2) years. As of the date hereof, none of the Company Employees are represented by a labor organization, work council or trade union and, to the Knowledge of the Company, there is no organizing activity, Legal Action, election petition, union card signing or other union activity or union corporate campaigns of or by any labor organization, trade union or work council directed at the Company, or any Company Employees. As of the date hereof, there are no Legal Actions, government investigations, or labor grievances pending, or, to the Knowledge of the Company, threatened relating to any employment related matter involving any Company Employee or applicant, including, but not limited to, charges of unlawful discrimination, retaliation or harassment, failure to provide reasonable accommodation, denial of a leave of absence, failure to provide compensation or benefits, unfair labor practices, or other alleged violations of Law, except for any of the foregoing which would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

 

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Section 3.14 Real Property and Personal Property Matters.

 

(a) Owned Real Estate. The Company does not have any Owned Real Estate.

 

(b) Leased Real Estate. Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, the Company has a valid and subsisting leasehold estate in each parcel of real property demised under a Lease for the full term of the respective Lease free and clear of any Liens other than Permitted Liens. Section 3.14(a) of the Company Disclosure Letter contains a complete and correct list, as of the date hereof, of the Leased Real Estate including with respect to each such Lease the date of such Lease and any material amendments thereto. Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (x) all Leases are valid and in full force and effect except to the extent they have previously expired or terminated in accordance with their terms, and (y) neither the Company nor any of its Subsidiaries nor, to the Knowledge of the Company, no third party, has violated any provision of, or committed or failed to perform any act which, with or without notice, lapse of time or both would constitute a default under the provisions of, any Lease. The Company has not assigned, pledged, mortgaged, hypothecated or otherwise transferred any Lease nor has the Company entered into with any other Person any sublease, license or other agreement that is material to the Company, taken as a whole, and that relates to the use or occupancy of all or any portion of the Leased Real Estate. The Company has delivered or otherwise made available to Parent true and complete copies of all Leases (including all material modifications, amendments, supplements, waivers and side letters thereto) pursuant to which the Company thereof leases, subleases or licenses, as tenant, any Leased Real Estate.

 

(c) Personal Property. Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, the Company has good title to, or a valid and binding leasehold interest in, all the personal property owned by it, free and clear of all Liens, other than Permitted Liens.

 

Section 3.15 Environmental Matters. Except for such matters as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect:

 

(a) The Company is, and has been, in compliance with all Environmental Laws, which compliance includes the possession, maintenance of, compliance with, or application for, all Permits required under applicable Environmental Laws for the operation of the business of the Company as currently conducted.

 

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(b) The Company has not (i) produced, processed, manufactured, generated, transported, treated, handled, used, stored, disposed of or released any Hazardous Substances, except in compliance with Environmental Laws, at any Real Estate, or (ii) exposed any employee or any third party to any Hazardous Substances under circumstances reasonably expected to give rise to any material Liability or obligation under any Environmental Law.

 

(c) The Company has received written notice of and there is no Legal Action pending, or to the Knowledge of the Company, threatened against the Company, alleging any Liability or responsibility under or non-compliance with any Environmental Law or seeking to impose any financial responsibility for any investigation, cleanup, removal, containment or any other remediation or compliance under any Environmental Law. The Company is not subject to any Order or written agreement by or with any Governmental Entity or third party imposing any material Liability or obligation with respect to any of the foregoing.

 

Section 3.16 Material Contracts.

 

(a) Material Contracts. For purposes of this Agreement, “Company Material Contract” shall mean the following to which the Company is a party or any of the respective assets are bound (excluding any Leases):

 

(i) any “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K of the Securities Act);

 

(ii) any employment or consulting Contract (in each case with respect to which the Company has continuing obligations as of the date hereof) with any current or former (x) executive officer of the Company, (y) member of the Company Board, or (z) Company Employee providing for an annual base salary;

 

(iii) any Contract providing for indemnification or any guaranty by the Company, in each case that is material to the Company, taken as a whole.

 

(iv) any Contract that purports to limit in any material respect the right of the Company (or, at any time after the consummation of the Merger, Parent or any of its Subsidiaries) (x) to engage in any line of business, or (y) to compete with any Person or operate in any geographical location;

 

(v) any Contract relating to the disposition or acquisition, directly or indirectly (by merger or otherwise), by the Company after the date of this Agreement.

 

(vi) any Contract that contains any provision that requires the purchase of all of the Company’s requirements for a given product or service from a given third party, which product or service is material to the Company, taken as a whole;

 

(vii) any Contract that obligates the Company to conduct business on an exclusive or preferential basis with any third party or upon consummation of the Merger will obligate Parent, the Surviving Corporation or any of their respective Subsidiaries to conduct business on an exclusive or preferential basis with any third party;

 

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(viii) any partnership, joint venture or similar Contract that is material to the Company and its Subsidiaries taken as a whole;

 

(ix) any mortgages, indentures, guarantees, loans or credit agreements, security agreements or other Contracts, in each case relating to indebtedness for borrowed money, whether as borrower or lender;

 

(x) any employee collective bargaining agreement or other Contract with any labor union;

 

(xi) any other Contract under which the Company or any of its Subsidiaries is obligated to make payment or incur costs in excess of $1,000 in any year and which is not otherwise described in clauses (i)–(x) above;

 

(xii) any Contract which is not otherwise described in clauses (i)-(xi) above that is material to the Company, taken as a whole, and listed on Section 3.16(b) of the Company Disclosure Letter; or

 

(xiii) any Company IP Agreement.

 

(b) Schedule of Material Contracts; Documents. Section 3.16(b) of the Company Disclosure Letter sets forth a true and complete list as of the date hereof of all Company Material Contracts. The Company has made available to Parent correct and complete copies of all Company Material Contracts, including any amendments thereto.

 

(c) No Breach. (i) All the Company Material Contracts are valid and binding on the Company, enforceable against it in accordance with its terms, and is in full force and effect, (ii) neither the Company, nor to the Knowledge of the Company, any third party, has violated any provision of, or failed to perform any obligation required under the provisions of, any Company Material Contract, and (iii) neither the Company nor, to the Knowledge of the Company, any third party, is in breach, or has received written notice of breach, of any Company Material Contract.

 

Section 3.17 Full Disclosure. No representation or warranty by the Company in this Agreement and no statement contained in any certificate or other document furnished or to be furnished to Parent or any of its Representatives pursuant to this Agreement contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statements contained therein, in light of the circumstances in which they are made, not misleading.

 

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Article IV

Representations and Warranties of Parent and Merger Sub

 

Parent and Merger Sub hereby jointly and severally represent and warrant to the Company as follows:

 

Section 4.01 Organization. Each of Parent and Merger Sub is a corporation duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation.

