SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
June 11, 2013 (March 13, 2010)
Date of Report (Date of earliest event reported)
BRAZIL INTERACTIVE MEDIA, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-26108
(Commission File No.)
94-2901715
(IRS Employer Identification No.)
801 Brickell Avenue, Suite 900, Miami, Florida 33131
(Address of principal executive offices)
Registrant’s telephone number, including area code: (201) 777-3395
NATUREWELL, INCORPORATED
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions.
[ ] Written communication 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))
Explanatory Note
This Amendment No. 1 to Current Report on Form 8-K (the “Amendment”) hereby amends our Current Report on Form 8-K dated April 21, 2013, which we filed with the Securities and Exchange Commission (“SEC”) on April 21, 2013 (the “Original Filing”). This Amendment is being filed for the purpose of responding to certain SEC comments which requires the inclusion of additional information not contained in the Original Filing. Further, this Amendment expands the disclosure relating to the entry into a material definitive agreement and the current business of the Company.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Amendment No. 1 to Current Report on Form 8-K of Brazil Interactive Media, Inc. (formerly named Naturewell, Incorporated), a Delaware Corporation (the “Company”), as well as other filings with the Securities and Exchange Commission (“SEC”) and the Company’s press releases contain statements relating to future results, plans, assumptions, assessments and information, including certain projections and business trends, that constitute “Forward-Looking Statements” within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include statements concerning plans, objectives, goals, strategies, expectations, future events or performance and underlying assumptions and other statements that are other than statements of historical facts. Certain statements contained herein are forward-looking statements and, accordingly, involve risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements, including, without limitation, risks related to our business and risks associated with our securities. The Company’s expectations, beliefs and projections are expressed in good faith and are believed by the Company to have a reasonable basis, including without limitations, management’s examination of historical operating trends, and data contained in the Company’s records and other data available from third parties. There can be no assurance that management’s expectations, beliefs or projections will be achieved or accomplished. Certain risks and uncertainties may cause actual results to be materially different from projected results contained in forward-looking statements in this Current Report and in other disclosures. The Company’s future results will depend upon various other risks and uncertainties, including, but not limited to, those detailed in the Company’s other filings with the SEC. Actual results may differ materially from those expressed or implied by forward-looking statements. The Company disclaims any obligation to revise any forward-looking statements to reflect the occurrence, or lack thereof, of events or circumstances after the date such forward-looking statements were made, except as required by law.
Under the Agreement and Plan of Merger (the “Merger Agreement”), as described more fully below, Naturewell, Incorporated (“Naturewell” or the “Company”) became the ultimate parent company of Brazil Interactive Media, Inc., a Delaware corporation (“Brazil Interactive Media”). In accordance with the terms of the Merger Agreement, Naturewell filed a certificate of amendment to change its name to “Brazil Interactive Media, Inc.”, and Brazil Interactive Media changed its name to “BIMI, Inc.” The Company also decreased its authorized capital from 5,000,000,000 shares of common stock, par value $0.00001, and 15,000,000 shares of preferred stock, par value $0.01, to 100,000,000 shares of common stock, par value $0.00001, and 5,000,000 shares of preferred stock, par value $0.01.
Unless otherwise provided in this Amendment, all references in this Current Report to “we,” “us,” “Company,” “our,” “Brazil Interactive Media, Inc.,” “Naturewell”, or the “Registrant” refer to the combined entity, Brazil Interactive Media, Inc. together with its wholly-owned subsidiary, BIMI Inc., and Brazil Interactive Media’s Brazilian subsidiaries, Brazil Interactive Media Participações, Ltda and EsoTV Brasil Promoção Publicidade Licenciamento e Comércio Ltda. Unless otherwise indicated in this Amendment, all references in this Current Report to the Company’s Board of Directors shall refer to the Board of Directors of Brazil Interactive Media, Inc., which was appointed in conjunction with the closing of the Merger Agreement. The business operations of Brazil Interactive Media, Inc. following the transaction consist of those of its Delaware subsidiary, BIMI Inc., and BIMI Inc.’s subsidiaries located in the Federal Republic of Brazil.
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Item 1.01
Entry Into a Material Definitive Agreement
On March 13, 2013 (the “Closing Date”), Naturewell, Incorporated, a Delaware corporation, entered into a merger agreement (the “Merger Agreement”) with Brazil Interactive Media, Inc., a Delaware corporation, and Naturewell’s wholly-owned subsidiary, BIMI Acquisition Corp., a Delaware corporation incorporated by the Company on February 20, 2013 specifically for the purpose of consummating the Merger Agreement (the “Merger Sub”), pursuant to which the Company acquired all of the issued and outstanding shares of Brazil Interactive Media (the “Brazil Interactive Media Shares”). Prior to entering into the Merger Agreement, there was no relationship between the Company or its affiliates and Brazil Interactive Media, other than in respect of the Merger Agreement and the transactions contemplated thereby.
In accordance with the Merger Agreement, the shareholders of Brazil Interactive Media (the “Brazil Interactive Media Shareholders”) were issued an aggregate of 3,740,000 shares of Series G Convertible Preferred Stock of the Company (the “Series G Convertible Preferred Stock”) in exchange for all of the issued and outstanding Brazil Interactive Media Shares, or approximately 4 shares of the Company’s Series G Convertible Preferred Stock for every Brazil Interactive Media share held by the Brazil Interactive Media Shareholders (the “Share Exchange”).
The Merger Agreement and subsequent events are discussed in more detail in Item 2.01 below, which information is hereby incorporated by reference into this Item 1.01. A copy of the Merger Agreement was filed in the Original Filing as Exhibit 2.1 to this Current Report, and is hereby incorporated by reference into this Item 1.01. Capitalized terms used herein not otherwise defined shall have the meanings assigned to them in the Merger Agreement.
Item 2.01
Completion or Acquisition or Disposition of Assets
On the Closing Date, the Company entered into the Merger Agreement with the Company’s Merger Sub and Brazil Interactive Media. In accordance with the Merger Agreement, the Brazil Interactive Media Shareholders were issued an aggregate of 3,740,000 shares of Series G Convertible Preferred Stock for all of the issued and outstanding Brazil Interactive Media Shares, or approximately 4 shares of the Company’s Series G Convertible Preferred Stock for every Brazil Interactive Media share held by the Brazil Interactive Media Shareholders, in the Share Exchange.
On March 27, 2013, the effective date (“the Effective Date”) of the merger (the “Merger”), as provided for in the Merger Agreement, the Company and Brazil Interactive Media filed a certificate of merger with the state of Delaware, causing the merger of the Merger Sub into Brazil Interactive Media pursuant to Delaware Law. Brazil Interactive Media was the surviving company and became a wholly-owned subsidiary of Naturewell. As a result of the Merger, Brazil Interactive Media’s name was changed to BIMI, Inc. A copy of the Certificate of Merger is filed as Exhibit 3.1 to this Amendment, and is hereby incorporated by reference into this Item 2.01.
On May 16, 2013, pursuant to the Merger Agreement, the Company filed a certificate of amendment (the “Certificate Amendment”) with the state of Delaware, effecting a reverse stock split at a ratio of 8,484 to one, reducing the Company’s authorized shares, and changing the name of the Company to Brazil Interactive Media, Inc. A copy of the Certificate Amendment is filed as Exhibit 3.2 to this Amendment, and is hereby incorporated by reference into this Item 2.01.
Before the consummation of the Merger, the Company had 2,448,665,750 shares of Common Stock, 19,000,000 shares of Series A Common Stock, 3,115 shares of Series E Convertible Preferred Stock, and 75 shares of Series C Convertible Preferred Stock issued and outstanding. In accordance with the Merger Agreement, the Company converted all shares of Series A Common Stock to 19,000,000 shares of regular common stock on March 11, 2013, all shares of Series E Convertible Preferred Stock to 4,152,295 shares of common stock on March 11, 2013, and all outstanding senior convertible notes to 210,746 shares of Series G Convertible Preferred Stock and 8,220,150 shares of Common Stock on March 11, 2013. The company issued 3,740,000 Shares of Series G Convertible Preferred Stock in exchange for the BIMI common stock on March 13, 2013. On March 22, 2013, the Company issued 2,500 shares of Series H Convertible Preferred Stock. For information about recent sales of unregistered securities, see Item 3.02 of this Amendment. On May 14, 2013, the Company converted all shares of Series C Convertible Preferred Stock to 1,875,000 shares of Common Stock.
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As a result, at the time of filing of the Certificate Amendment, 2,481,913,195 shares of Common Stock were issued and outstanding, 3,970,746 shares of Series G Convertible Preferred Stock, issued in connection with the Merger Agreement, were issued and outstanding, and 2,500 shares of Series H Convertible Preferred Stock were issued and outstanding. After the effects of the reverse split implemented by the Certificate Amendment, there were 292,917 shares of the Company’s Common Stock issued and outstanding, 3,970,746 shares of the Company’s Series G Convertible Preferred Stock issued and outstanding, and 2,500 shares of Series H Convertible Preferred Stock issued and outstanding. As a result of the Certificate Amendment, the Company decreased its authorized capital from 5,000,000,000 shares of common stock, par value $0.00001, and 15,000,000 shares of preferred stock, par value $0.01, to 100,000,000 shares of common stock, par value $0.00001, and 5,000,000 shares of preferred stock, par value $0.01.
According to the Certificate of Designation establishing the Series G Convertible Preferred Stock, the Series G Convertible Preferred Stock is subject to an automatic forced conversion one business day following the date that a sufficient number of authorized and unissued shares of Common Stock becomes available to facilitate the conversion. By operation of the reverse stock split, filed on May 16, 2013, sufficient authorized and unissued shares of Common Stock became available, triggering an automatic conversion of all issued and outstanding Series G Convertible Preferred Stock to Common Stock. Those common shares in conversion of the Series G Convertible Preferred Stock have not yet been issued as of the date hereof. In accordance with a condition to the closing of the Merger Agreement, the Company will require that the newly-issued Common Stock upon the conversion of the Series G Convertible Preferred Stock shall be subject to Lock Up and Leak Out Agreements that restrict the transferability of such Common Stock as more fully described therein.
As a result of the Certificate Amendment and after the issuance of common shares in conversion of the Series G Convertible Preferred Stock, the Company expects to have approximately 40,000,000 shares of Common Stock issued and outstanding and 2,500 shares of Series H Convertible Preferred Stock issued and outstanding. The former Brazil Interactive Media Shareholders will then hold approximately 93.5% of the issued and outstanding Common Stock of the Company and the remaining 6.5% will be held by certain pre-merger shareholders. Although the Company has not yet, as of the date hereof, issued common stock in conversion of the Series G Convertible Preferred Stock, we expect to do so in the near future, predicated upon the execution of the Lock Up and Leak Out Agreements as a condition of the Merger Agreement.
Prior to the filing of the Certificate Amendment, the Company’s authorized capitalization consisted of 5,000,000,000 shares of common stock, par value $0.00001, and 15,000,000 shares of preferred stock, par value $0.01. However, pursuant to the terms of the Merger Agreement, the Company filed the Certificate Amendment and decreased its authorized capital from 5,000,000,000 shares of common stock, par value $0.00001, and 15,000,000 shares of preferred stock, par value $0.01, to 100,000,000 shares of common stock, par value $0.00001, and 5,000,000 shares of preferred stock, par value $0.01.
As a result of the Merger Agreement, and effective upon the date thereof, Mr. James R. Arabia and Mr. Matthew Malesek resigned as Chief Executive Officer and Chief Financial Officer, respectively, and as directors of the Company. Also as a result of the Merger Agreement, and effective upon the date thereof, Mr. Themistocles Psomiadis became the Chief Executive Officer and a director of the Company, and Mr. Jesus Quintero became the Chief Financial Officer of the Company.
For accounting purposes, we will account for the assets and liabilities of the Company and Brazil Interactive Media on a consolidated basis at their historical cost, as presented in Exhibit 99.1.
We have begun to file annual and quarterly reports based upon the fiscal year-end of Brazil Interactive Media, which is December 31.
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FORM 10 INFORMATION
THE BUSINESS
Corporate Overview
Brazil Interactive Media, Inc., a Delaware corporation formed on September 24, 2001 under the name of Naturewell, Incorporated, is a public company quoted on the Over-the-Counter Bulletin Board under the symbol "NAWL." In conjunction with the Merger, the Company has applied for a new stock symbol more representative of the Company’s new name. The Company was formerly engaged in the research and development of healthcare products intended for a variety of conditions. On May 9, 2008, the Company completed the sale of essentially all of its assets. As a result of the sale of its assets, the Company became a shell company as defined under Rule 12b-2 of the Exchange Act.
On March 13, 2013, the Company entered into the Merger Agreement with Brazil Interactive Media, as described above. In accordance with the terms of the Merger Agreement, the Company issued 3,740,000 shares of Series G Convertible Preferred Stock to the Brazil Interactive Media Shareholders, which constitutes approximately 94% of the post-exchange issued and outstanding Series G Convertible Preferred Stock. Subsequent to the reverse split, the Series G Convertible Preferred Stock was subject to an automatic forced conversion into Company common stock at a conversion rate that equals approximately 93.5% of the post-transaction issued and outstanding common stock. Those common shares in conversion of the Series G Convertible Preferred Stock have not yet been issued as of May 30, 2013. In accordance with a condition to the closing of the Merger Agreement, the Company will required that the Common Stock newly issued upon the conversion of the Series G Convertible Preferred Stock be subject to Lock Up and Leak Out Agreements that restrict the transferability of that Common Stock.
Pursuant to the conversion ratios in the Merger Agreement, after the reverse split and issuance of common stock in conversion of Series G Convertible Preferred Stock, the former Brazil Interactive Media Shareholders will hold approximately 93.5% of the issued and outstanding Common Stock of the Company and the remaining 6.5% will be held by the Company's pre-merger shareholders. Also pursuant to the Merger Agreement, the Company decreased its authorized capital from 5,000,000,000 shares of common stock, par value $0.00001, and 15,000,000 shares of preferred stock, par value $0.01, to 100,000,000 shares of common stock, par value $0.00001, and 5,000,000 shares of preferred stock, par value $0.01. Subsequent to the Merger, the Company changed its corporate name to Brazil Interactive Media, Inc. and has applied for a new stock symbol that more appropriately reflects the new name of the Company.
Corporate History of Brazil Interactive Media
BIMI, Inc. (“Brazil Interactive Media”), a corporation organized under the laws of Delaware on September 11, 2012, is the parent company of Brazil Interactive Media Participações, Ltda., a Brazilian holding company, which through its wholly-owned subsidiary EsoTV Brasil Promoção Publicidade Licenciamento e Comércio Ltda. (“EsoTV”), combines live television broadcasts with a telecommunications component to create live, interactive television programming for the Brazilian viewing public. Brazil Interactive Media, Brazil Interactive Media Participações, Ltda. and EsoTV shall be collectively referred to herein as “Brazil Interactive Media”. Brazil Interactive Media’s Brazilian subsidiary, EsoTV, was founded and commenced operations in 2008. There is no relationship whatsoever between the Company nor any of its subsidiaries with the website US.Eso.TV.
Using its São Paulo, Brazil-based studios, Brazil Interactive Media has created a broadcast platform enabling the Company to live feed its proprietary interactive programming to the entire Brazilian television market. The Company creates income by generating telephone call traffic through co-billing contracts with Brazilian telecommunications providers.
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Current Business of our Company
As a result of the Merger, the Company, through its wholly-owned subsidiary, Brazil Interactive Media, commenced the business of producing live TV shows with an interactive telephone calling component using its own unique and proprietary programs that include quiz shows, games, psychics and live chat formats. The Company’s program content reaches the nationwide Brazilian television audience via an in-studio satellite signal uplink to a variety of Brazilian TV broadcast networks.
At its facilities in São Paulo, Brazil, the Company operates two modern television studios, producing and transmitting via satellite live television content to TV stations throughout Brazil. Although the Company currently broadcasts throughout Brazil, and has no plans at this time to broadcast to countries outside of Brazil, the Company has the capacity to broadcast the same signal throughout Latin America. Through the negotiation and purchase of block television time for strategic times and networks, the Company is able to distribute its content directly to its target audience throughout Brazil. Brazil Interactive Media currently leases two satellite uplinks and produces three daily live shows, providing 13 hours of live television program content daily. Brazilian television viewers participate in the shows in real time via telephone, calling into the Company’s voice system to participate in the show formats, which, depending on the particular show, could include the chance to respond to a question live on the air, or participate in a presenter’s conversation with other audience members. Audience participants calling in dial telephone numbers belonging to the Company’s telecommunications partners. The Company’s Brazilian telecommunications partners charge audience participants various per-minute rates for the incoming calls and share a portion of the revenue with the Company.
The Company currently broadcasts its programs on four Brazilian television channels: MixTV, VTV, Rede Brasil and Terra Viva. The programs may be seen those channels in the daytime slot, from 11 am until 2 pm, and in the early morning slot, from 12 am until 3 am. Programming channels and time slots vary from time to time as the Company negotiates block media times in advance and introduces new programs periodically in order to best reach its target audience.
The Company’s target audience is members of the Brazilian television viewing public who use cellular telephones. There are more than 264 million active cellular telephone lines in Brazil, which means the country has approximately 1.3 cellular telephone lines per inhabitant. Due to the Company’s business model, where income flows from third-party telecommunications providers who bill the Company’s customers directly, the Company does not have access to comprehensive or detailed information regarding the Company’s customers. However, based on years of experience monitoring the financial results of the Company’s television programs, the Company attempts to design its programs to appeal to male and female television viewers of all social classes and primarily middle class economic means between the ages of 18 and 50.
The Company is substantially dependent upon business with a Brazilian telecommunications partner, Brasil Telecom (operating in Brazil under the commercial name of “Oi Telecom”). It is not known what portion of Oi Telecom’s total revenue comes to the Company, and the Company receives more than 90% of the Company’s income from this continuing contract with Oi Telecom, by which the Company monetizes the sale of the major part of its services to the public.
Brasil Telecom (“Oi Telecom”) (Oi S.A.: BOVESPA: OIBR3, OIBR4; NYSE: OIBR.C, OIBR), is one of Brazil’s largest telecommunications companies, offering services including mobile and fixed telephone services, data transmission, broadband internet services, and paid residential television and internet services throughout the Brazilian territory. Oi Telecom is an important business partner for the Company because Oi Telecom is licensed by Brazil’s telecom regulator ANATEL to provide cellular telephone services in every Brazilian state, and Oi Telecom pays the Company on advantageous terms, at 40 days after the end of the applicable monthly accounting period. The Company is Oi Telecom’s largest provider of voice-added services.
The Company’s Content Provision and Service Agreement (co-billing service contract) with Oi Telecom (the “Oi Telecom Contract”) was signed between Oi Telecom and EsoTV on October 1, 2010. The summary of the material terms and conditions of the Content Provision and Service Agreement in this Amendment is qualified in its entirety by reference to the English translation of the full text of such document, the same being filed herewith as Exhibit 10.2 and incorporated herein by reference. The original document is written in the Portuguese language and the Portuguese version supersedes the English translation. A summary of the material terms of the Oi Telecom Contract are as follows.
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The Oi Telecom Contract is effective for 36 months from the date of signing and is extendable by its terms for equal periods upon renovation by the parties. The Company and Oi Telecom are currently discussing the renovation of the existing contract on equal terms. By the terms of the contract, Oi Telecom provides active designated telephone numbers to the Company, the Company provides the voice content system for the numbers, and publicizes the telephone numbers provided by Oi Telecom via television broadcast. Oi Telecom pays to the Company a value per minute of call traffic handled by Oi Telecom, with the call value being determined by the class of call, total volume of monthly call traffic, and whether the call is originated within the Oi Telecom system. Classes of call traffic are local (VC-1), intrastate (VC-2), and interstate (VC-3).
Calls originated within the Oi Telecom system are “on net” calls, and calls originated from outside the Oi Telecom system are “off net” calls. Total monthly volume ranges are under one million minutes per month, from one million minutes per month to up to two million minutes per month, and over two million minutes per month. The contractual values that Oi Telecom pays the Company range from R$ 0.115 per minute for all classes of calls at all volumes that originate within the Oi Telecom system, to R$ 0.35 per minute for long distance calls originating from outside the Oi Telecom system. Payment is due to the Company at 40 days after the close of the month. The following chart illustrates the payment structure contained in the Oi Telecom contract.
Monthly Minutes | Gross Per-Minute Values | ||
VC-1/VC-2/VC-3 on net |
VC-1 off net |
VC-2/VC-3 off net | |
Up to 1 million monthly minutes | R$ 0.115 | R$ 0.22 | R$ 0.30 |
From 1 million up to 2 million monthly minutes | R$ 0.115 | R$ 0.25 | R$ 0.33 |
Above 2 million monthly minutes | R$ 0.115 | R$ 0.25 | R$ 0.35 |
Although not substantially dependent on the contract, the Company also receives income from a second Brazilian Telecommunications partner, Falkland Tecnologia em Comunicações S.A. (operating in Brazil under the commercial name of “IP Corp”). The Company’s Telecommunications Support Service Provision Agreement (co-billing service contract) with Falkland Tecnologia em Comunicações S.A. (“IP Corp”) (the “IP Corp Telecom Contract”) was signed between IP Corp and EsoTV on September 21, 2011. A summary of the material terms of the IP Corp Telecom Contract are as follows.
The IP Corp Telecom Contract is effective for 12 months from the date of signing and is extendable by its terms for equal periods upon renovation by the parties. The contract was last extended on October 19, 2012. By the terms of the contract, IP Corp provides active designated telephone numbers to the Company, the Company provides the voice content system for the numbers, and publicizes the telephone numbers provided by IP Corp via television broadcast. IP Corp pays to the Company a value of R$1.00 per minute of call traffic handled by IP Corp, on thirty day terms.
Patents and Trademarks
The Company has applied for several trademarks with the Brazilian patent and trademark office.
Competition
The Company is unaware of any direct competitors in the Brazilian television market.
Employees
The Company contracts with thirty-six independent technical television engineers, television production staff, financial staff, and clerical and administrative support persons on an on-going as-needed basis. The majority of our third-party contractors are members of a Brazilian television industry labor union, in accordance with Brazilian law. There are no employment agreements.
Regulatory Approvals Required
None.
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REPORTS TO SECURITY HOLDERS
We are required to file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission and our filings are available to the public over the internet at the Securities and Exchange Commission’s website at http://www.sec.gov. The public may read and copy any materials filed by us with the Securities and Exchange Commission at the Securities and Exchange Commission’s Public Reference Room at 100 F Street N.E. Washington D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at 1-800-732-0330. The SEC also maintains an Internet site that contains reports, proxy and formation statements, and other information regarding issuers that file electronically with the SEC, at http://www.sec.gov.
A copy of any public filing is also available, at no charge, by contacting us at telephone no. (305)789-6621.
RISK FACTORS
You should carefully consider the risks described below together with all of the other information included in this Current Report before making an investment decision with regard to our securities. The statements contained in or incorporated into this Current Report that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed. In that case, the trading price of our common stock could decline.
Risks Relating to Our Business
Our success depends on our management team, the loss of any of whom could disrupt our business operations.
We believe that our continued success will depend to a significant extent upon the efforts and abilities of our management team, particularly our CEO, Themistocles Psomiadis, and our CFO, Jesus Quintero. We cannot ensure that we will be able to retain the services of such officers and our failure to retain them could adversely affect our operations. We do not currently have employment agreements executed with these two executives but anticipate entering into such agreements definitively in the near future. Further, we do not currently carry key-man life insurance on any of our executive officers.
Investors may have limited recourse against the majority owner, who is a resident of Brazil.
The Company’s operating subsidiary is located in Brazil, and the principal majority owner of the company is a foreign national and resident of Brazil. As a result, investors may have limited legal recourse against them in the United States.
If our products and services do not achieve market acceptance, our business will be materially and adversely affected.
Our success will depend upon widespread market acceptance of our product and any future products and services which we may offer. There can be no assurance as to the overall acceptance by our targeted customers of the product and services that we offer. There can be no assurance that the market for these products and/or services will develop or be sustained.
We may not be able to manage our growth effectively.
The expansion necessary for us to fully exploit the market for our products and services requires an effective planning and management process. Growth, if it occurs, will likely place a significant strain on our managerial, operational and financial resources. To manage our growth, we must implement and improve our operational system and expand, train and manage our employee base. There can be no assurance that our systems, procedures or controls will be adequate to support operations or that management will be able to achieve the expansion necessary to fully exploit the market for our products and services, and the failure to do so would have a material adverse effect on our business, operations and financial condition.
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We could be materially adversely affected by changes or imbalances in foreign currency exchange and other rates.
Given the location of our business in the country of Brazil, we have significant exposures to risks related to changes in foreign currency exchange rates, and interest rates, which can have material adverse effects on our business. For example, significant strengthening of the Brazilian Real relative to the U.S. dollar would affect the profitability of our U.S. parent company. In addition, in preparing our consolidated financial statements, we translate our revenues and expenses outside the U.S. into U.S. Dollars using the average foreign currency exchange rate for the period and the assets and liabilities using the foreign currency exchange rate at the balance sheet date. As a result, foreign currency fluctuations and the associated translations could have a material adverse effect on our results of operations.
Our business outside the U.S. exposes us to additional risks that may materially adversely affect our business.
