PART II – INFORMATION REQUIRED IN OFFERING CIRCULAR

An offering statement pursuant to Regulation A relating to these securities has been filed with the Securities and Exchange Commission. Information contained in this Preliminary Offering Circular is subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted before the offering statement filed with the Commission is qualified. This Preliminary Offering Circular shall not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sales of these securities in any state in which such offer, solicitation or sale would be unlawful before registration or qualification under the laws of any such state. We may elect to satisfy our obligation to deliver a Final Offering Circular by sending you a notice within two business days after the completion of our sale to you that contains the URL where the Final Offering Circular or the offering statement in which such Final Offering Circular was filed may be obtained.

 

PRELIMINARY OFFERING CIRCULAR		NOVEMBER 5, 2018, SUBJECT TO COMPLETION

 

 

714,285,714 Shares

Representing Limited Liability Company Interests

This Offering Circular relates to the offering and sale of up to 714,285,714 unit-denominated common limited liability company interests, which we refer to as shares, in LunaDNA, LLC, which we refer to as LunaDNA, our Company, we, us or our, for an aggregate, maximum gross dollar offering of $50,000,000. The shares will not be offered for cash but in exchange for self-reported genomic, phenotypic, medical, health and related data satisfying our requirements, which we refer to as Member Data, as shown in the table below. The aggregate offering price or aggregate sales for our shares is based on the fair value of Member Data as established by an accepted standard. See “Securities Being Offered—Value of Consideration” beginning on page 41.

 

Member Data Provided		Shares Issued				Estimated Fair Market Value
DNA Targeted Genes			10			$	0.70
Genotyping by DNA Genome-wide Microarray or Sequencing			50			$	3.50
DNA Exome			150			$	10.50
DNA Whole Genome			300			$	21.00
DNA Tumor Targeted Genes			10			$	0.70
DNA Tumor Genome-wide Genotyping			50			$	3.50
DNA Tumor Exome			150			$	10.50
DNA Tumor Whole Genome			300			$	21.00
DNA Targeted Methylation, including supporting collection information			10			$	0.70
DNA Whole Genome Methylation, including supporting collection information			20			$	1.40
RNA Genome-wide Expression, including supporting collection information			10			$	0.70
RNA Targeted Gene Expression, including supporting collection information			20			$	1.40
RNA Whole Transcriptome, including supporting collection information			40			$	2.80
RNA Tumor Genome-wide Expression			10			$	0.70
RNA Tumor Targeted Gene Expression			20			$	1.40
RNA Tumor Whole Transcriptome			40			$	2.80
Targeted Microbiome, including supporting collection information			20			$	1.40
Whole Microbiome, including supporting collection information			50			$	3.50
Health Records - Clinical Reports (ex. Lab results)			4			$	0.28
Health Records - Prescription Reports, including supporting collection information			4			$	0.28
PDF of Historical Health Record (per year of reports)			2			$	0.14
Electronic Survey (per 10 min average completion time)			2			$	0.14
Personal Fitness Monitor (per 20 days of data)			2			$	0.14
Clinically Certified Device (per 20 days of data)			10			$	0.70
Nutrition Tracker (per 20 days of data)			2			$	0.14

Based on these valuations, each share is deemed to have an offering price of approximately $0.07 per share, which we refer to as the Purchase Price.

 

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See “Securities Being Offered—Consideration” and “—Value of Consideration” for information on the data required to be provided to the Company for each type of Member Data and our valuation of the types of Member Data, beginning on page 41.

This Offering is being made pursuant to Tier 2 of Regulation A, promulgated under the Securities Act of 1933, as amended.

The proposed sale will begin as soon as practicable after this Offering Circular has been qualified by the Securities and Exchange Commission, or SEC. This Offering will continue until the earliest of the sale of all shares offered hereby, thirty-six months from the date of this Offering Circular, and the decision by our Manager to terminate the Offering. We are offering the shares directly to the public and no minimum number of shares are required to be sold. No underwriter, broker or dealer is involved in this offering and no underwriting, brokerage or dealer commissions will be paid in connection with this Offering.

We are governed by the terms of our Limited Liability Company Operating Agreement, or our Operating Agreement, and are managed by LunaPBC, Inc., a Delaware public benefit corporation, which we refer to as our Manager, under the terms of a Management Agreement, which we refer to as our Management Agreement. See “Our Management Agreement” beginning on page 49. With limited exceptions, our Manager has the unilateral right to modify the Operating Agreement and Management Agreement, without the consent of any of our members. See “Our Limited Liability Company Operating Agreement—Unilateral Modification” beginning on page 46 and “Our Management Agreement— Amendment, Modification, or Waiver” beginning on page 49.

Our and our Manager’s principal executive office is located at 415 South Cedros Avenue, Suite 260, Solana Beach, California, 92075, our phone number is (858) 299-4669, and our website is located at www.lunadna.com.

Our shares will not have any voting, consent or management rights relating to the management and operation of the Company, except to appoint a liquidator upon the dissolution of the Company if we do not have a manager at that time. Holders of shares will not be legally entitled to any profits we or our Manager derive from our database or our respective businesses, and will only be entitled to receive dividends and distributions as and when determined by our Manager, as our Manager effectively has complete discretion not to pay dividends or distributions even if profits are otherwise available for distribution to our members pursuant to our operating agreement. See “Securities Being Offered—Dividends and Distributions” beginning on page 42 and “Risks Related to our Securities—The declaration of distributions is at the discretion of our Manager” on page 13. Our shares are transferable only under limited circumstances. Due to the foregoing and our governance provisions, including the elimination of our Manager’s fiduciary duties, our members have extremely limited rights and remedies, which primarily consists of a member’s right to redeem his or her shares and have his or her Member Data purged, i.e., to withdraw his or her data from our database and resign as a member of our Company. See “Our Limited Liability Company Operating Agreement” beginning on page 43.

Our shares are non-transferable, except as may be required by law, and may be subject to automatic or elective redemption in the event of an unauthorized transfer, whether voluntary or by operation of law. See “Our Limited Liability Company Operating Agreement—Redemption Rights” beginning on page 43. No public market currently exists for our shares, and a public market for our shares will not develop, whether on a securities exchange, automated quotation system or otherwise.

Financial returns from the shares is highly speculative and you should not participate in this Offering if you expect a financial return. See “Risk Factors” beginning on page 7.

Generally, no sale may be made to you in this Offering if the aggregate Purchase Price you are deemed to have paid for shares in the form of contributions of Member Data is more than 10% of the greater of your annual income or net worth. Different rules apply to accredited investors. Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of Regulation A.

THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE SEC; HOWEVER, THE SEC HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED ARE EXEMPT FROM REGISTRATION. THE SEC DOES NOT PASS UPON THE MERITS OF OR GIVE ITS APPROVAL TO ANY SECURITIES OFFERED OR THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SELLING LITERATURE.

THE SECURITIES OFFERED HAVE NOT BEEN APPROVED OR DISAPPROVED BY ANY STATE REGULATORY AUTHORITY NOR HAS ANY STATE REGULATORY AUTHORITY PASSED UPON OR ENDORSED THE MERITS OF THE OFFERING OR THE ACCURACY OR ADEQUACY OF THIS OFFERING CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

 

		Number of Shares				Purchase Price				Underwriting discount and commissions (1)				Proceeds to issuer (2)(3)
Per share			1			$	0.07				N/A			$	50,000,000
Maximum Offering			714,285,714			$	50,000,000				N/A			$	50,000,000

 

(1)	No underwriter, broker or dealer is involved in this Offering and there will be no underwriting, brokerage or dealer commissions paid in connection with this Offering.

(2)	The amounts shown are deemed proceeds before deducting our offering expenses which may include legal, accounting, printing, due diligence, marketing, consulting, finder’s fees, selling and other costs incurred in this Offering.

(3)	We will receive Member Data instead of cash as consideration for the sale of shares. We have set the Purchase Price of shares for Member Data based on our management’s evaluation of the fair value of each type of Member Data.

The date of this Preliminary Offering Circular is November 5, 2018

 

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TABLE OF CONTENTS

 

SUMMARY OF INFORMATION IN OFFERING CIRCULAR			4
RISK FACTORS			7
PLAN OF DISTRIBUTION			16
USE OF PROCEEDS			17
DESCRIPTION OF BUSINESS			18
DESCRIPTION OF PROPERTY			29
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			30
DIRECTORS, OFFICERS AND SIGNIFICANT EMPLOYEES			31
COMPENSATION OF OUR MANAGER			33
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS			34
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS AND CONFLICTS OF INTEREST			35
SECURITIES BEING OFFERED			37
OUR LIMITED LIABILITY COMPANY OPERATING AGREEMENT			43
THE MANAGEMENT AGREEMENT			49
PURCHASER CONSENT			50
PRIVACY POLICY			50
CERTAIN US FEDERAL INCOME TAX CONSIDERATIONS			51
LEGAL MATTERS			55
EXPERTS			55

THIS OFFERING CIRCULAR CONTAINS FORWARD-LOOKING STATEMENTS AND INFORMATION RELATING TO, AMONG OTHER THINGS, OUR COMPANY, OUR BUSINESS PLAN AND STRATEGY, AND OUR INDUSTRY. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF, ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY AVAILABLE TO OUR MANAGER. WHEN USED IN THE OFFERING MATERIALS, THE WORDS “ESTIMATE,” “PROJECT,” “BELIEVE,” “ANTICIPATE,” “INTEND,” “EXPECT” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS REFLECT OUR MANAGER’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE OUR COMPANY’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN THE FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE.

 

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SUMMARY OF INFORMATION IN OFFERING CIRCULAR

As used in this Offering Circular, references to our “Company,” “LunaDNA” “we,” “our”, or “us” refer to LunaDNA, LLC, a Delaware limited liability company, unless the context otherwise indicated.

You should carefully read all information in this Offering Circular, including the financial statements and their explanatory notes, prior to making an investment decision.

 

The Company
Organization:		We were organized under the laws of the State of Delaware on April 23, 2018. Our principal executive office is located at 415 South Cedros Avenue, Suite 260, Solana Beach, California, 92075.
Capitalization:		Our Limited Liability Company Operating Agreement, which we refer to as our Operating Agreement, does not restrict the number of common limited liability company interests, which we refer to as our shares, that we may issue. As of the date of this Offering Circular no shares are issued and outstanding. Our Operating Agreement authorizes our Manager to designate and issue preferred limited liability company interests and other classes and series of equity securities.
Management:		We are managed by LunaPBC, Inc., a Delaware public benefit corporation, which we refer to as our Manager, under the terms of a Management Agreement, which we refer to as our Management Agreement. Our Manager’s principal executive office is located at 415 South Cedros Avenue, Suite 260, Solana Beach, California, 92075.   Our Manager may effectively modify the terms of our Operating Agreement and our Management Agreement, including the compensation paid to the Manager, unilaterally. Such modifications generally, but not always, require advance notice to members. See “Unilateral Modification of Rights” below.

 

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Our Business
Description of Business:		We seek to build the world’s first and largest human health database of Member Data owned (as described in this Offering Circular) by a community comprised of its members, which we refer to as our Database. Our Database will be comprised of various types of genomic and phenotypic data, such as medical, health and health-related data, as described under “Description of Business – Our Solution” beginning on page 25. Through community participation, we aim to create a dynamic, secure, and longitudinal database along with a supporting ecosystem geared towards the improvement of human health. By making the Database available to researchers for discovery, with our members’ consent, we aim to facilitate innovations which lead to new treatments, increased actionability, and greater predictive power of genomic information for disease and wellness applications. The personal health impact, societal health benefits, and economic value that can be created through clearer associations between genomics and health outcomes can be realized in myriad ways, including accelerating toward an era of precision medicine and preventative healthcare.
The Offering
Class of Securities Offered:		Unit-denominated common limited liability company interests in LunaDNA, LLC, which we refer to as shares.
Number of Shares Offered:		Up to 714,285,714 shares.
Purchase Price:		Each share will be offered in exchange for specific types of genomic and phenotypic data which meets our requirements, which we refer to as Member Data, as described under “Securities Being Offered—Consideration” beginning on page 38. We have allocated the number of shares offered for each type and amount of Member Data based on our Manager’s determination of the fair value of the various types of Member Data to equal $0.07 per share, which we refer to as the Purchase Price.
Use of Proceeds:		We will not receive cash proceeds from the sale of shares in this Offering. The Member Data will be used to build our Database. See “Use of Proceeds” beginning on page 17 and “Description of Business – Our Solution” beginning on page 25.
Shares Outstanding:		As of the date of this Offering Circular no shares have been issued or are outstanding.
Number of shares after the Offering:		If the Company is successful in selling all 714,285,714 shares offered hereby, then after the completion of this Offering there will be 714,285,714 shares issued and outstanding.
Termination of the Offering:		This Offering will continue until earliest of the sale of all of the shares offered hereby, thirty-six months from the date of this Offering Circular, or the decision by our Manager to terminate this Offering.
Market for our shares:		Our shares will be non-transferable, except as may be required by law, and will not be listed for trading on any exchange or automated quotation system.
Company Offering:		We are offering the shares directly to the public and no minimum number of shares are required to be sold. No underwriter, broker or dealer is involved in this Offering and there will be no underwriting, brokerage or dealer commissions paid in connection with this Offering.
Risk Factors:		Our services will involve the storage and transmission of Member Data, and theft and security breaches expose us to a risk of loss of this information, improper use and disclosure of such information, litigation, and potential liability. If your Member Data is somehow made public or made available through a security breach, it may be used to identify you and identify relatives, among other consequences. Because we are not a “covered entity”, the privacy and other protections afforded to patients by the Health Insurance Portability and Accountability Act of 1996, as amended (HIPPA), do not apply to us. See “Risk Factors” beginning on page 7 for an expanded discussion of these and other risks, which should be considered carefully before deciding to purchase shares.

 

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The Shares
Unilateral Modification of Rights:		Our Manager has the effective right to modify our Operating Agreement (subject to limited exceptions) and the Management Agreement, including the payment and distribution provisions, the compensation paid to our Manager, and our license to the Database IP, unilaterally (i.e., without the consent of any of our members). Our Manager may not, however, modify either the limitation of liability of our members for the debts, obligations or liabilities of our Company, or the basic right of a member to withdraw his or her Member Data from our Database by redeeming the associated shares.   All descriptions of the terms of our Operating Agreement, the Management Agreement, the license to Database IP, the terms of the shares and the rights of our members made in this Offering Statement should be read subject to both the Manager’s effectively unilateral modification right and your basic withdrawal and redemption right.   If our Manager believes that the modification may reasonably have an adverse effect on the rights or obligations of any member (in the case of the Operating Agreement) or our Company (in the case of the Management Agreement), we will provide our members not less than 30 days’ advance notice of the modification, thereby giving members the opportunity to redeem their shares and withdraw their Member Data from our Database before the effective date of the changes. If our Manager reasonably believes that a modification will not have an adverse effect on the rights or obligations of any member or the company, we are not required to give advance notice of the modification to members.   See “Our Limited Liability Company Operating Agreement—Unilateral Modification” beginning on page 46 and “Our Management Agreement— Amendment, Modification, or Waiver” beginning on page 49.
Purchaser Consent:		By purchasing any shares in this Offering, the purchaser is granting us certain rights to his or her Member Data used to purchase those shares pursuant to the LunaDNA Consent, which we refer to as the Purchaser Consent. See “Purchaser Consent” beginning on page 50 and “Securities Being Offered—Purchaser Consent” beginning on page 42.
Voting Rights:		Our members will not have any voting, consent or management rights relating to the management and operation of our Company, except to appoint a liquidator upon the dissolution of our Company if we do not have a Manager at that time. See “Securities Being Offered—Voting Rights” beginning on page 42.
Dividends and Distributions:		We will generally effect a distribution of accumulated net earnings at least once annually, subject to the availability of funds for such purpose. The Manager may elect not to make an annual distribution if, after payment of all estimated costs to be incurred in effecting the distribution, the distribution would be less than $0.02 per share. In certain circumstances, our Manager may request an advisory vote from our members regarding whether to effect a distribution, including the aforementioned annual distribution. See “Securities Being Offered—Dividends and Distributions” beginning on page 42 and “Risks Related to our Securities—The declaration of distributions is at the discretion of our Manager” on page 13.   The Operating Agreement may not be amended to remove the basic right of a member to purge his or her Member Data or any portion of his or her Member Data without the affected Member’s consent. See “Our Limited Liability Company Operating Agreement—Unilateral Modification.”
Redemption Rights:		A member will be allowed to redeem his or her shares at any time, at which point he or she may elect to have his or her Member Data provided in connection with the purchase of those shares purged, which will have the effect of revoking his or her Purchaser Consent as it relates to such Member Data (but not any other Member Data not purged). No consideration will be paid to members if their shares are redeemed. Upon certain other events, such as the death of a member, a fraudulent data submission or an invalid data submission, or an attempted or involuntary transfer of shares, we will either automatically redeem the affected shares, or have the option to redeem them. Subject to certain exceptions at the election of a member, including the affirmative election by a member to donate the Member Data to us, if any shares are redeemed, either by a member or by us, our right to use the associated Member Data will be cancelled and the data may be purged or suspended from our Database. See “Our Limited Liability Company Operating Agreement—Redemption Rights” beginning on page 43.   Our Manager has the effective right to modify these provisions of the Operating Agreement as described under “Unilateral Modification of Rights” above.
Transfer of shares:		The shares are non-transferable, except as may be required by law.

 

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RISK FACTORS

In evaluating the Company and an investment in any shares, careful consideration should be given to the following risk factors, in addition to the other information included in this Offering Circular. Each of these risk factors could materially adversely affect the Company’s business, operating results or financial condition, as well as adversely affect the distributions available for our shares and their value. The following is a summary of the most significant factors that make the future availability of distributions on the shares, and hence their value, highly speculative. The Company is also subject to many risks to which other companies in its industry, and companies in the United States generally, are exposed, which risks are not described below. These include risks relating to economic downturns, political and economic events, and technological developments. Additionally, early-stage companies are inherently riskier than more developed companies. You should consider general risks as well as specific risks when deciding whether to invest.

Risks Related to the Company

If our efforts to attract and retain members are not successful, our number of members and the amount of Member Data in our Database could fail to grow or decline and our potential to earn revenues may be materially affected.

We will be dependent on medical or research organizations to pay us for data discovery activities involving the Database. We must attract members to grow the Database and make it attractive to these third parties. If the public does not perceive our mission or our services to be reliable, valuable or of high quality, we may not be able to attract or retain members and create a viable Database, and our ability to earn revenues could be materially adversely affected.

Privacy concerns relating to our Database could damage our reputation and deter current and potential members from contributing additional Member Data to the Database. If our security measures are breached resulting in the improper use and disclosure of Member Data, our Database may be perceived as not being secure, users and customers may curtail or stop using the Database, and we may incur significant legal and financial exposure.

Concerns about our practices with regard to the collection, use, disclosure, or security of Member Data or other privacy related matters, even if unfounded, could damage our reputation and adversely affect our operating results.

Our services will involve the storage and transmission of Member Data, and theft and security breaches expose us to a risk of loss of this information, improper use and disclosure of such information, litigation, and potential liability. Any systems failure or compromise of our security that results in the release of Member Data, or in our or our users’ ability to access such data, could seriously harm our reputation and brand and, therefore, our business, and impair our ability to attract and retain members. Additionally, if your Member Data is somehow made public or made available through a security breach, it may be used to identify you and identify relatives. We will use technical, physical, and administrative controls to protect member personal information and Member Data from unauthorized access or disclosure and to ensure the appropriate use of this information. We also will require any partners that we work with to have similar controls. Further, we will disaggregate all genomic and phenotypic Member Data from member identifying information (such as name, address, and Social Security Number) from one another to decrease the likelihood that a breach would compromise a member’s identity.

We may experience cyber attacks of varying degrees. Our security measures may also be breached due to employee error, malfeasance, system errors or vulnerabilities, including vulnerabilities of our vendors, suppliers, their products, or otherwise. Such breach or unauthorized access, increased government surveillance, or attempts by outside parties to fraudulently induce employees, users, or customers to disclose sensitive information in order to gain access to Member Data could result in significant legal and financial exposure, damage to our reputation, and a loss of confidence in the security of the Database that could potentially have an adverse effect on our business. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, become more sophisticated, and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Additionally, cyber attacks could also compromise trade secrets and other sensitive information and result in such information being disclosed to others and becoming less valuable, which could negatively affect our business. If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security measures could be harmed and we could lose members and customers.

If we cease to continue as a going concern, due to lack of funding or otherwise, you may lose your entire investment in the company.

Our financial statements have been prepared on a going concern basis. Our Company has no plans to raise capital to fund its operations, and we are therefore dependent on our Manager for all organizational expenses and presently dependent on our Manager for all operational expenses. To date, we have had no expenses, as our Manager is obligated to cover our expenses until March 30, 2020 pursuant to our Operating Agreement (though our Manager has the effective right to modify this provision of the Operating Agreement unilaterally). In the future, we will be obligated to promptly reimburse our Manager for all our expenses advanced by our Manager, in accordance with our Management Agreement. Our dependence on our Manager for funding of these expenses raises substantial doubt about our ability to continue as a going concern.

 

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Our Manager’s capacity to fund all of our organizational expenses and to fund our operational expenses and the development expenses through the time when we generate significant revenues from operations is dependent on our Manager’s existing cash resources and its ability to obtain additional capital financing from investors sufficient to meet our needs and the needs of our Manager’s other operations. Our Manager presently intends to seek a combination of equity capital and convertible debt capital from outside investors, but it presently has no financing commitments. Our Manager believes that it will be able to raise capital that, combined with its existing cash resources, will be sufficient to fund all of our organizational expenses and to fund our operational expenses and the development expenses through the time when we generate significant revenues, at which time our revenues may be used to pay both our operational expenses and the management fee to our Manager (which management fee may then fund further development expenses). However, there can be no assurance that our Manager will be successful in its fundraising efforts. If our Manager is not successful in its intended fundraising efforts, our Manager may be required to delay various planned expenditures for development and marketing of our Database, which delays could materially adversely delay generation of revenues and potentially jeopardize our ability to continue as a going concern.

Our success depends on the growth of markets for analysis of genomic information.

We are currently targeting customers for data discovery activities involving our Database, including academic and government research institutions and pharmaceutical and other life science companies. Our customers may use de-identified information from our Database for research and for a wide variety of diagnostic and discovery applications. These markets are new and emerging, and they may not develop or reach their full potential as quickly as we anticipate. The development of the market for genomic information and the success of our Database depends in part on the following factors:

 

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demand by researchers for genomic and phenotypic information;

 

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the usefulness of genomic and phenotypic information in identifying or treating disease;

 

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the ability of our customers to successfully analyze the genomic and phenotypic information we provide;

 

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the ability of researchers to convert genomic and phenotypic information into medically valuable information; and

 

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the development of software tools to efficiently search, correlate and manage genomic and phenotypic data.

In addition, factors affecting research and development spending generally, such as changes in the regulatory environment affecting pharmaceutical and other life science companies and changes in government programs that provide funding to companies and research institutions, could harm our business. If our target markets do not develop in a timely manner, demand for our service may grow at a slower rate than we expect, or may fall, and we may not generate cash for distributions to members.

Our business is subject to complex and evolving U.S. and foreign laws and regulations regarding privacy, data protection, content, competition, consumer protection, and other matters. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business.

We are subject to a variety of laws and regulations in the United States and abroad that involve matters central to our business, such as privacy, data protection and personal information, rights of publicity, content, intellectual property, advertising, marketing, distribution, data security, data retention and deletion, electronic contracts and other communications, competition, protection of minors, consumer protection, taxation and securities law compliance. Expansion of our activities in certain jurisdictions, or other actions that we may take, may subject us to additional laws, regulations, or other government scrutiny. In addition, foreign data protection, privacy, content, competition, and other laws and regulations can impose different obligations or be more restrictive than those in the United States.

We are currently accepting only members who are resident in the United States, but if we accept European members, the European General Data Protection Regulation (GDPR), effective as of May 2018, will apply to us. The GDPR increases privacy rights for individuals in Europe, extends the scope of responsibilities for data controllers and data processors and imposes increased requirements and potential penalties on companies offering goods or services to individuals who are located in Europe or monitoring the behavior of such individuals (including by companies based outside of Europe). Noncompliance can result in penalties of up to the greater of €20 million, or 4% of global company revenues. See “Description of Business — Government Regulation.”

These U.S. federal and state and foreign laws and regulations, which in some cases can be enforced by private parties in addition to government authorities, are constantly evolving and can be subject to significant change. As a result, the application, interpretation, and enforcement of these laws and regulations are often uncertain, particularly in the newer industry in which we operate, and may be interpreted and applied inconsistently from country to country and inconsistently with our current policies and practices.

These laws and regulations, as well as any associated inquiries or investigations or any other government actions, may be costly to comply with and may delay or impede our international growth, result in negative publicity, increase our operating costs, require significant management time and attention, and subject us to remedies that may harm our business.

The Health Insurance Portability and Accountability Act of 1996 currently does not apply to us, and hence our members’ Member Data will not be protected by that law.

We are not subject to the Health Insurance Portability and Accountability Act of 1996, as amended, commonly known as HIPAA, even though we will have access to, store, process and transmit sensitive personal, health and medical information, because we are not a “covered entity” for purposes of that statute. HIPAA is designed to protect medical records and other personal health information by limiting their use and disclosure, giving patients the right to access, amend and seek accounting of their own health information and limiting most uses and disclosures of health information to the minimum amount reasonably necessary to accomplish the intended purpose. Various government agencies may enforce these provisions of HIPAA and impose civil or criminal penalties for HIPAA violations. Because we are not subject to HIPAA, we will not be subject to the civil and criminal penalties available to government agencies and, accordingly, we may not have the same incentive to protect Member Data as would a covered entity subject to HIPAA’s requirements.

 

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Our current lack of geographic diversity exposes us to risk.

Our operations are currently geographically limited to the United States and we are currently only accepting members who are resident in the United States. As a result of this geographical concentration, our Database may lack data diversification desired by our customers. We plan to expand our operations and member admissions internationally in order to increase the diversity of our Database, and if and when we do, such expansion would subject us to additional laws and regulations, such as data privacy, health and securities laws and regulations, place increased responsibilities on our Manager, divert resources from other operations and expose us to new risks of foreign operations.

We will depend upon third parties to generate Member Data who may become our direct competitors if they determine that they could create an ecosystem that competes with our Database.

Our ability to grow the Database depends on our ability to draw individuals to provide us with Member Data. Many types of Member Data must be generated by third parties, who provide it to potential members who then submit it to us. We will therefore depend on these third parties to provide consistent and reliable Member Data. These third parties could increase the costs to obtain Member Data or seek to interfere with potential members’ ability to provide the Member Data to us. Additionally, some of these third parties are, or could become, our direct competitors, if they determine that they could create an ecosystem to compete with our Database.

If we experience excessive rates of member attrition, our ability to attract customers or to enable genomic discovery could fail.

Members may elect to have their Member Data purged from our Database at any time. We must continually add new members both to replace members who choose to purge their data and to increase our member base. Members may choose to purge their Member Data for many reasons. If members are concerned about privacy and security and do not perceive our services to be reliable, if we fail to keep members engaged and interested in our mission and purpose, if we fail to generate sufficient cash to make distributions to members, or if we simply lose our members’ attention, we could fail to populate the Database with sufficient Member Data and our ability to earn revenues may be materially affected.

If members to do not recurrently provide us with certain types of Member Data, we could fail create a longitudinal database.

Certain types of our Member Data, such as personal fitness data or nutrition data will need to be contributed by Members recurrently in order for such data to provide full value to our potential customers. If our members fail to provide us with suitable longitudinal data, we will not be create a longitudinal Database and our ability to earn revenues may be materially affected.

Unfavorable media coverage could negatively affect our business.

Unfavorable publicity regarding, for example, our privacy practices, terms of service, regulatory activity, the actions of third parties, the use of our products or services for illicit, objectionable, or illegal ends or the actions of other companies that provide similar services to us, could adversely affect our reputation. Such negative publicity also could have an adverse effect on the size, engagement, and loyalty of our member base and result in member attrition and decreased revenue, which could adversely affect our business and financial results.

Because the market for genomic information is relatively new and rapidly evolving, we may become subject to additional future governmental regulation, which may place additional cost and time burdens on our operations.

We are subject, both directly and indirectly, to the adverse impact of existing and potential future government regulation of our operations and markets. The life sciences and pharmaceutical industries, which are significant target markets for our services, have historically been heavily regulated. There are comprehensive federal and state laws regarding matters such as the privacy of patient information and research in genetic engineering.

Legislative bodies or regulatory authorities may extend existing or adopt additional laws and regulations that adversely affect our market opportunities or services. Regulatory approval processes may be expensive, time-consuming and uncertain, and our failure to obtain or comply with these approvals or clearances could harm our business, financial condition or operating results.

We may face competition from a number of different sources, and our failure to compete effectively could materially impact our revenues, results of operations and financial condition.

We face competition in our business from a variety of organizations. If we fail to meet our members’ expectations, we could fail to retain existing or attract new members, either of which could harm our business and results of operations.

We expect our competition to grow via the emergence of new participants in our market. Our future competitors may include other genomics-focused businesses, governments, not-for-profit entities and other entities. Our competitors may have greater resources, more well-established brand recognition or more sophisticated technologies than we do.

To compete effectively, we may need to expend significant resources on data acquisition, technology, marketing and advertising. If we do not compete effectively, our ability to retain and expand our Database, and our revenues, results of operations and financial condition, could be materially adversely affected.

 

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Challenges in acquiring Member Data could materially adversely affect our ability to retain and expand our Database, and therefore could materially affect our business, financial condition and results of operations.

In order to expand our Database, we must continue to expend resources to make the submission of Member Data as user-friendly as possible. We, and our members, may face legal, logistical, cultural and commercial challenges in procuring Member Data. Relevant records may be widely dispersed and difficult or costly for our members to obtain. Once obtained, the process for submission, validation and exchange for shares may be perceived as too cumbersome and discourage potential members from submission. We may need to expend significant resources on user interfaces for evolving platforms, such as mobile devices. Inconveniences to our members or potential members at any stage of the process may materially challenge our growth.

If we fail to ensure that the Member Data in our Database is of high quality, our ability to attract customers or to enable genomic discovery could suffer.