 

Section 4.02 Authority; Non-contravention; Governmental Consents.

 

(a) Authority. Each of Parent and Merger Sub has all requisite corporate power and authority to enter into and to perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Parent and Merger Sub and the consummation by Parent and Merger Sub of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Parent and Merger Sub and no other corporate proceedings on the part of Parent or Merger Sub are necessary to authorize the execution and delivery of this Agreement or to consummate the Merger and the other transactions contemplated hereby, subject only to the filing of the Certificate of Merger pursuant to the DGCL. This Agreement has been duly executed and delivered by Parent and Merger Sub and, assuming due execution and delivery by the Company, constitutes the valid and binding obligation of Parent and Merger Sub, enforceable against Parent and Merger Sub in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium and other similar Laws affecting creditors’ rights generally and by general principles of equity.

 

(b) Non-contravention. The execution, delivery and performance of this Agreement by Parent and Merger Sub and the consummation by Parent and Merger Sub of the transactions contemplated by this Agreement, do not and will not: (i) contravene or conflict with, or result in any violation or breach of, the certificate of incorporation or bylaws of Parent or Merger Sub; (ii) subject to compliance with the requirements set forth in clauses (i)-(iv) of Section 4.02(c), conflict with or violate any Law applicable to Parent or Merger Sub or any of their respective properties or assets; (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation, or require any Consent under any Contract to which Parent or its Subsidiaries, including Merger Sub, are a party or otherwise bound; or (iv) result in the creation of any Lien (other than Permitted Liens) on any of the properties or assets of Parent or Merger Sub, except, in the case of each of clauses (ii), (iii) and (iv), for any conflicts, violations, breaches, defaults, terminations, amendments, accelerations, cancellations or Liens, or where the failure to obtain any Consents, in each case, would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on Parent’s and Merger Sub’s ability to consummate the transactions contemplated by this Agreement.

 

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(c) Governmental Consents. No Consent of any Governmental Entity is required to be obtained or made by Parent or Merger Sub in connection with the execution, delivery and performance by Parent and Merger Sub of this Agreement or the consummation by Parent and Merger Sub of the Merger and other transactions contemplated hereby, except for: (i) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of other states in which the Company and/or Parent are qualified to do business; (ii) such Consents as may be required under applicable state securities or “blue sky” laws and the securities Laws of any foreign country or the rules and regulations of FINRA; and (iii) such other Consents which if not obtained or made would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on Parent’s and Merger Sub’s ability to consummate the transactions contemplated by this Agreement.

 

Section 4.03 Financial Capability. Parent has or will have sufficient amount of authorized shares of Parent Stock to issue as Merger Shares as contemplated by this Agreement and to perform the other obligations of Parent and Merger Sub contemplated by this Agreement.

 

Section 4.04 Legal Proceedings. As of the date hereof, there is no pending or, to the Knowledge of Parent, threatened, Legal Action against Parent or any of its Subsidiaries, including Merger Sub, nor is there any injunction, order, judgment, ruling or decree imposed upon Parent or any of its Subsidiaries, including Merger Sub, in each case, by or before any Governmental Entity, that would, individually or in the aggregate, reasonably be expected to have a material adverse effect on Parent’s and Merger Sub’s ability to consummate the transactions contemplated by this Agreement.

 

Section 4.05 Ownership of Company Common Stock. Neither Parent nor any of its Affiliates beneficially owns (as defined in Rule 13d-3 of the Exchange Act) any shares of Company Common Stock.

 

Section 4.06 Full Disclosure. No representation or warranty by the Parent or Merger Sub in this Agreement and no statement contained in any certificate or other document furnished or to be furnished to Company or any of its Representatives pursuant to this Agreement contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statements contained therein, in light of the circumstances in which they are made, not misleading.

 

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Article V

Covenants

 

Section 5.01 Conduct of Business of the Company. The Company shall, and shall cause each of its Subsidiaries to, during the period from the date of this Agreement until the Effective Time, except as expressly contemplated by this Agreement or as required by applicable Law or with the prior written consent of Parent, conduct its business in the ordinary course of business consistent with past practice, and, to the extent consistent therewith, the Company shall use its reasonable best efforts to preserve substantially its business organization intact, to keep available the services of its current officers and employees, to preserve its present relationships with customers, suppliers, distributors, licensors, licensees and other Persons having business relationships with it. Without limiting the generality of the foregoing, between the date of this Agreement and the Effective Time, except as otherwise expressly contemplated by this Agreement or as set forth on Section 5.01 of the Company Disclosure Letter or as required by applicable Law, the Company shall not, without the prior written consent of Parent (which consent shall not be unreasonably withheld or delayed):

 

(a) amend or propose to amend its certificate of incorporation or bylaws (or other comparable organizational documents);

 

(b) (i) split, combine or reclassify any Company Stock, (ii) repurchase, redeem or otherwise acquire, or offer to repurchase, redeem or otherwise acquire, any Company Stock, (iii) declare, set aside or pay any dividend or distribution (whether in cash, stock, property or otherwise) in respect of, or enter into any Contract with respect to the voting of, any shares of its capital stock:

 

(c) issue, sell, pledge, dispose of or encumber any Company Stock, other than the issuance of shares of Common Stock upon the conversion of Convertible Notes listed on Section 5.01(c) of the Company Disclosure Letter;

 

(d) except as required by applicable Law or by any Company Employee Plan or Contract in effect as of the date of this Agreement, (i) increase the compensation payable or that could become payable by the Company to directors, officers or employees, other than increases in compensation made in the ordinary course of business consistent with past practice, (ii) enter into any new or amend in any material respect, any existing employment, severance, retention or change in control agreement with any of its past or present officers or employees, (iii) promote any officers or employees, except in connection with the Company’s annual or quarterly compensation review cycle or as the result of the termination or resignation of any officer or employee, or (iv) establish, adopt, enter into, amend, terminate, exercise any discretion under, or take any action to accelerate rights under any Company Employee Plans or any plan, agreement, program, policy, trust, fund or other arrangement that would be a Company Employee Plan if it were in existence as of the date of this Agreement, or make any contribution to any Company Employee Plan, other than contributions required by Law, the terms of such Company Employee Plans as in effect on the date hereof or that are made in the ordinary course of business consistent with past practice;

 

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(e) acquire, by merger, consolidation, acquisition of stock or assets, or otherwise, any business or Person or division thereof or make any loans, advances or capital contributions to or investments in any Person;

 

(f) (i) transfer, license, sell, lease or otherwise dispose of any assets (whether by way of merger, consolidation, sale of stock or assets, or otherwise), including the capital stock or other equity interests in the Company, provided that the foregoing shall not prohibit the Company from transferring, licensing, selling, leasing or disposing of obsolete equipment or assets being replaced, in each case in the ordinary course of business consistent with past practice, or (ii) adopt or effect a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization;