Our business income is generated outside the U.S. We are pursuing growth opportunities for our business in the Federal Republic of Brazil. Operating in a foreign country exposes us to political, economic, and other risks, as well as multiple foreign regulatory requirements that are subject to change, including:
• | Economic downturns in foreign countries or geographic regions where we have significant operations, such as Brazil; |
• | Economic tensions between governments and changes in international trade and investment policies, including imposing restrictions on the repatriation of dividends, especially between the United States and Brazil; |
• | Foreign regulations restricting our ability to market our products in those countries; |
• | Differing labor regulations and union relationships; |
• | Consequences from changes in tax laws; |
• | Difficulties in obtaining financing in foreign countries for local operations; and |
• | Political and economic instability, natural calamities, war, and terrorism. |
The effects of these risks may, individually or in the aggregate, materially adversely affect our business.
We may not be able to obtain sufficient capital and may be forced to limit the scope of our operations or discontinue operations.
If adequate additional financing is not available when needed, we may not be able to undertake any planned operational expansions and as a result, we may have to modify our business plans accordingly, or may be required to discontinue our business operations. There is no assurance that additional financing will be available to us when needed, or if made available, that such will be on terms favorable to us. Further, any future capital investments could dilute or otherwise materially and adversely affect the holdings or rights of our existing shareholders. In addition, new equity or convertible debt securities issued by us to obtain financing could have rights, preferences and privileges senior to those granted to existing shareholders.
If we are not able to adequately protect our intellectual property, other parties may develop competing products and/or services that utilize our intellectual property.
Although we have filed trademark applications in Brazil, as of this time we have not yet obtained any registered trademarks or patents over our products. We intend to obtain trademark and copyright law, patent law and trade secret protection for our products and services. At this time, we have submitted several trademark applications to the Brazilian government, to protect our intellectual property, which are being processed, however, no assurance can be made that third parties will not develop competing products that imitate or utilize our intellectual property.
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In addition, there can be no assurance that other parties will not assert infringement claims against us. Any such claims, with or without merit, could be time consuming to defend, result in costly litigation, divert management’s attention and resources or require us to enter into royalty or licensing agreements. There can be no assurance that such licenses would be available on commercially reasonable terms, if at all, and the assertion or prosecution of any such claims could have a material adverse effect on our business, financial condition and operations.
Risks Associated with our Securities
Our securities are restricted securities with limited transferability
Our securities should be considered a long-term, illiquid investment. Our common stock has not been registered under the Securities Act of 1933 (the “Act”), and cannot be sold without registration under the Act or any exemption from registration. In addition, our common stock is not registered under any state securities laws that would permit their transfer. Because of these restrictions, a shareholder will likely find it difficult to liquidate an investment in our common stock.
We are subject to penny stock rules which will make the shares of our common stock more difficult to sell.
We are subject to the SEC’s “penny stock” rules since our shares of common stock sell below $5.00 per share. Penny stocks generally are equity securities with a per share price of less than $5.00. The penny stock rules require broker-dealers to deliver a standardized risk disclosure document prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson, and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with the customer’s confirmation.
In addition, the penny stock rules require that prior to a transaction 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 agreement to the transaction. The penny stock rules are burdensome and may reduce purchases of any offerings and reduce the trading activity for shares of our common stock. As long as our shares of common stock are subject to the penny stock rules, the holders of such shares of common stock may find it more difficult to sell their securities.
Our shares of common stock are very thinly traded, and the price may not reflect our value and there can be no assurance that there will be an active market for our shares of common stock in the future.
Our shares of common stock are thinly traded. Due to the illiquidity, the market price may not accurately reflect the relative value of the Company. There can be no assurance that there will be an active market for our shares of common stock either now or in the future. Investors may not be able to liquidate their investment or liquidate it at a price that reflects the value of the business. If a more active market should develop, the price may be highly volatile. Because there may be a low price for our shares of common stock, many brokerage firms may not be willing to effect transactions in the securities. Even if an investor finds a broker willing to effect a transaction in the shares of our common stock, the combination of brokerage commissions, transfer fees, taxes, if any, and any other selling costs may exceed the selling price. Further, many lending institutions will not permit the use of such shares of common stock as collateral for a loans.
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SELECTED FINANCIAL DATA
Not applicable.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this Amendment. This Amendment contains certain forward-looking statements and the Company's future operating results could differ materially from those discussed herein. Certain statements contained in this Amendment, including, without limitation, statements containing the words “believes”, “anticipates,” “expects” and the like, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). However, as the Company intends to issue “penny stock,” as such term is defined in Rule 3a51-1 promulgated under the Exchange Act, the Company is ineligible to rely on these safe harbor provisions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to announce publicly the results of any revisions of the forward-looking statements contained or incorporated by reference herein to reflect future events or developments, except as required by the Exchange Act.
The management’s discussion and analysis of financial condition and results of operations set forth below is based on the audited financial statements of Brazil Interactive Media Inc. and its subsidiary as of December 31, 2012 and 2011, and the related statements of operations, shareholders' equity and cash flows for years ended December 31, 2012 and 2011. A copy of these financial statements is filed herewith as Exhibit 99.1 hereto.
Overview
BIMI, Inc. (“Brazil Interactive Media”), a corporation organized under the laws of Delaware on September 11, 2012, is the parent of Brazil Interactive Media Participações, Ltda., a Brazilian holding company, which through its wholly-owned subsidiary EsoTV Promoção Publicidade Licenciamento e Comércio Ltda. (“EsoTV”), combines live television broadcasts with an interactive telephone calling component using its own unique and proprietary program formats that include quiz shows, games, psychics and live chat formats. Brazil Interactive Media, Brazil Interactive Media Participações, Ltda. and EsoTV shall be collectively referred to herein as “BIMI”. There is no relationship whatsoever between the Company nor any of its subsidiaries with the website US.Eso.TV. BIMI commenced operations in 2011. BIMI’s program content reaches the nationwide Brazilian television audience via an in-studio satellite signal uplink to Brazilian television broadcasting companies. BIMI creates income by generating telephone call volume and sharing the resulting revenue by means of co-billing contracts with Brazilian telecommunications providers.
At its facilities in São Paulo, Brazil, BIMI operates two modern television studios, producing and transmitting via satellite live television content to TV stations throughout Brazil. Through the negotiation and purchase of block television time for strategic times and networks, BIMI is able to distribute its content directly to its target audience throughout Brazil. BIMI currently leases two satellite uplinks and produces three daily live shows, providing 13 hours of live television program content daily. Brazilian television viewers participate in the shows in real time through “pay-per-calls”. BIMI’s Brazilian telecommunications partners charge audience participants various per-minute rates for the incoming calls and share a portion of the revenue with BIMI.
Results of Operations
For the years ended December 31, 2012 and 2011
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Revenues
BIMI had revenues of $3,949,624 and $2,035,416 for the years ended December 31, 2012 and 2011, respectively. Pursuant to the telecommunications co-billing contracts entered between BIMI and its Brazilian telecommunications providers, BIMI obtained its revenues from BIMI’s portion of charge on the incoming calls related to the live shows. The increase by $1,914,208 during the year of 2012 was due to the revenues in 2011 representing seven-month operation in BIMI, which commenced operations in June of 2011.
Cost of Sales
Cost of sales consists primarily of media cost, leasing expenses related to satellite uplinks and other costs directly attributable to the provision of services. During the year ended December 31, 2012, BIMI had $2,518,980 in cost of sales, or 63.8% of sales revenue. During the year ended December 31, 2011, BIMI had $1,195,695 in cost of goods sold, or 58.7% of sales revenue. The increase by $1,323,285 during the year of 2012 was due to the cost of sales in 2011 representing seven-month operation in BIMI, which commenced operations in June of 2011.
Expenses
BIMI had operating expenses of $1,017,224 and $749,989 for the years ended December 31, 2012 and 2011, respectively. The increase by $267,235 during the year of 2012 was due to the increase in other taxes by $221,436, the increase in rent by $75,921, and the increase in other general and administrative expenses by $110,957. BIM commenced operations in June of 2011 so that the operating expenses in 2011 represented only seven-month operation in BIMI.
Income Taxes
BIMI is subject to Brazil enterprises income tax at the applicable tax rates on the taxable income as reported in its Brazilian statutory accounts in accordance with the relevant enterprises income tax laws applicable to domestic enterprises. During the years ended December 31, 2012 and 2011, BIMI had income taxes of $303,679 and $19,646, respectively.
Liquidity and Capital Resources
Operating Activities
Net cash used in operating activities was $194,127 during the year ended December 31, 2012, compared to net cash of $188,544 provided by operating activities during the year ended December 31, 2011. Negative cash flow from operation during the year ended December 31, 2012 was due to the increase in accounts receivable in amount of $354,904 and other receivable write-off by $390,000. Positive cash flow from operation during the year ended December 31, 2011 was due primarily to the net income of $55,880, plus the increase in accounts payable and tax payable in amounts of $405,820 and $81,684, respectively, offset by the increase in accounts receivable and prepayments in amount of $176,709 and $178,132, respectively.
Investing Activities
Net cash used in investing activities was $8,450 during the year ended December 31, 2012, due solely to purchase of equipment. There was no cash flow from investing activities during the year ended December 31, 2011.
Financing Activities
Net cash provided by financing activities was $173,334 and $23,561 during the years ended December 31, 2012 and 2011, respectively. Positive cash flow from financing activities during the year ended December 31, 2012 was due to proceeds from note payable in the amount of $170,000, plus proceeds of $67,478 from bank loans, which was $114,860 during the year of 2011, offset by the repayment to bank loans in amount of $64,244, which was $91,299 during the year of 2011.
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BIMI had cash of $146,331 on hand as of December 31, 2012, the most readily available recent date. Currently, BIMI does not have enough cash to fund its operations for the next twelve months. This is based on negative cash flows from operating activities and working capital deficit. BIMI will need to obtain adequate revenues to sustain operations for an additional year. BIMI cannot assure investors that adequate revenues will be generated. Without adequate revenues within the next twelve months, BIMI still anticipate being able to continue with its present activities, but BIMI may require financing to achieve operation and growth goals and to meet its working capital requirements. If BIMI is able to conduct an equity offering, there will be dilution to the current stockholders of the Company and to the investors that acquire shares in the offering; and if BIMI is able to conduct a debt offering, BIMI will likely be subject to various covenants on its business operations and may be required to make payments during the term of the securities.
BIMI anticipates that its operational, and general and administrative expenses for the next 12 months will total approximately $2,400,000. BIMI also does not expect any significant additions to the number of contracted service providers or employees, unless financing is raised. The foregoing represents its best estimate of its cash needs based on current planning and business conditions. The exact allocation, purposes and timing of any monies raised in subsequent private financings may vary significantly depending upon the exact amount of funds raised and its progress with the execution of its business plan.
Off Balance Sheet Arrangements
As of December 31, 2012, BIMI did not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies
Revenue Recognition
In accordance with guidance by paragraph 605-10-S99-1 of the FASB ASC for revenue recognition, the Company recognizes revenue when persuasive evidence of an arrangement exists, transfer of title has occurred or services have been rendered, the selling price is fixed or determinable and collectibility is reasonably assured.
The Company produces live TV shows including quizzes, games, psychics and talk show formats, which are distributed via its satellite signal to its distribution channels (TV stations). The Company currently leases two satellite uplinks and produces three live shows which provide 13 hours of daily live television programming. Members of the television audiences participate in real time through “pay-per-calls”. The local telecommunications providers charge various rates (per minute) for the incoming calls and share a portion of the revenue with the Company. Revenue is recognized by the Company when the minutes of calls from audiences are determined by the local telecommunications providers.
DESCRIPTION OF PROPERTY
The Company leases its principal office in the U.S.A. at 801 Brickell Avenue, Suite 901, Miami, Florida 33131. The Company’s subsidiary in Brazil leases approximately 25,000 square feet of offices and television studios in the city of São Paulo, Brazil. Current monthly rent in Miami is $290 and in Brazil is $10,000. A copy of the translated Brazilian lease agreement is filed herewith to this Amendment as Exhibit 10.1. The original document is written in the Portuguese language and the Portuguese version supersedes the English translation.
The Company has no plans to acquire any property in the immediate future. The Company believes that its current facilities are adequate for its needs through the next twelve months, and that, should it be needed, suitable additional space will be available to accommodate expansion of the Company's operations.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Beneficial Owners of More than Five Percent of the Common Stock:
The following table sets forth information regarding each stockholder who we know to beneficially own more than five percent of the Common Stock, as of June 5, 2013. Except as otherwise indicated, we believe, based on information furnished by such persons, that each person listed below has sole voting and investment power over the voting securities shown as beneficially owned, subject to community property laws, where applicable. Beneficial ownership is determined under the rules of the SEC and includes any shares which the person has the right to acquire within 60 days after May 30, 2013 through the exercise of any stock option, warrant or other right.
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership |
Percentage of Class (1) |
Themistocles Psomiadis 151 W. Passaic Street Rochelle Park, NJ 07662 |
2,870,000 (2) | 7.2% |
Andrea Villas Boas 151 W. Passaic Street Rochelle Park, NJ 07662 |
32,800,000 (3) | 82% |
Michael Novielli 1110 Rt. 55, Suite 206 LaGrangeville, NY 12540 |
3,041,672 (4) |
7.6% |
Douglas H. Leighton 50 Commonwealth Ave., Suite 2 Boston, MA 02116 |
2,833,338 (5) | 7.1% |
(1) | The percentages are based on 40,000,000 shares of Common Stock to be outstanding upon issuance of Common Stock in conversion of Series G Convertible Preferred Stock, plus shares of Common Stock that may be acquired by the beneficial owner within 60 days of June 5, 2013, by exercise of preferred stock conversions and/or warrants. | |
(2) | Consists of shares of common stock issuable upon conversion of Series G Convertible Preferred Stock held in the name of Themistocles Psomiadis, Themistocles Psomiadis Pension Trust, and Brazilian Investment Group, LLC. Themistocles Psomiadis has sole voting and dispositive power over the securities in his name and the name of Themistocles Psomiadis Pension Trust, and shared voting and dispositive power over the securities in the name of Brazilian Investment Group, LLC. | |
(3) | Consists of shares of common stock issuable upon conversion of Series G Convertible Preferred Stock held in the name of Brazil Interactive Holdings, LLC. Andrea Villas Boas has sole voting and dispositive power over the securities. | |
(4) | In addition to previously-issued common stock (49,744 shares), includes shares of common stock issuable upon (i) conversion of Series G Convertible Preferred Stock (1,950,260 shares); (ii) conversion of Series H Convertible Preferred Stock (833,334 shares); and (iii) exercise of Five-Year Warrants (208,334 shares), held in the name of Dutchess Opportunity Fund II, LP, of which Douglas H. Leighton and Michael Novielli are each managing directors, and each have voting and dispositive power over the securities, and in the name Dutchess Global Strategies Fund LLC, of which Michael Novielli has sole voting and dispositive power over the securities. | |
(5) | In addition to previously-issued common stock (49,744 shares), includes shares of common stock issuable upon (i) conversion of Series G Convertible Preferred Stock (1,950,260 shares); (ii) conversion of Series H Convertible Preferred Stock (666,667 shares); and (iii) exercise of Five-Year Warrants (41,667 shares), held in the name of Dutchess Opportunity Fund II, LP, of which Douglas H. Leighton and Michael Novielli are each managing directors, and each have voting and dispositive power over the securities. |
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Security Ownership of Management
The following table sets forth information regarding the number of shares of each class of our equity securities owned by all directors and director nominees, our executive officers, and all executive officers and directors as a group. Except as otherwise indicated, we believe, based on information furnished by such persons, that each person listed below has sole voting and investment power over the shares of common stock shown as beneficially owned, subject to community property laws, where applicable. Beneficial ownership is determined under the rules of the SEC and includes any shares which the person has the right to acquire within 60 days after May 30, 2013 through the exercise of any stock option, warrant or other right.
Name of Beneficial Owner | Amount and Nature of Beneficial Ownership |
Percentage of Class (1) |
Themistocles Psomiadis | 2,870,000 (2) | 7.2% |
Alan T. Hawkins | 1,270,000 (3) | 3.2% |
Michael Novielli | 3,041,672 (4) |
7.6% |
Douglas H. Leighton | 2,833,338 (5) | 7.1% |
Officers and Directors as a group | 5,200,000 | 24% |
(1) | The percentages are based on 40,000,000 shares of Common Stock to be outstanding upon issuance of Common Stock in conversion of Series G Convertible Preferred Stock, plus shares of Common Stock that may be acquired by the beneficial owner within 60 days of June 5, 2013, by exercise of preferred stock conversions and/or warrants. |
(2) | Consists of shares of common stock issuable upon conversion of Series G Convertible Preferred Stock held in the name of Themistocles Psomiadis, Themistocles Psomiadis Pension Trust, and Brazilian Investment Group, LLC. Themistocles Psomiadis has sole voting and dispositive power over the securities in his name and the name of Themistocles Psomiadis Pension Trust, and shared voting and dispositive power over the securities in the name of Brazilian Investment Group, LLC. |
(3) | Consists of shares of common stock issuable upon conversion of Series G Convertible Preferred Stock held in the name of Alan T. Hawkins and Brazilian Investment Group, LLC. Alan T. Hawkins has sole voting and dispositive power over the securities in his name and shared voting and dispositive power over the securities in the name of Brazilian Investment Group, LLC. |
(4) | In addition to previously-issued common stock (49,744 shares), includes shares of common stock issuable upon (i) conversion of Series G Convertible Preferred Stock (1,950,260 shares); (ii) conversion of Series H Convertible Preferred Stock (833,334 shares); and (iii) exercise of Five-Year Warrants (208,334 shares), held in the name of Dutchess Opportunity Fund II, LP, of which Douglas H. Leighton and Michael Novielli are each managing directors, and each have voting and dispositive power over the securities, and in the name Dutchess Global Strategies Fund LLC, of which Michael Novielli has sole voting and dispositive power over the securities. |
(5) | In addition to previously-issued common stock (49,744 shares), includes shares of common stock issuable upon (i) conversion of Series G Convertible Preferred Stock (1,950,260 shares); (ii) conversion of Series H Convertible Preferred Stock (666,667 shares); and (iii) exercise of Five-Year Warrants (41,667 shares), held in the name of Dutchess Opportunity Fund II, LP, of which Douglas H. Leighton and Michael Novielli are each managing directors, and each have voting and dispositive power over the securities. |
Changes in Control
There are no arrangements known to us that may, at a subsequent date, result in a change of control of the Company.
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MANAGEMENT
Directors, Executive Officers and Key Employees
The following individuals serve as the executive officers and key employees of our Company as of the Closing Date of the Merger Agreement. The executive officers of our Company are appointed by our board of directors and hold office as set forth in their respective employment agreements or until their earlier death, resignation or removal from office.
Name Position
Themistocles Psomiadis Chief Executive Officer, Director
Jesus Quintero Chief Financial Officer
Alan T. Hawkins Secretary
Andrea Villas Boas Key Employee
Michael A. Novielli Director
Douglas H. Leighton Director
Themistocles Psomiadis - From December, 2012 to the present, Mr. Psomiadis has served as CEO and chairman of Brazil Interactive Media, Inc. Under the Merger Agreement, Mr. Psomiadis has also been appointed as CEO and director of the Company beginning on the Closing Date. From June, 2011 to September, 2012, Mr. Psomiadis was a consultant to Brazil Interactive Media’s Brazilian subsidiary EsoTV with Brazilian Investment Group, LLC. From 1970 to 2010, Mr. Psomiadis worked in the financial sector, serving as CFO of County Trust Company from 1970 to 1980 and from 2005 to 2010 with New York Life, where he was a partner. Also during that time, he started and developed several financial businesses. From 2009 to the present, he has served as executive director of Brazilian Investment Group, LLC. Mr. Psomiadis attended New York University and holds general securities Series 7, Series 63 and Series 66 licenses. He is fluent in English, Brazilian Portuguese, Spanish and Greek. The Company concluded that Mr. Psomiadis has the appropriate knowledge and skill to serve as director due to his years of experience in banking and finance, as well as his ability to speak Portuguese and his substantial knowledge and experience regarding the Brazilian business environment.
Jesus Quintero, CPA - From January, 2013 to the present, Mr. Quintero has served as Brazil Interactive Media’s Chief Financial Officer. Pursuant to the Merger Agreement, Mr. Quintero was appointed as the CFO of the Company beginning on March 13, 2013, the Closing Date. The Company hired Mr. Quintero due to his considerable experience in public company accounting and SEC reporting. His experience in the telecommunications sector and with Latin American companies is particularly relevant to the Company’s business. Mr. Quintero’s public company financial experience began in 1990 as a senior financial analyst with the Wackenhut Corporation, a security services company and NASDAQ listed firm. From 1990 to 1995, Mr. Quintero was responsible for preparation of consolidated financial statements for SEC reporting purposes with Wackenhut, including responsibility for drafting 10-Q’s and 10-K’s. He consolidated the financials of 75 companies globally in his reports for Wackenhut. From 1996 to 2000, Mr. Quintero worked for CHS Electronics Inc. a computer distribution company listed on the NYSE, where he was the corporate controller and participated in several public stock offerings, preparing financial information for investor presentations as well as routine financial reporting. For CHS’s reporting, he consolidated the financial reports of 140 companies, mostly international. From March, 2005 to March, 2007, Mr. Quintero was a Vice President of Finance, Financial Controller and SEC Reporting Manager of Globetel Communications Corp., a NYSE-listed telecommunications company. From March, 2007 to July, 2008, Mr. Quintero served as Senior Corporate Controller and SOX Deputy Compliance Officer for Latin Node, Inc., a privately-held telecommunications company based in Miami, Florida. From November, 2009 to April, 2011, Mr. Quintero served as Corporate Accounting Manager for Aircraft Services of Miami, an aircraft maintenance company based in Miami, Florida. From April, 2011 to June, 2011, Mr. Quintero served as Regional Controller: Latin America for Avnet, Inc. (NYSE:AVT). From June, 2011 until January, 2013, Mr. Quintero worked as an accounting consultant for various private businesses in the South Florida area, including Plum TV, a television company.
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His early career experience also includes tenure with PriceWaterhouse and Deloitte & Touche. Mr. Quintero earned a B.S. in Accounting from St. John’s University and has been a certified public accountant since 1994. None of the corporations where Mr. Quintero previously worked is a parent, subsidiary or other affiliate of the Company. He is fluent in English and Spanish, and conversant in Brazilian Portuguese.
Alan T. Hawkins - From September 2012 to the present, Mr. Hawkins has served as general counsel to Brazil Interactive Media, and under the Merger Agreement, has been appointed as the corporate secretary and general counsel of the Company beginning on the Closing Date. From 2009 to the present, he has been a managing director at Brazilian Investment Group, LLC, and a practicing attorney representing venture capital funds in operational, corporate and tax law matters, and representing private companies in transactional, corporate finance, venture capital, and general corporate matters. Mr. Hawkins earned a JD in 2005 from the University of Florida Law School in Gainesville, Florida, where he also studied Latin American Business and Language. He received his BA in Language from Fort Lewis College in Durango, Colorado in 2000. Mr. Hawkins has been a member of the Florida Bar Association from April, 2006 to the present. He is fluent in English, Brazilian Portuguese and Spanish.
Andrea Villas Boas - From November 28, 2012 until the present, Ms. Villas Boas has served as a director and key employee of Brazil Interactive Media, Inc. and due to the Merger Agreement, became the majority beneficial shareholder of the Company. From 2011 to the present, she has served as a key employee, managing human resources for the Company’s Brazilian subsidiary. From 1994 to 2001, Ms. Villas Boas worked as human resources manager at Chase Manhattan Bank in São Paulo, Brazil. From 2001 to 2004, she served as director of human resources at ING Bank in São Paulo. From 2005 to the present, she has provided consulting services to Brazilian banks and businesses with Minds and Methods, a Brazilian human resources and management consulting firm she founded in 2005. From 2007 to 2009, she served as a director of the Brazilian Human Resources Association. Ms. Villas Boas earned her MBA in Human Resources from the University of São Paulo’s FIA Business School in 2000 and was awarded her undergraduate degree in psychology from the Catholic University of São Paulo in 1988.
Michael Novielli – Since 1996 to the present, Mr. Novielli has served as a Managing Partner of Dutchess Capital, where he co-managed an investment portfolio of $125 million in assets and has made over $200 million in principal investments in emerging growth companies, within the U.S. domestic as well as global markets. Mr. Novielli co-manages risk assessment, oversees investment opportunities and deal origination in Asia and Latin America, as well as the firm’s legal and compliance matters. He is also a member of Dutchess’s investment committee and has 21 years of experience in securities, investment banking and asset management. Prior to founding Dutchess, Mr. Novielli began his investment career with PaineWebber and Co., where he served from 1992 to 1995. He received a Bachelor of Science degree in Business from the University of South Florida. The Company concluded that Mr. Novielli has the appropriate knowledge and skill to serve as director due to his years of experience in finance, as well as his qualifications in business management and development.
Douglas H. Leighton - Since 1996 to the present, Mr. Leighton has served as a Managing Partner of Dutchess Capital, where he co-managed an investment portfolio of $125 million in assets and has made over $200 million in principal investments in emerging growth companies, within the U.S. domestic as well as global markets. Mr. Leighton co-manages risk assessment, oversees investment opportunities and deal origination in North America, Europe and Australia, as well as trading and investor relations. He is also a member of Dutchess’s investment committee and has 22 years of experience in trading, investment banking and asset management. Prior to founding Dutchess, from 1990 to 1996, Mr. Leighton was president of Beacon Capital, a Boston-based investment banking firm. He received a combined Bachelor of Arts and Bachelor of Science in Economics and Finance from the University of Hartford. The Company concluded that Mr. Leighton has the appropriate knowledge and skill to serve as director due to his years of experience in finance, as well as his qualifications in business management and development.
Family Relationships
There are no family relationships between any of our directors or executive officers.