The reliability of our Member Data depends upon the integrity and the quality of the process of accepting Member Data into our Database. We will take certain measures to validate the Member Data submitted by our members and potential members to assure a high quality of data in our Database including requiring members to provide supporting information along with submissions, employing spam-blocking techniques, cross-checking data, assessing overlap and generally confirming that data is submitted in accordance with our terms for such data type. We must continue to invest in our quality control measures relating to the Database in order to provide a high quality product to potential customers.

Our failure to attract, integrate and retain highly qualified key personnel could harm our business.

To execute our growth plan, our Manager must attract and retain highly-qualified personnel. Competition for employees with appropriate qualifications is intense, and our Manager may not be successful in attracting and retaining qualified personnel. Our competitors may have greater resources than our Manager has. Our unique business structure may make it more difficult for our Manager to attract and incentivize top talent. If our Manager fails to attract new personnel, or fails to retain and motivate its current personnel, our business and future growth prospects could be materially adversely affected.

We depend on the continued service and performance of our key personnel of our Manager. The loss of key personnel, including key members of our Manager’s management team, as well as certain key marketing, product development or technology personnel, could disrupt our operations and have a material adverse effect on our ability to operate or grow our business.

Any continued service outages or a significant disruption in service on our websites or in our Database could damage our reputation and result in a loss of Members, which would harm our business and operating results.

Our brand, reputation and ability to attract, retain and serve our members depends upon the reliable performance of our Database, websites, network infrastructure and content delivery processes. Interruptions in these systems, whether due to system failures, computer viruses or physical or electronic break-ins, could affect the security or availability of our Database and websites and prevent our members and customers from accessing our data and using our services. Problems with the reliability or security of our systems may harm our reputation and cause members to revoke consent to our use of their Member Data, and the cost of remedying these problems could negatively affect our business, financial condition and results of operations.

Expenses or liabilities resulting from litigation could materially adversely affect our results of operations and financial condition.

We may become party to various legal proceedings and other claims that arise in the ordinary course of business or otherwise in the future. Such matters are subject to many uncertainties and outcomes are not predictable. In addition, any such claims or litigation may be time-consuming and costly, divert management resources, require us to change our products and services, require us to accept returns of software products, require us to redeem shares of members, or have other adverse effects on our business. If one or more of these legal matters resulted in an adverse monetary judgment against us, such a judgment could have a material adverse effect on our results of operations and financial condition.

If we are unable to manage our marketing and advertising expenses, it could materially harm our results of operations and growth.

We plan to rely in part on our marketing and advertising efforts to attract new members. Our future growth and profitability, as well as the maintenance and enhancement of our brand, will depend in large part on the effectiveness and efficiency of our marketing and advertising strategies and expenditures. If we are unable to maintain our marketing and advertising channels on cost-effective terms, our marketing and advertising expenses could increase substantially, and our business, financial condition and results of operations may suffer. In addition, we may be required to incur significantly higher marketing and advertising expenses than we currently anticipate if excessive numbers of members withdraw their Member Data from our Database.

 

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Failure to comply with federal, state and local laws and regulations or our contractual obligations relating to data privacy, protection and security of Member Data, and civil liabilities relating to breaches of privacy and security of Member Data, could damage our reputation and harm our business.

A variety of federal, state and local laws and regulations govern the collection, use, retention, sharing and security of Member Data. We will collect Member Data from and about our members when they purchase shares and maintain that date in our Database. Claims or allegations that we have violated applicable laws or regulations related to privacy, data protection or data security could in the future result in negative publicity and a loss of confidence in us by our members and potential new members, and may subject us to fines and penalties by regulatory authorities. In addition, we have privacy policies and practices concerning the collection, use and disclosure of Member Data as part of our agreements with our members, including ones posted on our website. Several Internet companies have incurred penalties for failing to abide by the representations made in their privacy policies and practices. In addition, our use and retention of Member Data could lead to civil liability exposure in the event of any disclosure of such information due to hacking, malware, phishing, inadvertent action or other unauthorized use or disclosure. Several companies have been subject to civil actions, including class actions, relating to this exposure.

We have incurred, and will continue to incur, expenses to comply with data privacy, protection and security standards and protocols for Member Data imposed by law, regulation, self-regulatory bodies, industry standards and contractual obligations. Such laws, standards and regulations, however, are evolving and subject to potentially differing interpretations, and federal, state and provincial legislative and regulatory bodies may expand current or enact new laws or regulations regarding privacy matters. We plan to accept members from other countries in the future, which may subject us to the personal, medical, health and other data privacy, protection and security laws of those countries, We are unable to predict what additional legislation, standards or regulation in the area of privacy and security of personal information could be enacted or its effect on our operations and business.

If we are unable to satisfy data privacy, protection, security, and other government- and industry-specific requirements, our growth could be harmed.

We need or may in the future need to comply with a number of data protection, security, privacy and other government- and industry-specific requirements, including those that require companies to notify individuals of data security incidents involving certain types of personal data and including privacy regulations related to health and medical information. Security compromises could harm our reputation, erode user confidence in the effectiveness of our security measures, negatively impact our ability to attract new members, or cause existing members to withdraw their Member Data from our Database.

We intend to implement a blockchain to store several types of transaction related to our Database. Such intention entails a number of risks, including the risk that we may abandon efforts to implement a blockchain.

We plan to implement a blockchain to store several types of transaction related to our Database. See “Description of Business – Our Solution – Blockchain Technology” below. Blockchain and the related software, networks, technology, algorithms and other technical concepts and theories are still in an early development stage and are unproven. Our process for adding, maintaining, accessing or securing data in blockchains is at an early stage of development, and there is an inherent risk that our software, networks and related technologies will contain design flaws or implementation vulnerabilities or bugs exposing data to corruption, unauthorized modification, unauthorized access or other cybercrimes. We may conclude in light of these risks or for other reasons to abandon our efforts to implement a blockchain and instead rely on conventional technology for all proposed uses of a blockchain.

Risks Related to Intellectual Property

We have a non-exclusive license to the Database IP. Our Manager may grant additional non-exclusive licenses to third parties.

Our Manager may make, use, offer to sell, or sell the intellectual property that powers our database, or the Database IP, without our consent and without accounting to us. We cannot assure that our Manager will not grant additional licenses in the future to third parties, including potential direct competitors to our business. Any such licenses may enable third parties to develop and market products competitive with ours, provided that they do not infringe our other intellectual property rights, which could materially adversely affect our revenue, financial condition and results of operations.

 

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Our Manager may unilaterally change the terms of our license to the Database IP.

Our Manager effectively has the right to modify the terms of our license to the Database IP, which is granted in the Management Agreement, unilaterally. See “Our Management Agreement—Amendment, Modification, or Waiver” beginning on page 49. As a result, our Manager may revoke our right to use the Database IP, which could have a materially adverse effect on our business.

If our intellectual property and technologies are not adequately protected to prevent use or appropriation by our competitors, the value of our brand and other intangible assets may be diminished, and our business may be materially affected.

Our future success and competitive position depend in part on our ability to protect our proprietary technologies and intellectual property. At the present time, all of our intellectual property is owned by our Manager and licensed to us. Our Manager relies and expects to continue to rely on a combination of confidentiality and license agreements with its employees, consultants and third parties with whom it has relationships, as well as on the protections afforded by trademark, copyright, patent and trade secret law, to protect its and our proprietary technologies and intellectual property. Because certain of the trademarks we use contain words or terms that have a common usage, our Manager may have difficulty registering them in certain jurisdictions.

There can be no assurance that the steps we or our Manager take will be adequate to protect our technologies and intellectual property, that patent and trademark applications will lead to issued patents and registered trademarks in all instances, that others will not develop or patent similar or superior technologies, products or services, or that the patents, trademarks and other intellectual property we use do not infringe or misappropriate others’ rights or will not be challenged, invalidated or circumvented by others. Furthermore, the intellectual property laws of other countries from which our websites may be accessed may not protect our products and intellectual property rights to the same extent as the laws of the United States.

In addition, third parties may knowingly or unknowingly infringe our patents, trademarks and other intellectual property, and litigation may be necessary to protect and enforce our intellectual property rights. We are dependent on our Manager to commence litigation. Our Manager has no obligation to do so, and we currently have no agreement with our Manager with respect to the allocation of costs for litigation to protect intellectual property we use. Any intellectual property litigation could be very costly and could divert management attention and resources. If the protection of our technologies and intellectual property is inadequate to prevent use or appropriation by third parties, the value of our brand and other intangible assets may be diminished and competitors may be able to mimic our services and methods of operations more effectively. Any of these events would have a material adverse effect on our business, financial condition and results of operations.

We also expect that the more successful we are, the more likely it will become that competitors will try to develop products that are similar to ours, which may infringe on our proprietary rights. It may also be more likely that competitors will claim that our products and services infringe on their proprietary rights. If we or our Manager is unable to protect our proprietary rights or if third parties independently develop or gain access to our or similar technologies, our business, revenues, reputation and competitive position could be harmed.

Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information. Failure to protect our proprietary information could make it easier for third parties to compete with our products and harm our business.

In order to protect our proprietary technologies and processes, our Manager will rely in part on security measures, as well as confidentiality agreements with its and our employees, licensees, independent contractors and other advisors. These measures and agreements may not effectively prevent disclosure of confidential information, including trade secrets, and may not provide an adequate remedy in the event of unauthorized use or disclosure of confidential information. We or our Manager could lose future trade secret protection if any unauthorized disclosure of trade secrets occurs. In addition, others may independently discover our confidential and proprietary know-how or technologies, and in such cases, neither we nor our Manager could assert any trade secret claims against them. Laws regarding trade secret rights in certain markets in which we operate may afford little or no protection to our trade secrets. The loss of trade secret protection could make it easier for third parties to compete with our products by copying functionality. In addition, any changes in or unexpected interpretations of the trade secret and other intellectual property laws in any country in which we operate may compromise our or our Manager’s ability to enforce our trade secret and intellectual property rights. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights. Depending on the nature of the trade secret, we may be dependent on our Manager to bring any such litigation. Our Manager has no obligation to do so, and we currently have no agreement with our Manager with respect to the allocation of costs for litigation to protect trade secrets that our Manager licenses to us. Failure to obtain or maintain trade secret protection could materially affect our business, revenues, reputation and competitive position.

Intellectual property claims against us could be costly and result in the loss of significant rights related to, among other things, our websites, content indexes, and marketing and advertising activities.

Trademark, copyright, patent and other intellectual property rights are important to us and other companies. Our intellectual property rights extend to our technologies, business processes and the content on our websites and social media accounts. We currently license the technology that enables our Database and the software that powers our website from our Manager. We also use intellectual property licensed from third parties in merchandising our products and marketing and advertising our services. From time to time, third parties may allege that we have violated their intellectual property rights. Our Manager is obligated to indemnify us for claims of infringement based on the technology that enables our Database and the software that powers our website, subject to various exceptions, but our Manager is not obligated to indemnify us for claims of infringement based on other intellectual property licensed from it, including trademarks, trade dress, logos, internet domain names, and images, text, multimedia and associated consent on our website and social media accounts which our Manager created or may create for us. If there is a valid claim against us for infringement, misappropriation, misuse or other violation of third-party intellectual property rights, and we or our Manager is unable to obtain sufficient rights or develop non-infringing intellectual property or otherwise alter our business practices on a timely basis, our business and competitive position may be materially adversely affected.

 

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Many companies are devoting significant resources to obtaining patents that could affect many aspects of our business. There are numerous patents that broadly claim means and methods of conducting business on the Internet. We have not exhaustively searched patents relevant to our technologies and business. If we are forced to defend ourselves or our Manager against intellectual property infringement claims, we will be reliant upon our Manger to do so, and whether the claims are made with or without merit or are determined in our favor, we may face costly litigation, diversion of technical and management personnel, limitations on our ability to use our current websites or the Database or inability to market or provide our products or services. As a result of any such dispute, we or our Manager may have to develop non-infringing technology, pay damages, enter into royalty or licensing agreements, cease providing certain products or services, adjust our merchandizing or marketing and advertising activities or take other actions detrimental to our business to resolve the claims. These actions, if required, may be costly or unavailable on terms acceptable to us. In addition, co-branding, distribution and other partnering agreements may require us to indemnify our partners for third-party intellectual property infringement claims, which could increase the cost to us of an adverse ruling in such an action.

In addition, as a publisher of online content, we face potential liability for negligence, copyright, patent or trademark infringement or other claims based on the nature and content of data and materials that we publish or distribute. These claims could arise with respect to both institutional and user-generated content. Litigation to defend these claims could be costly and any other liabilities we incur in connection with the claims may have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Our Securities

You should not rely on the Purchase Price as being an accurate measure of the current value of our shares.

Our Manager has determined the offering price per share, or the Purchase Price, to be $0.07. Our Manager’s objective in determining the Purchase Price was to arrive at a value, based on the most recent data available, that it believed was reasonable based on methodologies that it deemed appropriate.

As with any valuation method, the methods used to determine the Purchase Price were based upon a number of assumptions, estimates and judgments that may not be accurate or complete. The Purchase Price is not a representation or indication that, among other things: a stockholder would ultimately realize distributions per share with a discounted cash value equal to the Purchase Price, whether from cash flows or upon a hypothetical sale of our Company (which is not anticipated) to a third party; or a third party would offer the Purchase Price per share for rights similar to those given to the Company via a member’s Purchaser Consent.

There is no trading market for our shares and our shares are non-transferable.

There is no trading market for our shares and our shares are non-transferable, except as required by law. Members have no control over the distributions they may receive upon their shares and no means other than such distributions to realize income for their shares.

The declaration of distributions is at the discretion of our Manager.

Our Operating Agreement reflects our intention to effect a distribution of accumulated net earnings at least once annually, subject to the availability of funds for such purpose and the other terms and conditions under the heading “Securities Being Offered—Dividends and Distributions” beginning on page 42. However, with limited exceptions, our Manager has the right unilaterally to modify the terms of our Operating Agreement, including the terms relating to payments of distributions. Our Manager also has the unilateral right to modify the terms of our Management Agreement relating to the Manager’s compensation, which would affect the availability of funds for distributions. See “Our Limited Liability Company Operating Agreement—Unilateral Modification” beginning on page 46 and “Our Management Agreement— Amendment, Modification, or Waiver” beginning on page 49. As a result, our Manager may never cause the declaration of a distribution, and our members may never receive a distribution, even if our business generates substantial profits.

You have limited voting rights.

Our members will not have any voting, consent or management rights relating to the management and operation of our Company, except to appoint a liquidator upon the dissolution of our Company if we do not have a Manager at that time.

Our Manager has broad authority to change the terms of our Operating Agreement or the Management Agreement.

With limited exceptions, our Manager may effectively amend the Operating Agreement or the Management Agreement (including the Database IP license terms contained therein) unilaterally. Unless our Manager changes this provision with 30 days’ notice to our members, we generally, but not always, will be required to provide our members 30 days’ advance notice of such a unilateral modification, thereby providing members the opportunity to redeem their shares and withdraw their Member Data from our Database before the effective date of those changes. See “Our Limited Liability Company Operating Agreement—Unilateral Modification” beginning on page 46 and “Our Management Agreement—Amendment, Modification, or Waiver” beginning on page 49.

 

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Risks Related to Our Relationship with Our Manager

We are dependent on our Manager for all aspects of our business.

We are managed by our Manager pursuant to the terms of our Limited Liability Company Operating Agreement and the Management Agreement between us and our Manager. We do not have any officers or directors of our own and our members will have no voting rights with respect to the officers and directors of our Manager or the supervision of our Manager’s management of our Company. With only limited exceptions, our Manager has the complete discretion to operate our business as it sees fit.

Until such time as we generate sufficient revenues to cover our operating costs, we will be completely dependent on our Manager for operating costs. We are also dependent on our Manager for the development, maintenance and improvement of our Database IP, website, social media accounts and other assets.

Any failure of our Manager to fund our operations pending generation of revenues sufficient to offset our operating costs, to develop, maintain and improve our Database effectively, or to run and grow our business effectively will have a material adverse effect on the timing and amount of distributions available to members.

Our Manager’s status as a public benefit corporation may not result in the benefits that we anticipate.

Our Manager is a public benefit corporation under Delaware law. As a public benefit corporation, our Manager is required to balance the pecuniary interests of its shareholders, the best interests of those materially affected by its conduct, and the specific public benefit or public benefits identified in its certificate of incorporation. The specific public benefit to be promoted by our Manager includes the creation and maintenance of a community-owned genomic and phenotypic database that is designed to solve humankind’s most important medical challenges. We cannot provide any assurance that our Manager will achieve its specific public benefit purpose. On the other hand, our Manager’s status as a public benefit corporation, and corresponding obligation to balance profits against the other factors and interests noted above, may negatively impact the financial return to our members.

As a public benefit corporation, our Manager is required to publicly disclose a report at least biennially on its overall public benefit performance and on its assessment of its success in achieving its specific public benefit purpose. If our Manager is not timely or is unable to provide this report, or if the report is not viewed favorably by parties doing business with us, our Manager or regulators or others reviewing our Manager’s credentials, our reputation may be harmed and our financial condition and results may suffer.

As a public benefit corporation, our Manager’s focus on a specific public benefit purpose and producing a positive effect for society may negatively influence our financial performance.

As a public benefit corporation, our Manager may take actions that it believes will be in the best interests of those stakeholders materially affected by its specific benefit purpose, even if those actions do not maximize the short- or medium-term financial results of us or our Manager. While we intend for this public benefit designation and obligation to provide an overall net benefit to us and our members, it could instead cause our Manager to make decisions and take actions without seeking to maximize the income generated from our Database, and hence available for distribution to our members. Our Manager’s pursuit of longer-term or non-pecuniary benefits may not materialize within the timeframe it expects or at all, yet may have an immediate negative effect on any amounts available for distribution to our members.

Our Manager may have conflicts of interest with us and has limited duties to us and our members; our Manager may favor its own interests or those of its equityholders to the detriment of us and our members.

The directors and officers of our Manager have a fiduciary duty to manage our Manager in a manner that is beneficial to its owners, subject to the public benefit stated in our Manager’s certificate of incorporation. Conflicts of interest may arise between our Manager, on the one hand, and us and our members, on the other hand. In resolving these conflicts of interest, our Manager may favor its own interests over our interests and the interests of our members. See “Interest of Management and Others in Certain Transactions and Conflicts of Interest—Conflicts of Interest” beginning on page 36 and “Our Limited Liability Company Operating Agreements—Fiduciary Duties” beginning on page 47. In particular, to maximize the value of our Manager’s outstanding equity or to further its public benefit in accordance with our Manager’s fiduciary duties, our Manager may elect unilaterally to modify our Management Agreement to increase the fees payable to our Manager, or take other actions in its management of our business, which may result in reduced or even no amounts being available for distribution to our Members. See “Our Management Agreement—Amendment, Modification, or Waiver” beginning on page 49.

Our Operating Agreement eliminates our Manager’s fiduciary duties to our members.

Our Operating Agreement contains provisions that eliminate, to the fullest extent permitted, the fiduciary duties our Manager owes members under Delaware law. For example, our Operating Agreement permits our Manager to make a number of decisions, in its individual capacity, as opposed to in its capacity as our Manager, or otherwise, free of fiduciary duties to us and our members other than the implied contractual covenant of good faith and fair dealing. This entitles our Manager to consider only the interests and factors that it desires, and it has no duty or obligation to give any consideration to any interest of, or factors affecting, us or our members. See “Our Limited Liability Company Operating Agreements—Fiduciary Duties” beginning on page 47.

Our Manager’s lack of fiduciary duties to us or our members applies to all aspects of our Company and our operations, including our Manager’s right to effect unilateral modifications to our Operating Agreement and Management Agreement. See “Our Limited Liability Company Operating Agreement—Unilateral Modification” beginning on page 46 and “Our Management Agreement—Amendment, Modification, or Waiver” beginning on page 49.

Our Management and Operating Agreements contain provisions, including mandatory arbitration, class action waivers, jury trial waivers, exclusive forums, and fee shifting provisions which could limit our members’ effective ability to obtain a favorable judgement from disputes with us.

All claims or disputes arising under the Operating Agreement, Management Agreement or any related agreement, except for the excluded claims described in this paragraph, must be resolved by final and binding arbitration in San Diego, California before the American Arbitration Association. While corporations may not be able to enforce arbitration provisions in their bylaws against shareholders who did not specifically agree to them, binding arbitration provisions in limited liability company operating agreements have been upheld under Delaware law since members agree to be bound by their terms. None of the claims or disputes subject to mandatory arbitration may be brought as a class action, and the prevailing party in these claims and disputes will be entitled to recover fees and costs (including attorneys’ fees) from the other parties to the arbitration. Excluded claims refers to (a) compulsory or permissive cross-claims between or among the parties to those agreements that arise in a legal action brought by or against a non-party to the agreement, and (b) claims or counterclaims under the federal securities laws or the rules and regulations thereunder. These excluded claims are not subject to mandatory arbitration, the class action waiver, or the fee shifting provisions.

All proceedings against us or our Manager, whether or not excluded claims, including claims or counterclaims under the federal securities laws or the rules and regulations thereunder, must be brought in San Diego, California. By agreeing to the exclusive forum in San Diego, California, investors will not be deemed to have waived our or our Manager’s compliance with any federal securities laws or the rules and regulations thereunder.

The foregoing provisions could limit our members ability to obtain a favorable judgement from disputes with us or our Manager, including because:

 

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The fee shifting provision (which applies to all claims except excluded claims) could dissuade a member from bringing a claim against us or our Manager, particularly if the claim is not a strong one, due to the need to reimburse us or our Manager for our potentially substantial fees and costs incurred in contesting that claim in the event we or our Manager prevails on that claim.

 

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The class action waiver (which applies to all claims except excluded claims) means multiple members cannot share the costs of bringing a claim against us or our Manager, including the costs of discovery or of the arbitration. This may make it more difficult to find an attorney who would represent a member without being paid a non-contingent hourly fee, and may also result in a member having to pay substantial attorneys’ fees, to pursue a claim against us or our Manager, including with respect to the discovery process and the arbitration proceeding, compared to a class action brought against us on behalf of a large number of members who could share those costs.

 

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In a dispute subject to mandatory arbitration (which applies to all claims except excluded claims), neither a jury trial, nor an appeal from an award, would be available, and a single arbitrator, rather than a judge and a jury of a member’s peers and potentially an appellate court or courts, would decide all the issues of fact and law in the dispute.

 

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The requirement to bring any claim or dispute, whether subject to mandatory arbitration or an excluded claim, in San Diego, California could make bringing any claim against us or our Manager more difficult, time consuming and expensive for a member living in another city, state or country.

 

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Because our Manager has the effective right to modify the provisions of our Operating Agreement and the Management Agreement unilaterally (with limited exceptions), our Manager may in the future add additional provisions to, or remove favorable provisions from, those agreements which would further limit, delay, restrict or make more expensive one or more members’ ability to obtain a favorable judgment from disputes with us or our Manager.

Because our Operating Agreement and Management Agreement limit the liability of our Manager and its officers, directors, and others, members may have no recourse for acts performed in good faith.

Under our Operating Agreement and Management Agreement, each of our Manager and its officers, directors, employees, agents, attorneys, accountants and representatives are not liable to us or our members for acts they perform in good faith, or for any non-action or failure to act, except for acts of willful misconduct or knowing violation of law as determined by a final judgment, order or decree of an arbitrator or a court of competent jurisdiction and except for certain claims under United States securities laws and the rules and regulations thereunder.

It may be difficult for our members to seek accountability for wrongdoing.

Given the elimination of fiduciary duties, governance provisions which could limit our members ability to obtain a favorable judgement and the effectively unilateral discretion of our Manager to amend our Operating Agreement and Management Agreement, it may be difficult for our members to seek accountability for wrongdoing. Members will have fewer alternatives available to them then they would have if they were shareholders in a typical United States corporation. As a result of all of the above, members may have more difficulty in protecting their interests in the face of actions taken by our Manager and its officers, directors, employees, agents, attorneys, accountants and representatives.

Our members have no right to remove our Manager.

Unlike the holders of common stock in a corporation, members have extremely limited voting rights on matters affecting our business. Our Members have no right to remove our Manager or to supervise our Manager’s decisions, and will therefore generally have limited say in matters affecting our operations.

We must indemnify our Manager and its officers, directors and employees, to the fullest extent permitted by law, against liabilities, costs and expenses incurred by our Manager or these other persons.

We must indemnify our Manager and its officers, directors and employees, to the fullest extent permitted by law, against liabilities, costs and expenses incurred by our Manager or these other persons in connection with managing our Company. We must provide this indemnification unless there has been a final and non-appealable judgment by a court of competent jurisdiction determining that these persons acted in bad faith or engaged in fraud or willful misconduct in connection with the claim brought against them. Thus, we may be obligated to indemnify our Manager for its negligent and self-interested acts.

 

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PLAN OF DISTRIBUTION

This is our initial public offering. We are offering up to $50,000,000 of unit-denominated common limited liability company interests in our Company, which we refer to as shares.

We are offering the shares directly, without an underwriter or placement agent, and on a continuous basis. We do not have to sell any minimum amount of shares in order to accept your Member Data. We cannot assure you that all shares we are offering will be sold. We have not made any arrangement to place any Member Data in an escrow, trust, or similar account. The shares will not be listed on any securities exchange or automated quotation system, there will not be any public trading market for the shares, and the shares are non-transferable, except as may be required by law. We have the right to reject any Member Data, in whole or in part, for any reason. The intended methods of offer include; website promotion, digital and other advertising, collaborations with third parties, email, telephone, direct mail solicitations and personal contacts. Shares must be purchased directly from us by completing the applicable purchase documentation and delivering such documentation together with the requisite Member Data to us through our website or other designated portal.

No underwriter, broker or dealer is involved in this Offering and there will be no underwriting, brokerage or dealer commissions paid in connection with this Offering. If an underwriter is later selected to assist in this Offering, we will be required to amend this Offering Circular to include the disclosures required regarding engaging an underwriter to assist in this Offering. Although we are not using a selling agent or finder in connection with this Offering, we will use a website as an online portal and information management tool in connection with this Offering, which can be accessed at https://www.lunadna.com.

We currently intend to accept subscriptions to shares only via our website. An individual who wants to join our community will create an account on our website, at which point that individual will be a member of our community. A community member can select to contribute Member Data any time when logged on by navigating to a page on our website to designate the type of Member Data he or she wants to upload from a list of acceptable types for that community member, and to upload that Member Data. Software will automatically screen and validate the Member Data and, if valid, eligible community members (currently, only United States residents) will be provided the option to contribute the Member Data without consideration or to subscribe for shares. In the event the member elects to receive Shares for the contributed Member Data, the member will be requested to complete and execute a subscription agreement and, upon completion and acceptance, will be issued the appropriate number of shares. In the event the Member Data is invalid or the subscription agreement is not completed or executed or we reject the subscription agreement, the uploaded Member Data will be purged and no shares will be issued.

In the event this Offering is oversubscribed or terminated prior to the sale of all of the shares, we intend to allocate shares in the offering based on the order in which we receive eligible contributions of Member Data, with shares being issued in exchange for all contributions until no shares remain available in this Offering. Once all of our available shares have been issued, we will no longer issue shares in this Offering. During the offering period and thereafter, we may also accept contributions of Member Data without the issuance of any shares, in which case we would treat the contributed Member Data as contributed without consideration.

As noted above, we may collaborate with third parties to offer opportunities for individuals to participate in this Offering. For example, we may collaborate with orphan disease foundations or organizations representing populations that have historically been underrepresented in DNA databases to encourage Database participation. In no case will any such third parties receive any compensation tied directly or indirectly to persons joining the Database through these collaborations.

This Offering Circular will be furnished to prospective investors upon their request via electronic PDF format and will be available for viewing and download 24 hours per day, seven days per week on our website, subject to planned or unplanned interruptions of website access, as well as on the SEC’s website at www.sec.gov.

In addition to this Offering Circular, subject to the limitations imposed by applicable securities laws, we expect to use additional advertising, sales and other promotional materials in connection with this Offering. These materials may include information relating to our Company and our business, this Offering or public advertisements and audio-visual materials, in each case only as authorized by us. Although these materials will not contain information in conflict with the information provided by this Offering Circular and will be prepared with a view to presenting a balanced discussion of risk and reward with respect to an investment in the shares, these materials will not give a complete understanding of this Offering, our Company or the shares and are not to be considered part of this Offering Circular. This Offering is made only by means of this Offering Circular and prospective investors must read and rely on the information provided in this Offering Circular in connection with their decision to invest in the shares. All investors will be furnished with a current Offering Circular before or at the time of any written offers.

 

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USE OF PROCEEDS

We are offering the shares in exchange for Member Data, which we will use to populate our Database. None of the proceeds will be used to compensate or otherwise make payments to the officers or directors of our Manager or of our or our Manager’s subsidiaries. We do not have any assets or operating history and our Manager has provided and will continue to provide our start-up operational funding. After populating the Database, we anticipate earning revenues by providing researchers with anonymized Member Data information regarding members of our Database who match the researcher’s search parameters and through license fees, royalties and other payment streams derived from intellectual property acquired through collaborations with third parties with respect to Member Data. We may also receive compensation from researchers for identifying potential members for targeted research. See below under “Description of Business—Our Solution” beginning on page 25.

 

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DESCRIPTION OF BUSINESS

Our Company

We seek to build the world’s first and largest human health database of Member Data, which we refer to as the Database, that is owned by a community comprised of its members. Our Database will be comprised of various types of genomic and phenotypic data, such as various medical, health and health-related data, as described under “Database” below. Through community participation, we aim to create a dynamic, secure, and longitudinal Database along with a supporting ecosystem geared towards the improvement of human health. By making the Database available, with our members’ consent, to researchers, we aim to facilitate discoveries which lead to new treatments, increased actionability, and greater predictive power of genomic information for disease and wellness applications. The personal health impact, societal health benefits, and economic value that can be created through clearer associations between genomics and health outcomes can be realized in a myriad of ways, including accelerating toward an era of precision medicine and preventative healthcare.

We are a limited liability company managed by our Manager, a Delaware public benefit corporation. Our Manager will retain the rights to the Database IP (as defined below). Unlike the holders of common stock in a corporation, holders of our shares will have very limited rights, as described in further detail under “Securities Being Offered” on page 37, and will have no right to control our operations. We have chosen this structure as we feel it recognizes that our members are making a limited and non-exclusive contribution of data rights, and they have the ability to withdraw their contributions at any time (with reasonable notice) and for any reason. Our governance structure was therefore designed to mirror the rights that data contributors have in other businesses that obtain consumer data rights in exchange for benefits to consumers that evolve over time and at the discretion of the data recipient. Like such other businesses, we are incentivized to keep our platform attractive to members so that they allow us to retain our data rights and potentially contribute additional Member Data in consideration for additional shares. We believe that keeping our platform attractive will include, but will not be limited to, managing our Company in a manner that maximizes funds for distributions to our members no less frequent than annually. However, we do not guarantee the frequency or amount distributions to our members, and as discussed at “Our Limited Liability Company Operating Agreement—Distributions and Dividends,” our Manager has effective control over the frequency and amount of distributions.