 

(g) repurchase, prepay or incur any indebtedness for borrowed money or guarantee any such indebtedness of another Person, issue or sell any debt securities or options, warrants, calls or other rights to acquire any debt securities of the Company, guarantee any debt securities of another Person, enter into any “keep well” or other Contract to maintain any financial statement condition of any other Person or enter into any arrangement having the economic effect of any of the foregoing, other than in connection with the financing of ordinary course trade payables consistent with past practice;

 

(h) enter into or amend or modify in any material respect, or consent to the termination of (other than at its stated expiry date), any Company Material Contract or any Lease with respect to material Real Estate or any other Contract or Lease that, if in effect as of the date hereof would constitute a Company Material Contract or Lease with respect to material Real Estate hereunder;

 

(i) institute, settle or compromise any Legal Actions pending or threatened before any arbitrator, court or other Governmental Entity involving the payment of monetary damages by the Company , other than (i) any Legal Action brought against Parent or Merger Sub arising out of a breach or alleged breach of this Agreement by Parent or Merger Sub, and (ii) the settlement of claims, liabilities or obligations reserved against on the most recent balance sheet of the Company; provided that, the Company shall not settle or agree to settle any Legal Action which settlement involves a conduct remedy or injunctive or similar relief or has a restrictive impact on the Company’s business;

 

(j) make any material change in any method of financial accounting principles or practices, in each case except for any such change required by a change in GAAP or applicable Law;

 

(k) (i) settle or compromise any material Tax claim, audit or assessment, (ii) make or change any material Tax election, change any annual Tax accounting period, adopt or change any method of Tax accounting, (iii) amend any material Tax Returns or file claims for material Tax refunds, or (iv) enter into any material closing agreement, surrender in writing any right to claim a material Tax refund, offset or other reduction in Tax liability or consent to any extension or waiver of the limitation period applicable to any material Tax claim or assessment relating to the Company;

 

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(l) enter into any material agreement, agreement in principle, letter of intent, memorandum of understanding or similar Contract with respect to any joint venture, strategic partnership or alliance;

 

(m) except in connection with actions permitted by Section 5.04 hereof, take any action to exempt any Person from, or make any acquisition of securities of the Company by any Person not subject to, any state takeover statute or similar statute or regulation that applies to Company with respect to an Acquisition Proposal or otherwise, including the restrictions on “business combinations” set forth in Section 203 of the DGCL, except for Parent, Merger Sub or any of their respective Subsidiaries or Affiliates, or the transactions contemplated by this Agreement;

 

(n) abandon, encumber, convey title (in whole or in part), exclusively license or grant any right or other licenses to Company IP, other than in the ordinary course of business consistent with past practice; or

 

(o) agree or commit to do any of the foregoing.

 

Section 5.02 Other Actions. From the date of this Agreement until the earlier to occur of the Effective Time or the termination of this Agreement in accordance with the terms set forth in Article VII, the Company and Parent shall not, and shall not permit any of their respective subsidiaries to, take, or agree or commit to take, any action that would reasonably be expected to, individually or in the aggregate, prevent, materially delay or materially impede the consummation of the Merger or the other transactions contemplated by this Agreement.

 

Section 5.03 Access to Information; Confidentiality.

 

(a) From the date of this Agreement until the earlier to occur of the Effective Time or the termination of this Agreement in accordance with the terms set forth in Article VII, the Company shall afford to Parent and Parent’s Representatives reasonable access, at reasonable times and in a manner as shall not unreasonably interfere with the business or operations of the Company, to the officers, employees, accountants, agents, properties, offices and other facilities and to all books, records, contracts and other assets of the Company, and the Company shall furnish promptly to Parent such other information concerning the business and properties of the Company as Parent may reasonably request from time to time. The Company shall not be required to provide access to or disclose information where such access or disclosure would jeopardize the protection of attorney-client privilege or contravene any Law (it being agreed that the parties shall use their reasonable best efforts to cause such information to be provided in a manner that would not result in such jeopardy or contravention). No investigation shall affect the Company’s representations and warranties contained herein, or limit or otherwise affect the remedies available to Parent or Merger Sub pursuant to this Agreement.

 

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Section 5.04 No Solicitation.

 

(a) The Company shall not, and shall not authorize or permit any of its Affiliates or any of its or their Representatives to, directly or indirectly, (i) encourage, solicit, initiate, facilitate or continue inquiries regarding an Acquisition Proposal; (ii) enter into discussions or negotiations with, or provide any information to, any Person concerning a possible Acquisition Proposal; or (iii) enter into any agreements or other instruments (whether or not binding) regarding an Acquisition Proposal. The Company shall immediately cease and cause to be terminated, and shall cause its Affiliates and all of its and their Representatives to immediately cease and cause to be terminated, all existing discussions or negotiations with any Persons conducted heretofore with respect to, or that could lead to, an Acquisition Proposal. For purposes hereof, “Acquisition Proposal” shall mean any inquiry, proposal or offer from any Person (other than Parent or any of its Affiliates) concerning (i) a merger, consolidation, liquidation, recapitalization, share exchange or other business combination transaction involving the Company; (ii) the issuance or acquisition of shares of capital stock or other equity securities of the Company; or (iii) the sale, lease, exchange or other disposition of any significant portion of the Company’s properties or assets.

 

(b) In addition to the other obligations under this Section 5.04, the Company shall promptly (and in any event within two Business Days after receipt thereof by the Company or its Representatives) advise Parent orally and in writing of any Acquisition Proposal, any request for information with respect to any Acquisition Proposal, or any inquiry with respect to or which could reasonably be expected to result in an Acquisition Proposal, the material terms and conditions of such request, Acquisition Proposal or inquiry, and the identity of the Person making the same.

 

(c) The Company agrees that the rights and remedies for noncompliance with this Section 5.04 shall include having such provision specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed that any such breach or threatened breach shall cause irreparable injury to Parent and that money damages would not provide an adequate remedy to Parent.

 

Section 5.05 Stockholders Consent.

 

(a) The Company shall use its reasonable best efforts to obtain, immediately following the execution and delivery of this Agreement, the Requisite Company Vote pursuant to written consents of the Stockholders (the “Written Consent”). Promptly following receipt of the Written Consent, the Company shall deliver a copy of such Written Consent to Parent.

