UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): June 30, 2016

 

SOURCE FINANCIAL, INC.
(Exact name of registrant as specified in its charter)

 

Delaware   000-55122   80-0142655

(State or other jurisdiction

of incorporation)

  (Commission File Number)  

(IRS Employer

Identification No.)

 
604 Arizona Ave
Santa Monica, CA 90401

(Address of Principal Executive Offices)

 

(424) 322-2201

Registrant’s telephone number, including area code

 

Level 6/97 Pacific Highway

North Sydney NSW 2060

Australia

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

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

  

 

 

 

 

 

Forward Looking Statements

 

This Current Report on Form 8-K and other reports filed by registrant from time to time with the Securities and Exchange Commission (collectively, the “ Filings ”) contain or may contain forward-looking statements and information that is based upon beliefs of, and information currently available to, registrant’s management, as well as estimates and assumptions made by registrant’s management. When used in the Filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan” or the negative of these terms and similar expressions as they relate to registrant or registrant’s management identify forward-looking statements. Such statements reflect the current view of registrant with respect to future events and are subject to risks, uncertainties, assumptions and other factors (including the risks contained in the section of this Current Report on Form 8-K entitled “Risk Factors”) relating to registrant’s industry and registrant’s operations and results of operations. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.

 

You should not place undue reliance on any forward-looking statement, each of which applies only as of the date of this Current Report on Form 8-K. Except as required by law, we undertake no obligation to update or revise publicly any of the forward-looking statements after the date of this Current Report on Form 8-K to conform our statements to actual results or changed expectations, or the results of any revision to these forward-looking statements.

  

Item 1.01 Entry Into A Material Definitive Agreement.

 

Spin-Out Transaction

 

On June 30, 2016 (the “Closing Date”), Source Financial, Inc. (“we” or the “Company”) entered into that certain Share Exchange Agreement (the “Moneytech Agreement”) by and among the Company, Moneytech Group Pty Ltd., an Australian Corporations (“Moneytech”) and certain shareholders of the Company. Pursuant to the terms of the Moneytech Agreement, Moneytech acquired from the Company all of the outstanding shares and equity interests in Moneytech Limited and mPayments Pty Ltd., as well as its 95% equity interests in Moneytech POS Pty Ltd. and its 37.5% equity interests in 360 Markets Pty Ltd. (collectively, the “Moneytech Entities” and the shares and equity interests of the Moneytech Entities are referred to herein as the “Moneytech Interests”), in exchange for the return to the Company 6,076,679 shares of the Company’s common stock from the stockholders of the Company (the “Spin-Out Stockholders”) and 5,000 shares of Series B Preferred Stock of the Company. In connection with the transaction, Moneytech issued to the Spin-Out Stockholders one fully paid ordinary shares in the capital of Moneytech as consideration for every one shares of the Company’s common stock returned by the Spin-Out Stockholders to the Company.

 

As a result, the Moneytech Entities become subsidiaries of Moneytech and the Company has no further relationship with the Moneytech Entities. Immediately after the transaction, an aggregate of 6,076,679 shares of the Company’s common stock and 5,000 shares of Series B Preferred Stock were cancelled, and a total of 2,714,957 shares of the Company’s common stock were issued and outstanding. In addition, stock options to purchase 3,750,000 shares of the Company’s common stock were relinquished immediately prior to closing and after the closing; the Company has outstanding stock options to purchase 25,000 shares of the Company’s common stock.

 

In connection with the transaction, Hugh Evans resigned as the President, Chief Executive Officer and Director of the Company. Brian M. Pullar resigned as Chief Financial Officer of the Company. Klaus Selinger and John Wolfgang resigned from the director position with the Company. Effective on the same date, Edward C. DeFeudis was appointed as the President, Chief Executive Officer, Chief Financial Officer and Director of the Company.

 

The above description of the Moneytech Agreement does not purport to be complete and is qualified in its entirety by reference to the Moneytech Agreement, which is attached here to as Exhibit 2.1 to this Current Report on Form 8-K.

 

Share Exchange Transaction

 

Simultaneously on the Closing Date, the Company entered into that certain Share Exchange Agreement (the “Share Exchange Agreement”) by and among the Company, Venture Track, Inc., a Delaware corporation (“Venture Track”) and the shareholders of Venture Track (the “Venture Track Shareholders”). Pursuant to the Share Exchange Agreement, the Company agreed to exchange the outstanding common stock of Venture Track held by the Venture Track Shareholders for 3,089,360 shares of common stock and 4,500 shares of Series C Convertible Preferred Stock, par value $0.01 per share (the “Series C Preferred Stock”), of the Company. The 4,500 shares of Series C Preferred Stock are convertible into 6,893,100 shares of the Company’s common stock, at the rate of 1,531.80 per share.

 

As a result of the Share Exchange Agreement, Venture Track become a wholly owned subsidiary of the Company. The share exchange is accounted for as a reverse merger with Venture Track being the accounting acquirer.

 

  2  

 

 

Immediately after the transaction, the Company had 5,804,317 shares of common stock and 4,500 shares of Series C Preferred Stock issued and outstanding. We are now a holding company engages in app development and deployment, as well as to provide innovative accelerator program for start-up companies.

 

The above description of the Share Exchange Agreement does not purport to be complete and is qualified in its entirety by reference to the Share Exchange Agreement, which is attached here to as Exhibit 2.2 to this Current Report on Form 8-K.

 

Item 2.01 Completion of Acquisition or Disposition of Assets

 

The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference.

 

As described in Item 1.01 above, on June 30, 2016, the Company entered into a Share Exchange Agreement, which resulted in Venture Track becoming our wholly owned subsidiary. The acquisition was accounted for as a recapitalization effected by a share exchange, wherein Venture Track is considered the acquirer for accounting and financing reporting purposes.

 

BUSINESS OF VENTURE TRACK

 

Corporate History

 

Venture Track is a development stage company originally incorporated in the state of Delaware in February 2014 as Songstress, Inc. The Company changed its name in May 2015 to Scoocher, Inc. and then to Venture Track, Inc. in February 2016. Venture Track focused on app development and deployment. Venture Track also intends to offer an innovation accelerator program (the “Venture Track Program”) designed to provide early-stage technology companies (the “Innovators”) with bridge loans, support in all areas of business development, and access to equity crowdfunding as designated under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).

 

When we refer to “Venture Track, Inc.,” “Venture Track”, the “Company”, “we”, “our,” “us” or use similar words, we mean Venture Track, Inc.

 

The JOBS Act, is a law intended to encourage the funding of United States small businesses by easing various securities regulations. The JOBS Act was signed into law by President Barack Obama on April 5, 2012. The recently enacted JOBS Act reduces certain disclosure requirements for emerging growth companies, thereby decreasing related regulatory compliance costs. We qualify as an emerging growth company as of the date of this offering.

 

Venture Track was founded by Edward C. DeFeudis, a serial entrepreneur and venture investor, with 20-plus years of experience. Since 1995, he has helped launch numerous private and public companies, including Wiki Technologies, Inc., and has received major financing commitments to help fund companies, startups and product launches. WikiTechnologies, Inc. is a technology company dedicated to making financial transactions simple, secure, social and affordable. WikiTechnologies is comprised of (i) WikiPay®, a Money Services Business, that provides a simple, low-cost alternative to existing mobile and online money transfer and payment solutions; and (ii) WikiLoan®, a low-cost peer-to-peer lending solution. The apps use industry-leading privacy and payment security systems. Throughout his career, Mr. DeFeudis has primarily been engaged in the development of strategic partnerships and financial strategies.

 

Through Venture Track, Mr. DeFeudis is leveraging his experience and resources in capital markets and Internet marketing to provide an innovative accelerator program and crowdfunding platform for early-stage disruptive technology companies.

 

Headquartered in Santa Monica, CA, we operate throughout key markets in the United States. Our corporate office is located at 604 Arizona Ave, Santa Monica, CA 90401, and our telephone is (424) 322-2201.

 

Business Overview

 

Venture Track focuses on financing, developing, and deploying apps. We own www.scoocher.com, an online content monetization engine, and has an additional app in development. The Company’s initial focus is to develop and deploy these apps as in-house projects (“Phase 1”).

 

The Company recognizes the unique opportunity that exists in today’s app market. There are thousands of apps that have been financed, built and deployed, but the founders of these apps do not possess the wherewithal to market the apps successfully. In many cases, the apps are available for sale at a fraction of the development cost. It is the Company’s intention to identify, purchase and deploy select apps with the greatest market potential (“Phase 2”).

 

The Venture Track Program first aims to fund the launch of revenue ready apps and start-ups (“Innovators”) through bridge loans. Then the Venture Track Program aims to market the apps, determine the true customer acquisition cost, fine-tune their projections and use of proceeds, and set them on a track for a public offering facilitated through equity crowdfunding. We intend to provide office space to Innovators with receptionist coverage, mail services, conference rooms, as well as access to on-site legal and accounting, advertising and marketing services, networking events, investor presentations, business plan competitions, and more (“Phase 3”).

 

  3  

 

 

The Venture Track Program

 

Venture Track intends on offering a three-phase, two-year program, for revenue ready Innovators. The three stages are: 1) Market Preparation, 2) Public Crowdfunding, and 3) Graduation.

 

In order for Innovators to be accepted into the program, each must: 1) solve an obvious problem or make an existing solution much more efficient; 2) be scalable; 3) have a focused team; and 4) be ready to generate revenue with a small capital infusion.

 

We are seeking to accept 29 Innovators into the program over the course of our first three (3) years: five (5) Innovators in year one (1), eight (8) in year two (2), and sixteen (16) in year three (3).

 

Venture Track will receive approximately 10-30% seed-stage sweat-equity in each Innovator, a portion of which may be distributed as dividends to shareholders based upon rules to be determined by the Board of Directors.

 

Investment capital offered by Venture Track in the Market Preparation stage will be in the form of a 506c Regulation A+ offering and bridge loan. The bridge loan amount is expected average $200,000, which shall be used by Innovators for general operating, legal, accounting, advertising, marketing expenses related to filing a Regulation A+ offering.

 

Upon approval of the Regulation A+ offering, the Innovator will move to the Public Crowdfunding stage. Venture Track will advertise and market the offering to the public through equity crowdfunding, primarily to accredited investors, angels, venture capital firms, and broker dealers. The Regulation A+ registration statement will offer a maximum of $50,000,000 in equity to investors. Venture Track will retain the first right to sell its holdings in the Regulation A+ offering.

 

Upon the completion of the Regulation A+ offering, the Innovator will move to the Graduation stage. In this stage, Venture Track will continue to mentor the Innovator to manage its growth and begin the process of introducing the company to 1) registered broker dealers with the intent of uplisting the Innovator to a national exchange, 2) strategic acquirers and/or merger candidates, and 3) strategic buyers.

 

Target Market

 

Our target market is early-stage technology companies that are seeking funding, business development, and access to equity crowdfunding as designated under the JOBS Act.

 

Revenue Sources

 

We plan on generating most of our revenue from the Venture Track Program and generally a minimal amount from advertising and marketing on our website, venturetrack.net.

 

We plan on revamping the Venturetrack.net website within the next few months.

 

Competition

 

Today, incubators and accelerators are a fixture in the tech community and there are more than 200 programs across the US. Venture Track is unique, as it has keenly focused on leveraging the opportunities offered under the JOBS Act to bring Innovators to market as fast as possible.

 

The incubators and accelerators industry is highly competitive, and continues to evolve as a result of changes in regulation, technology, product delivery systems, and the general market and economic climate. Our competitors include other incubators and accelerators, banks, debt funds and specialty and diversified financial services intermediaries that offer lending, leasing, payments, investment, foreign currency exchange, advisory and other financial products and services to our target client base. We also compete with other lenders, such as “marketplace” lenders, peer-to-peer lenders and other non-traditional lenders that have merged in recent years. In addition, we compete with hedge funds and private equity funds. The principal competitive factors in our markets include product offerings, service, pricing, and transaction size and structure.

 

There are many companies who compete directly with our products and services, for example, AngelPad, MuckerLab, TechStars and StartX, etc. These companies may already have an established market in our industry. Most of these companies have significantly greater financial and other resources than us and have been developing their products and services longer than we have been developing ours. Additionally, there are no significant barriers to entry in our industry and new companies may be created that will compete with us and other, more established companies who do not now directly compete with us, may choose to enter our markets and compete with us in the future.

 

  4  

 

 

Intellectual Property

 

Domain Names

 

Venture Track owns various domain names, including but not limited to www.scoocher.com and www.venturetrack.net .

 

Patent

 

Venture Track filed a patent on its Scoocher platform technology with the United States Patent and Trademark Office on March 19, 2014. The application is currently pending.

 

Employees

 

As of July 2016, we employ 1 full-time employee. We plan to hire 6 additional employees within the next 6-12 months.

  

Properties

 

The Company maintains its principal office at 604 Arizona Ave, Santa Monica, CA 90401, pursuant to a month-to-month lease at the rate of $125 per month.

  

RISK FACTORS

 

You should carefully consider the risks described below together with all of the other information included in this report before making an investment decision with regard to our securities. The statements contained in or incorporated into this offering 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, and you may lose all or part of your investment.

 

RISKS RELATED TO OUR BUSINESS

 

We are a development stage company with history of operating losses and cumulative deficit.

 

Our operating subsidiary, Venture Track, has been in existence for approximately two years. Our limited operating history means that there is a high degree of uncertainty in our ability to: (i) find the target start-up companies for the Venture Track program; (ii) raise capital to provide bridge loan to such start-up companies; (iii) respond to competition; or (iv) operate the business, as management has not previously undertaken such actions as a company. Additionally, even if we do implement our business plan, we may not be successful. No assurances can be given as to exactly when, if at all, we will be able to recognize profits high enough to sustain our business. We face all the risks inherent in a new business, including the expenses, difficulties, complications, and delays frequently encountered in connection with conducting operations, including capital requirements. Given our limited operating history, we may be unable to effectively implement our business plan, which would result in a loss of your investment.

 

Adverse economic conditions in the United States and worldwide may negatively impact our results.

 

We are subject to changes in general economic conditions that are beyond our control. During periods of economic slowdown, delinquencies, defaults, and losses, generally increase while collections decrease. These periods may also be accompanied by increased unemployment rates and decreased consumer demand, which negatively impact businesses being lent to, weakening the collectability of the purchase orders we finance, increasing the risk that an event of default from one of our customers will eventuate in a loss. In addition, during an economic slowdown or recession, our servicing costs may increase without a corresponding increase in our finance charge income. Furthermore, our business is significantly affected by monetary and regulatory policies of the U.S. federal government and the US Federal Reserve. Changes in the policies of the institutions are influenced by macroeconomic conditions and other factors that are beyond our control and could have a material adverse effect on us through interest rate changes, costs of compliance with increased regulation, and other factors.

 

The process we use to estimate losses inherent in our credit exposure requires complex judgments, including analysis of individual industries, forecasts of economic conditions and how those economic conditions might impair the ability of our borrowers to repay their facility. The degree of uncertainty concerning economic conditions may adversely affect the accuracy of our estimates, which may, in turn, impact the reliability of the process and the quality of our assets.

  

  5  

 

 

Our financial condition, liquidity, and results of operations depend on the credit performance of the credit facilities we provide to our customers.

 

While our underwriting guidelines were designed to establish that the obligors on the receivables we purchase represent a reasonable credit risk, the receivables we purchase nonetheless are likely to experience higher default rates than a portfolio of obligors comprised of large companies. In the event of a default, the most practical alternative may be to engage in collection action against the obligor or, if permitted under the terms of our agreement, the customer who sold the receivable to us. The realizable value of a receivable may not cover the outstanding account balance and costs of recovery, and if collection of the receivables does not yield sufficient proceeds to repay the receivables in full could result in losses on those receivables.

  

Competition may adversely impact our results.

 

The financial services sector in which we operate is highly competitive and could become even more so, particularly in those segments which are perceived as providing higher growth prospects.  Factors contributing to this include industry deregulation, mergers and acquisitions, changes in customers’ needs and preferences, entry of new participants, development of new distribution and service methods and increased diversification of products by competitors.  For example, changes in the financial services sector have made it possible for non-bank financial institutions to offer products and services traditionally provided by banks, such as automatic payment systems, mortgages and credit cards.

  

The effect of competitive market conditions may have a material adverse effect on our financial performance and position.  For example, increasing competition for customers can lead to compression in our net interest margin, or increased advertising and related expenses to attract and retain customers.

 

The asset backed lending market is served by a variety of entities, including, banks, credit unions, and independent finance companies. Our competitors may provide financing on terms more favorable to customers than we offer. Many of these competitors also have long-standing relationships with potential clients.

 

We anticipate that we will encounter greater competition as we expand our operations.

 

The market for providing loans and other financial services to small to medium size businesses is highly competitive and we expect that competition will increase. Current competitors have significantly greater financial, technical and marketing resources than we do. We expect that more companies will enter this sector of the financial services market. We may not be able to compete successfully against either current or future competitors. Increased competition could result in reduced revenue, lower margins or loss of market share, any of which could significantly harm our business.

  

Changes in interest rates may adversely impact our profitability and risk profile.

 

Interest rate levels and fluctuations in interest rates may directly affect our profitability. As interest rates change, our gross interest rate spread on new facilities either increases or decreases because the rates we charge on the facilities we provide is limited by market and competitive conditions, restricting our ability to pass on increased interest costs to the consumer. Additionally, although the majority of our clients are small to medium businesses and are not highly sensitive to interest rate movement, increases in interest rates may reduce the volume of facilities we originate.

 

We depend on the accuracy and completeness of information about our clients and obligors and any misrepresented information could adversely affect our business, results of operations and financial condition.

 

In deciding whether to enter into other transactions with our clients and their obligors, we rely on information furnished to us by or on behalf of our clients and counterparties, including financial statements and other financial information. We are vulnerable to fraud by our customers and employees. We also rely on representations made by our clients and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent third parties. If any of this information is intentionally or negligently misrepresented, such as a fraudulent invoice, and such misrepresentation is not detected, purchased invoices may be worthless, or worth significantly less than expected. Whether a misrepresentation is made by our client, another party, or one of our employees, we generally bear the risk of loss associated with the misrepresentation. Any such misrepresented information could adversely affect our business, financial condition, and results of operations.

 

Our growth strategies require significant capital investments and may require us to seek external financing, which may not be available on terms favorable to us.

 

Our business operations and growth strategies require substantial capital investments, the availability of which depends on our ability to generate cash flow from operations, borrow funds on satisfactory terms and raise funds in the capital markets. Our ability to arrange for financing to support our capital expenditures and the cost of such financing are dependent on numerous factors, including general economic and capital markets conditions, interest rates and credit availability from banks or other lenders, many of which are beyond our control. In addition, increases in interest rates or the failure to obtain external financing on terms favorable to us will affect our financing costs and our results of operations. We may not be able to obtain financing in amounts or on terms acceptable to us,

 

  6  

 

 

RISKS RELATED TO THE COMPANY

 

There is serious doubt regarding our ability to continue as a going concern.

 

At March 31, 2016, Venture Track had accumulated losses of $115,934. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continued existence is dependent upon its ability to generate sufficient cash flows from operations to support its daily operations as well as provide sufficient resources to retire existing liabilities and obligations on a timely basis. It is the intent of management and significant stockholders to provide sufficient working capital necessary to support and preserve the integrity of the corporate entity. However, no formal commitments or arrangements to advance or loan funds to the Company or repay any such advances or loans exist.

 

We depend on our key management personnel and the loss of their services could adversely affect our business.

 

We place substantial reliance upon the efforts and abilities of Edward C. DeFeudis, our sole director and officer. Though no individual is indispensable, the loss of the services of Mr. DeFeudis could have a material adverse effect on our business, operations, revenues or prospects. We do not maintain key man life insurance on the life of Mr. DeFeudis.

 

We may not be able to effectively control and manage our growth, which would negatively impact our operations.

 

If our business and markets grow and develop it will be necessary for us to finance and manage expansion in an orderly fashion. We may face challenges in managing the expansion of our business and in integrating any acquired businesses with our own. Such eventualities will increase demands on our existing management, workforce and facilities. Failure to satisfy increased demands could interrupt or adversely affect our operations and cause administrative inefficiencies.

  

We may be unable to successfully execute our identified business opportunities or other business opportunities that we determine to pursue.

 

We currently have a limited corporate infrastructure. In order to pursue business opportunities, we will need to continue to build our infrastructure and operational capabilities. Our ability to do any of these successfully could be affected by any one or more of the following factors:

 

  our ability to raise substantial amounts of additional capital if needed to fund the implementation of our business plan;

 

  our ability to execute our business strategy;

 

  the ability of our products to achieve market acceptance;

 

  our ability to manage the expansion of our operations and any acquisitions we may make, which could result in increased costs, high employee turnover or damage to customer relationships;

 

  our ability to attract and retain qualified personnel;

 

  our ability to manage our third party relationships effectively; and

 

  our ability to accurately predict and respond to the rapid market changes in our industry and the evolving demands of the markets we serve.

 

Our failure to adequately address any one or more of the above factors could have a significant impact on our ability to implement our business plan and our ability to pursue other opportunities that arise.

  

The obligations associated with being a public company will require significant resources and management attention, which will increase our costs of operations and may divert focus from our business operations.

 

As a publicly traded company, we are required to file with the SEC periodic reports containing our consolidated financial statements within a specified time following the completion of quarterly and annual periods. As a public company, we incur significant legal, accounting, insurance, and other expenses. Compliance with these reporting requirements and other rules of the SEC will increase our legal and financial compliance costs and make some activities more time consuming and costly. Furthermore, the need to establish the corporate infrastructure demanded of a public company may divert management’s attention from implementing our strategy, which could prevent us from successfully implementing our strategic initiatives and improving our business, results of operations, and financial condition. We have made, and will continue to make, changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a public company. However, we cannot predict or estimate the amount of additional costs we may incur in order to comply with these requirements. We anticipate that these costs will materially increase our total costs and expenses.

 

  7  

 

 

We are required to make significant estimates and assumptions in the preparation of our financial statements and our estimates and assumptions may not be accurate.

 

The preparation of our consolidated financial statements in conformity with generally accepted accounting principles in the United States of America (“GAAP”) requires our management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of income and expense during the reporting periods. We use estimates and assumptions in determining the residual values of delinquent receivables. Critical estimates are made by management in determining, among other things, the allowance for loan losses, amounts of impairment, and valuation of income tax assets or tax refunds. If our underlying estimates and assumptions prove to be incorrect, our financial condition and results of operations may be materially different from that reported in our financial statements. 

 

We may incur significant costs to ensure compliance with United States corporate governance and accounting requirements.

 

We may incur significant costs associated with our company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission. We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly. We also expect that these applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these newly applicable rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

   

RISKS RELATED TO THE SECURITIES

 

There is currently a limited trading market for our common stock and an active, liquid trading market for our common stock may not develop, which could adversely affect the liquidity and price of our common stock.

 

Our common stock is quoted on the OTCQX quotation service. There is currently a limited trading market for our common stock. If an active, liquid trading market does not develop, you may have difficulty selling your shares of common stock at an attractive price, or at all. An inactive market may also impair our ability to raise capital by selling our common stock and may impair our ability to acquire other companies, products or technologies by using our common stock as consideration.

 

The market price of our common stock may be volatile, which could cause the value of an investment in our common stock to decline.