Genomics Opportunity

The application of genomics is relevant at many points during an individual’s life (see Figure 1). We envision a future where everyone’s genomic information is individually owned and referenced at many stages of life—from planning a baby, to determining the medication that is best suited to the individual’s unique biology, through managing disease and maximizing wellness. Scientific and medical research has made clear that the information encoded in our genome will be able to help individuals—as patients and personal health advocates—understand inherent health strengths and provide insights into possible health risk factors, equipping individuals and their health practitioners to approach preventative healthcare strategies and lifestyle decisions more informatively. Genomic data can also provide an assessment on the impact of lifestyle on an individual’s biology.

 

Figure 1. Timeline of Sequencing Applications in Medicine from Pre-Womb to Tomb

Despite advances in genomics technology that make genome sequencing more accessible than ever from a cost perspective (see Figure 2), modern science, research and medicine are still far from broad and lifelong adoption of genomic information for many reasons, including information complexity, reimbursement of genomics by payers, and lack of common frameworks around data interpretation, usage, and management. One of the most powerful challenges to the genomics trajectory and impact opportunity, especially in the healthcare system, is that genomic information is largely regarded as not actionable or predictive enough due to limited scientific research. To unlock the power of the genome and its potential for discovery, science, research, and medicine, we must create a new platform for research.

 

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Genomics data is now plentiful, as described in “Leveraging Intersecting Trends” below. The true issue is data aggregation and organization to enable discovery, which is why we are creating the Database.

 

Figure 2. Cost per ‘draft’ whole human genome sequence, National Human Genome Research Institute

Unlocking the Potential for Discovery

The Database aims to address four primary issues that have hindered genomics research:

 

1.

The scale and scope of discovery datasets have been insufficient for discovery and broad applicability of discoveries to the widest population. Researchers require more samples, more data types (DNA, phenotype, health history, lifestyle, environment, nutrition), and greater diversity (gender, ethnicity, age, socioeconomic).

 

2.

The data in databases have lacked a harmonized structure; they cannot be aggregated for calibrated and reproducible discoveries.

 

3.

Data is siloed and will likely remain isolated, despite calls to share data. Most institutional incentives and business models are to retain data because that’s what their business or laboratory was established to do and what their members and stakeholders expect them to do; moreover, in many instances, consent was not granted from the individual to release their data for research.

 

4.

People have been treated as specimen sources and not holders of tremendous value for medical research. Genomic research has been disease-centric as opposed to being people-centric. People care about their holistic health, which includes both prevention (to maximize wellness) and treatment (during sickness). The current health industry rewards only disease treatments. We believe that people hold valuable health information and should be treated as research partners and recognized and rewarded for their contributions to our mission.

People-Centric Model

When enabled, we feel that individuals will seek involvement as research partners with the opportunity to fight disease, especially if they are managing a chronic condition. In addition to the need to accelerate our understanding and treatments of common complex disease, approximately 7,000 different types of rare disease and disorders afflict 30 million people in the United States that remain a mystery. Similar to the United States, Europe has approximately 30 million people living with rare diseases, and an estimated 350 million people worldwide suffer from rare diseases. Healthy people also bring tremendous research value, not only as controls in disease study, but also as study subjects to understand how they have avoided disease.

 

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We are aiming to unlock the power of the genome by unlocking the potential for discovery with the largest aggregation of genomic and health data ever assembled. By engaging individuals proactively and responsibly, our goal is to facilitate purpose-driven deep engagement that will lead to an information-rich, active, and longitudinal data community. Through a silo-free, people-centered effort, we aim to achieve the scale and scope to enable research for a wide range of diseases, both common and rare, as well as increase our understanding of healthy states. We believe a flexible platform of magnitude architected with smart contract capability and technical extensibility to ingest data associated with new monitors of health states (e.g., wearables) will have the statistical power to reveal the genomic underpinnings of many diseases and also to detect associations between nutritional, environmental, or other exposures to health outcomes.

Market Background

The Genomics Era

On June 26, 2000, in the East Wing of the White House, United States President William J. Clinton and British Prime Minister Tony Blair announced the successful completion of the first whole human genome sequence. This groundbreaking scientific achievement, called the Human Genome Project, encompassed over 10 years and cost $2.7 billion to complete. Sequencing a human genome heralded a new era for understanding and treating human disease based on the fundamental building blocks of life – DNA. With the sequence of the human genome in hand, the next step was to identify the genetic variants that increase the risk for common diseases like cancer and diabetes. The vision was that if the underpinnings of disease could be decoded, then precision or personalized medicine would be possible.

The State of Genomic Discovery

Genomics is the study of the function and the evolution of genomes. In humans, this typically refers to the 23 pairs of chromosomes and mitochondrial DNA that make up the full complement of DNA present in every cell. Many hereditary diseases, such as Huntington’s Disease, as well as other conditions, can be traced back to specific gene mutations observable in the DNA code. To date, genomic research studies have identified genetic causes of hundreds of traits and diseases, including breast cancer, high cholesterol, rheumatoid arthritis, schizophrenia, height, atrial fibrillation, and responses to various medications. These studies not only provide diagnostic value for families and individuals but, moreover, provide meaningful insights into gene function and disease mechanisms that enable better drug design and targeted treatments.

During the last decade, genome-wide association studies (GWAS) that utilize common variants in our genome, instead of analyzing the whole genome, have emerged as the primary method of discovering genetic variants associated with complex traits and disease. The GWAS approach was utilized primarily due to economics. The measurement of hundreds of thousands of common variants in our genome was more than one-thousand times less costly than acquiring 3.3 billion bases in whole genome sequencing studies. Unlike traditional linkage mapping approaches, which are based on analyzing patterns of disease inheritance in families, GWAS is based on the observation that common polymorphic genetic markers that are close to a causative disease allele are often statistically associated with disease status in large cohorts of unrelated individuals.

A major strength of GWAS is its ability to locate causative genetic variants with fine-scale resolution. However, GWAS requires obtaining and analyzing data from large numbers of samples. In many cases, data from tens of thousands of individuals are required to achieve adequate statistical power.

Although GWAS studies have successfully identified thousands of common genomic variants that contribute to diseases, each variant rarely accounts for more than a small fraction of disease causation. The full genome, including rare genomic variants detected through direct DNA sequencing, the microbiome, the epigenome, and other environmental factors are together thought to explain the vast majority of disease impacting human health. Detailed genome sequencing of millions of individuals will be required to fully understand genetic contributions to disease and health. While large amounts of genomic and other data are freely available from public databases such as the National Center for Biotechnology Information (NCBI), in general, such data have been of little interest to the pharmaceutical industry due to the high variation in data quality and standards of data encoding. To meet these criteria, pharmaceutical companies typically rely on data collected in-house.

In summary, the causes of many genetic diseases remain stubbornly hidden despite advances in technology to read whole genomes of individuals cost-effectively. We envision that the scope, scale, and harmonized data architecture of the Database will help reveal genotype-phenotype associations that otherwise could not be found due to lack of statistical power and/or data interoperability.

 

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Precision Medicine

Precision medicine proposes to invert the healthcare framework by recognizing that each patient is biologically unique. Rather than clinical trials to determine whether a therapy is safe and effective for most of the population before it is available to all of the population, personalized medicine applies technology to big data to investigate whether therapies will be effective for that specific patient and, equally important, if it will not be effective and potentially harmful for that patient.

This distinction is important because diseases are unique to the individual. Diseases manifest and progress differently in different people, and treatments that are effective for one person may fail altogether for another. The promise of precision medicine is that patients will respond to targeted therapies and avoid the all too common, ineffective, costly, and often damaging treatment regimen. The cost of “imprecise” medicine has been well documented (see Figure 3).

 

Figure 3. Personalized medicine: Time for one-person trials

 

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Our DNA represents a “barcode” that is individually unique and can be leveraged in precision medicine and health. Futurists project that everyone will have genome information as a resource, on file and actionable, before they get sick so that it can be leveraged to maximize the health strengths that individuals naturally possess, while avoiding an individual’s inherent health weakness through lifestyle decisions. Precision medicine will increasingly leverage advances in big data to analyze large amounts of genomic data and apply the understanding gained to individual diseases and treatment. As stated, for centuries, the engine of medicine has been the clinical trial that poses the central question, “what is effective for most people?”. Genomic data and the technology developed to compute, analyze, and understand these data is increasingly regarded as the engine of medicine going forward.

We believe that the research enabled by our Database will drive the development and application of more genome-guided therapeutics, ensuring that the right medicine is given to the right patient at the right time.

The DNA-Aware and Data-Engaged Consumer

The popularity of the direct-to-consumer (DTC) genetic testing market segment signals an ever-expanding paradigm shift among consumers who are seeking more individualized health insights and greater control over their own healthcare.

Since the 1980s, consumers have pushed for access to their laboratory results, but access became slow to evolve due to concerns by doctors and regulators that consumers may try to self-diagnose without understanding the complexity of the data. With advances in genetic testing technology at accessible cost points and the mainstream nature of personalized medicine, DTC laboratory testing is becoming increasingly popular—attributed in part to actress Angelina Jolie’s op-ed in The New York Times in May 2013 called ‘My Medical Choice,’ which documents her medical decisions based on BRCA1 gene mutations and family history of cancer. Likewise and following suit, consumers are becoming health hobbyists and self-quantifiers, taking individualized healthcare into their own hands. Consumers have become medical consumers as well as patients. This has created a shift in the doctor/patient relationship as individuals have become more knowledgeable about their own health, view themselves as unique biologically in a one-size fits all healthcare system, and want more control over their personal information and treatment decisions.

Almost 20 years since the Human Genome Project, consumer-directed genomic testing has become practically routine with over 12 million individuals purchasing genetic tests ranging from entertaining applications in genealogy and wellness to genetic profiling of tumors to provide targeted treatment guidance. A January 2018 report from market research firm Kalorama Information estimates that the consumer market for genetic health testing alone could nearly triple from about $99 million in 2017 to $310 million in 2022.

As technological advances continue to drive down the costs of genome sequencing, from approximately $1,000 per genome today to $100 or less within the next few years, there will be an increasing availability of this highly valuable health data. Several trends are continuing to shape the DTC market including the growing demand for maximizing wellness, early disease detection and diagnosis, personalized medicine, importance of disease monitoring, and expanded digital monitoring and sensing technologies. In addition, consumer-directed but physician mediated genomic tests are emerging with companies like Veritas Genetics partnering with healthcare systems like the Mayo Clinic.

Privacy, Security, and Trust

Arguably, no data is as personal as an individual’s own genome—the essential blueprint of each individual’s life, and, to an extent, each individual’s family. Privacy concerns are paramount in the design of any biomedical study involving human participants and especially genomics. These concerns arise from the many potential abuses of personal genetic and medical data, including denial of healthcare services due to genetic predispositions, racial discrimination, and disclosure of intimate familial relationships such as non-paternity.

In current practice, privacy is typically protected by concealing the identities of study participants, while certain types of de-identified data are shared freely. Standard data security controls are often sufficient for protecting identity data itself, but in many cases the freely-shared component remains vulnerable to misuse. For example, advances in re-identification techniques have made it possible to infer surnames from certain types of genetic data. For this reason, genomic data and pre-defined aspects of one’s personal information are not shared publicly by data aggregation efforts, even when de-identified.

There are a variety of reasons people participate in biomedical studies. Some reasons may be personal, such as the desire to know one’s ancestry and disease predispositions. Other motivations may be broader or more altruistic, such as the desire to improve human health and society. In all cases, there must exist a level of trust between the research participant and the investigators that they are pursuing a shared goal. Unfortunately, failure of researchers to maintain the trust of study participants can have lasting negative effects on science as a whole.

 

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A notable example is the 2010 legal battle between the Havasupai tribe and Arizona State University that ensued after researchers used genetic data collected from tribe members to study sensitive topics outside the perceived scope of the project (type 2 diabetes), such as inbreeding, demographic history, and schizophrenia. Further eroding public trust in research activities is the fact that many pharmaceutical and biotech companies forgo an open, collaborative approach to research and development for strategic reasons because they estimate its benefits are outweighed by legal, regulatory, and intellectual-property risks. The perceived lack of transparency and sense of common purpose often discourages study participants from providing broad consent to use their data in these cases. Trust remains a significant factor in individuals both consenting to studies and providing important health and medical data.

Privacy, security, and trust are core pillars of the Database and are reflected in our team, mission, transparency, and the technology we are using to ensure the best possible management and maintenance of information. It is important to note that we, unlike others who are brokering sale of individuals’ data, will be marketing discovery based on de-identified metadata. See “Privacy Policy” beginning on page 50.

Research Participant Consent

Nearly all medical research requires some form of informed consent by, or on behalf of, the research participant. In this process, the individual enrolling in the study provides their voluntary agreement to participate in the research, and understands the risks associated with their participation. Sometimes the field of the informed consent is very narrow, such as in clinical trials for pharmaceutical companies interested in deep, focused studies of a particular biological function or disease. In other cases, the consent can be broad, enabling future exploratory studies into research questions that are yet to be defined. Occasionally, data collected as part of a research study can be shared and/or re-examined by other investigators for a secondary study. In practical terms, this variability means the usefulness of a collection of data sets is circumscribed by the subset with the narrowest terms of consent. This presents a clear scalability problem and limits the utility of historical datasets, if the individuals comprising the data are unavailable to provide a more broad informed consent.

Our Manager has endeavored to ensure our informed consent process is clear and effective.

Drug Development & Data Monetization

One of the primary use cases for mining genomic databases is the opportunity to identify new drug targets. Rational drug design leverages biological understanding to develop therapies targeted at disease pathways and mechanisms of action, and can be applied to both common and rare diseases. By understanding the genetics of disease and the role mutated genes play in the cell, drug developers can pursue a more “rational” design approach. This promise of genomic insights to drive better drug development motivated the purchase of deCODE Genetics by drug developer Amgen in 2012 and at least a dozen pharmaceutical company partnership deals with consumer genetics company 23andMe, which reportedly holds genomic data on approximately four million customers.

A recent example of how rare genetic mutations can lead to understanding of the biology underlying common diseases and lead to cures for the broader population came from the study of a small sample of patients with familial hypercholesterolemia (FH). FH is suspected when LDL-cholesterol is above 190 mg/dL in adults and above 160 mg/dL in children without cholesterol-lowering treatment and poses a life-long risk of severe cardiovascular disease. Based on these family studies, researchers discovered a monogenic form of FH that is due to severe mutations in one of three genes: LDLR, APOB, or PCSK9. This observation led to the development of monoclonal antibodies to lower LDL by blocking the PCSK9 gene, and has now been commercialized by five different drug companies offering the therapy to lower cholesterol in the general population, not just those with FH.

Currently, an estimated 90 percent of potential medicines entering clinical trials fail to demonstrate the necessary efficacy and safety, and never reach patients. Many of these failures are due to an incomplete understanding of the link between the biological target of a drug and human disease. By contrast, medicines developed with human genetic evidence have had substantially higher success rates and patient care has benefited. In the spirit of more rational drug design guided by genomic information, Regeneron Pharmaceuticals reportedly brought together AbbVie, Alnylam Pharmaceuticals, AstraZeneca, Biogen, and Pfizer to each commit $10 million to enable genomic sequencing of the UK Biobank of 500,000 samples. These deals demonstrate a growing interest in access to genomic information for discovering drug targets, repositioning drugs, and better understanding the genetic underpinnings of disease. Our model enables smaller participants to make discoveries and provide an alternative source of data for “big pharma.”

Data Challenges

Unfortunately, much of the genomic data and phenotype data collected by commercial genomics companies, laboratories, and pharmaceutical companies remains siloed and inaccessible to the research and medical communities. In some cases, the reason is inefficient database design or poor data management practices. The pharmaceutical industry lags behind other sectors in several indicators of digital maturity. More often, however, is the strategic decision to attempt to extract value from data themselves, hampering meaningful data sharing across organizational boundaries. Additionally and importantly, the revenues of their data monetization strategies have never been shared with those who contributed the data. Often discovery companies go to great lengths and expense to ensure data provenance, completeness, and integrity, and hence these institutions attribute a much lower value to data from other entities.

 

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Many pharmaceutical companies have begun integrating patient data from apps, wearable devices, and electronic medical records (EMRs) to improve healthcare and make discoveries about disease. Technology companies are also entering this market, such as IBM with its Watson Health program, and Apple with its HealthKit platform. Given these trends, it seems unlikely to us that the pace of future research will be limited by information technology problems, but rather hindered by corporate self-interest to keep the data private.

Another major challenge is the current state of EMRs. While adoption of EMRs is almost at 100 percent in the United States, in this new health economy, effective implementation of EMRs is still in the early stages. The standards deployed in terms of how they are used and the medical terminology adopted varies greatly from institution to institution. Standards for medical nomenclature and inter-relationship, or ontology, can vary greatly and, in some cases, health care providers still rely on the comments section of the patient record to record important information. Historic clinical records are often simply PDF files or pictures of hand written medical histories. Ingesting, curating, and harmonizing this information to the quality required for identifying links between our genome and our lifestyle to disease remains a major task and challenge.

By aligning with a broad base of members who individually have access to their data generated from these previously siloed sourced, we plan to collect, aggregate and make available to researchers a much broader range of data then available from the current siloed sources. See “—Our Solution—Broad Data Collection & Engagement” below.

 

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Our Solution

Leveraging Intersecting Trends

The two intersecting trends of inexpensive and accessible personal DNA testing and nearly frictionless transaction capacity create our opportunity. As discussed above in the section “—Market Background—The DNA-Aware and Data-Engaged Consumer” above, individual DNA testing is going mainstream, led by consumer-friendly companies like 23andMe, Ancestry.com, MyHeritage, and National Geographic in partnership with Helix, a partially owned subsidiary of Illumina. For example, Ancestry.com announced they sold 1.5 million DNA test kits between Black Friday and Cyber Monday in 2017. Approximately 12 million people reportedly have genotyping or sequencing data purchased through DTC genetic testing companies.

In addition to DTC products, there are new and emerging opportunities for individuals to receive their DNA information that can be contributed to us. Consumer-directed and physician-mediated wellness offerings are growing in popularity as individuals look to work with a healthcare provider to maximize their wellness. For example, the Mayo Clinic offers preventative whole genome sequencing through Veritas Genetics. Large-scale population health projects like the United States National Institute of Health’s All of Us Research Program will accelerate individual’s access to their genomic information. We also plan to engage with disease foundations who have very engaged patient communities and funding for genomics research, but who typically lack the interest and skills to stand up and manage a genomics database.

Together, these forces create the ideal time and place to develop a shared, secure, and member-controlled medical research data platform.

Broad Data Collection & Engagement

To date, obtaining large volumes of high-quality biological, health, and lifestyle data has been a major challenge in the medical research field. By being independent and agnostic to DNA analysis technology platform and brand, we can gather data from multiple sources without conflict of interest. A member’s genomic information can be acquired by companies that help him or her learn about himself or herself, while also being shared in the Database in support of disease discovery. There is no need to choose between these two options.

As part of our solution, new members can join our community and receive shares by contributing validated genomic information and providing consent for such data to be used anonymously in population-wide disease research. A wide range of genomic data types will be accepted, including genotyping, exome, and whole genome data files. In addition to the genomic data, we will collect high-quality health, medical, and environmental data from new and existing members. These data can come from EMRs, surveys on diet and exercise, health history, and data from biometric/wearable devices.

Given the high variation in data quality throughout the industry, we will take certain measures to validate the data submitted by our members and potential members to assure a high quality of data in our Database. Such measures will include requiring members to provide supporting information along with submissions, employing spam-blocking techniques, cross-checking data, assessing overlap and generally confirming that data is submitted in accordance with our terms for such data type.

Recognition of the importance of these combined datasets is demonstrated in the launch of large-scale projects including:

 

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Geisinger Health System’s MyCode Community Health Initiative including genome sequence data from 250,000 individuals, coupled to health records;

 

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Apple’s Health app including heart rate, activity, sleep, and nutrition data;

 

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Biometric data such as that collected by implanted and radio frequency-enabled pacemakers or glucose monitors;

 

•

Regeneron-UK BioBank partnership including genome sequence data from 500,000 individuals, coupled to health records and a wide range of phenotypes collected by UK BioBank; and

 

•

The National Institute of Health’s All of Us Research Program including environmental, wearable (e.g., FitBit), and genomic data on one million United States residents.

The data collected in these projects are often accessible to the data owners (i.e., the patient/participant), but are often primarily captured in siloed databases and infrequently shared with the broader research and medical communities. Our solution is compatible with these efforts in that we are requesting that our members share their data with us on a non-exclusive basis.

One of our main goals is to encourage participants to remain active and engaged in the research process over time, providing regular data contributions and coming back to learn about how their data is being used. Crowdsourced funding platforms such as Patreon have been successful at building long-term relationships between artists and art patrons by providing a means to share art on a regular weekly or daily schedule, and see art in early creative stages. Such a relationship between scientists and study participants could greatly benefit the scientific creative process as well.

 

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Platform Description

We will build our “community-owned” Database by providing our members share ownership in our Database as consideration for contributing personal genomic and phenotypic data, such as medical, health and health-related data for medical research, as described in this Offering Circular.

Our Database will earn income through the sale of access to its de-identified metadata and research findings to our customers in the research and medical industries.

Information inputs into our Database include self-reported information, medical data, and DTC testing product data files. Our Database is extensible such that future data inputs (e.g., wearables) can be added. The collective de-identified data creates a metadata resource for nonprofit and for-profit research to be conducted with the help of enabling informatics and artificial intelligence resources. As value is derived from the access to and discoveries from our Database, a portion of that value flows back to the community via their share ownership.

Research Queries

We will make your de-identified Member Data in an aggregated, indexed, or otherwise analyzed fashion available to third-parties for their research use in ways that are designed to avoid the potential for learning the identity of the person or persons who contributed a particular item or set of Member Data. This population-level research may have various purposes, including the advancement of genomic science, identifying links between human genomes and disease, and other commercial applications, such as determining opportunities for targeted research that would seek your voluntary participation (e.g. how many members share a particular genotype and phenotype).

Targeted Research

We may use your individual Member Data to determine whether you may be eligible to participate in targeted research and to then seek your voluntary participation in the targeted research. For example, if a third-party pharmaceutical company is interested in doing research on individuals who may have a particular genotypic, genomic, or phenotypic profile, we may query our Database to determine the subset of members (based on their de-identified Database record number) that have the relevant profile for participation in the study, and then initiate an anonymous invitation to matching members to request their participation in the study.

We may receive compensation from researchers for identifying potential members for targeted research. Initially, our Manager will negotiate with these researchers to provide them introductory access to members and our Manager may be compensated by such researchers for such services without sharing such compensation with our Company or any members. The research sponsors may thereafter negotiate directly with our members, and any such members who elect to participate in any such targeted research may be compensated directly by such researchers. Any such compensation to members will be determined entirely through private agreements between such members and the applicable researchers. See “Compensation of our Manager” below.

Community Ownership

By making our Database community-owned, our members become participants in and beneficiaries of the project, encouraging new members to join and members to actively participate and continue contributing their data to us for additional shares. As a member deposits more genomic, phenotypic, biometric (e.g., wearables) and other valuable Member Data in the Database, that member’s ownership stake in our Database increases. When medical or research organizations pay us to run queries against the Database, our profits from these transactions will enable dividends to our Database members, proportionately to the number of shares held and therefore the value of data each member contributed.

We believe that as our Database grows, it will become increasingly valuable to the medical and research industries. Unlike other companies currently marketing DTC test kits, proceeds generated by selling query access to our Database, such as to pharmaceutical companies, will inure in part to the benefit of the member community. Members will always retain the ability to withdraw their Member Data from our Database by redeeming shares received as compensation for contributing such data. See “Our Limited Liability Company Operating Agreement—Redemption Rights” beginning on page 43.

Community ownership addresses many of the challenges that exist due to: prevalence of data silos; lack of trust in commercial entities monetizing an individual’s data; lack of trust in research activities that go dark once information is provided; and lack of single data standards hindering large-scale biomedical research studies.

We will update members on studies being performed and results that accrue. It is anticipated that a primary motivation for many members will be to support the greater good through scientific discovery. We aim to encourage this type of participation through regular communications in order to build trust in the management of our Database and its contributions to science.

 

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Extensibility of the Database

The first focus of our Database will be driving associations between genomic information and health outcomes. However, as science advances and other “omic technologies” (which are primarily aimed at the universal detection of genes (genomics), mRNA (transcriptomics), proteins (proteomics) and metabolites (metabolomics)) in a specific biological sample (see Figure 4), such as gut microbiome or proteomics become less expensive and more accessible to patients and consumers, our Database will be scalable and capable of incorporating these other data types to further researchers’ ability to understand and digitize the medical and health essence of a human being.

 

Figure 4. Geographic information system (GIS) of a human being.

The ability to digitize the medical essence of a human being is predicated on the integration of multi-scale data, akin to a digital map, which consists of superimposed layers of data such as street, traffic and satellite views. For a human being, these layers include demographics and the social graph, biosensors to capture the individual’s physiome, imaging to depict the anatomy (often along with physiologic data), and the biology from the various omics (genome-DNA sequence, transcriptome, proteome, metabolome, microbiome, and epigenome). In addition to all these layers, there is one’s important environmental exposure data, known as the “exposome.”

Blockchain Technology

To provide our community of members with transparency into our operations, including providing a tamper-evident record of the transactions described below, we plan to implement a blockchain to store select information about several types of transaction related to our company. Implementation of a blockchain for these functions entails various risks, and we may for that or various other reasons abandon these efforts. See “Risk Factors – We intend to implement a blockchain . . .” At the present time, we plan to store the following record types in our blockchain, which we currently store using only conventional database technology.

 

•

Members Joining or Withdrawing: When a new member first joints our community by contributing Member Data to our Database, or if an existing member withdraws from our Company, we would record that fact together with an anonymized identifier for that member in the blockchain. Member identities will be anonymized by using a hashed or numerical identifier or similar de-identifying measure to represent each member.

 

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Member Data Contribution or Withdrawal: When a new or existing member contributes new Member Data to our Database, or an existing Member withdraws some or all of his or her Member Data from our Database, we would record the type of data submitted or withdrawn, the number of shares issued to the member (in case of a contribution) or redeemed by us or the member (in case of a withdrawal), and the member’s de-identified identifier discussed in the preceding bullet point.

 

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Database Queries: When a third party conducts a query against our Database, we would add the occurrence of the query and the anonymized identity of the third party to the blockchain. In some cases we may add a description of the query as well. The blockchain will not include any results of queries.

We may in the future add additional data types to our blockchain to create greater transparency to our community, subject to our privacy and security policies.

The largest advantage of blockchain technology over exclusive reliance on our current conventional database technology is that we intend to implement our blockchain solution using an independent, decentralized network of servers, such as the Ethereum (or similar) network, to improve public verifiability. The decentralized network operates by having multiple nodes validate any changes to the blockchain, such as the addition of a new transaction, and a change is accepted to the blockchain only if a majority of nodes agree that the transaction is valid. Independence means that independent third parties will control the nodes validating transaction and updating the blockchain. In our intended implementation, the network would not delete old transactions; instead, each new transaction would be added to the existing blockchain, enabling members to have a full transaction history.

While blockchain technology is relatively new, we anticipate that the advantages of this approach would be twofold. First, every member or potential investor would have assurances that every block of data retrieved from the blockchain – i.e., every transaction –is uncorrupted and unaltered since its initial recording. Second, each member or potential investor can trace how the blockchain has been appended over time and validate that our current reports to members, including the member’s share holdings and the total outstanding shares, are accurate.

In the event we implement our blockchain, we also intend to develop a tool which will enable anybody to review the data stored in the blockchain. Moreover, since we intend to make our blockchain publicly accessible on the Ethereum (or similar) network, any third party, including any member or potential investor, would be able to develop their own tools, or employ existing compatible tools provided by third parties, to retrieve the blockchain data.

 

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Our Unique Advantages

Public Service Vision

Our Company was founded with a vision of public service at least as important as potential financial remuneration. Trust in us by our members is paramount. We recognize our members are voluntarily placing some of their most private health data in our Database, and we understand we will need to work hard to earn and maintain the trust that informs that contribution. Our operating agreement authorizes our Manager, a public benefit corporation, to make decisions that prioritizes public welfare. However, as demonstrated by other public benefit corporations, such as Patagonia and Warby Parker, what is in the interest of the public can also show significant financial returns in the long run.

Public benefit corporations are a relatively new class of corporations that are intended to produce a public benefit and to operate in a responsible and sustainable manner. Under Delaware law, public benefit corporations are required to identify in their certificate of incorporation the public benefit or benefits they will promote and their directors have a duty to manage the affairs of the corporation in a manner that balances the pecuniary interests of the stockholders, the best interests of those materially affected by the corporation’s conduct, and the specific public benefit or public benefits identified in the public benefit corporation’s certificate of incorporation. Public benefit corporations organized in Delaware are also required to assess their benefit performance internally and to disclose publicly at least biennially a report detailing their success in meeting their benefit objectives.

Our Manager’s public benefit, as provided in its certificate of incorporation, is to create and maintain a community-owned genomic and phenotypic database that is designed to solve humankind’s most important medical challenges.

Given the large number of rare, chronic, and overlooked diseases, and the huge volume of genomics data being generated, it is critical that genomics data be made available to researchers to support the public good. Traditionally, this has been the domain of government institutions such as the National Institutes of Health and various non-profit foundations. However, foundations, while supportive of data sharing, are often not in the position to build the required technology to create the searchable container, or database, nor are they in a position to be responsible for sustaining the data and safeguarding the privacy and security of the data.

First Class Team in the Epicenter of Genomics

Our Manager’s executive team is comprised of experienced leaders in science and genomics, engineering, economics, and large-scale consumer engagement platforms. See “Directors, Officers and Significant Employees” beginning on page 31.