 

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(b) Promptly following, but in no event than ten Business Days after, receipt of the Written Consent, the Company shall prepare and mail a notice (the “Stockholder Notice”) to every Stockholder that did not execute the Written Consent. The Stockholder Notice shall (i) be a statement to the effect that the Company Board unanimously determined that the Merger is advisable in accordance with Section 251(b) of the DGCL and in the best interests of the Stockholders and unanimously approved and adopted this Agreement, the Merger and the other transactions contemplated hereby, (ii) provide the Stockholders to whom it is sent with notice of the actions taken in the Written Consent, including the approval and adoption of this Agreement, the Merger and the other transactions contemplated hereby in accordance with Section 228(e) of the DGCL and the bylaws of the Company and (iii) notify such Stockholders of their dissent and appraisal rights pursuant to Section 262 of the DGCL. The Stockholder Notice shall include therewith a copy of Section 262 of Delaware Law and all such other information as Parent shall reasonably request, and shall be sufficient in form and substance to start the twenty (20) day period during which a Stockholder must demand appraisal of such Stockholder’s Common Stock as contemplated by Section 262(d)(2) of the DGCL. All materials submitted to the Stockholders in accordance with this Section 5.05(b) shall be subject to Parent’s advance review and reasonable approval.

 

Section 5.06 Notice of Certain Events.

 

(a) From the date hereof until the Closing, the Company shall promptly notify Parent in writing of:

 

(i) any fact, circumstance, event or action the existence, occurrence or taking of which (A) has had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (B) has resulted in, or could reasonably be expected to result in, any representation or warranty made by the Company hereunder not being true and correct or (C) has resulted in, or could reasonably be expected to result in, the failure of any of the conditions set forth herein to be satisfied;

 

(ii) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement;

 

(iii) any notice or other communication from any Governmental Authority in connection with the transactions contemplated by this Agreement; and

 

(iv) any Actions commenced or, to the Company’s Knowledge, threatened against, relating to or involving or otherwise affecting the Company that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to this Agreement or that relates to the consummation of the transactions contemplated by this Agreement.

 

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(b) Parent’s receipt of information pursuant to this Section 5.06 shall not operate as a waiver or otherwise affect any representation, warranty or agreement given or made by the Company in this Agreement and shall not be deemed to amend or supplement the Disclosure Schedules.

 

Section 5.07 Governmental Approvals and Consents

 

(a) Each party hereto shall, as promptly as possible, (i) make, or cause or be made, all filings and submissions required under any Law applicable to such party or any of its Affiliates; and (ii) use reasonable best efforts to obtain, or cause to be obtained, all consents, authorizations, orders and approvals from all Governmental Authorities that may be or become necessary for its execution and delivery of this Agreement and the performance of its obligations pursuant to this Agreement. Each party shall cooperate fully with the other party and its Affiliates in promptly seeking to obtain all such consents, authorizations, orders and approvals. The parties hereto shall not willfully take any action that will have the effect of delaying, impairing or impeding the receipt of any required consents, authorizations, orders and approvals.

 

(b) The Company and Parent shall use reasonable best efforts to give all notices to, and obtain all consents from, all required third parties.

 

Section 5.08 Directors’ and Officers’ Indemnification and Insurance.

 

(a) Parent and Merger Sub agree that all rights to indemnification, advancement of expenses and exculpation by the Company now existing in favor of each Person who is now, or has been at any time prior to the date hereof or who becomes prior to the Effective Time an officer or director of the Company (each an “D&O Indemnified Party”) as provided in the Company Charter Documents, in each case as in effect on the date of this Agreement, shall be assumed by the Surviving Corporation in the Merger, without further action, at the Effective Time and shall survive the Merger and shall remain in full force and effect in accordance with their terms, and, in the event that any proceeding is pending or asserted or any claim made during such period, until the final disposition of such proceeding or claim.

 

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Section 5.09 Reasonable Best Efforts.

 

(a) Upon the terms and subject to the conditions set forth in this Agreement (including those contained in this Section 5.09), each of the parties hereto shall use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, and to satisfy all conditions to, in the most expeditious manner practicable, the transactions contemplated by this Agreement, including (i) the obtaining of all necessary permits, waivers, consents, approvals and actions or nonactions from Governmental Entities and the making of all necessary registrations and filings (including filings with Governmental Entities) and the taking of all steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Entities, (ii) the obtaining of all necessary consents or waivers from third parties, and (iii) the execution and delivery of any additional instruments necessary to consummate the Merger and to fully carry out the purposes of this Agreement. Parent will take all action necessary to cause Merger Sub to perform its obligations under this Agreement and to consummate the Merger on the terms and conditions set forth in this Agreement. The Company and Parent shall, subject to applicable Law, promptly (x) cooperate and coordinate with the other in the taking of the actions contemplated by clauses (i), (ii) and (iii) immediately above and (y) supply the other with any information that may be reasonably required in order to effectuate the taking of such actions. Each party hereto shall promptly inform the other party or parties hereto, as the case may be, of any communication from any Governmental Entity regarding any of the transactions contemplated by this Agreement. If the Company or Parent receives a request for additional information or documentary material from any Governmental Entity with respect to the transactions contemplated by this Agreement, then it shall use reasonable best efforts to make, or cause to be made, as soon as reasonably practicable and after consultation with the other party, an appropriate response in compliance with such request, and, if permitted by applicable Law and by any applicable Governmental Entity, provide the other party’s counsel with advance notice and the opportunity to attend and participate in any meeting with any Governmental Entity in respect of any filing made thereto in connection with the transactions contemplated by this Agreement. Neither Parent nor the Company shall commit to or agree (or permit their respective Subsidiaries to commit to or agree) with any Governmental Entity to stay, toll or extend any applicable waiting period under the HSR Act or other applicable Antitrust Laws, without the prior written consent of the other (such consent not to be unreasonably withheld or delayed).

 

Section 5.10 Public Announcements. The initial press release with respect to this Agreement and the transactions contemplated hereby shall be a release mutually agreed to by the Company and Parent. Thereafter, no public release or announcement concerning the transactions contemplated hereby shall be issued by any party without the prior written consent of the Company and Parent (which consent shall not be unreasonably withheld or delayed), except as such release or announcement may be permitted by Section 5.04 or required by applicable Law or the rules or regulations of any applicable United States securities exchange or Governmental Entity to which the relevant party is subject, wherever situated, in which case the party required to make the release or announcement shall consult with the other party about, and allow the other party reasonable time to comment on such release or announcement in advance of such issuance.

 

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Section 5.11 Further Assurances. At and after the Effective Time, the officers and directors of the Surviving Corporation shall be authorized to execute and deliver, in the name and on behalf of the Company or Merger Sub, any deeds, bills of sale, assignments or assurances and to take and do, in the name and on behalf of the Company or Merger Sub, any other actions and things to vest, perfect or confirm of record or otherwise in the Surviving Corporation any and all right, title and interest in, to and under any of the rights, properties or assets of the Company acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger.