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Involvement in Certain Legal Proceedings
None of our directors, executive officers, promoters or control persons has been involved in any of the following events during the past five years:
1. 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;
2. Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
3. 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 involvement in any type of business, securities or banking activities; or
4. Being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange 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.
Meetings of the Board
Our board of directors meets on a quarterly basis.
Board Committees
Our board of directors does not have any committees. However, at such time in the future that we appoint independent directors to the board, we expect to form the appropriate board committees.
Director Independence
We do not have any independent directors. Our determination of independence of directors is made by using the definition of “independent director” contained under Rule 5605(a)(2) of the NASDAQ Marketplace Rules.
EXECUTIVE COMPENSATION
As of the present time, Brazil Interactive Media has not entered into employment agreements with any of its executive management team and is not paying any executive compensation. However, the Company intends to enter into employment agreements with its officers and executive management in the near future.
Employment Contracts
As of the present time, Brazil Interactive Media has not entered into employment agreements with any of its executive management team and is not paying any executive compensation. However, the Company intends to enter into employment agreements with its officers and management in the near future.
Director Compensation
In the three most recent fiscal years, the Company has not paid any cash or other type of compensation to any Directors.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Certain key management personnel hold positions in another entity that results in them having control or significant influence over the financial or operating policies of that entity. That entity transacted with the Company in the reporting period. The terms and conditions of the transactions with key management personnel were no more favorable than those available, or which might reasonably be expected to be available, on similar transactions to non-key management personnel related entities on an arm’s length basis.
LEGAL PROCEEDINGS
We know of no material, pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder are an adverse party or has a material interest adverse to us.
MARKET PRICE OF AND DIVIDENDS ON COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the Over-the-Counter Pink Sheets under the symbol "NAWL." The following table sets forth the high and low closing prices per share for the Company's Common Stock for the prior three years:
HIGH | LOW | |
Fiscal Year 2009: | ||
First Quarter | 0.0003 | 0.0001 |
Second Quarter | 0.0008 | 0.0001 |
Third Quarter | 0.0007 | 0.0002 |
Fourth Quarter | 0.0005 | 0.0002 |
Fiscal Year 2010: | ||
First Quarter | 0.0003 | 0.0001 |
Second Quarter | 0.0004 | 0.0002 |
Third Quarter | 0.0007 | 0.0001 |
Fourth Quarter | 0.0006 | 0.0002 |
Fiscal Year 2011: | ||
First Quarter | 0.0004 | 0.0002 |
Second Quarter | 0.0002 | 0.0001 |
Third Quarter | 0.0002 | 0.0001 |
Fourth Quarter | 0.0001 | 0.0001 |
Holders
As of June 5, 2013, there were 468 holders of record of the Company’s common stock. Pacific Stock Transfer Company, of 4045 S. Spencer Street, Suite 403, Las Vegas, Nevada 89119, (702) 361-3033 (Phone), (702) 433-1979 (Fax), is the transfer agent for the Company’s common stock.
Before the Merger, the Company had 2,448,665,750 shares of Common Stock, 19,000,000 shares of Series A Common Stock, 3,115 shares of Series E Convertible Preferred Stock, and 75 shares of Series C Convertible Preferred Stock issued and outstanding. In accordance with the Merger Agreement, the Company converted all shares of Series A Common Stock to 19,000,000 shares of regular common stock on March 11, 2013, all shares of Series E Convertible Preferred Stock to 4,152,295 shares of common stock on March 11, 2013, and all outstanding senior convertible notes to 210,746 shares of Series G Convertible Preferred Stock and 8,220,150 shares of Common Stock on March 11, 2013. The company issued 3,740,000 Shares of Series G Convertible Preferred Stock in exchange for the BIMI common stock on March 13, 2013. On March 22, 2013, the Company issued 2,500 shares of Series H Convertible Preferred Stock. On May 14, 2013, the Company converted all shares of Series C Convertible Preferred Stock to 1,875,000 shares of Common Stock.
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As a result, at the time of filing of the Certificate Amendment, 2,481,913,195 shares of Common Stock were issued and outstanding, 3,970,746 shares of Series G Convertible Preferred Stock, issued in connection with the Merger Agreement, were issued and outstanding, and 2,500 shares of Series H Convertible Preferred Stock were issued and outstanding. After the effects of the reverse split implemented by the Certificate Amendment, there were 292,917 shares of the Company’s Common Stock issued and outstanding, 3,970,746 shares of the Company’s Series G Convertible Preferred Stock issued and outstanding, and 2,500 shares of Series H Convertible Preferred Stock issued and outstanding.
According to the Certificate of Designation establishing the Series G Convertible Preferred Stock, the Series G Convertible Preferred Stock is subject to an automatic forced conversion one business day following the date that a sufficient number of authorized and unissued shares of Common Stock becomes available to facilitate the conversion. By operation of the reverse stock split, filed on May 16, 2013, sufficient authorized and unissued shares of Common Stock became available, triggering an automatic conversion of all issued and outstanding Series G Convertible Preferred Stock to Common Stock on May 20, 2013. Those common shares in conversion of the Series G Convertible Preferred Stock have not yet been issued as of May 30, 2013. In accordance with a condition to the closing of the Merger Agreement, the Company will required that the Common Stock newly issued upon the conversion of the Series G Convertible Preferred Stock be subject to Lock Up and Leak Out Agreements that restrict the transferability of that Common Stock.
As a result of the Certificate Amendment and after the issuance of common shares in conversion of the Series G Convertible Preferred Stock, the Company expects to have approximately 40,000,000 shares of Common Stock issued and outstanding and 2,500 shares of Series H Convertible Preferred Stock issued and outstanding. The former Brazil Interactive Media Shareholders will then hold approximately 93.5% of the issued and outstanding Common Stock of the Company and the remaining 6.5% will be held by the Company's pre-merger shareholders. Although the Company has not yet, as of May 30, 2013, issued common stock in conversion of the Series G Convertible Preferred Stock, we expect to do so in the near future, predicated upon the execution of the Lock Up and Leak Out Agreements as a condition of the Merger Agreement.
Prior to the filing of the Certificate Amendment, the Company’s authorized capitalization consisted of 5,000,000,000 shares of common stock, par value $0.00001, and 15,000,000 shares of preferred stock, par value $0.01. However, pursuant to the terms of the Merger Agreement, the Company filed the Certificate Amendment and decreased its authorized capital from 5,000,000,000 shares of common stock, par value $0.00001, and 15,000,000 shares of preferred stock, par value $0.01, to 100,000,000 shares of common stock, par value $0.00001, and 5,000,000 shares of preferred stock, par value $0.01.
Common Stock
We are currently authorized to issue 100,000,000 shares of common stock, par value $0.00001. As of May 30, 2013, 292,917 common shares were issued and outstanding. As discussed above, the Company expects to have approximately 40,000,000 shares of Common Stock issued and outstanding after the issuance of common shares in conversion of the Series G Convertible Preferred Stock, completing the merger transaction.
Warrants
None.
Dividend Policy
We have not paid any cash dividends on Series G Convertible Preferred Stock or Series H Convertible Preferred Stock or our Common Stock and we have no intention of paying any dividends on any of our shares of common stock or preferred stock in the near future. Our current policy is to retain earnings, if any, for use in our operations and in the development of our business. Our future dividend policy will be determined from time to time by our board of directors.
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Securities Authorized for Issuance Under Equity Compensation Plans
Not applicable.
RECENT SALES OF UNREGISTERED SECURITIES
For information about recent sales of unregistered securities, please see Item 3.02 below and the Company’s Current Report on Form 8-K, as filed on March 28, 2013.
DESCRIPTION OF SECURITIES
Prior to the filing of the Certificate Amendment pursuant to the Merger Agreement, the Company’s authorized capitalization consisted of 5,000,000,000 shares of common stock, par value $0.00001, and 15,000,000 shares of preferred stock, par value $0.01. However, pursuant to the terms of the Merger Agreement, the Company filed the Certificate Amendment and decreased its authorized capital from 5,000,000,000 shares of common stock, par value $0.00001, and 15,000,000 shares of preferred stock, par value $0.01, to 100,000,000 shares of common stock, par value $0.00001, and 5,000,000 shares of preferred stock, par value $0.01. As of May 30, 2013, 292,917 common shares were issued and outstanding. The Company expects to have approximately 40,000,000 shares of Common Stock issued and outstanding in the near future, after the issuance of common shares in conversion of the Series G Convertible Preferred Stock.
Common Stock
The holders of our common stock are entitled to one vote per share on all matters for which shareholders are able to vote. The holders of our common stock are not entitled to cumulative voting rights. Therefore, the holders of a majority of the shares voting in the election of directors can elect all of the directors then standing for election, subject to the rights of the holders of preferred stock, if and when issued. The holders of common stock have no preemptive or other subscription rights.
The holders of our common stock are entitled to receive dividends, if they are ever declared by the Board of Directors from legally available funds, with each share of common stock sharing equally in the dividends. The possible issuance of preferred stock with a preference over common stock as to dividends could impact the dividend rights of holders of our common stock.
There are no redemption provisions with respect to our common stock. All outstanding shares of common stock are fully paid and non-assessable.
The by-laws provide that the number of directors shall be fixed by the board of directors. Any director of the Company may be removed from office with or without cause by the holders of a majority of the outstanding shares of the Company entitled to vote at an election of directors.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our directors and officers are indemnified as provided by the Delaware Revised Statutes and our Bylaws. We have been advised that in the opinion of the Securities and Exchange Commission, indemnification for liabilities arising under the Act is against public policy as expressed in the Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities is asserted by one of our directors, officers, or controlling persons in connection with the securities being registered, we will, unless in the opinion of our legal counsel the matter has been settled by controlling precedent, submit the question of whether such indemnification is against public policy to a court of appropriate jurisdiction. We will then be governed by the court’s decision.
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At present, there is no pending litigation or proceeding involving any of our directors, officers, employees or agents where indemnification will be required or permitted. We are not aware of any threatened litigation or proceeding that may result in a claim for indemnification by any director or officer.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes in accounting principles or disagreements with our auditors regarding applications of any accounting principles during the fiscal years ended June 30, 2012 and 2011.
FINANCIAL STATEMENTS AND EXHIBITS
See Item 9.01 below, which is incorporated by reference herein.
Item 3.02 Unregistered Sales of Equity Securities.
In connection with the closing of the Merger Agreement on March 13, 2013, the Company issued 3,740,000 shares of the Company’s Series G Convertible Preferred Stock to the Brazil Interactive Media Shareholders in exchange for Brazil Interactive Media Shares. Due to the Brazil Interactive Media Shareholder's sophistication and the nature of the transaction, the issuances are exempt from registration under the Securities Act of 1933 pursuant to Section 4(2) thereunder. The exchange of the Brazil Interactive Media Shares for Series G Convertible Preferred Stock also qualifies as an the exemption from registration pursuant to Rule 506 of Regulation D promulgated under the Act. The facts relied upon to make the exemption were, among other things, the representations made by the parties to the Merger Agreement, that there was no general solicitation and the limited number of participants.
On March 22, 2013, the Company entered into Stock Purchase Agreements (individually the “Purchase Agreement” and collectively the “Purchase Agreements”) with Dutchess Global Strategies Fund LLC, a New York limited liability company (“Dutchess Global”), and Dutchess Opportunity Fund II LP, a Delaware limited partnership (“Dutchess Opportunity”, and with Dutchess Global, collectively the “Dutchess Funds” or the “Purchasers”). The Purchase Agreements provided for the purchase by the Dutchess Funds of an aggregate of 2,500 shares of the Company’s Series H Convertible Preferred Stock, par value $0.01 per share (the “Preferred Shares”), at a purchase price of $100.00 per share (the “Offering”). The Preferred Shares may be convertible into the Company’s Common Stock, at the sole option of the holder, at a conversion price of $0.30 per share. In addition to the Preferred Shares, the Company also agreed to issue to the Dutchess Funds five-year warrants to purchase, in the aggregate, 208,334 shares of the Company’s Common Stock at an exercise price of $0.60 per share (the “Warrants”). The Offering consists of the Company’s Series H Convertible Preferred Stock, par value $0.01 per share, with 30,000 shares authorized, the terms of which are defined pursuant to the certificate of designation filed with the state of Delaware Division of Corporations.
The Company claims an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Act”) for the private placement of these securities pursuant to Section 4(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transaction does not involve a public offering, the Investor is an “accredited investor” and/or qualified institutional buyer, the Investor has access to information about the Company and its investment, the Investor will take the securities for investment and not resale, and the Company is taking appropriate measures to restrict the transfer of the securities.
Item 5.01 Changes in Control of Registrant
As set forth in more detail in Item 2.01 above, which information is hereby incorporated by referenced into this Item 5.01, as of the Closing Date, former Brazil Interactive Media Shareholders hold approximately 93.5% of the issued and outstanding Series G Convertible Preferred Stock and control the post-exchange Company.
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Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
In conjunction with the Merger Agreement, James R. Arabia resigned from his positions as Chief Executive Officer and director, and Matthew Malesek resigned as director, effective as of the Closing Date. Themistocles Psomiadis was appointed to serve as Chief Executive Officer, Jesus Quintero was appointed as the Chief Financial Officer and Alan T. Hawkins was appointed to serve as secretary. A description of the business experience of the individuals named above over the past five years can be found in Item 2.01 of the Current Report. Mr. Arabia and Mr. Malesek will be replaced on the Company’s board of directors by Messrs. Themistocles Psomiadis and Michael A. Novielli.
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
Pursuant to the Merger Agreement, the Company filed a Certificate of Amendment to amend its Articles of Incorporation in order to change its name to Brazil Interactive Media, Inc. and to decrease the Company’s authorized capital stock from 5,000,000,000 to 100,000,000. These amendments to the Company’s Articles of Incorporation have been previously approved by shareholders of the Company with voting rights representing approximately 52% of the Company’s outstanding stock.
In addition, the Company’s Board of Directors has determined to change the Company’s fiscal year end to December 31, which is the fiscal year end of Brazil Interactive Media, the accounting acquirer.
Item 5.06 Change in Shell Company Status.
Upon completion of the transactions contemplated by the Merger Agreement, which are described in more detail in Item 2.01 above, management has determined that, as of the Closing Date, the Company has ceased to be a shell company as defined in Rule 12b-2 of the United States Securities Exchange Act of 1934, as amended. Prior to the Closing Date, the Company had no or nominal operation or assets.
Item 9.01. Financial Statements and Exhibits.
EXHIBIT INDEX | |
Exhibit No. | Description |
2.1 | Agreement and Plan of Merger between Naturewell, Incorporated, BIMI Acquisition Corp., and Brazil Interactive Media, Inc., dated March 13, 2013* |
3.1 | Certificate of Merger for BIMI Acquisition Corp. and Brazil Interactive Media, Inc., dated March 27, 2013** |
3.2 | Certificate of Amendment of Naturewell, Incorporated, dated May 16, 2013** |
10.1 | English Translation of Lease Agreement between MKD Agência de Comunicação e Marketing S/C Ltda. and EsoTV Brasil Promoção Publicidade Licenciamento e Comércio Ltda., effective as of December 1, 2012** |
10.2 | English Translation of Content Provision and Service Agreement by and between 14 Brasil Telecom Celular S.A., TNL PCS S.A., and EsoTV Brasil Promoção Publicidade Licenciamento e Comércio Ltda., dated October 1, 2010** |
99.1 | Audited Financial statements for the fiscal year ended December 31, 2012 and 2011 and related notes** |
*Previously filed in the Original Filing.
**Filed Herewith.
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SIGNATURE
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.
Date: June 11, 2013
Brazil Interactive Media, Inc.
/s/Themistocles Psomiadis
Chief Executive Officer
EXHIBIT INDEX | |
Exhibit No. | Description |
2.1 | Agreement and Plan of Merger between Naturewell, Incorporated, BIMI Acquisition Corp., and Brazil Interactive Media, Inc., dated March 13, 2013* |
3.1 | Certificate of Merger for BIMI Acquisition Corp. and Brazil Interactive Media, Inc., dated March 27, 2013** |
3.2 | Certificate of Amendment of Naturewell, Incorporated, dated May 16, 2013** |
10.1 | English Translation of Lease Agreement between MKD Agência de Comunicação e Marketing S/C Ltda. and EsoTV Brasil Promoção Publicidade Licenciamento e Comércio Ltda., effective as of December 1, 2012** |
10.2 | English Translation of Content Provision and Service Agreement by and between 14 Brasil Telecom Celular S.A., TNL PCS S.A., and EsoTV Brasil Promoção Publicidade Licenciamento e Comércio Ltda., dated October 1, 2010** |
99.1 | Audited Financial statements for the fiscal year ended December 31, 2012 and 2011 and related notes** |
*Previously filed in the Original Filing.
**Filed Herewith.
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AGREEMENT AND PLAN OF MERGER
by and among
Naturewell, Incorporated,
BIMI Acquisition Corp.,
and
Brazil Interactive Media, Inc.,
Dated as of March 13, 2013
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AGREEMENT AND PLAN OF MERGER, dated as of March 13, 2013 (this ''Agreement''), by and among NatureWell, Incorporated, a Delaware corporation (the ''Company''), BIMI Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of the Company (''Merger Sub''), and Brazil Interactive Media, Inc., a Delaware corporation (''BIMI'').
WHEREAS, the respective Boards of Directors of the Company, Merger Sub and BIMI have approved and declared advisable the merger of Merger Sub with and into BIMI (the ''Merger'') upon the terms and subject to the conditions of this Agreement and in accordance with the General Corporation Law of the State of Delaware (the ''DGCL'');
WHEREAS, the respective Boards of Directors of the Company and BIMI have determined that the Merger is in furtherance of and consistent with their respective business strategies and is in the best interest of their respective stockholders, and the Company has approved this Agreement and the Merger as the sole stockholder of Merger Sub;
WHEREAS, for federal income tax purposes, the Company, Merger Sub and BIMI intend that the Merger qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the ''Code'');
WHEREAS, immediately after the Effective Time, BIMI shall be renamed BIMI, Inc. and the Company shall be renamed Brazil Interactive Media, Inc.
NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Agreement and intending to be legally bound hereby, the parties hereto agree as follows:
Article I The Merger
Section 1.1 The Merger. Upon the terms and subject to satisfaction or waiver of the conditions set forth in this Agreement, and in accordance with the DGCL, Merger Sub, at the Effective Time, shall be merged with and into BIMI. As a result of the Merger, the separate corporate existence of Merger Sub shall cease and BIMI shall continue as the surviving corporation of the Merger (the ''Surviving Corporation'') and shall be a wholly owned subsidiary of the Company.
Section 1.2 Closing. The closing of the Merger (the ''Closing'') shall take place on such date as mutually determined by the parties hereto after the satisfaction or waiver of the conditions (excluding conditions that, by their nature, cannot be satisfied until the Closing Date) set forth in Article VI, unless this Agreement has been theretofore terminated pursuant to its terms (the actual date of the Closing being referred to herein as the ''Closing Date''). The Closing shall be held at the place previously agreed to in writing by the parties. As soon as practicable on or after the Closing Date, the parties hereto shall cause the Merger to be consummated by filing a certificate of merger relating to the Merger (the ''Certificate of Merger'') with the Secretary of
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State of the State of Delaware, in such form as required by, and executed in accordance with the relevant provisions of, the DGCL (the date and time of such filing, or if another date and time is specified in such filing, such specified date and time, being the ''Effective Time'').
Section 1.3 Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of the DGCL. Without limiting the generality of the foregoing, at the Effective Time, except as otherwise provided herein, all the property, rights, privileges, powers and franchises of BIMI and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of BIMI and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.
Section 1.4 Certificate of Incorporation; By-laws. At the Effective Time, (i) the Certificate of Incorporation, as amended, of the Surviving Corporation shall be its Certificate of Incorporation and (ii) the By-laws of the Surviving Corporation shall be its By-laws, in each case until thereafter changed or amended as provided therein or applicable Law.
Section 1.5 Directors and Officers of Surviving Corporation. At the Effective Time, the initial directors of the Surviving Corporation shall be the persons designated on Exhibit A hereto, each to hold office in accordance with the Certificate of Incorporation and By-laws of the Surviving Corporation. The initial officers of the Surviving Corporation shall be the persons designated on Exhibit A hereto, each to hold office in accordance with the Certificate of Incorporation and By-laws of the Surviving Corporation.
Section 1.6 Directors; Officers; Change of Company Name. The parties will take all action necessary such that as of the Effective Time (x) the Board of Directors of the Company shall consist of the three (3) members set forth on Exhibit B hereto, which annex shall also designate the class of director and the committees to which each such member will initially belong, of whom one (1) directors have been designated by BIMI (it being understood that BIMI shall have the right to change the persons as set forth on Exhibit B hereto only with the written consent of the Company) and two (2) directors have been designated by the Company (it being understood that the Company shall have the right to change the persons as set forth on Exhibit B hereto only with the written consent of BIMI) and (y) the officers of the Company shall consist of the officers set forth on Exhibit B hereto. The parties shall take such action as is necessary to structure the Board of Directors of the Company to satisfy applicable stock exchange and corporate governance requirements. Immediately after the Effective Time, the Company shall take, or cause to be taken, all action necessary to amend the Company Certificate (as defined) such that the Company shall be renamed Brazil Interactive Media, Inc. (the ''Name Change'').
Article II Exchange and Conversion of Securities; Reverse Split; Series G Conversion; Amendments
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Section 2.1 Exchange and Conversion of Securities. At the Effective Time, by virtue of the Merger and without any action on the part of the Company, Merger Sub, BIMI or the holders of any of the following securities:
(a) Exchange of BIMI Common Stock for Company Series G Preferred Stock. Each share of common stock, par value $0.0001 per share, of BIMI (''BIMI Common Stock'') issued and outstanding immediately prior to the Effective Time, shall be exchanged for that number of shares of Series G Convertible Preferred Stock of the Company (''Company Series G Preferred'') equal to four to one (4 to 1) (the “Exchange Ratio”). Prior to the Effective Time, the Company Series G Preferred Stock into which such BIMI Common Stock will be exchanged in the Merger shall be issued according to the Series G Convertible Preferred Stock Schedule attached to this Agreement as Exhibit F. At the Effective Time, all such shares of BIMI Common Stock shall be tendered to Merger Sub.
(b) Merger Sub. Each share of common stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and be exchanged for one newly and validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation.
(d) Conversion of Debt and Shares. The parties acknowledge and agree that the Exchange Ratio assumes that a conversion of all of the Company’s issued and outstanding Series A Common Stock, Series E Convertible Preferred Stock, and all outstanding Company convertible debt (subject to any exceptions in the Company Disclosure Schedule), to Company regular common stock (or to Company Series G Preferred issued according to Exhibit F), will have occurred prior to or upon the Effective Time. If between the date of this Agreement and the Effective Time the outstanding shares of Company stock shall have been further changed into a different number of shares or a different class so that the Company’s capitalization differs from that established in Section 3.3(a), by reason of any stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares, the Exchange Ratio shall be correspondingly adjusted to reflect such stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares. The Company Series C Convertible Preferred Stock shall be converted into Company regular common stock immediately upon execution of the actions described in Section 2.2(d) infra.
Section 2.2 Post-Merger Reverse Split and Series G Conversion.
(a) Post-Merger Reverse Split. As soon as practicable after the Effective Time, the Company shall effect a reverse stock split of all outstanding shares of Company Common Stock at a ratio of one-to-8,484.
(b) Series G Conversion. As soon as practicable after the Effective Time and the completion of the post-merger reverse split, the Company Series G Preferred Stock shall be converted into newly-authorized shares of Company Common Stock according to the terms of the Series G Convertible Preferred Stock Certificate of Designation attached to this Agreement as Exhibit E
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and as summarized in the Series G Convertible Preferred Stock Schedule attached to this Agreement as Exhibit F (the “Series G Conversion”).
(c) Further Rights in BIMI Common Stock or BIMI Preferred Stock. All shares of Company Series G Preferred issued upon conversion of the shares of BIMI Common Stock in accordance with the terms hereof shall be deemed to have been issued in full satisfaction of all rights pertaining to such shares of BIMI Common Stock.
(d) Post-Merger Amendments to Company Articles. Immediately after the reverse stock split and Series G Conversion have taken place, the Company shall take, or cause to be taken, all action necessary to amend the Company Certificate (as defined) such that the authorized capital stock of the Company shall consist of 100,000,000 shares of Company Common Stock, par value $0.00001 per share, and 5,000,000 shares of blank check preferred stock, par value $0.01 per share (the ''Company Preferred Stock'').
Section 2.3 Appraisal Rights. Notwithstanding anything in this Agreement to the contrary, shares of BIMI Common Stock and BIMI Preferred Stock outstanding immediately prior to the Effective Time and held by a stockholder who has not voted in favor of the Merger or consented thereto in writing and who has properly demanded appraisal for such shares in accordance with the DGCL, shall not be converted into a right to receive shares of Company Common Stock unless such stockholder fails to perfect or withdraws or otherwise loses such stockholder's right to appraisal. If, after the Effective Time such stockholder fails to perfect or withdraws or loses such stockholder's right to appraisal, such shares of BIMI Common Stock or BIMI Preferred Stock shall be treated as if they had been converted as of the Effective Time into the right to receive such consideration. BIMI shall give the Company prompt notice of any demands received by BIMI for appraisal of shares of BIMI Common Stock. BIMI shall not settle, make any payments with respect to, or offer to settle, any claim with respect to dissenting shares without the consent of the Company.