San Diego, the Capital of Genomics

We are proud to be headquartered in San Diego, where biotech and high tech, especially as it relates to genomics, are part of our economic and community fabric. As the number one most patent intensive genomics market in the United States, San Diego is leading the charge in a new era of healthcare. Personalized medicine and technology are taking precedence, with local genomics companies, research institutions, and universities at the forefront. Other highlights from the San Diego Regional Economic Development Corporation 2017 report include:

 

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Leadership: San Diego is poised to continue its leadership in the field of precision medicine. With more than 115 genomics-related firms, San Diego has companies that handle every aspect of the genomics value-chain, from sampling and sequencing (e.g., Illumina, Thermo Fisher Scientific) to analysis and interpretation (e.g., AltheaDX, Human Longevity, Inc.) to clinical applications (e.g., Celgene, Arcturus Therapeutics), creating a complete ecosystem. Additionally, San Diego conducts the fundamental scientific research, due in part to the concentration of research institutes, that form the basis for many global genomics therapies and interventions.

 

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Capital: While San Diego is home to just one percent of the United States population, it received 22 percent – $292 million – of the venture capital funding in genomics in 2016. Continually, San Diego’s numerous nonprofit research institutes command a large share of federal funding (e.g., NIH). In fact, San Diego received $3.2 million federal contract dollars in 2016 – more than any other United States region.

 

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Talent: San Diego produces more genomics-ready graduates, relative to the size of its workforce, than any other United States region. With nearly 2,000 average genomics-related degrees (biochemistry, cognitive science, and bioinformatics) conferred per year, San Diego’s genomics companies benefit from the preparatory work of the region’s top academic institutions. In that vein, it is projected that the local talent pool for key genomics occupations will grow by an additional 10 percent by 2021.

Government Regulation

Health Insurance Portability and Accountability Act of 1996 (HIPAA)

We are not subject to the Health Insurance Portability and Accountability Act of 1996, as amended, commonly known as HIPPA, because we are not a “covered entity” for purposes of that law. Accordingly, the privacy and other protections afforded to patients by HIPAA do not apply to us.

European General Data Protection Regulation (GDPR)

The European General Data Protection Regulation, commonly referred to as the GDPR, went into effect in May 2018. The GDPR increases privacy rights for individuals in Europe, extends the scope of responsibilities for data controllers and data processors and imposes increased requirements and potential penalties on companies offering goods or services to individuals who are located in Europe or monitoring the behavior of such individuals (including by companies based outside of Europe). Noncompliance can result in penalties of up to the greater of €20 million, or 4% of global company revenues. While we are currently accepting only members who reside in the United States, and hence are currently not subject to the requirements of the GDPR, we have structured our policies and procedures to comply with the GDPR.

Employees

We have no full time employees. We are managed by our Manager. Currently, our Manager has six full-time and one part-time employee.

Legal Proceedings

We know of no existing or pending legal proceedings against us or our Manager, nor are we or our Manager involved as a plaintiff in any proceeding or pending litigation.

 

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DESCRIPTION OF PROPERTY

We and our Manager’s principal executive office is located at 415 South Cedros Avenue, Suite 260, Solana Beach, California, 92075, which our Manager leases. The initial term of the lease is for one year, ending in March 2019. The cost of the lease will be paid by our Manager and reimbursed by us to the extent such cost qualifies for reimbursement. See “Our Management Agreement – Management Fee” beginning on page 49. We believe this space is adequate to meet our near-term needs.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Overview

We were organized as a limited liability company under the laws of the State of Delaware on April 23, 2018. We are managed by LunaPBC, Inc., a Delaware public benefit corporation, which we refer to as our Manager, under the terms of our Operating Agreement and Management Agreement. We seek to build the world’s first and largest human health database of Member Data, which we refer to as our Database, that is owned (as described in this Offering Circular) by a community comprised of its members. Our Database will be comprised of various types of genomic and phenotypic data, such as medical, health and health-related data.

Liquidity and Capital Resources

We will not receive any proceeds from this Offering.

To date, we have had no expenses, as our Manager is obligated to cover our expenses until March 30, 2020 pursuant to our Management Agreement. In the future, we will be obligated to promptly reimburse our Manager for all our expenses advanced by our Manager, in accordance with our Management Agreement (which the Manager may effectively modify unilaterally). Our dependence on our Manager for funding of these expenses raises substantial doubt about our ability to continue as a going concern.

Our Manager’s capacity to fund all of our organizational expenses and to fund our operational expenses and the development expenses through the time when we generate significant revenues from operations is dependent on our Manager’s existing cash resources and its ability to obtain additional capital financing from investors sufficient to meet our needs and the needs of our Manager’s other operations. Our Manager presently intends to seek a combination of equity capital and convertible debt capital from outside investors, but it presently has no financing commitments. Our Manager believes that it will be able to raise capital that, combined with its existing cash resources, will be sufficient to fund all of our organizational expenses and to fund our operational expenses and the development expenses through the time when we generate significant revenues, at which time our revenues may be used to pay both our operational expenses and the management fee to our Manager (which management fee may then fund further development expenses). However, there can be no assurance that our Manager will be successful in its fundraising efforts. If our Manager is not successful in its intended fundraising efforts, our Manager may be required to delay various planned expenditures for development and marketing of our Database, which delays could materially adversely delay generation of revenues and potentially jeopardize our ability to continue as a going concern.

Following this Offering, we may not generate operating revenue for an indeterminate period of time until third parties begin to pay us for services related to our Database. Upon generation of revenue, we will be obligated to pay a management fee to our Manager. See “Our Management Agreement—Management Fee” beginning on page 49.

Plan of Operations

We have neither engaged in any operations nor generated any revenues to date. Our only activities since inception have been organizational activities and those necessary to prepare for this Offering. Following this Offering, we may not generate operating revenue for an indeterminate period of time until third parties begin to pay us for services related to the Database. After this Offering, we expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance). We will rely on our Manager to fund our plan of operations for the next twelve months.

 

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DIRECTORS, OFFICERS AND SIGNIFICANT EMPLOYEES

We do not have any directors, officers, or significant employees. We are managed by our Manager, and we sometimes refer to our Manager’s officers and directors as our officers and directors and as our management. Neither our Manager, nor our Manager’s directors, is elected by our members, and neither will be subject to re-election by our members in the future. Our Manager may not be removed by our members for any reason.

Our Manager has a board of directors consisting of three directors. The following are the directors, key officers and significant employees of our Manager:

 

Name		Position with Manager		Age				Term of Office		Approximate Hours per Week for Part-Time Employees
Robert Kain		Chief Executive Officer and Director			57			Since October 2017
Dawn Barry		President and Director			44			Since January 2018
Scott Kahn, Ph.D.		Chief Information Officer			59			Since January 2018		30 Hours
David Lewis		Chief Financial Officer, Treasurer, Secretary and Director			47			Since October 2017
Debora Thompson		Vice President, Strategic and Business Ops			45			Since March 2018
Kenneth Bloom		Chief Architect			41			Since April 2018

Robert Kain has been LunaPBC’s Chief Executive Officer (Principal Executive Officer) since October 2017. Bob is a renowned pioneer in genomics and a co-founder of LunaPBC. Bob joined Illumina pre-IPO in 1999 and retired in 2014 as the Chief Engineering Officer. At Illumina, Bob led the invention of the modern, high-throughput genome sequencer that brought the cost from millions of dollars per genome down to less than $1,000 U.S. dollars. Bob is lead inventor on 28 United States patents that led to the breakthroughs that have revolutionized genome sequencing. Prior to joining Illumina, Bob was the Director of the Microarray Business Unit at Molecular Dynamics. He is also on the Scientific Advisory Boards of Dovetail Genomics, Singular Genomics, and Edenroc Biosecurity, and is the co-founder and acting chief executive officer of Revere Biosensor, a private company. Additionally, he is the co-founder and chairman of the board of a successful health & fitness business, Mesa Rim Climbing and Fitness Center, with multiple locations in San Diego and Reno, Nevada. Bob received a BS in Physics from San Diego State University and an MBA from Saint Mary’s College of California.

Dawn Barry has been LunaPBC’s President since January 2018. Dawn is an esteemed thought leader and veteran of the genomics industry and a co-founder of LunaPBC. She has given TED talks and is a frequent guest speaker on personalized medicine and genomics. Dawn served as the Vice President of Applied Genomics at Illumina, Inc through January 2018. Dawn integrated market development strategies with product and business model innovation to accelerate the application of genomics in medicine and personal healthcare. Dawn joined Illumina in 2005. Prior to Illumina, Dawn spent seven years at Genaissance Pharmaceuticals, one of the first genomics startups focused on individualized medicine and DNA-based diagnostic testing. Dawn was named San Diego Business Journal’s 2017 Business Woman of the Year and was a speaker at TEDxSanDiego 2016. She holds a BS in biology from the University of Vermont and a MBA from the University of Connecticut School of Business.

Scott Kahn, Ph.D., has been LunaPBC’s Chief Information Officer since January 2018. Scott leads LunaPBC’s information and data strategy and information security. Scott joined Illumina in 2005 as its first Chief Information Officer and also served as its VP of Commercial and Enterprise Informatics, where he led all corporate information services, software development, and bioinformatics. Prior to Illumina, Scott was the Chief Science Officer and General Manager of Life Sciences at Accelrys (currently Biovia/Dassault Systems) responsible for 65 percent of the company’s business. Scott received his PhD in Theoretical Organic Chemistry and was an Assistant Professor of Chemistry at the University of Illinois Urbana-Champaign.

 

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David Lewis has been LunaPBC’s Chief Financial Officer, Treasurer and Secretary since October 2017. David is a co-founder of LunaPBC and leads the company’s strategic funding and investment initiatives. A successful life science, equity and credit investor, David’s background is in investing in public and private companies on behalf of institutional investors, family offices, and high-net worth individuals. David started his career in investment banking at Lehman Brothers in 1994, then left banking to pursue several analyst and portfolio manager roles at CitiGroup, First Manhattan, and J Goldman & Co. In 2006 David Co-founded Ganley Investments with the financial backing of a large multinational family office, and served as its Chief Investment Officer. He holds a Bachelor of Business Science with honors in Accounting and Finance from the University of Cape Town, South Africa.

Debora Thompson has been LunaPBC’s Vice President, Strategic and Business Operations, since March 2018. Debora joined LunaPBC in March 2018 to spearhead strategic planning and execution of the LunaPBC infrastructure development. Prior to that, she spent over 10 years at Illumina leading projects and teams to accelerate genotyping and next-generation sequencing into applied and clinical markets. She served as chief of staff to both the new and emerging markets and applied genomics business units. Her passion and commitment to improving healthcare through discovery is anchored by a background in clinical molecular biology research and almost 20 years in biotech. She holds an MS from the University of Central Florida.

Kenneth (Kirby) Bloom has been LunaPBC’s Chief Architect since April 2018. In that role, Kirby is primarily responsible for architecting and developing the engagement and discovery platform that invites, aggregates, and organizes Member Data; establishes members as shareholders; and enables medical research across the de-identified aggregated Member Data. Prior to this role, Kirby was Head of Software & Informatics at Illumina, Inc. where he lead the ideation and development of several sample-to-answer software solutions for Illumina’s sequencing and microarray platforms serving forensics, transplant diagnostics, food and agriculture, microbiology, and clinical segments. He began working at Illumina in 2007. With almost 20 years of experience in software design, engineering and databases, Kirby specializes in user centric interfaces and experiences and highly scalable, distributed cloud architectures and data engineering. He holds a BS in Management Information Systems from Texas Tech University and is currently working towards his Masters in Information & Data Science at University of California, Berkeley.

Family Relationships

There are no family relationships among any of our officers or directors.

Potential Conflicts of Interest

Since we do not have an audit or compensation committee comprised of independent persons, the functions that would have been performed by such committees are performed by our Manager. Thus, there is a potential conflict of interest in that our Manager has the authority to determine issues concerning its own and its management’s compensation and other audit issues that may affect management decisions.

Involvement in Certain Legal Proceedings

In the last five years,

 

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no petition under the federal bankruptcy laws or any state insolvency law has been filed by or against, nor has a receiver, fiscal agent or similar officer been appointed by a court for the business or property of, any director of executive officer of our Manager, or any partnership in which he or she was general partner at or within two years before the time of such filing, or any corporation or business association of which he or she was an executive officer at or within two years before the time of such filing, and

 

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no director of executive officer of our Manager has been convicted in a criminal proceeding (excluding traffic violations and other minor offenses).

 

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COMPENSATION OF OUR MANAGER

The operation of our Company is managed by our Manager. Our Company does not have any directors, officers or employees. Pursuant to the Management Agreement, the Company is obligated to pay to the Manager a management fee (the “Management Fee”) calculated as the sum of (i) 50% of the Net Revenues (defined below) of the Company; plus (ii) the amount of all Non-Profit Revenue (defined below) of the Company. The following description of our Manager’s compensation is subject to our Manager’s effective right to modify the terms of the Management Agreement, including the terms relating to the Manager’s fees and other compensation, unilaterally. See “Our Management Agreement—Amendment, Modification, or Waiver” above beginning on page 49.

“Net Revenues” means (i) all revenue (excluding Non-Profit Revenue) recognized by the Company from (a) discovery activities that derive value from the content contained in the Database and (b) license fees, royalties and other revenue derived from intellectual property acquired through collaborations with third parties with respect to Member Data, less (ii) Operational Expenses (as defined below). For this purpose, Operational Expenses do not include Organizational Expenses (as defined below), Operational Expenses borne by the Manager or the Management Fee.

“Non-Profit Revenue” means all revenues recognized by the Company from transactions with corporations, trusts, unincorporated association, or other types of organizations (“Non-Profit Organizations”) that (i) are exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code of 1986, as amended, (ii) have applied in good faith for a determination of such exemption from the Internal Revenue Service, or (iii) would be eligible to be so exempt, in the reasonable opinion of the Manager, if operated in the United States. Examples of Non-Profit Organizations include disease foundations, research organizations, and organizations for the benefit of minority or economically disadvantaged groups. License fees, royalties and other revenues earned from Collaboration IP (as defined below) generated through collaboration with a Non-Profit Organization are not Non-Profit Revenue and will be included in Net Revenues, even if such license fees, royalties and other revenues are paid by Non-Profit Organizations.

The Manager will determine the Management Fee with respect to Net Revenues and Non-Profit Revenue for each fiscal quarter. The Management Fee is payable within ten (10) days following the closing of the Company’s books for each quarter, to the extent of available cash in the Company. To the extent sufficient cash is not available at a payment date, the unpaid portion of the Management Fee will accrue and be paid promptly following the Company’s receipt of cash sufficient to pay the amount in arrears.

The Manager is responsible for, and not entitled to reimbursement for, all fees, costs or expenses incurred by it on behalf of the Company in connection with organizing and managing the Company and in connection with the initial offer and sale of the Shares, including printing, travel, filing fees, marketing expenses, legal and accounting fees, and similar fees incurred in connection with the investigation, evaluation, registration, qualification, issuance and sale thereof, such as costs incurred in qualifying for the exemption from registration pursuant to Regulation A under the Securities Act of 1933, as amended with the Securities and Exchange Commission, including any post-qualification amendments or supplements to the initial Regulation A offering statement (collectively, the “Organizational Expenses”).

The Company is obligated to reimburse the Manager promptly for all Operational Expenses (defined below) advanced by the Manager. Notwithstanding the foregoing, the Manager is not entitled to reimbursement for Operational Expenses paid by the Manager if such Operational Expenses would have been, but for the provisions of the Management Agreement denying reimbursement, accrued by the Company under generally accepted accounting principles on or before March 31, 2020. “Operational Expenses” are all costs and expenses related to the Company’s operations, but excluding the Organizational Expenses, costs to develop Database IP (as defined below) and the Manager’s overhead and compensation related expenses, including compensation and expenses of the officers, directors, employees, auditors, attorneys and other agents of the Manager and fees and expenses for administrative, bookkeeping, clerical and related support services, office space and facilities, utilities, telephone and email of the Manager, all of which are the responsibility of the Manager.

The Manager will own all intellectual property, including U.S. and foreign patents and trade secrets, conceived or discovered by the Manager, solely or jointly, related to the Database (collectively, “Database IP”). Database IP does not include intellectual property rights the Company acquires from collaborations with third parties that obtain Access to the Database (“Collaboration IP”), which Collaboration IP will be owned by the Company.

Net Revenues includes compensation from researchers for identifying potential members for targeted research. Initially, our Manager will negotiate with these researchers to provide them introductory access to members and our Manager may be compensated by such researchers for such services without sharing such compensation with our Company or any members. The research sponsors may thereafter negotiate directly with members, and any such members who elect to participate in any such targeted research may be compensated directly by such researchers. Any such compensation to members will be determined entirely through private agreements between such members and the applicable researchers.

 

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SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS

As of the date of this Offering Circular no shares have been issued or are outstanding.

 

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INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS AND CONFLICTS OF INTEREST

Interest of Management and Others in Certain Transactions

Management Fee and Expenses

We anticipate conducting various transactions with our Manager, a related party, including but not limited to those specified in the Management Agreement. We are obligated to pay a Management Fee to the Manager and our Manager is obligated to pay for certain of our expenses. See “Compensation of our Manager” beginning on page 33. With limited exceptions, our Manager has the effective right to modify the Management Agreement unilaterally (i.e., without the consent of any of our members). Such modifications generally, but not always, require advance notice to members. See “Our Management Agreement – Amendment, Modification, or Waiver” above beginning on page 49.

Manager Operations Separate from the Company

The Company will earn revenues from data discovery activities that derive value from the content contained in the Database, such as (i) providing to third parties including but not limited to pharmaceutical and biotechnology discovery companies, access to the Database for population-level research, and (ii) making available to these customers, directly or through the Manager, contact information for Members who have elected to allow the sharing of such contact information. The Management Agreement indicates that certain activities are not data discovery activities and permits the Manager in its sole discretion to choose to conduct such activities for its own or for its affiliate’s account or for customers without accounting to the Company for the revenues derived from such activities. Excluded activities are:

 

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Communication and member engagement services provided to customers following a data discovery activity that identifies or provides contact information of members;

 

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assisting customers in collecting longitudinal data of identified members that is at the time of initial collection outside the Database;

 

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the offer or sale of value added goods and services to members, whether by the Manager, an affiliate of the Manager or a third party offering goods or services that may be of interest to members;

 

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professional services such as scientific consultation or project management; and

 

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any and all other activities of the Manager that do not derive direct value from the content of the Database.

Database Development and Intellectual Property License

Pursuant to the Management Agreement, the Manager develops and improves the Database at the Manager’s sole expense. The Manager will own all intellectual property, including U.S. and foreign patents and trade secrets, conceived or discovered by the Manager, solely or jointly, related to the Database (collectively, “Database IP”). Database IP does not include intellectual property rights the Company acquires from collaborations with third parties that obtain access to the Database (“Collaboration IP”), which Collaboration IP will be owned by the Company.

The Company enjoys a non-exclusive license for the Database IP, which license will continue in perpetuity in the event of termination of the Management Agreement, the Manager ceasing to serve as manager of the Company or the dissolution of the Manager.

Our Manager may effectively modify the terms of our Management Agreement, including the license terms, unilaterally. See “Our Management Agreement—Amendment, Modification, or Waiver” above beginning on page 49.

Other Intellectual Property

The Manager owns certain trademarks, trade dress, logos, internet domain names, websites and associated software and social media accounts created for the Company. The Company has an exclusive license to all those assets but the Manager has reserved a non-exclusive right also to use them in connection with its operations that are separate from those of the Company. Our Manager may effectively modify the terms of our Management Agreement, including the license terms, unilaterally. See “Our Management Agreement—Amendment, Modification, or Waiver” above beginning on page 49.

 

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Except as noted immediately above, there are no transactions or currently proposed transactions since our inception to which we were or will be a participant and the amount involved exceeded or will exceed the lesser of $120,000 or 1% of our total assets, and in which any member of our Manager or 10% beneficial owner, promoter (or immediate family member of the foregoing persons) of our Company had or will have a direct or indirect material interest.

Conflicts of Interest

Fiduciary Duties

The directors and officers of our Manager have a fiduciary duty to manage our Manager in a manner that is beneficial to its owners, subject to the public benefit stated in our Manager’s certificate of incorporation. That benefit is to create and maintain a community-owned genomic and phenotypic database that is designed to solve humankind’s most important medical challenges. Conflicts of interest may arise between our Manager, on the one hand, and us and our members, on the other hand. In resolving these conflicts of interest, our Manager may favor its own interests over our interests and the interests of our members.

Our Operating Agreement contains provisions that eliminate the fiduciary standards to which our Manager would otherwise be held by state fiduciary duty law. For example, our Operating Agreement permits our Manager to make a number of decisions, in its individual capacity, as opposed to in its capacity as our Manager, or otherwise, free of fiduciary duties to us and our members other than the implied contractual covenant of good faith and fair dealing, which means that a court will enforce the reasonable expectations of the parties where the language in our Operating Agreement does not provide for a clear course of action. This entitles our Manager to consider only the interests and factors that it desires, and it has no duty or obligation to give any consideration to any interest of, or factors affecting, us or our members.

Incumbency of Manager and Changes to Operating Agreement or Management Agreement

Our Members have no right to remove our Manager or to consent to changes to our Operating Agreement (subject to limited exceptions) or the Management Agreement, which our Manager may effectively make unilaterally. Accordingly members will have very limited say in matters affecting our operations and very limited recourse against us.

Indemnification Matters

We must indemnify our Manager and its officers, directors and employees, to the fullest extent permitted by law, against liabilities, costs and expenses incurred by our Manager or these other persons. We must provide this indemnification unless there has been a final and non-appealable judgment by a court of competent jurisdiction determining that these persons acted in bad faith or engaged in fraud or willful misconduct. Thus, our Manager could be indemnified for its negligent acts if it met the requirements set forth above.

 

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SECURITIES BEING OFFERED

The shares represent limited liability company interests in our Company. See “Our Limited Liability Company Operating Agreement” below beginning on page 43. The discussion below regarding the rights of holders of shares relates to our current Operating Agreement and is qualified by our Manager’s effective right to modify the provisions of our Operating Agreement (with limited exceptions) unilaterally, without the consent of any of our members. See “Our Limited Liability Company Operating Agreement—Unilateral Modification” beginning on page 46. Currently no shares are outstanding.

Unlike the holders of common stock in a corporation, our members have extremely limited rights and remedies, which primarily consist of a member’s right to redeem his or her shares by withdrawing his or her Member Data from our Database and resign as a member of our Company. See “Our Limited Liability Company Operating Agreement” beginning on page 43. Compared to stockholders in a typical public Delaware corporation, the holders of our shares will have very limited rights, as summarized in the following table and as further described below:

 

		Common Stock		Our Shares
Consideration for Shares		Flexible, but generally cash (for investors) or services (for employees or contractors).		Grant of a limited, non-exclusive right to use Member Data.
Voting Power		Generally entitled to elect and remove directors and to vote on major issues, including proposals for fundamental changes affecting the company, such as mergers or liquidation, and amendments to the certificate of incorporation (such as authorizing new classes of stock or increasing the number of authorized shares of stock).		No voting rights relating to the management and operation of the Company or the issuance of new classes of equity, except to appoint a liquidator upon the dissolution of our Company if the Company does not have a Manager at that time.
Mergers; Conversions		Requires the approval of the stockholders if the company is a party, except for certain “short form” mergers between a parent corporation and a 90% held subsidiary.		Does not require the approval of any members.
Dissolution		Requires the approval of the stockholders or a court order.		Does not require the approval of any members.
Transfers		Right to transfer ownership of shares, subject to applicable securities laws.		No right to transfer shares, except as may be required by law.
Dividends/Distributions		Subject to the board of directors authorizing a dividend and subject to any dividend preference of any other classes of stock, shares are entitled to an equal share of distributions of company assets, including in the event of a liquidation of the company.		While our Operating Agreement provides that the Company will effect a distribution of accumulated net earnings at least once annually, subject to the availability of sufficient funds, our Manager may unilaterally change the terms of our Operating Agreement, including the terms relating to payments of distributions, and hence may reduce or eliminate the payment of distributions on shares, including in the case of a liquidation of our Company.
Right to Sue		Officers and directors are subject to fiduciary duties to the stockholders. Stockholders can bring derivative actions in the name of the corporation against officers or directors who have breached their fiduciary duties to the stockholders.   Generally no specific restrictions on bringing class actions, no arbitration requirements, no fee-shifting provisions, and no waiver of jury trial. Venue may be defined in government documents.		Neither we nor our Manager is subject to any fiduciary duties to our members, and our members cannot bring derivative actions against us or our Manager. Our Operating Agreement limits venue for claims against our Company or our Manager to San Diego, California, requires mandatory arbitration except for a few types of exempt claims, and precludes members’ right to bring any claim as a class action or to a jury trial. In addition, the prevailing party in any arbitration may be entitled to recover his, her or its fees and expenses.
Fixed Terms		Generally requires the consent of a majority of outstanding shares to modify the terms of a class of shares.		With limited exceptions, our Manager may unilaterally modify the terms of our Operating Agreement, which govern the rights of our members.
Limited Liability of Stockholder		Stockholders liability generally limited to invested capital and distributions received unlawfully.		Members’ liability limited to distributions received unlawfully.
Information Rights		A stockholder is entitled to view a corporation’s stock ledger, a list of its stockholders, and its other books and records for any purpose reasonably related to the stockholder’s interest as a stockholder.		Members may not view the member list or a members’ contact information, and review of books and records is limited to our organizational documents and financial statements.
Redemption Right		Generally no right to redeem shares.		Right to redeem shares by withdrawing from our Database his or her Member Data previously contributed in exchange for those shares.
Power of Attorney		Generally none provided except for an optional limited proxy in connection with shareholder meetings.		Each member grans a limited power of attorney to our Manager by virtue of becoming a member.

 

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Consideration

To become an initial holder of shares, a member must provide us with validated genome data of the type listed under the heading “Data Type” in the table below. If eligible, and if Extra Submissions or Additional Files of similar Member Data are provided in the same calendar year, such Member Data will entitle members to additional shares (as noted in columns 3-7 in the table below) and such additional submission and issuance is contingent on confirmation of the different content of the additional Member Data (see the “Quality Assurance” section below for more information).

 

Data Type		Shares per Initial File				Extra Submissions* Allowed at Initial File Value		Subtotal shares at Initial File Value		Additional Files** of Same Type Allowed (@ 10 shares each)				Subtotal Additional Shares(@ 10 shares each)				Maximum Possible Shares
DNA Targeted Genes			10			—		10			4				40			50
Genotyping by DNA Genome-wide Microarray or Sequencing			50			—		50			2				20			70
DNA Exome			150			—		150			3				30			180
DNA Whole Genome			300			—		300			2				20			320
DNA Tumor Targeted Genes			10			4 time points/year		40			3				120			160/year
DNA Tumor Genome-wide Genotyping			50			4 time points/year		200			3				120			320/year
DNA Tumor Exome			150			4 time points/year		600			3				120			720/year
DNA Tumor Whole Genome			300			4 time points/year		1,200			3				120			1,320/year
DNA Targeted Methylatio, including supporting collection information			10			—		10			0				0			10
DNA Whole Genome Methylation, including supporting collection information			20			—		20			0				0			20
RNA Genome-wide Expression, including supporting collection information			10			4 tissues or time points/year		40			0				0			40/year
RNA Targeted Gene Expression, including supporting collection information			20			4 tissues or time points/year		80			0				0			80/year
RNA Whole Transcriptome, including supporting collection information			40			4 tissues or time points/year		160			0				0			160/year
RNA Tumor Genome-wide Expression			10			4 time points/year		40			3				120			160/year
RNA Tumor Targeted Gene Expression			20			4 tissues or time points/year		80			3				120			200/year
RNA Tumor Whole Transcriptome			40			4 tissues or time points/year		160			3				120			280/year
Targeted Microbiome, including supporting collection information			20			5 regions/year		100			0				0			100/year
Whole Microbiome, including supporting collection information			50			5 regions/year		250			0				0			250/year
Health Records - Clinical Reports (ex. Lab results)			4			No maximum for unique reports		Dependent on number of visits and reports each year.
Health Records - Prescription Reports, including supporting collection information			4			1 report/month		48			0				0			48
PDF of Historical Health Record (per year of reports)			2			20 years		40			0				0			40
Electronic Survey (per 10 min average completion time)			2			1 Update/year		Dependent on the number of surveys.
Personal Fitness Monitor (per 20 days of data)			2			18 collections /year		36			0				0			36/year
Clinically Certified Device (per 20 days of data)			10			18 collections /year		180			0				0			180/year
Nutrition Tracker (per 20 days of data)			2			18 collections /year		36			0				0			36/year

 

*	Some data types permit Extra Submissions at the “initial file” share value as defined in the table above.

**	Additional files of similar data types in the same calendar year are only worth 10 shares and contingent on confirmation of different content in the additional files (see the heading “Quality Assurance Process for Contributed Data” below for details).

 

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Example: For a Tumor Targeted Panel, additional files from same time point (i.e. same biopsy, different areas of tumor) may be submitted for 10 shares each to a maximum of 4 files per biopsy. Extra submissions are also allowable so long as each submission is from a different time point up to a max of 4 time points per year.

Detailed Definitions of Data Types (With Examples)

 

•

Genotyping by DNA Genome-Wide: Data produced from a product that targets and reads pre-selected genetic variations, within human DNA (i.e. the human genome) . Genome-wide means that the product covers variants that span the full 23 chromosomes of all humans (typically targeting at least 500,000 variants). Today, most direct-to-consumer genetic testing products are DNA genome-wide microarrays including those currently provided by 23andMe, AncestryDNA, FamilyTree DNA and MyHeritage.

 

•

Genotyping by Sequencing: Data produced from a product that sequences the human genome, typically at .5x to 5x genome coverage. Coverage refers to the average number of reads that cover a specific section of the human genome. Example supplier: Gencove.

 

•

DNA Targeted Genes: Data produced from a product that targets and reads a pre-selected subset of genetic variants or subset of genes (typically not across the entire genome or even across all genes) that support the medical or health goals of the product (ex. mutations associated with cardiovascular disease risk), either through microarray or next-generation sequencing technology. Excludes products with <10 variants targeted (such as PCR products and Sanger sequencing products). Example suppliers: Myriad, Color Genomics.

 

•

DNA Exome: Data produced from a sequencing product that encompasses all genetic variation within all of the genes in the human genome, also known as the coding region (~1% of a whole genome). Example suppliers: Invitae, Ambry.

 

•

DNA Whole Genome: Data produced from a sequencing product that sequences the entire human genome including all genes (coding regions), as well as all DNA not within genes (non-coding regions). A total of ~3 billion DNA base pairs make up the human genome, spanning 23 chromosomes. Example suppliers: Understand Your Genome®, Veritas.