 

Article VI

Conditions

 

Section 6.01 Conditions to Each Party’s Obligation to Effect the Merger. The respective obligations of each party to this Agreement to effect the Merger is subject to the satisfaction or waiver on or prior to the Closing Date of each of the following conditions:

 

(a) Company Stockholder Approval. This Agreement will have been duly adopted by the Requisite Company Vote.

 

(b) No Injunctions, Restraints or Illegality. No Governmental Entity having jurisdiction over any party hereto shall have enacted, issued, promulgated, enforced or entered any Laws or Orders, whether temporary, preliminary or permanent, that make illegal, enjoin or otherwise prohibit consummation of the Merger or the other transactions contemplated by this Agreement.

 

Section 6.02 Conditions to Obligations of Parent and Merger Sub. The obligations of Parent and Merger Sub to effect the Merger are also subject to the satisfaction or waiver by Parent and Merger Sub on or prior to the Closing Date of the following conditions:

 

(a) Representations and Warranties. The representations and warranties of the Company set forth in Article III of this Agreement shall be true and correct in all respects (without giving effect to any limitation indicated by the words “material adverse effect,” “in all material respects,” “in any material respect,” “material” or “materially”) when made and as of immediately prior to the Effective Time, as if made at and as of such time (except those representations and warranties that address matters only as of a particular date, which shall be true and correct in all respects as of that date), except where the failure of such representations and warranties to be so true and correct would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

 

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(b) Performance of Covenants. The Company shall have performed in all material respects all obligations, and complied in all material respects with the agreements and covenants, required to be performed by or complied with by it hereunder.

 

(c) Company Material Adverse Effect. Since the date of this Agreement, there shall not have been any Company Material Adverse Effect or any event, change or effect that would, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

 

(d) Officer’s Certificate. Parent will have received a certificate, signed by the chief executive officer or chief financial officer of the Company, certifying as to the matters set forth in Section 6.02(a), Section 6.02(a) and Section 6.02(c) hereof.

 

Section 6.03 Conditions to Obligation of the Company. The obligation of the Company to effect the Merger is also subject to the satisfaction or waiver by the Company on or prior to the Closing Date of the following conditions:

 

(a) Representations and Warranties. The representations and warranties of Parent and Merger Sub set forth in Article IV of this Agreement shall be true and correct in all respects (without giving effect to any limitation indicated by the words “material adverse effect,” “in all material respects,” “in any material respect,” “material” or “materially”) when made and as of immediately prior to the Effective Time, as if made at and as of such time (except those representations and warranties that address matters only as of a particular date, which shall be true and correct in all respects as of that date), except where the failure of such representations and warranties to be so true and correct would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.

 

(b) Performance of Covenants. Parent and Merger Sub shall have performed in all material respects all obligations, and complied in all material respects with the agreements and covenants, required to be performed by or complied with by them hereunder.

 

(c) Parent Material Adverse Effect. Since the date of this Agreement, there shall not have been any Parent Material Adverse Effect or any event, change or effect that would, individually or in the aggregate, reasonably be expected to have Parent Material Adverse Effect.

 

(d) Officer’s Certificate. The Company will have received a certificate, signed by an officer of Parent, certifying as to the matters set forth in Section 6.03(a), Section 6.03(b) and Section 6.03(c).

 

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Article VII

Termination, Amendment and Waiver

 

Section 7.01 Termination. This Agreement may be terminated at any time prior to the Closing:

 

(a) by the mutual written consent of the Company and Parent;

 

(b) by Parent by written notice to the Company if:

 

(i) neither Parent nor Merger Sub is then in material breach of any provision of this Agreement and there has been a breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by the Company pursuant to this Agreement that would give rise to the failure of any of the conditions specified in this Agreement and such breach, inaccuracy or failure has not been cured by the Company within ten (10) Business Days of the Company’s receipt of written notice of such breach from Parent; or

 

(ii) any of the conditions of Section 6.02 shall not have been, or if it becomes apparent that any of such conditions will not be, fulfilled by May 14, 2014 (the “End Date”), unless such failure shall be due to the failure of Parent to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by it prior to the Closing;

 

(c) by the Company by written notice to Parent if:

 

(i) the Company is not then in material breach of any provision of this Agreement and there has been a breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by Parent or Merger Sub pursuant to this Agreement that would give rise to the failure of any of the conditions specified in this Agreement and such breach, inaccuracy or failure has not been cured by Parent or Merger Sub within ten (10) Business Days of Parent’s or Merger Sub’s receipt of written notice of such breach from the Company; or

 

(ii) any of the conditions of set forth Section 6.03 shall not have been, or if it becomes apparent that any of such conditions will not be, fulfilled by the End Date, unless such failure shall be due to the failure of the Company to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by it prior to the Closing; or

 

(d) by Parent or the Company if:

 

(i) there shall be any Law that makes consummation of the transactions contemplated by this Agreement illegal or otherwise prohibited or any Governmental Authority shall have issued a Governmental Order restraining or enjoining the transactions contemplated by this Agreement, and such Governmental Order shall have become final and non-appealable; or

 

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(ii) if within twenty (20) days following the execution and delivery of this Agreement by all of the parties hereto, the Company shall not have delivered to Parent a copy of the executed Written Consent evidencing receipt of the Requisite Company Vote.

 

Section 7.02 Notice of Termination; Effect of Termination. The party desiring to terminate this Agreement pursuant to this Article VII (other than pursuant to Section 7.01) shall deliver written notice of such termination to each other party hereto specifying with particularity the reason for such termination, and any such termination in accordance with Section 7.02 shall be effective immediately upon delivery of such written notice to the other party. If this Agreement is terminated pursuant to this Article VII, it will become void and of no further force and effect, with no liability on the part of any party to this Agreement (or any stockholder, director, officer, employee, agent or Representative of such party) to any other party hereto, except (i) with respect to this Section 7.02, and Article VIII (and any related definitions contained in any such Sections or Article), which shall remain in full force and effect and (ii) with respect to any liabilities or damages incurred or suffered by a party, to the extent such liabilities or damages were the result of fraud or the breach by another party of any of its representations, warranties, covenants or other agreements set forth in this Agreement.

 

Section 7.03 Amendment. At any time prior to the Effective Time, this Agreement may be amended or supplemented in any and all respects, whether before or after receipt of the Requisite Company Vote, by written agreement signed by each of the parties hereto; provided, however, that following the receipt of the Requisite Company Vote, there shall be no amendment or supplement to the provisions of this Agreement which by Law or in accordance with the rules of any relevant self-regulatory organization would require further approval by the holders of Company Common Stock without such approval.