Article III Representations and Warranties of the Company and Merger Sub
Except as set forth in the Disclosure Schedule which identifies exceptions by specific section references delivered by the Company to BIMI prior to the execution of this Agreement (the ''Company Disclosure Schedule''), the Company and Merger Sub hereby jointly and severally represent and warrant to BIMI as follows:
Section 3.1 Organization and Qualification; Subsidiaries. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Each subsidiary of the Company has been duly organized, and is validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, as the case may be.
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Section 3.2 Certificate of Incorporation and By-laws; Corporate Books and Records. The copies of the Company's Restated Certificate of Incorporation (the ''Company Certificate'') and Amended and Restated By-laws (the ''Company By-laws'') provided to BIMI are complete and correct copies thereof as in effect on the date hereof. The Company is not in violation of any of the provisions of the Company Certificate or the Company By-laws. True and complete copies of all minute books of the Company have been made available by the Company to BIMI.
Section 3.3 Capitalization
(a) As of the Effective Time, (A) 2,481,913,195 shares of Company Common Stock (other than treasury shares) will be issued and outstanding, all of which shall be validly issued and fully paid, nonassessable and free of preemptive rights, and (B) 2,518,086,805 shares of Company Common Stock will be held in the treasury of the Company. As of the Effective Time, 3,970,746 shares of Company Series G Convertible Preferred Stock (the “Company Series G Preferred”) will be issued and outstanding, and no shares of Company Series A Common Stock will be issued or outstanding. The Company Series G Preferred shall have the powers, preferences and rights established by the certificate of designation attached to this Agreement as Exhibit D, and the issued and outstanding Company Series G Preferred shall be distributed as shown in the schedule attached to this Agreement as Exhibit F. All capital stock or other equity securities of the Company have been issued in compliance with applicable federal and state securities laws.
(b) There are no options, warrants or other rights, agreements, arrangements or commitments of any character to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound relating to the issued or unissued capital stock or other equity interests of the Company or any of its subsidiaries, or securities convertible into or exchangeable for such capital stock or other equity interests, or obligating the Company or any of its subsidiaries to issue or sell any shares of its capital stock or other equity interests, or securities convertible into or exchangeable for such capital stock of, or other equity interests in, the Company or any of its subsidiaries.
(c) Other than as disclosed in Exhibit C [Disclosure Schedule] attached, there are no outstanding contractual obligations of the Company or any of its subsidiaries (A) restricting the transfer of, (B) affecting the voting rights of, (C) requiring the repurchase, redemption or disposition of, or containing any right of first refusal with respect to, (D) requiring the registration for sale of, or (E) granting any preemptive or antidilutive right with respect to, any shares of Company Common Stock, Company Series G Preferred, or any capital stock of, or other equity interests in, the Company or any of its subsidiaries. Each outstanding share of capital stock of each subsidiary of the Company is duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights and is owned, beneficially and of record, by the Company or another of its subsidiaries, free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on the Company's or such other of its subsidiary's voting rights, charges and other encumbrances of any nature whatsoever. There are no outstanding contractual obligations of the Company or any of its subsidiaries to provide funds to, or make any
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investment (in the form of a loan, capital contribution or otherwise) in, any of its subsidiaries or any other person, other than guarantees by the Company of any indebtedness or other obligations of any wholly-owned subsidiary.
(d) Other than as disclosed in Exhibit C [Disclosure Schedule] attached, the Company does not have outstanding any bonds, debentures, notes, or other obligations the holders of which have the right to vote (or convertible into or exercisable for securities having the right to vote) with the stockholders of the Company on any matter. The Company has not adopted a stockholder rights plan.
Section 3.4 Authority.
(a) Each of the Company and Merger Sub has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement by the Company and Merger Sub and the consummation by the Company and Merger Sub of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of the Company or Merger Sub and no stockholder votes are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly authorized and validly executed and delivered by each of the Company and Merger Sub and constitutes a legal, valid and binding obligation of each of the Company and Merger Sub, enforceable against each of the Company and Merger Sub in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles.
(b) The Board of Directors of the Company (the ''Company Board''), by resolutions duly adopted by unanimous vote at a meeting duly called and held and not subsequently rescinded or modified in any way (the ''Company Board Approval''), has duly (i) determined that this Agreement and the transactions contemplated hereby (including the Merger) are advisable and fair to and in the best interests of the Company and its stockholders, and (ii) approved and adopted this Agreement, and the transactions contemplated hereby (including the Merger). The Company Board Approval constitutes approval of this Agreement and the Merger as required under any applicable state takeover Law and no such state takeover Law is applicable to the Merger or the other transactions contemplated hereby, including, without limitation, the restrictions on business combinations contained in Section 203 of the DGCL.
(c) Merger Sub's Board of Directors, at a meeting duly called and held, has (i) determined that this Agreement and the transactions contemplated hereby (including the Merger) are advisable and fair to and in the best interests of the Company, as Merger Sub's sole stockholder, (ii) approved and adopted this Agreement and the transactions contemplated hereby (including the Merger) and (iii) recommended that the Company approve and adopt this Agreement and the transactions contemplated hereby (including the Merger).
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Section 3.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by each of the Company and Merger Sub does not, and the performance of this Agreement by each of the Company and Merger Sub will not, (A) (assuming the Company Stockholder Approval is obtained) conflict with or violate any provision of the Company Certificate or Company By-laws or any equivalent organizational documents of any of its Subsidiaries (including Merger Sub), (B) (assuming that all consents, approvals, authorizations and permits described in Section 3.5(b) have been obtained and all filings and notifications described in Section 3.5(b) have been made and any waiting periods thereunder have terminated or expired) conflict with or violate any Law applicable to the Company or any of its subsidiaries.
(b) The execution and delivery of this Agreement by each of the Company and Merger Sub does not, and the performance of this Agreement by each of the Company and Merger Sub will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity or any other person, except (A) under the Exchange Act, the Securities Act, applicable Blue Sky Law and the filing and recordation of the Certificate of Merger as required by the DGCL and (B) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not, individually or in the aggregate, have a material adverse effect.
Section 3.6 Ownership of Merger Sub; No Prior Activities. Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Merger Sub is a direct wholly-owned subsidiary of the Company. Merger Sub has not conducted any activities other than in connection with the organization of Merger Sub, the negotiation and execution of this Agreement and the consummation of the transactions contemplated hereby. Merger Sub has no Subsidiaries.
Section 3.7 Financials.
(a) The consolidated financial statements of the Company as of the period ending September 30, 2012, audited through June 30, 2012 (including the notes thereto) provided by the Company to BIMI (the “Company Financial Statements”) were prepared in accordance with GAAP applied (except as may be indicated in the notes thereto) on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto), and present fairly the consolidated financial position, results of operations and cash flows of the Company and the consolidated subsidiaries of the Company as of the respective dates thereof and for the respective periods indicated therein. The books and records of the Company and each of its subsidiaries have been, and are being, maintained in accordance with applicable material legal and accounting requirements.
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(b) Except as and to the extent set forth on the consolidated balance sheet of the Company and its consolidated subsidiaries included in the Company’s Financial Statements, none of the Company or any of its consolidated subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) that would be required to be reflected on a balance sheet or in notes thereto prepared in accordance with GAAP, except for normal year-end adjustments and liabilities or obligations incurred in the ordinary course of business that would not, individually or in the aggregate, have a material adverse effect.
Article IV Representations and Warranties of BIMI
Except as set forth in the Disclosure Schedule which identifies exceptions by specific section references delivered by BIMI to the Company prior to the execution of this Agreement (the ''BIMI Disclosure Schedule''), BIMI hereby represents and warrants to the Company as follows:
Section 4.1 Organization and Qualification; Subsidiaries. BIMI is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Each subsidiary of BIMI has been duly organized, and is validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, as the case may be. BIMI and each of its subsidiaries has the requisite power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted. BIMI and each of its subsidiaries is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification, licensing or good standing necessary, except for such failures to be so qualified, licensed or in good standing that would not, individually or in the aggregate, have a material adverse effect.
Section 4.2 Certificate of Incorporation and By-laws; Corporate Books and Records. The copies of BIMI's Certificate of Incorporation (the ''BIMI Certificate'') and By-laws (the ''BIMI By-laws'') as provided to the Company are complete and correct copies thereof as in effect on the date hereof. BIMI is not in violation of any of the provisions of the BIMI Certificate or the BIMI By-laws. True and complete copies of all minute books of BIMI have been made available by BIMI to the Company.
Section 4.3 Capitalization
(a) The authorized capital stock of BIMI consists of 80,000,000 shares of BIMI Common Stock and 20,000,000 shares of Preferred Stock. As of the Effective Time, (A) 935,000 shares of BIMI Common Stock (other than treasury shares) were issued and outstanding, all of which were validly issued and fully paid, nonassessable and free of preemptive rights, (B) no shares of BIMI Common Stock were held in the treasury of BIMI or by its Subsidiaries. All capital stock or other equity securities of BIMI have been issued in compliance with applicable federal and state securities laws.
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(b) As of the Effective Time, there were no options, warrants or other rights, agreements, arrangements or commitments of any character to which BIMI or any of its subsidiaries is a party or by which BIMI or any of its subsidiaries is bound relating to the issued or unissued capital stock or other equity interests of BIMI or any of its subsidiaries, or securities convertible into or exchangeable for such capital stock or other equity interests, or obligating BIMI or any of its subsidiaries to issue or sell any shares of its capital stock or other equity interests, or securities convertible into or exchangeable for such capital stock of, or other equity interests in, BIMI or any of its subsidiaries. BIMI has not issued any shares of its capital stock, or securities convertible into or exchangeable for such capital stock or other Equity Interests, other than those shares of capital stock reserved for issuance as set forth in this Section 4.3 or Section 4.3 of the BIMI Disclosure Schedule. BIMI has previously provided the Company with a true and complete list, as of the date hereof, of the shareholders of BIMI.
(c) There are no outstanding contractual obligations of BIMI or any of its subsidiaries (A) restricting the transfer of, (B) affecting the voting rights of, (C) requiring the repurchase, redemption or disposition of, or containing any right of first refusal with respect to, (D) requiring the registration for sale of, or (E) granting any preemptive or antidilutive right with respect to, any shares of BIMI Common Stock or any capital stock of, or other equity interests in, BIMI or any of its subsidiaries. Each outstanding share of capital stock of each Subsidiary of BIMI is duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights and is owned, beneficially and of record, by BIMI or another of its subsidiaries, free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on BIMI's or such other of its subsidiary's voting rights, charges and other encumbrances of any nature whatsoever. There are no outstanding contractual obligations of BIMI or any of its subsidiaries to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any of its subsidiaries or any other person, other than guarantees by BIMI of any indebtedness or other obligations of any wholly-owned subsidiary.
(d) BIMI does not have outstanding any bonds, debentures, notes, or other obligations the holders of which have the right to vote (or convertible into or exercisable for securities having the right to vote) with the stockholders of BIMI on any matter. BIMI has not adopted a stockholders rights plan.
Section 4.4 Authority.
(a) BIMI has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement by BIMI and the consummation by BIMI of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of BIMI and no stockholder votes are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly authorized and validly executed and delivered by BIMI and constitutes a legal, valid and binding obligation of BIMI, enforceable
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against BIMI in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles.
(b) The Board of Directors of BIMI (the ''BIMI Board''), by resolutions duly adopted by unanimous vote of the directors present at a meeting duly called and held and not subsequently rescinded or modified in any way (the ''BIMI Board Approval''), has duly (i) declared that this Agreement and the transactions contemplated hereby (including the Merger) are advisable and fair to and in the best interests of BIMI and its stockholders, and (ii) approved and adopted this Agreement and the transactions contemplated hereby (including the Merger) and (iii) resolved to recommend that the stockholders of BIMI adopt this Agreement and vote for the approval of the Merger and directed that this Agreement and the transactions contemplated hereby be submitted for consideration by BIMI's stockholders in accordance with this Agreement.
Section 4.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by BIMI does not, and the performance of this Agreement by BIMI will not, (A) (assuming the BIMI Stockholder Approval is obtained) conflict with or violate any provision of the BIMI Certificate or BIMI By-laws or any equivalent organizational documents of any of its subsidiaries, (B) (assuming that all consents, approvals, authorizations and permits described in Section 4.5(b) have been obtained and all filings and notifications described in Section 4.5(b) have been made and any waiting periods thereunder have terminated or expired) conflict with or violate any Law applicable to BIMI or any of its subsidiaries or by which any property or asset of BIMI or any of its subsidiaries is bound or affected or (C) require any consent or approval under, result in any breach of or any loss of any benefit under, constitute a change of control or default (or an event which with notice or lapse of time or both would become a default) under or give to others any right of termination, vesting, amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance on any property or asset of BIMI or any of its subsidiaries pursuant to, any contract or other instrument or obligation, except, with respect to clauses (B) and (C), for any such conflicts, violations, consents, approvals, breaches, losses, defaults or other occurrences which would not, individually or in the aggregate, have a material adverse effect.
(b) The execution and delivery of this Agreement by BIMI does not, and the performance of this Agreement by BIMI will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity or any other person, except (A) under the Exchange Act, the Securities Act, applicable Blue Sky Law and the filing and recordation of the Certificate of Merger as required by the DGCL and (B) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not, individually or in the aggregate, have a material adverse effect.
Section 4.6 Financial Statements.
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(a) The audited consolidated financial statements as of the period ending December 31, 2012 (including the notes thereto) provided to the Company (the “BIMI Financial Statements”) were prepared in accordance with GAAP applied (except as may be indicated in the notes thereto) on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto), and present fairly the consolidated financial position, results of operations and cash flows of BIMI and the consolidated subsidiaries of BIMI as of the respective dates thereof and for the respective periods indicated therein. The books and records of BIMI and each of its subsidiaries have been, and are being, maintained in accordance with applicable material legal and accounting requirements.
(b) Except as and to the extent set forth on the consolidated balance sheet of BIMI and its consolidated subsidiaries included in the BIMI Financial Statements, none of BIMI or any of its consolidated subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) that would be required to be reflected on a balance sheet or in notes thereto prepared in accordance with GAAP, except for normal year-end adjustments and liabilities or obligations incurred in the ordinary course of business that would not, individually or in the aggregate, have a material adverse effect.
Section 4.7 Brokers. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the Merger based upon arrangements made by or on behalf of BIMI or any of its subsidiaries.
Section 4.8 Tax Treatment. None of BIMI, any of its subsidiaries or any of BIMI's affiliates has taken or agreed to take any action that would prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code. BIMI is not aware of any agreement, plan or other circumstance that would prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
Section 4.9 Litigation. Except as and to the extent disclosed, (a) there is no suit, claim, action, proceeding or investigation pending or, to the knowledge of BIMI, threatened in writing against BIMI or any of its subsidiaries or for which BIMI or any of its subsidiaries is obligated to indemnify a third party and (b) neither BIMI nor any of its subsidiaries is subject to any outstanding and unsatisfied order, writ, injunction, decree or arbitration ruling, award or other finding. There is no suit, claim, action, proceeding or investigation pending or, to the knowledge of BIMI, threatened in writing against BIMI or any of its subsidiaries that, as of the date hereof, challenges the validity or propriety, or seeks to prevent consummation of, the Merger or any other transaction contemplated by this Agreement.
Section 4.10 Vote Required. The affirmative vote of the holders of a majority of the outstanding shares of BIMI Common Stock are the only votes of the holders of any class or series of capital stock or other equity eecurities of BIMI necessary to approve this Agreement and the transactions contemplated hereby, including the Merger (the ''BIMI Stockholder Approval'').
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Article V Covenants
Section 5.1 Tax-Free Reorganization Treatment
(a) The Company and BIMI shall use their commercially reasonable best efforts, and shall cause their respective Subsidiaries to use their commercially reasonable best efforts, to take or cause to be taken any action necessary for the Merger to qualify as a reorganization within the meaning of Section 368(a) of the Code. Neither the Company nor BIMI shall, nor shall they permit any of their respective Subsidiaries to, take or cause to be taken any action that could reasonably be expected to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
(b) This Agreement is intended to constitute, and the parties hereto hereby adopt this Agreement as, a ''plan of reorganization'' within the meaning Treasury Regulation Sections 1.368-2(g) and 1.368-3(a). Each of the Company and BIMI shall report the Merger as a reorganization within the meaning of Section 368 of the Code, unless otherwise required pursuant to a ''determination'' within the meaning of Section 1313(a) of the Code.
Article VI Closing Conditions
Section 6.1 Conditions to Obligations of Each Party Under This Agreement. The respective obligations of each party to effect the Merger and the other transactions contemplated herein shall be subject to the satisfaction at or prior to the Effective Time of the following conditions, any or all of which may be waived, in whole or in part, to the extent permitted by applicable Law:
(a) Stockholder Approval. The Company Stockholder Approval and the BIMI Stockholder Approval shall have been obtained.
(b) No Order. No governmental entity, nor any federal or state court of competent jurisdiction or arbitrator shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, executive order, decree, judgment, injunction or arbitration award or finding or other order (whether temporary, preliminary or permanent), in any case which is in effect and which prevents or prohibits consummation of the Merger or any other transactions contemplated in this Agreement.
(c) Consents and Approvals. All material consents, approvals and authorizations of any governmental entity required of BIMI, the Company or any of their subsidiaries shall have been obtained.
(d) Execution and Delivery of Lock-Up and Leak-Out Agreements. Each stockholder listed on attached Schedule F shall execute and deliver to the Company a Lock-Up and Leak-Out agreement on or prior to the Effective Time. A stockholder shall not receive its respective
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certificate evidencing its shares of Company Common Stock unless and until it has executed and delivered its Lock-Up and Leak-Out agreement to the Company.
Section 6.2 Additional Conditions to Obligations of the Company and Merger Sub. The obligations of the Company and Merger Sub to effect the Merger and the other transactions contemplated herein are also subject to the following conditions:
(a) Representations and Warranties. The representations and warranties of BIMI contained in this Agreement shall be true and correct (without giving effect to any limitation as to materiality set forth therein) at and as of the Effective Time as if made at and as of such time, except where the failure of such representations and warranties to be true and correct would not, individually or in the aggregate, have a material adverse effect.
(b) Agreements and Covenants. BIMI shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Effective Time.
Section 6.3 Additional Conditions to Obligations of BIMI. The obligation of BIMI to effect the Merger and the other transactions contemplated herein are also subject to the following conditions:
(a) Representations and Warranties. The representations and warranties of the Company and Merger Sub contained in this Agreement shall be true and correct at and as of the Effective Time.
(b) Agreements and Covenants. The Company and Merger Sub shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by each of them on or prior to the Effective Time.
(c) Consents and Approvals. All material consents, approvals and authorizations of any person other than a Governmental Entity required to be set forth in Section 3.5 or Section 4.5 or the related sections of the Company Disclosure Schedule or the BIMI Disclosure Schedule, as applicable, shall have been obtained.
Article VII Termination, Amendment and Waiver
Section 7.1 Termination. This Agreement may be terminated, and the Merger contemplated hereby may be abandoned, at any time prior to the Effective Time, by action taken or authorized by the Board of Directors of the terminating party or parties, whether before or after approval of the matters presented in connection with the Merger by the stockholders of the Company or the stockholders of BIMI:
(a) By mutual written consent of BIMI and the Company, by action of their respective Boards of Directors;
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(b) By either the Company or BIMI if the Merger shall not have been consummated prior to May 31, 2013 (such date, the ''Outside Date''); provided, however, that the right to terminate this Agreement under this Section 7.1(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement (including without limitation such party's obligations set forth in Section 5.7) has been the cause of, or resulted in, the failure of the Effective Time to occur on or before the Outside Date;
(c) By either the Company or BIMI if any governmental entity shall have issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement, and such order, decree, ruling or other action shall have become final and nonappealable (which order, decree, ruling or other action the parties shall have used their commercially reasonable best efforts to resist, resolve or lift, as applicable, subject to the provisions of Section 5.7);
(d) By written notice of BIMI (if BIMI is not in material breach of its obligations or its representations and warranties under this Agreement), if there has been a breach by the Company or Merger Sub of any representation, warranty, covenant or agreement contained in this Agreement which (i) would result in a failure of a condition set forth in Section 6.3(a) or 6.3(b) and (ii) cannot be cured prior to the Outside Date; provided that BIMI shall have given the Company written notice, delivered at least twenty (20) days prior to such termination, stating BIMI's intention to terminate this Agreement pursuant to this Section 7.1(d) and the basis for such termination;
(e) By written notice of the Company (if the Company is not in material breach of its obligations or its representations and warranties under this Agreement), if there has been a breach by BIMI of any representation, warranty, covenant or agreement contained in this Agreement which (i) would result in a failure of a condition set forth in Section 6.2(a) or 6.2(b) and (ii) cannot be cured prior to the Outside Date; provided that the Company shall have given BIMI written notice, delivered at least twenty (20) days prior to such termination, stating the Company's intention to terminate this Agreement pursuant to this Section 7.1(e) and the basis for such termination; or
(h) By written notice of either BIMI or the Company if (i) the Company Stockholder Approval shall not have been obtained at the Company Stockholders' Meeting duly convened therefor (or at any adjournment or postponement thereof), or (ii) the BIMI Stockholder Approval shall not have been obtained at the BIMI Stockholders' Meeting duly convened therefor (or at any adjournment or postponement thereof).
Section 7.2 Effect of Termination. Limitation on Liability. In the event of termination of this Agreement by either BIMI or the Company as provided in Section 7.1, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of BIMI or the Company or their respective subsidiaries, officers or directors except (x) with respect to this
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Section 7.2 and Article VIII and (y) with respect to any liabilities or damages incurred or suffered by a party as a result of the willful and material breach by the other party of any representations, warranties, covenants or other agreements set forth in this Agreement.
Section 7.3 Amendment. To the extent permitted by applicable Law, this Agreement may be amended by the parties, by action taken or authorized by their respective Boards of Directors, at any time before or after approval of the matters presented in connection with the Merger by the stockholders of BIMI and the Company; provided, that after any such approval, no amendment shall be made that by law requires further approval by the Company's or BIMI's stockholders, as the case may be, without such further approval. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties.
Section 7.4 Waiver. At any time prior to the Effective Time, any party hereto may (a) extend the time for the performance of any of the obligations or other acts of the other party hereto, (b) waive any inaccuracies in the representations and warranties of the other party contained herein or in any document delivered pursuant hereto, and (c) waive compliance by the other party with any of the agreements or conditions contained herein.
Section 7.5 Fees and Expenses. Subject to Section 7.2(a), Section 7.2(b) and Section 7.2(c) hereof, all expenses incurred by the parties hereto shall be borne solely and entirely by the party which has incurred the same (including, but not limited to, fees and expenses of counsel, accountants, investment bankers and other advisors).
Article VIII General Provisions
Section 8.1 Non-Survival of Representations and Warranties. None of the representations and warranties in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time. This Section 8.1 shall not limit any covenant or agreement of the parties which by its terms contemplates performance after the Effective Time.
Section 8.2 Notices. Any notices or other communications required or permitted under, or otherwise in connection with this Agreement, shall be in writing and shall be deemed to have been duly given when delivered in person or upon confirmation of receipt when transmitted by facsimile transmission (but only if followed by transmittal by national overnight courier or hand for delivery on the next business day) or on receipt after dispatch by registered or certified mail, postage prepaid, addressed, or on the next business day if transmitted by national overnight courier, in each case as follows:
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If to BIMI, addressed to it at:
Brazil Interactive Media, Inc.
Attention: T. Psomiadis
151 W. Passaic Street
Rochelle Park, NJ 07662
with a copy to:
Alan T. Hawkins, Esq.
2106 NW 4th Place
Gainesville, FL 32603
If to the Company or Merger Sub, addressed to it at:
NatureWell, Incorporated
Attention: Michael Novielli
50 Commonwealth Ave., Suite 2
Boston, MA 02116
with a copy to:
Thompson Hine LLP
Attention: Peter Gennuso, Esq.
335 Madison Avenue
New York, New York 10017
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Section 8.3 Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
Section 8.6 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.
Section 8.7 Entire Agreement. This Agreement (together with the Exhibits, BIMI Disclosure Schedule and Company Disclosure Schedule and the other documents delivered pursuant hereto)constitutes the entire agreement of the parties and supersedes all prior agreements and undertakings, both written and oral, between the parties, or any of them, with respect to the subject matter hereof, and except as otherwise expressly provided herein, is not intended to confer upon any other person any rights or remedies hereunder.
Section 8.11 Governing Law; Consent to Jurisdiction; Waiver of Trial by Jury.
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(a) This Agreement shall be governed by, and construed in accordance with, the Laws of the State of Delaware, without regard to laws that may be applicable under conflicts of laws principles.
(b) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any Delaware State court, or Federal court of the United States of America, sitting in Delaware, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the agreements delivered in connection herewith or the transactions contemplated hereby or thereby or for recognition or enforcement of any judgment relating thereto, and each of the parties hereby irrevocably and unconditionally (A) agrees not to commence any such action or proceeding except in such courts, (B) agrees that any claim in respect of any such action or proceeding may be heard and determined in such Delaware State court or, to the extent permitted by law, in such Federal court, (C) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such action or proceeding in any such Delaware State or Federal court and (D) waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such Delaware State or Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 8.2. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by Law.
Section 8.13 Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the Company, Merger Sub and BIMI have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.
NatureWell, Incorporated
By: James R. Arabia
_________________________
a duly authorized signatory
BIMI Acquisition Corp.
By: Michael Novielli
_________________________
a duly authorized signatory
Brazil Interactive Media, Inc.