 

•

DNA Tumor: Data produced from a product that genotypes pre-selected variants or sequences genes, the exome, or the whole genome of the tumor DNA from an individual. This information is typically used to compare to the normal DNA found outside of the tumor. Example suppliers: Foundation Medicine, Tempus.

 

•

DNA Methylation: Data produced from a product that profiles DNA modification of either a subset (targeted) of the entire genome or the entire genome that influences the function of a genome. Methylation is a common example of the type of DNA modification that is profiled in the epigenome. Example suppliers: GeneDx, Great Plains Lab.

 

•

RNA: Data produced from a product that profiles the expression of either a subset (targeted) of the entire transcriptome or the entire transcriptome (i.e. all of the RNA expressed from a person’s genome) using microarray (genome-wide) or sequencing (targeted, transcriptome) technologies. The expression levels of the RNA represents how active genes are in a person’s genome. Example suppliers: Macrogen, MBG Laboratories.

 

•

RNA Tumor: Data produced from a product that profiles RNA expression levels of either a subset (targeted) of the entire transcriptome or the entire transcriptome of an individual’s tumor. This information is typically used to compare to the normal RNA expression levels found outside the tumor in the same tissue. Example suppliers: Caris Molecular Intelligence, Tempus.

 

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Microbiome: Profiling of select microorganisms (e.g. bacteria, viruses, fungi, etc.) by looking at a subset (targeted, e.g. 16S) of genes or the whole genome of the microorganism in gut, skin, reproductive, and oral regions. Example suppliers: uBiome, American Gut.

 

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•

Health Records – Clinical Reports: The Electronic Health Record is a record of clinical services for patient encounters in a care delivery organization. Clinical Reports include reports such as pathology reports, blood test results, and other health data. Digitally compatible formats aligned to HL7 CDA, ASTM CCR, or the blended CCD standard are included in this data type. Example suppliers: Healthcare Providers, Diagnostic Labs.

 

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Health Records – Prescription Reports: These reports are specifically pulled from Pharmacists , and do not include prescription information within doctor’s office reports (which are “EHR - Clinical Reports”). Example suppliers: CVS, Walgreens, Rite-Aid.

 

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PDF of Historical Health Record: This is a PDF version of the “Health Records – Clinical Reports” that LunaDNA will accept for historical records of patient encounters in a care delivery organization. Only typed reports (not handwritten) are currently accepted in PDF. Example suppliers: Healthcare Provides, Diagnostic Labs.

 

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Electronic Surveys: Completion of one LunaDNA-supplied or LunaDNA-supported third party survey. Topics may include but are not limited to: family health history, member health, medications, environment, or lifestyle.

 

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Personal Fitness Monitor: Fitness monitors measure steps, distance, calories burned, pulse rate, etc. To be accepted, a file must include 20 full (non-duplicated) days of device data from a LunaDNA-approved product. Example devices: Fitbit, Apple Watch..

 

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Clinically Certified Device: These devices have clinical certification, are typically prescribed by a physician, and may include devices permanently attached to an individual (i.e. pacemaker). To be accepted, a file must include 20 full (non-duplicated) days of device data from a LunaDNA-approved product. Example devices: Medtronic Azure® pacemaker, Dexcom G6TM Continuous Glucose Monitoring (CGM) System.

 

•

Nutrition Tracker: These apps or devices typically keep track of what an individual eats on a daily basis. To be accepted, a file must include 20 full (non-duplicated) days of nutrition consumption from a LunaDNA-approved product. Example products: Calorie Counter & Food Diary by MyNetDiary, Calorie Counter & Diet Tracker by MyFitnessPal.

Quality Assurance Process for Contributed Data

 

1.

Prevention of randomly generated files / confirmation that file is human genomic data:

 

a.

The sites for sharing data will employ various spam blocking techniques to suppress bot activities and spammers.

 

b.

The uploaded data will be cross-checked against a reference of the latest human genome.

 

2.

Prevention of duplication of files / assessment level of overlap (if any) of content:

 

a.

Each time a file is submitted, the system will review previous data contributions to assess (1) if this is the first of this data type contributed by this member, (2) what rules exist for additional files and extra submissions (see below), and (3) the level of overlap of the content provided (see below).

 

b.

If any previously contributed files of the same data type exist, the uploaded data is compared against it/them to identify overlapping content. For DNA or RNA files, content that has greater than 95% overlap will be considered a duplicate file and not accepted.

 

3.

Confirmation of additional submission rules:

 

a.

Tumor file submissions must include the date of test or they will not be accepted. All files will be reviewed to determine whether they are the same time point (see rules for “Additional Files”) or different time points (see rules for “Extra Submissions”).

 

b.

Microbiome submissions must include the date of the test and the region of the body from which the sample was taken. All files will be checked to confirm that the date and region contributed are not duplicates of previous submissions.

 

c.

Digital and PDF Health Records will be checked to confirm the month or year of data being submitted, test type, and test provider are not duplicates of prior submissions.

 

d.

Device and Tracker data files must include the date for each data entry and the name of the device or app from which they come. The system will confirm that (1) the file comes from a LunaDNA-supported and approved device or tracker, (2) the dates submitted are not duplicated with prior submissions, and (3) at least 20 days of submitted days have data.

As we accept new data types and our discovery capabilities expand, we intend to evolve our quality assurance processes to continue to ensure accurate and appropriate data is accepted into our Database and credited to Members for share acquisition.

 

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Value of Consideration

We established the value for the different types of Member Data, which we used to determine the number of shares issued in exchange for the contribution of such Member Data, based on the fair value as determined by an accepted standard. In using an accepted standard, we noted the absence of bona fide sales of similarly limited and revocable Member Data rights made within a reasonable time. In particular, we used three independent, market-based valuation methods to determine the fair value of Member Data received in exchange for our shares. Our valuation of Member Data involved first estimating the fair value of Genotyping by DNA Genome-Wide Microarray or by Sequencing data, which we refer to as a GT file. Other genomic contributions were then valued in relation to the fair value of a GT file.

Each valuation method applied was based on observable, third-party market transaction data using either the market approach valuation technique or the income approach valuation technique. The market approach is a valuation technique that uses prices and other relevant information generated by market transactions involving identical or comparable (that is, similar) assets, liabilities, or a group of assets and liabilities, such as a business. The market approach bases the value measurement on what other similar unrelated enterprises or comparable transactions indicate the value to be. Specifically, investments by unrelated parties in comparable equity securities (or assets) of the subject enterprise or transactions in comparable equity securities (or assets) of comparable enterprises are evaluated. Financial and nonfinancial metrics may be used in conjunction with the market approach to estimate the fair value of the privately issued securities of the subject enterprise. The income approach uses valuation techniques that convert future amounts (for example, cash flows or income and expenses) to a single current (that is, discounted) amount. The fair value measurement is estimated on the basis of the value indicated by current market expectations about those future amounts. The income approach obtains its conceptual support from its basic assumption that value emanates from expectations of future income and cash flows.

The first analysis of the GT file value was a genotype contribution valuation. This analysis is a market approach based on market participant data, specifically the price that individuals pay to established genotype testing services for both (a) trait, genealogy and health analyses (services) and (b) the right to access the underlying GT file (asset). To obtain the value of a GT file, we subtracted the estimated cost of the services of sequencing a DNA sample and generating a genealogy report from the total observed market price paid by consumers for the bundle of services/assets consumers pay to direct to consumer genomics providers, to obtain at the “residual value” of the standalone GT file. The total observed market price paid by a consumer for the bundle of services/asset is $50, which is the market price (or in some cases, the frequently available discount price) frequently observed from different well known vendors in the industry that provide these services. We then estimated the cost of sequencing a DNA sample and generating a genealogy report at $35, based on the cost observed for a vendor providing only the services (i.e., sequencing and providing a genealogy report) but not the asset. We then calculated the residual value of the GT file to be $15. Then, based on the number of vendors in the marketplace seeking a copy of a consumer’s GT file and the ability of consumer’s to share a GT file with an unlimited number of vendors, we estimated that the average consumer would license his or her GT file to four entities, yielding a value of $3.75 per GT file license. We are not aware of any market data indicating the average number of vendors to which a person licenses his or her GT file. Our Manager has observed at least 25 vendors currently in the market accepting GT Files and believes this number will grow over time. The estimate that a consumer would on average license his or her GT file to four entities is the Manager’s reasonable estimate derived from the experience of its management team acquired by talking to consumers, data brokers, researchers and other data collection vendors.

The second analysis of the GT file value was an imputed valuation based on observed market prices of an electronic health record (EHR). This analysis is also a market approach based on market participant data – specifically, the observable price of a de-identified EHR, which we observed in publicly available listings to be between $7 and $50. We were not able to obtain information on the content or comprehensiveness of the EHRs that were indicated to be for sale. In our analysis, we assumed a mid-price of $20 per EHR, and we then estimated that a mid-priced EHR record would contain 30% of the total information we would be able to obtain from a highly engaged member. That is, we assumed that a member who elects to provide an EHR to us will be more engaged with our community and likely also to provide multiple other data contributions in exchange for shares, such as various types of genomic data, wearable data and surveys. This analysis implies a value of $67 ($20/30%) for all data we would obtain from a single more engaged member providing an EHR to us, including other data provided by the same member. We estimated that the GT file for such a member would represent 5% of the total value of all contributions by that member, thereby implying a value of the GT file of $3.33.

The third analysis of the GT file value was a discounted cash flow (net present value or NPV) analysis based on the value per record observed from two significant market transactions involving the acquisition of large volumes of patient medical data. The discounted cash flow analysis is an income based approach that involves forecasting cash flow estimates for a discrete forecast period (seven years in this case), discounted to present value, and then adding the estimated cash flows from the end of the projection period forward (the terminal value), also discounted to present value. The terminal value captures the residual value of all cash flows generated beyond the seven-year discrete forecast period used in the analysis. We prepared the discounted cash flow analysis using estimates of the projected number of members, number of studies/queries per member, and the associated revenues for the first seven years after qualification. We then estimated the earnings per member based on observed market transactions that included the acquisition of large volumes of patient medical data. We estimated that the earnings per member will increase by 5.0 percent each year and assumed that our company will not generate any earnings until it has at least 1.0 million members, which we anticipate occurring by year four. The estimated growth rate in earnings per member of 5.0 percent reflects anticipated annual inflationary and real growth rates of 3.0 percent and 2.0 percent, respectively. We estimated a discount rate range of 50.0 percent to 55.0 percent based on historical venture capital rates of return for startup or early development stage healthcare companies. In order to estimate the terminal value, we utilized a Gordon Growth Model to estimate the residual value beyond the explicit seven-year forecast period used. We estimated a long-term sustainable annual growth rate of 3.0 percent for the terminal value calculation based on the anticipated long-term inflation rate. Based on the foregoing, we estimated a range of the aggregate value of an average member’s total Member Data contributions and then adjusted that aggregate value by the relative value of a member’s GT file compared to the aggregate value of all of an average member’s total Member Data contributions to determine the NPV of the GT file. The discounted cash flow analysis also provides a reasonableness test with respect to the other two valuation methods in that it relates the fair value per GT file to the anticipated future value of our company via its anticipated cash flows. The discounted cash flow analysis resulted in an estimated fair value for the GT file of $3.35.

We then took the arithmetic mean of these three methods described above to arrive at an estimated fair value of $3.48 for a GT file. Finally, we determined to issue 50 shares for each GT file, resulting in an estimate of the fair value of each share at $0.069, which we rounded to $0.07 per share. We established 50 shares per GT file to yield a baseline value per share (that is, $0.07) that enables us to value more precisely other Member Data types as a fraction or multiple of the value of the GT File. For example, we determined that the value of an Electronic Survey (per 10 min average completion time) was approximately 4% of the value of a GT file, or $0.14, and allocating 50 shares to the GT file enabled us to allocate a round number of 2 shares to such Electronic Survey.

Once we determined the fair value of a single GT file on a stand-alone basis, we developed estimates of the fair value of all other types of Member Data based on the relative values of the various types of data. The valuations for all types of Member Data other than the GT file were based on a determination of the relative value of such Member Data type compared to the GT file or compared to another Member Data type that in turn was valued relative to the GT file. (An example of the latter is the DNA Tumor Exome discussed immediately below.)

For example, we assigned 300 shares to the DNA Tumor Whole Genome based on a multiple of 6 times the value of a human normal GT file. Our Manager estimated the information contained in an individual’s cancer tumor whole genome file (as defined by an Illumina Sequenced Genome) to be about 6 times more informative medically than the information in a human normal GT file, largely due to the value of the incremental information culled from evaluating the mutations that have occurred in the sequence of the cancer tumor. Accordingly, we assigned 300 shares to the whole genome.

We assigned 150 shares to the DNA Tumor Exome (exome) based on the exome’s relative value to the DNA Tumor Whole Genome (whole genome). Specifically, the whole genome (both cancer tumor and human normal) is composed of the exome plus other regions that may be informative. However, the value of these non-gene areas has not been proven and is thought to be smaller than the value of the exome. As such, we assigned 150 shares to the exome based on our estimate that the exome represents approximately 50% of the value of the whole genome.

For the following data types, we determined the relative value starting with an assumed quantity of contributed Member Data over time, and compared that assumed quantity to the value of the GT file, as follows:

 

Member Data Type		Assumed Contribution Quantity Compared to GT File		Estimated Total Value of Assumed Contribution Quantity				Estimated Value Relative to GT File
Health Records - Prescription Reports, including supporting collection information		Monthly contributions over 1 year, 4 shares per contribution		$	3.36				97	%
Electronic Survey (per 10 min takes on average completion time)		One such survey per month over 2 years, 2 shares per survey		$	3.36				97	%
Personal Fitness Monitor (per 20 days of data)		Monthly contributions over 1 year, 4 shares per contribution		$	2.52				72	%
Clinically Certified Device (per 20 days of data)		18 20-day contributions over 1 year, 10 shares per contribution		$	12.60				362	%
Nutrition Tracker (per 20 days of data)		18 20-day contributions over 1 year, 2 shares per contribution		$	2.52				72	%

Two of the Member Data types in the table above – Electronic Survey and Nutrition Tracker – involve a subjective component, meaning that the data is member-reported and is neither determined or measured by a physical device nor collected by a third party subject to controlled reporting criteria (such as Health Records).

 

•

For Electronic Survey data, we took into account in our relative valuation that the utility of self-reported survey answers in scientific discovery increases when such responses are collected over time from the same individual and when responses from multiple individuals are combined into the same database. We estimated that two years of once-per-month survey data from a single individual combined into our database would approximate the value, for discovery purposes, of a single individual’s GT file combined into our database.

 

•

For Nutrition Tracker data, we took into account the same considerations as for Electronic Survey data. The greater frequency of assumed data collection (every 20 days versus once a month) and the more narrow subject matter of the collected data led us to conclude that one year of Nutrition Tracker data had approximately the same value as the GT file at the end of one year but had lower long-term value than the GT file. We applied a discount of 28% to the assumed contribution quantity of Nutrition Tracker data relative to the GT file to reflect the lower long-term value of the Nutrition Tracker data versus the GT file.

We determined the relative valuation of all other Member Data types, none of which are subjective in the manner discussed immediately above, based on a single contribution of such Member Data type compared to a GT file contribution.

 

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Purchaser Consent

By purchasing any shares in this Offering, a purchaser will grant us certain limited rights to use his or her Member Data, which we refer to as the Purchaser Consent. See “Purchaser Consent” and “Privacy Policy” beginning on page 50. Subject to certain exceptions at the election of a member, including the affirmative election by a member to grant us a permanent right to use (donate) that Member Data in connection with the redemption of the associated shares, either by the member or by us, our right to use such Member Data will be cancelled and the associated data may be purged or suspended from our Database. See “Our Limited Liability Company Operating Agreement—Redemption Rights” beginning on page 43.

Voting Rights

Our members will not have any voting, consent or management rights relating to the management and operation of our Company, except to appoint a liquidator upon the dissolution of our Company if we do not have a Manager at that time. See “Our Limited Liability Company Operating Agreement— Meetings; Approvals” beginning on page 46.

Dividends and Distributions

We will generally effect a distribution of accumulated net earnings at least once annually, subject to the availability of funds for such purpose. The Manager may elect not to make an annual distribution if, after payment of all estimated costs to be incurred in effecting the distribution, the distribution would be less than $0.02 per share. In certain circumstances, our Manager may request an advisory vote from our members regarding whether to effect a distribution, including the aforementioned annual distribution.

Distributions may never be declared and our Manager may unilaterally change the terms of our Operating Agreement, relating to distributions, generally, but not always, with advance notice to members. See “Risks Related to our Securities—The declaration of distributions is at the discretion of our Manager” on page 13 and “Our Limited Liability Company Operating Agreement— Distributions and Dividends” beginning on page 43.

Redemption Rights

A member will be allowed to redeem his or her shares at any time, at which point he or she may elect to revoke his or her Purchaser Consent provided in connection with purchase of those shares. Upon certain other events, such as the death of a member, a fraudulent data submission or an invalid data submission, or an attempted or involuntary transfer of shares, we will either automatically redeem the affected shares, or have the option to redeem them.

Subject to certain exceptions at the election of a member, including the affirmative election by a member to donate the Member Data to us, if any shares are redeemed, either by a member or by us, our right to use the associated Member Data will be cancelled and the data may, at the member’s election, be purged or suspended from our Database. See “Our Limited Liability Company Operating Agreement—Redemption Rights” beginning on page 43.

Transfer of Shares

The shares are non-transferable, except as may be required by law.

 

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OUR LIMITED LIABILITY COMPANY OPERATING AGREEMENT

The following is a summary of certain provisions of our Amended and Restated Limited Liability Company Operating Agreement, or our Operating Agreement, which should be read in conjunction with the actual agreement, a copy of which is filed with this Offering Circular. The following description of our Operating Agreement is subject to our Manager’s effective right to modify its terms unilaterally (with limited exceptions), generally, but not always, with advance notice to members. See “—Unilateral Modification” below.

Organization and Duration

We are a Delaware limited liability company formed by our Manager on April 23, 2018.

Purpose

Generally under our Operating Agreement, our purpose is to build, operate, maintain, manage and query our Database on behalf of our community and to take any other action permitted by or in accordance with our Operating Agreement.

U.S. Federal Income Tax Status as a Corporation

We have elected to be treated as a corporation for U.S. federal income tax purposes. See “Certain U.S. Federal Income Tax Considerations” beginning on page 51.

Management

Our Manager will conduct and exercise full control over, and make all decisions with respect to, all activities, affairs and business of our Company (including all decisions relating to the authorization and issuance of additional classes or series of equity securities and the issuance of additional shares).

Our members will not have any management rights or the right to replace our Manager. See below under the heading “—Meetings; Approvals”.

We have no officers, directors or employees. Accordingly, we sometimes refer to our Manager’s officers, directors and employees as our officers, directors and employees. Our Manager and its officers, directors and key personnel may engage in other or new business interests independent from our business, including competitive businesses, and need only devote as much of their time and attention to our Company as may be reasonably required to promote our purposes.

Our Manager will be paid a management fee, as described below under the heading “Compensation to Our Manager”.

Distributions and Dividends

We will generally effect a distribution of accumulated net earnings at least once annually, subject to the availability of “Distributable Cash” for such purpose. “Distributable Cash” means, with respect to any annual period, all unrestricted cash and cash equivalents held by us, reduced by (i) cash disbursements due or coming due with respect to operations (including any fees, expenses, royalties or other amounts paid pursuant to the Management Agreement), (ii) capital improvements and replacements (as determined by the Manager), and (iii) reserves in such amounts and for such time periods as the Manager in good faith determines are reasonably necessary for the proper operation, improvement and expansion of our business and operations, including our estimated expenses and any contingent or unforeseen liabilities.

The Manager may elect not to make an annual distribution if, after payment of all estimated costs to be incurred in effecting the distribution, the distribution would be less than $0.02 per share. In certain circumstances, our Manager may request an advisory vote from our members regarding whether to effect an annual or additional distribution. Under the LLC Act, we may not make a dividend or distribution to a member if, after giving effect to the dividend, all of our liabilities exceed the fair value of our assets.

Our Manager generally may effectively modify the terms of our Operating Agreement unilaterally. Our Manager also has the effective right to modify the terms of our Management Agreement relating to the Manager’s compensation unilaterally, which would affect the availability of funds for distributions. Accordingly, the frequency of distributions and the amount of cash available for distribution may be reduced from the timing and amounts described above or entirely eliminated. See “—Unilateral Modification” below beginning on page 46.

We will comply with any applicable tax withholding obligations in connection with making distributions. See “Certain U.S. Federal Income Tax Considerations” beginning on page 51.

Transfer Shares

No member may transfer his or her shares, or any interest therein, except with the prior written consent of our Company, and our Company will not recognize a purported transfer without the Manager’s consent. Since ownership of shares is intimately linked over control over the associated Member Data, we do not currently anticipate granting consent to any share transfers.

Redemption Rights

If we redeem any shares previously issued to a member, as described below, we will cancel the shares and the prior holder of those shares will not be entitled to any further distributions on those shares, even if we had accumulated earnings at the time of redemption.

 

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Retention of Member Data/termination of Purchaser Consent upon redemption

Upon a Holder Redemption or a Company Redemption (both of which are described below), the affected member may in certain circumstances elect from two or more of these options:

 

•

To have his or her Member Data purged, which we refer to as a Data Purge. In this case, the member’s Member Data will be permanently removed, or purged, from our Database (subject to retaining an archival copy if, and for so long as, required by law), and the Purchaser Consent as it relates to such Member Data (but not any other Member Data not purged) will automatically terminate. We will immediately prevent the purged Member Data from being included in the results of any new queries run, and we will remove such Member Data from any previously delivered query results that we still control, such as those for which the researcher retains temporary, limited access to the query results on our servers (which we refer to as a “sandboxed” area of our servers). These results, like all Member Data we will deliver to researchers pursuant to our Purchaser Consent, are de-identified. The process to remove a member’s purged data from all relevant sandboxed areas may take up to 30 days. Upon removal from a sandboxed area, the researcher will be aware that data was removed and may be able to identify a specific data file identification number associated with the removed data. We will not be able to remove the inclusion of any Member Data data in any query results previously delivered that we do not control. See further detail below under “Privacy Policy—Data Protection” below.

 

•

To request a Data Archive, as described below. In this case, we will retain a copy of the members’ Member Data but will not include those Member Data in future customer search queries or in any metadata results provided to our customers. The member may then later decide to re-activate those Member Data in exchange for the re-issuance of the same number of shares which were redeemed.

 

•

To grant us a permanent, irrevocable (except as required by law) Purchaser Consent to use the data, which we refer to as a Data Donation.

Holder Redemption

A member will be allowed to redeem shares at any time, at which point the member may elect to have us effect a Data Purge, to permit us to keep a Data Archive or to make a Data Donation. A member’s decision to redeem shares may be inspired by our Manager’s authority to modify the terms of the Management Agreement or our Operating Agreement without member approval. We are required to give our members 30 days’ advance notice of certain modifications which may adversely affect any member, thereby giving members the ability to redeem their shares and Data Purge their Member Data from the Database before the effective date of the changes. See “—Unilateral Modification” below.

Company Redemption

 

1.

Attempted Transfer by Holder

Upon an attempted voluntary transfer of shares by a holder, unless prohibited by law, we may in our discretion automatically redeem the holder’s shares, in which event we will effect a Data Purge.

 

2.

Involuntary Transfer – Holder Death

If we receive notice that a holder has died, the Company will automatically redeem the holder’s shares. We will provide holders the option at any time to elect, upon their death or make a Data Donation of all or any part of the holder’s contributed Member Data. Absent such an election, the Company will effect a Data Purge.

 

3.

Involuntary transfer – Other

If we receive notice of any other type of involuntary transfer, whether by order or decree (such as in the case of the entry of a final judgment in a divorce or attachment proceeding), bankruptcy, or otherwise, we will automatically redeem the holder’s shares. We will provide holders the option at any time to elect, upon the occurrence of any of those events, to Data Archive, or make a Data Donation, of all or any part of the holder’s contributed Member Data. Absent such an election, or if the Company believes effecting the holder’s election would violate applicable law or an applicable order, the Company will effect a Data Purge.

 

4.

Unacceptable Member Data

We screen Member Data upon submission for shares in order to filter out invalid data. If we discover after acceptance that a member has submitted invalid, inaccurate, unusable or inappropriate Member Data, including if the Member Data are of a person other than the member, we will redeem the shares issued for those Member Data and effect a Data Purge of those Member Data. Generally we expect to redeem only the shares issued in exchange for the affected Member Data; however, we may elect to redeem the shares issued to the holder for any or all of the holder’s other contributed Member Data, in which case we will also effect a Data Purge of those Member Data.

 

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5.

Undesired Member Data Types

If we determine that a certain type or class of Member Data is no longer desirable for the Company to maintain in any Database, we may redeem all shares issued in connection with the contribution of that class or type of Member Data, in which case we will also effect a Data Purge of those Member Data.

Additional Redemptions

In the event of any Holder Redemption or Company Redemption, we will redeem additional shares held by the same holder as follows:

 

•

In the event some (but not all) shares issued in connection with the contribution of particular Member Data are to be redeemed, we will also redeem all other shares issued in connection with the contribution of that Member Data.

 

•

In the event the contribution of a particular type of Member Data is conditioned upon the contribution of other specified types of Member Data, and all of the shares issued for the contribution of those specified types of Member Data are being redeemed, then we will also redeem all of the shares issued for that particular type of Member Data.

Limited Liability

Holders of our shares have limited liability other than as set forth in the Delaware Limited Liability Company Act, or the LLC Act. The LLC Act provides that a member who receives a dividend or distribution and knew at the time of the dividend or distribution that it was made in violation of the LLC Act will be liable to us for the amount of the dividend or distribution for a period of three years from the date of the dividend.

Capital Structure

Our capital structure consists only of shares, which are the shares being sold in this Offering. We are authorized to issue an unlimited number of additional shares and to create additional classes or series of securities, which may have rights superior to those of the shares. Our members do not have preemptive or preferential rights to acquire additional shares or other securities issued by our Company.

Our Members

Our shareholders will be members of our Company and will have minimal rights of members of limited liability companies under the LLC Act or our Operating Agreement.

A shareholder may resign as a member at any time by redeeming all of his or her shares. See above under the heading “—Redemption Rights – Holder Redemptions”.

Dissolution and Winding Up

We will be dissolved and wound up only upon:

 

•

One hundred eighty days after the resignation or dissolution of the Manager, unless prior to that date a successor manager is appointed under our Operating Agreement and the Management Agreement;

 

•

upon the approval of the Manager; or

 

•

the entry of a decree of dissolution of the Company.

Exculpation and Indemnification

To the maximum extent permitted by law, neither our Manager nor its affiliates, officers, directors, employees, agents, lawyers, accountants or representatives will be liable to our Company or any member for any act or omission performed or omitted by our Manager.

We must indemnify our Manager and its officers, director, partners, members, employees and affiliates, and any other person who serves at the request of the Manager on behalf of the Company as an officer, advisor, director, member or employee of any other company, to the fullest extent permitted by law, against any loss, expense, damage, claim, liability, obligation, judgment or injury suffered or sustained by reason of any act, omission or alleged act or omission arising out of their respective activities on behalf of our Company or in furtherance of its interests.

 

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Unilateral Modification

With limited exceptions described below, our Manager has right to modify the terms and provisions of the Operating Agreement, including the distribution provisions, without the consent of any of our members. If the Operating Agreement does not specifically authorize the Manager to make the modification to the Operating Agreement, and the modification may reasonably have an adverse effect on the rights or obligations of any member, we are obligated to provide our members not less than 30 days’ advance notice of the modification, thereby giving members the opportunity to redeem their shares and withdraw their Purchaser Consent before the effective date of the changes. Our Manager may elect unilaterally to modify the Operating Agreement to eliminate the obligation to provide advance notice for those types of modifications, but only upon providing our members not less than 30 days’ advance notice of this modification.

The Operating Agreement specifically authorizes the Manager to make the following modifications to the Operating Agreement:

 

•

authorize and create new classes of equity securities, including limited liability company interests, options and warrants;

 

•

admit new members; and

 

•

update the schedule of members to reflect the addition, substitution, resignation or removal of members.

If our Manager reasonably believes that a modification will not have an adverse effect on the rights or obligations of any member, we are not required to give advance notice of the modification to members. A member will always be allowed to redeem his or her shares at any time, at which point he or she may elect to withdraw from our Database his or her Member Data provided in connection with purchase of those shares.

Our Manager does not have the right to modify or waive the following provisions of our Operating Agreement in a manner adverse to any then current member without the consent of each member affected:

 

•

Provisions limiting the liability of our members for debts, obligations and liabilities of our Company

 

•

The basic right of a member to withdraw his or her Member Data, or any portion of his or her Member Data (subject to the Company’s right to purge additional Member Data of that member, and redeem the shares issued in connection with the contribution of that additional Member Data) from our Database by redeeming the shares issued in connection with the contribution of that Member Data, subject only to reasonable notice provisions.

Meetings; Approvals

Our members will not have any voting, consent or management rights relating to the management and operation of our Company, except to appoint a liquidator upon the dissolution of our Company if we do not have a Manager at that time.

Under the terms of our Operating Agreement, we are not required to hold meetings of our members except if necessary to appoint a liquidator or as required by the LLC Act. In those cases, or if our Manager elects to call a meeting of our members, our Company may hold a member meeting by notice specifying the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, as determined by the Manager. All notices of meetings of members shall be sent or otherwise given in accordance with our Operating Agreement not less than 10 nor more than 60 calendar days before the date of the meeting. If indicated in the meeting notice, members entitled to vote on matters at a meeting may participate by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other.

Any previously scheduled meeting of the members may be postponed, and any meeting of the members may be canceled, by the Manager upon notice to the members given prior to the date previously scheduled for such meeting of members. In the case of a postponement, the new date must be not less than 10 nor more than 60 calendar days after the date of the notice.

Members may vote either in person or by proxy at meetings. The holders of a ten percent of the outstanding shares represented in person or by proxy will constitute a quorum unless any action by the members requires approval by holders of a greater percentage of the shares, in which case the quorum will be the greater percentage.

All matters submitted to the members for approval will be determined by a majority of the votes cast by holders of the shares entitled to vote, except where a greater percentage is required by applicable laws or by our Operating Agreement.

Any notice, demand, request, report or proxy material required or permitted to be given or made by us to members under our Operating Agreement will be delivered to the record holder who is entitled to vote at such meeting.