 

Section 7.04 Extension; Waiver. At any time prior to the Effective Time, Parent or Merger Sub, on the one hand, or the Company, on the other hand, may (a) extend the time for the performance of any of the obligations of the other party(ies), (b) waive any inaccuracies in the representations and warranties of the other party(ies) contained in this Agreement or in any document delivered under this Agreement, or (c) unless prohibited by applicable Law, waive compliance with any of the covenants, agreements or conditions contained in this Agreement. Any agreement on the part of a party to any extension or waiver will be valid only if set forth in an instrument in writing signed by such party. The failure of any party to assert any of its rights under this Agreement or otherwise will not constitute a waiver of such rights.

 

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Article VIII

Miscellaneous

 

Section 8.01 Definitions. For purposes of this Agreement, the following terms will have the following meanings when used herein with initial capital letters:

 

Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by or is under common control with, such first Person. For the purposes of this definition, “control” (including, the terms “controlling,” “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities, by Contract or otherwise.

 

Agreement” has the meaning set forth in the Preamble.

 

Antitrust Laws” has the meaning set forth in Section 3.03(c).

 

Book-Entry Shares” has the meaning set forth in Section 2.03(a).

 

Business Day” means any day, other than Saturday, Sunday or any day on which banking institutions located in New York, NY are authorized or required by Law or other governmental action to close.

 

Certificate” has the meaning set forth in Section 2.01(c).

 

Certificate of Merger” has the meaning set forth in Section 1.03.

 

Charter Documents” has the meaning set forth in Section 3.01(a).

 

Closing” has the meaning set forth in Section 1.02.

 

Closing Date” has the meaning set forth in Section 1.02.

 

Code” has the meaning set forth in Section 2.06.

 

Company” has the meaning set forth in the Preamble.

 

Company Balance Sheet” has the meaning set forth in Section 3.05(b).

 

Company Board” has the meaning set forth in the Recitals.

 

Company Board Recommendation” has the meaning set forth in Section 3.03(d).

 

Company Common Stock” has the meaning set forth in the Recitals.

 

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Company Disclosure Letter” has the meaning set forth in the introductory language in Article III.

 

Company Employee” has the meaning set forth in Section 3.13(a).

 

Company Employee Agreement” means any Contract between the Company or any of its Subsidiaries and a Company Employee.

 

Company Employee Plans” has the meaning set forth in Section 3.13(a).

 

Company Equity Award” means a Company Stock Option or a Company Stock Award or a phantom stock award, as the case may be.

 

Company IP” has the meaning set forth in Section 3.08(b).

 

Company IP Agreements” means all licenses, sublicenses, consent to use agreements, covenants not to sue and permissions and other Contracts, including the right to receive royalties or any other consideration, whether written or oral, relating to Intellectual Property and to which the Company or any of its Subsidiaries is a party or under which the Company or any of its Subsidiaries is a licensor or licensee.

 

Company Material Adverse Effect” means any event, occurrence, fact, condition or change that is, or would reasonably be expected to become, individually or in the aggregate, materially adverse to (i) the business, results of operations, prospects, condition (financial or otherwise), or assets of the Company, taken as a whole, or (ii) the ability of the Company to consummate the transactions contemplated hereby on a timely basis; provided, however, that, for the purposes of clause (i), a Company Material Adverse Effect shall not be deemed to include events, occurrences, facts, conditions or changes arising out of, relating to or resulting from: (a) changes generally affecting the economy, financial or securities markets; (b) the announcement of the transactions contemplated by this Agreement; (c) any outbreak or escalation of war or any act of terrorism; or (d) general conditions in the industry in which the Company and its Subsidiaries operate; provided further, however, that any event, change and effect referred to in clauses (a), (c) or (d) immediately above shall be taken into account in determining whether a Company Material Adverse Effect has occurred or would reasonably be expected to occur to the extent that such event, change or effect has a disproportionate effect on the Company and its Subsidiaries, taken as a whole, compared to other participants in the industries in which the Company conducts its businesses.

 

Company Material Contract” has the meaning set forth in Section 3.16(a).

 

Company-Owned IP” means all Intellectual Property owned or purported to be owned by the Company.

 

Company Preferred Stock” has the meaning set forth in Section 3.02(a).

 

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Company Securities” has the meaning set forth in Section 3.02(a).

 

Company Stock Plans” has the meaning set forth in Section 3.02(a).

 

Company Stockholders Meeting” means the special meeting of the Stockholders of the Company to be held to consider the adoption of this Agreement.

 

Confidentiality Agreement” has the meaning set forth in Section 5.03.

 

Consent” has the meaning set forth in Section 3.03(c).

 

Contracts” means any contracts, agreements, licenses, notes, bonds, mortgages, indentures, leases or other binding instruments or binding commitments, whether written or oral.

 

Convertible Notes” means any debt instruments convertible or exchangeable into securities of the Company. “DGCL” has the meaning set forth in Section 1.01.

 

Dissenting Shares” has the meaning set forth in Section 2.04.

 

Effective Time” has the meaning set forth in Section 1.03.

 

End Date” has the meaning set forth in Section 7.01(b)(ii).

 

Environmental Laws” means any applicable Law, and any Order or binding agreement with any Governmental Entity: (a) relating to pollution (or the cleanup thereof) or the protection of natural resources, endangered or threatened species, human health or safety, or the environment (including ambient air, soil, surface water or groundwater, or subsurface strata); or (b) concerning the presence of, exposure to, or the management, manufacture, use, containment, storage, recycling, reclamation, reuse, treatment, generation, discharge, transportation, processing, production, disposal or remediation of any Hazardous Materials. The term “Environmental Law” includes, without limitation, the following (including their implementing regulations and any state analogs): the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq.; the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. §§ 6901 et seq.; the Federal Water Pollution Control Act of 1972, as amended by the Clean Water Act of 1977, 33 U.S.C. §§ 1251 et seq.; the Toxic Substances Control Act of 1976, as amended, 15 U.S.C. §§ 2601 et seq.; the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. §§ 11001 et seq.; the Clean Air Act of 1966, as amended by the Clean Air Act Amendments of 1990, 42 U.S.C. §§ 7401 et seq.; and the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. §§ 651 et seq.

 

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ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

Exchange Act” has the meaning set forth in Section 3.03(c).

 

Exchange Agent” has the meaning set forth in Section 2.03(a).

 

GAAP” has the meaning set forth in Section 3.05.

 

Governmental Entity” has the meaning set forth in Section 3.03(c).