By: Themistocles Psomiadis
_________________________
a duly authorized signatory
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EXHIBIT A
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
Directors:
Themistocles Psomiadis
Officers:
Themistocles Psomiadis President & Treasurer
Alan T. Hawkins Secretary
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EXHIBIT B
BOARD OF DIRECTORS AND OFFICERS OF THE COMPANY
Directors:
Themistocles Psomiadis
Michael Novielli
Douglas H. Leighton
Officers:
Themistocles Psomiadis Chief Executive Officer and Chairman of the Board
Jesus M. Quintero Chief Financial Officer
Alan T. Hawkins Secretary
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EXHIBIT C
DISCLOSURE SCHEDULES
NAWL DISCLOSURE SCHEDULE
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BIMI DISCLOSURE SCHEDULE ZERO
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EXHIBIT D
CERTIFICATE OF DESIGNATION OF
SERIES G CONVERTIBLE PREFERRED STOCK
CERTIFICATE OF DESIGNATION
of
SERIES G CONVERTIBLE PREFERRED STOCK
Of
NatureWell, Incorporated
NatureWell, Incorporated, a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"),
DOES HEREBY CERTIFY:
THAT, pursuant to the authority conferred upon the board of directors by the Certificate of Incorporation (as restated) of this Corporation and Section 151 of Title 8 of the Delaware Code; the board of directors has duly adopted the following resolution:
RESOLVED, that, pursuant to the authority expressly granted to and vested in the board of directors of this Corporation by the provisions of its Certificate of Incorporation, the board of directors hereby creates a series of Preferred Stock to consist of 4,000,000 of the 15,000,000 shares of Preferred Stock, $.01 par value per share, which this Corporation now has authority to issue, and the board of directors hereby fixes the designation, powers, preferences and relative, participating, optional and other special rights, and the qualifications, limitations or restrictions thereof, of the shares of such series (in addition to the designation, powers, preferences and relative, participating, optional and other special rights, and the qualifications, limitations or restrictions thereof, set forth in the Certificate of Incorporation of this Corporation which are applicable to Preferred Stock of all series) as follows:
1. Designation. The distinctive designation of such series shall be the Series G Convertible Preferred Stock (the “Series G Preferred Stock”).
2. Number of Shares. The number of shares, which shall constitute such series, shall be 4,000,000 shares, which number may not be increased or decreased in part without the prior written consent of a majority of the outstanding Series G Preferred Stock.
3. Dividends.
(a) The Corporation shall not be required to pay any dividend on the Series G Preferred Stock. However, so long as the Series G Preferred is outstanding, no dividends whatever shall be paid or declared, nor shall any distribution be made, on any Junior Stock, other than a dividend or distribution payable in Junior Stock or warrants or other rights to purchase Junior Stock, without the prior written consent of a majority of the outstanding Series G Preferred Stock.
4. Liquidation Rights. The Series G Preferred Stock shall have no liquidation preference over any Junior Stock.
5. Voting Rights. Except as otherwise provided by law or the Certificate of Incorporation, each share of the Series G Preferred Stock shall be entitled to cast a vote for all matters that are presented
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to the Corporation’s shareholders for a vote, whether by shareholder meeting (annual or special) or by written consent, equal to 1 vote for each share of Common Stock that the Series G Preferred Stock is entitled to convert into at the time of such vote. For example; if 1 share of Series G Preferred Stock is entitled to convert into 84,840 shares of Common Stock at the time of a shareholder vote, then each share of Series G Preferred Stock is entitled to cast 84,840 votes, regardless of whether the Corporation has a sufficient number of authorized, but unissued, Common Stock available for the Series G Preferred Stock to convert into at the time of such vote.
6. Conversion Rights. All outstanding shares of the Series G Preferred Stock shall convert into fully paid and non-assessable Common Stock of the Corporation upon the terms and conditions of this section;
(a) For the purposes of this Section 6, each share of Series G Preferred Stock shall be convertible into 84,840 shares of the Corporation’s Common Stock.
(b) In case at any time the Common Stock outstanding shall be combined into a lesser number of shares, whether by reclassification, recapitalization, reduction of capital stock, whether referred to as a “reverse split” or otherwise, or other corporate action of similar or different kind, then the amount of common shares that the Series G Preferred shall be convertible into shall be proportionately decreased.
(c) In case at any time any Common Stock shall be issued, or be deemed to have been issued, as a dividend on outstanding Common Stock or shall be issued upon subdivision, reclassification, recapitalization, whether referred to as a “stock split” or otherwise, the amount of common shares that the Series G Preferred shall be convertible into shall be proportionately increased.
(d) In case at any time any warrants, rights or any other security which is declared or issued to the holders of Common Stock or which Common Stock holders have the right to acquire, the Series G Preferred Stock shall automatically be entitled to such rights and/or the receipt of such rights or warrants or other instrument in the same proportion as if the Series G Preferred Stock had been converted on the day such right, warrant or security was declared without having to convert the Series G Preferred Stock.
(e) At such time that the Corporation has a sufficient number of authorized and unissued shares of Common Stock available to facilitate the conversion into Common Stock of all outstanding shares of the Series G Preferred Stock, the conversion of the Series G Preferred Stock into Common Stock shall automatically occur one (1) business day following the date that such sufficient number of authorized and unissued shares of Common Stock becomes available, at the conversion rate that is in effect at that time (the “Forced Conversion”). The Corporation shall effect a Forced Conversion by delivering to each holder of Series G Preferred a notice (the “Notice of Forced Conversion”) informing each holder of the date that the Forced Conversion became effective (the “Effective Date”) and that their Series G Preferred Stock certificate or certificates are rendered null and void as of the Effective Date. All Series G Preferred certificates shall be rendered null and void as of the Effective Date of a Forced Conversion. Following a Forced Conversion the Corporation shall deliver to each holder of Series G Preferred Stock the shares of Common Stock that each holder is entitled to receive upon a Forced Conversion within thirty (30) days of the Effective Date of the Forced Conversion.
(f) Each share of Series G Preferred Stock shall be convertible, at the sole option of the holder thereof, into share(s) of the Corporation’s Common Stock, at any time after April 1, 2013. Such (voluntary) conversion of Series G Preferred Stock into Common Stock shall be made by the
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surrender to the Corporation of the certificate or certificates representing the Series G Preferred Stock to be converted, duly endorsed or assigned (unless such endorsement or assignment is waived by the Corporation), together with a written request for conversion.
(g) All Series G Preferred Stock which shall have been surrendered for conversion or been the subject of a Forced Conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares of stock, including the rights, if any, to receive notices and to vote, shall forthwith cease except only the rights of the holders thereof to receive Common Stock in exchange therefor. Any Series G Preferred Stock so converted shall be permanently retired, shall no longer be deemed outstanding and shall not be reissued.
(h) The Corporation shall promptly take all actions necessary to provide for a number of authorized shares of Common Stock sufficient to provide for the conversion of the Series G Preferred Stock outstanding upon the basis hereinbefore provided, and thereafter shall at all times be reserved for such conversion. If the Corporation shall propose to issue any securities or to make any change in its capital structure which would change the number of shares of Common Stock into which each share of Series G Preferred Stock shall be convertible as herein provided, the Corporation shall at the same time also make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved for conversion of the outstanding Series G Preferred Stock on the new basis.
(i) The term "Common Stock" as used in this Section 6 shall mean stock of the class designated as regular Common Stock of the Corporation on the date the Series G Preferred Stock is created.
7. Definitions. For the purposes of this resolution, the following terms shall have the meanings indicated.
(a) The term "Preferred Stock" means the class of 15,000,000 shares of Preferred stock, par value $.01 per share, authorized for issuance by the Certificate of Incorporation of this Corporation.
(b) The term "Junior Stock" means (i) Common Stock, and (ii) all those classes and series of preferred or special stock and all those series of Preferred Stock, by the terms of the Certificate of Incorporation or of the instrument by which the board of directors, acting pursuant to authority granted in the Certificate of Incorporation, shall designate the special rights and limitations of each such class and series of preferred or special stock or series of Preferred Stock, which shall be subordinate to Series G Preferred Stock with respect to the right of the holders thereof to receive dividends or to participate in the assets of this Corporation distributable to stockholders upon any liquidation, dissolution or winding up of this Corporation.
8. General. The section headings contained in this resolution are for reference purposes only and shall not affect in any way the meaning of this resolution.
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IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designation to be executed as of the 12th day of March 2013, by an officer thereunto duly authorized.
NatureWell, Incorporated
By: ______________________________
James R. Arabia, Chief Executive Officer
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Commercial Lease Agreement
Parties
LANDLORD
MKD Agencia de Comunicação e Marketing Ltda., located at Rua dos Guaxins n˚203, Planalto Paulista, State of São Paulo 04058-030, represenetd in this act by its shareholder Mrs. Ena Silvia Caltello Gonçalves Barbosa, Brazilian, widowed, businesswoman, ID number [redacted], Federal Tax Payer Number [redacted], hereinafter LANDLORD.
TENANT
ESOTV BRASIL PROMOÇÃO PUBLICIDADE LICENCIAMENTO E COMÉRCIO LTDA., registered at Santana de Parnaiba, State of São Paulo, at Rua Professor Edgard de Moraes, n. 534, ZIP 06502-165, enrolled with the Brazilian Federal Tax Payer Registration Number (CNPJ) 10.563.796/0001-4, hereinafter TENANT.
Through this Commercial Lease Agreement, signed in the presence of two witnesses, in the best form of Law, the parties identified above have hereby agree between them, the non-residential rental of the real estate located at Alameda Uapixana, n˚ 278, Planalto Paulista, Sao Paulo - SP 04085-030, owned by the LANDLORD, observing the following clauses and conditions described herein.
Article 1 Duration of the Agreement
1. The duration of this agreement is of 36 (thirty six) months, beginning on Dec. 1st 2012 and ending on Dec. 1st 2015, date on which the lease is fully and righteously terminated.
Article 2 Lease Value, Costs, and Taxes
2.1 As a monthly lease, the TENANT is obliged to pay to pay the amount of of R$19,488.11 (nineteen thousand, four hundred and eighty eight Reais and eleven cents), amount which will be paid by deposit to the LANDLORDs bank account, Banco Itau n˚[redacted], Branch [redacted], on the 17th day of each month, the TENANT being obliged to pay by the first business day after the due date.
2.2 The lease value will be readjusted yearly, in accordance to the accrued variation of the IGPM index presented by the Fundação Getulio Vargas, or by any other that shall substitute it.
2.3 In the event there are any changes in the legislation during the term of this agreement, as to the periodicity of the readjustments, the parties agree that rent will be readjusted within the shortest time period legally allowed.
2.4 FINE: The TENANT, when not paying rent by the scheduled date, in accordance with Article 3, will be obliged to pay a fine of 10% (ten percent) over the lease value stipulated in this agreement, as well as 1% (one percent) interest per month, plus monetary correction.
2.5 WAIVER: The TENANT will have a waiver grace period to pay rent until the second business day after the deadline, and if this date is not a business day, then will be obliged to pay on the first business day after that date, unless payment is made with a check.
Article 3- Use of The Property
3.1 The present Lease is destined restrictively to the use of the property for production for the film industry and television.
3.2 The conditions of the Property/Estate/Building: The property being object of this agreement will be delivered in the conditions described in the inspection sheet, in other words, with all electrical and water infrastructure in perfect condition, with all walls and rooms painted, and all doors and gates functioning corectly, the TENANT being
obliged to maintain such conditions. It is also agreed that the property will be returned in the same conditions foreseen in the inspection sheet, besides, on the act of return of the keys, al taxes and bills paid, and if not it is the LANDLORD’s call to receive it back or not. In the event the LANDLORD does not receive back the property, the TENANT shall continue to pay rent as they expire.
3.3 TERMINATION: If the property is used in a different manner of use than commercial/industrial, the LANDLORD shall have the option to fully terminate this agreement, with no obligation to idemnify or any other liability.
3.4 IMPROVEMENTS AND CONSTRUCTIONS: Any improvement or construction to be made on the property object of this agreement, should immediately be submitted to the express authorization of the LANDLORD. Once the improvement is made, LANDLORD shall have the right to accept it or not, where in the event the LANDLORD does not accept it, the TENANT must return the property to the same condition in which it was delivered. The improvements, modifications, or repairs will be part of the property, having no rights of idemnification or retention over them.
3.5 RETURN OF THE PROPERTY AFTER TERMINATION OF THE AGREEMENT: The TENANT shall return the property in the same condition in which it was received, which are, painted with latex paint in the color described in the inspection sheet, with all electrical and water infrastructure and acessories in perfect conditions, except the deterioration resulting from common and normal use of the building. The first and final inspection sheets will be part of this agreement and will be signed by two witnesses, the parties, the guarantors, and one civil consruction engineer.
3.6 THE EXPENSES FOR THE BEGINING, EXECUTION, AND FINALIZING THE ACTIVITIES: The TENANT is responsible to obtain all pre-requisites to allow the effectiveness of the comercial/industrial activities, such as permits, license, and authorizations by public authorities, as well as the payment of all fees and taxes resulting from the implementation and execution of its activities. In summary, all costs for the elaboration and execution of this agreement.
Article 4- Extension of the Agreement
4.1 The present agreement may be renewed in accordance to the terms determined on the article 51 of Law number 8.245-91 (Rent Law), with the exceptions listed on article 52 of the same.
Article 5 - Right to Enter and Random Inspections
5.1 The TENANT will allow the LANDLORD to make inspections, on the days and times to be scheduled, where Landlor d will check all infrastructure, acessories, and safety equipment.
Article 6 - The Information Exchange Between Parties
6.1 The parties that sign this agreement shall only communicate betwen them in written form, through any way allowed by Law. In the absence of any of the parties, they herein compromise to nominate attorney with powers for such acts.
Article 7 - Fire Insurance and other Provisions
7.1. TENANT shall hire a reputable insurance company to contract for insurance against fire and other damage. Such contract shall name the LANDLORD, stating that it will be based on the market value of the property. The insurance contract will be valid as long as there LEASE, including the renovation, having as beneficiary the LANDLORD, in relation to the property and its accessories, and even TENANT regarding their property.
7.2. TENANT shall hire the insurance company within 10 (ten) days from the signing of this contract. If the TENANT does not, this contract shall be legally terminated.
7.3. Any accident that may subsequently occur in the property by negligence or willful misconduct of LESSEE, to compel payment plus all expenses for damage to property, and shall deliver him in the state which found, and especially learned in self survey, well as fine provided for in the FIFTH PARAGRAPH SECTION 3.
Article 8 - The Penalty for Breach
8.1. The parties stipulate the payment of a fine of 03 (three) monthly rental amounts prevailing at the time of occurrence of the event, to be applied to that that may infringe any of the clauses contained in this contract except upon the occurrence of the events set forth in ARTICLE 9.
8.2. Should the LESSEE to return the property before the end of the contract, the same shall pay a penalty value of 03 (three) times the minimum wage, effective as of the date of delivery of the keys.
Article 9 - On Contract Termination
9.1. The termination of this contract shall occur, regardless of any prior notice or compensation by the TENANT, when:
a) If there is any accident, fire, or other event that makes it impossible to continue possession and use of the property, regardless of intent or fault of TENANT;
b) In the event of expropriation of the property rented;
c) In the situations listed herein.
Article 10 - Final Provisions
This contract is effective between the parties after the signing of the same, and they elect the city of São Paulo, where the property is located, to resolve any controversies arising from the implementation and enforcement of the same.
The heirs, successors or assigns of the Contracting Parties shall honor the full content of this contract.
And, being fair and agreed, the parties sign this COMMERCIAL LEASE AGREEMENT, along with two (2) witnesses.
São Paulo, December 1, 2012.
Landlord:
[illegible signature]
______________________________
MKD AGÊNCIA DE COMUNICAÇÃO E MARKETING S/C LTDA
Tenant:
[illegible signature]
______________________________
ESOTV BRASIL PROMOÇÃO PUBLICIDADE LICENCIAMENTO E COMÉRCIO LTDA
CONTRACT TO PROVIDE CONTENT SERVICES MADE BETWEEN TNL PCS S.A.; 14 BRASIL TELECOM CELULAR S.A., AND PROVIDER ESOTV BRASIL PROMOÇÃO PUBLICIDADE LICENCIAMENTO E COMÉRCIO LTDA.
By this instrument and in the best form of law, on one side,
ESOTV BRASIL PROMOÇÃO PUBLICIDADE LICENCIAMENTO E COMÉRCIO LTDA., a company with registered offices at Rua Professor Edgard de Moraes, nº 534 – Santana de Parnaiba – SP – CEP 06502-165, with taxpayer’s number 10.563.796/0001-44, represented herein by its legal representative, hereinafter named CLIENT or PROVIDER.
and, on the other side,
TNL PCS S.A., with offices at Rua Jangadeiros, 48, Ipanema, Rio de Janeiro/RJ, with taxpayer’s number 04.164.616/0001-59 and City Registration number 02.920.034, represented herein by its legal representative, hereinafter named Oi or CARRIER; and
14 BRASIL TELECOM CELULAR S.A., a company with its main offices in the city of Brasilia, Distrito Federal, at SIA/Sul, Area de Servicos Publicos, Conjunto D, Bloco B, Setor Industrial, with taxpayer’s number 05.423.963/0001-11, represented herein as provided for in its bylaws, hereinafter named BRT or CARRIER.
Oi and BRT, jointly named “CARRIERS” and, when in conjunction with the PROVIDER, named PARTIES;
WHEREAS Oi and BRT MOVEL are companies that hold a license to explore Personal Mobile Service-PMS (Serviço Pessoal Movel-SMP), in a private setting;
WHEREAS PROVIDER is holder of voice content related to a voice portal;
WHEREAS it is of interest of the PARTIES to make available an interactive channel to allow access to the voice content aforementioned in the preceding item.
The Parties decide to execute, in mutual agreement, this Contract to Provide Content Services, according to the following clauses and conditions:
CLAUSE ONE – DEFINITIONS
1.1 For purposes of this contract, the following definitions apply:
(a) | VOICE PORTAL: A channel for communication, relationships, and interactivity accessible by calling a certain access code made available by the CARRIERS. |
(b) | VOICE CONTENT: Audio recordings related to the voice portal produced by the PROVIDER and licensed by the latter to the CARRIERS to be available in the VOICE PORTAL. |
(c) | USERS: Clients of PMS and/or STFC providers who opt to access the VOICE CONTENT, available in the VOICE PORTAL, by calling the access code made available by the CARRIERS. |
(d) | TRAFFIC VC-1 / VC-2 / VC-3 ON NET: All traffic originated in the Personal Mobile Service of Carrier Oi and intended for Personal Mobile Service of Carrier Oi, and, in addition, all traffic originated from Personal Mobile Service of Carrier BRT and intended for the Personal Mobile Service of Carrier BRT. |
(e) | TRAFFIC VC-1 OFF NET: All local traffic originated in the Commuted Conventional Telephony Service (STFC) or the Personal Mobile Service (PMS) excluding carriers from the Oi and BRT Personal Mobile Service intended for the mobile accesses of the carriers’ voice portal. |
(f) | TRAFFIC VC-2/VC-3 OFF NET: All long distance traffic originated in the Commuted Conventional Telephony Service (STFC) or the Personal Mobile Service (PMS) excluding carriers of Personal Mobile Service Oi and BRT intended for the mobile access to the carriers’ voice portal. |
CLAUSE TWO – PURPOSE
2.1. The Contract herein has the purpose of providing services, with exclusivity in the supply of specific VOICE CONTENT by the PROVIDER to the CARRIERS, under the conditions and by the means of transmission specified in ADDENDUM I, so that the CARRIERS can distribute, transmit, and commercialize the respective VOICE CONTENT to USERS, via the VOICE PORTAL, by calling an access code.
2.1.1. PROVIDER as the holder of VOICE CONTENT hereby authorizes CARRIERS to present aforementioned VOICE CONTENT, in the VOICE PORTAL, allowing the access of any USER.
2.1.2. It is agreed and accepted by Parties that the access code aforementioned belong to the CARRIERS, the PROVIDER not having any right of use to such any access code, after the term of the contract herein has elapsed.
2.2. Calls considered invalid shall be excluded in accordance with the rules of the regulating agency, which shall be presented to the PROVIDER and justified.
2.3. The access to the VOICE PORTAL by clients of PMS providers that are in roaming (that is, using their device outside their service area) or outside the area where personal mobile services (PMS) services are provided by the CARRIERS, are subject to the terms of roaming agreements to be executed between providers of GSM (Global System Mobile). Thus, it is herein noted that client may not gain access to the VOICE PORTAL. CARRIERS shall inform clients of such limitations under such conditions.
2.3.1. The eventual impossibility of access to the VOICE PORTAL by clients mentioned in the Clause above, shall under no circumstance be considered a breach of contract on the part of the CARRIERS, which shall not be responsible for any occurance of such a fact, nor shall they be subject to penalties resulting hereof.
2.4. For all due legal purposes the Addenda indicated below are an integral part of the present Contract, which, when dully initialed by the Parties, are made an integral and inseparable part thereof, as though they had been transcribed hereto:
(i) | Addendum I – Voice Portal Content Service; and |
(ii) | Addendum II – Service Level Agreement (SLA). |
2.4.1. PROVIDER hereby acknowledges and agrees with the participation of the INTEGRATOR in fulfilling the purpose hereof, according to the Clauses and provisions set forth in Addenda I and II, being such provisions to be reflected in the Contract with the INTEGRATOR.
CLAUSE THREE – TERM
3.1. The term of this instrument is 36 (thirty six) months from the date of its execution, however, it may be extended for equal periods of time by the execution of a corresponding Addendum, to be executed by the legal representatives of the Parties, 30 (thirty) days prior to the expiration of its term.
CLAUSE FOUR – OBLIGATIONS AND RESPONSIBILITIES OF THE PARTIES
4.1. Obligations of PROVIDER:
4.1.1. Provide CARRIERS with the VOICE CONTENT under the conditions set forth in ADDENDUM I, respecting topics, content, format, and timeframe.
4.1.2. Inform the public the access code to the VOICE PORTAL, making known the cost of the call, type of call and possibility of free choice of the Carrier Selection Code (CSC) by the USER.
4.1.3. Employ only professionals fully qualified for the execution of the activities that are part of its responsibility under the terms herein.
4.1.3. Be responsible for the accuracy, validity, and verification of the VOICE CONTENT that it produces or that is produced by other parties, including, but not limited to copyright, rights to image or industrial property.
4.1.6. Notify CARRIERS, in advance, as to any preventive or planned changes in the manner of transmission and/or the time schedule of any updating of information.
4.1.7. Commit to give exclusivity to the CARRIERS as to the VOICE CONTENT object hereof, for the term of the Contract.
4.1.8. Employ all means necessary to insure that no sale or transmission of VOICE CONTENT specified in the VOICE PORTAL occurs by other telecom service providers, respecting the compromise of exclusivity with the CARRIERS.
4.1.9. Notify CARRIERS, in advance, as to any preventive or planned changes in the manner of transmissions and /or the time schedule of any updating of information.
4.1.10. It is precluded the right to assign any credit resulting hereof, as well as any clearing, assigning, or endorsing of each and every instrument of credit issued which may contain necessarily the Clause “not to the order of”, which exclude their aspect of circulation, the CARRIERS being exempt from each and every payment or obligation to other parties, for any instrument placed in collection, clearing, collateral or other modality of circulation or guarantee, including those related to the rights emerging hereof, and in no instance shall the CARRIERS accept such instruments, which shall be promptly returned to the individual or company that have presented them. Under no circumstance, the CARRIERS shall be responsible for bank expenses/fees or any others not expressly provided herein. Without prejudice to other penalties set forth herein, the breach of this Clause shall result in the application of a compensatory penalty equal to 100% (one hundred percent) of the value of instrument cleared or endorsed.
4.1.11 Be responsible for obtaining and paying the authorizations related to Ecad (Copyright Monitoring Agency) and/or any similar agencies, and present the CARRIERS at the end of the term the respective receipts for payments.
4.1.12. Inform USERS that the information transmitted shall have their purpose limited to private and non-commercial use by the USERS.
4.1.13. Inform client of PMS providers the possibility of restricted access to the VOICE PORTAL when in roaming (that is, using their device outside their service area) or outside the area where the personal mobile services (PMS) services are provided by the CARRIERS.
4.1.14. Be responsible for the accuracy, validity, and verification of the information and content supplied by other parties, being agreed and accepted between the parties hereto that any event of disagreement or dispute resulting from this information or content shall be of sole and exclusive responsibility of the PROVIDER.
4.1.15. Make its best efforts to advertise the VOICE PORTAL.
4.2 Obligations of CARRIERS:
4.2.1. Make available to PROVIDER the system capacity necessary to allow access to the VOICE PORTAL by USERS.
4.2.2. Inform PROVIDER, with a minimum advance time of 7 (seven) days, any scheduled interruption, technological updating or change that may affect the VOICE PORTAL.
4.2.3. Make the payments due as provided for in Clause Five herein.
4.2.4 Appoint the platform INTEGRATOR responsible for answering the calls and for complying with the conditions set forth in the addenda: ADDENDUM I – VOICE PORTAL CONTENT SERVICE and ADDENDUM II – SERVICE LEVEL AGREEMENTS (SLA).
CLAUSE FIVE – PRICE AND PAYMENT CONDITIONS
5.1. CARRIERS guarantee the payment of the total amounts of traffic per minute to PROVIDERS for the services herein contracted for, as per schedule below:
Minutes per Month | Total Amounts per Minute | ||
VC-1 / VC-2 / VC-3 | VC-1 |
VC-2 / VC-3 Off Net | |
Up to 1 million minutes per month | R$ 0.115 | R$ 0.22 | R$ 0.30 |
From 1 million to 2 million minutes per month | R$ 0.115 | R$ 0.25 | R$ 0.33 |
Above 2 million minutes per month | R$ 0.115 | R$ 0.25 | R$ 0.35 |
5.1.1 For the purposes of provision in item 5.1. above, only billable calls shall be taken into account considering the minimum time of 4 (four) seconds for any valid calls.