Any action required or permitted to be taken by our members may be taken by any consent in writing by members holding at least the number of outstanding shares as would otherwise be necessary to take any such action at a meeting at which all shares were present.

In the event our Manager elects to request an advisory vote from our members, the vote will not be binding on our Company. An advisory vote need not be by meeting or written consent, need not have a quorum, and may be conducted entirely online through our Company’s website.

 

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Fiduciary Duties

Our Manager is not accountable to our members as a fiduciary. As permitted by the LLC Act, we have eliminated the fiduciary duties owed by the Manager to our members, except for the contractual covenant of good faith and fair dealing.

Waiver of Liability

Under our Operating Agreement, each of our Manager and its officers, directors, employees, agents, attorneys, accountants and representatives are not liable to us or our members for acts they perform in good faith, or for any non-action or failure to act, except for acts of willful misconduct or knowing violation of law as determined by a final judgment, order or decree of an arbitrator or a court of competent jurisdiction and except for certain claims under United States securities laws and the rules and regulations thereunder.

Agreement to be Bound by Operating Agreement; Power of Attorney

By purchasing one of our shares, you will be admitted as a member of our Company and will be deemed to have agreed to be bound by the terms of our Operating Agreement. Under that agreement, each member and each person who acquires a share from a member grants to our Manager a power of attorney, among other things, to execute and file documents required for our qualification, continuance or dissolution. The power of attorney also grants our Manager the authority to make authorized amendments to, and to make consents and waivers under and in accordance with, our Operating Agreement, and to dissolve our Company. Such power of attorney shall be irrevocable and deemed coupled with an interest and shall survive a member’s death, incompetency, disability, dissolution, bankruptcy or termination.

Books and Records

We are required to keep appropriate books of our business at our principal offices. The books are maintained for both tax and financial reporting purposes. Our fiscal year-end is December 31.

We will furnish or make available to our members an annual report containing audited financial statements and a report on those financial statements by our independent public accountants. We intend to furnish or make available to record holders of shares a semi-annual report (or quarterly reports, if required) containing financial statements and a report on those financial statements by our independent public accountants. We will be deemed to have made a report available if we have either filed it with the SEC and the report is publicly available or made the report available on any publicly available website we maintain.

Right to Inspect Books and Records

In addition to the reports referred to above in “—Books and Records,” our Operating Agreement provides that a member can, for a purpose reasonably related to his interest as a member, upon reasonable demand and at his own expense, have furnished to him:

 

•

a copy of our Operating Agreement and Certificate of Formation, and all amendments thereto; and

 

•

copies of the financial statements referred to above under “—Books and Records.”

Our Manager may, and intends to, keep confidential from our members information that it believes to be personal information or in the nature of trade secrets or other information, the disclosure of which our Manager believes in good faith is not in our best interests, information that could damage our Company or the Manager or information that we or the Manager are required by law, by agreements with a third party to keep confidential (other than agreements with affiliates that are designed to circumvent the above obligations). These provisions are deemed to replace the default provisions under Section 18-305 of the LLC Act.

No member has the right to access or inspect any other member’s Member Data.

No Property or Partition Rights

No member may partition any of our property, own or use any of our particular or individual assets, or have the right to receive property other than cash in return for his or her contributions, loans or advances or upon dissolution.

Information Requests From Members

In order for our Company to comply with applicable laws, or to comply with our obligations to third parties who desire to query or access our Database, each member agrees to provide our Manager additional documentation verifying, among other things, his or her identity. Requests for documentation may be made at any time during which our Company holds Member Data of a member or former member. Our Manager may provide that information, or report the failure to comply with requests, to governmental authorities without notifying the affected member.

 

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Confidentiality

Unless our Manager gives its prior written consent, each member agrees to maintain the confidentiality of any non-public information and documents relating to our Company, our Manager, or our Database, subject to certain exceptions. Our Company will maintain Member Data in accordance with our privacy policy applicable to Member Data, as described under “Privacy Policy” beginning on page 50.

Arbitration; Governing Law; Class Actions

All claims or disputes arising under the Operating Agreement, Management Agreement or any related agreement, except for the excluded claims described in this paragraph, must be resolved by final and binding arbitration in San Diego, California before the American Arbitration Association. While corporations may not be able to enforce arbitration provisions in their bylaws against shareholders who did not specifically agree to them, operating agreement binding arbitration provisions have been upheld under Delaware law since members agree to be bound by their terms. None of the claims or disputes subject to mandatory arbitration may be brought as a class action, and the prevailing party in these claims and disputes will be entitled to recover fees and costs (including attorneys’ fees) from the other parties to the arbitration. The following types of claims are excluded from mandatory arbitration (and hence the class action waiver and the fee shifting provisions): (a) compulsory or permissive cross-claims between or among the parties to those agreements that arise in a legal action brought by or against a non-party to the agreement, and (b) claims or counterclaims under the federal securities laws or the rules and regulations thereunder.

All proceedings against us or our Manager, whether or not excluded claims, including claims under the federal securities laws or the rules and regulations thereunder, must be brought in San Diego, California. By agreeing to the exclusive forum in San Diego, California, investors will not be deemed to have waived our or our Manager’s compliance with any federal securities laws or the rules and regulations thereunder.

The Operating Agreement is governed by Delaware law.

To the extent that the transfer of any share is required by law, the provisions in this section would apply to transferees.

 

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OUR MANAGEMENT AGREEMENT

LunaPBC, Inc. serves as our Manager under the Management Agreement between our Manager and our Company. The following description of the Management Agreement below is subject to our Manager’s effective right to modify its terms unilaterally, generally, but not always, with advance notice to the members. See “—Amendment, Modification, or Waiver” below.

Services

Under the terms of the Management Agreement, the Manager will, among other things: (i) create and maintain a community-owned genomic and phenotypic Database that is designed to solve humankind’s most important medical challenges, consistent the Manager’s public benefit, (ii) make the Database dynamic, secure, and longitudinal, (iii) promote a supporting ecosystem for the Database, and (iv) generate revenue from which to make distributions to Members. The Manager will have the sole discretion as to the emphasis to be placed upon each of these goals.

License

Under license terms forming part of the Management Agreement, our Manager grants us a non-exclusive, royalty-free, fully paid up, non-sublicensable, non-transferable, perpetual, worldwide right and license to use all of the intellectual property relating to the Database that the Manager owns. That license does not include intellectual property rights the Manager acquires from collaborations with third parties that obtain access to the Database.

While the foregoing describes the current terms of our license, our Manager may effectively modify the terms of our Management Agreement, including the license terms, unilaterally. See “—Amendment, Modification, or Waiver” below beginning on page 49.

Effectiveness and Termination

The Management Agreement became effective on April 23, 2018. Unless earlier terminated as described below, the Management Agreement will remain in effect perpetually.

The Management Agreement may be only be terminated by the Manager upon thirty (30) days prior notice. The Management Agreement may not be terminated by the Company.

Amendment, Modification, or Waiver

Our Manager may effectively modify any terms and conditions of the Management Agreement unilaterally, including our license to use the Database IP and the compensation paid to our Manager. While certain amendments, including modifying the trigger events which change the terms of the intellectual property license in favor of our Company, require our consent, our consent is also provided by our Manager. We are required to give our members 30 days’ advance notice of any modification which may reasonably have an adverse effect on the rights or obligations of our Company, thereby providing members the opportunity to redeem their shares and withdraw their Member Data from our Database before the effective date of the modification. Our Manager may elect unilaterally to modify the Management Agreement to eliminate the obligation to provide advance notice of those types of modifications, but only upon providing our members not less than 30 days’ advance notice of this modification.

If our Manager reasonably believes that a modification will not have an adverse effect on the rights or obligations of our Company, we are not required to give advance notice of the modification to members. A member will always be allowed to redeem his or her shares at any time, at which point he or she may elect to withdraw from our Database his or her Member Data provided in connection with purchase of those shares.

Management Fee

We are obligated to pay the Management Fee to our Manager. See “Compensation of our Manager” beginning on page 33.

Indemnification

We must indemnify our Manager and its officers, director, partners, members, employees and affiliates, and any other person who serves at the request of the Manager on behalf of the Company as an officer, advisor, director, member or employee of any other company, to the fullest extent permitted by law, against any loss, expense, damage, claim, liability, obligation, judgment or injury suffered or sustained by reason of any act, omission or alleged act or omission arising out of their respective activities on behalf of our Company or in furtherance of its interests.

Waiver of Liability

Under our Management Agreement, each of our Manager and its officers, directors, employees, agents, attorneys, accountants and representatives are not liable to us or our members for acts they perform in good faith, or for any non-action or failure to act, except for acts of willful misconduct or knowing violation of law as determined by a final judgment, order or decree of an arbitrator or a court of competent jurisdiction. To the extent that any of these provisions would apply to any claims under the federal securities laws or the rules and regulations thereunder, by our company agreeing to these provisions, investors will not be deemed to have waived our Manager’s or our company’s compliance with any federal securities laws or the rules and regulations thereunder.

Arbitration; Governing Law; Class Actions

To the maximum extent permitted by law, all claims or disputes arising under the Management Agreement will be resolved by final and binding arbitration in San Diego, California before the American Arbitration Association and no member will have the right to bring any claim against our Company or our Manager as a class action. Additionally, the prevailing party in any arbitration or lawsuit will be entitled to recover reasonable attorneys’ fees. Given that our Manager controls us, and that we have no officers or directors, it is unlikely that our Manager would cause our company to initiate claims against our Manager to enforce the terms of the Management Agreement. With the exception of exercising the right to redeem their shares and withdraw their Purchaser Consent, members will have no effective recourse for any breaches by our Manager of the Management Agreement.

Organization of the Manager

We are managed by our Manager, LunaPBC, Inc., a Delaware Public Benefit Corporation, with principal executive offices located at 415 South Cedros Avenue, Suite 260, Solana Beach, California, 92075.

 

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PURCHASER CONSENT

By purchasing a share in this Offering, you will grant us a revocable rights to use your Member Data in accordance with your Purchaser Consent. By contributing your Member Data to the Database, you also agree to be bound by our Privacy Policy. In general, you are agreeing that, for as long as you do not withdraw access to your Member Data by redeeming your applicable shares, your Member Data can be used in population-level studies, using queries which we believe prevent any specific individual from being reasonably identified.

We may also contact you from time-to-time regarding opportunities for you to participate in targeted research and notify you of the terms of participation, including any compensation offered. Your participation in targeted research is completely voluntary.

We may also use your Member Data to improve our operational services, and as otherwise required by law. Further detail is provided below under “Privacy Policy.”

A member will be allowed to redeem his or her shares at any time, at which point he or she may elect to have his or her Member Data provided in connection with purchase of those shares purged, which will have the effect of revoking his or her Purchaser Consent as it relates to such Member Data (but not any other Member Data not purged). See “Our Limited Liability Company Operating Agreement—Redemption Rights” above.

PRIVACY POLICY

Our Philosophy

The privacy and security of Member Data is of the utmost importance. We are a community comprised of members united by the principles that (1) aggregated Member Data has the potential to radically improve healthcare outcomes and (2) those who share their Member Data for discovery studies own and control their Member Data and should be compensated for the use of their Member Data. We understand and respect the sensitive nature of the information that our members provide to us, and we strive to be transparent in our collection, use and disclosure of this information and will always ask for your explicit consent to share such sensitive information with third-parties. We are committed to providing a secure, private, and safe environment.

Use of Member Data

We will only use your Member Data in the following ways:

 

•

Population-Level Research: We will make available to third-parties for their research use, your de-identified Member Data in an aggregated, indexed, or otherwise analyzed fashion in ways that are designed to avoid the potential for learning the identity of the person or persons who contributed a particular item or set of Member Data. See below under the heading “Privacy Policy—Data Protection.” This population-level research may have various purposes, including the advancement of genomic science, identifying links between human genomes and disease, and other commercial applications, such as determining opportunities for targeted research that would seek your voluntary participation (e.g. how many members share a particular genotype and phenotype).

 

•

Facilitation of Voluntary Participation in Targeted Research: We may use your individual Member Data to determine whether you may be eligible to participate in targeted research and to then seek your voluntary participation in the targeted research. For example, if a third-party pharmaceutical company is interested in doing research on individuals who may have a particular genotypic, genomic, or phenotypic profile, we may query the Database to determine the subset of members (based on their de-identified Database record number) that have the relevant profile for participation in the study, and then initiate an anonymous invitation to relevant members to request their participation in the study. While we will not receive any compensation related to targeted research, both the Manager and members who elect to participate may receive compensation from the research sponsors.

 

•

Advertising: We may display advertisements to you when using the Database. These advertisements may or may not be targeted for you based on information that we collect. If advertisements are targeted for you based on information that we collect, they will be displayed in such a way that neither we nor the advertiser will know which particular user or users are receiving the advertisements, unless a user identifies themselves by answering or otherwise responding to the advertisement.

 

•

To Improve Our Services: We may use the information collected to improve our operational services, for example, improving the design and structure of the Database. However, we will only use Member Data for this purpose when such information is de-identified.

 

•

As Required by Law: We may use or disclose any information collected as required by law, for example, in responding to a court-issued subpoena. However, we believe the steps we take to protect your information described, such as our data segregation architecture, which does not allow for re-identification of Member Data without the consent of the member obtained by e-mail initiated and kept anonymous through encrypted software, will provide substantial protection to members in these situations. Where allowed by law and where reasonably possible, we will anonymously notify you in advance of any such proposed use or disclosure of your Member Data.

Data Protection

We will take a number of steps to make sure that your information can be accessed and used only in accordance with our Privacy Policy. We will use technical, physical, and administrative controls to protect member personal information and Member Data from unauthorized access or disclosure and to ensure the appropriate use of this information.

All Member Data is anonymized (or de-identified) so that the information does not identify you based on individual pieces of information or combinations of information. Your personal information is removed, such that you cannot be reasonably re-identified as an individual. Each type of Member Data is uniquely tagged with a sequence of characters that is determined by a one-way hash function, designed in such a way that makes it difficult to reverse-engineer the given value. This disaggregated data is stored across separate and private, cloud storage sites, which we believe increases the barriers for anyone trying to access any member’s complete data profile. While we have implemented precautions designed to avoid the potential for researchers or other third parties to learn the identity of any member who contributed a particular item or set of Member Data, we cannot provide absolute assurance that a researcher or other third party may not be able to circumvent our protections and learn or verify the identity of a specific member. See “Risk Factors—Risks Related to the Company—Privacy concerns relating to our Database could damage our reputation...” above.

We maintain a high level of data protection via safeguards such as data backup, audit controls, access controls, and data encryption. We also require a two-step verification for members signing into their accounts.

Children’s Privacy

Our Database is not designed for, intended to attract, or directed toward children under the age of 13, and we do not accept Member Data from children under the age of 13.

 

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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS

The following discussion is a summary of the material U.S. federal income tax considerations relating to the purchase, ownership and disposition of the shares, but does not purport to be a complete analysis of all potential tax effects and does not address the effects of any state, local, alternative minimum, estate, gift or non-U.S. tax laws. This discussion is based upon the U.S. Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations issued thereunder, and judicial and administrative interpretations thereof, each as in effect on the date hereof, and all of which are subject to change, possibly with retroactive effect and to differing interpretations, all of which could result in U.S. federal income tax considerations different from those described below. No rulings from the Internal Revenue Service (“IRS”) have been or are expected to be sought with respect to the matters discussed below. The discussion below is not binding on the IRS or the courts. Accordingly, there can be no assurance that the IRS will not take a different position concerning the tax consequences of the purchase, ownership or disposition of the shares or that any such position would not be sustained.

This discussion does not address all of the U.S. federal income tax considerations that might be relevant to a beneficial owner in light of such beneficial owner’s particular circumstances. This discussion is limited to holders who hold the shares as capital assets within the meaning of Section 1221 of the Code.

For purposes of this discussion, a “U.S. holder” is a beneficial owner of shares that is, for U.S. federal income tax purposes:

 

•

an individual who is a citizen or resident of the United States;

 

•

a corporation (or any other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

 

•

an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

 

•

a trust if (1) it is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

For purposes of this discussion, a “non-U.S. holder” is a beneficial owner of shares that is (i) a foreign corporation, (ii) a nonresident alien individual, or (iii) a foreign estate or trust that in each case is not subject to U.S. federal income tax on a net-income basis on income or gain. Special rules may apply to certain non-U.S. shareholders such as “controlled foreign corporations,” or, in certain circumstances, individuals who are U.S. expatriates. Such entities should consult their own tax advisors to determine the U.S. federal, state, local and other tax consequences that may be relevant to them.

We intend, and this summary assumes, that all shares issued pursuant to the offering either will be exempt from or will comply with the requirements of Section 409A of the Code regarding nonqualified deferred compensation such that its income inclusion and tax penalty provisions will not apply to the shareholders. The offering and any issuance of shares made under the offering will be administered consistently with this intent.

Prospective investors considering the purchase of shares should consult their own tax advisors concerning the particular U.S. federal income tax consequences to them of the ownership of the shares in light of their specific situation, as well as the consequences to them arising under the laws of any other taxing jurisdiction.

Classification of the Company

The Company has elected to be treated as a corporation for U.S. federal and state income tax purposes. The following discussion presumes that the Company is taxable as a corporation.

U.S. Shareholders

The following discussion is a summary of certain U.S. federal income tax considerations applicable to a U.S. shareholder of shares.

Issuance of Shares

The receipt of shares by a shareholder in exchange for Member Data should result in the recognition of ordinary income by the shareholder in an amount equal to the excess of the fair market value of such shares on the date of purchase over the purchase price paid for such shares (i.e., zero). The holding period for such shares will commence just after the date the shares are purchased. Any income recognized at such time by a shareholder should not be subject to income tax withholding by the Company under the assumption that the shareholder is not an employee of the Company.

The shareholder’s basis in the shares will be equal to the purchase price (i.e., zero), increased by the amount of ordinary income recognized.

 

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The Company believes that the issuance of shares either meets the requirements of Code Section 409A, or qualifies for an applicable exemption, and the offering is expected to avoid its adverse tax consequences.

Distributions to U.S. Shareholders

Distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions made on our shares that are treated as dividends generally will be included in a U.S. shareholder’s income as ordinary dividend income. With respect to noncorporate taxpayers, including individuals, such dividends are generally subject to reduced tax rates of U.S. federal income tax provided certain holding period requirements are satisfied.

Amounts not treated as dividends for U.S. federal income tax purposes will constitute a non-taxable return of capital and first be applied against and reduce a U.S. shareholder’s adjusted tax basis in its shares, but not below zero. Any excess will be treated as capital gain and will be treated as described below.

Sale or Taxable Disposition of Shares by U.S. Shareholders

Upon the sale, exchange or other taxable disposition of our shares, a U.S. shareholder generally will recognize capital gain or loss equal to the difference between (i) the amount of cash and the fair market value of any property received upon the sale or exchange and (ii) the U.S. shareholder’s adjusted tax basis in the shares. Such capital gain or loss will be long-term capital gain or loss if the U.S. holder’s holding period in the shares is more than one year at the time of the sale, exchange or other taxable disposition. Long-term capital gains recognized by certain noncorporate U.S. shareholders, including individuals, will generally be subject to reduced rates of U.S. federal income tax. The deductibility of capital losses is subject to limitations.

Medicare Contributions Tax

Certain U.S. shareholders who are individuals, estates or certain trusts must pay a 3.8% tax on the U.S. person’s “net investment income.” Net investment income generally includes, among other things, dividend income and net gains from the disposition of our shares. A U.S. holder that is an individual, estate or trust should consult its tax advisor regarding the applicability of the Medicare tax to its income and gains in respect of its investment in our shares.

Certain U.S. Federal Income Tax Considerations Applicable to Non-U.S. shareholders

Distributions to Non-U.S. Shareholders

Distributions of cash or property, if any, paid to a non-U.S. shareholder of our shares will constitute “dividends” for U.S. federal income tax purposes to the extent paid out of our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes. If the amount of a distribution exceeds both our current and accumulated earnings and profits, such excess will first constitute a nontaxable return of capital, which will reduce the shareholder’s tax basis in our shares, but not below zero. Any excess will be treated as gain from the sale of our shares and will be treated as described below.

Subject to the following paragraphs, dividends on our shares generally will be subject to U.S. federal withholding tax at a 30% gross rate, subject to any exemption or lower rate as may be specified by an applicable income tax treaty. We may withhold up to 30% of either (i) the gross amount of the entire distribution, even if the amount of the distribution is greater than the amount constituting a dividend, as described above or (ii) the amount of the distribution we project will be a dividend, based upon a reasonable estimate of both our current and our accumulated earnings and profits for the taxable year in which the distribution is made. If tax is withheld on the amount of a distribution in excess of the amount constituting a dividend, then a non-U.S. shareholder may obtain a refund of that excess amount by timely filing a claim for refund with the IRS.

To claim the benefit of a reduced rate of or an exemption from U.S. federal withholding tax under an applicable income tax treaty, a non-U.S. shareholder will be required (i) to satisfy certain certification requirements, which may be made by providing us or our agent with a properly executed and completed IRS Form W-8BEN or W-8BEN-E (or other applicable form) certifying, under penalty of perjury, that the holder qualifies for treaty benefits and is not a U.S. person or (ii) if our shares are held through certain non-U.S. intermediaries, to satisfy the relevant certification requirements of the applicable Treasury Regulations. Special certification and other requirements apply to certain non-U.S. shareholders that are pass-through entities. Non-U.S. shareholders that do not timely provide us or our paying agent with the required certification, but that qualify for a reduced treaty rate, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. Non-U.S. shareholders should consult their tax advisors regarding their entitlement to benefits under an applicable income tax treaty.

 

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Dividends that are effectively connected with the conduct of a trade or business by the non-U.S. shareholder within the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment, or a fixed base in the case of an individual non-U.S. holder, that is maintained by the non-U.S. shareholder in the United States), or “effectively connected dividends”, are not subject to the U.S. federal withholding tax, provided that the non-U.S. shareholder certifies, under penalty of perjury, that the dividends paid to such shareholder are effectively connected dividends on a properly executed and completed IRS Form W-8ECI (or other applicable form). Instead, any such dividends will be subject to U.S. federal income tax on a net income basis in a manner similar to that which would apply if the non-U.S. shareholder were a U.S. shareholder.

Corporate non-U.S. shareholders who receive effectively connected dividends may also be subject to an additional “branch profits tax” at a gross rate of 30% on their earnings and profits for the taxable year that are effectively connected with the shareholder’s conduct of a trade or business within the United States, subject to any exemption or reduction provided by an applicable income tax treaty.

Sale or Taxable Disposition of Shares by Non-U.S. Shareholders

Any gain realized on the sale, exchange or other taxable disposition of our shares generally will not be subject to U.S. federal income tax unless:

 

•

the gain is effectively connected with the conduct of a trade or business by the non-U.S. shareholder within the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment, or fixed base in the case of an individual non-U.S. shareholder, that is maintained by the non-U.S. shareholder in the United States); or

 

•

we are or have been a “United States real property holding corporation” for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of such disposition and the non-U.S. holder’s holding period in our shares.

A non-U.S. shareholder described in the first bullet point above generally will be subject to U.S. federal income tax on the net gain derived from the sale or other taxable disposition under applicable U.S. federal income tax rates as if the shareholder were a U.S. shareholder. If the non-U.S. shareholder is a corporation, then the gain may also, under certain circumstances, be subject to the “branch profits” tax discussed above.

With respect to the second bullet point, although there can be no assurance, we believe we are not, have not been and will not become a “United States real property holding corporation” for U.S. federal income tax purposes. In the event that we are or become a United States real property holding corporation at any time during the applicable period described in the second bullet point above, any gain recognized on a sale or other taxable disposition of our shares may be subject to U.S. federal income tax, including any applicable withholding tax.

Information Reporting and Backup Withholding

Information returns will be filed with the IRS in connection with payments of dividends on our shares and the proceeds from a sale or other taxable disposition of our shares. Copies of information returns may be made available to the tax authorities of the country in which a non-U.S. shareholder resides or is incorporated under the provisions of a specific treaty or agreement.

You may be subject to backup withholding with respect to dividends paid on our shares or with respect to proceeds received from a disposition of the shares. Certain shareholders (including, among others, corporations and certain tax-exempt organizations) are generally not subject to backup withholding. You will be subject to backup withholding if you are not otherwise exempt and you:

 

•

fail to furnish your taxpayer identification number, or TIN, which, for an individual, is ordinarily his or her social security number;

 

•

furnish an incorrect TIN;

 

•

are notified by the IRS that you have failed to properly report payments of interest or dividends; or

 

•

fail to certify, under penalties of perjury, that you have furnished a correct TIN and that the IRS has not notified you that you are subject to backup withholding.

Backup withholding is not an additional tax, but rather is a method of tax collection. You generally will be entitled to credit any amounts withheld under the backup withholding rules against your U.S. federal income tax liability provided that the required information is furnished to the IRS in a timely manner.

 

-53-

A non-U.S. shareholder may have to comply with certification procedures to establish that it is not a U.S. person in order to avoid information reporting and backup withholding tax requirements. The certification procedures required to claim a reduced rate of withholding under an income tax treaty will satisfy the certification requirements necessary to avoid backup withholding as well. The amount of any backup withholding from a payment to a non-U.S. shareholder may be allowed as a credit against such shareholder’s U.S. federal income tax liability and may entitle such non-U.S. shareholder to a refund, provided that the required information is timely furnished to the IRS.

Foreign Account Compliance Act Considerations

Under the Foreign Account Tax Compliance Act provisions of the Code and related Treasury guidance, or FATCA, a withholding tax of 30% will be imposed in certain circumstances on payments of (i) dividends on our shares and (ii) gross proceeds from the sale or other disposition of our shares after December 31, 2018. In the case of payments made to a “foreign financial institution” (as defined for FATCA purposes), as a beneficial owner or as an intermediary, the tax generally will be imposed, subject to certain exceptions, unless such institution (i) enters into (or is otherwise subject to) and complies with a reporting agreement with the U.S. government, or FATCA Agreement or (ii) complies with applicable foreign law enacted in connection with an intergovernmental agreement between the United States and a foreign jurisdiction in either case to, among other things, collect and provide to the U.S. or other relevant tax authorities certain information regarding U.S. account holders of such institution. In the case of payments made to a foreign entity that is not a financial institution, the tax generally will be imposed, subject to certain exceptions, unless such entity provides the withholding agent with a certification that it does not have any “substantial” U.S. owners (generally, any specified U.S. person that directly or indirectly owns more than a 10% of such entity) or that identifies its “substantial” U.S. owners. If our shares are held through a foreign financial institution that enters into (or is otherwise subject to) a FATCA Agreement, such foreign financial institution (or, in certain cases, a person paying amounts to such foreign financial institution) may be required, subject to applicable exceptions, to withhold such tax on payments of dividends and gross proceeds described above made to (i) a person (including an individual) that fails to comply with certain information requests or (ii) a foreign financial institution that has not complied with its obligations under FATCA. Each non-U.S. holder should consult its own tax advisor regarding the application of FATCA to an investment in our shares.

 

-54-

LEGAL MATTERS

The validity of the issuance of our shares offered by this Offering Circular will be passed upon for us by Sheppard, Mullin, Richter & Hampton LLP, San Diego, California.

EXPERTS

The balance sheet of LunaDNA, LLC, as of April 23, 2018 (inception) and related notes included in this preliminary Offering Circular have been audited by Mayer Hoffman McCann P.C., independent certified public accountants, as stated in their report appearing herein, which report expresses an unqualified opinion on the financial statements (and includes an explanatory paragraph about the existence of substantial doubt concerning the Company’s ability to continue as a going concern). Such financial statements are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

 

-55-

INDEX TO FINANCIAL STATEMENTS OF LUNADNA, LLC

 

Independent Auditor’s Report		F-2
Balance Sheet		F-3
Notes to Financial Statements		F-4 – F-6

 

F-1

Independent Auditor’s Report

To the Member

LunaDNA, LLC

Solana Beach, CA

Report on the Financial Statement

We have audited the accompanying balance sheet of LunaDNA, LLC, a Delaware limited liability company, as of April 23, 2018 (Inception), and the related notes.

Management’s Responsibility for the Financial Statement

Management is responsible for the preparation and fair presentation of this financial statement in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of the financial statement that is free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statement. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to LunaDNA, LLC’s preparation and fair presentation of the financial statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of LunaDNA, LLC’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statement.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the balance sheet referred to above presents fairly, in all material respects, the financial position of LunaDNA, LLC as of April 23, 2018 (Inception) in accordance with accounting principles generally accepted in the United States of America.

Matter of Emphasis

The accompanying financial statement has been prepared assuming that LunaDNA, LLC will continue as a going concern. As discussed in Note 2 to the financial statement, LunaDNA, LLC’s ability to commence operations will depend on the Manager’s ability to raise funds, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to this matter are also described in Note 2. The balance sheet does not include any adjustments that might result from the outcome of this uncertainty.

/s/ Mayer Hoffman McCann P.C.

San Diego, California

June 8, 2018

 

F-2

LunaDNA, LLC

Balance Sheet

As of April 23, 2018 (inception)

 

ASSETS			—
TOTAL ASSETS			—
LIABILITIES AND MEMBERS’ CAPITAL
Total Liabilities			—
Total Members’ Capital			—
TOTAL LIABILITIES & EQUITY			—

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

 

F-3

LUNADNA, LLC

NOTES TO THE FINANCIAL STATEMENTS

As of April 23, 2018 (inception)

1. Organization and Purpose

LunaDNA, LLC (the “Company”), a Delaware limited liability company, was formed on April 23, 2018. The Company was formed to build, operate, maintain, query and otherwise deal with databases comprised of member data that is licensed to the Company (collectively, the “Database”). The Company has not commenced principal operations nor generated revenue as of June 7, 2018.

The Company has entered into a management services agreement (the “Management Agreement”) with LunaPBC, Inc. (the “Manager”), a Delaware corporation, to provide business, operational and financial management services to the Company. The rights, duties and powers of the Manager are governed by the Management Agreement and Company operating agreement (“Operating Agreement”). The Manager, acting alone, has the power and authority to act for and bind the Company. The Management Agreement may not be terminated by the Company and can be terminated by the Manager with thirty days’ written notice.

2. Going Concern

The accompanying balance sheet has been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company is a business that has not commenced planned principal operations and has not generated any revenues as of June 7, 2018.