 

The market price of our common stock may fluctuate substantially due to a variety of factors, many of which are beyond our control, including:

 

General market conditions;

 

Domestic and international economic factors unrelated to our performance;

 

Actual or anticipated fluctuations in our quarterly operating results;
     
Changes in or failure to meet publicly disclosed expectations as to our future performance;

 

Downgrades in securities analysts’ estimates of our financial performance or lack of research and reports by industry analysts;
     
Changes in market valuations or earnings of similar companies;
     
Any future sales of our common stock or other securities;

 

Additions or departures of key personnel;

 

Fluctuations in foreign exchange rates;

 

Regulatory developments in Australia affecting us or our competitors; and

 

Release or expiry of transfer restrictions on our outstanding shares. 

 

  8  

 

 

The stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of particular companies. These types of broad market fluctuations may adversely affect the trading price of our common stock. In the past, stockholders have sometimes instituted securities class action litigation against companies following periods of volatility in the market price of their securities. Any similar litigation against us could result in substantial costs, divert management’s attention and resources, and harm our business or results of operations. For example, we are currently operating in, and have benefited from, a protracted period of historically low interest rates that will not be sustained indefinitely, and future fluctuations in interest rates could cause an increase in volatility of the market price of our common stock.

 

Certain provisions of our amended and restated certificate of incorporation may have anti-takeover effects, which could limit the price investors might be willing to pay in the future for our common stock. In addition, Delaware law may inhibit takeovers of us and could limit our ability to engage in certain strategic transactions our board of directors believes would be in the best interests of stockholders.

 

Certain provisions of our amended and restated certificate of incorporation and bylaws could discourage unsolicited takeover proposals that stockholders might consider to be in their best interests. Among other things, our amended and restated certificate of incorporation and bylaws may include provisions that:

 

Do not permit cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates;

 

Limit the ability of our stockholders to nominate candidates for election to our board of directors;

 

Authorize the issuance of “blank check” preferred stock without any need for action by stockholders; and

 

Limit the ability of stockholders to call special meetings of stockholders. 

 

The foregoing factors, as well as the significant common stock ownership by Hugh Evans, could impede a merger, takeover, or other business combination or discourage a potential investor from making a tender offer for our common stock, which, under certain circumstances, could reduce the market value of our common stock.

  

In addition, Section 203 of the Delaware General Corporation Law (the “DGCL”), generally affects the ability of an “interested stockholder” to engage in certain business combinations, including mergers, consolidations, or acquisitions of additional shares, for a period of three years following the time that the stockholder becomes an “interested stockholder.” An “interested stockholder” is defined to include persons owning directly or indirectly 15% or more of the outstanding voting stock of a corporation.

 

You will experience dilution of your ownership interest because of the future issuance of additional shares of our common stock and our preferred stock.

 

In the future, we may issue our authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of our present stockholders. We may also issue additional shares of our common stock or other securities that are convertible into or exercisable for common stock in connection with hiring or retaining employees or consultants, future acquisitions, future sales of our securities for capital raising purposes, or for other business purposes. The future issuance of any such additional shares of our common stock or other securities may create downward pressure on the trading price of our common stock. There can be no assurance that we will not be required to issue additional shares, warrants or other convertible securities in the future in conjunction with hiring or retaining employees or consultants, future acquisitions, future sales of our securities for capital raising purposes or for other business purposes, including at a price (or exercise prices) below the price at which shares of our common stock are trading.

 

Our common stock is considered a penny stock, which may be subject to restrictions on market ability, so you may not be able to sell your shares.

 

Our common stock is considered a penny stock, subject to the penny stock rules adopted by the SEC that require brokers to provide extensive disclosure to their customers prior to executing trades in penny stocks. These disclosure requirements may cause a reduction in the trading activity of our common stock, which in all likelihood would make it difficult for our shareholders to sell their securities.

 

Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system). Penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. The broker-dealer must also 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. These requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security that becomes subject to the penny stock rules. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our securities, which could severely limit the market price and liquidity of our securities. These requirements may restrict the ability of broker-dealers to sell our common stock and may affect your ability to resell our common stock.

 

  9  

 

 

Our executive officers and directors will continue to beneficially own the majority of our outstanding Common Stock.

 

As of the date of this Report, our executive officers and directors beneficially own approximately 73% of our outstanding common stock, all of which are beneficially owned by our sole director and officer, Edward C. DeFeudis. As a result, Mr. DeFeudis may have substantial influence over all matters submitted to shareholders for approval.

 

We do not expect to pay dividends.

 

We have never declared or paid any cash dividends or distributions on our capital stock. We currently intend to retain our future earnings, if any, to support operations and to finance expansion and therefore we do not anticipate paying any cash dividends on our common stock in the foreseeable future.

 

The declaration, payment and amount of any future dividends will be made at the discretion of the board of directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors as the board of directors considers relevant. There is no assurance that future dividends will be paid, and, if dividends are paid, there is no assurance with respect to the amount of any such dividend. If the Company does not pay dividends, the Company’s common stock may be less valuable because a return on an investor’s investment will only occur if the Company’s stock price appreciates.

 

If we fail to establish and maintain an effective system of internal control, we may not be able to report our financial results accurately or to prevent fraud. Any inability to report and file our financial results accurately and timely could harm our reputation and adversely impact the trading price of our common stock.

 

Effective internal control is necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation with investors may be harmed. As a result, our small size and any current internal control deficiencies may adversely affect our financial condition, results of operation and access to capital. We have not performed an in-depth analysis to determine if historical un-discovered failures of internal controls exist, and may in the future discover areas of our internal control that need improvement.

  

Management’s Discussion And Analysis Of Financial Condition

AND RESULTS Of Operations

 

This Current Report on Form 8-K contains forward-looking statements within the meaning of the federal securities laws. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as “anticipate,” “expect,” “intend,” “plan,” “will,” “we believe,” “management believes” and similar language. Except for the historical information contained herein, the matters discussed in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this Current Report are forward-looking statements that involve risks and uncertainties. The factors listed in the section captioned “Risk Factors,” as well as any cautionary language in this Current Report, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from those projected. Except as may be required by law, we undertake no obligation to update any forward-looking statement to reflect events after the date of this Current Report on Form 8-K.

 

The following management’s discussion and analysis is intended to provide additional information regarding the significant changes and trends which influenced our financial performance for the quarters ended March 31, 2016 and 2015, and the years ended December 31, 2015 and 2014. This discussion should be read in conjunction with the audited financial statements and notes as set forth in this Report.

 

Our Business

 

Venture Track is a development stage company and was originally incorporated in the state of Delaware in February 2014 as Songstress, Inc. The Company changed its name in May 2015 to Scoocher, Inc. and then to Venture Track, Inc. in February 2016. Venture Track focused on app development and deployment. Venture Track intends to offer an innovation accelerator program (the “Venture Track Program”) designed to provide early-stage technology companies (the “Innovators”) with bridge loans, support in all areas of business development, and access to equity crowdfunding as designated under the JOBS Act.

 

Venture Track was founded by Edward C. DeFeudis, a serial entrepreneur and venture investor, with 20-plus years of experience in the financial industry. Since 1995, he has helped launch numerous private and public companies, including Wiki Technologies, Inc., and has received major financing commitments to help fund companies, startups and product launches. WikiTechnologies, Inc. is a technology company dedicated to making financial transactions simple, secure, social and affordable. WikiTechnologies is comprised of (i) WikiPay®, a Money Services Business, that provides a simple, low-cost alternative to existing mobile and online money transfer and payment solutions; and (ii) WikiLoan®, a low-cost peer-to-peer lending solution. The apps use industry-leading privacy and payment security systems. Throughout his career, Mr. DeFeudis has primarily been engaged in the development of strategic partnerships and financial strategies.

 

  10  

 

 

Through Venture Track, Mr. DeFeudis is leveraging his experience and resources in capital markets and Internet marketing to provide an innovative accelerator program and crowdfunding platform for early-stage disruptive technology companies.

 

Venture Track focuses on financing, developing, and deploying apps. We own www.scoocher.com, an online content monetization engine, and have an additional app in development. The Company’s initial focus is to develop and deploy these apps as in-house projects (“Phase 1”).

 

The Company recognizes the unique opportunity that exists in today’s app market. There are thousands of apps that have been financed, built and deployed, but the founders of these apps do not possess the wherewithal to market the apps successfully. In many cases, the apps are available for sale at a fraction of the development cost. It is the Company’s intention to identify, purchase and deploy select apps with the greatest market potential (“Phase 2”).

 

The Venture Track Program first aims to fund the launch of revenue ready Innovators through bridge loans. Then the Venture Track Program aims to market the apps, determine the true customer acquisition cost, fine-tune their projections and use of proceeds, and set them on a track for a public offering facilitated through equity crowdfunding. We intend to provide office space to Innovators with receptionist coverage, mail services, conference rooms, as well as access to on-site legal and accounting, advertising and marketing services, networking events, investor presentations, business plan competitions, and more (“Phase 3”).

 

Plan of Operation

 

We have the following short-term goals for our business operations:

 

  Raise capital to fund operations and provide bridge loans;
     
  Attract high-performing talent; and

 

  Finance high performance/profile Innovators that grow our brand and bottom-line.

 

We have the following long-term goals for our business operations:

 

  Build our brand to become a market leader;
     
  Leverage partners that allow us to provide more value than peers; and

 

  Continuously innovate to deliver value to our customers.

 

We intend to establish a culture recognized for excellence, attract high performing team members and execution will be the foundation of which we will grow our company.

 

In order to move forward it is critical that we raise capital to fund our operations. Raising capital is our primary goal and we are focusing most of our attention to identify prospective investors and strategic partners.

     

If we do not obtain additional funding, we will continue to operate on a reduced budget until such time as more capital is raised. 

  

We are focused on securing $2-6 million in financing, which would accelerate our business plan and allow us to hire up to 6 to 8 more staff members, increase our office space and operations, and increase our advertising and marketing budget, all of which would directly affect the performance and business operation of the company.

 

Results of Operations

 

Comparison of results of operations for the three months ended March 31, 2016, as compared to March 31, 2015

 

Revenues

 

The Company has not generated any revenue for the three months ended March 31, 2016 and 2015.

 

Operating Expenses

 

Our expenses during the three months ended March 31, 2016 and 2015 consisted of general and administrative expenses in the amount of $5,606 and $5,343, respectively.

 

  11  

 

 

Net Loss

 

We are currently operating at a loss and we have a net loss of $5,606 for the three months ended March 31, 2016 as compared to $8,343 for the three months ended March 31, 2015. The decrease in net loss was primarily contributed to lower development expenses.

 

Comparison of results of operations for the year ended December 31, 2015, as compared to December 31, 2014

 

Revenues

 

The Company has not generated any revenue for the years ended December 31, 2015 and 2014.


Operating Expenses

 

Our expenses during the year ended December 31, 2015 and 2014 consisted of general and administrative expenses in the amount of $10,740 and $82,654, respectively. The higher expenses in fiscal year December 31, 2014 were mainly incurred in relation to developing our web technology and establishing the necessary infrastructure to launch our services.  

 

Net Loss

 

We are currently operating at a loss and we have a net loss of $18,538 for the year ended December 31, 2015 as compared to $91,790 for the year ended December 31, 2014. The decrease in net loss was primarily contributed to lower development expenses.

  

Liquidity and Capital Resources

 

As of March 31, 2016, we had cash of $77.  Due to our limited history with limited revenue, we require additional funds to continue to operate. We will continue to operate on a reduced budget until such time as more capital is raised.  We have no written agreement to legally insure that funding will be provided for our operations.  Although we have no commitments for capital, other than verbal assurances, we may raise additional funds through:

 

  -   public offerings of equity, securities convertible into equity or debt,

 

  -   private offerings of securities or debt, or other sources.

 

At this time, we have not identified any sources of additional financing. Upon developing a trading market for the common stock we intend to seek additional sources of financing through hedge funds and/or licensed broker-dealers, however, given our precarious financial condition and our lack of business, a trading market may not develop in the foreseeable future.

 

We have no written agreement to legally insure that funding will be provided for our operations. Although we have no commitments for capital, other than verbal assurances, we may attempt to raise additional funds through public offerings of equity, securities convertible into equity or debt, and private offerings of securities or debt, as our previous efforts raised $110,000.  Given our history of raising money, there is no guarantee that we will be successful in obtaining funds through public or private offerings in order to fund our operations. Our investors should assume that any additional funding will cause substantial dilution to current stockholders. In addition, we may not be able to raise additional funds on favorable terms, if at all.

 

As to the following serious conditions:

 

1)   As of March 31, 2016, we had cash of $77;

 

2)   We received $100,000 from the sale of promissory notes in fiscal 2014;

 

3)   Our auditor has determined that based on our financial condition there is substantial doubt as to whether we can continue to operate as a going concern.

 

To date, we have been able to secure $110,000 that we raised through convertible promissory notes over the past two years. We may also rely on sources to borrow funds in the form of loans.

 

Our investors should assume that any additional funding may cause substantial dilution to current stockholders. In addition, we may not be able to raise additional funds on favorable terms, if at all.

 

  12  

 

 

Going Concern

 

The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. At March 31, 2016, the Company had accumulated losses of $115,934. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continued existence is dependent upon its ability to generate sufficient cash flows from operations to support its daily operations as well as provide sufficient resources to retire existing liabilities and obligations on a timely basis. It is the intent of management and significant stockholders to provide sufficient working capital necessary to support and preserve the integrity of the corporate entity. However, no formal commitments or arrangements to advance or loan funds to the Company or repay any such advances or loans exist.

 

Critical Accounting Policies

 

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

A summary of significant accounting policies is included in Note 1 to the audited financial statements for the year ended December 31, 2015. Management believes that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our Company's operating results and financial condition.

 

Recently Issued Accounting Pronouncements

 

We do not believe that any recently issued accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.

 

Off Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities” (SPEs).

  

MANAGEMENT

 

Directors and Executive Officers

 

The following table sets forth certain information regarding our sole director and officer as of the date of this report:

 

Name   Age   Position
Edward C. DeFeudis   43   President, Chief Executive Officer, Chief Financial Officer and Chairman of the Board of Directors

 

A summary description of the principal occupation and business experience of our sole director and officer for at least the last five years, is fully described in Item 5.02, which is incorporated herein by reference.

  

During the past five years none of our officers and directors has been involved in any legal proceedings that are material to an evaluation of their ability or integrity as director or an executive officer of us, and none of them have been affiliated with any company that been involved in bankruptcy proceedings.

 

Our Board of Directors

 

Our directors hold office until the next annual meeting of our shareholders or until their successors are duly elected and qualified. There have been no material changes to the procedures by which stockholders can nominate directors.

  

  13  

 

 

Director Independence

 

We are not subject to listing requirements of any national securities exchange or national securities association and, as a result, we are not at this time required to have our Board comprised of a majority of “independent directors,” nor is our sole director considered to be independent under the definition of independence used by any national securities exchange or any inter-dealer quotation system.

 

Leadership Structure

 

Our chairman of the board of directors also serves as our sole officer. Our board of directors does not have an independent director. Our board of directors has determined that its leadership structure is appropriate and effective in light of the limited number of individuals in our management team and that we currently only have one director. Our board of directors believes having a single individual serve as both chairman and chief executive officer provides clear leadership, accountability and promotes strategic development and execution as our company executes our strategy. Our board of directors also believes that there is a high degree of transparency among the board of directors and company management.

 

Risk Management

 

Our board of directors oversees the risk management of our company and each of our subsidiaries. Our board of directors regularly reviews information provided by management in order for our board of directors to oversee the risk identification, risk management and risk mitigation strategies. Our board considers, as appropriate, risks among other factors in reviewing our strategy, business plan, budgets and major transactions.

 

Committees of Our Board of Directors

 

The Board of Directors has no nominating, or compensation committee, and does not have an “audit committee financial expert”. Our board of directors currently acts as our audit committee. There are no family relationships among members of management or the Board of Directors of the Company.

 

Code of Ethics

 

We have adopted a code of ethics that applies to our Chief Executive Officer and Chief Financial Officer containing written standards that are reasonably designed to deter wrongdoing and to promote:

 

  Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships

 

  Full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with, or submits to, the Securities & Exchange Commission and in other public communications made by the Company

 

  Compliance with applicable governmental law, rules and regulations

 

  The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and

 

  Accountability for adherence to the code

   

EXECUTIVE COMPENSATION

 

Venture Track Summary Compensation

 

The following table sets forth information for Venture Track’s most recently completed fiscal year concerning the compensation of Edward C. DeFeudis, sole officer of Company, during the most recently completed fiscal years ended December 31, 2015 and 2014.

 

Name and Principal Position   Year     Salary
($)
    Option
Awards
($) (1)
    All Other
Compensation
($)
    Total
($)
 
                               
Edward C. DeFeudis (1)     2015       --       --     $ 8,427     $ 8,427  
President, CEO & CFO     2014       --       --     $ 76,592     $ 76,592  

 

(1) Venture Track paid $8,427 and $76,592 for consulting services to Mr. DeFeudis, the President of Venture Track, for the year ended December 31, 2015 and for the period from February 28, 2014 through December 31, 2014, respectively.

 

No retirement, pension, profit sharing, stock option or insurance programs or other similar programs have been adopted by us for the benefit of our employees. We had no options outstanding as of December 31, 2013.

 

  14  

 

 

Compensation of Directors

 

Directors are permitted to receive fixed fees and other compensation for their services as directors. The Board of Directors has the authority to fix the compensation of directors. No amounts have been paid to, or accrued to, directors in such capacity.

 

Employment Agreements

 

We do not have any employment agreements with our officers or directors currently.

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

  

The following table provides the names and addresses of each person known to us to own more than 5% of our outstanding shares of common stock as of July 7, 2016, including shares issuable upon conversion of the Series C Preferred Stock, and by the officers and directors, individually and as a group. Except as otherwise indicated, all shares are owned directly and the shareholders listed possess sole voting and investment power with respect to the shares shown.

 

    Title of Class  
    Series C Convertible
Preferred Stock
    Common Stock        
Name and Address of Beneficial Owner (1)   Number of shares Beneficially Owned     % of Class     Number of Shares Beneficially Owned     % of Class     Total Voting Power (2)  
Directors and Officers                              
Edward C. DeFeudis (3)     4,164       92.53 %     2,919,572       50.3 %     73.08 %
All current directors and officers as a group (1 person)     4,164       92.53 %     2,919,572       50.3 %     73.08 %
                                         
5% shareholders                                        
Spider Investments, LLC (3)     2,082       46.27 %     1,429,786       25.15 %     36.31 %

 

(1) Except as otherwise indicated, the persons named in this table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws where applicable and to the information contained in the footnotes to this table. Unless otherwise indicated, the address of the beneficial owner is Source Financial, Inc., 604 Arizona Avenue Santa Monica, CA 90401.

 

(2) Calculated pursuant to rule 13d-3(d) of the Exchange Act. Beneficial ownership is calculated based on 5,804,317 shares of common stock and 4,500 shares of Series C Preferred Stock issued and outstanding on a fully diluted basis as of July 7, 2016. Each share of Series C Preferred Stock is convertible into 1531.80 shares of common stock. Holders of the Series C Preferred Stock are entitled to vote on all matters submitted to the Company’s stockholders and are entitled to such number of votes as is equal to the aggregate number of shares of common stock into which such holder’s shares of Series C Preferred Stock are convertible. Under Rule 13d-3(d) of the Exchange Act, shares not outstanding which are subject to options, warrants, rights or conversion privileges exercisable within 60 days are deemed outstanding for the purpose of calculating the number and percentage owned by such person, but are not deemed outstanding for the purpose of calculating the percentage owned by each other person listed.
   
(3) Includes 1,489,786 shares of common stock and 2,082 shares of Series C Preferred Stock held directly by Mr. DeFeudis, and 1,429,786 shares of common stock and 2,082 shares of Series C Preferred Stock held by Spider Investments, LLC, which Mr. DeFeudis is the Managing Member. Mr. DeFeudis may be deemed to have voting and dispositive power with respect to and have beneficial ownership of the shares owned by Spider Investments, LLC.

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,

AND DIRECTOR INDEPENDENCE

 

In 2014, Venture Track received advances of $100,000 from an affiliate of Venture Track. In 2015, Venture Track received an additional $10,000 in advances. These advances have an interest rate of 12% per annum. As of December 31, 2015 and 2014, the interest accrued is $0 and $9,136, respectively. On August 21, 2015, Venture Track issued 110,000 shares of its common stock for the advances and the interest was forfeited.

 

Venture Track paid $8,427 and $76,592 for consulting services to the president of Venture Track for the year ended December 31, 2015 and for the period from February 28, 2014 through December 31, 2014, respectively.

 

On February 9, 2016, Venture Track purchased from an affiliate of the company, all rights, title and interest in and to the development of the apps and the business plan of Venture Track, in exchange for the issuance of 1,400,000 shares of its common stock for a total value of $18.

 

  15  

 

 

Venture Track receives advances from an affiliate of the company for operation expenses. These advances, which are due on demand, have an interest rate of 12% per annum and have no collateral. As of March 31, 2016, the Company has advances outstanding of $1,005.

 

On March 23, 2016, Venture Track entered into a promissory note agreement of $5,000 with a shareholder. The note payable, which is due on September 23, 2016, has an interest rate of 12% per annum and has no collateral. As of March 31, 2016, the company has an outstanding balance of $5,000.

 

DESCRIPTION OF SECURITIES

 

General

 

Our amended and restated certificate of incorporation authorizes us to issue 12,000,000 shares of common stock, $0.001 par value per share, and 10,000 shares of preferred stock, $0.01 par value per share. As of July 7, 2016, we had outstanding 5,804,317 shares of common stock and 4,500 shares of Series C Preferred Stock.

 

Common Stock

 

Voting Rights

 

Holders of common stock will be entitled to one vote per share on all matters to be voted upon by the stockholders. The holders of common stock will not have cumulative voting rights in the election of directors.

 

Dividend Rights

 

Holders of common stock will be entitled to ratably receive dividends if, as and when declared from time to time by our board of directors at its own discretion out of funds legally available for that purpose, after payment of dividends required to be paid on outstanding preferred stock, if any. Under Delaware law, we can only pay dividends either out of “surplus” or out of the current or the immediately preceding year’s net profits. Surplus is defined as the excess, if any, at any given time, of the total assets of a corporation over its total liabilities and statutory capital. The value of a corporation’s assets can be measured in a number of ways and may not necessarily equal their book value.

  

Liquidation Rights

 

Upon liquidation, dissolution or winding up, the holders of common stock will be entitled to receive ratably the assets available for distribution to the stockholders after payment of all liabilities and accrued but unpaid dividends and liquidation preferences on any outstanding preferred stock.

 

Other Matters

 

The common stock will have no preemptive or conversion rights pursuant to the terms of our amended and restated certificate of incorporation and bylaws. There will be no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of our common stock will be fully paid and non-assessable, and the shares of our common stock offered in this offering, upon payment and delivery in accordance with the underwriting agreement, will be fully paid and non-assessable.

 

Preferred Stock

 

Pursuant to our amended and restated certificate of incorporation, our board of directors from time to time by resolution (and without further stockholder approval) may authorize the issuance of shares of preferred stock, in one or more series, with the designations of the series, the voting rights of the shares of the series (if any), the powers, preferences and relative, participation, optional or other special rights (if any), and any qualifications, limitations or restrictions thereof set forth in the resolution authorizing the series, subject to certain limitations. Each series will consist of that number of shares as will be stated and expressed in the certificate of designations providing for the issuance of the stock of the series.

 

Series B Preferred Stock

 

On the Closing Date, 5,000 shares of Series B Preferred Stock were cancelled in connection with the Spinout transaction.