5.1.2 The amount of R$ 0.03 shall be deducted from the INTEGRATOR’s remuneration as provided for in item 5.1 for the traffic intended for the CARRIERS.
5.1.3 For the purposes of provision in item 5.1. above, exclusively for traffic VC-1 / VC-2 / VC-3 ON NET intended for CARRIERS’ Access Codes, only calls collected by CARRIERS shall taken into account.
5.2 Oi and BRT shall remit to PROVIDER a detailed report by type of call by USERS, containing the amounts collected and the total amount due to PROVIDER, up to the 20th business day subsequent the services provided, such information being strictly confidential.
5.3 The amount due shall be paid based on the report to be remitted by Oi and by BRT to PROVIDER.
5.3.1. In the event that the values presented in the consolidated report of each CARRIER are inconsistent, either higher or lower, from those amounts presented in the INTEGRATOR’s report from the Platform, the issuing of tax receipts (notas fiscais) shall be made based on the values contained on each CARRIER’s (Oi and BRT) report.
5.3.2 In the event the difference found in the reports issued by the Parties is higher than 10% (ten per cent), the Parties shall conciliate the results of their review and define the solution for the dispute and the actions for reduction or elimination of the causes for dispute.
5.3.4. The eventual differences that may exist shall be compensated in the subsequent month’s report by the causing Party.
5.4. Payments shall be made up to 15 (fifteen) days from the date the tax receipts/invoices are received by Oi and BRT`s DRC (Documents Receiving Center) together with the billing documents, in two copies, delivered up to the 18th day of each month. Payments shall be subject to the satisfaction of the main and accessory obligations resulting and/or stemming hereof.
5.5 If the due date of any Tax Receipt/Invoice does not fall on a business day, it shall automatically be extended to the following business day.
5.6 In the event the respective Tax Receipts/Invoices are not presented to Oi or BRT with the advance time set forth in item 5.4 above, the due date shall be extended by the number of days that correspond to the days of delay, without any onus to the CARRIERS.
5.7 If a delay in the payments due by the CARRIERS occurs, the amounts due shall be adjusted based on the variation of the CDI (Interbank Deposit Certificate), calculated pro rata die from the date due to the date the actual payment is made, as late fees and compensation for eventual financial charges incurred by the other party.
5.8 Each Party shall be responsible for paying taxes and contributions that apply to their respective operations, and under which obligation it is under pursuant to Brazilian tax laws.
5.9. If, during the term of the Contract, new taxes, fees, contributions, or assessments, or social or labor charges are created, extinguishing those now applicable or modifying their calculation basis or rates, or if the tax authorities give a new interpretation as to their applicability and, provided they have a direct effect on the prices contracted for hereby, such prices shall be revised, higher or lower, so that they reflect such changes, compensating any differences resulting from such modifications.
CLAUSE SIX – TERMINATION AND RESCISSION
6.1. This Contract may be terminated at any time by any of the Parties without the right to any compensation or indemnity, by written notice, from one party to the other, with a minimum advance time of 30 (thirty) days, from the date one wishes to terminate the agreement.
6.2. This Contract may be rescinded in its full rights, at any time and irrespective of Notification or Court Order, by any of the parties, in the following instances:
(a) The failure to comply or the breach of any of the Clauses, conditions and/or Addenda hereto, or yet, of any legal provision to which the Parties are subject to, except in the cases of acts of God or force majeure, notwithstanding the observance of provision in Clause 6.3 above;
(b) Bankruptcy, reorganization, dissolution or judicial or extrajudicial liquidation of any of the parties, requested or legally approved, or, any changes within the company that hinders its ability to faithfully execute the obligations assumed hereby;
(c) If the CARRIERS lose their License, granted by the competent agency to provide Personal Mobile Services, as provided for in the regulations in force;
(d) If the CARRIERS suspend their operations for period higher than 30 (thirty) days;
(e) Delay or interruption in the execution of the activities provided for herein by the CARRIERS, due to exclusive fault of PROVIDER, without any justification accepted by the CARRIERS;
(f) Technical inability, negligence, improper handling or lack of prudence on the part of the PROVIDER, as well as bad faith by any of the parties hereto;
(g) Actions on the part of the PROVIDER, provided they are related to the object hereof that result in a business discredit of the CARRIERS;
(h) Other eventualities provided for herein.
6.3. The breach of any of the clauses or conditions set forth herein, may result in its immediate termination, by a simple written notice from the party not-at-fault to the breaching party, which shall have the time of 10 (ten) days, after notification is received, to cure the default. After the time limit has elapsed and the default has not been resolved, the contract shall be considered terminated in its full rights, with the breaching party being liable for losses and damages resulting from such a breach, as may be determined by legal process, damages being limited to the value of this Contract, calculated as provided for in clause 6.3.1 above. After the problem has been resolved, the parties may not have any interest in resuming the present contract, in light of the gravity of the breach committed, allowing them to terminate this instrument, without onus.
6.4. Nonetheless, CARRIERS shall have the right to terminate immediately the present contract if the PROVIDER fails to supply VOICE CONTENT as described in ADDENDUM I, during a period of 3 (three) consecutive days, without prejudice to the application of penalties and other charges that may be due by the PROVIDER.
6.5. In the event of termination, the terms hereby agreed to shall no longer produce any legal effects, except as to civil liability, and intellectual property, as well as the obligations of secrecy and confidentiality assumed among the parties.
CLAUSE SEVEN – SECRECY AND CONFIDENTIALITY
7.1. The Parties shall maintain the most absolute secrecy as to any of their data, information, material, systems, techniques, strategies, operating methods, details, innovations, business secrets, trademarks, creations, technical and commercial specifications, among others, hereinafter named “CONFIDENTIAL INFORMATION”, to which any of the Parties or any of its officers, professionals and/or agents have access to, knowledge of or to which it has been trusted for reason of the signing and execution this Contract, and the parties shall additionally not disclose, reproduce, utilize or give knowledge, under any circumstances, to third parties, as well as not allow none of its officers, professionals and/or agents to make undue use of such “CONFIDENTIAL INFORMATION”.
7.2. The obligations of secrecy and confidentiality provided for in the Clause above obligates the parties during the term of the contract and shall continue to be in force in the event of its termination, irrespective of the reason for it to occur and of its breach by the Parties, without express consent and in writing from the other Party, shall allow the immediate termination of this Contract with the applicable penalties and without prejudice as to the liability for proven losses and damages caused the harmed Party and/or others, and criminal responsibility to which its managers shall answer to for reason of such a breach of secrecy.
7.3. The parties shall obtain prior and express consent from the other party for the eventual disclosure of any reports, illustrations, interviews, or details related to the object hereof, as well as promptly notify in writing the Party revealed, before any disclosure due to the law or a court order. Or still, in the event that it has occurred an authorized disclosure of such confidential information.
CLAUSE EIGHT – BRAND NAMES AND DISCLOSURES
8.1. PROVIDER is hereby explicitly precluded from using the terms herein, whether it be by disclosure or made public, without prior and express consent from the CARRIERS, with the breach of this clause allowing termination, in its full rights, in addition to PROVIDER being liable for any direct losses and damages eventually occurred and duly proven.
8.2. In the event that PROVIDER comes to produce any advertising material related to the VOICE PORTAL, it shall always submit to prior and written approval by the CARRIERS, even in instances where they do not contain more than a simple mention/indication of the service.
CLAUSE NINE – RIGHTS TO CONTENTS
9.1. The Parties declare, for all legal purposes, to be legitimate holders of the names and/or brands – including commercial names – used for purposes of complying with the present instrument, any use without prior and express consent from the other Party not being allowed.
9.2. In the event of any demand, in court or out of court, from other parties having as object the undue use of names and/or brands – including commercial names - used for purposes of the present instrument, the Party that states to be its legitimate holder, obligates itself to maintain the other Party free and clear from each and every responsibility or obligation, including as to the payment of damages or compensation for any reason, assuming all costs and expenses thereof, directly or indirectly.
9.3. Each Party shall be liable for any breach that it permits as to the right to materials, equipment, software, or execution process, protected by brands and patents, being directly liable for any damages, fees or commissions that are due, as well as for any claims resulting from its undue use.
9.4. Any studies, projects, reports and other documents produced by the CARRIERS and in any way related to the object hereto, shall belong to the CARRIERS, which may use them, without any restriction or additional cost, including in similar ventures of the CARRIERS themselves, their subsidiaries and affiliated companies.
9.5. PROVIDER is exclusively responsible for the accuracy, validity and verification of the VOICE CONTENT it or other parties may produce, including, but not limited to copyright, rights images and industrial property, being agreed and arranged between the parties that any eventual disputes or claims resulting from the aforementioned VOICE CONTENT shall be of sole and exclusive responsibility of the PROVIDER, being the PROVIDER responsible to reimburse CARRIERS for any amount that the latter may be compelled to pay, in or out of court, as a result of the aforementioned claims/complaints, the amount of damages being limited to the total amount of the present Contract.
CLAUSE TEN - GENERAL PROVISIONS
10.1. The eventual inclusion of other Clauses, exclusions or amendments to those already existing, shall be set forth in an ADDENDUM duly signed by the parties, which shall be an integral and inseparable part hereto.
10.2. None of the conditions herein shall be interpreted as a means to constitute a company, joint venture, partnership or business representation between the Parties or, additionally, labor relation between the employees, agents, temporary workers and/or subcontractors of the PROVIDER and the CARRIERS, being each one solely, integrally and exclusively responsible for their acts and obligations.
10.3. The Parties shall make use of skilled professionals within the scope of their respective activities, having exclusive responsibility for complying with the laws, in special but not limited to social security, social and labor laws, as to their employees, agents, temporary workers, and third parties.
10.4. The Party that disregards the provisions above shall be solely responsible for each and every labor dispute and/or social security claim proposed against the Party not-at-fault, as well as for their results, reimbursing the Party not-at-fault for any amount that it may be compelled to pay, in or out of court. Due to its object and nature, the present Contract does not generate to the CARRIERS, any relation to professionals and agents of the PROVIDER, any relation of a social, labor and/or social security nature, the PROVIDER being exclusively responsible for each and every labor dispute and/or compensation that it may be eventually proposed, as well as for the results thereof, reimbursing the CARRIERS for any amount that they may be compelled to pay in or out of court. It is hereby established that one Party shall have no obligation for debt and/or obligations assumed by another Party, the latter or others not being allowed to use the present contract or any other action to claim compensation or reimbursement.
10.5. Any omission or tolerance by the parties in demanding the faithful fulfillment of the terms and conditions herein and of its addenda or in the exercise of prerogatives resulting hereof, shall not constitute a novation or waiver of rights, and shall not affect the right to demand them at any time.
10.6. The Parties declare that they have read and understood the present Contract and its Addenda and agree to be bound by their terms and conditions. The Parties additionally declare that the present instrument constitutes the totality of the understanding among them as to its purpose, incorporating all of the previous and current communications between the Parties. The present Contract shall not be amended, except by an addendum in writing signed by the Parties.
10.7. The parties agree to amend the present contract in order to comply with any new regulation issued by ANATEL, the telecommunications agency of Brazil, or any other legislation as it relates to the service hereby contracted for, whether in public and private law, to which compliance CARRIERS are subject to, and in the event that new legislation be issued that prohibits CARRIERS from providing the services hereby contracted for by the USERS.
10.8. During the term of this contract, the parties are liable for any direct or emerging damages that they may cause to other parties due to any action or omission resulting from the execution of the purpose of the present instrument, as well as for its disclosure, including but not limited to those resulting from any violation of rules that regulate telecommunications services, as well as the rights of USERS of the VOICE PORTAL and any other parties.
10.9. In the event of a claim, demand or other procedure, in or out of court, of any nature, related to the present contract, filed by another party or by professionals and/or agents of the PROVIDER, against the CARRIERS, their shareholders, employees, temporary workers, or assigns, the PROVIDER hereby shall pay all expenses related to the claim, including costs and attorneys fees, in addition to an award granted, so understood those relative to losses and damages, indemnity, attorneys fees, without prejudice to the obligation of the PROVIDER to compensate CARRIERS, their shareholders, employees, temporary workers or assigns for all expenses, of any nature, that they may eventually incur due to such a claim.
10.10. Any notification or requests, mandatory or allowed under the terms hereof shall be directed to the addressees named below and shall be answered in writing within 10 days from the date they are received.
If directed to Oi:
Name: | Luiz Henrique Coni de Castro Lima |
Address: | Rua Humberto de Campos, 425, 6º andar. |
Telephone: | (21) 3131 - 1116 |
Fax: | (21) 3131 - 1116 |
E-mail: | Luis.coni@oi.net.br |
If directed to BRT:
Name: | Luiz Henrique Coni de Castro Lima |
Address: | Rua Humberto de Campos, 425, 6º andar. |
Telephone: | (21) 3131 - 1116 |
Fax: | (21) 3131 - 1116 |
E-mail: | luis.coni@oi.net.br |
If directed to PROVIDER:
Name: | Arpad Csaba Buranyi |
Address: | Rua Professor Edgard de Moraes, 534 |
Telephone: | xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx |
Fax: | xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx |
E-mail: | xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx |
10.12. In the event that any Clause, term or provision herein is declared null or not applicable, such nullity or unenforceability shall not affect any other clauses, terms or provisions herein, which shall remain in full force and effect.
10.13. In all issues related to the contract, the parties shall act as independent contractors. None of the parties may declare that it has any authority to assume or create any obligation, expressly or implicitly, on behalf of the other party, nor to represent the other party as an agent, employee, representative or in any other function. It is hereby established that the parties have no responsibility for debt or obligations contracted for by the other party, the latter or third parties not being allowed to use this contract or any other reason to claim indemnity or compensation.
10.14. It is expressly and irrevocably established that any tolerance as to any delays or non-fulfillment of obligations by the other party, as well as the non-exercise by the parties of any rights guaranteed hereby or by law in general shall not imply novation of a contract or waiver of any of its rights, which the parties may exercise at any time.
10.15. The clauses hereunder that by their nature have a permanent character, especially, but not limited to those relative to civil liability, labor, tax and social security, as well as rights to intellectual property and confidentiality, among others, shall remain in effect irrespective of the termination of the present contract.
CLAUSE ELEVEN -JURISDICTION
11.1. The parties elect the central forum of the capital of the city of Rio de Janeiro, as competent to resolve all disputes resulting hereof.
In witness of thereof the parties signed the present contract, in two copies of the same content, in the presence of two witnesses that also signed below.
Rio de Janeiro, the 1st of October and 2010.
ESOTV BRASIL PROMOÇÃO PUBLICIDADE LICENCIAMENTO E COMÉRCIO LTDA.
Signed
Arpad Csaba Buranyl
TNL PCS S.A.
Signed Signed
Luis Henrique Coni de Castro Lima
Director of New Business
14 BRASIL TELECOM CELULAR SA
Signed Signed
Luis Henrique Coni de Castro Lima
Director of New Business
Witnesses:
Name: Carlos Eduardo de Barros Couto Name
Taxpayer’s number Taxpayer’s number
Management of Interactivity
ADDENDUM I – VOICE PORTAL CONTENT SERVICE
This ADDENDUM is an integral part of the Contract to PROVIDE CONTENT SERVICES signed between TNL PCS S.A.; 14 BRASIL TELECOM CELULAR S.A. and REDE UNIÃO RÁDIO E TELEVISÃO; hereinafter named “Contract”.
I – Purpose:
The provision of services, with exclusivity, to supply specific content by the PROVIDER to the CARRIERS, so that these can distribute, transmit and commercialize the respective content to users of voice content services, by way of its voice portal.
II - Definitions:
VOICE PORTAL: Channel for communication, relationships, and interactivity, accessible by means of a call to a determined access code made available by the CARRIERS.
VOICE PORTAL: audio recordings related to voice portal produced by the PROVIDER and licensed by the latter to the CARRIERS to be available in the VOICE PORTAL.
USERS: clients of providers of PMS and/or STFC that opt for having access the VOICE CONTENT, made available in the VOICE PORTAL, by making a call to the access code made available by the CARRIERS.
CARRIERS` SYSTEMS: a set of BRT and Oi systems that allow the transmission and integration of the VOICE PORTAL service.
INTEGRATOR: company that will manage the CARRIERS` SYSTEMS with the purpose of (i) allowing USERS to browse the VOICE CONTENT and the VOICE PORTAL, as well as (ii) giving support to USERS in the utilization of the VOICE PORTAL.
III - Specific obligations of the PARTIES:
Obligations of PROVIDER:
3.1 Provide the CARRIERS with VOICE CONTENT to be made available in the VOICE PORTAL.
Obligations of the INTEGRATOR:
3.2 It is not a purpose of the present Addendum collect calls (ACB) intended for the access code of the voice portal service, the INTEGRATOR having the obligation to block these calls, which are not billable.
3.3 The INTEGRATOR shall furnish a monthly report or for a different time period, as may be requested by the CARRIERS for the purpose of verification, follow-up and settling of accountants related to traffic and performance of the VOICE PORTAL by fulfilling the information listed below, up to the fifth day of the subsequent month.
3.3.1 Sample table:
Type of Call | Branch | Area Code |
Traffic (excluding no-charge rules) | |||
Simple Tabulation (00:00h to |
Multi Tabulation (06:01h to 11:59h) | |||||
Type of Call | Calls | Minutes | Chamadas | Minutes | ||
Other Mobile Carriers |
AC RO MT MS TO GO DF PR
SC RS |
68 69 65, 66 67 63 62, 64 61 41,42,43,44,45 46 47,48,49 51,53,54,55 |
1 | 1 | 1 | 1 |
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
Total not tabulated | 10 | 10 | 10 | 10 |
Conventional Carriers (Local) |
AC RO MT MS TO GO DF PR
SC RS |
68 69 65, 66 67 63 62, 64 61 41,42,43,44,45 46 47,48,49 51,53,54,55 |
1 | 1 | 1 | 1 |
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
Total | 10 | 10 | 10 | 10 |
Mobile Carriers (LDN) |
AC RO MT MS TO GO
|
68 69 65, 66 67 63 62, 64
|
1 | 1 | 1 | 1 |
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
Total | 10 | 10 | 10 | 10 |
Type of Call | Branch | Area Code |
Traffic (excluding no-charge rules) | |||
Simple Tabulation (00:00h to |
Multi Tabulation (06:01h to 11:59h) | |||||
Type of Call | Calls | Minutes | Chamadas | Minutes | ||
|
DF PR
SC RS |
61 41,42,43,44,45 46 47,48,49 51,53,54,55 |
1 | 1 | 1 | 1 |
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
Total not tabulated | 10 | 10 | 10 | 10 |
Conventional Carriers (LDN) |
AC RO MT MS TO GO DF PR
SC RS |
68 69 65, 66 67 63 62, 64 61 41,42,43,44,45 46 47,48,49 51,53,54,55 |
1 | 1 | 1 | 1 |
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
Total | 10 | 10 | 10 | 10 |
Mobile Intranet Prepaid and Postpaid |
AC RO MT MS TO GO DF PR
SC RS |
68 69 65, 66 67 63 62, 64 61 41,42,43,44,45 46 47,48,49 51,53,54,55 |
1 | 1 | 1 | 1 |
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
1 | 1 | 1 | 1 | |||
Total | 10 | 10 | 10 | 10 |
Total by Branch |
AC RO MT MS TO GO DF
|
68 69 65, 66 67 63 62, 64 61
|
5 | 5 | 5 | 5 |
5 | 5 | 5 | 5 | |||
5 | 5 | 5 | 5 | |||
5 | 5 | 5 | 5 | |||
5 | 5 | 5 | 5 | |||
5 | 5 | 5 | 5 | |||
5 | 5 | 5 | 5 |
Type of Call | Branch | Area Code |
Traffic (excluding no-charge rules) | |||
Simple Tabulation (00:00h to |
Multi Tabulation (06:01h to 11:59h) | |||||
Type of Call | Calls | Minutes | Chamadas | Minutes | ||
Other Mobile Carriers |
PR
SC RS |
41,42,43,44,45 46 47,48,49 51,53,54,55 |
5 | 5 | 5 | 5 |
5 | 5 | 5 | 5 | |||
5 | 5 | 5 | 5 | |||
5 | 5 | 5 | 5 | |||
Total not tabulated | 50 | 50 | 50 | 50 |
3.3.2 Details to fill out the spreadsheet:
3.3.2.1 Type of call: This column shall contemplate the information from which carrier the call was originated, with the following grouping:
a) from other carriers (local)
b) from conventional carriers (local)
c) from mobile carriers (LDN)
d) from conventional carriers (LDN)
e) from BRT or Oi (intra-network) prepaid and postpaid (local)
3.3.2.2 Branch: this column shall detail the previous grouping by the state codes where the call originated from, based on the relation ANUF x UF, according to table Codes ANUF x UF attached.
3.3.2.3 Area Code: formatting shall not be necessary – informational.
3.3.2.4 Total Calls: shall list the number of calls made within the previous levels as established.
3.3.2.5 Total regular minutes: this column shall present the number of minutes for calls identified for the combination of a determined branch and CN (DDD) within the normal time grid considered Regular Rate.
3.3.2.6 Total minutes of reduced rates: this column shall present the number of minutes for calls identified for the combination of a determined branch and CN (DDD) within the time grid considered Reduced Rate, as detailed below:
a) Business days and Saturdays from 0:00 h to 7:00h and from 21:00 to 24:00h;
b) Sundays and national holidays: from 0:00 to 24:00h.
3.3.3 Provide reports for performance / period / type of content, as defined in the contract and SLA “Service Levels Agreement” (Addendum II).
3.3.4 Provide other reports and/or analyses every time they are requested by the CARRIERS for the adequate management of the service and the attractiveness in relation to the distribution of VOICE CONTENT in the VOICE PORTAL`s internal content channels.
3.3.5 The forms of integration and the needs for development and/or adjustments for such shall be tested and approved by the of CARRIERS and validated by the INTEGRATOR according to the conditions specified in the SLA or Service Quality Agreement, aiming at preparing an evidentiary document that demonstrates acquiescence by both parties.
Obligations of CARRIERS:
3.4 Provide the INTEGRATOR all technical information necessary for the integration of the service to the CARRIERS` systems, including supplying information on billing codes.
3.5 Inform the PROVIDER and the INTEGRATOR the access codes to the VOICE PORTAL. Access codes shall be used by the PROVIDER during the term of the contract.
IV – Technical Approach
4.1 Services provided shall be in compliance with the `Services Levels Agreement` signed between the parties and which is an integral part of this Contract.
V – General Provisions
Given the specificities of this Addendum, the complementary definitions, indications, or aspects treated in a specific form in this instrument shall be adopted as a complement to the general rules stipulated in the Contract.
VI. Term
The term for this instrument is the same as for the Contract.
ADDENDUM II – SERVICE LEVELS AGREEMENT (SLA)
This ADDENDUM is an integrating part of the contract to PROVIDE SERVICES OF CONTENT signed between TNL PCS S.A.; 14 BRASIL TELECOM CELULAR S.A. and REDE UNIÃO DE RÁDIO E TELEVISÃO; herein named “Contract”.
WHEREAS the Parties acknowledge that it is of mutual interest to establishe standards of performance and quality of the services and networks, specifying minimum levels to be followed by the INTEGRATOR.
WHEREAS that if the levels of service are not attained they will generate effective losses to the CARRIERS, existing thus the need to set responsibilities and penalties to the INTEGRATOR.
The parties resolve, in common accord to execute this Services Level Agreement (SLA) that shall be governed as provided for in the following clauses, terms and conditions:
1. | DEFINITIONS: |
VOICE PORTAL: A channel for communication, relationships, and interactivity accessible by calling a certain access code made available by the CARRIERS.
VOICE CONTENT: Audio recordings related to the voice portal produced by the PROVIDER and licensed by the latter to the CARRIERS to be available in the VOICE PORTAL.
USERS: Clients of PMS and/or STFC providers who opt to access the VOICE CONTENT, available in the VOICE PORTAL, by calling the access code made available by the CARRIERS.
CARRIERS` SYSTEMS: Set of BRT and Oi systems that allow the transmission and in greater integration of the VOICE PORTAL service.
INTEGRATOR: the company that will perform management of the CARRIERS SYSTEMS with the objective of (I) allowing USERS to browse the VOICE CONTENT of the VOICE PORTAL, in addition to (ii) provide support. USERS in the utilization of the VOICE PORTAL.