The Company has no plans to raise capital to fund its operations, and it is therefore dependent on the Manager for all Organizational Expenses (defined in Note 6 – Expenses) and presently dependent on the Manager for all Operational Expenses (defined in Note 6 – Expenses). The Company is also dependent on the Manager for all costs associated with development, improvement and maintenance of the Database (“Development Expenses”). The Manager is not entitled to reimbursement for Organizational Expenses. The Manager is not entitled to reimbursement for Operational Expenses paid by the Manager that are or would have been, but for the provisions of the Management Agreement denying such reimbursement, accrued by the Company on or before March 31, 2020 (see Note 6 – Expenses). The Manager will be entitled to reimbursement for Operational Expenses accrued by the Company after March 31, 2020. The Manager is not entitled to reimbursement for Development Expenses. The Manager has not committed to the Company to fund any particular amounts for any of these purposes. The Company’s dependence on the Manager for funding of these expenses raises substantial doubt about the Company’s ability to continue as a going concern.

The Manager’s ability to fund all of the Organizational Expenses and to fund Operational Expenses and Development Expenses through the time when the Company generates significant revenues from operations is dependent on the Manager’s existing cash resources and the ability of the Manager to obtain additional capital financing from investors sufficient to meet the needs of the Company and the Manager’s other operations. The Manager presently intends to seek a combination of equity capital and convertible debt capital from outside investors, but it presently has no financing commitments. The Manager believes that it will be able to raise capital that, combined with its existing cash resources, will be sufficient to fund all of the Organizational Expenses and to fund Operational Expenses and Development Expenses through the time when the Company generates significant revenues, at which time revenues earned by the Company may be used to pay both Operational Expenses and the management fee to the Manager (which management fee may then fund further Development Expenses). However, there can be no assurance that the Manager will be successful in its fundraising efforts. If the Manager is not successful in its intended fundraising efforts, the Company will be required to delay various planned expenditures for development of the Database, which delays could adversely delay generation of revenues and potentially jeopardize the Company’s ability to continue as a going concern.

3. Summary of Significant Accounting Policies

The following is a summary of significant accounting policies applied by the Company in preparation of its financial statements. The policies are in accordance with the accounting principles generally accepted in the United States of America (“GAAP”) and are presented in U.S. dollars.

Use of Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Income Taxes – The Company has elected to be taxed as a corporation and uses the liability method of accounting for income taxes as set forth in ASC 740, Income Taxes. Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. A valuation allowance is recorded when it is unlikely that the deferred tax assets will not be realized. The Company assesses its income tax positions and record tax benefits for all years subject to examination based upon our evaluation of the facts, circumstances and information available at the reporting date. In accordance with ASC 740-10, for those tax positions where there is a greater than 50% likelihood that a tax benefit will be sustained, the Company’s policy is to record the largest amount of tax benefit that is more likely than not to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where there is less than 50% likelihood that a tax benefit will be sustained, no tax benefit will be recognized in the financial statements. The Company has evaluated its income tax positions and has determined that it does not have any uncertain tax positions. The Company will recognize interest and penalties related to any uncertain tax positions through its income tax expense. The Company may in the future become subject to federal, state, and local income taxation though it has not been since its inception. The Company is not presently subject to any income tax audit in any taxing jurisdiction.

 

F-4

Recent Accounting Pronouncements – Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying balance sheet. As new accounting pronouncements are issued, the Company will adopt those that are applicable under the circumstances.

4. Company Operating Agreement

The Manager is the sole initial member. The Manager will automatically resign as, and cease to be, a member upon any other person being admitted as a member of the Company. In the event the Company would otherwise have no member, the Manager will automatically be admitted as a member, but will again automatically resign upon the subsequent admission of another Person as member of the Company as provided in the immediately preceding sentence. In its capacity as initial member, the Manager has no obligation to make any contribution to, or pay any liabilities of, the Company, and has no right or entitlement to any distributions from the Company.

The Company will issue unit-denominated common limited liability company interests in the Company (“Shares”). Each Share (including fractional Shares) will be offered in exchange for specific types of genomic and phenotypic data, such as medical, health and health-related data (“Member Data”) that meet the Company’s requirements.

The Shares will be non-transferable, except as may be required by law, and will not be listed for trading on any exchange or automated quotation system. The members will not have any voting, consent or management rights relating to the management and operation of the Company, except to appoint a liquidator upon the dissolution of our Company if the Company does not have a Manager at that time.

A member may resign as a member for all purposes at any time by redeeming all of its Shares. A member may, at any time and from time to time, elect to terminate, or in some cases, reduce the scope of, the Company’s license to use the Member Data he or she contributed to the Company by written notice to the Company made in accordance with the then current Member Data policies, in which case the Shares issued in exchange for the Company’s original rights to such Member Data will be redeemed. A member will automatically cease to be a member for all purposes immediately upon such member ceasing to own of record any Shares.

Contributions

An individual may be admitted as a member and issued Shares by contributing Member Data, as defined in the Operating Agreement, to the Company in accordance with the Company’s Member Data policies, subject to the Manager accepting such contribution. Members have no obligation to contribute funds to the capital of the Company or to make additional contributions. A member may, in such member’s discretion, make additional contributions of Member Data in return for additional Shares from time to time in accordance with the Company’s Member Data policies, subject to the Manager accepting such contribution.

Distributions

The Manager intends for the Company to distribute (i) distributable cash from operations (but excluding proceeds from the sale of all or substantially all of the Company’s assets) for each annual period no less frequently than once per annum; provided that if the estimated distribution per Share is not expected to exceed $0.02, as adjusted appropriately for any Share dividend, Share split, combination or other similar recapitalization with respect to the Company’s equity, the Manager may elect to not make a distribution in such annual period, and (ii) proceeds, if any, realized by or available to the Company (after deducting therefrom an amount for addition to a reserve for contingencies, working capital, and the payment of unreserved or unfunded Company obligations, such amounts to be established by the Manager in its discretion) net proceeds from the sale of all or substantially all of the Company’s assets within thirty days following the receipt by the Company of such proceeds.

Upon a member’s resignation or termination as a member or partial redemption of Shares, the member will no longer be entitled to any further distributions with respect to the Shares redeemed, irrespective of whether distributable cash was available for distribution at or prior to such time.

5. Related Party Transactions

The Company anticipates conducting various transactions with the Manager, a related party, including but not limited to those specified in the Management Agreement (see Note 6). The Company and the Manager are under common control. The Company will follow the accounting and disclosure requirements under ASC 850-10-50 with regards to any related party transactions and relationships.

6. Management Agreement

Management Fee

The Company is obligated to pay to the Manager a management fee (the “Management Fee”) calculated as the sum of (i) 50% of the Net Revenues (defined below) of the Company; plus (ii) the amount of all Non-Profit Revenue (defined below) of the Company.

“Net Revenues” means (i) all revenue (excluding Non-Profit Revenue) recognized by the Company from (a) discovery activities that derive value from the content contained in the Database and (b) license fees, royalties and other revenue derived from intellectual property acquired through collaborations with third parties with respect to Member Data, less (ii) Operational Expenses. For this purpose, Operational Expenses do not include Organizational Expenses, Operational Expenses borne by the Manager (See Note 7 – Expenses) or the Management Fee. See also Note 7 –Manager Operations Separate from the Company, concerning activities that the Manager may conduct that do not generate revenue for the Company and are therefore excluded from Net Revenues.

“Non-Profit Revenue” means all revenues recognized by the Company from transactions with corporations, trusts, unincorporated association, or other types of organizations (“Non-Profit Organizations”) that (i) are exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code of 1986, as amended, (ii) have applied in good faith for a determination of such exemption from the Internal Revenue Service, or (iii) would be eligible to be so exempt, in the reasonable opinion of the Manager, if operated in the United States. Examples of Non-Profit Organizations include disease foundations, research organizations, and organizations for the benefit of minority or economically disadvantaged groups. License fees, royalties and other revenues earned from Collaboration IP (as defined below) generated through collaboration with a Non-Profit Organization are not Non-Profit Revenue and will be included in Net Revenues, even if such license fees, royalties and other revenues are paid by Non-Profit Organizations.

The Manager will determine the Management Fee with respect to Net Revenues and Non-Profit Revenue for each fiscal quarter. The Management Fee is payable within ten (10) days following the closing of the Company’s books for each quarter, to the extent of available cash in the Company. To the extent sufficient cash is not available at a payment date, the unpaid portion of the Management Fee will accrue and be paid promptly following the Company’s receipt of cash sufficient to pay the amount in arrears.

 

F-5

Manager Operations Separate from the Company

The Company will earn revenues from data discovery activities that derive value from the content contained in the Database, such as (i) providing to third parties including but not limited to pharmaceutical and biotechnology discovery companies (collectively, “Customers”), access to the Database for population-level research, and (ii) making available to Customers, directly or through the Manager, contact information for Members who have elected to allow the sharing of such contact information. The Management Agreement indicates that certain activities are not data discovery activities and permits the Manager in its sole discretion to choose to conduct such activities for its own or for its affiliate’s account or for Customers without accounting to the Company for the revenues derived from such activities. Excluded activities are:

 

•

Communication and member engagement services provided to Customers following a data discovery activity that identifies or provides contact information of members;

 

•

assisting Customers in collecting longitudinal data of identified members that is at the time of initial collection outside the Database;

 

•

the offer or sale of value added goods and services to members, whether by the Manager, an affiliate of the Manager or a third party offering goods or services that may be of interest to members;

 

•

professional services such as scientific consultation or project management; and

 

•

any and all other activities of the Manager that do not derive direct value from the content of the Database.

Database Development and Intellectual Property License

Pursuant to the Management Agreement, the Manager develops and improves the Database at the Manager’s sole expense. The Manager will own all intellectual property, including U.S. and foreign patents and trade secrets, conceived or discovered by the Manager, solely or jointly, related to the Database (collectively, “Database IP”). Database IP does not include intellectual property rights the Company acquires from collaborations with third parties that obtain Access to the Database (“Collaboration IP”), which Collaboration IP will be owned by the Company.

The Company enjoys a non-exclusive license for the Database IP, which license will continue in perpetuity in the event of termination of the Management Agreement, the Manager ceasing to serve as manager of the Company or the dissolution of the Manager.

Other Intellectual Property

The Manager owns certain trademarks, trade dress, logos, internet domain names, websites and associated software and social media accounts created for the Company. The Company has an exclusive license to all such properties but the Manager has reserved a non-exclusive right to use such properties in connection with its operations that are separate from those of the Company.

Expenses

The Manager is responsible for, and not entitled to reimbursement for, all fees, costs or expenses incurred by it on behalf of the Company in connection with organizing and managing the Company and in connection with the initial offer and sale of the Shares, including printing, travel, filing fees, marketing expenses, legal and accounting fees, and similar fees incurred in connection with the investigation, evaluation, registration, qualification, issuance and sale thereof, such as costs incurred in qualifying for the exemption from registration pursuant to Regulation A under the Securities Act of 1933, as amended (the “Securities Act”) with the Securities and Exchange Commission, including any post-qualification amendments or supplements to the initial Regulation A offering statement (collectively, the “Organizational Expenses”).

The Company is obligated to reimburse the Manager promptly for all Operational Expenses (defined below) advanced by the Manager. Notwithstanding the foregoing, the Manager is not entitled to reimbursement for Operational Expenses paid by the Manager if such Operational Expenses are or would have been, but for the provisions of the Management Agreement denying reimbursement, accrued by the Company under generally accepted accounting principles on or before March 31, 2020. “Operational Expenses” are all costs and expenses related to the Company’s operations, but excluding the Organizational Expenses, costs to develop Database IP and the Manager’s overhead and compensation related expenses, including compensation and expenses of the officers, directors, employees, auditors, attorneys and other agents of the Manager and fees and expenses for administrative, bookkeeping, clerical and related support services, office space and facilities, utilities, telephone and email of the Manager, all of which are the responsibility of the Manager.

7. Subsequent Events

The Company has evaluated subsequent events through June 8th, 2018, the date these financial statements were available to be issued, and there were no events to report.

 

F-6

PART III

Index to Exhibits

 

Item 17 Number		Exhibit
2a*		Certificate of Formation of the Company, filed April 23, 2018
2b**		Certificate of Amendment of the Company, filed September 25, 2018
2c**		Amended and Restated Limited Liability Company Operating Agreement of LunaDNA, LLC, effective as of April 23, 2018
4a***		Form of Subscription Agreement, including LunaDNA Consent and Privacy Policy
6a*		Amended and Restated Management Agreement, dated as of April 23, 2018, by and between LunaPBC, Inc. and the Company
11a**		Consent of Mayer Hoffman McCann P.C.
12a*		Opinion of Sheppard, Mullin, Richter & Hampton LLP
13a**		“Testing the waters” materials
15a**		Non-public correspondence

 

*	Previously Filed

**	Filed Herewith

***	To be Filed by Amendment

 

-56-

SIGNATURES

Pursuant to the requirements of Regulation A, the issuer certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form 1-A and has duly caused this offering statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Solana Beach, State of California, on November 5, 2018.

 

This offering statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature		Title		Date
/s/ Robert Kain		Chief Executive Officer and Director of LunaPBC, Inc. (Principal Executive Officer)		November 5, 2018
Robert Kain
/s/ David Lewis		Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) and Director of LunaPBC, Inc.		November 5, 2018
David Lewis
/s/ Dawn Barry		President and Director of LunaPBC, Inc.		November 5, 2018
Dawn Barry

 

-57-

Exhibit 2(b)

STATE OF DELAWARE

CERTIFICATE OF AMENDMENT

OF

LUNATRUST LLC

 

1.

The name of the limited liability company is LunaTrust LLC.

 

2.

The Certificate of Formation of the limited liability company is hereby amended to change the name of the limited liability company from LunaTrust LLC to LunaDNA, LLC.

IN WITNESS WHEREOF, the undersigned has executed this Certificate of Amendment on this 24^th day of September, 2018.

 

Exhibit 2(c)

AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

of

LUNADNA, LLC

Dated as of April 23, 2018

Last Amended: October 30, 2018

THE INTERESTS REPRESENTED BY THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT ARE SUBJECT TO CONDITIONS AND RESTRICTIONS ON TRANSFER SET FORTH HEREIN, AND THE COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH INTERESTS UNLESS AND UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO THE REQUESTED TRANSFER.

 

-1-

AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

OF

LUNADNA, LLC

 

		TABLE OF CONTENTS
				Page
ARTICLE 1 DEFINITIONS					5
ARTICLE 2 GENERAL PROVISIONS					10
2.1		Formation			10
2.2		Term			10
2.3		Name			10
2.4		Purpose			10
2.5		Place of Business			10
2.6		Nature of Members’ Interests; Goodwill			10
2.7		Opinions of Counsel			10
2.8		Manager as Member			10
2.9		Limited Liability Company Agreement			10
2.10		No State-Law Partnership			11
2.11		Bank Accounts			11
2.12		Title to Company Assets			11
ARTICLE 3 CONTRIBUTIONS					11
3.1		Contributions			11
3.2		Commitments			11
3.3		Shares			11
3.4		New Equity Securities			11
3.5		Certificates			12
3.6		Use of Capital Contributions and Loans			12
3.7		No Withdrawal			12
3.8		Loans From Members			12
3.9		Distributions In Kind			12
3.10		Preemptive Rights			12
3.11		Subscription Agreements			12
ARTICLE 4 MANAGEMENT OF THE COMPANY					12
4.1		Duties and Powers of the Manager.			12
4.2		Management Fee; Organization and Initial Qualification Expenses; and Expenses of the Company			14
4.3		Removal and Replacement; Successor Managers			15
4.4		Limitation of Liability			15
4.5		Indemnification			15
4.6		Delegation of Authority			16
ARTICLE 5 DISTRIBUTIONS AND ALLOCATIONS; TAX MATTERS					16
5.1		Timing of Distributions			16
5.2		Distributions			16
5.3		Record Date			17
5.4		Tax Elections and Returns			17
5.5		Withholding			17
5.6		Offset			17

 

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ARTICLE 6 MEMBERS					17
6.1		Limited Voting and No Management Rights			17
6.2		Advisory Votes			17
6.3		Meetings of Members			17
6.4		Written Consents			18
6.5		Members as Creditors			18
6.6		Non Partition			19
6.7		No Distributions of Property			19
6.8		Limitation of Liability			19
6.9		Lack of Authority and Agency			19
6.10		Information Requests			19
6.11		Resignation and Removal			19
6.12		Licensors			19
6.13		Indemnification and Reimbursement			20
6.14		Substituted Members			20
6.15		Additional Members			20
ARTICLE 7 BOOKS AND RECORDS; TAX MATTERS					20
7.1		Accounting			20
7.2		Financial Statements			20
7.3		Books and Records			20
7.4		Inspection; Limitations			20
ARTICLE 8 TRANSFER AND REDEMPTION OF LIMITED LIABILITY COMPANY INTERESTS					21
8.1		Transfer of LLC Interests by Members			21
8.2		Redemption of Shares			22
8.3		Status of LLC Interests Transferred			23
8.4		Legend			23
ARTICLE 9 DISSOLUTION AND TERMINATION					24
9.1		Dissolution			24
9.2		The Liquidator			24
9.3		Distributions and Other Matters			25
9.4		Compromise			25
9.5		Securityholders Agreement			25
9.6		Cancellation of Certificate			26
ARTICLE 10 MISCELLANEOUS					26
10.1		Notices			26
10.2		Mandatory Arbitration			26
10.3		Further Assurances			28
10.4		Other Remedies			28
10.5		Partial Invalidity			28
10.6		Waiver			28
10.7		Governing Law			28
10.8		Jurisdiction; Venue; Service of Process			29
10.9		Amendment			29
10.10		Grant of Power of Attorney			29
10.11		Execution in Counterparts			30
10.12		Successors and Assigns			30
10.13		Computation of Time			30
10.14		Table of Contents; Titles and Captions			30
10.15		Interpretation			30
10.16		Entire Agreement			31
10.17		Creditors			31
10.18		Consent to Disclosure			31

 

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10.19		Electronic or Digital Delivery of Signatures			31
10.20		Survival			31
10.21		Acknowledgments			31

 

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LUNADNA, LLC

AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT

THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this “Agreement”) of LunaDNA, LLC, a Delaware limited liability company (“Company”), is made as of April 23, 2018 (the “Effective Date”) by and among LunaPBC, Inc., a Delaware corporation (together with its successors as manager of the Company, the “Manager”) and the persons from time to time identified on the Schedule of Members (as defined herein) who are members of the Company (collectively, and solely in their respective capacity as members of the Company, the “Members”).

WHEREAS, LunaPBC, Inc. joined the Company as the initial member in order to establish the Company and will automatically resign as a member of the Company upon the admission of another member.

WHEREAS, LunaPBC, Inc., as the sole member and sole manager of the Company, desires to further amend and restate the operating agreement of the Company, as set forth in this Agreement, to provide for the terms applicable to the affairs of the Company and the conduct of its business.

NOW THEREFORE, in consideration of the covenants and conditions herein contained, and intending to be legally bound hereby, the Members hereby agree to enter into this Agreement as follows:

ARTICLE 1

DEFINITIONS

Certain terms when used in this Agreement shall have the definitions set forth in the text hereof. The following terms when used in this Agreement shall have the respective meanings ascribed to them below:

“Access” means the right of the Company, the Manager or an Affiliate, or a third party, to access Member Data for the purposes of (a) providing population-level research to third parties and (b) facilitation by the Manager of voluntary participation in targeted research, in each case in accordance with the Member Data Policies.

“Act” means the Delaware Limited Liability Company Act, Chapter 434 of Title 6 of the Delaware Code, 6 Del. Code § 18-101 et seq., as in effect on the date hereof and as it may be amended hereafter from time to time.

“Additional Member” has the meaning set forth in Section 6.15.

“Affected Member” has the meaning provided in Section 7.2(A) or 7.3(A).

“Affiliate” means, with respect to any designated Person, any other Person who or which is directly or indirectly (through one or more intermediaries) in control of, under common control with, or controlled by such designated Person. For purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of an Entity, whether through ownership of voting securities, by contract interest or otherwise.

“Agreement” means the meaning set forth in the Preamble.

“Annual Period” means any full calendar year commencing on January 1 and ending on the next succeeding December 31, or in the year of formation of the Company, the partial calendar year commencing on the date of formation of the Company and ending on the next succeeding December 31, or in the year of dissolution of the Company, the partial calendar year commencing on January 1 and ending on the date of dissolution.

“Archived” means, with respect to any Member Data, that the Company maintains an archival copy of such Member Data, but without the right or authority to Access or grant Access to such Member Data. The term “Archive” shall have the correlative meaning.

 

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“Base Percentages” means, with respect to any Member, the amount, expressed as a percentage, determined by dividing the number of Shares held of record by such Member by the aggregate number of Shares held of record by all Members.

“Business Day” means a day of the year on which commercial banks are not required or authorized to close in San Diego, California.

“Capital Contributions” means any cash, cash equivalents, promissory obligations or the Fair Market Value of any Contributions or other property or rights that a Person contributes or licenses with respect to any Equity Securities pursuant to Article 3, net of any liabilities assumed by the Company for such Person in connection with such contribution and net of any liabilities to which the assets contributed by such Person are subject.

“Certificate” means the Certificate of Formation of the Company, filed with the Secretary of State of the State of Delaware on April 23, 2018, as the same may be amended, corrected, restated or otherwise modified from time to time in accordance with the Act.

“Certificated Interests” has the meaning set forth in Section 3.5.

“Claims” means all claims, controversies or disputes arising under or in connection with this Agreement or any Transaction Document, between or among any of the parties hereto, the Company, the Manager, the Liquidator or any Member or Licensor (and their respective employees, officers, directors, managers, attorneys, and other agents), whether sounding in contract or tort, including arbitrability.

“Code” means the Internal Revenue Code of 1986, as amended from time to time, and all successors thereto.

“Commitment” means, with respect to any Member, any commitment such Member has made to Contribute Member Data to the Company, which commitment has not been satisfied or terminated (by such Member, the Manager, by its terms, by law or otherwise). The terms “Commits” and “Committing” shall have the correlative meanings.

“Community” means all Members from time to time, collectively.

“Community Agreement” means, with respect to any Member, the agreement or policy (such as a privacy policy to which a Member consents) by which such Member’s Member Data is Licensed to the Company.

“Company” means LunaDNA, LLC.

“Company Party” means any (a) Affiliate of the Company, including the Manager; (b) equityholder, officer, manager, director or employee of: the Company or any of its Affiliates; (c) member of the Family Group of any individual described in clause (b) of this definition; and (d) any Entity in which any Person described in clause (a), (b) or (c) of this definition directly or indirectly has a material financial interest (including as beneficiary).

“Contributions” means, with respect to any Member, any Member Data such Member has Licensed to the Company in accordance with the Member Data Policies, which License has not been terminated (by such Member, the Manager, by its terms, by law or otherwise). The terms “Contributes”, “Contributed” and “Contributing” shall have the correlative meanings.

“Database” means the meaning set forth in Section 2.4.

“Database IP” has the meaning ascribed in the Management Agreement.

“Distributable Cash” means, with respect to any Annual Period, all unrestricted cash and cash equivalents held by the Company, reduced by (i) cash disbursements due or coming due with respect to operations of the Company (including any fees, expenses, royalties or other amounts paid pursuant to the Management Agreement), (ii) capital improvements and replacements (as determined by the Manager), and (iii) reserves in such amounts and for such time periods as the Manager in good faith determines are reasonably necessary for the proper operation, improvement and

 

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expansion of the Company’s business and operations, including estimated Company expenses and any contingent or unforeseen Company liabilities.

“Distribution” means each distribution or dividend made by the Company to a Member in respect of such Member’s LLC Interests, whether in cash, property or securities of the Company; provided that none of the following shall be a Distribution: (a) any redemption or repurchase by the Company of any Shares to the extent no cash, securities or other property is distributed in connection therewith, and (b) any recapitalization, exchange or conversion of LLC Interests, and any subdivision (by split or otherwise) or combination (by reverse split or otherwise) of any outstanding LLC Interests that does not involve (i) a distribution of cash or other property that is not Equity Securities or (ii) a direct or indirect change in (A) the ownership of the Company, or (B) the holders of the Equity Securities of the Company.

“Donated” means, with respect to any Member Data, that the Member grants the Company a perpetual, irrevocable, non-exclusive right and license to use such Member Data, notwithstanding the redemption or cancellation of the Shares issued in connection with the Contribution of such Member Data, subject only to such restrictions and limitations as apply generally to Licensable Member Data maintained in the Database. The term “Donate” shall have the correlative meaning.

“Electronic Record” means any record stored in any tangible medium that may be retained, retrieved and reviewed by the Manager and that the Manager may directly and legibly reproduce in paper form through an automated process, including, for avoidance of doubt, any digital database or distributed ledger.

“Entity” means a partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other business or legal entity of whatever nature.

“Equity Securities” means (a) LLC Interests, (b) obligations, evidences of indebtedness or other securities or interests convertible or exchangeable into LLC Interests, and (c) warrants, options or other rights to purchase or otherwise acquire LLC Interests.

“Exchange Act” means the United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Family Group” means, as to any particular individual, (a) such individual’s grandparents, parents, siblings, spouse or domestic partner (or equivalent), cousins (once removed) and descendants (in each case, whether natural or adopted), and (b) any trust or other estate planning vehicle controlled solely by such individual and created solely for the benefit of such individual or an individual described in clause (a) of this definition.

“Forced Resignation Date” means the meaning set forth in Section 10.18B.(1).

“Forfeiture Event” means the meaning provided in Section 7.2(A).

“Governmental Authority” means any foreign, domestic, federal, territorial, state or local governmental or quasi-governmental legislature, executive, judicial or administrative authority, including any court, commission, board, bureau, agency or instrumentality, or any regulatory, administrative or other department, agency, or any political or other subdivision, department or branch of any of the foregoing.

“Joinder” means the execution and delivery of a joinder or counterpart to this Agreement, in form and substance satisfactory to the Manager, in which a new member agrees to be bound by all of the terms and conditions of this Agreement as a member, including the power of attorney granted in Section 10.10,

“Key Personnel” means directors, officers and key personnel of the Manager, including any key personnel set forth in any of the Company’s filings with the SEC.

 

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“Licensed” means, with respect to any Member Data, that the Company has the right and license to use, Access and grant Access to such Member Data, in accordance with the applicable Community Agreement. The term “License” shall have the correlative meaning.

“Licensor” means a licensor of Member Data to the Company who is not a Member.

“Liquidator” means the Person appointed pursuant to this Agreement, or the order of a court of competent jurisdiction, to wind up the affairs of the Company and to distribute its assets upon the dissolution of the Company.

“LLC Interest” means, when used in reference to an interest in the Company, the entire limited liability company interest of a Member in the Company at any particular time, including its interest in the Distributions of the Company and any voting and inspection rights; provided that any class, group or series of LLC Interests issued shall have the relative rights, powers and duties set forth in this Agreement.

“Majority in Interest” means Members whose aggregate Base Percentages total greater than fifty percent (50%).

“Management Agreement” means that certain Management Agreement, made and entered into as of the date hereof, by and between the Company and the Manager, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms and conditions thereof and hereof.

“Management Fee” has the meaning set forth in Section 4.2(a).

“Manager” means LunaPBC, Inc., in its capacity as manager of the Company, together with its successors and permitted assigns in such capacity under this Agreement and the Management Agreement.

“Member Data” means personal, health, medical, health-related or other information or data about a Member submitted by such Member to the Company in accordance with the Member Data Policies.

“Member Data Policies’ means the rules and procedures published from time to time by the Manager regarding valid types and quantities of Member Data for which Members or potential Members may make Commitments or Contributions, the Licenses granted in connection with such Commitments or Contributions, the number of Shares to be issued therefor (based on type, quality, amount or other factors the Manager deems relevant from time to time), the validation of such Member Data and other rules and procedures governing the submission and acceptance of any Member Data and the issuance or redemption of Shares therefor, including prescribed forms for effecting the submission, validation or redemption of Member Data and associated Shares. For the avoidance of doubt, each Community Agreement is included in the Member Data Policies.

“Members” has the meaning set forth in the Preamble.

“Net Sale Proceeds” means the proceeds realized by the Company upon the sale of all or substantially all of the Company’s assets, net of expenses incident to such sale, the payment of any Company indebtedness secured by or related to such asset to the extent then required, and satisfaction of any right of any creditor of the Company to receive such proceeds.

“Operational Expenses” has the meaning set forth in Section 4.2(c).

“Organizational Expenses” has the meaning set forth in Section 4.2(b).

“Person” means an individual or an Entity.

“Purged” means, with respect to any Member Data, that the Company deletes such data from the Database and thereafter lacks the right or authority to Archive, Access or grant Access to such Member Data; provided that (i) the Company may Archive such Member Data to the extent that (and only for so long as) the retention and maintenance of such Member Data is required by applicable law or regulatory requirements if the Company notifies such Member (to the extent permitted by law) that it is required to Archive such Member Data and the duration thereof,

 

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and (ii) for avoidance of doubt, if such Member re-Contributes such Member Data to the Company, the Company may use such Member Data as if it had not been Purged. The term “Purge” shall have the correlative meaning.

“Regulations” or “Treasury Regulations” means Regulations promulgated by the Department of Treasury of the United States in respect of the Code.

“Resigning Member” has the meaning set forth in Section 10.18B.(1).

“Schedule of Members” means the list maintained by the Manager, including in the form of an Electronic Record, in accordance herewith containing the name, address, Commitments, Contributions and Base Percentages of each Member, which list shall not be attached to this Agreement but shall be incorporated by reference herein, as the same shall be constituted from time to time, and made a part hereof.

“SEC” means the United States Securities and Exchange Commission.

“Securities Act” means the United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Share” means a unit of LLC Interest having the rights and obligations specified with respect to Shares in this Agreement. Holders of Shares shall have no power to vote hereunder whatsoever, except (a) as provided in Section 9.2(a)(ii), or (b) matters as to which the right of such holders to vote is expressly required by applicable law (as to which Members shall have one (1) vote per Share).

“Subscription Agreement” means any securities purchase agreement, subscription agreement, contribution agreement, license agreement, employment agreement, or any other agreement, document or instrument evidencing or effecting the issuance or other transfer of any Equity Securities or otherwise governing the terms and conditions with respect to any Equity Securities, in each case as the same may be amended or otherwise modified from time to time.