 

  16  

 

 

Series C Preferred Stock

 

On July 6, 2016, the Company filed the certificate of designation of the Series C Preferred Stock with the Secretary of State of the State of Delaware. The newly designation class of preferred stock consists of 4,500 shares. Each holder of the Series C Preferred Stock may, from time to time and at any time, convert any or all of such holder’s shares of Series C Preferred Stock into fully paid and non-assessable shares of common stock of the Company in an amount equal to the number of shares of Series C Preferred Stock to be converted multiple by 1531.80. Holders of the Series C Preferred Stock are entitled to vote on all matters submitted to the Company’s stockholders and are entitled to such number of votes as is equal to the aggregate number of shares of common stock into which such holder’s shares of Series C Preferred Stock are convertible. In any liquidation, holders of our Series B Preferred will receive dividend preference and liquidation preference.

 

In connection with our acquisition of Venture Track, we issued 4,500 shares of our Series C Preferred Stock to the Venture Track Shareholders.

 

Certain Anti-Takeover Provisions of Delaware Law and our Amended and Restated Certificate of Incorporation and Bylaws

 

Certain provisions of Delaware law and certain provisions that may be included in our amended and restated certificate of incorporation and bylaws summarized below may be deemed to have an anti-takeover effect and may delay, deter or prevent a tender offer or takeover attempt that a stockholder might consider to be in its best interests, including attempts that might result in a premium being paid over the market price for the shares held by stockholders.

 

Preferred Stock

 

Our amended and restated certificate of incorporation contains provisions that permit our board of directors to issue, without any further vote or action by the stockholders, shares of preferred stock in one or more series and, with respect to each such series, to fix the number of shares constituting the series and the designation of the series, the voting rights (if any) of the shares of the series, and the powers, preferences and relative, participation, optional and other special rights, if any, and any qualifications, limitations or restrictions, of the shares of such series.

  

Vacancies

 

Vacancies on our board of directors may be filled only by election at an annual meeting or at a special meeting of stockholders called for that purpose, subject to the rights of the Board of Directors to designate replacements to fill vacancies created by the departure of directors.

 

No Cumulative Voting

 

Our amended and restated certificate of incorporation provides that stockholders do not have the right to cumulative votes in the election of directors.

 

Business Combinations with Interested Stockholders

 

We are subject to Section 203 of the Delaware General Corporation Law (“DGCL”), which generally prohibits a publicly held Delaware corporation from engaging in a business combination, such as a merger, with a person or group owning 15% or more of the corporation’s voting stock, for a period of three years following the date on which the person became an interested stockholder, unless (with certain exceptions) the business combination or the transaction in which the person became an interested stockholder is approved in accordance with Section 203.

 

Limitation on Liability and Indemnification of Directors and Officers

 

The DGCL authorizes corporations to limit or eliminate the personal liability of directors to corporations and their stockholders for monetary damages for breaches of directors’ fiduciary duties. Our amended and restated certificate of incorporation includes a provision that eliminates the personal liability of directors for monetary damages for breach of fiduciary duty as a director, except:

 

  for breach of duty of loyalty;

 

  for acts or omissions not in good faith or involving intentional misconduct or knowing violation of law;

 

  under Section 174 of the DGCL (unlawful dividends); or

 

  for transactions from which the director derived an improper personal benefit.

 

Our amended and restated certificate of incorporation and bylaws provide that we must indemnify our directors and officers to the fullest extent authorized by the DGCL. We are expressly authorized to, and do, carry directors’ and officers’ insurance providing coverage for our directors, officers and certain employees for some liabilities. We believe that these indemnification provisions and insurance are useful to attract and retain qualified directors and executive directors.

 

  17  

 

 

The limitation on liability and indemnification provisions in our amended and restated certificate of incorporation and bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duty. These provisions may also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit our stockholders and us. In addition, your investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. 

 

Transfer Agent and Registrar

 

Standard Registrar & Transfer Co., Inc., 12528 S 1840 E, Draper, Utah 84020 is the transfer agent and registrar for the common stock.

  

Penny Stock Regulations

 

The Securities and Exchange Commission has adopted regulations, which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share. Our common stock, when and if a trading market develops, may fall within the definition of penny stock and be subject to rules that impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000, or annual incomes exceeding $200,000 individually, or $300,000, together with their spouse).

 

For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser’s prior written consent to the transaction. Additionally, for any transaction, other than exempt transactions, involving a penny stock, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the Securities and Exchange Commission relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Consequently, the “penny stock” rules may restrict the ability of broker-dealers to sell our common stock and may affect the ability of investors to sell their Common Stock in the secondary market.

 

Dividend Policy

 

Any future determination as to the declaration and payment of dividends on shares of our common stock will be made at the discretion of our board of directors out of funds legally available for such purpose. We are under no contractual obligations or restrictions to declare or pay dividends on our shares of common stock. In addition, we currently have no plans to pay such dividends. Our board of directors currently intends to retain all earnings for use in the business for the foreseeable future. See “Risk Factors.”

 

Equity Compensation Plan Information

 

Currently, there is no equity compensation plan in place.

 

LEGAL PROCEEDINGS

 

There are no material proceedings to which any director or officer, or any associate of any such director or officer, is a party that is adverse to our Company or any of our subsidiaries or has a material interest adverse to our Company or any of our subsidiaries. No director or executive officer has been a director or executive officer of any business, which has filed a bankruptcy petition, or had a bankruptcy petition filed against it during the past ten years. No director or executive officer has been convicted of a criminal offense or is the subject of a pending criminal proceeding during the past ten years. No director or executive officer has been the subject of any order, judgment or decree of any court permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities during the past ten years. No director or officer has been found by a court to have violated a federal or state securities or commodities law during the past ten years.

 

In addition, there are no material proceedings to which any affiliate of our Company, or any owner of record or beneficially of more than five percent of any class of voting securities of our Company, is a party that is adverse to our Company or any of our subsidiaries or has a material interest adverse to our Company or any of our subsidiaries. Currently there are no legal proceedings pending or threatened against us. We are not currently involved in any litigation that we believe could have a materially adverse effect on our financial condition or results of operations.

 

There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our Company, our common stock, any of our subsidiaries or of our Company’s or our Company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

  18  

 

 

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

  

RECENT SALES OF UNREGISTERED SECURITIES

 

Reference is made to Item 3.02 of this Current Report on Form 8-K for a description of recent sales of unregistered securities, which is hereby incorporated by reference.

 

INDEMNIFICATION OF OFFICERS AND DIRECTORS

 

Section 102(b)(7) of the Delaware General Corporation Law (the “DGCL”) permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (1) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (2) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (3) under Section 174 of the DGCL (regarding, among other things, the payment of unlawful dividends or unlawful stock purchases or redemptions) or (4) for any transaction from which the director derived an improper personal benefit. Our amended and restated certificate of incorporation provides for such limitation of liability.

 

Section 145(a) of the DGCL empowers a corporation to indemnify any director, officer, employee or agent, or former director, officer, employee or agent, who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation), by reason of such person’s service as a director, officer, employee or agent of the corporation, or such person’s service, at the corporation’s request, as a director, officer, employee or agent of another corporation or enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding; provided that such director or officer acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the corporation; and, with respect to any criminal action or proceeding, provided that such director or officer had no reasonable cause to believe his conduct was unlawful.

  

Section 145(b) of the DGCL empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another enterprise, against expenses (including attorneys’ fees) actually and reasonably incurred in connection with the defense or settlement of such action or suit; provided that such director or officer acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification may be made in respect of any claim, issue or matter as to which such director or officer shall have been adjudged to be liable to the corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such director or officer is fairly and reasonably entitled to indemnity for such expenses that the court shall deem proper. Notwithstanding the preceding sentence, except as otherwise provided in the by-laws, we shall be required to indemnify any such person in connection with a proceeding (or part thereof) commenced by such person only if the commencement of such proceeding (or part thereof) by any such person was authorized by the Board of Directors.

 

In addition, our amended and restated certificate of incorporation provides that we must indemnify our directors and officers to the fullest extent authorized by law. We are also expressly required to advance certain expenses to our directors and officers and carry directors’ and officers’ insurance providing indemnification for our directors and officers for some liabilities. We believe that these indemnification provisions and the directors’ and officers’ insurance are useful to attract and retain qualified directors and executive officers.

  

Item 3.02 Unregistered Sales of Equity Securities.

 

The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference.

 

The 3,089,360 shares of our common stock and 4,500 shares of Series C Preferred Stock issued to the Venture Track Shareholders in connection with the share exchange transaction were offered and sold to such persons in a private transaction in reliance upon exemptions from registration pursuant to Section 4(a)(2) of the Securities Act. Our reliance on Section 4(a)(2) of the Securities Act was based upon the following factors: (a) the issuance of the securities was an isolated private transaction by us which did not involve a public offering; (b) there were only a limited number of offerees; (c) there were no subsequent or contemporaneous public offerings of the securities by us; (d) the securities were not broken down into smaller denominations; and (e) the negotiations for the sale of the stock took place directly between the offeree and us. 

 

  19  

 

 

Item 4.01 Changes in Registrant’s Certifying Accountant.

 

(a) Dismissal of Independent Registered Public Accounting Firm

 

On June 30, 2016, our board of directors dismissed Lichter, Yu and Associates, Inc. (“LYA”), as the Company’s independent registered public accounting firm.

 

LYA’s report on the financial statements for the fiscal years ended June 30, 2015 and 2014, contained no adverse opinion or disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principle.

 

During the fiscal years ended June 30, 2015 and 2014, and in the subsequent interim period through June 30, 2016, the date of dismissal of LYA, there were no disagreements with LYA on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of LYA, would have caused them to make reference to the subject matter of the disagreements in its reports on the financial statements for such year. During the fiscal years ended June 30, 2015 and 2014, and in the subsequent interim period through June 30, 2016, the date of dismissal of LYA there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.

 

We have provided a copy of the above disclosures to LYA and requested LYA to provide it with a letter addressed to the U.S. Securities and Exchange Commission stating whether or not LYA agrees with the above disclosures. A copy of LYA’s response letter is attached hereto as Exhibit 16.1.

 

(b) New Independent Registered Public Accounting Firm

 

On June 30, 2016, our board of directors approved the engagement of LBB & Associates Ltd., LLP (“LBB”), as the Company’s new independent registered public accounting firm.

 

During the fiscal years ended June 30, 2015 and 2014, and the subsequent interim period prior to the engagement of LBB, the Company has not consulted LBB regarding (i) the application of accounting principles to any specified transaction, either completed or proposed; (ii) the type of audit opinion that might be rendered on the Company’s financial statements, and either a written report was provided to the registrant or oral advice was provided that the new accountant concluded was an important factor considered by the registrant in reaching a decision as to the accounting, auditing or financial reporting issue; or (iii) any matter that was either the subject of a disagreement (as defined in Item 304(o)(1)(iv)) or a reportable event (as defined in Item 304(a)(1)(v)).

  

Item 5.01 Changes in Control of Registrant.

 

Reference is made to the disclosure set forth under Items 1.01, 1.02 and 5.02 of this report, which disclosure is incorporated herein by reference.

 

As explained more fully in Item 1.01, in connection with the Share Exchange Agreement by and among the Company, Venture Track and the Venture Track Shareholders, the Company agreed to exchange the outstanding common stock of Venture Track held by the Venture Track Shareholders for 3,089,360 shares of common stock and 4,500 shares of Series C Preferred Stock of the Company. At the Closing Date, there were approximately 5,804,317 shares of common stock and 4,500 shares of Series C Preferred Stock, convertible into 6,893,100 shares of common stock of the Company, issued and outstanding. As such, immediately following the share exchange transaction, the Venture Track Shareholders held approximately 80% of the total voting power of our common stock.

 

In addition, on the Closing Date, Hugh Evans resigned as the President, Chief Executive Officer and Director of the Company. Brian M. Pullar resigned as Chief Financial Officer of the Company. Klaus Selinger and John Wolfgang resigned from the director position with the Company. Effective on the same date, Edward C. DeFeudis was appointed as the President, Chief Executive Officer, Chief Financial Officer and Director of the Company. 

  

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

 

Resignation of Directors and Officers

 

Effective on the Closing Date, Hugh Evans resigned as the President, Chief Executive Officer and Director of the Company. Brian M. Pullar resigned as Chief Financial Officer of the Company. Klaus Selinger and John Wolfgang resigned from the director position with the Company. Their resignations are not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

 

  20  

 

 

Appointment of Directors and Officers

 

Effective on the Closing Date, Mr. Edward C. DeFeudis was appointed as the President, Chief Executive Officer, Chief Financial Officer and Director of the Company. A discussion of Mr. DeFeudis’ relevant business experience is as follows.

 

Edward C. DeFeudis, President, Chief Executive Officer, Chief Financial Officer and Director, age 43.

 

Mr. DeFeudis, is the CEO and founder of Venture Track, Inc. since 2014 and the Co-Founder and President of WikiTechnologies, Inc. since 2008. He is a serial entrepreneur and angel investor, with investments focused on high-tech, biotech and finance industries. He has more than eight years of experience in the payments and prepaid industries and more than 20 years of financial experience, which included employment at both Merrill Lynch and Oppenheimer Securities. Throughout his career, he was primarily engaged in the development of strategic partnerships and financial strategy. Mr. DeFeudis graduated from University of New Hampshire in 1995 with a BA degree in Political Science.

   

Family Relationships

 

None of our officers have a family relationship with any of the other current officers or directors of the Company.

 

Related Party Transactions

 

There are no related party transactions reportable under Item 5.02 of Form 8-K and Item 404(a) of Regulation S-K.

 

Family Relationships

 

None.

 

Employment Agreements

 

We currently have no employment agreements with executive officers.

  

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

 

Series C Preferred Stock

 

On July 6, 2016, the Company filed the certificate of designation of the Series C Preferred Stock with the Secretary of State of the State of Delaware. The newly designation class of preferred stock consists of 4,500 shares. Each holder of the Series C Preferred Stock may, from time to time and at any time, convert any or all of such holder’s shares of Series C Preferred Stock into fully paid and non-assessable shares of common stock of the Company in an amount equal to the number of shares of Series C Preferred Stock to be converted multiple by 1531.80. Holders of the Series C Preferred Stock are entitled to vote on all matters submitted to the Company’s stockholders and are entitled to such number of votes as is equal to the aggregate number of shares of common stock into which such holder’s shares of Series C Preferred Stock are convertible. In any liquidation, holders of our Series B Preferred will receive dividend preference and liquidation preference.

 

In connection with our acquisition of Venture Track, we issued 4,500 shares of our Series C Preferred Stock to the Venture Track Shareholders.

 

Change in Fiscal Year

 

On June 30, 2016, the Board approved a change of the Company’s fiscal year end from June 30 to December 31. This change was effectuated in connection with the share exchange transaction described in Item 1.01 above.

 

Item 9.01 Financial Statement and Exhibits.

 

(a) Financial Statements of Business Acquired.

 

Filed herewith as Exhibit 99.1 to this Report and incorporated herein by reference are the Audited Financial Statements for the year ended December 31, 2015 and 2014 for Venture Track, Inc.

 

Filed herewith as Exhibit 99.2 to this Report and incorporated herein by reference are the Unaudited Financial Statements for the three months ended March 31, 2016 and 2015 for Venture Track, Inc.

 

  21  

 

 

(d) Exhibits.

 

Exhibit    
Number   Description
2.1 *   Share Exchange Agreement, dated as of June 30, 2016, by and among Source Financial, Inc., Moneytech Group Pty Ltd. and certain shareholders of the Company.
     
2.2 *   Share Exchange Agreement, dated as of June 30, 2016, by and among Source Financial, Inc., Venture Track, Inc. and the shareholders of Venture Track, Inc.
     
3.1   Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Annual Report on Form 10-K filed on October 15, 2013).
     
3.2 *   Certificate of Designation of Series C Convertible Preferred Stock.
     
3.3   Bylaws (incorporated by reference to Exhibit 3.2 to Registration Statement on Form S-1 filed on October 22, 2008).
     
14.1   Code of Ethics (incorporated by reference to Exhibit 14.1 to Form 10-K/A filed on May 1, 2014).
     
16.1 *   Letter from Lichter, Yu and Associates, Inc., dated July 7, 2016.
     
17.1 *   Resignation Letter of Hugh Evans, dated June 30, 2016.
     
17.2 *   Resignation Letter of Brian M. Pullar, dated June 30, 2016.
     
17.3 *   Resignation Letter of Klaus Selinger, dated June 30, 2016.
     
17.4 *   Resignation Letter of John Wolfgang, dated June 30, 2016.
     
21.1 *   List of Subsidiaries.
   
99.1 * Audited Financial Statements for the year ended December 31, 2015 and 2014 for Venture Track, Inc.
   
99.2 * Unaudited Financial Statements for the three months ended March 31, 2016 and 2015 for Venture Track, Inc.

 

* Filed herewith

 

  22  

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  Source Financial, Inc.
     
Date: July 7, 2016 By: /s/ Edward C. DeFeudis
  Name: Edward C. DeFeudis
  Title: Chief Executive Officer

  

 

23

 

 

 

 

Exhibit 2.1

 

SHARE EXCHANGE AGREEMENT

 

THIS SHARE EXCHANGE AGREEMENT (this “Agreement”) is made this 30th day of June 2016 by and among Source Financial, Inc., a Delaware corporation (the “Company”), Moneytech Group Pty Ltd, an Australian corporation (“Newco”), and the stockholders of the Company who are signatories to this Agreement (each a “Stockholder” and collectively, the “Stockholders”). The Company, Newco and the Stockholders shall be hereinafter collectively referred to as the “Parties” or individually as the “Party”.

 

Preliminary Statement

 

The Stockholders, all of whom are residents of Australia, own the number of shares of the Company’s common stock, $0.001 par value (the “Common Stock”), and Series B Preferred Stock set opposite their respective names on Schedule A annexed hereto (the “Subject Shares”), representing in the aggregate 6,076,679 outstanding shares of Common Stock and 100% of the 5,000 shares of Series B Preferred Stock. The number of shares of Common Stock and Series B Preferred Stock owned in the aggregate by the Stockholders being hereinafter referred to as the “Company Shares.”

 

Upon consummation of the transactions contemplated hereby, the Stockholders will own substantially all of the outstanding shares of Newco, a company formed in connection with the transactions contemplated hereby.

 

The Stockholders desire to cause Newco to acquire from the Company all of the outstanding shares and equity interests in Moneytech Limited (excluding the redeemable preference shares in Moneytech Limited on issue) and mPayments Pty Ltd., as well as its 95% equity interest in Moneytech POS Pty Ltd and its 37.5% equity interest in 360 Markets Pty Ltd (collectively, the “Moneytech Entities” and the shares and equity interests of the Moneytech Entities are collectively listed in Schedule B and are referred to herein as the “Moneytech Interests”), in exchange for the Company Shares (the “Share Exchange”), the Company is willing to effect the Share Exchange, and the Stockholders desire Newco to issue to the Stockholders 1 fully paid ordinary shares in the capital of Newco (a “Newco Share”) as consideration for every 1 Company Share transferred by the Stockholders to the Company (the “Share Issue”) and Newco is willing to effect the Share Issue, on the terms and subject to the conditions set forth herein.

 

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

 

ARTICLE I

EXCHANGE AND ISSUE TRANSACTIONS

 

1.1          The Share Exchange . The Stockholders agree, upon closing of the transactions described in this Agreement in accordance with and subject to the terms hereof, to sell and convey the Company Shares to the Company in exchange for the Moneytech Interests and the Company agrees, upon closing of the transactions described in this Agreement in accordance with and subject to the terms hereof, to sell, transfer and convey the Moneytech Interests to Newco in exchange for the Company Shares. The Company shall cancel the Company Shares as soon as practicable following the Closing.

 

  1  

 

 

1.2         The Parties agree that, effective upon the Closing, Newco shall have assumed all debt and other obligations owed by Source to Moneytech Limited.

 

1.3          The Share Issue . Newco agrees, upon closing of the transactions described in this Agreement in accordance with and subject to the terms hereof, to issue to each Stockholder 1 Newco Share for every 1 of the Stockholder’s Subject Shares as consideration for the transfer of those Subject Shares to the Company under the Share Exchange, as a result of which Newco will acquire the Moneytech Interests.

 

1.4          Application for Newco Shares . The Stockholders apply for the Newco Shares to be issued to them in accordance with Section 1.2, agree to be bound by the constitution of Newco from time to time and consent to the entry of their names in the register of members of Newco.

   

ARTICLE II

CLOSING

 

2.1          Closing . The exchange of the Company Shares for the Moneytech Interests contemplated hereby shall be consummated at a closing (the “Closing”) to be held on the date hereof or any other date and at a place and time mutually agreeable to Source and Newco. The date on which the Closing occurs is herein referred to variously as the “Closing Date.”

 

2.2          Certain Actions at Closing . The following actions shall be taken at the Closing, each of which (together with all other actions provided in this Agreement to be taken at the Closing) shall be conditional on completion of all the others, and all of which (together with all other actions provided in this Agreement to be taken at the Closing) shall be deemed to have taken place simultaneously:

 

(a)         Each Stockholder shall deliver to the Company the stock certificates representing his, her or its Subject Shares, duly executed in blank or accompanied by stock powers duly executed in blank, together with all requisite transfer stamps, if required;

 

(b)         The Company shall deliver to Newco:

 

(i) share certificates registered in the name of Newco representing the Moneytech Interests;

 

  2  

 

 

(ii) completed transfers of the Moneytech Interests to Newco duly executed by the Company; and
     
(iii) all the books and records of each Moneytech Entity except 360 Markets Pty Ltd.

 

(c)         Newco shall issue to each Stockholder 1 Newco Share for every 1 of the Stockholder’s Subject Shares.

 

2.3          Further Assurances; Post-Closing Cooperation . At any time after the Closing, for litigation, tax or accounting purposes, upon the written request of Newco to the Company or the Company to Newco, stating the need therefore, the party receiving such request shall (i) make or cause to be made available to the other party, its related companies or successors, and permit such other party and its agents to inspect and copy the books and records of the party receiving such request and (ii) assist in arranging discussions with (and calling as witnesses) officers, employees and agents of the party receiving such request on matters relating to the Moneytech Entities or the Company, subject to the reimbursement of the party receiving such request for any actual out-of-pocket expenses incurred by the party receiving such request in the performance of its obligations under this Section.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES

 

3.1          Representations and Warranties of the Stockholders . Each of the Stockholders hereby represents and warrants to the Company and Newco that the representations and warranties set forth below are true as of the date hereof and shall be true as of the Closing Date, with the same effect as if said representations and warranties had been made at and as of the Closing Date:

 

(a)          Title to the Subject Shares . The Stockholder has good, valid and marketable record and beneficial title to his, her or its Subject Shares, free and clear of all liens, subscriptions, options, warrants, calls, proxies, commitments, restrictions, claims and encumbrances of any kind or nature whatsoever, and upon the Stockholder’s delivery to the Company of the stock certificates representing the Subject Shares in transferable form, the Company will receive good, valid and marketable title to the Subject Shares free and clear of all liens, claims and encumbrances of any nature whatsoever.

 

(b)          Power and Authority; Authorization . The Stockholder possesses the full legal right, power and capacity to execute and deliver this Agreement and to consummate the transactions contemplated hereby. All authorizations and approvals necessary in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by the Stockholder will have been obtained by the Closing Date. This Agreement is a valid and binding obligation of the Stockholder, enforceable against such Stockholder in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditor’s rights generally.

 

  3  

 

 

(c)          Due Execution and Delivery; Binding Obligation. This Agreement has been duly and validly authorized, executed and delivered by or on behalf of the Stockholder. This Agreement is a valid and binding obligation of the Stockholder, enforceable against such Stockholder in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditor’s rights generally.