2. | OBJECT |
2.1 | The object hereof is to establish standards of performance and quality that the INTEGRATOR shall maintain available to CARRIERS, in addition to establishing the obligations of the Parties as to the guarantee of availability of the VOICE CONTENT in the VOICE PORTAL. |
2.1.1. | The characteristics of the service provide content is defined in the Contract to Provide Content, executed between PROVIDER and CARRIERS. |
3. | INTEGRATOR's RESPONSIBILITIES: |
3.1. | In addition to the obligations set forth in the Contract, the INTEGRATOR shall: |
3.1.1 | Manage the equipment used to make viable the scope of the Contract, with the objective of guaranteeing the functionality and its good performance; |
3.1.2. | Provide the CARRIERS means so that they can collect and supervise alarms of performance failures in the platform; |
3.1.3. | Provide assistance and support to inquiries and complaints related to the VOICE CONTENT available when made by conventional or mobile clients that access the VOICE PORTAL, when required by the CARRIERS. |
3.1.3.1. | In the event that the consultations and complaints are made directly to the Client Relationship Centers of the CARRIERS, the INTEGRATOR hereby commits itself to answer questions, in writing, within a time period of 24 (twenty-four) hours. |
3.1.4 | Maintain technical support 24X7 (24 hours a day, seven days a week) in cases of interruption or failures detected in the services, with the goal of guaranteeing a high level of reliability and offering proactive action in the resolution of failures. |
3.1.4.1. | CARRIERS shall contact the INTEGRATOR as provided for in Clause Six, above, ”Notification of Events”. |
3.1.4.2. | INTEGRATOR shall notify the CARRIERS, any failure, disruption, malfunctioning or defect detected, when they affect directly or indirectly the services provided for in the purpose of this Contract or their access by USERS. |
3.1.4.3. | The recovery of failures that may occur shall take place after an alarm in the INTEGRATOR’s or CARRIERS’ management systems go off or following a call or remittal of electronic mail by the CARRIERS, whichever occurs first, with the INTEGRATOR incurring all costs of repair and/or routine maintenance, without prejudice to deductions and penalties applicable in cases of disruption. |
3.1.5 | Provide regular reports, as provided for in item 5.10., above. |
4. | RESPONSIBILITIES OF CARRIERS: |
4.1. | In addition to the obligations provided for in the Contract, CARRIERS shall: |
4.1.1. | Provide assistance to the INTEGRATOR, in the event of problems found in its own network, such as routers, firewalls, circuits, commutation and control central- CCCs, and cell sites. |
4.1.2. | Supervise/monitor the INTEGRATOR`s services quality and possible abnormalities detected. |
4.1.3. | Maintain a contact with the INTEGRATOR for the opening of calls and the solution of problems, as well as the follow-up on the steps for solution. |
4.1.4 | Insure access to the building and other facilities for employees of the INTEGRATOR duly screened and identified, where the equipment is installed, perform maintenance and repair tasks on the equipment. |
5. | LEVELS OF SERVICE |
5.1. | Availability rate refers to the availability of the CARRIERS` telecommunications network, in addition to the availability of the service to be provided by the INTEGRATOR. |
5.1.1. | It is understood as “availability rate” the relation between the time at which the system presents specific technical and operational characteristics and the total time to be taken into account. The period of observation to be considered is the time between the first and the last date of the business month (30) days. |
5.2. | The period of unavailability shall be determined monthly and shall be computed considering as the time the initial report of the problem was received and the end the time at which the solution was accepted by the CARRIERS, according to the communication process described in Clause Six – Notification of Events. |
5.3. | It shall be deducted from such a period of unavailability, the lapse of time taken from the notification of the resolution of the problem and the acceptance of the solution by the CARRIERS. |
5.4. | Cases resulting from acts of God or force majeure shall not be taken into account when tabulating the time services are available, as provided for in the sole paragraph of article 393 of the Civil Code and in the cases of scheduled and emergency interruptions for maintenance, as provided for in the SLA. |
5.5. | The minimum availability for each one of these elements that make up the CARRIERS SYSTEMS shall be 99% (ninety-nine percent) per month, except when different and specific values are set for defined elements. |
5.6. | There shall be an adjustment phase from the date the SLA goes into effect up to 90 days, in which the CARRIERS shall take into consideration the rates of availability as indicated below: |
5.6.1. | Initial phase (D0): the initial phase will be from day 1 (one) to be 30 (thirty) of the execution of the SLA, where the service levels shall obtain a minimum of 96% (ninety-six percent) of availability. |
5.6.2. | From the end of the Initial Phase (D0) up to 60 days from the execution of the SLA, considered the second phase, service levels are for security and shall obtain a level of 98% availability. |
5.6.3. | At the end of the second phase up to 90 days from the execution of the SLA, service levels are definitive and shall have a minimum availability of 99%, as aforementioned in 5.5 above. |
5.7. | Parties, hereby agree that, as necessary, they shall perform systematic tests on the equipment, so as to guarantee the standards of performance and quality and that those abide by, at a minimum, the performance specifications of the equipment manufacturer. Joint technical tests shall be scheduled with a minimum advance time of one week and performed at a time that does not affect the execution of the services to be determined in common agreement between the Parties. |
5.8. | In addition to the systemic tests on equipment, the Parties agree that the INTEGRATOR shall respond to all requests for: |
5.8.1. | Corrective Maintenance – which is the technical maintenance/intervention performed in order to correct the failures detected and that may be performed at any time, as the demand occurs, informing the CARRIERS immediately. |
5.8.2. | Evolutional/Preventive Maintenance – which is the maintenance performed to update the system. |
5.9. | The Parties agreed that the Service Levels to be provided to CARRIERS are those listed below, for each type of technical maintenance/intervention: |
5.9.1 | Corrective Maintenance: |
Service Level Indicator | Calculation Mechanism | Gravity | Goal to Meet | Measuring Frequency |
Problems resolved within time limit
|
Problems resolved within time limit in relation to the total number of problems resolved by priority | 1 | 95% | Weekly |
2 | 90% | Weekly | ||
3 | 90% | Monthly | ||
4 | 90% | Monthly | ||
Average deviation from resolution of problems | Percentage of average deviation in relation to time of resolution set for the total number of problems resolved in delay by priority | 1 | 95% | Weekly |
2 | 90% | Weekly | ||
3 | 90% | Monthly | ||
4 | 90% | Monthly | ||
Inquiry resolved within time limit | Percentage of inquiries resolved in time in relation to the total number of inquiries resolved | 95% | Monthly | |
Average deviation from resolution of the inquiry | Percentage of average deviation in relation to time of resolution set for the total number of inquiries in delay | 95% | Monthly |
Gravity | Description | Timeframe | |
Diagnostic | Solution (temporary or definitive) | ||
1 |
Service unavailable and no alternative exists for Oi and BRT to perform the work. Services non-performed may result in loss of benefits or revenues by the company |
1 hour | 3 hours |
2 | Service is seriously affected or unavailable for a group of clients, and no alternative exists to perform the work. | 2 hours | 5 hours |
3 | Service to a specific client is affected, causing difficulty to perform normal work, alternative exist to perform the work | 12 hours | 12 hours |
4 |
Service to a specific client is affected, alternatives exist to perform the work. Service non-performed shall not result in direct impact to the business. |
24 hours | 12 hours |
5.9.2 Evolutional Maintenance
Service Rating Indicator | Calculation mechanisms | Goal to meet | Date of measurement |
Requests estimated within time limit | Percentage of requests estimated within time frame in relation to the total estimated requests | 95% | Monthly |
Requests estimated within time limit | Percentage of finalized requests within time frame in relation to the total projected requests | 95% | Monthly |
Deviation from finalizing dates for development | Percentage of average deviation in relation to the projected finalizing date for the total requests not finalized within time frame | 95% | Monthly |
Requests with capacity documentation | Percentage of requests with capacity documentation perform in relation to the total requests with projected capacity material | 95% | Monthly |
Requests with functional and technical documentation | Percentage of requests with functional and technical documentation performed in relation to the total projected requests | 95% | Monthly |
5.9.3. Levels of Services to CARRIERS
PRIORITY Schedule | |
Priority | Type of Call |
High | Loss of Revenue / Legal Loss /Loss to Client |
Medium | Operational Loss |
Low | Requests for Improvements |
SERVICE Schedule | |
Priority | Service |
High (1) | Follow-up – Oi and BRT ServiceDesk shall contact individual responsible for resolving the problem after one hour (from the date the call was opened) to obtain the status on the resolution of the problem. |
Medium (2) | Follow-up – Oi and BRT ServiceDesk contact back individual responsible for resolving the problem after one business day (from the date the call was opened) to obtain the status on the resolution of the problem. |
Low (3) | Oi and BRT ServiceDesk shall contact individual responsible for resolving after 24 hours (from the date the call was opened) to obtain the status on the resolution of the problem. |
5.10. The INTEGRATOR shall monthly generate the following types of reports, according to the provisions in item 3.1.5. above:
5.10.1. Operational Performance Reports:
(i) Service Time per event;
(ii) Travel Time per event;
(iii) Solution Time per event;
(iv) Summary of Performance per type of event.
5.10.2. The reports mentioned in 5.10. shall we contain, at a minimum, the following descriptions: type of event (with date, time and priority), summary of request, description and solution (with date, time, priority), number failures identified, event number, person in charge and other information that may be relevant.
6. PENALTIES RELATED TO THE SERVICE LEVELS:
6.1. Penalties shall apply in cases of non-performance of service as provided for in the SLA, in their full rights. CARRIERS shall apply, on a monthly basis, the formula below, using the information corresponding to the previous month in order to determine the level of compliance:
ND = ( 1 – ( NC / Nco)) * 100
Where:
ND = Level of non- compliance
NC = Level of compliance ( as per SLA calculations)
Nco = Level compromised (as established in the SLA
6.2. After the Non-Compliance (ND) is calculated, the CARRIERS shall use the schedule below to apply the value to be deducted from the monthly invoice for services from PROVIDER, according to the percentages indicated:
Percentage of non-compliance of indicator | Penalties (% on the monthly invoice) |
1% –5% | 5% |
5. 01% – 15% | 10% |
15.01% – 30% | 15% |
30.01% – 50% | 25% |
+ 50% | 30% |
6.3. When compliance level surpasses 50%, the CARRIERS may consider the contract and the current SLA, terminated, in full rights, without compensation.
5.3.1. Deductions shall not be made in the following instances:
(i) interruption scheduled by the CARRIERS.
(ii) interruption patently caused by failure of CARRIERS’ network.
(iii) interruption caused by acts of God or force majeure.
6.4. All penalties provided for in this Agreement shall be applied by the CARRIERS irrespective of prior notice to INTEGRATOR. The amount to be deducted for penalties detected shall be deducted directly from the invoices presented for payment for other credit that the CARRIERS have in its favor.
6.5. CARRIERS may terminate this SLA, by simple notice 30 days in advance, at its sole discretion and without being subject to any penalty, in the event that the INTEGRATOR fails to fulfill any of the indicators set forth in this instrument for two consecutive months or three alternate months during the term of this Agreement.
6.6. In the event that the CARRIERS are subject to sanctions, whether administratively or judicially, due to any issue related to the fulfillment of the terms this Agreement, including, but not limited to, for not reaching the goals stipulated or for low performance as to the quality of the services provided. The INTEGRATOR shall incur half other costs related to an eventual court award and the expenses related to the defense, as duly proven by the CARRIERS, provided liability or fault exists on the part of the INTEGRATOR.
7. NOTIFICATION OF OCCURRENCES:
7.1. Oi and BRT may notify the INTEGRATOR by the following means:
Name: | |
Address: | |
Telephone: | |
Fax: | |
E-mail: |
7.2. Notifications sent by Oi or BRT, by any means, shall receive confirmation of delivery, which in the event that there made by telephone their immediate and in the case that there may by electronic means (e-mail) by the immediate return confirmation of receipt, which in both cases are irrespective of the level of the problem (high, medium, low).
7.2.1. | Any notification by email must contain in the field subject the classification of the problem (high, medium, low) and a summary description of the occurrence. |
7.3. Any time INTEGRATOR receives a report of an event, its support shall issue a reference number to be used in all the communications related to the issue in question, which shall be informed by telephone and confirmed by electronic mail.
7.4. The CARRIERS shall have as a focal point the representative(s) indicated below, who shall notify PROVIDER of any events.
Name: | |
Address: | |
Telephone: | |
Fax: | |
E-mail: |
7.4.1. | The representatives above indicated may appoint other collaborators of the CARRIERS as to anyto notify events and to follow up on their status. |
7.5. The time of response for each notification is in the Service Schedule set forth in item 5.9.3 above and its sub-items.
8. GENERAL PROVISIONS:
8.1. This Agreement describes the level of service to be provided by INTEGRATOR for the CARRIERS. In the event that any conflict or inconsistency exists between the Agreement and the Contract, their Addenda and Additions, the provisions in the Contract shall prevail.
8.2. This Agreement may be amended at any time by the Parties, and such eventual amendments shall be made by additions, which shall be made an integral part of the present Agreement.
8.3. Any tolerance, by any of the Parties, as to the fulfillment of any of the causes of the present Agreement, shall mean mere discretion, not implying any novation.
9. TERM:
The term of this instrument is the same as the CONTRACT.
Exhibit 31
Exhibit 32
BRAZIL INTERACTIVE MEDIA, INC. AND ITS SUBSIDIARY CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
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BRAZIL INTERACTIVE MEDIA, INC. AND ITS SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
Index to Consolidated Financial Statements
Pages | ||
Report of Independent Registered Public Accounting Firm | 1 | |
Consolidated Balance Sheets | 2 | |
Consolidated Income Statements | 3 | |
Consolidated Statement of Stockholders’ Equity | 4 | |
Consolidated Statements of Cash Flows | 5 | |
Notes to Consolidated Financial Statements | 6 – 17 | |
FL Office 7951 SW 6th St., Suite. 216 Plantation, FL 33324 Tel: 954-424-2345 Fax: 954-424-2230
NC Office 19720 Jetton Road, 3rd Floor Cornelius, NC 28031 Tel: 704-892-8733 Fax: 704-892-6487 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Brazil Interactive Media, Inc. and its subsidiary
We have audited the accompanying consolidated balance sheets of Brazil Interactive Media, Inc. and its subsidiary (“the Company”) as of December 31, 2012 and 2011 and the related consolidated statements of income, stockholders’ equity, and consolidated cash flows for the years ended December 31, 2012 and 2011. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated 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, an audit 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Brazil Interactive Media, Inc. and its subsidiary as of December 31, 2012 and 2011, and the results of its operations, changes in stockholders’ equity and cash flows for the years ended December 31, 2012 and 2011 in conformity with accounting principles generally accepted in the United States of America.
/ Bongiovanni & Associates, CPA’s/
Bongiovanni & Associates, CPA’s
Certified Public Accountants
Cornelius, North Carolina
The United States of America
February 27, 2013, except for Note 16, for which the date is May 30, 2013
www.ba-cpa.net
BRAZIL INTERACTIVE MEDIA, INC. AND ITS SUBSIDIARY | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
AS OF DECEMBER 31, 2012 AND 2011 | ||||||||
(restated) | ||||||||
ASSETS | 2012 | 2011 | ||||||
Current assets: | ||||||||
Cash | $ | 146,331 | $ | 193,255 | ||||
Accounts receivable | 484,982 | 161,005 | ||||||
Prepayments and advances | 68,910 | 162,302 | ||||||
Total current assets | 700,222 | 516,562 | ||||||
Fixed assets | 447,619 | — | ||||||
TOTAL ASSETS | $ | 1,147,841 | $ | 516,562 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 171,497 | $ | 369,755 | ||||
Due to third party | 220,000 | — | ||||||
Taxes payable | 194,883 | 74,425 | ||||||
Note payable | 170,000 | — | ||||||
Bank loans payable | 22,621 | 21,467 | ||||||
Total current liabilities | 779,002 | 465,649 | ||||||
Long-term liabilities: | ||||||||
Tax installments payable | 436,355 | — | ||||||
Total long-term liabilities | 436,355 | — | ||||||
TOTAL LIABILITIES | 1,215,357 | 465,649 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
Stockholders' equity | ||||||||
Common stock ($0.0001 par value, 80,000,000 shares authorized; 1,000,000 and -0- shares issued and outstanding as of December 31, 2012 and 2011, respectively) | 100 | — | ||||||
Preferred stock ($0.0001 par value, 20,000,000 shares authorized, -0- and -0- shares issued and outstanding as of December 31. 2012 and 2011, respectively) | — | — | ||||||
Due from shareholders | (5,367 | ) | (5,367 | ) | ||||
Additional paid-in-capital | 225,147 | 5,367 | ||||||
Accumulated other comprehensive income (loss) | (14,015 | ) | (4,966 | ) | ||||
Retained earnings (deficit) | (273,380 | ) | 55,880 | |||||
TOTAL STOCKHOLDERS’ EQUITY | (67,515 | ) | 50,914 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,147,841 | $ | 516,562 | ||||
The Report of Independent Registered Public Accounting Firm and accompanying notes are an integral part of these financial statements |
-2- |
BRAZIL INTERACTIVE MEDIA, INC. AND ITS SUBSIDIARY | ||||||||
CONSOLIDATED INCOME STATEMENTS | ||||||||
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 | ||||||||
(restated) | ||||||||
For the year ended | For the year ended | |||||||
December 31, 2012 | December 31, 2011 | |||||||
Revenue | $ | 3,949,624 | $ | 2,035,416 | ||||
Cost of sales | (2,518,980 | ) | (1,195,695 | ) | ||||
Gross profit | 1,430,645 | 839,721 | ||||||
Operating Expenses: | ||||||||
Other taxes | 283,374 | 61,938 | ||||||
Payroll | 435,574 | 432,521 | ||||||
Contract labor | — | 144,131 | ||||||
Rent | 118,355 | 42,434 | ||||||
Other general and administrative expenses | 179,921 | 68,964 | ||||||
Operating income | 413,420 | 89,732 | ||||||
Other income (expense): | ||||||||
Interest expense | (49,001 | ) | (14,207 | ) | ||||
Other receivable write off- related party | (390,000 | ) | — | |||||
Total Other income (expense): | (439,001 | ) | (14,207 | ) | ||||
Income before income taxes | (25,581 | ) | 75,525 | |||||
Income taxes | (303,679 | ) | (19,646 | ) | ||||
Net income | (329,260 | ) | 55,880 | |||||
Other comprehensive income (expense) | ||||||||
Foreign currency translation adjustment | (9,049 | ) | (4,966 | ) | ||||
Comprehensive income | $ | (338,309 | ) | $ | 50,914 | |||
Basic and fully diluted net income (loss) per common share: | ($ | 3.95 | ) | — | ||||
Weighted average common shares outstanding | 83,333 | — | ||||||
The Report of Independent Registered Public Accounting Firm and accompanying notes are an integral part of these financial statements |
-3- |
BRAZIL INTERACTIVE MEDIA, INC. AND ITS SUBSIDIARY | ||||||||||||||||||||||||||||||||||||
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT) (RESTATED) | ||||||||||||||||||||||||||||||||||||
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 | ||||||||||||||||||||||||||||||||||||
Common stock | Preferred stock | Due from shareholders | Additional paid-in capital | Accumulated other comprehensive income (loss) | Retained earnings (deficit) | Total stockholders' equity | ||||||||||||||||||||||||||||||
Common share | Amount (Par value $0.0001) | Preferred share | Amount | |||||||||||||||||||||||||||||||||
Balances at January 1, 2011 | — | $ | — | — | $ | — | $ | (5,367 | ) | $ | 5,367 | $ | — | $ | — | $ | — | |||||||||||||||||||
Net income | — | — | — | — | — | — | — | 55,880 | 55,880 | |||||||||||||||||||||||||||
Translation adjustments | — | — | — | — | — | — | (4,966 | ) | — | (4,966 | ) | |||||||||||||||||||||||||
Balances at December 31, 2011 | — | — | — | — | (5,367 | ) | 5,367 | (4,966 | ) | 55,880 | 50,914 | |||||||||||||||||||||||||
Common stock issued for cash | 1,000,000 | 100 | — | — | — | — | — | — | 100 | |||||||||||||||||||||||||||
Shareholder contribution of equipment | — | — | — | — | — | 219,780 | — | — | 219,780 | |||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | (329,260 | ) | (329,260 | ) | |||||||||||||||||||||||||
Translation adjustments | — | — | — | — | — | — | (9,049 | ) | — | (9,049 | ) | |||||||||||||||||||||||||
Balances at December 31, 2012 | 1,000,000 | $ | 100 | — | $ | — | $ | (5,367 | ) | $ | 225,147 | $ | (14,015 | ) | $ | (273,380 | ) | $ | (67,515 | ) | ||||||||||||||||
The Report of Independent Registered Public Accounting Firm and accompanying notes are an integral part of these financial statements |
-4- |
BRAZIL INTERACTIVE MEDIA, INC. AND ITS SUBSIDIARY | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 | ||||||||
For the year ended | For the year ended | |||||||
December 31, 2012 | December 31, 2011 | |||||||
Cash flows from operating activities: | (restated) | |||||||
Net income (loss) | $ | (329,260 | ) | $ | 55,880 | |||
Other receivable write off- related party | 390,000 | — | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (354,904 | ) | (176,709 | ) | ||||
Other receivable- related party | (390,000 | ) | — | |||||
Prepayments and advances | 82,618 | (178,132 | ) | |||||
Accounts payable and accrued expenses | 274,087 | 405,820 | ||||||
Taxes payables | 133,331 | 81,684 | ||||||
Net cash provided by (used in) operating activities | (194,127 | ) | 188,544 | |||||
Cash flows from investing activities: | ||||||||
Purchase of equipment | (8,450 | ) | — | |||||
Net cash (used in) investing activities | (8,450 | ) | — | |||||
Cash flows from financing activities: | ||||||||
Proceeds from bank loan payable | 67,478 | 114,860 | ||||||
Proceed from note payable | 170,000 | — | ||||||
Principal repayments of bank loan payable | (64,244 | ) | (91,299 | ) | ||||
Proceeds from issuing common stock | 100 | — | ||||||
Net cash provided by financing activities | 173,334 | 23,561 | ||||||
Foreign currency translation adjustment | (17,650 | ) | (18,880 | ) | ||||
Increase (decrease) in cash and cash equivalents | (46,893 | ) | 193,225 | |||||
Cash and cash equivalents at beginning of year | 193,225 | — | ||||||
Cash and cash equivalents at end of year | $ | 146,331 | $ | 193,225 | ||||
Cash paid for: | ||||||||
Income tax | $ | — | — | |||||
Interest | $ | 24,028 | $ | 12,388 | ||||
NON-CASH INVESTING ACTIVITIES | ||||||||
Shareholder contribution of equipment | $ | 219,780 | $ | — | ||||
Payment of accounts receivable with fixed assets | $ | 219,389 | $ | — | ||||
The Report of Independent Registered Public Accounting Firm and accompanying notes are an integral part of these financial statements |
-5- |
BRAZIL INTERACTIVE MEDIA, INC. AND ITS SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 1. ORGANIZATION AND BUSINESS BACKGROUND
Brazil Interactive Media Inc. (the “Company” or “BIMI”) was incorporated in the State of Delaware on September 11, 2012. The principal activity of BIMI at that time was seeking and consummating a merger or acquisition opportunity with EsoTV Brasil Trade Promotion and Advertising License Ltda. (“ESOTV”), a corporation organized under the laws of Federative Republic of Brazil (“Brazil”).
On November 28, 2012, the Company entered into a Plan of Exchange agreement (the “Plan of Exchange”) between and among the Company and Jose Percival Palesel, the sole owner of ESOTV. By this agreement, BIMI was transferred all issued and outstanding shares of EsoTV (100,000 "quotas") from Palesel in exchange for the founder's shares of BIMI issued on November 28, 2012. As a result of the agreement, Palesel received an 88.5% stake in BIMI via his U.S.A. LLC Brazil Interactive Holdings, Brazilian Investment Group, LLC received a 5.5% stake, and Themistocles Psomiadis received a 6% stake. By means of an assignment agreement dated December 6, 2012, Palesel transferred his ownership of Brazil Interactive Holdings, LLC to Andrea Villas Boas.
The stock exchange transaction was accounted for as a reverse acquisition and recapitalization of the Company whereby ESOTV was deemed to be the accounting acquirer (legal acquiree) and the Company to be the accounting acquiree (legal acquirer). The accompanying consolidated financial statements are in substance those of ESOTV, with the assets and liabilities, and revenues and expenses, of the Company being included effective from the date of stock exchange transaction. The Company is deemed to be a continuation of the business of ESOTV. Accordingly, the accompanying consolidated financial statements include the following:
(1) | The balance sheet consists of the net assets of the accounting acquirer at historical cost and the net assets of the accounting acquiree at historical cost; |
(2) | The financial position, results of operations, and cash flows of the accounting acquirer for all periods presented as if the recapitalization had occurred at the beginning of the earliest period presented and the operations of the accounting acquiree from the date of stock exchange transaction. |
Brazil Interactive Media, Inc. and ESOTV are hereinafter referred to as (the “Company”).
ESOTV started operation in June 2011.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) under the accrual basis of accounting.
Use of Estimates
In preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. These accounts and estimates include, but are not limited to, the valuation of accounts receivables, inventories, income taxes and the estimation on useful lives of property, plant and equipment. Actual results could differ from these estimates.
BRAZIL INTERACTIVE MEDIA, INC. AND ITS SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
Generally Accepted Accounting Principles (“GAAP”)
These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). Such accounting principles differ in certain respects from accounting principles generally accepted in Brazil (“Brazilian GAAP”), which is applied by the Company for its annual consolidated financial statement preparation. Unless otherwise specified, all references in these financial statements to (i) “reais,” the “real” or “R$” are to the Brazilian real (singular), or to the Brazilian reais (plural), the legal currency of Brazil, and (ii) “U.S. dollars” or “$” are to United States dollars.
Basis of Consolidation
The consolidated financial statements include the financial statements of the Company and its subsidiary.
All significant inter-company balances and transactions within the Company and subsidiary have been eliminated upon consolidation.
Cash and Cash Equivalents
Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.
Accounts Receivable
Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. An allowance for doubtful accounts is established and determined based on managements’ assessment of known requirements, aging of receivables, payment history, the customer’s current credit worthiness and the economic environment. As of December 31, 2012 and 2011, the Company did not record an allowance for uncollectible accounts.