 

Hazardous Substance” shall mean (a) any material, substance, chemical, waste, product, derivative, compound, mixture, solid, liquid, mineral or gas, in each case, whether naturally occurring or man-made, that is hazardous, acutely hazardous, toxic, or words of similar import or regulatory effect under Environmental Laws, and (b) any petroleum or petroleum-derived products, radon, radioactive materials or wastes, asbestos in any form, lead or lead-containing materials, urea formaldehyde foam insulation and polychlorinated biphenyls.

 

Intellectual Property” means all intellectual property and other similar proprietary rights in any jurisdiction worldwide, whether registered or unregistered, including such rights in and to: (a) patents (including all reissues, divisions, provisionals, continuations and continuations-in-part, re-examinations, renewals and extensions thereof), patent applications, patent disclosures or other patent rights (“Patents”); (c) copyrights, design, design registration, and all registrations, applications for registration, and renewals for any of the foregoing, and any “moral” rights (“Copyrights”); (d) trademarks, service marks, trade names, business names, logos, trade dress, certification marks and other indicia of commercial source or origin together with all goodwill associated with the foregoing, and all registrations, applications and renewals for any of the foregoing (“Trademarks”); (e) trade secrets and business, technical and know-how information, databases, data collections and other confidential and proprietary information and all rights therein (“Trade Secrets”); (f) software, including data files, source code, object code, application programming interfaces, architecture, files, records, schematics, computerized databases and other software-related specifications and documentation (“Software”); and (g) Internet domain name registrations.

 

IRS” means the United States Internal Revenue Service.

 

Knowledge” means, when used with respect to a party to this Agreement, the actual or constructive knowledge of any officer or director, after due inquiry, of such party.

 

Laws” means any domestic or foreign laws, common law, statutes, ordinances, rules, regulations, codes, Orders or legally enforceable requirements enacted, issued, adopted, promulgated, enforced, ordered or applied by any Governmental Entity.

 

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Lease” shall mean all leases, subleases and other agreements under which the Company or any of its Subsidiaries leases, uses or occupies, or has the right to use or occupy, any real property.

 

Leased Real Estate” shall mean all real property that the Company or any of its Subsidiaries leases, subleases or otherwise uses or occupies, or has the right to use or occupy, pursuant to a Lease.

 

Legal Action” has the meaning set forth in Section 3.10.

 

Liability” shall mean any liability, indebtedness or obligation of any kind (whether accrued, absolute, contingent, matured, unmatured or otherwise, and whether or not required to be recorded or reflected on a balance sheet under GAAP).

 

Liens” means, with respect to any property or asset, all pledges, liens, mortgages, charges, encumbrances, hypothecations, options, rights of first refusal, rights of first offer and security interests of any kind or nature whatsoever.

 

Merger” has the meaning set forth in Section 1.01.

 

Merger Sub” has the meaning set forth in the Preamble.

 

Merger Shares” has the meaning set forth in Section 2.01(a).

 

Order” has the meaning set forth in Section 3.10.

 

Owned Real Estate” shall mean any real estate owned in fee by Company or any of its Subsidiaries, together with all buildings, structures, fixtures and improvements thereon and all of the Company’s and its Subsidiaries’ rights thereto, including without limitation, all easements, rights of way and appurtenances relating thereto.

 

Parent” has the meaning set forth in the Preamble.

 

Parent Material Adverse Effect” means any event, occurrence, fact, condition or change that is, or would reasonably be expected to become, individually or in the aggregate, materially adverse to (i) the business, results of operations, prospects, condition (financial or otherwise), or assets of the Parent or Merger Sub, taken as a whole, or (ii) the ability of the Parent to consummate the transactions contemplated hereby on a timely basis; provided, however, that, for the purposes of clause (i), a Parent Material Adverse Effect shall not be deemed to include events, occurrences, facts, conditions or changes arising out of, relating to or resulting from: (a) changes generally affecting the economy, financial or securities markets; (b) the announcement of the transactions contemplated by this Agreement; (c) any outbreak or escalation of war or any act of terrorism; or (d) general conditions in the industry in which the Parent and Merger Sub operate; provided further, however, that any event, change and effect referred to in clauses (a), (c) or (d) immediately above shall be taken into account in determining whether a Parent Material Adverse Effect has occurred or would reasonably be expected to occur to the extent that such event, change or effect has a disproportionate effect on the Parent and Merger Sub, taken as a whole, compared to other participants in the industries in which the Parent conducts its businesses.

 

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Permits” has the meaning set forth in Section 3.09(b).

 

Permitted Liens” means (a) statutory Liens for current Taxes or other governmental charges not yet due and payable or the amount or validity of which is being contested in good faith (provided appropriate reserves required pursuant to GAAP have been made in respect thereof), (b) mechanics’, carriers’, workers’, repairers’ and similar statutory Liens arising or incurred in the ordinary course of business for amounts which are not delinquent or which are being contested by appropriate proceedings (provided appropriate reserves required pursuant to GAAP have been made in respect thereof), (c) zoning, entitlement, building and other land use regulations imposed by Governmental Entities having jurisdiction over such Person’s owned or leased real property, which are not violated by the current use and operation of such real property, (d) covenants, conditions, restrictions, easements and other similar non-monetary matters of record affecting title to such Person’s owned or leased real property, which do not materially impair the occupancy or use of such real property for the purposes for which it is currently used in connection with such Person’s businesses, (e) any right of way or easement related to public roads and highways, which do not materially impair the occupancy or use of such real property for the purposes for which it is currently used in connection with such Person’s businesses, and (f) Liens arising under workers’ compensation, unemployment insurance, social security, retirement and similar legislation.

 

Person” means any individual, corporation, limited or general partnership, limited liability company, limited liability partnership, trust, association, joint venture, Governmental Entity and other entity and group (which term will include a “group” as such term is defined in Section 13(d)(3) of the Exchange Act).

 

Real Estate” means the Owned Real Estate and the Leased Real Estate.

 

Representatives” has the meaning set forth in Section 5.04(a).

 

Requisite Company Vote” has the meaning set forth in Section 3.03(a).

 

SEC” has the meaning set forth in Section 3.03(c).

 

Securities Act” has the meaning set forth in Section 3.04(a).

 

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Subsidiary” means, when used with respect to any party, any corporation or other organization, whether incorporated or unincorporated, a majority of the securities or other interests of which having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such party or by any one or more of its subsidiaries, or by such party and one or more of its subsidiaries.

 

Surviving Corporation” has the meaning set forth in Section 1.01.

 

Taxes” means all federal, state, local, foreign and other income, gross receipts, sales, use, production, ad valorem, transfer, franchise, registration, profits, license, lease, service, service use, withholding, payroll, employment, unemployment, estimated, excise, severance, environmental, stamp, occupation, premium, property (real or personal), real property gains, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind whatsoever, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties.