 

(e)          No Violation . Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will, with or without the lapse of time or the giving of notice or both: (i) violate, conflict with, result in the breach or termination of any of the terms or provisions of, constitute a default under or result in the creation of any lien, charge or encumbrance upon any of the properties or assets of the Stockholder pursuant to, any will, deed of trust, indenture, mortgage, charter, by-law, contract, lease, agreement or other instrument, or any judgment, decree or order of any federal, state, local or foreign court, regulatory or other governmental body (“Government Entity”) to which the Stockholder is a party or by which the Stockholder or any of such Stockholder’s assets may be bound, or (ii) violate any statute, rule or regulation applicable to the Stockholder.

 

(f)          Governmental and Other Consents . No consent or approval, authorization, order, regulation or qualification of or with, or exemption by, any Governmental Entity is required for the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby by the Stockholder.

 

(g)          Access to Information Concerning Moneytech Entities . The Stockholder acknowledges that the Company has made available to such Stockholder information concerning the business and operations of Moneytech Entities, which are included in the reports filed by the Company with the Securities and Exchange Commission (the “SEC”) under the Exchange Act, which are available on the SEC’s Edgar website at www./sec.gov.

 

3.2           Representations and Warranties of Newco . Newco hereby represents and warrants to the Company and the Stockholders as follows, each of which representations and warranties shall be true as of the Closing Date:

 

(a)           Organization . Newco is a company duly organized, validly existing under the laws of Australia.

 

(b)          Power and Authority. Newco has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby.

 

(c)          Authorization of Agreement; Due Execution and Delivery; Binding Agreement. The execution, delivery and performance of this Agreement by Newco, and the consummation of the transactions contemplated hereby, have been, or will have been on or before the Closing Date, duly and effectively authorized by the Board of Directors of Newco. This Agreement has been duly executed and delivered on behalf of Newco. This Agreement constitutes a valid and binding obligation of the Newco, enforceable in accordance with its terms, except that such enforcement may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors, rights generally.

 

  4  

 

 

(d)          No Violation. The execution, delivery and performance of this Agreement by Newco, and the consummation of the transactions contemplated hereby, will not, with or without the giving or notice and the lapse of time, or both, (i) violate any judgment, order, writ or decree of any court applicable to Newco; or (ii) result in the breach of or conflict with any term, covenant, condition or provision of the organizational documents of Newco or any commitment, contract or other agreement or instrument to which Newco is a party.

 

3.3          Representations and Warranties of Company . The Company hereby represents and warrants to Newco and the Stockholders as follows, each of which representations and warranties shall be true as of the Closing Date:

 

(a)          Organization . The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and each Moneytech Entity is a corporation duly organized, validly existing under the laws of Australia.

 

(b)          Power and Authority. The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby.

 

(c)          Authorization of Agreement; Due Execution and Delivery; Binding Agreement. The execution, delivery and performance of this Agreement by the Company, and the consummation of the transactions contemplated hereby, has been, or will have been on or before the Closing Date, duly and effectively authorized by the Board of Directors of the Company. This Agreement has been duly executed and delivered on behalf of the Company. This Agreement constitutes a valid and binding obligation of the Company, enforceable in accordance with its terms, except that such enforcement may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors, rights generally.

 

(d)          No Violation. The execution, delivery and performance of this Agreement by the Company, and the consummation of the transactions contemplated hereby, will not, with or without the giving or notice and the lapse of time, or both, (i) violate any judgment, order, writ or decree of any court applicable to the Company; or (ii) result in the breach of or conflict with any term, covenant, condition or provision of the organizational documents of the Company or any commitment, contract or other agreement or instrument to which the Company is a party.

 

(e)          The Moneytech Interests . The Company owns the number of ordinary shares and percentage interest in each Moneytech Entity as listed in Schedule B. The Company has good, valid and marketable record and beneficial title to the Moneytech Interests, free and clear of all liens, subscriptions, options, warrants, calls, proxies, commitments, restrictions, claims and encumbrances of any kind or nature whatsoever, and upon the Company’s delivery to Newco of the certificates representing the Moneytech Interests in transferable form, Newco will receive good, valid and marketable title to the Moneytech Interests free and clear of all liens, claims and encumbrances of any nature whatsoever.

 

  5  

 

 

(f)           Moneytech Entities . Substantially all of the Company’s business and operations are conducted through the Moneytech Entities. The Company has made available to the Stockholders and Newco information concerning the business and operations of the Moneytech Entities, which is included in the Company’s reports filed with the SEC under the Exchange Act, which are available on the SEC’s Edgar website at www./sec.gov.

 

ARTICLE V

COVENANTS

 

4.1          The Company covenants, represents and warrants in favor of Newco and the Stockholders that, pending the Closing, unless otherwise agreed to in writing by Newco:

 

(a)         The Company will not sell, transfer, or otherwise dispose of, or enter into any transaction, contract, or commitment for the sale or disposition of all or any portion of the assets of the Moneytech Entities, except for purchase and sale order in the ordinary course of business consistent with historical practices;

 

(b)         The Company will use its best efforts to preserve the business organization and all equipment and records of the Moneytech Entities in good order, and to keep available all of the present employees of the Moneytech Entities and to preserve the goodwill of suppliers, customers, advertisers, and others having business relationships with the Moneytech Entities;

 

(c)         The Company will give Newco and the Stockholders prompt written notice of any and all events prior to closing which materially relate to its obligations under this section;

 

(d)         The Company shall not directly or indirectly engage in discussions or negotiations with any corporation, partnership, person, or other entity (other than Newco) concerning any proposed merger or sale of the Moneytech Entities, whether in the form of an asset or stock sale, merger or similar business combination transaction, or sale of any portion of the assets of the Moneytech Entities; and

 

(e)         The Company shall disclose to Newco and the Stockholders the existence of any unsolicited proposals relating to the foregoing types of transactions and the content thereof as soon as possible after they take place.

 

4.2.          Access and Cooperation . Between the date of this Agreement and the Closing Date, the Company will permit Newco, on its own behalf and on behalf of the Stockholders, and its representatives reasonable access to and the right to inspect during business hours the equipment, properties, books and records and other relevant assets of the Moneytech Entities as Newco may from time to time reasonably request. Newco will conduct its due diligence in a manner which minimizes any disruption of the business activities of the Moneytech Entities.

 

  6  

 

 

ARTICLE VI

CONDITIONS PRECEDENT

 

6.1.           Conditions to Obligation of Company . The obligations of the Company to consummate the Share Exchange are subject to the satisfaction or waiver (where permissible) of the following additional conditions:

 

(a)          Representations and Warranties . Each of the representations and warranties of Newco and the Stockholders set forth in this Agreement shall be true and correct in all material respects as of the Closing as though made as of the Closing, except to the extent that such representations and warranties refer specifically to an earlier date, in which case such representations and warranties shall have been true and correct as of such earlier date.

 

(b)          Agreements and Covenants . Newco and the Stockholders shall have performed in all material respects all of their respective obligations and complied with all of their respective agreements and covenants to be performed or complied with by them under this Agreement at or prior to the Closing.

 

(c)           Officer’s Certificate . To the extent the Closing is not on the date hereof, Newco shall have delivered to the Company a certificate, dated the Closing Date, signed by the chief executive officer of Newco, certifying in such capacity as to the satisfaction of the conditions specified in Sections 6.1(a) and 6.1(b) so far as they relate to Newco.

 

(d)           Consent and Authorizations . The Newco shall have obtained all third party consents and approvals of Governmental Entities, if any, required for the consummation of the Share Exchange.

 

(e)           Absence of Litigation . There shall be no actions, suits, proceedings or governmental investigations or inquiries pending or threatened against the Company or the Moneytech Entities which, in the Company’s reasonable judgment, would prevent the consummation of the transactions contemplated hereby.

 

(f)            Relinquishment of Options and Other Rights to Purchase Shares of the Company . Each Stockholder and each other holder of an option or right to purchase shares of the Company’s common stock other than those set forth on Schedule B annexed hereto shall have relinquished all such options and rights.

 

(g)           Forgiveness of Stockholder Loans . Each Stockholder to whom the Company is indebted for money borrowed shall forgive the repayment of such indebtedness.

 

(h)           Release of Claims Against the Company . Each of the Moneytech Entities shall have delivered to the Company a release in form and substance satisfactory to the Company releasing the Company and its officers, directors, employees, agents and representatives from and against any and all causes of action, liabilities and claims that it may have against them, to the maximum extent permitted by law.

 

  7  

 

 

6.2          Conditions to Obligation of Newco and the Stockholders . The obligations of Newco and the Stockholders to consummate the Share Exchange are subject to the satisfaction or waiver (where permissible) of the following additional conditions:

 

(a)           Representations and Warranties . Each of the representations and warranties of the Company set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Closing as though made as of the Closing, except to the extent that such representations and warranties refer specifically to an earlier date, in which case such representations and warranties shall have been true and correct as of such earlier date.

 

(b)          Agreements and Covenants . The Company shall have performed in all material respects all of its obligations and complied with all of its agreements and covenants to be performed or complied with by it under this Agreement at or prior to the Closing.

 

(c)         Release of Claims Against the Moneytech Entities . The Company shall have delivered to Newco a release in form and substance satisfactory to Newco releasing each of the Moneytech Entities, and their respective officers, directors, employees, agents and representatives from and against any and all causes of action, liabilities and claims that it may have against them, to the maximum extent permitted by law.

 

(d)          Officer’s Certificate . To the extent the Closing is not on the date hereof, the Company shall have delivered to Newco for the benefit of Newco and the Stockholders a certificate, dated the Closing Date, signed by the chief financial officer of the Company, certifying in such capacity as to the satisfaction of the conditions specified in Sections 6.2(a) and 6.2(b).

 

(e)           Officers and Directors . The officers and directors of the Moneytech Entities shall have resigned from such positions effective immediately prior to Closing and Newco’s designees for such positions shall have been duly appointed.

 

(f)          Absence of Litigation . There shall be no actions, suits, proceedings or governmental investigations or inquiries pending or threatened against the Company, Newco or the Moneytech Entities which, in Newco’s reasonable judgment, would prevent the consummation of the transactions contemplated hereby.

 

ARTICLE VII

SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION

 

7.1          Survival . All representations, warranties, covenants, indemnities and agreements contained in or made pursuant to this Agreement or in any certificate, document or statement delivered pursuant hereto (the “Ancillary Documents”) shall survive for a period of twelve (12) months after the Closing Date, and shall thereupon terminate and expire and shall be of no force or effect thereafter, except that the representation and warranty of the Stockholders in Section 3.1(a) as to the ownership of the Company Shares and the Company in Section 3.3(e) shall survive for the period equal to the applicable statute of limitations relating to said matter.

 

  8  

 

 

7.2          Indemnification by Newco and the Moneytech Entities . Newco shall indemnify and hold the Company and the Stockholders harmless from and against, any damage, loss, liability, cost or expense (including, without limitation, the reasonable fees and expenses of counsel and others) resulting or arising from, or incurred in connection with or based upon:

 

(i)           the inaccuracy of any representation or warranty of Newco contained in this Agreement;

 

(ii)          Newco’s breach of or failure to perform any of its covenants or agreements contained in this Agreement; and

 

(iii)         all claims and liabilities arising out of the business activities of Newco and the Moneytech Entities prior to the date hereof.

 

7.3          Indemnification by the Company . The Company shall indemnify and hold Newco and the Stockholders harmless from and against, any damage, loss, liability, cost or expense (including, without limitation, the reasonable fees and expenses of counsel and others) resulting or arising from, or incurred in connection with or based upon:

 

(i)           the inaccuracy of any representation or warranty of the Company contained in this Agreement; and

 

(ii)          the Company’s breach of or failure to perform any of its covenants or agreements contained in this Agreement.

 

7.4          Indemnification by the Stockholders . Each Stockholder shall indemnify and hold the Company and Newco harmless from and against, any damage, loss, liability, cost or expense (including, without limitation, the reasonable fees and expenses of counsel and others) resulting or arising from, or incurred in connection with or based upon:

 

(i)           the inaccuracy of any representation or warranty of that Stockholder contained in this Agreement (in so far as it relates to that Stockholder); and

 

(ii)          that Stockholder’s breach of or failure to perform any of their covenants or agreements contained in this Agreement.

  

  9  

 

 

ARTICLE VIII

MISCELLANEOUS

 

8.1          Notices . All documents, notices, requests, demands and other communications that are required or permitted to be delivered, given or made under this Agreement shall be in writing, and shall be deemed to have been duly delivered, given or made when delivered personally, or upon receipt after dispatch by a nationally recognized overnight courier, or upon mailing by registered or certified mail, postage prepaid, or upon receipt when transmitted by electronic mail to the party to whom the same is so given or made:

 

If to the Company, to:

 

Source Financial, Inc.

Level 6, 97 Pacific Highway

North Sydney NSW 2060, Australia

Attention: Brian M. Pullar, Chief Financial Officer         

 

with a copy (which shall not constitute notice) to:

 

Eaton & Van Winkle LLP

3 Park Avenue, 16 th Floor,

New York, New York 10016

Attention: Vincent J. McGill, Esq.

 

If to Newco or the Stockholders, to:

 

Moneytech Group Pty Ltd

Level 6, 97 Pacific Highway

North Sydney NSW 2060, Australia

Attention: Hugh Evans, Chief Executive Officer         

 

with copies (which shall not constitute notice) to:

 

Watson Mangioni Lawyers Pty Limited

Level 23, 85 Castlereagh Street

Sydney, NSW 2000, Australia

Attention: Chris Clarke

 

8.2          Expenses . Except as expressly provided otherwise in this Agreement, the Company, Newco and the Stockholders, shall each pay all their own fees and expenses incident to the negotiation, preparation, execution and performance of this Agreement, including the fees and expenses of counsel, accountants, investment bankers and other experts.

 

8.3          Entire Agreement . This Agreement and all ancillary documents executed and delivered in connection with, and made a part of, this Agreement, constitute the entire agreement and understanding of the parties hereto with respect to the transactions contemplated hereby, supersede any and all prior agreements and understandings relating to the subject matter hereof and may not be modified, amended or terminated except in writing signed by all the parties hereto.

 

8.4          Applicable Law, Jurisdiction and Venue . All questions concerning the construction, validity, and interpretation of this Agreement and the performance of the obligations imposed by this Agreement shall be governed by the laws of Australia. Any suit involving any dispute or matter arising under this Agreement may only be brought in a court located Sydney, Australia having jurisdiction over the subject matter of the dispute or matter. All parties hereby consent to the exercise of personal jurisdiction by any such court with respect to any such proceeding.

 

  10  

 

 

8.5           Parties of Interest . This Agreement shall be binding upon and shall inure solely to the benefit of the parties hereto and their respective successors, heirs and assigns and nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. This Agreement shall not be assignable by any party hereto without the prior written consent of the other parties.

 

8.6          Assignment . None of the Company, Newco or the Stockholders shall assign this Agreement or any part hereof without the written consent of all parties hereto.

 

8.7          Modification and Waiver . No provision of this Agreement may be modified and the performance or observance thereof may not be waived except by written agreement of the parties affected thereby. No waiver of any violation or nonperformance of any provision of this Agreement shall be deemed to be a waiver of any subsequent violation or nonperformance of the same or any other provision of this Agreement.

 

8.8          Separability of Provisions . Each provision of this Agreement shall be considered separable; and if, for any reason, any provision or provisions herein are determined to be invalid and contrary to any existing or future law, such invalidity shall not impair the operation of or affect those portions of this Agreement, which are valid.

 

8.9          Brokerage . The Company, Newco and each Stockholder represent that no broker, finder, agent or other person acted in any manner in connection with the transactions contemplated by this Agreement so as to entitle such person to a brokerage fee. Each of the Parties each hold the others harmless from any obligation fro the payment of any finder’s fees or commission in connection with the transactions contemplated by this Agreement as a result of any action of the indemnifying party.

 

8.10        Captions . The caption headings of the Articles, Sections and subsections of this Agreement are for convenience of reference only are not intended to be, and should not be construed as, a part of this Agreement.

 

8.11         Terms . Common nouns and pronouns shall be deemed to refer to the masculine, feminine, neuter, singular, and plural, as the identity of the person may in the context require.

 

8.12         Counterparts . This Agreement may be executed in counterparts, each of which shall be deemed to be any number of an original instrument and all of which together shall constitute a single agreement.

  

The remainder of this page is intentionally left blank.

 

  11  

 

 

IN WITNESS WHEREOF, each of the parties hereto has duly executed this Agreement as of the date first above written.

 

  COMPANY:
   
  Source Financial, Inc.
     
  By: /s/ Brian M. Pullar
  Name: Brian M. Pullar
  Title: Chief Financial Officer
     
  NEWCO:
   
  Moneytech Group Pty Ltd
     
  By: /s/ Hugh Evans
  Name: Hugh Evans
  Title: Chief Executive Officer
     
  STOCKHOLDERS:
   
  The Stockholders listed on Schedule A annexed hereto
     
  By: /s/ Hugh Evans
    Hugh Evans, Attorney-in-fact

  

Solely for the purpose of confirming their agreement to the obligation to indemnify the Company and the Stockholders in accordance with Section 7.2:

 

Moneytech Limited   mPayments Pty Ltd.   Moneytech POS Pty Ltd.
               
By: /s/ Hugh Evans   By: /s/ Hugh Evans   By: /s/ Hugh Evans
  Hugh Evans     Hugh Evans     Hugh Evans

 

  12  

 

 

Schedule A

 

Stockholders

 

Name of Stockholder   Common Stock     Series B Preferred Stock  
BACK TO PEOPLE MARKETING AND ADVERTISING PTY LTD ATF THE HEALEY SUPERANNUATION FUND     9,823       0  
BILLIQ PTY LTD ATF ALTMANN SUPERANNUATION FUND     10,053       0  
BIX HOLDINGS PTY LTD ATF THE ATHERSTONE TRUST     2,001,514       0  
CAMERON JACK TAYLOR     26,470       0  
CARTESIAN CORPORATE FINANCE LTD ACN: 72 069 152 656     3,697       0  
CHRISTOPHER JOHN TAYLOR AND ANGUS JAMES TAYLOR ATF CTJ SUPER FUND     549,590       0  
CHRISTOPHER JOHN TAYLOR AND ANGUS JAMES TAYLOR ATF THE TAYLOR FAMILY SUPERANNUATION FUND NO.2     80,090       0  
CHRISTOPHER PAUL KNOBLANCHE     11,271       0  
DAVID ANTHONY CRUWYS     14,226       0  
DAVID DAL BEN AND RISUKO ALWANO ATF DALWANO FAMILY TRUST     50,756       0  
FIRST ROCK TRUSTEES LTD ATF THE MAIDEVALE TRUST     32,462       0  
FRED RICHARD HOPLEY     3,654       0  
GEORGE AND MARYANN ELISEBETH KAHWATI ATF G&M KAHWATI SUPERANNUATION FUND     27,218       0  
GJN HOLDINGS PTY LTD ATF PATTERSON BUSINESS TRUST     3,697       0  
HOWARD LESLIE     38,067       0  
HUGH EVANS     960,000       5,000  
ISOMI INVESTMENTS PTY LTD ATF ISOMI INVESTMENT TRUST     111,186       0  
JAMES HAMILTON PTY LTD     92,425       0  
JANE JOANNE TAYLOR AND ANGUS JAMES TAYLOR ATF JJT SUPER FUND     80,090       0  
JJG EQUITIES PTY LTD ATF EQUITIES TRUST     269,993       0  
JOHNATHAN SEAN LEVIN     2,254       0  
KFT CAPITAL PTY LTD ATF KIDSON FAMILY A/C     3,697       0  
KLAUS SELINGER     160,000       0  
LD MEDISOFT PTY LTD ATF DUURSMA FAMILY TRUST     77,986       0  
LUCIA DANIELLA TESORIERO     6,143       0  
LYNETTE MARY HOBBS AND LESLIE GRAHAM HOBBS ATF L AND L HOBBS SUPERANNUATION FUND     49,594       0  
MACLEAN SALES PTY LTD ATF MACLEAN INVESTMENT TRUST     15,329       0  
MICHAEL LITHERLAND     50,714       0  
MICHELE MARY TAYLOR     12,678       0  
MITCHELL JOHN TAYLOR     1,922       0  
MK PARTNERSHIP (PARTNERS: DAVID HOLMES MATHLIN AND GUNNIER SINGH KATARI)     27,294       0  
MOAT INVESTMENTS PTY LTD     57,585       0  
MONTAGUE INVESTMENTS PTY LTD     96,934       0  
OPTISYS INTERNATIONAL PTY LIMITED     29,136       0  
PAUL ROBBERDS     78,466       0  
PETER GEOFFREY & MONICA URSULA BREWER     52,299       0  
PJ CARSON PTY LIMITED ATF CARSON FAMILY TRUST     94,167       0  
PROISM PTY LTD ATF BAUDISH FAMILY TRUST     65,825       0  
PTE NOMINEES PTY LTD     21,641       0  
RAYMOND KEVIN BARCLAY     2,254       0  
ROBYN GIBSON     124,380       0  
ROGER AND ALEXANDRA CONWAY ATF CONWAY SUPERANNUATION FUND     25,357       0  
ROLES PTY LTD     94,679       0  
ROSSMART NOMINEES PTY LTD     3,697       0  
SEAN MARTIN AND LIAM MARTIN ATF BASIL MARTIN FAMILY TRUST     12,624       0  
SOMAR HOLDINGS PTY LIMITED ATF COHEN FAMILY TRUST     144,393       0  
SONJA MARIE SANDRAL     100,136       0  
STANMITH PTY LTD ATF JUVENA SUPERANNUATION FUND     115,671       0  
TAYLOR, ANGUS JAMES     2,271       0  
TEMRON PTY LTD     13,526       0  
WAYNE AND JILLIAN WEISSE ATF WEISSE FAMILY SUPER FUND     53,535       0  
WEBSTER & CO PTY LTD ATF WEBSTER FAMILY SUPER FUND     50,756       0  
WOOLLY SUPERANNUATION PTY LTD ATF WOOLLY SUPERANNUATION FUND     53,454       0  
Total     6,076,679       5,000  

  

  13  

 

 

Schedule B

 

  Moneytech Interests

 

 

Name of Moneytech Entity

 

Number of Ordinary Shares

owned by the Company

   

 

 

% Ordinary Shares owned

 
Moneytech Limited     111,676,854       100 %
mPayments Pty Ltd.     12       100 %
Moneytech POS Pty Ltd     95       95 %
360 Markets Pty Ltd     375       37.5 %

 

 

14

Exhibit 2.2

 

SHARE EXCHANGE AGREEMENT

 

by and among

 

Source Financial, Inc.

(a Delaware corporation),

 

Venture Track, Inc.

(a Delaware corporation)

 

and

 

the Shareholders of

Venture Track, Inc.

 

Dated as of June 30, 2016

 

 
 

 

SHARE EXCHANGE AGREEMENT

 

THIS SHARE EXCHANGE AGREEMENT (hereinafter referred to as this “ Agreement ”) is entered into as of June 30, 2016, by and among Source Financial, Inc., a Delaware corporation (“ Source ”), Venture Track, Inc., a Delaware corporation (the “ Company ”), and the stockholders of the Company (the “ Stockholders ”), upon the following premises:

 

Preliminary Statement

 

Source is a publicly traded corporation quoted on OTCQX (the “OTCQX).