Fixed Assets, Net
Fixed assets are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:
Depreciable Life | Residual Value | |||||
Machinery and Equipment | 5 years | 5 | % | |||
Furniture and Fixture | 7 years | 5 | % |
Expenditures for maintenance and repairs that do not make the fixed asset more useful or prolong its useful life are expensed as incurred.
-7- |
BRAZIL INTERACTIVE MEDIA, INC. AND ITS SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
Fair Value for Financial Assets and Financial Liabilities
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification (“ASC”) for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB ASC (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in U.S. GAAP, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
Level 1 | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. | |
Level 2 | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. | |
Level 3 | Pricing inputs that are generally observable inputs and not corroborated by market data |
The carrying amounts of the Company’s financial assets and liabilities, such as cash and accounts payable approximate their fair values because of the short maturity of these instruments.
The Company does not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis, consequently, the Company did not have any fair value adjustments for assets and liabilities measured at fair value at December 31, 2012 and 2011 nor gains or losses are reported in the statement of operations that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date for the for the years ended December 31, 2012 and 2011, respectively.
Revenue Recognition
In accordance with guidance by paragraph 605-10-S99-1 of the FASB ASC for revenue recognition, the Company recognizes revenue when persuasive evidence of an arrangement exists, transfer of title has occurred or services have been rendered, the selling price is fixed or determinable and collectability is reasonably assured.
The Company produces live TV shows with an interactive telephone calling component using its own unique and proprietary programs that include quiz shows, games, psychics and live chat formats. The Company’s program content reaches the nationwide Brazilian television audience via an in-studio satellite signal uplink to a variety of Brazilian TV broadcast networks. Members of the television audiences participate in real time by telephone. The local telecommunications providers charge various per-minute rates for the incoming calls and share a portion of the revenue with the Company. Revenue is recognized by the Company when the minute volume of calls from audiences are determined by the Company’s local telecommunications providers.
Cost of Revenues
Cost of revenues consists primarily of media cost, leasing expenses related to satellite uplinks and other costs directly attributable to the provision of services.
-8- |
BRAZIL INTERACTIVE MEDIA, INC. AND ITS SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
Income Taxes
Income taxes are determined in accordance with Accounting Standards Codification Topic 740, “Income Taxes” (“ASC 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.
The Company conducts its primary business in Brazil and is subject to tax in this jurisdiction. As a result of its business activities, the Company files tax returns that are subject to examination by the foreign tax authority. As of December 31, 2012 and 2011, the Company had outstanding income taxes due with the tax authority in Brazil in the amounts of $305,897 and $16,287, respectively. A portion of the income tax due in 2012, or $222,316, will be paid over time pursuant to an installment plan entered into by the Company and the tax authority in Brazil.
Earnings per share
The Company reports earnings (loss) per share in accordance with FASB Accounting Standards Codification 260 “Earnings per Share” (“ASC 260”). This statement requires dual presentation of basic and diluted earnings (loss) with a reconciliation of the numerator and denominator of the earnings (loss) per share computations. Basic earnings per share amounts are based on the weighted average shares of common outstanding. If applicable, diluted earnings per share assume the conversion, exercise or issuance of all common stock instruments such as options, warrants and convertible securities, unless the effect is to reduce a loss or increase earnings per share. Accordingly, this presentation has been adopted for the periods presented. There were no adjustments required to net income for the periods presented in the computation of diluted earnings per share. There were no common stock equivalents (CSE) necessary for the computation of diluted earnings per share.
Comprehensive income
The Company adopted FASB Accounting Standards Codification 220 “Comprehensive Income” (ASC “220”) which establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during the year from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying consolidated balance sheets consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.
Foreign currency translation
The functional currency of the Company is the Brazilian Real. The Company maintains its consolidated financial statements in the functional currency. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet date. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchanges rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income for the respective periods.
-9- |
BRAZIL INTERACTIVE MEDIA, INC. AND ITS SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
For financial reporting purposes, the consolidated financial statements of the Company, which are prepared using the functional currency, have been translated into United States dollars. Current assets and liabilities are translated at the exchange rates at the balance sheet dates and revenue and expenses are translated at the average exchange rates of the year while fixed assets and stockholders’ equity is translated at historical exchange rates. Any translation adjustments resulting are not included in determining net income but are included in foreign exchange adjustment to other comprehensive income, a component of stockholders’ equity. The exchange rates in effect as of December 31, 2012 and 2011 were US$1 for R$2.05 and R$1.86, respectively. The average exchange rates for the two years ended December 31, 2012 and 2011 were US$1 for R$1.95 and R$1.69, respectively. There is no significant fluctuation in exchange rate for the conversion of Brazilian Real to US dollars after the balance sheet date.
Off-balance sheet arrangements
The Company does not have any off-balance sheet arrangements.
Related Parties
The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.
Pursuant to Section 850-10-20 the Related parties include a. affiliates of the Company; b. Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Commitment and Contingencies
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
BRAZIL INTERACTIVE MEDIA, INC. AND ITS SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s consolidated financial position, consolidated results of operations or consolidated cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, consolidated financial position, and consolidated results of operations or consolidated cash flows.
Uncertain Tax Positions
The Company did not take any uncertain tax positions and had no adjustments to unrecognized income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the years ended December 30, 2012 or 2011.
Subsequent Events
The Company evaluated for subsequent events through the issuance date of the Company’s financial statements.
Recently issued accounting standards
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its consolidated financial condition or the consolidated results of its operations.
In May 2011, FASB issued Accounting Standards Update No. 2011-04, “Fair Value Measurements (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (“ASU 2011-04”). ASU 2011-04 changes the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements to ensure consistency between U.S. GAAP and IFRS. ASU 2011-04 also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. This new guidance is to be applied prospectively. The Company anticipates that the adoption of this standard will not materially expand its financial statement note disclosures.
In June 2011, FASB issued ASU No. 2011-05, “Comprehensive Income (ASC Topic 220): Presentation of Comprehensive Income” (“ASU 2011-05”), which amends current comprehensive income guidance. This accounting update eliminates the option to present the components of other comprehensive income as part of the statement of shareholders’ equity. Instead, the Company must report comprehensive income in either a single continuous statement of comprehensive income which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. ASU 2011-05 will be effective for public companies during the interim and annual periods beginning after December 15, 2011, with early adoption permitted. The Company is reviewing ASU 2011-05 to ascertain its impact on the Company’s financial position, results of operations or cash flows as it only requires a change in the format of the current presentation.
-11- |
BRAZIL INTERACTIVE MEDIA, INC. AND ITS SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
In September 2011, the FASB issued ASU 2011-08, “Testing Goodwill for Impairment”, which allows, but does not require, an entity when performing its annual goodwill impairment test the option to first do an initial assessment of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount for purposes of determining whether it is even necessary to perform the first step of the two-step goodwill impairment test. Accordingly, based on the option created in ASU 2011-08, the calculation of a reporting unit’s fair value is not required unless, as a result of the qualitative assessment, it is more likely than not that fair value of the reporting unit is less than its carrying amount. If it is less, the quantitative impairment test is then required. ASU 2011-08 also provides for new qualitative indicators to replace those currently used. Prior to ASU 2011-08, entities were required to test goodwill for impairment on at least an annual basis, by first comparing the fair value of a reporting unit with its carrying amount. If the fair value of a reporting unit is less than its carrying amount, then the second step of the test is performed to measure the amount of impairment loss, if any. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted. The Company adopted ASU 2011-08 during the first quarter of fiscal 2013. The adoption of ASU 2011-08 did not impact the Company’s results of operations or financial condition.
In December 2011, FASB issued Accounting Standards Update 2011-11, “Balance Sheet - Disclosures about Offsetting Assets and Liabilities” to enhance disclosure requirements relating to the offsetting of assets and liabilities on an entity's balance sheet. The update requires enhanced disclosures regarding assets and liabilities that are presented net or gross in the statement of financial position when the right of offset exists, or that are subject to an enforceable master netting arrangement. The new disclosure requirements relating to this update are retrospective and effective for annual and interim periods beginning on or after January 1, 2013. The update only requires additional disclosures, as such, the Company does not expect that the adoption of this standard will have a material impact on its results of operations, cash flows or financial condition.
In July 2012, the FASB issued ASU No. 2012-02, “Testing Indefinite-Lived Intangible Assets for Impairment”. The guidance allows companies to perform a “qualitative” assessment to determine whether further impairment testing of indefinite-lived intangible assets is necessary, similar in approach to the goodwill impairment test.
ASU 2012-02 allows companies the option to first assess qualitatively whether it is more likely than not that an indefinite-lived intangible asset is impaired, before determining whether it is necessary to perform the quantitative impairment test. An entity is not required to calculate the fair value of an indefinite-lived intangible asset and perform the quantitative impairment test unless the entity determines that it is more likely than not that the asset is impaired. Companies can choose to perform the qualitative assessment on none, some, or all of its indefinite-lived intangible assets or choose to only perform the quantitative impairment test for any indefinite-lived intangible in any period.
ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. The Company is in the process of evaluating the guidance and the impact ASU 2012-02 will have on its consolidated financial statements.
NOTE 3. ACCOUNTS RECEIVABLE
Accounts receivable was comprised of the following amounts as of December 31, 2012 and 2011:
2012 | 2011 | |||||||
Gross trade accounts receivable from customers | $ | 484,982 | $ | 161,005 | ||||
Allowance for doubtful customer accounts | 0 | 0 | ||||||
Accounts receivable, net | $ | 484,982 | $ | 161,005 |
There was no bad debt expenses recognized during the years ended December 31, 2012 and 2011 in the accompanying consolidated income statements.
BRAZIL INTERACTIVE MEDIA, INC. AND ITS SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 4. FIXED ASSETS
Fixed assets were comprised of the following as of December 31, 2012 and 2011:
2012 | 2011 | |||||||
Cost: | ||||||||
Machinery and equipment | $ | 439,560 | $ | 0 | ||||
Furniture and fixtures | 8,059 | 0 | ||||||
Total cost | 447,619 | 0 | ||||||
Less: Accumulated depreciation | 0 | 0 | ||||||
Property and equipment, net | $ | 447,619 | $ | 0 | ||||
There was no depreciation expense recorded for the year ended December 31, 2012 since the acquisition was completed at the end of 2012 and the fixed assets were not yet placed in service for depreciation purpose.
The Company’s fixed assets are pledged as collateral in the event of default on the note payable. See note 7.
NOTE 5. BANK LOANS PAYABLE
The Company has a few monthly unsecured loans with HSBC at interest rates ranging from 1.08% to 6% per month. The balance on these loans was $22,621 and $21,467 as of December 31, 2012 and 2011, respectively. Accordingly, the Company recorded interest expense of $7,053 and $12,388 during the years ended December 31, 2012 and 2011, respectively.
NOTE 6. TAX INSTALLMENTS PAYABLE
In 2012, an installment plan was entered into by the Company and the tax authority in Brazil, pursuant to which the following taxes will be paid over time. As of December 31, 2012, the outstanding balance on the tax installments payable was $436,355.
Type of tax | Balance as of December 31, 2012 | |||
Cofins Payable - Tax on Service | $ | 107,084 | ||
PIS Withheld Payable – Tax on Services | 22,725 | |||
Social Contribution Payable – Social Security Tax | 84,230 | |||
Income Tax Payable | 222,316 | |||
Total | $ | 436,355 |
The company’s plan to pay back the tax installments, along with interest and fines, for the next 5 years is as follows:
Year Ended | ||||||||||||||||||
December 31 | Principal | Fines | Interest | Total | ||||||||||||||
2013 | $ | 87,271 | $ | 17,454 | $ | 4,763 | $ | 109,488 | ||||||||||
2014 | 87,271 | 17,454 | 4,763 | 109,488 | ||||||||||||||
2015 | 87,271 | 17,454 | 4,763 | 109,488 | ||||||||||||||
2016 | 87,271 | 17,454 | 4,763 | 109,488 | ||||||||||||||
2017 | 87,271 | 17,454 | 4,763 | 109,488 | ||||||||||||||
$ | 436,355 | $ | 87,270 | $ | 23,815 | $ | 547,440 |
BRAZIL INTERACTIVE MEDIA, INC. AND ITS SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 7. NOTE PAYABLE
The company has a loan payable bearing monthly interest of 2% as of December 31, 2012. The balance of this loan was $170,000 as of December 31, 2012 and is secured by the Company’s fixed assets with a net book value of $447,619. The effect of accrued interest for the year ended December 31, 2012 is immaterial to the consolidated financial statements taken as a whole.
Principal maturities of the loan payable as of December 31, 2012 are as follows:
Amount | ||||||
2013 | $ | 170,000 | ||||
Total | $ | 170,000 |
NOTE 8. CAPITAL STRUCTURE
As of December 31, 2012, the Company is authorized to issue 80,000,000 shares of common stock, par value $.0001 per share, and 20,000,000 shares of preferred stock, par value $.0001 per share. As of December 31, 2012, there were 1,000,000 shares of common stock issued and outstanding.
NOTE 9. INCOME TAXES
United States
The Company was incorporated in the United States of America and is subject to U.S. tax. No provisions for income taxes have been made as the Company has no U.S. related taxable income for the years presented.
Brazil
The Company’s subsidiary, ESOTV, is subject to Brazil enterprises income tax at the applicable tax rates on the taxable income as reported in its Brazilian statutory accounts in accordance with the relevant enterprises income tax laws applicable to domestic enterprises.
The Company uses the asset and liability method, where deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes. There are no material timing differences and therefore no deferred tax asset or liability as of December 31, 2012 and 2011. There are no net operating loss carry forwards as of December 31, 2012 and 2011.
The effective income tax expenses for the years ended December 31, 2012 and 2011 are as follows:
2012 | 2011 | |||||||
Current taxes | $ | 303,679 | $ | 19,646 | ||||
Deferred taxes | 0 | 0 | ||||||
$ | 303,679 | $ | 19,646 |
According to Brazilian Federal Income Tax Regulation RIR/99, Article 516, a company with prior year's gross revenues not exceeding R$ 24,000,000.00 (approximately US$ 12,000,000.00) can choose between two types of taxation methods: the actual profit method and the presumed profit method. Management can choose what method to use based on the criteria of expected profit for that year but this choice must be declared with the tax authority at the beginning of the year. For year 2012, management chose presumed profit method to calculate its income tax. For year 2011, management chose actual profit method to calculate its income tax.
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BRAZIL INTERACTIVE MEDIA, INC. AND ITS SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
Under the presumed profit method, income tax is computed based on gross revenue. A presumed profit base which is equal to 32% of gross revenue is calculated first. If this presumed profit base is less than BRL 60,000, then 15% of this presumed profit base is the income tax due. If this presumed profit base is greater than BRL 60,000, then 15% of this presume profit base plus 10% of the difference between this presume profit base and BRL 60,000 is the final income tax due.
Under the actual profit method, income tax is computed quarterly based on quarterly net profit and the cumulative year-end profits are not relevant. Net profit is equal to net revenue minus deductible expenses. If the net profit is greater than BRL 60,000, then income tax is equal to 15% of net profit plus 10% of the difference between the net profit and BRL 60,000. If net profit is less than BRL 60,000 but greater than zero, income tax is equal to 15% of net profit. If net profit is less than zero (loss), no income tax is assessed for that quarter and for the next quarter and the quarters thereafter, the Company can deduct this loss from the calculated net profit before applying the 15% rate, the deduction is limited to 30% of the calculated net profit for the quarter and the unused loss can be carry forward into next quarter.
NOTE 10. EARNINGS PER SHARE
The following table sets forth the computation of basic earnings per share for the years ended December 31, 2012 and 2011 indicated:
2012 | 2011 | |||||||
Numerator: | ||||||||
Net income (loss) | $ | -329,260 | $ | 55,880 | ||||
Denominator: | ||||||||
Weighted average number of shares outstanding | ||||||||
Basic | 83,333 | — | ||||||
Earnings (loss) per share | ||||||||
Basic and fully diluted | $ | -3.95 | $ | — |
The basic earnings (loss) per share were calculated using the net income and the weighted average number of shares outstanding during the reporting periods. All share and per share data have been adjusted to reflect the recapitalization of the Company in the Exchange.
The Company had no dilutive instruments as of December 31, 2012 and 2011.
NOTE 11. COMMITMENT AND CONTINGENCIES
Office Leasing
The Company leases its office space under non-cancelable operating lease agreements. The lease ends in December 2015. Based on the current rental lease agreement, the future 3 years minimum rental payments required as of December 31 are as follows:
Lease payment | ||||||
Year ended, December 31, 2013 | $ | 119,766 | ||||
2014 | $ | 123,359 | ||||
2015 | $ | 127,060 | ||||
Total | $ | 370,185 |
-15- |
BRAZIL INTERACTIVE MEDIA, INC. AND ITS SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
The two satellite uplink leases are on a month to month basis with no future operating lease commitments.
For the years ended December 31, 2012 and 2011, the Company had rental expenses of $118,355 and $42,434, respectively.
The Company had no contingencies existing as of December 31, 2012 and 2011.
NOTE 12. CONCENTRATION AND RISK
(a) | Major Customers |
The Company had one customer from which the Company generated 100% and 91.3% revenues during the years ended December 31, 2012 and 2011, respectively.
(b) | Major Vendors |
During the year ended December 31, 2012, major vendors were as follows:
Vendors | Purchases | |||||||
Rio Bonito | 537,232 | 21 | % | |||||
Total | $ | 537,232 | 21 | % |
During the year ended December 31, 2011, major vendors were as follows:
Vendors | Purchases | |||||||
Rio Bonito | 251,811 | 21 | % | |||||
Total | $ | 251,811 | 21 | % |
(c) | Credit risk |
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and trade accounts receivable. The Company performs ongoing credit evaluations of its customers' financial condition, but does not require collateral to support such receivables.
As of December 31, 2012 and 2011, substantially all of the Company’s cash and cash equivalents were held by financial institutions located in Brazil, which the Company’s management believes are of high credit quality.
The Company’s operations are carried out in Brazil. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in Brazil and by the general state of the local economy. The Company’s operations in Brazil are subject to specific considerations and significant risks not typically associated with companies in North America and Western Europe. The Company’s results may be affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.
In addition, the Company is subject to risks common to companies in its industry, including, but not limited to, litigation, development of new technological innovations and dependence on key personnel.
-16- |
BRAZIL INTERACTIVE MEDIA, INC. AND ITS SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 13. RELATED PARTY TRANSACTIONS
The Company had $390,000 other receivable from a related party, which was written off as other expense for the year ended December 31, 2012.
NOTE 14. SEGMENTS
The Company determined that it do not operate in any material, separately reportable operating segments as of December 31, 2012 and 2011.
NOTE 15. SUBSEQUENT EVENTS
In accordance with ASC Topic 855-10, the Company has analyzed its operations subsequent to December 31, 2012 to the date these consolidated financial statements were issued. In addition to the transactions disclosed below, the Company does not have other material subsequent events to disclose in these financial statements, except as follows:
On January 28, 2013, Brazil Interactive Media Participações, Ltda., the Company’s Brazil holding company ("BIMI BR") was formed as a subsidiary of the Company, to be the holding company for EsoTV.
On March 13, 2013, the Company entered into a merger agreement (the “Merger Agreement”) with Naturewell, Incorporated, a Delaware corporation (“Naturewell”), and Naturewell’s wholly-owned subsidiary, BIMI Acquisition Corp., a Delaware corporation incorporated by Naturewell on February 20, 2013 specifically for the purpose of consummating the Merger Agreement (the “Merger Sub”), pursuant to which Naturewell acquired all of the issued and outstanding shares of the Company. Prior to entering into the Merger Agreement, there was no relationship between the Company or its affiliates and Naturewell, other than in respect of the Merger Agreement and the transactions contemplated thereby.
On March 27, 2013, the effective date (“the Effective Date”) of the merger (the “Merger”), as provided for in the Merger Agreement, the Company and Brazil Interactive Media filed a certificate of merger with the state of Delaware, causing the merger of the Merger Sub into Brazil Interactive Media pursuant to Delaware Law. Brazil Interactive Media was the surviving company and became a wholly-owned subsidiary of Naturewell. As a result of the Merger, Brazil Interactive Media’s name was changed to BIMI, Inc.
On May 16, 2013, pursuant to the Merger Agreement, Naturewell filed a certificate of amendment (the “Amendment”) with the state of Delaware, effecting a reverse stock split at a ratio of 8,484 to one, reducing the Company’s authorized shares, and changing the name of the Company to Brazil Interactive Media, Inc.
Before the consummation of the Merger, the Company had 2,448,665,750 shares of Common Stock, 19,000,000 shares of Series A Common Stock, 3,115 shares of Series E Convertible Preferred Stock, and 75 shares of Series C Convertible Preferred Stock issued and outstanding. In accordance with the Merger Agreement, the Company converted all shares of Series A Common Stock to 19,000,000 shares of regular common stock on March 11, 2013, all shares of Series E Convertible Preferred Stock to 4,152,295 shares of common stock on March 11, 2013, and all outstanding senior convertible notes to 210,746 shares of Series G Convertible Preferred Stock and 8,220,150 shares of Common Stock on March 11, 2013. The company issued 3,740,000 Shares of Series G Convertible Preferred Stock in exchange for the BIMI common stock on March 13, 2013. On March 22, 2013, the Company issued 2,500 shares of Series H Convertible Preferred Stock. For information about recent sales of unregistered securities, see Item 3.02 of this Current Report on Form 8-K. On May 14, 2013, the Company converted all shares of Series C Convertible Preferred Stock to 1,875,000 shares of Common Stock.
-17- |
BRAZIL INTERACTIVE MEDIA, INC. AND ITS SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
As a result, at the time of filing of the Amendment, 2,481,913,195 shares of Common Stock were issued and outstanding, 3,970,746 shares of Series G Convertible Preferred Stock, issued in connection with the Merger Agreement, were issued and outstanding, and 2,500 shares of Series H Convertible Preferred Stock were issued and outstanding. After the effects of the reverse split implemented by the Amendment, there were 292,917 shares of the Company’s Common Stock issued and outstanding, 3,970,746 shares of the Company’s Series G Convertible Preferred Stock issued and outstanding, and 2,500 shares of Series H Convertible Preferred Stock issued and outstanding. As a result of the Amendment, the Company decreased its authorized capital from 5,000,000,000 shares of common stock, par value $0.00001, and 15,000,000 shares of preferred stock, par value $0.01, to 100,000,000 shares of common stock, par value $0.00001, and 5,000,000 shares of preferred stock, par value $0.01.
According to the Certificate of Designation establishing the Series G Convertible Preferred Stock, the Series G Convertible Preferred Stock is subject to an automatic forced conversion one business day following the date that a sufficient number of authorized and unissued shares of Common Stock becomes available to facilitate the conversion. By operation of the reverse stock split, filed on May 16, 2013, sufficient authorized and unissued shares of Common Stock became available, triggering an automatic conversion of all issued and outstanding Series G Convertible Preferred Stock to Common Stock. Those common shares in conversion of the Series G Convertible Preferred Stock have not yet been issued as of May 30, 2013. In accordance with a condition to the closing of the Merger Agreement, the Company will required that the Common Stock newly issued upon the conversion of the Series G Convertible Preferred Stock be subject to Lock Up and Leak Out Agreements that restrict the transferability of that Common Stock.
Although the Company has not yet, as of May 30, 2013, issued common stock in conversion of the Series G Convertible Preferred Stock, we expect to do so in the near future, predicated upon the execution of the Lock Up and Leak Out Agreements as a condition of the Merger Agreement. As a result of the Amendment and after the issuance of common shares in conversion of the Series G Convertible Preferred Stock, the Company expects to have approximately 40,000,000 shares of Common Stock issued and outstanding and 2,500 shares of Series H Convertible Preferred Stock issued and outstanding. The former Brazil Interactive Media Shareholders will then hold approximately 93.5% of the issued and outstanding Common Stock of the Company and the remaining 6.5% will be held by the Company's pre-merger shareholders.
As a result of the Merger Agreement, Mr. James R. Arabia and Mr. Matthew Malesek resigned as Chief Executive Officer and Chief Financial Officer, respectively, and as directors of the Company. Also as a result of the Merger Agreement, Mr. Themistocles Psomiadis became the Chief Executive Officer and a director of the Company, and Mr. Jesus Quintero became the Chief Financial Officer of the Company.
We have begun to file annual and quarterly reports based upon the fiscal year-end of Brazil Interactive Media, which is December 31.
-18- |
BRAZIL INTERACTIVE MEDIA, INC. AND ITS SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 16. RESTATEMENTS OF FINANCIAL STATEMENTS
On April 25, 2013, the Company’s management concluded that the Company’s audited financial statements for the year ended December 31, 2012 should no longer be replied on. Specifically, on the balance sheet, the Company’s currently liability was understated by $390,000 as of December 31, 2012. The company’s other receivable balance as of December 31, 2012 was also understated by $390,000, which was written off as other expense for the year ended December 31, 2012. On the income statement, the amount of other expense was increased from $49,001 to $439,001 for the year ended December 31, 2012.
The following table sets forth all the accounts in the original amounts and restated amounts, respectively.
As of December 31, 2012 | ||||||||
Original | Restated | |||||||
Due to third party | $ | — | $ | 220,000 | ||||
Note Payable | $ | — | $ | 170,000 | ||||
Retained earnings (deficit) | $ | 116,620 | $ | (273,380 | ) |
For the year ended December 31, 2012 | ||||||||
Original | Restated | |||||||
Other receivable write off - related party | $ | — | $ | 390,000 | ||||
Net income (loss) | $ | 60,740 | $ | (329,260 | ) | |||
Basic and fully diluted net income per common share | $ | 0.73 | $ | (3.95 | ) |
-19- |
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