 

Tax Returns” means any return, declaration, report, claim for refund, information return or statement or other document required to be filed with or provided to any taxing authority in respect of Taxes, including any schedule or attachment thereto, and including any amendment thereof.

 

Treasury Regulations” means the Treasury regulations promulgated under the Code.

 

Section 8.02 Interpretation; Construction.

 

(a) The table of contents and headings herein are for convenience of reference only, do not constitute part of this Agreement and shall not be deemed to limit or otherwise affect any of the provisions hereof. Where a reference in this Agreement is made to a Section, Exhibit or Schedule, such reference shall be to a Section of, Exhibit to or Schedule of this Agreement unless otherwise indicated. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” A reference in this Agreement to $ or dollars is to U.S. dollars. The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. References to “this Agreement” shall include the Company Disclosure Letter.

 

(b) The parties have participated jointly in negotiating and drafting this Agreement. In the event that an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.

 

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Section 8.03 Survival. None of the representations and warranties contained in this Agreement or in any instrument delivered under this Agreement will survive the Effective Time. This Section 8.03 does not limit any covenant of the parties to this Agreement which, by its terms, contemplates performance after the Effective Time. The Confidentiality Agreement will (a) survive termination of this Agreement in accordance with its terms and (b) terminate as of the Effective Time.

 

Section 8.04 Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of Laws of any jurisdiction other than those of the State of New York.

 

Section 8.05 Submission to Jurisdiction. Each of the parties hereto irrevocably agrees that any legal action or proceeding with respect to this Agreement and the rights and obligations arising hereunder, or for recognition and enforcement of any judgment in respect of this Agreement and the rights and obligations arising hereunder brought by any other party hereto or its successors or assigns shall be brought and determined exclusively in the relevant state court located in the County of New York in the State of New York , or in the event (but only in the event) that such court does not have subject matter jurisdiction over such action or proceeding, in the relevant federal court located in the County of New York in the State of New York. Each of the parties hereto agrees that mailing of process or other papers in connection with any such action or proceeding in the manner provided in Section 8.07 or in such other manner as may be permitted by applicable Laws, will be valid and sufficient service thereof. Each of the parties hereto hereby irrevocably submits with regard to any such action or proceeding for itself and in respect of its property, generally and unconditionally, to the personal jurisdiction of the aforesaid courts and agrees that it will not bring any action relating to this Agreement or any of the transactions contemplated by this Agreement in any court or tribunal other than the aforesaid courts. Each of the parties hereto hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, counterclaim or otherwise, in any action or proceeding with respect to this Agreement and the rights and obligations arising hereunder, or for recognition and enforcement of any judgment in respect of this Agreement and the rights and obligations arising hereunder (i) any claim that it is not personally subject to the jurisdiction of the above named courts for any reason other than the failure to serve process in accordance with this Section 8.05, (ii) any claim that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise), and (iii) to the fullest extent permitted by the applicable Law, any claim that (x) the suit, action or proceeding in such court is brought in an inconvenient forum, (y) the venue of such suit, action or proceeding is improper, or (z) this Agreement, or the subject matter hereof, may not be enforced in or by such courts.

 

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Section 8.06 Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.06.

 

Section 8.07 Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt), (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested), (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient, or (d) on the [third] day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 8.07):

 

If to Parent or Merger Sub, to:  

On-Air Impact, Inc.

130 Maple Avenue, Suite 6D

Red Bank, NJ 07701

Attention: Edward Whitehouse

T: (732) 530-7300

E: ewhitehouse@gmail.com

 

Agreement and Plan of MergerPage 41
 

 

with a copy (which will not constitute notice to Parent or Merger Sub) to:  

The Magri Law Firm, PLLC

2642 NE 9th Ave

Fort Lauderdale, FL 33334

Attn: Philip Magri, Esq.

T: (646) 502-5900

F: (646) 836-9200

E: pmagri@magrilaw.com

www.SEClawyerFL.com

     
If to the Company, to:  

Eco-Logical Concepts, Inc.

420 Jericho Turnpike, Suite 110

Jericho, NY 11753-1319

Attn: Joel Falitz, President

 

or to such other Persons, addresses or facsimile numbers as may be designated in writing by the Person entitled to receive such communication as provided above.

 

Section 8.08 Entire Agreement. This Agreement (including the Exhibits and Schedules to this Agreement) and the Company Disclosure Letter constitute the entire agreement among the parties with respect to the subject matter of this Agreement and supersede all other prior agreements and understandings, both written and oral, among the parties to this Agreement with respect to the subject matter of this Agreement. In the event of any inconsistency between the statements in the body of this Agreement, the Confidentiality Agreement and the Company Disclosure Letter (other than an exception expressly set forth as such in the Company Disclosure Letter), the statements in the body of this Agreement will control.

 

Section 8.09 No Third Party Beneficiaries. This Agreement is for the sole benefit of the parties hereto and their permitted assigns and respective successors and nothing herein, express or implied, is intended to or shall confer upon any other Person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

 

Section 8.10 Severability. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

 

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Section 8.11 Assignment. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Neither party may assign its rights or obligations hereunder without the prior written consent of the other party, which consent shall not be unreasonably withheld or delayed[; provided, however, that prior to the Effective Time, Merger Sub may, without the prior written consent of the Company, assign all or any portion of its rights under this Agreement to Parent or to one or more of Parent’s direct or indirect wholly-owned subsidiaries. No assignment shall relieve the assigning party of any of its obligations hereunder.

 

Section 8.12 Remedies. Except as otherwise provided in this Agreement, any and all remedies expressly conferred upon a party to this Agreement will be cumulative with, and not exclusive of, any other remedy contained in this Agreement, at Law or in equity. The exercise by a party to this Agreement of any one remedy will not preclude the exercise by it of any other remedy.

 

Section 8.13 Specific Performance. The parties hereto agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to an injunction or injunctions to prevent breaches or threatened breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof in any federal court located in the State of New York or any New York state court, in addition to any other remedy to which they are entitled at Law or in equity.

 

Section 8.14 Counterparts; Effectiveness. This Agreement may be executed in any number of counterparts, all of which will be one and the same agreement. This Agreement will become effective when each party to this Agreement will have received counterparts signed by all of the other parties.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

 

Company: ECO-LOGICAL CONCEPTS, INC.
     
  By: /s/ Joel Falitz
  Name: Joel Falitz
  Title: President and CEO
     
Parent: ON-AIR IMPACT, INC.
     
  By: /s/ Dorothy Whitehouse
  Name: Dorothy Whitehouse
  Title: resident and CEO
     
Merger Sub: ECO-MERGER SUB, INC.
     
  By: /s/ Joel Falitz
  Name: Joel Falitz
  Title: President and CEO