 

Source desires to acquire 100% of the issued and outstanding shares of the Company from the Stockholders in exchange for the issuance of an aggregate of 3,089,360 shares of the common stock of Source and 4,500 shares of the Series C Preferred Stock of Source convertible into an additional 6,893,100 shares of the common stock of Source, or convertible into such other number of shares of the common stock of Source so that the Stockholders will upon conversion of the Source Series C Preferred Stock, together with the shares of common stock to be delivered pursuant hereto, own approximately 80% of the total shares of common stock of Source to be outstanding upon consummation of the exchange contemplated hereby, after giving effect to the conversion of the Series C Preferred Stock  (collectively, the “ Exchange Shares ”) and the Stockholders are willing to exchange their shares of the Company in exchange for the Exchange Shares on the terms and subject to the conditions set forth herein (the “ Exchange ”). On the Closing Date (as defined in Section 4.02), the Company will become a wholly-owned subsidiary of Source.

 

The boards of directors of Source and the Company have determined, subject to the terms and conditions set forth in this Agreement, that the transaction contemplated hereby is desirable and in the best interests of their respective stockholders.  This Agreement is being entered into for the purpose of setting forth the terms and conditions of the proposed acquisition.

 

Agreement

 

NOW THEREFORE , on the stated premises and for and in consideration of the mutual covenants and agreements hereinafter set forth and the mutual benefits to the parties to be derived here from, and intending to be legally bound hereby, it is hereby agreed as follows:

 

ARTICLE I

REPRESENTATIONS, COVENANTS, AND WARRANTIES OF THE COMPANY

 

As an inducement to Source to consummate the Exchange, the Company represents and warrants that except as set forth in the schedules of exceptions to the representations of the Company annexed hereto (the “ Company Schedules ”) the following statements will be true and correct as of the Closing Date (as hereinafter defined):

 

1.01 Organization .  The Company is duly incorporated, validly existing, and in good standing under the laws of Delaware and has the corporate power and is duly authorized under all applicable laws, regulations, ordinances and orders of public authorities, to carry on its business in all material respects as it is now being conducted.  Prior to the Closing Date (as hereinafter defined) the Company will deliver to Source complete and correct copies of the certificate of incorporation and by-laws of the Company as in effect on the date hereof.  The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, violate any provision of Company’s certificate of incorporation or by-laws.  The Company has taken all actions required by law, its certificate of incorporation or by-laws, or otherwise to authorize the execution and delivery of this Agreement.  The Company has full power, authority, and legal capacity and prior to the Closing Date will have taken all action required by law, its certificate of incorporation or by-laws, and otherwise to consummate the transactions herein contemplated.

 

  2  
 

 

1.02 Power and Authority . The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby.

 

1.03 Authorization of Agreement; Due Execution and Delivery; Binding Agreement. The execution, delivery and performance of this Agreement by the Company, and the consummation of the transactions contemplated hereby, have been duly authorized by the Board of Directors of the Company, and the Board of Directors has recommended that the Stockholders accept the Exchange. This Agreement has been duly executed and delivered on behalf of the Company. This Agreement constitutes a valid and binding obligation of the Company, enforceable in accordance with its terms, except that such enforcement may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors, rights generally, and subject to the qualification that the availability of equitable remedies is subject to the discretion of the court before which any proceeding therefore may be brought.

 

1.04 No Conflict .  The execution of this Agreement and the consummation of the transactions contemplated by this Agreement (i) will not violate any provision of the certificate of incorporation or by-laws of the Company; (ii) will not, with or without the giving or notice and the lapse of time, or both, result in the breach of any term or provision of, constitute a default under, or terminate, accelerate or modify the terms of any indenture, mortgage, deed of trust, or other material agreement, or instrument to which the Company is a party or to which any of its assets, properties or operations are subject; (iii) violate any provision of law, statute, rule, regulation or executive order to which the Company is subject; or (iv) violate any judgment, order, writ or decree of any court applicable to the Company.

 

1.05 Issued and Outstanding Shares .  The issued and outstanding shares of common stock of the Company are validly issued, fully paid, and non-assessable and not issued in violation of the preemptive or other rights of any person.

 

1.06 Options or Warrants .  There are no existing options, warrants, calls, or commitments of any character relating to the authorized and unissued stock of the Company.

 

1.07 Financial Statements .

 

(a)  Prior to the Closing Date, the Company will deliver to Source audited financial statements of the Company for each of the two years ended December 31, 2015 and 2014, together with the opinion with respect thereto of a recognized independent certified public accountant, together with such other unaudited interim financial statements as are necessary for Source to fill its reporting obligations as required by Form 8-K (the “ Financial Statements ”).  All such Financial Statements will have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved, and will fairly present in all material respects the financial position, results of operations, cash flows and changes in stockholders’ equity of the Company as of the dates and for the periods presented therein.

 

(b)  The Company has duly and punctually paid all governmental fees and taxes which it has become liable to pay and has duly allowed for all taxes reasonably foreseeable and is under no liability to pay any penalty or interest in connection with any claim for governmental fees or taxation and the Company has made any and all proper declarations and returns for taxation purposes and all information contained in such declarations and returns is true and complete and full provision or reserves have been made in its financial statements for all governmental fees and taxation.

 

  3  
 

 

(c)  The books and records, financial and otherwise, of the Company are in all material respects complete and correct and have been maintained in accordance with generally accepted accounting principles consistently applied throughout the periods involved.

 

(d)  The Company will have no liabilities (whether absolute, accrued, contingent, known or unknown or otherwise), claims, obligations or other liens, except as disclosed on the balance sheets included in the Financial Statements.   Schedule 1.07 sets forth, separately, (a) a true, correct and complete list of all outstanding loans, lines of credit and other indebtedness incurred by the Company, inclusive of any outstanding loans, lines of credit and other indebtedness incurred by the Company, the repayment obligations for which are secured by any of the Company’s assets and (b) with respect to each loan described in the foregoing clause, the amounts due thereunder as of the date hereof.  

 

1.08 Absence of Certain Changes or Events .  Prior to the Closing Date:

 

(a)  There will not have been any material adverse change in the business, operations, properties, assets, or condition (financial or otherwise) of the Company since the date of the most recent balance sheet included in the Financial Statements;

 

(b)  Except as otherwise contemplated herein, subsequent to the date hereof, the Company will not (i) amend its memorandum of association or articles of association; (ii) declare or make, or agree to declare or make, any payment of dividends or distributions of any assets of any kind whatsoever to stockholders or purchase or redeem, or agree to purchase or redeem, any of its shares; (iii) make any material change in its method of management, operation or accounting, (iv) enter into any other material transaction other than sales in the ordinary course of its business; or (v) make any increase in or adoption of any profit sharing, bonus, deferred compensation, insurance, pension, retirement, or other employee benefit plan, payment, or arrangement made to, for, or with its officers, directors, or employees; and

 

(c)  The Company will not (i) grant or agree to grant any options, warrants or other rights for its stocks, bonds or other corporate securities calling for the issuance thereof, (ii) borrow or agree to borrow any funds or incur, or become subject to, any material obligation or liability (absolute or contingent) except as disclosed herein and except liabilities incurred in the ordinary course of business; (iii) sell or transfer, or agree to sell or transfer, any of its assets, properties, or rights or cancel, or agree to cancel, any debts or claims; or (iv) issue, deliver, or agree to issue or deliver any stock, bonds or other corporate securities including debentures (whether authorized and unissued or held as treasury stock) except in connection with this Agreement.

 

1.09 Litigation and Proceedings .  There are no actions, suits, proceedings, or investigations pending or, to the knowledge of the Company after reasonable investigation, threatened by or against the Company or affecting the Company or its properties, at law or in equity, before any court or other governmental agency or instrumentality, domestic or foreign, or before any arbitrator of any kind.  The Company does not have any knowledge of any material default on its part with respect to any judgment, order, injunction, decree, award, rule, or regulation of any court, arbitrator, or governmental agency or instrumentality or of any circumstances which, after reasonable investigation, would result in the discovery of such a default.

 

1.10 Compliance With Laws and Regulations . To the best of its knowledge, the Company has complied with all statutes and regulations applicable to its business, except to the extent that noncompliance would not materially and adversely affect the business, operations, properties, assets, or condition of the Company or except to the extent that noncompliance would not result in the occurrence of any material liability for the Company.  

 

  4  
 

 

1.11   Contracts .

 

(a)  All “material” contracts, agreements, franchises, license agreements, debt instruments or other commitments to which the Company is a party or by which it or any of its assets, products, technology, or properties are bound other than those incurred in the ordinary course of business have been disclosed to Source prior to the date hereof.  A “material” contract, agreement, franchise, license agreement, debt instrument or commitment is one which (i) will remain in effect for more than six (6) months after the date of this Agreement, (ii) involves aggregate obligations of at least one hundred thousand dollars ($100,000) and which cannot be terminated by the Company on notice of no more than thirty days at a cost of no more than $50,000;

  

(b)  All contracts, agreements, franchises, license agreements, and other commitments to which the Company is a party or by which its properties are bound and which are material to the operations of the Company taken as a whole are valid and enforceable by the Company in all respects, except as limited by bankruptcy and insolvency laws and by other laws affecting the rights of creditors generally; and

 

(c)  Except as included or described in the Company Schedule 1.11 or reflected in the most recent Company balance sheet included in the Financial Statements, the Company is not a party to any oral or written (i) contract for the employment of any officer or employee; (ii) profit sharing, bonus, deferred compensation, stock option, severance pay, pension benefit or retirement plan, (iii) agreement, contract, or indenture relating to the borrowing of money, (iv) guaranty of any obligation; (vi) collective bargaining agreement; or (vii) agreement with any present or former officer or director of the Company, which, in each case cannot be terminated by the Company on notice of no more than thirty days at a cost of no more than $50,000.

 

1.12 Taxes . The Company has: (i) timely filed with the appropriate taxing authorities all tax returns required to be filed by or with respect to its business, or is properly on extension and all such duly filed tax returns are true, correct and complete in all material respects; and (ii) timely paid in full or made adequate provisions for on its balance sheet (in accordance with GAAP) all taxes shown to be due on such tax returns.  There are no liens for taxes upon the assets of the Company except for statutory liens for current taxes not yet due and payable or which may thereafter be paid without penalty or are being contested in good faith.  The Company has not received any notice of audit, is not undergoing any audit of its tax returns, and has not received any notice of deficiency or assessment from any taxing authority with respect to liability for taxes which has not been fully paid or finally settled.  There have been no waivers of statutes of limitations by the Company with respect to any tax returns.  The Company has not filed a request with any taxing authority for changes in accounting methods within the last three years which change would affect the accounting for tax purposes, directly or indirectly, of its business.  The Company has not executed an extension or waiver of any statute of limitations on the assessment or collection of any taxes due that is currently in effect.  

 

1.13  No Disagreements with Accountants and Lawyers.  There are no disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the accountants, and lawyers formerly or presently employed by the Company and the Company is current with respect to any fees owed to its accountants and lawyers.

 

1.14 No Brokers . The Company has not retained any broker or finder in connection with any of the transactions contemplated by this Agreement, and has not incurred or agreed to pay, or taken any other action that would entitle any person to receive, any brokerage fee, finder’s fee or other similar fee or commission with respect to any of the transactions contemplated by this Agreement.

 

  5  
 

 

1.15   Disclosure .  All disclosure provided to Source regarding the Company, its business and the transactions contemplated hereby, including the Company Disclosure Schedules to this Agreement, furnished by or on behalf of the Company with respect to the representations and warranties made herein are true and correct with respect to such representations and warranties and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.  The Company acknowledges and agrees that Source has not made, nor is Source making, any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth herein.  In the event that the Company Disclosure Schedules are not delivered contemporaneously with the execution of this Agreement, they shall be delivered as soon as practicable prior to the Closing Date.

 

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS

 

The Stockholders hereby represents and warrants, severally and solely, to Source as follows.

 

2.01 Good Title .  Each of the Stockholders is the record and beneficial owner, and has good title to the shares of the Company owned by such Stockholder (“Company Shares”), with the right and authority to sell and deliver such Company Shares, free and clear of all liens, claims, charges, encumbrances, pledges, mortgages, security interests, options, rights to acquire, proxies, voting trusts or similar agreements, restrictions on transfer or adverse claims of any nature whatsoever.  Upon delivery of any certificate or certificates duly assigned, representing the same as herein contemplated and/or upon registering of Source as the new owner of such Company Shares in the share register of the Company, Source will receive good title to such Company Shares, free and clear of all liens.

 

2.02 Power and Authority . Each of the Stockholders has the legal power, capacity and authority to execute and deliver this Agreement to consummate the transactions contemplated by this Agreement, and to perform such Stockholder’s obligations under this Agreement.  This Agreement constitutes a legal, valid and binding obligation of the Stockholder, enforceable against the Stockholder in accordance with the terms hereof.

 

2.03 No Conflicts.  The execution and delivery of this Agreement by the Shareholder and the performance by the Shareholder of his, her or its obligations hereunder in accordance with the terms hereof: (a) will not require the consent of any third party or governmental entity under any laws; (b) will not violate any laws applicable to the Stockholder and (c) will not violate or breach any contractual obligation to which the Stockholder is a party.

 

2.04 Acquisition of Exchange Shares for Investment .

 

(a) Each Stockholder is acquiring the Exchange Shares for investment for such Stockholder’s own account and not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and each Stockholder has no present intention of selling, granting any participation in, or otherwise distributing the same.  Each Stockholder further represents that he, she or it does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participation to such person or to any third person, with respect to any of the Exchange Shares.

 

(b) Such Stockholder represents and warrants that such Stockholder (i) can bear the economic risk of such Stockholder’s respective investments, and (ii) possesses such knowledge and experience in financial and business matters that such Stockholder is capable of evaluating the merits and risks of the investment in Source and its securities.

 

  6  
 

 

(c) Each Stockholder understands that the Exchange Shares are not registered under the Securities Act and that the issuance thereof to such Stockholder is intended to be exempt from registration under the Securities Act pursuant to Section 4(a)(2) of the Securities Act (“ Section 4(a)(2) ”) for transactions by an issuer not involving a public offering or Regulation S for offers and sales of securities outside the U.S.  Are we dealing with non-accredited investors? And if so, how many investors are there? Each Stockholder represents and warrants that he is an “accredited investor” as such term is defined in Rule 501 of Regulation D or, if not an accredited investor, that such Stockholder otherwise meets the suitability requirements of Regulation D and Section 4(a)(2). Each Stockholder who is a “U.S. Person” as defined in Rule 902(k) of Regulation S agrees to provide documentation to Source prior to Closing as may be requested by Source to confirm compliance with Regulation D and/or Section 4(a)(2), including, without limitation, a letter of investment intent or similar representation letter and a completed investor questionnaire. Each certificate representing the Exchange Shares issued to such Stockholder shall be endorsed with the following legends, in addition to any other legend required to be placed thereon by applicable federal or state securities laws:

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“SECURITIES ACT”), OR APPLICABLE STATE SECURITIES OR “BLUE SKY” LAWS.”

 

“TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS PROHIBITED UNLESS A REGISTRATION STATEMENT UNDER THE SECURITIES ACT WITH RESPECT TO SUCH SECURITY SHALL THEN BE IN EFFECT AND SUCH TRANSFER HAS BEEN QUALIFIED UNDER ALL APPLICABLE STATE SECURITIES OR “BLUE SKY” LAWS, OR AN EXEMPTION THEREFROM SHALL BE AVAILABLE UNDER THE ACT AND SUCH LAWS.”

 

Each Stockholder who is not a “U.S. Person” as defined in Regulation S understands that the Exchange Shares are not registered under the Securities Act and that the issuance thereof to such Stockholder is intended to be exempt from registration under the Securities Act pursuant to Regulation S. Each Non-U.S. Shareholder has no intention of becoming a U.S. Person. At the time of the origination of contact concerning this Agreement and the date of the execution and delivery of this Agreement, each Non-U.S. Shareholder was outside of the United States. Each certificate representing the Exchange Shares shall be endorsed with the following legends, in addition to any other legend required to be placed thereon by applicable federal or state securities laws:

 

“THE SECURITIES ARE BEING OFFERED TO INVESTORS WHO ARE NOT U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“SECURITIES ACT”)) AND WITHOUT REGISTRATION WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT IN RELIANCE UPON REGULATION S PROMULGATED UNDER THE SECURITIES ACT.”

 

“TRANSFER OF THESE SECURITIES IS PROHIBITED, EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S, PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT TO AVAILABLE EXEMPTION FROM REGISTRATION. HEDGING TRANSACTIONS MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.”

 

  7  
 

 

(d) Such Stockholder acknowledges that neither the SEC, nor the securities regulatory body of any state or other jurisdiction, has received, considered or passed upon the accuracy or adequacy of the information and representations made in this Agreement.

  

(e) Such Stockholder acknowledges that he has carefully reviewed such information as he has deemed necessary to evaluate an investment in Source and its securities, and that all information required to be disclosed to such Stockholder under Regulation D has been furnished to such Stockholder by Source.  Each Stockholder acknowledges that he, she or it has been furnished all materials that he has requested relating to Source and the issuance of the Exchange Shares hereunder, and that such Stockholder has been afforded the opportunity to ask questions of Source’s representatives to obtain any information necessary to verify the accuracy of any representations or information made or given to the Stockholders.  Notwithstanding the foregoing, nothing herein shall derogate from or otherwise modify the representations and warranties of Source set forth in this Agreement, on which each of the Stockholders has relied in making an exchange of his, her or its Company Shares for the Exchange Shares.

 

(f) Such Stockholder understands that the Exchange Shares may not be sold, transferred, or otherwise disposed of without registration under the Securities Act or an exemption therefrom, and that in the absence of an effective registration statement covering the Exchange Shares or any available exemption from registration under the Securities Act, the Exchange Shares may have to be held indefinitely.  Each Stockholder further acknowledges that the Exchange Shares may not be sold pursuant to Rule 144 promulgated under the Securities Act unless all of the conditions of Rule 144 are satisfied (including, without limitation, Source’s compliance with the reporting requirements under the Securities Exchange Act of 1934, as amended (“ Exchange Act ”)).

 

(g) Such Stockholder agrees that, notwithstanding anything contained herein to the contrary, the warranties, representations, agreements and covenants of such Stockholder under this Section 2.04 shall survive the Closing for the period set forth in Section 8.11.

 

2.05 No Brokers . Such Stockholder has not retained any broker or finder in connection with any of the transactions contemplated by this Agreement, nor has such Stockholder incurred or agreed to pay, or taken any other action that would entitle any person to receive, any brokerage fee, finder’s fee or other similar fee or commission with respect to any of the transactions contemplated by this Agreement.

 

ARTICLE III

REPRESENTATIONS, COVENANTS, AND WARRANTIES OF SOURCE

 

As an inducement to, and to obtain the reliance of the Company and the Stockholders, except as set forth in the schedules of exceptions to the representations of Source annexed hereto (the “ Source Schedules ”), Source represents and warrants, as of the date hereof and as of the Closing Date, as follows:

 

3.01 Organization .  Source is a corporation duly incorporated, validly existing, and in good standing under the laws of Delaware and has the corporate power and is duly authorized under all applicable laws, regulations, ordinances, and orders of public authorities to carry on its business in all material respects as it is now being conducted.  Source has made available to the Company or there has been available on EDGAR complete and correct copies of the certificate of incorporation and bylaws of Source as in effect on the date hereof. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, violate any provision of Source’s certificate of incorporation or by-laws.  Source has taken all action required by law, its certificate of incorporation and by-laws, or otherwise to authorize the execution and delivery of this Agreement, and Source has full power, authority, and legal right and has taken all action required by law, its certificate of incorporation and by-laws, or otherwise to consummate the transactions herein contemplated.

 

  8  
 

 

3.02 Capitalization .

 

(a) Source’s authorized capitalization consists of 12,000,000 shares of common stock, par value $0.001 per share, of which 8,791,636 shares are issued and outstanding, and 10,000 shares of preferred stock, par value $0.01 per share, of which 5,000 shares, designated as Series B Preferred Stock, are issued and outstanding, and 4,500 shares, designated as Series C Preferred Stock have been authorized for issuance to the Stockholders as part of the Exchange Shares.   Source’s capitalization immediately before and after Closing is set forth in Schedule 3.02 hereof. All issued and outstanding shares are legally issued, fully paid, and non-assessable and not issued in violation of the preemptive or other rights of any person. Except as disclosed in the SEC Reports (as defined in Section 3.04 below) and as contemplated hereof, as of the date hereof and the Closing Date, no shares of Source’s common stock are or will be reserved for issuance upon the exercise of outstanding options to purchase the common stock; no shares of common stock are or will be reserved for issuance upon the exercise of outstanding warrants to purchase shares of Source common stock; and no shares of common stock are or will be reserved for issuance upon the conversion of any outstanding convertible notes, debentures or other securities except as otherwise contemplated by this Agreement.  All outstanding shares of Source common stock have been issued and granted in compliance with (i) all applicable securities laws and (in all material respects) other applicable laws and regulations, and (ii) all requirements set forth in any applicable Contracts.

 

(b) There are no equity securities, partnership interests or similar ownership interests of any class of any equity security of Source, or any securities exchangeable or convertible into or exercisable for such equity securities, partnership interests or similar ownership interests, issued, reserved for issuance or outstanding.   Except as contemplated by this Agreement or as set forth in Source Schedule 3.02 , there are no subscriptions, options, warrants, equity securities, partnership interests or similar ownership interests, calls, rights (including preemptive rights), commitments or agreements of any character to which Source is a party or by which it is bound obligating Source to issue, deliver or sell, or cause to be issued, delivered or sold, or repurchase, redeem or otherwise acquire, or cause the repurchase, redemption or acquisition of, any shares of capital stock, partnership interests or similar ownership interests of Source or obligating Source to grant, extend, accelerate the vesting of or enter into any such subscription, option, warrant, equity security, call, right, commitment or agreement.  There is no plan or arrangement to issue shares of Source common stock, except as set forth in this Agreement.

 

Except as contemplated by this Agreement and except as set forth in Schedule 3.02 hereto, there are no registration rights, and there is no voting trust, proxy, rights plan, anti-takeover plan or other agreement or understanding to which Source is a party or by which it is bound with respect to any equity security of any class of Source, and there are no agreements to which Source is a party, or which Source has knowledge of, which conflict with this Agreement or the transactions contemplated herein or otherwise prohibit the consummation of the transactions contemplated hereunder.

 

3.03 Subsidiaries and Predecessor Corporations .   Except as disclosed in the SEC Reports, Source does not have any predecessor corporation(s), no subsidiaries, and does not own, beneficially or of record, any shares of any other corporation.

 

  9  
 

 

3.04 SEC Filings; Financial Statements .

 

(a) Source has made available to the Company and the Stockholders, or there has been available on EDGAR, correct and complete copies of each report, registration statement and definitive proxy statement filed by Source with the SEC since December 30, 2013 (the “ SEC Reports ”). As of their respective dates, the Source SEC Reports: (i) were prepared in accordance and complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations of the SEC thereunder applicable to such Source SEC Reports, and (ii) did not at the time they were filed (and if amended or superseded by a filing prior to the date of this Agreement then on the date of such filing and as so amended or superseded) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

(b) Included in the SEC Reports are the audited consolidated balance sheets of Source as of June 30, 2015 and 2014 and the related audited consolidated statements of operations, stockholders’ equity and cash flows for June 30, 2015 and 2014, together with the notes to such statements and the opinion of its independent certified public accountants, with respect thereto; and (ii) the unaudited consolidated balance sheets of Source as of December 31, 2015 and 2014 and the related unaudited consolidated statements of operations and cash flows for the three months and six months ended December 31 2015 and 2014, together with the notes to such statements.

 

 (c) Each set of financial statements (including, in each case, any related notes thereto) contained in the SEC Reports comply as to form in all material respects with the published rules and regulations of the SEC with respect thereto, were prepared in accordance with U.S. GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto) and each fairly presents in all material respects the financial position of Source at the respective dates thereof and the results of its operations and cash flows for the periods indicated, except that the unaudited interim financial statements were or are subject to normal adjustments which were not or are not expected to have a  material adverse effect upon the business, prospects, management, properties, operations, condition (financial or otherwise) or results of operations of Source, taken as a whole (“Material Adverse Effect”).

 

The Source balance sheets are true and accurate and present fairly as of their respective dates the financial condition of Source.  As of the date of such balance sheets, except as and to the extent reflected or reserved against therein, Source had no liabilities or obligations (absolute or contingent) which should be reflected in the balance sheets or the notes thereto prepared in accordance with generally accepted accounting principles, and all assets reflected therein are properly reported and present fairly the value of the assets of Source, in accordance with generally accepted accounting principles. The statements of operations, stockholders’ equity and cash flows reflect fairly the information required to be set forth therein by generally accepted accounting principles. All of Source’s assets are reflected on its financial statements, and, except as set forth in the Source Schedules or the financial statements of Source or the notes thereto, Source has no material liabilities, direct or indirect, matured or unmatured, contingent or otherwise;

 

(d) Source has no liabilities with respect to the payment of any federal, state, county, local or other taxes (including any deficiencies, interest or penalties), except for taxes accrued but not yet due and payable; and

  

(e) The books and records, financial and otherwise, of Source are in all material aspects complete and correct and have been maintained in accordance with generally accepted accounting principles consistently applied throughout the periods involved.

 

  10  
 

 

3.05 Taxes .  Source has: (i) timely filed with the appropriate taxing authorities all tax returns required to be filed by or with respect to its business, or are properly on extension and all such duly filed tax returns are true, correct and complete in all material respects; and (ii) timely paid in full or made adequate provisions for on its balance sheet (in accordance with GAAP) all Taxes shown to be due on such tax returns.  There are no liens for taxes upon the assets of Source except for statutory liens for current taxes not yet due and payable or which may thereafter be paid without penalty or are being contested in good faith.  Source has not received any notice of audit, is not undergoing any audit of its tax returns, and has not received any notice of deficiency or assessment from any taxing authority with respect to liability for taxes which has not been fully paid or finally settled.  There have been no waivers of statutes of limitations by Source with respect to any tax returns.  Source has not filed a request with the Internal Revenue Service for changes in accounting methods within the last three years which change would affect the accounting for tax purposes, directly or indirectly, of its business.  Source has not executed an extension or waiver of any statute of limitations on the assessment or collection of any taxes due (excluding such statutes that relate to years currently under examination by the Internal Revenue Service or other applicable taxing authorities) that is currently in effect.  

 

3.06 No Disagreements with Accountants and Lawyers.  There are no disagreements of any kind presently existing, or reasonably anticipated by Source to arise, between the accountants, and lawyers formerly or presently employed by Source and Source is current with respect to any fees owed to its accountants and lawyers, except as set forth in Schedule 3.06 hereto.   

 

3.07 Options or Warrants.   Except as set forth in the SEC Reports, there are no existing options, warrants, calls, or commitments of any character relating to the authorized and unissued stock of Source.

 

3.08 Absence of Certain Changes or Events.  Since December 31, 2015 and except as set forth in Schedule 3.08 hereto:

 

(a) there has not been (i) any material adverse change in the business, operations, properties, assets or condition of Source or (ii) any damage, destruction or loss to Source (whether or not covered by insurance) materially and adversely affecting the business, operations, properties, assets or condition of Source;

 

(b) Source has not (i) amended its certificate of incorporation or by-laws, except as required by this Agreement; (ii) declared or made, or agreed to declare or make any payment of dividends or distributions of any assets of any kind whatsoever to stockholders or purchased or redeemed, or agreed to purchase or redeem, any of its capital stock; (iii) waived any rights of value which in the aggregate are outside of the ordinary course of business or material considering the business of Source; (iv) made any material change in its method of management, operation, or accounting; (v) entered into any transactions or agreements other than in the ordinary course of business; (vi) made any accrual or arrangement for or payment of bonuses or special compensation of any kind or any severance or  termination pay to any present or former officer or employee; (vii) increased the rate of compensation payable or to become payable by it to any of its officers or directors or any of its salaried employees whose monthly compensation exceed $1,000; or  (viii) made any increase in any profit sharing, bonus, deferred compensation, insurance, pension, retirement, or other employee benefit plan, payment, or arrangement, made to, for or with its officers, directors, or employees;

 

(c) Source has not (i) granted or agreed to grant any options, warrants, or other rights for its stock, bonds, or other corporate securities calling for the issuance thereof; (ii) borrowed or agreed to borrow any funds or incurred, or become subject to, any material obligation or liability (absolute or contingent) except liabilities incurred in the ordinary course of business; (iii) paid or agreed to pay any material obligations or liabilities (absolute or contingent) other than current liabilities reflected in or shown on the most recent Source balance sheet and current liabilities incurred since that date in the ordinary course of business and professional and other fees and expenses in connection with the preparation of this Agreement and the consummation of the transaction contemplated hereby; (iv) sold or transferred, or agreed to sell or transfer, any of its assets, properties, or rights (except assets, properties, or rights not used or useful in its business which, in the aggregate have a value of less than $1,000), or canceled, or agreed to cancel, any debts or claims (except debts or claims which in the aggregate are of a value less than $1,000); (v) made or permitted any amendment or termination of any contract, agreement, or license to which it is a party if such amendment or termination is material, considering the business of Source; or (vi) issued, delivered or agreed to issue or deliver, any stock, bonds or other corporate securities including debentures (whether authorized and unissued or held as treasury stock), except in connection with this Agreement; and

 

  11  
 

 

(d)  Source has not become subject to any law or regulation which materially and adversely affects, or in the future, may adversely affect, the business, operations, properties, assets or condition of Source.

 

3.09 Litigation and Proceedings.  There are no actions, suits, proceedings or investigations pending or, to the knowledge of Source, threatened against Source, or affecting Source or its properties, at law or in equity, before any court or other governmental agency or instrumentality, domestic or foreign, or before any arbitrator of any kind except as disclosed in the Source Schedule 3.09 .  Source is not in default with respect to any judgment, order, writ, injunction, decree, award, rule or regulation of any court, arbitrator, or governmental agency or instrumentality.  

 

 3.10 Contracts .  Except as set forth in Schedule 3.10 hereto:

 

(a) Source is not a party to, and its assets, products, technology and properties are not bound by, any contract, franchise, license agreement, agreement, debt instrument or other commitments whether such agreement is in writing or oral;

 

(b) Source is not a party to or bound by, and the properties of Source are not subject to any contract, agreement, other commitment or instrument; any charter or other corporate restriction; or any judgment, order, writ, injunction, decree, or award; and

 

(c) Source is not a party to any oral or written (i) contract for the employment of any officer or employee; (ii) profit sharing, bonus, deferred compensation, stock option, severance pay, pension benefit or retirement plan, (iii) agreement, contract, or indenture relating to the borrowing of money, (iv) guaranty of any obligation, (vi) collective bargaining agreement; or (vii) agreement with any present or former officer or director of Source.

 

3.11 No Conflict With Other Instruments.   The execution of this Agreement and the consummation of the transactions contemplated by this Agreement will not result in the breach of any term or provision of, constitute a default under, or terminate, accelerate or modify the terms of, any indenture, mortgage, deed of trust, or other material agreement or instrument to which Source is a party or to which any of its assets, properties or operations are subject.

 

3.12 Compliance With Laws and Regulations.  Source has complied with all applicable statutes and regulations of any federal, state, or other applicable governmental entity or agency thereof.  This compliance includes, but is not limited to, the filing of all reports to date with federal and state securities authorities.

 

3.13 Approval of Agreement.  The Board of Directors of Source has authorized the execution and delivery of this Agreement by Source and has approved this Agreement and the transactions contemplated hereby.

 

  12  
 

 

3.14 Material Transactions or Affiliations.  Except as set forth in Schedule 3.14 hereto and in the SEC Reports, there exists no contract, agreement or arrangement between Source and any predecessor and any person who was at the time of such contract, agreement or arrangement an officer, director, or person owning of record or known by Source to own beneficially, 5% or more of the issued and outstanding common shares of Source and which is to be performed in whole or in part after the date hereof or was entered into since July 1, 2013. Neither any officer, director, nor 5% Shareholders of Source has, or has had since inception of Source, any known interest, direct or indirect, in any such transaction with Source which was material to the business of Source.  Source has no commitment, whether written or oral, to lend any funds to, borrow any money from, or enter into any other transaction with, any such affiliated person.

 

3.15 Bank Accounts; Power of Attorney.  Set forth in Schedule 3.15 is a true and complete list of (a) all accounts with banks, money market mutual funds or securities or other financial institutions maintained by Source within the past twelve (12) months, the account numbers thereof, and all persons authorized to sign or act on behalf of Source, (b) all safe deposit boxes and other similar custodial arrangements maintained by Source within the past twelve (12) months, (c) the check ledger for the last 12 months, and (d) the names of all persons holding powers of attorney from Source or who are otherwise authorized to act on behalf of Source with respect to any matter, other than its officers and directors, and a summary of the terms of such powers or authorizations.

 

3.16 Valid Obligation .  This Agreement and all agreements and other documents executed by Source in connection herewith constitute the valid and binding obligation of Source, enforceable in accordance with its or their terms, except as may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and subject to the qualification that the availability of equitable remedies is subject to the discretion of the court before which any proceeding therefore may be brought.

 

3.17 Exchange Act Compliance .  Source is in compliance with, and current in, all of the reporting, filing and other requirements under the Exchange Act, the Source common stock has been registered under Section 12(g) of the Exchange Act, and Source is in compliance with all of the requirements under, and imposed by, Section 12(g) of the Exchange Act, except where a failure to so comply is not reasonably likely to have a Material Adverse Effect on Source.

 

3.18 No Brokers .  Source has not retained any broker or finder in connection with any of the transactions contemplated by this Agreement, and Source has not incurred or agreed to pay, or taken any other action that would entitle any person to receive, any brokerage fee, finder’s fee or other similar fee or commission with respect to any of the transactions contemplated by this Agreement.  

 

3.19 Disclosure .  All disclosure provided to the Stockholders regarding Source, its business and the transactions contemplated hereby, including the Source Disclosure Schedules to this Agreement, furnished by or on behalf of Source with respect to the representations and warranties made herein are true and correct and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.  Source acknowledges and agrees that the Stockholders have not made, nor are the Stockholders making, any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth herein.  In the event that the Source Disclosure Schedules are not delivered contemporaneously with the execution of this Agreement, they shall be delivered as soon as practicable prior to the Closing Date.

 

  13  
 

 

ARTICLE IV

PLAN OF EXCHANGE

 

4.01 The Exchange . On the terms and subject to the conditions set forth in this Agreement, on the Closing Date, each of the Stockholders, shall assign, transfer and deliver, free and clear of all liens, pledges, encumbrances, charges, restrictions or known claims of any kind, nature, or description, the number of shares of the Company set forth on Schedule 4.01 attached hereto, constituting all of the shares of the Company held by such Stockholder and, in the aggregate, 100% of the issued and outstanding shares of the Company.  In exchange for the transfer of such securities by the Stockholders,  Source shall issue to the Stockholders, their affiliates or assigns, a total of 3,089,360 shares of Source common stock and 4,500 shares of Source Series C Preferred Stock (the “Series C Preferred Shares”), each share of Series C Preferred Stock being convertible into 1,531.80 shares of Source common stock and having the rights and preferences in the Certificate of Designation to be filed with the Secretary of State of the State of Delaware in accordance with Section 7.06 hereof, so that the Stockholders will upon conversion of the Source Series C Preferred Stock, together with the shares of common stock to be delivered pursuant hereto, hold approximately 80% of the total shares of common stock of Source to be outstanding upon consummation of the exchange contemplated hereby (the “ Stockholder Percentage Ownership ”). At the Closing Date, each of the Stockholders shall, on surrender of their certificate or certificates representing his Company Shares to Source or its registrar or transfer agent, be entitled to receive a certificate or certificates evidencing his proportionate interest in the Exchange Shares as set forth in Schedule 4.01 hereto. The Shareholders acknowledge that the distribution of Source’s shares among them is not proportional to their holdings in the Company, but has been determined by agreement among them and that those who are receiving more than their proportionate share are compensating those who are receiving less than their proportionate share.

 

4.02 Closing .  The closing (the “ Closing ” or the “ Closing Date ”) of the transactions contemplated by this Agreement shall occur on or before such date which is thirty (30) days from the execution of this Agreement, or such other date as the parties shall agree. Such Closing shall take place at a mutually agreeable time and place, and be conditioned upon all of the conditions of the Exchange being met.

 

4.03 Closing Events .  At the Closing, Source, the Company and the Stockholders shall execute, acknowledge, and deliver (or shall ensure to be executed, acknowledged, and delivered), any and all certificates, financial statements, schedules, agreements, resolutions, rulings or other instruments required by this Agreement to be so delivered at or prior to the Closing, together with such other items as may be reasonably requested by the parties hereto and their respective legal counsel in order to effectuate or evidence the transactions contemplated hereby.

 

4.04 Termination .  This Agreement may be terminated by the Board of Directors of the Company or Source only in the event that the Company or Source, as the case may be, does not meet the conditions precedent set forth in Articles VI and VII.  If this Agreement is terminated pursuant to this section, this Agreement shall be of no further force or effect, and no obligation, right or liability shall arise hereunder.

 

ARTICLE V

COVENANTS OF THE PARTIES

 

The parties hereby agree that:

 

5.01 Public Status .  Source shall make any and all required filings under the Exchange Act so that it remains a reporting company under the Exchange Act and so that its Common Stock continues to be a publicly-traded security for a period of at least 24 months from the Closing Date.  Source shall, to the best of its ability, take all action necessary to insure that its Common Stock continues to be quoted on the OTCQX or a substantially equivalent electronic trading system.

 

  14  
 

 

5.02 Public Announcements .  Except as required by applicable law, Source, the Company and the Stockholders shall consult with each other before issuing any press release or making any public statement with respect to this Agreement or the transactions contemplated hereby and will not issue any such press release or make any such public statement prior to such consultation and without the consent of the other parties.

 

5.03 Notices of Certain Events .  In addition to any other notice required to be given by the terms of this Agreement, each of the parties shall promptly notify the other party hereto of:

 

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

 

(b) any notice or other communication from any governmental or regulatory agency or authority in connection with the transactions contemplated by this Agreement; and

 

(c) any actions, suits, claims, investigations or proceedings commenced or, to its knowledge threatened against, relating to or involving or otherwise affecting such party that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant hereto or that relate to the consummation of the transactions contemplated by this Agreement.

 

5.04 Access to Information.  Following the date hereof, until consummation of all transactions contemplated hereby, Source shall give to the Company, its counsel, financial adviser, auditor and other authorized representatives reasonable access to the offices, properties, books and records, financial and other data and information of Source as the Company and their representatives may reasonably request.  Likewise, following the date hereof, until consummation of all transactions contemplated hereby, the Company shall give to Source, its counsel, financial advisers, auditors and other authorized representatives reasonable access to the offices, properties, books and records, financial and other data and information of the Company as Source and its representatives may reasonably request.  

 

5.05 Source’ Business and the Company’s Business.  Except for transactions contemplated by this Agreement, neither Source nor the Company will, without the prior written consent of the other, (i) make any material change in the type or nature of its business, or in the nature of its operations, (ii) create or suffer to exist any debt, other than that currently in existence or undertaken to complete projects ongoing or to meet short term working capital needs, (iii) issue any capital stock or (iv) enter into any new agreements of any kind or undertake any new obligations or liabilities likely to have a material impact on its business.

 

5.06 Consents of Third Parties.  Each of the parties will give any notices to third parties, and will use its reasonable best efforts to obtain any third party consents, that the other parties reasonably may request in connection with this Agreement.  Each of the parties will give any notices to, make any filings with, and use its reasonable best efforts to obtain any authorizations, consents, and approvals of governments and governmental agencies in connection with the matters in this Agreement.

 

  15  
 

 

5.09 No Solicitations .  From and after the date of this Agreement until the  later of the Closing, sixty days after the date hereof or termination of this Agreement pursuant to Section 8.01, the Company will not, nor will it permit any of its officers, directors or agents acting on its behalf to: (a) take any action to solicit, initiate, encourage or assist the submission of any proposal, negotiation or offer from any person or entity other than Source, and other person(s) or entities for purposes of soliciting their participation as investors or co-investors with the Company, relating to the acquisition, sale or transfer of any of the capital stock of the Company or any material part of the assets of the Company; (b) offer to sell or transfer any of the capital stock of the Company or any material part of the assets of the Company to any person other than Source and/or other person(s) or entities who participate as investors or co-investors with Source; or (c) disclose financial or other information relating to the company other than in the ordinary course of business to any person or entity other than Source, Source’ agents and representatives, and other person(s) or entities for purposes of soliciting their participation as investors or co-investors with Source, except with the written consent of Source.  The Company acknowledges and agrees that the legal remedies available to Source in the event the Company violates any of the foregoing covenants would be inadequate and that Source shall be entitled to specific performance, injunctive relief and other equitable remedies in the event of any such violation.  The Company will immediately notify Source regarding any contact between the Company, any of its directors, officers, employees, agents or representatives and any other person regarding any offer, proposal or inquiry during this exclusivity period.

 

5.10. Audited Financial Statements .  The Company shall deliver to Source no later than ninety (90) days following the execution of this Agreement, the Financial Statements of the Company contemplated by Section 1.07 hereof.

 

5.11 Relinquishment of Options . Stock options to purchase a total of 24,000,000 shares of Source’s common stock shall be relinquished by the holders thereof.

 

ARTICLE VI

CONDITIONS PRECEDENT TO OBLIGATIONS OF SOURCE

 

The obligations of Source under this Agreement are subject to the satisfaction, at or before the Closing Date, of the following conditions:

 

6.01 Accuracy of Representations and Performance of Covenants.  Each of the representations and warranties made by the Company and the Stockholders shall be true and correct in all material respects as of the Closing Date as if made on such date.  The Company and each Stockholder shall have performed or complied with all covenants and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing.  Source shall be furnished with a certificate, signed by a duly authorized executive officer of the Company and dated the Closing Date, confirming (i) the statements made in the two preceding sentences and (ii) that there has been no material adverse change in the business, affairs, prospects, operations, properties, assets or conditions of the Company since the date of this Agreement.

 

6.02 No Governmental Prohibition.   No order, statute, rule, regulation, executive order, injunction, stay, decree, judgment or restraining order shall have been enacted, entered, promulgated or enforced by any court or governmental or regulatory authority or instrumentality which prohibits the consummation of the transactions contemplated hereby.

 

6.03 Consents.  All consents, approvals, waivers or amendments pursuant to all contracts, licenses, permits, trademarks and other intangibles in connection with the transactions contemplated herein, or for the continued operation of the Company after the Closing Date on the basis as presently operated shall have been obtained.

 

6.04 Other Items . Source shall have received such further documents, certificates or instruments relating to the transactions contemplated hereby as Source may reasonably request.

 

  16  
 

 

6.05 Absence of Litigation . There shall be no actions, suits, proceedings or governmental investigations or inquiries pending or threatened against the Company which would prevent the consummation of the transaction contemplated hereby.

 

6.06 Schedules and Other Information .  The Company shall have delivered to Source the Financial Statements of the Company contemplated by Section 1.04, the Company Disclosure Schedules required hereunder, and other books and records reasonably requested in connection with Source’s due diligence investigation of the Company, and there shall have been no disclosure in any financial statements or any schedule delivered after the date of execution and delivery of this Agreement, or the documents described therein, or in any disclosure provided in connection with such due diligence investigation, which in the reasonable opinion of Source does or may have a materially adverse effect on the value of the business of the Company or on its assets, properties or goodwill.

 

 

ARTICLE VII

CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY

AND THE STOCKHOLDERS

 

The obligations of the Company and the Stockholders under this Agreement are subject to the satisfaction, at or before the Closing Date, of the following conditions:

 

7.01 Accuracy of Representations and Performance of Covenants . Each of the representations and warranties made by Source shall be true and correct in all material respects as of the Closing Date as if made on such date.  Source shall have performed or complied with all covenants and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing.  The Company shall be furnished with a certificate, signed by a duly authorized executive officer of Source and dated the Closing Date, confirming (i) the statements made in the two preceding sentences and (ii) that there has been no material adverse change in the business, affairs, prospects, operations, properties, assets or conditions of Source since the date of this Agreement.

 

7.02 No Governmental Prohibition .  No order, statute, rule, regulation, executive order, injunction, stay, decree, judgment or restraining order shall have been enacted, entered, promulgated or enforced by any court or governmental or regulatory authority or instrumentality which prohibits the consummation of the transactions contemplated hereby.

 

7.03 Consents .  All consents, approvals, waivers or amendments pursuant to all contracts, licenses, permits, trademarks and other intangibles in connection with the transactions contemplated herein, or for the continued operation of Source after the Closing Date shall have been obtained.

 

7.04 C ertificate of Designation . Source shall have filed a Certificate of Designation with the Secretary of State of Delaware authorizing the issuance of the Series C Preferred Shares as contemplated by Section 4.01 and having such rights and privileges as are set forth in the form of Certificate of Designation agreed upon by the parties.

 

7.05 Absence of Litigation . There shall be no actions, suits, proceedings or governmental investigations or inquiries pending or threatened against Source which would prevent the consummation of the transactions contemplated hereby.

 

7.06 Good Standing Certificate . Source shall have delivered to the Company a certificate of good standing issued by the Secretary of the State of the State of Delaware, dated as of a date within ten (10) days prior to the Closing Date, certifying that Source is in good standing as a corporation in the State of Delaware and has filed all tax returns required to have been filed by it with the State of Delaware to date and has paid all taxes reported as due thereon.

 

  17  
 

 

7.07 Board of Directors Resolutions .  Source shall have delivered to the Company a certificate signed by an officer of Source certifying to the adoption by its Board of Directors of resolutions approving this Agreement, the Australian Share Exchange Agreement and the transactions contemplated hereby and thereby.

 

7.08 Officers and Directors .   The officers and directors of Source shall have resigned from such positions effective immediately prior to Closing and the Company’s designees for such positions shall have been duly appointed.

 

7.9 Other Items.   The Company shall have received further documents, certificates, or instruments relating to the transactions contemplated hereby as the Company may reasonably request.

 

7.10 Schedules and Other Information .  Source shall have delivered to the Company the Source Disclosure Schedules required hereunder, and other books and records reasonably requested in connection with the Company’s due diligence investigation of Source, and there shall have been no disclosure in any schedule delivered after the date of execution and delivery of this Agreement, or the documents described therein, or in any disclosure provided in connection with such due diligence investigation, which in the reasonable opinion of the Company does or may have a materially adverse effect on the value of the business of Source or on its assets, properties or goodwill.

 

ARTICLE VIII

TERMINATION AND INDEMNIFICATION

 

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

 

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

 

(b) by either the Company or Source if the Closing shall not have occurred on or before such date which is thirty (30) days from the date of the execution of this Agreement (unless the failure to consummate the transactions by such date shall be due to the action or failure to act of the party seeking to terminate this Agreement which, in the case of the Company would include the failure of any Stockholder);

 

(c) by Source if: (i) the Company or a Stockholder shall have failed to timely comply in any material respect with any of the other covenants, conditions, terms or agreements contained in this Agreement to be complied with or performed by it, which breach is not cured within ten (10) days if capable of cure; or (ii) any representations and warranties of the Company or the Stockholders contained in this Agreement shall have been materially false when made or on and as of the Closing Date; or

 

(d) by the Company if: (i) Source shall have failed to timely comply in any material respect with any of the covenants, conditions, terms or agreements contained in this Agreement to be complied with or performed by it, which breach is not cured within ten (10) days if capable of cure; or (ii) any representations and warranties of Source contained in this Agreement shall have been materially false when made or on and as of the Closing Date.

 

  18  
 

 

8.02 Effect of Termination .  In the event of the termination of this Agreement pursuant to this Article 8, all further obligations of the parties under this Agreement shall forthwith be terminated without any further liability of any party to the other parties; provided, however, that nothing contained in this Section 8.02 shall relieve any party from liability for any breach of this Agreement.  Upon termination of this Agreement for any reason, each of the parties shall promptly cause to be returned to the other all documents and information obtained in connection with this Agreement and the transactions contemplated by this Agreement and all documents and information obtained in connection with the investigation of the other party’s business, operations and legal affairs, including any copies made of any such documents or information.

 

8.03 Indemnification

 

(a) The Company and each Stockholder shall indemnify and hold Source harmless, and shall reimburse Source for, any loss, liability, claim, damage, expense, including, but not limited to, reasonable cost of investigation and defense and reasonable attorneys’ fees (collectively, “ Damages ”), arising from or in connection with: (i) any inaccuracy in any of the representations and warranties of the Company and Stockholders contained herein or in any certificate delivered by the Company or a Stockholder pursuant to this Agreement, or any actions, omissions or states of facts inconsistent with any such representation or warranty; or (ii) any failure by the Company or any Stockholder to perform or comply with any provision of this Agreement.  

 

(b) Source shall indemnify and hold the Stockholders harmless, and shall reimburse the Stockholders for any Damages arising from: (i) any inaccuracy in any of the representations and warranties of Source in this Agreement or in any certificate delivered by Source pursuant to this Agreement, or any actions, omissions or states of facts inconsistent with any such representation or warranty; or (ii) any failure by Source to perform or comply with any provision of this Agreement.

 

8.4   Procedure for Indemnification .  Promptly after receipt by an indemnified party of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party, give notice to the indemnifying party of the commencement thereof, but the failure so to notify the indemnifying party shall not relieve it of any liability that it may have to any indemnified party except to the extent the defense of such action by the indemnifying party is prejudiced thereby.  In case any such action shall be brought against an indemnified party and it shall give notice to the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, to assume the defense thereof with counsel reasonable satisfactory to such indemnified party and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such section for any fees of other counsel or any other expenses, in each case subsequently incurred by such indemnified party in connection with the defense thereof, other than reasonable costs of investigation, If an indemnifying party assume the defense of such an action: (a) no compromise or settlement thereof may be effected by the indemnifying party without the indemnified party’s consent (which shall not be unreasonable withheld) unless: (i) there is no finding or admission of any violation of law or any violation of the rights of any person which is not fully remedied by the payment referred to in clause; (ii) no adverse effect on any other claims that may be made against the indemnified party; and (ii) the sole relief provided is monetary damages that are paid in full by the indemnifying party; (b) the indemnifying party shall have no liability with respect to any compromise or settlement thereof effected without its consent (which shall not be reasonably withheld); and (c) the indemnified party will reasonably cooperate with the indemnifying party in the defense of such action.  If notice is given to an indemnifying party of the commencement of any action and it does not, within fifteen days after the indemnified party’s notice is given, give notice to the indemnified party of its election to assume the defense thereof, the indemnifying party shall be bound by any determination made in such action or any compromise or settlement thereof effected by the indemnified party.  Notwithstanding the foregoing, if an indemnified party determined in good faith that there is a reasonable probability that an action may materially and adversely affect it or its affiliated other than as a result of monetary damages, such indemnified party may, by notice to the indemnifying party, assume the exclusive right to defend, compromise or settle such action, but the indemnifying party shall not be bound by any determination of an action so defended or any compromise or settlement thereof effected without its consent (which shall not be unreasonably withheld).

 

  19  
 

 

ARTICLE IX

MISCELLANEOUS

 

8.01 Governing Law .  This Agreement shall be governed by, enforced, and construed under and in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law thereunder.  Venue for all matters shall be in New York, New York.  Each of the parties (a) irrevocably consents and agrees that any legal or equitable action or proceedings arising under or in connection with this Agreement shall be brought exclusively in the Southern District Court of the United States located in New York County. By execution and delivery of this Agreement, each party hereto irrevocably submits to and accepts, with respect to any such action or proceeding, generally and unconditionally, the jurisdiction of the aforesaid court, and irrevocably waives any and all rights such party may now or hereafter have to object to such jurisdiction.

 

8.02 Notices .  Any notice or other communications required or permitted hereunder shall be in writing and shall be sufficiently given if personally delivered to it or sent by overnight courier or registered mail or certified mail, postage prepaid, or electronic mail, addressed as follows:

  

If to the Company or any Stockholder:

 

Venture Track, Inc.

867 Boylston Street

5th Floor

Boston, MA 02116

Attn: Edward C. DeFeudis, Chief Executive Officer

 

If to Source:

 

Source Financial, Inc.

867 Boylston Street

5th Floor

Boston, MA 02116

Attn: Edward C. DeFeudis, Chief Executive Officer

 

or such other addresses as shall be furnished in writing by any party in the manner for giving notices hereunder, and any such notice or communication shall be deemed to have been given (i) upon receipt, if personally delivered or sent by electronic mail, (ii) on the day after dispatch, if sent by overnight courier, and (iii) three (3) days after mailing, if sent by registered or certified mail.

 

Section 8.03 Attorney’s Fees .  In the event that either party institutes any action or suit to enforce this Agreement or to secure relief from any default hereunder or breach hereof, the prevailing party shall be reimbursed by the losing party for all costs, including reasonable attorney’s fees, incurred in connection therewith and in enforcing or collecting any judgment rendered therein.

 

  20  
 

 

Section 8.04 Confidentiality .  Each party hereto agrees with the other that, unless and until the transactions contemplated by this Agreement have been consummated, it and its representatives will hold in strict confidence all data and information obtained with respect to another party or any subsidiary thereof from any representative, officer, director or employee, or from any books or records or from personal inspection, of such other party, and shall not use such data or information or disclose the same to others, except (i) to the extent such data or information is published, is a matter of public knowledge, or is required by law to be published; or (ii) to the extent that such data or information must be used or disclosed in order to consummate the transactions contemplated by this Agreement.  In the event of the termination of this Agreement, each party shall return to the other party all documents and other materials obtained by it or on its behalf and shall destroy all copies, digests, work papers, abstracts or other materials relating thereto, and each party will continue to comply with the confidentiality provisions set forth herein.

 

8.05 Public Announcements and Filings .  Unless required by applicable law or regulatory authority, none of the parties will issue any report, statement or press release to the general public, to the trade, to the general trade or trade press, or to any third party (other than its advisors and representatives in connection with the transactions contemplated hereby) or file any document, relating to this Agreement and the transactions contemplated hereby, except as may be mutually agreed by the parties.  Copies of any such filings, public announcements or disclosures, including any announcements or disclosures mandated by law or regulatory authorities, shall be delivered to each party at least one (1) business day prior to the release thereof.

 

8.06 Schedules; Knowledge .  Each party is presumed to have full knowledge of all information set forth in the other party’s schedules delivered pursuant to this Agreement.

 

8.07 Third Party Beneficiaries.  This contract is strictly between Source and the Company, and, except as specifically provided, no director, officer, stockholder (other than the Stockholders), employee, agent, independent contractor or any other person or entity shall be deemed to be a third party beneficiary of this Agreement.

 

8.08 Expenses .  Whether or not the Exchange is consummated, each of Source and the Company will bear their own respective expenses, including legal, accounting and professional fees, incurred in connection with the Exchange or any of the other transactions contemplated hereby.

 

8.09 Entire Agreement.  This Agreement represents the entire agreement between the parties relating to the subject matter thereof and supersedes all prior agreements, understandings and negotiations, written or oral, with respect to such subject matter.

 

8.10 Amendment or Waiver.  Every right and remedy provided herein shall be cumulative with every other right and remedy, whether conferred herein, at law, or in equity, and may be enforced concurrently herewith, and no waiver by any party of the performance of any obligation by the other shall be construed as a waiver of the same or any other default then, theretofore, or thereafter occurring or existing.  This Agreement may by amended only by a writing signed by all parties hereto.

 

8.10 Survival; Termination.  The representations, warranties, and covenants of the respective parties shall survive the Closing Date and the consummation of the transactions herein contemplated for a period of one year except that the representation and warranty of the Stockholders in Section 2.01 as to the ownership of the Company Shares shall survive for the period equal to the applicable statute of limitations relating to said matter.

 

8.12 Best Efforts .   Subject to the terms and conditions herein provided, each party shall use its best efforts to perform or fulfill all conditions and obligations to be performed or fulfilled by it under this Agreement so that the transactions contemplated hereby shall be consummated as soon as practicable.  Each party also agrees that it shall use its best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective this Agreement and the transactions contemplated herein.

 

8.13 Counterparts .  This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which taken together shall be but a single instrument.

 

[Signature Page Follow]

 

  21  
 

 

IN WITNESS WHEREOF , the parties hereto have executed this Agreement as of the date first-above written.

 

  Source Financial, Inc.
     
  By: /s/ Edward C. DeFeudis
   

Name:  Edward C. DeFeudis

Title:    Chief Executive Officer

     
  Venture Track, Inc.
   
  By: /s/ Edward C. DeFeudis
    Name:   Edward C. DeFeudis
    Title:     Chief Executive Officer
     
  Stockholders:
   
  By: /s/ Edward C. DeFeudis
    Name:   Edward C. DeFeudis
     
  By: /s/ Kumar Lanka
    Name:   Kumar Lanka
     
  By: /s/ Robert Pearson
    Name:   Robert Pearson
     
  By: /s/ Mark Alan Glassman
    Name:   Mark Alan Glassman
     
  Spider Investments, LLC
     
  By: /s/ Edward C. DeFeudis
    Name:   Edward C. DeFeudis
    Title:     Managing Member

 

  22  
 

 

Schedule 3.02

 

Capitalization

 

    Pre-Exchange     Post-Exchange     Post-Exchange,
Fully-Diluted
 
Common Stock - Source Stockholders     8,791,636       100 %     2,714,957       47 %     2,714,957       21.34 %
Common Stock - Venture Stockholders     -       -       3,089,360       26 %     3,089,360       24.28 %
Total Common Shares Outstanding     8,791,636       100 %     5,804,317       100 %     5,804,317       45.62 %
Series B Preferred Stock     5,000               -       -       -       -  
Series C Preferred Stock     -       -       4,500               6,893,100       54.18 %
Stock Options     2,400,000               25,000               25,000       0.20 %
Fully Diluted Shares Outstanding                                     12,797,417       100 %

 

Note:

 

6,076,679 shares of common stock and 5,000 Series B Preferred Stock shall be cancelled simultaneously with the Share Exchange. In addition, 2,375,000 stock options shall be cancelled prior to the Closing.

 

4,500 shares of Series C Preferred Stock are convertible into 6,893,100 shares at the rate of 1,531.80 per share.

 

  23  
 

 

Schedule 4.01

 

Venture Track Stockholders

 

    # of Shares in     # of Shares in Source Financial after the Exchange  
Name   Venture Track Prior to the Exchange     Common Stock     Series C Preferred Stock  
Edward C. DeFeudis     1,400,000       1,429,786       2,082  
Kumar Lanka     100,000       102,128       149  
Robert Pearson     110,000       112,340       164  
Mark Alan Glassman     15,000       15,320       23  
Spider Investments, LLC     1,400,000       1,429,786       2,082  
Total     3,025,000       3,089,360       4,500  

 

 

24 

 

 

Exhibit 3.2

 

  Delaware Page 1
  The First State  

 

I, JEFFREY W. BULLOCK, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF DESIGNATION OF "SOURCE FINANCIAL, INC . " , FILED IN THIS OFFICE ON THE SIXTH DAY OF JULY, A . D . 2016, AT 10:38 O' CLOCK A.M.

 

A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE COUNTY RECORDER OF DEEDS.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  /s/ Jeffrey W. Bullock
  Jeffrey W. Bullock, Secretary of State

 

2164821    8100   Authentication: 202616546
SR# 20164787568   Date: 07-07-16

 

You may verify this certificate online at corp.delaware.gov/authver.shtml

 

 

 

 

 

State of Delaware
Secretary of State
Division of Corporations
Delivered 10:38 AM 07/06/2016

FILED 10:38 AM 07/06/2016

SR 20164787568 - File Number 2164821

 

CERTIFICATE OF DESIGNATIONS,

PREFERENCES AND RIGHTS OF

SERIES C CONVERTIBLE PREFERRED STOCK

 

Source Financial, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), hereby certifies that the following resolution was adopted by the Board of Directors of the Corporation (the “Board”) on June 30, 2016, in accordance with the provisions of its Certificate of Incorporation (as amended, the “Certificate of Incorporation”) and bylaws. The authorized series of the Corporation’s previously-authorized preferred stock shall have the following preferences, privileges, powers and restrictions thereof, as follows:

 

RESOLVED , that pursuant to the authority granted to and vested in the Board in accordance with the provisions of the Certificate of Incorporation and bylaws of the Corporation, the Board hereby authorizes a series of the Corporation’s previously authorized preferred stock (the “Preferred Stock”), and hereby states the designation and number of shares, and fixes the relative rights, preferences, privileges, powers and restrictions thereof as follows:

 

I. NAME OF THE CORPORATION

 

Source Financial, Inc.

 

  II. DESIGNATION AND AMOUNT; DIVIDENDS

 

A. Designation . The designation of said series of preferred stock shall be Series C Convertible Preferred Stock, $0.01 par value per share (the “Series C Preferred Stock”).

 

B. Number of Shares . The number of shares of Series C Preferred Stock authorized shall be four thousand five hundred (4,500) shares. Each share of Series C Preferred Stock shall have a stated value equal to $0.01 (as may be adjusted for any stock dividends, combinations or splits with respect to such shares) (the “Series C Stated Value”).

 

C. Dividends . The Corporation’s Board shall not declare a dividend payable to holders of any class of stock other than Series C Preferred Stock until the Corporation shall have declared and paid dividends to the holders of Series C Preferred Stock equal in aggregate to the Series C Stated Value of the outstanding shares of Series C Preferred Stock.

 

  III . Liquidation Rights

 

In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, the holders of Series C Preferred Stock shall be entitled to receive, on parity with the holders Common Stock (as defined herein), assets of the Corporation available for distribution to the holders of capital stock of the Corporation. The Series C Preferred Stock shall not have any priority or preference with respect to any distribution of any of the assets of the Corporation. Neither a consolidation or merger of the Corporation with another corporation or other entity nor a sale, transfer, lease or exchange of all or part of the Corporation’s assets will be considered a liquidation, dissolution or winding up of the affairs of the Corporation for purposes of this Article III.

 

  2  
 

 

  IV. CONVERSION

 

A. Conversion Procedure . Subject to and in compliance with the provisions of this Article IV, any shares of Series C Preferred Stock may, at the option of the holder, be converted into fully paid and non-assessable shares of Common Stock. The holder of a share of Series C Preferred Stock may exercise its conversion right by giving a written conversion notice (the “Conversion Notice”) (x) by email or facsimile to the Corporation confirmed by a telephone call or (y) by overnight delivery service, with a copy by email or facsimile to the Corporation’s transfer agent for its Common Stock, as designated by the Corporation from time to time (the “Transfer Agent”) and to its counsel, as designated by the Corporation from time to time. If such conversion will result in the conversion of all of such holder’s Series C Preferred Stock, the holder shall also surrender the certificate for the Series C Preferred Stock to the Corporation at its principal office (or such other office or agency of the Corporation may designate by notice in writing to the holder) at any time during its usual business hours on the date set forth in the Conversion Notice.

 

B. Conversion Ratio . The number of shares of Common Stock to which a holder of Series C Preferred Stock shall be entitled upon a Conversion shall equal to (x) the number of shares of Series C Preferred Stock recited in the Conversion Notice multiple by (y) 1,531.80 (the “Conversion Rate”). The Corporation shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Corporation shall round such fraction of a share of Common Stock up to the nearest whole share. The Corporation shall pay any and all transfer, stamp and similar taxes that may be payable with respect to the issuance and delivery of Common Stock upon any conversion.

 

C. Issuance of Certificates; Time Conversion Effected . Conversion shall be deemed to have been effected, and the “Conversion Date” shall be deemed to have occurred, on the date on which such Conversion Notice shall have been received by the Corporation and at the time specified stated in such Conversion Notice, which must be during the calendar day of such notice. The rights of the holder of the Series C Preferred Stock shall cease, and the person or persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares represented thereby, on the Conversion Date. Promptly, but in no event more than three (3) Trading Days, after the Conversion Date and surrender of the Series C Preferred Stock certificate (if required), the Corporation shall issue and deliver, or the Corporation shall cause to be issued and delivered, to the holder, registered in such name or names as the holder may direct, a certificate or certificates for the number of whole shares of Common Stock into which the Series C Preferred Stock has been converted. In the alternative, if the Corporation’s Transfer Agent is a participant in the electronic book transfer program, the Transfer Agent shall credit such aggregate number of shares of Common Stock to which the holder shall be entitled to the holder’s or its designee’s balance account with The Depository Trust Corporation. Issuance of shares of Common Stock issuable upon conversion that are requested to be registered in a name other than that of the registered holder shall be subject to compliance with all applicable federal and state securities laws.

 

  3  
 

 

D. Limitation . Notwithstanding anything to the contrary contained herein or elsewhere, no holder of Series C Preferred Stock may exercise its conversion rights hereof unless the Company has sufficient number of authorized unissued shares of common stock to provide for the issuance of all shares of common stock required upon conversion of the Series C Preferred Stock.

 

  V. RANK

 

All shares of the Series C Preferred Stock shall rank (i) senior to the Corporation’s common stock, par value $0.001 per share (“Common Stock”), and any other class or series of capital stock of the Corporation hereafter created, except as otherwise provided in clauses (ii) and (iii) of this Article V, (ii) pari passu with any class or series of capital stock of the Corporation hereafter created and specifically ranking, by its terms, on par with the Series C Preferred Stock and (iii) junior to any class or series of capital stock of the Corporation hereafter created specifically ranking, by its terms, senior to the Series C Preferred Stock, in each case as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary.

 

  VI. VOTING RIGHTS

 

Each one (1) share of Series C Preferred Stock shall entitle the holder thereof, on all matters submitted to a vote of the stockholders of the Corporation, to that number of votes as shall be equal to the aggregate number of shares of Common Stock into which such holder’s shares of Series C Preferred Stock are convertible on the record date for the stockholder action without taking into account potential conversions of any other convertible securities issued by the Corporation.

 

  VII. PROTECTION PROVISIONS

 

So long as any shares of Series C Preferred Stock are outstanding, the Corporation shall not, without first obtaining the unanimous written consent of the holders of Series C Preferred Stock, alter or change the rights, preferences or privileges of the Series C Preferred so as to affect adversely the holders of Series C Preferred Stock.

 

Should any holder of Series C Preferred Stock cease to be an officer or director of the Company at any time and for any reason, such holders’ Series C Preferred Stock shall be immediately cancelled.

 

  VIII. MISCELLANEOUS

 

A. Status of Redeemed Stock. In case any shares of Series C Preferred Stock shall be redeemed or otherwise repurchased or reacquired, the shares so redeemed, repurchased, or reacquired shall resume the status of authorized but unissued shares of preferred stock, and shall no longer be designated as Series C Preferred Stock.

 

  4  
 

 

B. Lost or Stolen Certificates. Upon receipt by the Corporation of (i) evidence of the loss, theft, destruction or mutilation of any Preferred Stock Certificate(s) and (ii) in the case of loss, theft or destruction, indemnity (with a bond or other security) reasonably satisfactory to the Corporation, or in the case of mutilation, the Preferred Stock Certificate(s) (surrendered for cancellation), the Corporation shall execute and deliver new Preferred Stock Certificates.

 

C. Waiver . Notwithstanding any provision in this Certificate of Designation to the contrary, any provision contained herein and any right of the holders of Series C Preferred granted hereunder may be waived as to all shares of Series C Preferred Stock (and the holders thereof) upon the unanimous written consent of the holders of the Series C Preferred Stock.

 

D. Notices . Any notices required or permitted to be given under the terms hereof shall be sent by certified or registered mail (return receipt requested) or delivered personally, by nationally recognized overnight carrier or by confirmed facsimile transmission, and shall be effective five (5) days after being placed in the mail, if mailed, or upon receipt or refusal of receipt, if delivered personally or by nationally recognized overnight carrier or confirmed facsimile transmission, in each case addressed to a party as set forth below, or such other address and telephone and fax number as may be designated in writing hereafter in the same manner as set forth in this Article.

 

If to the Corporation:

 

Source Financial, Inc.

867 Boylston Street, 5th Floor

Boston, MA 02116

Attention: Edward C. DeFeudis

Telephone: (424) 322-2201

 

If to the holders of Series C Preferred Stock, to the address listed in the Corporation’s books and records.

  

[-Signature page follows-]

 

  5  
 

 

IN WITNESS WHEREOF, the undersigned has signed this certificate as of the 30 th day of June, 2016.

 

  SOURCE FINANCIAL, INC.
   
  By:   /s/ Edward C. DeFeudis 
  Name:   Edward C. DeFeudis
  Title: Chief Executive Officer

 

 

6

 

Exhibit 16.1  

 

July 7, 2016

 

Securities and Exchange Commission

100 F Street, N.E.

Washington, DC 20549

Ladies and Gentlemen:

 

We have read the Item 4.01 of Form 8-K dated July 7, 2016, of Source Financial, Inc. and are in agreement with the statements contained therein.

 

 

/s/ Lichter, Yu and Associates, Inc.

Exhibit 17.1

 

Board of Directors

Source Financial, Inc.

 

June 30, 2016

 

Gentlemen:

 

This is to confirm my resignation as a director and officer of Source Financial, Inc. (“Source”) effective with the closing of the transactions contemplated by that certain Share Exchange Agreement dated June 30, 2016 by and among Source, Moneytech Group Pty Ltd and the stockholders of Source signatory thereto.

 

  Very truly,
   
  /s/ Hugh Evans
  Hugh Evans

Exhibit 17.2

 

Board of Directors

Source Financial, Inc.

 

June 30, 2016

 

Gentlemen:

 

This is to confirm my resignation as an officer of Source Financial, Inc. (“Source”) effective with the closing of the transactions contemplated by that certain Share Exchange Agreement dated June 30, 2016 by and among Source, Moneytech Group Pty Ltd and the stockholders of Source signatory thereto.

 

  Very truly,
   
  /s/ Brian Pullar
  Brian Pullar

 

Exhibit 17.3

 

Board of Directors

Source Financial, Inc.

 

June 30, 2016

 

Gentlemen:

 

This is to confirm my resignation as a director of Source Financial, Inc. (“Source”) effective with the closing of the transactions contemplated by that certain Share Exchange Agreement dated June 30, 2016 by and among Source, Moneytech Group Pty Ltd and the stockholders of Source signatory thereto.

 

  Very truly,
   
  /s/ Klaus Selinger
  Klaus Selinger

 

Exhibit 17.4

 

Board of Directors

Source Financial, Inc.

 

June 30, 2016

 

Gentlemen:

 

This is to confirm my resignation as a director of Source Financial, Inc. (“Source”) effective with the closing of the transactions contemplated by that certain Share Exchange Agreement dated June 30, 2016 by and among Source, Moneytech Group Pty Ltd and the stockholders of Source signatory thereto.

  

  Very truly,
   
  /s/ John Wolfgang
  John Wolfgang

Exhibit 21.1

 

List of Subsidiaries

 

Name   Jurisdiction of Incorporation/
Organization
  Percent 
Ownership
         
Venture Track, Inc.   Delaware   100%
Moneytech USA, Inc.   Delaware   100%

 

 

 

Exhibit 99.1

 

 

 

 

 

 

 

 

 

 

 

VENTURE TRACK, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 2015 and 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

Venture Track, Inc.
Table of Contents

 

  Page
   
Report of Independent Registered Public Accounting Firm 1
   
Balance Sheets 2
   
Statements of Operations 3
   
Statements of Cash Flows 4
   
Statements of Stockholders’ Equity (Deficit) 5
   
Notes to Financial Statements 6 - 10

 

 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors

Venture Track, Inc.

 

We have audited the accompanying balance sheets of Venture Track. Inc. as of December 31. 2015 and 2014, and the related statements of operations, stockholders' equity (deficit) and cash flows for the year ended December 31. 2015 and the period from February 28, 2014 (inception) through December 31, 2014. Venture Track's management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit 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 audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion. the financial statements referred to above present fairly, in all material respects, the financial position of Venture Track, Inc. as of December 31, 2015 and 2014. and the results of its operations and its cash flows for the year ended December 31, 2015 and the period from February 28, 2014 (inception) through December 31, 2014, in conformity with accounting principles generally accepted in the United States of America.

 

As discussed in Note 2 to the financial statements. the Company's absence of significant revenues, recurring losses from operations, and its need for additional financing in order to fund its projected loss in 2016 raise substantial doubt about its ability to continue as a going concern. The 2015 financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ LBB & Associates Ltd., LLP

 

LBB & Associates Ltd., LLP

Houston, Texas

May 18, 2016

 

 

10260 WESTHEIMER ROAD, SUITE 310    ●      HOUSTON, TEXAS 77042    ●     TEL: (713) 800-4343    ●     FAX: (713) 456-2408

 

 

 

 

 

Venture Track, Inc.

BALANCE SHEETS

As of December 31, 2015 and 2014

 

    December 31,
2015
    December 31,
2014
 
ASSETS            
             
CURRENT ASSETS:            
             
Cash and cash equivalents   $ 452     $ 518  
                 
Total Current Assets     452       518  
                 
Intangible assets, net of accumulated amortization of $5,365 and $4,691, respectively     31,169       16,843  
                 
TOTAL ASSETS   $ 31,621     $ 17,361  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)                
                 
CURRENT LIABILITIES:                
                 
Advances from affiliate   $     $ 100,000  
Accrued expenses           9,136  
                 
Total Current Assets           109,136  
                 
TOTAL LIABILITIES           109,136  
                 
STOCKHOLDERS’ EQUITY (DEFICIT)                
Common stock, $0.00001 par value, 10,000,000 shares authorized, 1,625,000 and 1,500,000 shares issued and outstanding as of December 31, 2015 and 2014, respectively     16       15  
Additional paid in capital     141,933        
Accumulated deficit     (110,328 )     (91,790 )
Total Stockholders’ Equity (Deficit)     31,621       (91,775 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)   $ 31,621     $ 17,361  

 

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

 

  2  
 

 

Venture Track, Inc.

STATEMENTS OF OPERATIONS

For the year ended December 31, 2015 and for the period from
February 28, 2014 (Inception) through December 31, 2014

 

    Year ended December 31,
2015
    Inception through December 31, 2014  
             
EXPENSES            
             
General Administrative   $ 10,740     $ 82,654  
                 
TOTAL EXPENSES     10,740       82,654  
                 
Loss from operations     (10,740 )     (82,654 )
                 
OTHER EXPENSES                
                 
Interest Expense     (7,798 )     (9,136 )
                 
NET LOSS   $ (18,538 )   $ (91,790 )
                 
NET LOSS PER SHARE:                
BASIC AND DILUTED   $ (0.01 )   $ (0.08 )
                 
WEIGHTED AVERAGE SHARES OUTSTANDING:                
BASIC AND DILUTED     1,539,781       1,133,242  

 

The accompanying notes are an integral part of these financial statements

 

  3  
 

 

Venture Track, Inc.

STATEMENTS OF CASH FLOWS

For the year ended December 31, 2015 and for the period from
February 28, 2014 (Inception) through December 31, 2014

 

    Year ended December 31,
2015
    Inception through December 31, 2014  
CASH FLOWS USED IN OPERATING ACTIVITIES            
Net loss   $ (18,538 )   $ (91,790 )
Adjustments to reconcile net loss to cash provided by operating activities:                
Amortization     674       4,691  
Accrued expenses     7,798       9,136  
Stock-based compensation           15  
                 
Net Cash Used in Operating Activities     (10,066 )     (77,948 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES                
Capital expenditures           (21,534 )
Net Cash Used in Investing Activities           (21,534 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES                
Advances from affiliate     10,000       100,000  
Net Cash Provided by Financing Activities     10,000       100,000  
                 
NET CHANGE IN CASH     (66 )     518  
                 
CASH – BEGINNING     518        
                 
CASH – ENDING   $ 452     $ 518  
                 
Supplemental Cash Flow Information:                
Cash paid for:                
Interest   $     $  
Income taxes   $     $  
                 
Supplemental disclosures of non-cash transactions:                
Common stock for advances   $ 110,000     $  
Common stock for intangible assets   $ 15,000     $  
Forgiveness of debt   $ 16,934     $  

 

The accompanying notes are an integral part of these financial statements

 

  4  
 

 

Venture Track, Inc.

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For the year ended December 31, 2015 and for the period from
February 28, 2014 (Inception) through December 31, 2014

 

    Common Stock     Additional Paid-in     Accumulated        
    Shares     Amount     Capital     Deficit     Total  
                               
Common shares issued to founders     1,500,000     $ 15     $     $     $ 15  
                                         
Net loss                       (91,790 )     (91,790 )
                                         
Balance, December 31, 2014     1,500,000       15               (91,790 )     (91,775 )
                                         
Issuance of common stock for advances     110,000       1       109,999             110,000  
                                         
Shares issued for intangible assets     15,000             15,000             15,000  
                                         
Forgiveness of debt                 16,934             16,934  
                                         
Net loss                       (18,538 )     (18,538 )
                                         
Balance, December 31, 2015     1,625,000     $ 16     $ 141,933     $ (110,328 )   $ 31,621  

 

The accompanying notes are an integral part of these financial statements

 

  5  
 

   

Venture Track, Inc.

  Notes to the Financial Statements

For the year ended December 31, 2015 and for the period from
February 28, 2014 (Inception) through December 31, 2014

 

Note 1 - Organization, Description of Business, and Basis of Accounting

 

Business Organization  

The Company was incorporated as Songstress, Inc. on February 28, 2014. On May 13, 2015, the Company changed its name to Scoocher, Inc. On February 10, 2016, the Company changed its name to Venture Track, Inc. The business built and launched a proprietary Content Monetization Engine that provides the music industry with a safe, simple and reliable platform to monetize new and existing content on the Internet.

 

Accounting Basis

These financial statements have been prepared on the accrual basis of accounting following generally accepted accounting principles of the United States of America consistently applied. The Company’s fiscal year end is December 31.

 

Cash and Cash Equivalents  

For Statement of Cash Flows purposes, the Company considers all cash on hand and in banks, certificates of deposit and other highly-liquid investments with original maturities of three months or less, when purchased, to be cash and cash equivalents. There were no cash equivalents at December 31, 2015 and 2014.

 

Use of Estimates  

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Recently Issued Accounting Pronouncements 

Except for rules and interpretive releases of the SEC under authority of federal securities laws and a limited number of grandfathered standards, the FASB Accounting Standards CodificationTM (“ASC”) is the sole source of authoritative GAAP literature recognized by the FASB and applicable to the Company. Management has reviewed the aforementioned rules and releases and believes any effect will not have a material impact on the Company's present or future consolidated financial statements.

 

At the year ended December 31, 2015, the Company has adopted Accounting Standards Update (“ASU”) No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. The adoption of this ASU allows the Company to remove the inception to date information and all references to development stage.

 

Dividends 

The Company has not yet adopted a policy regarding the payment of dividends.

 

Earnings (Loss) per Share  

Basic earnings (loss) per share is computed by dividing the net income (loss) available to common shareholders by the weighted-average number of common shares outstanding during the respective period presented in our accompanying financial statements.

 

  6  
 

 

Venture Track, Inc.

  Notes to the Financial Statements

For the year ended December 31, 2015 and for the period from
February 28, 2014 (Inception) through December 31, 2014

 

Note 1 - Organization, Description of Business, and Basis of Accounting (Continued)

 

Intangible Assets  

The Company’s intangible assets, which are recorded at cost, consist primarily of the unamortized cost basis of issued and pending patents and domain cost. These assets are being amortized on a straight line basis over their estimated useful lives. The Company continually evaluates the amortization period and carrying basis of intangible assets to determine whether subsequent events and circumstances warrant a revised estimated useful life or impairment in value. To date, no such impairment has occurred. To the extent such events or circumstances occur that could affect the recoverability of our intangible assets, we may incur changes for impairment in the future.

 

Revenue Recognition Policy  

The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collection is probable. The Company has not recorded any revenue for years ended 2015 and 2014.

 

Income Taxes  

The Company uses the asset and liability approach for accounting for income taxes, whereby deferred income taxes are recognized for the tax consequences in future years of differences in the tax bases of assets and liabilities and their financial reporting amounts based on enacted laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, if necessary, to reduce deferred tax assets to the amount expected to be realized. No material uncertain tax positions were identified during 2015 or 2014. The Company believes that its’ income tax filing positions and deductions will more-likely-than-not be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on the Company’s financial condition, results of operations or cash flows. Therefore, no reserves for uncertain income tax positions have been recorded. The Company is no longer subject to income tax examinations by the U.S federal, state, or local tax authorities for years before 2013. At December 31, 2015, a fully deferred tax asset valuation allowance has been provided and no deferred tax asset benefit has been recorded.

 

Concentrations of Risk  

The Company does not have any concentration of risks as of December 31, 2015.

 

Software Development Costs  

Software development costs include payments made to independent software developers under development arrangements primarily for the development of our smart-phone mobile applications (“Apps”). Software development costs are capitalized once technological feasibility of a product is established and it is determined that such costs should be recoverable against future revenues. For products where proven technology exists, this may occur early in the development cycle. Technological feasibility is evaluated on a product-by-product basis. Amounts related to software development that are not capitalized are charged immediately to product research and development costs.

 

Commencing upon the related product’s release, capitalized software development costs are amortized to cost of sales based upon the higher of (i) the ratio of current revenue to total projected revenue or (ii) the straight-line method. The recoverability of capitalized software development costs is evaluated based on the expected performance of the specific products for which the costs relate. The following criteria are used to evaluate expected product performance: historical performance of comparable products using comparable technology and orders for the product prior to its release. Software development costs are included in intangible costs.

 

  7  
 

 

Venture Track, Inc.

  Notes to the Financial Statements

For the year ended December 31, 2015 and for the period from
February 28, 2014 (Inception) through December 31, 2014

 

Note 1 - Organization, Description of Business, and Basis of Accounting (Continued)

 

Software Development Costs (Continued)

Significant management judgments and estimates are utilized in the assessment of when technological feasibility is established, as well as in the ongoing assessment of the recoverability of capitalized costs. If revised forecasted or actual product sales are less than and/or revised forecasted or actual costs are greater than the original forecasted amount utilized in the initial recoverability analysis, the net realizable value may be lower than originally estimated in any given quarter, which could result in an impairment charge.

 

Note 2 - Going Concern Uncertainty

 

The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. At December 31, 2015 and 2014, the Company had accumulated losses of $110,328 and $91,790, respectively. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continued existence is dependent upon its ability to generate sufficient cash flows from operations to support its daily operations as well as provide sufficient resources to retire existing liabilities and obligations on a timely basis. It is the intent of management and significant stockholders to provide sufficient working capital necessary to support and preserve the integrity of the corporate entity. However, no formal commitments or arrangements to advance or loan funds to the Company or repay any such advances or loans exist.

 

Note 3 - Intangible Assets, net

 

Intangible assets includes domain cost, software development and patent costs related to the creation of the Company's patent and costs related to the application of patents. The Company periodically evaluates the recoverability of these costs and writes off the unamortized cost if it is determined that value no longer exists.

 

    2015     2014  
             
Domain Costs   $ 6,163     $ 6,163  
                 
Software Development     15,000        
                 
Patent Cost     15,371       15,371  
                 
Less: accumulated amortization     (5,365 )     (4,691 )
                 
Intangible assets, net   $ 31,169     $ 16,843  

 

Amortization expense on intangible assets was $674 and $4,691 for the years ended December 31, 2015 and 2014, respectively. The domain costs are amortized based on one or two year terms of their subscription renewals. Software development cost will be amortized over an estimated useful life of three years. The patent costs will be amortized, at such time the patents have been issued, over the life of the patent.

 

  8  
 

 

Venture Track, Inc.

  Notes to the Financial Statements

For the year ended December 31, 2015 and for the period from
February 28, 2014 (Inception) through December 31, 2014

 

Note 4 - Income Tax

 

The provision for Federal income tax consists of the following:

 

    2015     2014  
             
Federal income tax attributable to:            
Current operations at statutory rate (34%)   $ 6,303     $ 31,208  
Less: change in valuation allowance     (6,303 )     (31,208 )
Current provision for federal Income tax   $     $  

 

Deferred tax assets   2015     2014  
                 
Net operating loss carryforward   $ 37,511     $ 31,208  
Less: valuation allowance     (37,511 )     (31,208 )
Net deferred tax assets   $     $  

 

At December 31, 2015 and 2014, respectively, The Company has net operating loss carryforwards of approximately $110,328 and $91,790 for federal income tax purposes, which expires beginning in 2034.

 

Note 5 - Related Party Transactions

 

In 2014, the Company received advances of $100,000 from an affiliate of the Company. In 2015, the Company received an additional $10,000 in advances. These advances have an interest rate of 12% per annum. As of December 31, 2015 and 2014, the interest accrued is $0 and $9,136, respectively. On August 21, 2015, the Company issued 110,000 shares of common stock for the advances and the interest was forfeited.

 

Note 6 - Consulting Fees

 

The Company paid $8,427 and $76,592 for consulting services to the president of Venture Track, Inc. for the year ended December 31, 2015 and for the period from February 28, 2014 through December 31, 2014, respectively.

 

Note 7 - Capital Stock

 

The Company has 10,000,000 common shares authorized at a par value of $0.00001. At December 31, 2015 and 2014, there were 1,625,000 and 1,500,000 shares issued and outstanding, respectively. The Company has no other classes of shares authorized for issuance.

 

On March 31, 2014, the Company ratified and affirmed the Certificate of Incorporation, adopted the bylaws and sold 1,400,000 shares of Common Stock to the president of Venture Track, Inc., and 100,000 shares to a service provider, for a total of $15.

 

  9  
 

 

Venture Track, Inc.

  Notes to the Financial Statements

For the year ended December 31, 2015 and for the period from
February 28, 2014 (Inception) through December 31, 2014

 

Note 7 - Capital Stock (Continued)

 

On August 21, 2015, the Company issued 110,000 shares of common stock for advances of $110,000 and the affiliate of the Company forfeited a total of $16,934 of interest accrued.

 

During 2015, the Company issued 15,000 shares of common stock for software development valued at $15,000.

 

Note 8 - Subsequent Events

 

On February 9, 2016, the Company purchased from an affiliate of the Company, all rights, title and interest in and to the development of the apps and the business plan of Venture Track, in exchange for the issuance of 1,400,000 shares of Common Stock.

 

The Company has evaluated subsequent events through May 18, 2016.

 

 

10

 

 

 

 

 

 

 

 

 

Exhibit 99.2

 

 

 

 

 

 

 

 

 

VENTURE TRACK, INC.
FINANCIAL STATEMENTS
MARCH 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Venture Track, Inc.
Table of Contents

 

  Page
   
Balance Sheets (Unaudited) 1
   
Statements of Operations (Unaudited) 2
   
Statements of Cash Flows (Unaudited) 3
   
Notes to Financial Statements (Unaudited) 4 - 5

 

 

 

 

Venture Track, Inc.
BALANCE SHEETS
(UNAUDITED)

 

    March 31, 2016     December 31,
2015
 
             
ASSETS            
             
CURRENT ASSETS:            
             
Cash and cash equivalents   $ 77     $ 452  
Prepaid     5,000       -  
                 
Total Current Assets     5,077       452  
                 
Intangible assets, net of accumulated amortization of $6,847 and $5,365, respectively     32,961       31,169  
                 
TOTAL ASSETS   $ 38,038     $ 31,621  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
                 
CURRENT LIABILITIES:                
                 
Accounts payable   $ 3,000     $ -  
Advances from affiliate     1,005       -  
Notes payable     3,000       -  
Notes payable – related party     5,000       -  
                 
Total Current Liabilities     12,005       -  
                 
TOTAL LIABILITIES     12,005       -  
                 
STOCKHOLDERS’ EQUITY                
Common stock, $0.00001 par value, 10,000,000 shares authorized, 3,025,000 and 1,625,000 shares issued and outstanding as of March 31, 2016 and December 31, 2015, respectively     30       16  
Additional paid in capital     141,937       141,933  
Accumulated deficit     (115,934 )     (110,328 )
Total Stockholders’ Equity     26,033       31,621  
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY   $ 38,038     $ 31,621  

 

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

 

  1  

 

 

Venture Track, Inc.
STATEMENTS OF OPERATIONS
(UNAUDITED)

 

    For the Three
Months Ended
March 31,
    For the Three
Months Ended
March 31,
 
    2016     2015  
EXPENSES            
             
General Administrative   $ 5,606     $ 5,343  
                 
TOTAL EXPENSES     5,606       5,343  
                 
Loss from operations     (5,606 )     (5,343 )
                 
OTHER EXPENSES                
                 
Interest Expense     -       (3,000 )
                 
NET LOSS   $ (5,606 )   $ (8,343 )
                 
NET LOSS PER SHARE:                
BASIC AND DILUTED   $ (0.00 )   $ (0.00 )
                 
WEIGHTED AVERAGE SHARES OUTSTANDING:                
BASIC AND DILUTED     2,409,615       1,500,000  

 

The accompanying notes are an integral part of these financial statements

 

  2  

 

 

Venture Track, Inc.
STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2016 and 2015
(UNAUDITED)

 

    March 31, 2016     March 31, 2015  
             
CASH FLOWS USED IN OPERATING ACTIVITIES            
Net loss   $ (5,606 )   $ (8,343 )
Adjustments to reconcile net loss to cash used in operating activities:                
Amortization     1,482        
Changes in operating assets and liabilities                
Prepaid     (5,000 )      
Accounts payable     3,000        
Accrued expense           3,000  
                 
Net Cash Used in Operating Activities     (6,124 )     (5,343 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES                
Purchase of intangible assets     (3,256 )      
                 
Net Cash Used in Investing Activities     (3,256 )      
                 
CASH FLOWS FROM FINANCING ACTIVITIES                
Proceeds from notes payable     3,000        
Proceeds from notes payable – related party     5,000        
Advances from affiliate     1,005       4,898  
                 
Net Cash Provided by Financing Activities     9,005       4,898  
                 
NET CHANGE IN CASH     (375 )     (445 )
                 
CASH – BEGINNING     452       518  
                 
CASH – ENDING   $ 77     $ 73  
                 
Supplemental Cash Flow Information:                
Cash paid for:                
Interest   $     $  
Income taxes   $     $  
                 
Supplemental disclosures of non-cash transactions:                
Common stock for intangible assets   $ 18     $  

 

The accompanying notes are an integral part of these financial statements

 

  3  

 

 

Venture Track, Inc.
Notes to the Financial Statements
March 31, 2016
(UNAUDITED)

 

Note 1 - Organization, Description of Business, and Basis of Accounting

 

Business Organization

The Company was incorporated as Songstress, Inc. on February 28, 2014. On May 13, 2015, the Company changed its name to Scoocher, Inc. On February 10, 2016, the Company changed its name to Venture Track, Inc. The Company built and launched a proprietary Content Monetization Engine that provides the music industry with a safe, simple and reliable platform to monetize new and existing content on the Internet.

 

Basis of Presentation

The accompanying unaudited interim financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial information. However, except as disclosed herein, there has been no material changes in the information disclosed in the notes to the financial statements for the year ended December 31, 2015. These interim unaudited financial statements should be read in conjunction with those financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2016, are not necessarily indicative of the results that may be expected for the year ended December 31, 2016.

 

Note 2 - Going Concern Uncertainty

 

The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. At March 31, 2016, the Company had accumulated losses of $115,934. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continued existence is dependent upon its ability to generate sufficient cash flows from operations to support its daily operations as well as provide sufficient resources to retire existing liabilities and obligations on a timely basis. It is the intent of management and significant stockholders to provide sufficient working capital necessary to support and preserve the integrity of the corporate entity. However, no formal commitments or arrangements to advance or loan funds to the Company or repay any such advances or loans exist.

 

Note 3 - Related Party Transactions

 

The Company receives advances from an affiliate of the Company for operation expenses. These advances, which are due on demand, have an interest rate of 12% per annum and have no collateral. As of March 31, 2016, the Company has advances outstanding of $1,005.

 

On March 23, 2016, the Company entered into a promissory note agreement of $5,000 with a shareholder. The note payable, which is due on September 23, 2016, has an interest rate of 12% per annum and has no collateral. As of March 31, 2016, the Company has an outstanding balance of $5,000.

 

Note 4 - Notes Payable

 

On March 21, 2016, the Company entered into a promissory note agreement of $3,000. The note payable, which is due on September 21, 2016, has an interest rate of 12% per annum and has no collateral. As of March 31, 2016, the Company has an outstanding balance of $3,000.

 

  4  

 

 

Venture Track, Inc.
Notes to the Financial Statements
March 31, 2016
(UNAUDITED)

 

Note 5 - Capital Stock

 

The Company has 10,000,000 common shares authorized at a par value of $0.00001. At March 31, 2016 and December 31, 2015, there were 3,025,000 shares issued and 1,625,000 outstanding, respectively. The Company has no other classes of shares authorized for issuance.

 

On February 9, 2016, the Company purchased from an affiliate of the Company, all rights, title and interest in and to the development of the apps and the business plan of Venture Track, in exchange for the issuance of 1,400,000 shares of Common Stock for a total value of $18.

 

Note 6 - Subsequent Events

 

On June 30, 2016, the Company entered into a Share Exchange Agreement with Source Financial, Inc., a Delaware corporation. Pursuant to the agreement, the Company agreed to exchange the outstanding common stock of Venture Track held by the Venture Track Shareholders for 3,089,360 shares of common stock and 4,500 shares of Series C Convertible Preferred Stock, par value $0.01 per share, of Source Financial, Inc. The 4,500 shares of Series C Preferred Stock are convertible into 6,893,100 shares of Source Financial’s common stock, at the rate of 1,531.80 per share.

 

As a result of the Share Exchange Agreement, Venture Track becomes a wholly owned subsidiary of the Source Financial, Inc. The share exchange is accounted for as a reverse merger with Venture Track being the accounting acquirer.

 

5