“Subsidiary” means, with respect to any Person, any Entity of which (a) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (b) if a limited liability company, partnership, association or other business entity (other than a corporation), a majority of partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof (for purposes hereof of this clause (b), a Person or Persons shall be deemed to have a majority ownership interest in such a limited liability company, partnership, association or other business entity if such Person or Persons shall be allocated a majority of such limited liability company, partnership, association or other business entity gains or losses or shall be or control any managing director or general partner of such limited liability company, partnership, association or other business entity).

“Substituted Member” has the meaning set forth in Section 6.14.

“Transaction Document” has the meaning set forth in Section 10.19.

“Transfer” has the meaning set forth in Section 8.1(a), and the terms “Transferee”, “Transferor” and “Transferred” shall have the correlative meanings.

“Voting Units” means, collectively, (a) any LLC Interests created by the Manager from time to time creates with express voting rights (for avoidance of doubt, excluding advisory votes or any vote in connection with the appointment of a Liquidator or the dissolution of the Company), and (b) solely with respect to matters on which the right of such class of LLC Interests to vote as to such matter is expressly required by, and cannot be waived under, applicable law or any vote in connection with the appointment of a Liquidator or the dissolution of the Company (to the extent provided herein), any other class or series of LLC Interests, including Shares.

 

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ARTICLE 2

GENERAL PROVISIONS

2.1 Formation. The Company was formed as LunaTrust LLC, a Delaware limited liability company, on April 23, 2018 (the “Formation Date”), with the filing of a Certificate of Formation with the Secretary of State of the State of Delaware. The Company changed its name to LunaDNA, LLC on September 21, 2018.

2.2 Term. The term of the Company shall continue until the Company is dissolved pursuant to Article 9.

2.3 Name. The business of the Company shall be carried on under the name “LunaDNA, LLC” (or any other fictitious or assumed names as determined by the Manager from time to time). Any change to any names of the Company shall not require Member consent.

2.4 Purpose. The principal purpose and character of the business of the Company is to build, operate, maintain, query and otherwise deal with databases comprised of Member Data that is owned by the applicable Member and Licensed to the Company, to the extent and in the manner provided in this Agreement and any applicable Community Agreement, by the Members (collectively, the “Database”), and to engage in any other lawful business activities in connection therewith, or related to the business of the Company (as such business may be expanded, contracted or otherwise modified from time to time), and to engage in any and all activities necessary, desirable or incidental to the accomplishment of the foregoing.

2.5 Place of Business. The Company’s principal place of business shall be at 415 South Cedros Avenue, Suite 260, Solana Beach, California, 92075, or at such place as the Manager may designate from time to time. The Company may have such other or additional places of business or offices in the United States of America or in other countries as the Manager may from time to time designate.

2.6 Nature of Members’ Interests; Goodwill. The interests of the Members in the Company shall be personal property for all purposes. All property owned by the Company, whether real or personal, including the Company’s name and goodwill, shall be owned by the Company as an entity, and no Member individually shall have any ownership of such property.

2.7 Opinions of Counsel. For purposes of this Agreement, whenever an opinion of counsel is required to be provided, such opinion may be provided by in-house counsel of the Member or the Member’s Affiliate, or outside counsel.

2.8 Manager as Member. The Manager shall be the sole initial member. The Manager will automatically resign as, and cease to be, a member upon any other Person being admitted as a member of the Company. In the event the Company would otherwise have no member, the Manager shall automatically be admitted as a member, but will again automatically resign upon the subsequent admission of another Person as member of the Company as provided in the immediately preceding sentence. The Manager shall not acquire any LLC Interest in the Company, have or incur any obligation to make any contribution (as defined in the Act) to, or pay any liabilities of, the Company, or have any right or entitlement to any distributions from the Company, in its capacity as member by virtue of being admitted, being or resigning as a member as provided in this Section 2.8. For avoidance of doubt, nothing in this Section 2.8 shall prejudice any rights the Manager may have in its capacity as the “Manager” under this Agreement or the Management Agreement.

2.9 Limited Liability Company Agreement. The Licensors and Members hereby agree that during the term of the Company, the rights, powers and obligations of the Licensors and Members with respect to the Company shall be determined in accordance with the terms and conditions of this Agreement and the Act; provided that the Act shall not apply where the Act provides that such rights, powers and obligations specified in the Act shall apply “unless otherwise provided in the limited liability company agreement” or words of similar effect and such rights, powers and obligations are set forth in this Agreement. To the extent that the rights or obligations of any Licensor or Member are different by reason of any provision of this Agreement than they would be in the absence of such provision (including the negation of any right or obligation), this Agreement shall, to the extent permitted by the Act, control.

 

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2.10 No State-Law Partnership. Each Members intends that the Company not be a partnership (including a limited partnership) or joint venture, and that no Member be a partner or joint venturer of any other Member by virtue of this Agreement, for any purposes, including for federal and, if applicable, state or local income tax purposes, and neither this Agreement nor any other document entered into by the Company or any Member relating to the subject matter hereof shall be construed to suggest otherwise. The Company shall file all tax returns and shall otherwise take all tax and financial reporting positions in a manner consistent with such treatment.

2.11 Bank Accounts. All funds of the Company will be deposited in such Company bank account or accounts insured by the FDIC (subject to applicable FDIC insurance limitations) as designated from time to time by the Manager. Withdrawals from any such bank account or accounts will be made upon such signature or signatures as the Manager may from time to time designate.

2.12 Title to Company Assets. Company assets shall be deemed to be owned by the Company as an entity, and no Member, individually or collectively, shall have any ownership interest in such Company assets or any portion thereof. Legal title to any or all Company assets may be held in the name of the Company or one or more nominees, as the Manager may determine. The Manager hereby declares that any Company assets for which legal title is held in the name of any nominee shall be held in trust by such nominee for the use and benefit of the Company in accordance with the provisions of this Agreement. All Company assets shall be recorded as the property of the Company on its books and records, irrespective of the name in which legal title to such Company assets is held.

ARTICLE 3

CONTRIBUTIONS

3.1 Contributions.

(a) Initial Contribution. An individual may be admitted as a Member and issued Shares by Contributing Member Data to the Company in accordance with the Member Data Policies, subject to the Manager accepting such Contribution and the terms and conditions of any applicable Subscription Agreement. Each Contribution may be made by submission of Member Data in the form of Electronic Records to or through the Company’s website (or such other method as determined by the Manager) for validation by the Manager in accordance with the Member Data Policies and inclusion in the Database.

(b) Additional Contributions. Except as otherwise provided by the Act or as approved in writing by a Member, a Member shall have no obligation to contribute funds to the capital of the Company or to make additional Contributions. A Member may, in such Member’s discretion, make additional Contributions of Member Data in return for additional Shares from time to time in accordance with the Member Data Policies, subject to the Manager accepting such Contribution and the terms and conditions of any applicable Subscription Agreement. Each additional Contribution may be made by submission of Member Data to or through the Company’s website (or such other method as determined by the Manager) for inclusion in the Database.

3.2 Commitments. The Manager in its discretion may from time to time admit an individual as a Members and issue Shares to such individual, or issue additional Shares to an existing Member, in return for such Member making a Commitment. In the event such individual or Member defaults on his or her Commitment (subject to any grace or cure period to which such Commitment is subject included in any applicable Subscription Agreements), the Manager shall promptly cancel the Shares issued to such individual or Member in exchange for such Commitment.

3.3 Shares. Members shall be issued the number of Shares (including fractional Shares) in respect of an initial or additional Contribution or a Commitment in accordance with the Member Data Policies.

3.4 New Equity Securities. Subject to compliance with Section 3.10 and Article 4, the Manager shall have the right and power to authorize and cause the Company to create and issue additional LLC Interests or other Equity Securities, and, in such event, the right and power to amend this Agreement and the Schedule of Members to reflect such additional issuances and dilution, for such consideration determined by the Manager, and in each case without the approval or consent of any Member or any other Person. In connection with any issuance of Equity Securities, the Person who acquires such Equity Securities shall execute an acceptable Joinder, and shall enter into such Subscription Agreements and other documents, instruments and agreements to effect such purchase as are required by the Manager.

 

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3.5 Certificates. The Company may (but need not) issue certificates representing Equity Securities (such Equity Securities, “Certificated Securities”). The Company may issue fractional LLC Interests or other Equity Securities.

3.6 Use of Capital Contributions and Loans. All Capital Contributions and proceeds of any Company borrowings made pursuant to this Agreement shall be used and applied only for a Company purpose as determined by the Manager.

3.7 No Withdrawal. No Person shall be entitled to withdraw any part of such Person’s Capital Contributions or to receive any Distribution from the Company, except as expressly provided herein.

3.8 Loans From Members. Loans by Members to the Company shall not be considered Capital Contributions. The amount of any such loan shall be a debt of the Company to such Member and shall be payable or collectible in accordance with the terms and conditions upon which such loan is made.

3.9 Distributions In Kind. To the extent that the Company distributes property in kind to the Members, the Company shall be treated as making a Distribution equal to the Fair Market Value of such property for purposes of Section 5.1 and such property shall be treated as if it were sold for an amount equal to its Fair Market Value. Any Distribution of property in-kind shall be made to each Member based on their respective Base Percentages.

3.10 Preemptive Rights. No Member shall have any preemptive rights with respect to the issuance of additional LLC Interests or other Equity Securities; provided that the Manager may grant preemptive rights to holders of any class or series of Equity Securities other than Shares in connection with the issuance thereof.

3.11 Subscription Agreements. Notwithstanding anything to the contrary set forth in this Agreement, Equity Securities may be subject to forfeiture or redemption as set forth in any applicable Subscription Agreement.

ARTICLE 4

MANAGEMENT OF THE COMPANY

4.1 Duties and Powers of the Manager.

(a) General Authority. The Manager shall conduct, direct and exercise full control over, and will directly have the power to make all decisions with respect to, all activities, affairs and business of the Company (including all decisions relating to the authorization and issuance of additional Equity Securities, including Shares, and the voting and sale of, and the exercise of other rights with respect to, the equity securities of its Subsidiaries or investments, if any), without the consent of any Member. The Manager will possess all of the powers and rights of a manager under the Act.

(b) Specific Authority. Subject to the terms of this Agreement, the Manager shall have the sole power and authority to bind or take any action on behalf of the Company, or to exercise any rights and powers (including the rights and powers to take certain actions, give or withhold certain consents or approvals, or make certain determinations, opinions, judgments, or other decisions) granted to the Company (i) under this Agreement or any other agreement, instrument, or other document to which the Company is a party, or (ii) pursuant to applicable law or regulation. Without limiting the generality of the foregoing, the Manager shall directly have the following powers and the Manager is authorized on behalf of the Company to do or cause to be done the following:

(1) admit and remove Members, accept and acquire licenses to Member Data, and issue and redeem Shares;

(2) form a Subsidiary or make an investment in any other Entity or enter into any joint venture, partnership or other profit sharing relationship;

(3) provide all consents and approvals on behalf of the Company with respect to the Database;

 

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(4) grant third parties Access to all or any portion of the Database for such consideration, and on such other terms and conditions, as the Manager shall determine is in the best interests of the Company, subject to the Member Data Policies;

(5) prepare and distribute, or cause to be prepared and distributed, the statements and reports described in Article 7;

(6) engage or change the Company’s auditor or accounting firm;

(7) institute, conduct, defend or settle legal or arbitration proceedings;

(8) pay, collect, compromise, arbitrate, resort to legal action or otherwise adjust claims or demands of or against the Company;

(9) pay any dividends, make any distributions or redeem or purchase any of the Company’s outstanding Equity Securities, subject only to any express limitations or conditions thereto set forth in this Agreement; provided that this provision shall not in and of itself obligate any Member or to sell any Equity Securities to the Company;

(10) amend, alter, repeal or waive any provision of this Agreement, the Certificate or the Management Agreement, or the organizational documents of any Subsidiary, subject only to any express limitations or conditions thereto set forth in this Agreement;

(11) enter into, modify, waive or terminate any agreement with, or enter into, modify or terminate any transaction with, any Company Party, subject only to any express limitations or conditions thereto set forth in this Agreement;

(12) hire, terminate, establish or change the compensation, benefits or other employment/engagement terms of any officer or executive level employee or consultant;

(13) select a replacement Manager in the event of the Manager’s resignation or removal and to assign the Management Agreement to such replacement manager in connection therewith;

(14) enter into any bankruptcy, insolvency or similar proceedings;

(15) dissolve, liquidate or wind-up the Company’s affairs, including the appointment of any Persons as Liquidators; and

(16) generally do all things in connection with any of the foregoing, generally manage, oversee and administer the day-to-day business and affairs of the Company and execute all documents on behalf of the Company in connection therewith, and sign or accept all checks, notes and drafts on the Company’s behalf and, except as expressly restricted herein, pay as a Company expense all costs or expenses connected with the operation or management of the Company.

(c) Limitations on Authority. The Manager shall not have the power or authority to sell, exchange or otherwise dispose of all or substantially all of the Company’s assets, or to merge or consolidate (or any similar transaction) with another Entity, except if (i) the Company is the surviving Entity, and (ii) in compliance with any express limitations or conditions thereto set forth in this Agreement, including with respect to any changes in the Company’s organizational documents.

(d) Other Business. The Manager and the Key Personnel and their respective Affiliates shall be permitted to continue (and it is acknowledged by the Members that the Manager and its respective Affiliates intend to continue) their respective other or new business interests independent from the business of the Company. The Manager and its respective Affiliates will not be required to devote all of its or their time or attention to the management and other affairs of the Company, but each will devote thereto as much of its time and attention as may be reasonably

 

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required to promote the purposes of the Company. The Members acknowledge that the Manager and its Affiliates have formed (and will form) other Entities, which may engage in a business of the same type as the business of the Company. Notwithstanding any other provision of this Agreement to the contrary, Affiliates of the Manager shall be permitted to conduct the activities of other investment vehicles, including conducting management and investment activities on their behalf. Neither the Company nor any Member shall have any right by virtue of this Agreement in or to such other ventures or activities or to the income or proceeds derived therefrom, and the pursuit of such ventures shall not be deemed wrongful or improper.

4.2 Management Fee; Organization and Initial Qualification Expenses; and Expenses of the Company.

(a) Pursuant to the Management Agreement, the Manager has been appointed to serve as the Company’s management company and to provide services to the Company. The Manager shall be entitled to various management fees (collectively, the “Management Fees”) as provided in the Management Agreement from time to time. The Manager shall not be entitled to any compensation for serving as the manager of the Company, except for (i) amounts payable pursuant to this Section 4.2 and Section 4.5, and (ii) the compensation, expense, costs, royalties and fees provided in the Management Agreement.

(b) Subject to Section 4.2(e) and any contrary provisions in the Management Agreement, the Manager shall be responsible for, and not entitled to reimbursement for, all fees, costs or expenses incurred by it on behalf of the Company in connection with organizing and managing the Company and in connection with the initial offer and sale of the Shares, including printing, travel, filing fees, marketing expenses, legal and accounting fees, and similar fees incurred in connection with the investigation, evaluation, registration, qualification, issuance and sale thereof, such as costs incurred in qualifying for the exemption from registration pursuant to Regulation A promulgated under the Securities Act with the SEC, including any post-qualification amendments or supplements to the initial Regulation A offering statement (collectively, the “Organizational Expenses”).

(c) The Company shall be responsible for and shall bear all costs and expenses related to its operations (“Operational Expenses”), including any sales or other taxes which may be assessed against the Company; the costs and expenses, including reasonable travel and out-of-pocket travel related expenses, debt service attributable to borrowed money; all expenses relating to litigation and threatened litigation involving the Company, including permitted indemnification expenses; expenses attributable to normal and extraordinary investment banking, accounting, appraisal, legal, custodial, and registration services provided to the Company, including services with respect to the Company’s relationships with the Manager; costs and expenses associated with financial research and market analysis; the costs of risk management services and appropriate insurance coverage for the Company including premiums for liability insurance to protect the Company, the Manager, and their respective Affiliates in connection with the performance of Company activities except to the extent prohibited by this Agreement; interest and taxes related to the acquisition or license by the Company of any portion of the Database; fees or other expenses incurred in connection with the investigation, prosecution or defense of any claims by or against any Governmental Authority, which fees and expenses are subject to indemnification pursuant to this Agreement; reports to Governmental Authorities, including the SEC; the preparation of annual financial reports of the Company and other reports to the Members; expenses relating to meetings of the Members; costs incurred in connection with any offer and sale of Equity Securities other than offers and sales qualified in the initial offer and sale of the Shares (whether via including via the initial Regulation A offering statement or any post-qualification amendment thereto), including printing, travel, filing fees, marketing expenses, legal and accounting fees, and similar fees incurred in connection with the investigation, evaluation, registration, qualification, issuance and sale thereof, such as costs incurred in registering or qualifying for the exemption from registration pursuant to Regulation A promulgated under the Securities Act with the SEC and any commissions, brokerage fees, investment banking fees or similar charges; and all other expenses properly chargeable to the activities of the Company. Operational Expenses exclude the Organizational Expenses and costs to develop Database IP, which are the responsibility of the Manager.

(d) Subject to any contrary provisions in the Management Agreement, to the extent the Manager pays Operational Expenses of the Company (which the Manager is not obligated to do), the Manager shall be entitled to reimbursement of such Operational Expenses. To the extent that any payment of Operational Expenses of the Company by the Manager is not reimbursed by the Company and is properly allocable as an expense of the Company for federal, state and local tax purposes, a portion of the Management Fees for a like amount shall be treated as a reimbursement to the Manager for such expenses and not as a payment of Management Fees.

 

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(e) Subject to any contrary provisions in the Management Agreement, the Manager shall bear all of its own overhead and compensation related expenses, including compensation and expenses of the officers, directors, employees, auditors, attorneys and other agents of the Manager and fees and expenses for administrative, bookkeeping, clerical and related support services, office space and facilities, utilities, telephone and email of the Manager.

4.3 Removal and Replacement; Successor Managers.

(a) The Members may not under any circumstance (i) remove or replace the Manager as a manager of the Company, or (ii) appoint an additional or substitute manager of the Company.

(b) The Manager shall at all times be the “Manager” under both this Agreement and the Management Agreement. The Manager may not assign any rights, powers, obligations or authorities under this Agreement or under the Management Agreement unless the Manager assigns all of its rights, powers, obligations and authorities under this Agreement and under the Management Agreement to the same successor. Notwithstanding such assignment, the assigning Manager shall remain liable for any liabilities that arose prior to such assignment and for the performance of its successor Manager.

4.4 Limitation of Liability.

(a) Waiver of Liability. Except as otherwise provided herein or in any agreement entered into with the Company or any of its Subsidiaries and to the maximum extent permitted by the Act, no present or former Manager or officer of the Company, nor any such Person’s Affiliates, officers, directors, employees, agents, lawyers, accountants or representatives, shall be liable to the Company or to any Member for any act or omission performed or omitted by such Person in its capacity as Manager or officer; provided that, except as otherwise provided herein, such limitation of liability shall not apply to the extent the act or omission was attributable to such Person’s willful misconduct or knowing violation of law as determined by a final judgment, order or decree of an arbitrator or a court of competent jurisdiction (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); and provided further that, such limitation of liability will not apply to any claims Members may have under United States securities laws or the rules and regulations thereunder with respect to the Manager’s or the Company’s compliance with any such United States securities laws or the rules and regulations thereunder. The Manager and each officer of the Company shall be entitled to rely upon the advice of legal counsel, independent public accountants and other experts, including financial advisors, and any act of or failure to act by such person in good faith reliance on such advice shall in no event subject such Person or any of such Person’s Affiliates, employees, officers, directors, agents, lawyers, accountants or representatives to liability to the Company or any Member.

(b) Manager Discretion. Unless another standard is expressly set forth herein, whenever in this Agreement or any other agreement contemplated herein the Manager is permitted or required to take any action or to make a decision or determination, the Manager may take or refrain from taking such action or make or refrain from making such decision in its sole discretion, meaning that the Manager shall be entitled to consider such interests and factors as it desires (including the interests of such Manager or its Affiliates).

(c) Disclaimer of Fiduciary Duties. Except as expressly set forth herein, the Manager shall, in its capacity as Manager, not have any duties or other obligations to the Company or any Member or Licensor. To the extent that there are duties and obligations of the Manager otherwise existing at law or in equity, such duties and obligations are hereby waived and eliminated for all purposes under this Agreement and, to the fullest extent possible, under applicable law.

4.5 Indemnification.

(a) The Company shall indemnify, defend and hold harmless the Manager, and its respective officers, directors, partners, members, employees and Affiliates thereof, any other person who serves at the request of

 

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the Manager on behalf of the Company as an officer, advisor, director, member or employee of any other Entity (each such person an “Indemnitee”) against any loss, expense, damage, claim, liability, obligation, judgment or injury, including any judgment, award, settlement, fines, penalties, reasonable attorney’s fees and other costs or expenses (collectively, “Losses”) incurred, suffered or sustained by any of them in connection with the defense of any actual or threatened, civil or criminal, action, proceeding or claim (each, an “Action”) by reason of any act, omission or alleged act or omission by them arising out of their respective activities on behalf of the Company or in furtherance of the interests of the Company, all of which shall be charged to and paid by the Company as incurred; provided, however, that, the acts, omissions or alleged acts or omissions upon which such Action is based were performed or omitted in good faith and were not fraudulent, in bad faith or as a result of wanton and willful misconduct. The foregoing right of indemnification shall inure to the benefit of the executors, administrators, personal representative, successors or assigns of each such Indemnitee and shall continue regardless of whether such Indemnitee remains in the position or capacity pursuant to which such Indemnitee became entitled to indemnification under this Section 4.5.

(b) The Company shall pay the expenses incurred by any Indemnitee in defending an Action or in opposing any claim arising in connection with any potential or threatened Action in advance of the final disposition of such Action, upon receipt of a written undertaking by such Indemnitee to repay such payment if such Indemnitee shall be ultimately determined not to be entitled to indemnification therefor as provided herein.

(c) The Manager shall use commercially reasonable efforts to obtain the funds needed to satisfy the Company’s indemnification obligations under this Section 4.5 from Persons other than the Members or the Company (for example, pursuant to insurance policies that provide primary coverage) before causing the Company to make payments pursuant to this Section 4.5.

(d) The Company may purchase and maintain insurance with such limits or coverages as the Manager reasonably deems appropriate, at the expense of the Company and to the extent available, for the protection of any Indemnitee against any Losses incurred by such Indemnitee in any such capacity or arising out of its status as such, whether or not the Company would have the power or obligation to indemnify such Indemnified Person against such Losses under the Act or the provisions of this Section 4.5. The Manager may purchase and maintain insurance on behalf of the Company for the protection of any officer, director, employee, consultant or other agent of any other Entity in which the Company owns an interest or of which the Company is a creditor against similar liabilities.

(e) If this Section 4.5 or any portion hereof shall be invalidated on any ground by any arbitrator or court of competent jurisdiction, then the Company shall nevertheless indemnify and hold harmless each Indemnified Person pursuant to this Section 4.5 to the fullest extent permitted by any applicable portion of this Section 4.5 that shall not have been invalidated and to the fullest extent permitted by applicable law.

4.6 Delegation of Authority. The Manager may, from time to time, delegate to one or more Persons (including any Member or Company Party) such authority and duties as the Manager may deem advisable.

ARTICLE 5

DISTRIBUTIONS AND ALLOCATIONS;

TAX MATTERS

5.1 Timing of Distributions. The Manager shall cause the Company to distribute (i) Distributable Cash other than Net Sale Proceeds realized by or available to the Company for each Annual Period no less frequently than once per annum; provided that if the estimated distribution per Share is not expected to exceed $0.02, as adjusted appropriately for any dividend in Equity Securities, Share split, combination or other similar recapitalization with respect to the LLC Units, the Manager may elect to not make a distribution in such Annual Period, and (ii) Net Sale Proceeds, if any, realized by or available to the Company (after deducting therefrom an amount for addition to a reserve for contingencies, working capital, and the payment of unreserved or unfunded Company obligations, such amounts to be established by the Manager in its discretion) within thirty (30) days following the receipt by the Company of the Net Sale Proceeds.

5.2 Distributions. Prior to the dissolution of the Company and subject to Section 5.1, any Distributable Cash to be distributed shall be Distributed among all Members in accordance with their respective Base Percentages measured at the close of business on the record date for the Distribution.

 

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5.3 Record Date. The Manager may establish a record date for making a Distribution, which record date shall be a date not earlier than the date of declaring the Distribution and not later than thirty (30) days thereafter. If no record date is expressly established, the record date shall be the date the Manager declared the Distribution.

5.4 Tax Elections and Returns.

(a) The Manager shall, without further consent of the Members being required, have the authority to make any and all elections for federal, state, and local tax purpose; provided that the Company shall affirmatively elect to be treated as a corporation, and not be classified as a partnership, for federal, state and local tax purposes. The taxable year shall be the Company’s fiscal year.

(b) The Manager shall arrange for the preparation and timely filing of all tax returns required to be filed by the Company.

5.5 Withholding. The Company shall comply with any applicable withholding requirements under U.S. federal, state and local law and foreign law and shall remit amounts withheld to and file required forms with the applicable jurisdictions. To the extent the Company is required to withhold and pay over any amounts to any authority with respect to Distributions to any Member, the amount withheld shall be deemed to be, at the option of the Manager, either a distribution to or a demand loan by the Company to such Member in the amount of the withholding. In the event of any claimed over-withholding, Members shall be limited to an action against the applicable taxing authority. If the amount was deemed to be a demand loan, the Company may, at its option, (a) at any time require the Member to repay such loan in cash, or (b) at any time reduce any subsequent distributions by the amount of such loan. Each Member agrees to furnish the Company with any representations and forms as shall reasonably be requested by the Company to assist it in determining the extent of, and in fulfilling, its withholding obligations.

5.6 Offset. Whenever the Company is to pay any sum to any Member, any amounts that such Member owes to the Company or any of its Subsidiaries under any promissory note or other debt instrument issued to the Company or any of its Subsidiaries or any other bona fide obligation owed to the Company or any of its Subsidiaries that is then due and unpaid may be deducted from that sum before payment.

ARTICLE 6

MEMBERS

6.1 Limited Voting and No Management Rights. Except as required by non-waivable provisions of the Act and as provided in Section 9.2(a), no Member or Licensor shall have any voting or consent rights under this Agreement or the Act with respect to the LLC Interests held by such Member or Licensor, including with respect to any matters to be decided by the Company or any other governance matters described in this Agreement, and no Member or Licensor shall take part in the management or control of the affairs or business of the Company. Each Member, by its acceptance of any LLC Interests or by becoming a party hereto, expressly waives all consent, voting and management rights or other rights to participate in the governance of the Company, whether such rights may be provided under the Act or otherwise, except for the limited Liquidator appointment right set forth in Section 9.2(a). The Members and Licensors hereby agree and consent to the grant to, and exercise by, the Manager of the powers, rights and authorities conferred upon it by the Act and this Agreement.

6.2 Advisory Votes. The Manager may from time to time submit matters to an advisory vote of the Members, subject to such rules and procedures as the Manager may establish from time to time and publish to the Members. An advisory vote shall in no event be binding to any extent on the Company or the Manager. For avoidance of doubt, an advisory vote need not be by meeting or written consent, need not have a quorum, and, without limiting the generality of the foregoing, may have any standard of approval determined by the Manager and may be conducted entirely online using Electronic Records.

6.3 Meetings of Members.

(a) Notice. In the event a vote or consent of Members is required pursuant to in Section 9.2(a) or applicable law, or at the election of the Manager in its sole discretion, the Company may hold a meeting of Members

 

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at such places and at such times as determined by the Manager with at least ten (10) and not more than sixty (60) days prior written notice to the Members entitled to vote thereon or consent thereto, which notice shall state the purpose or purposes for which such meeting is being called.

(b) Cancellation or Postponement. The Manager may cancel or postpone any previously scheduled meeting of the Members by notice to the Members given prior to the date previously scheduled for such meeting. In the case of a postponement, the new time must not be less than ten (10) and not more than sixty (60) days after the date of such notice.

(c) Waiver of Notice. The actions taken by the Members entitled to vote at any meeting (as opposed to by written consent), however called and noticed, shall be as valid as though taken at a meeting duly held after regular call and notice if (but not until) each Member entitled to vote or consent thereat, as to whom it was improperly called or held, appears at such meeting without protest, or either before, at or after the meeting, signs a written waiver of notice or a consent to the holding of such meeting or an approval of the minutes thereof.

(d) Remote Participation. Members entitled to vote on matters at a meeting of Members may participate by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

(e) Proxies. Each Member entitled to vote on any matter that is permitted or required to be voted upon by the Members entitled to vote may authorize another Person or Persons to act for him or her by proxy with respect to such Member’s LLC Interests. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the LLC Interests to which it relates or an interest in the Company generally.

(f) Quorum. Ten percent (10%) of the outstanding LLC Interests entitled to vote on a matter, represented in person or by proxy, shall constitute a quorum sufficient for conducting meetings and making decisions; provided that in the case of the appointment of a Liquidator pursuant to Section 9.2(a), if quorum is not reached at the first meeting to appoint a Liquidator despite reasonable efforts to obtain attendance at the meeting, at the next meeting called for the appointment of a Liquidator, there shall be no minimum quorum requirement.

(g) Voting. Except as expressly otherwise provided in this Agreement and except for non-waivable provisions of the Act, each Member shall be entitled to one (1) vote per Voting Unit held by such Member on all matters (if any) submitted to the Members for a vote, voting as a single class of LLC Interests. Unless otherwise required by this Agreement of the Act, a majority of votes cast on any such matter at a meeting duly held and at which a quorum is present shall approve or authorize such matter by the Members.

(h) Costs. All costs and expenses of the meeting shall be a Company expense.

(i) General. The Manager may from time to time adopt and publish to the Members such other procedures governing meetings and the conduct of business at such meetings as it shall deem appropriate.

6.4 Written Consents. The actions by the Members entitled to vote or consent may be taken by written consent (without a meeting and without a vote) so long as such written consent is signed by the Members holding not less than the minimum number of Voting Units that would be necessary to authorize or take such action at a meeting at which all Members entitled to vote thereon or consent thereto were present and voted. Prompt notice of the action so taken without a meeting shall be given to those Members entitled to vote or consent who have not so signed such written consent. Any action taken pursuant to such written consent of the Members shall have the same force and effect as if taken by the Members at a meeting thereof. The Company may solicit written consents via the Company’s website (or such other electronic or digital method as determined by the Manager which requires reasonable authentication) and may consist entirely of Electronic Records.

6.5 Members as Creditors. Any Member who is a bona fide creditor of the Company as a lender thereto or by reason of any other debtor/creditor relationship therewith (in each case with the approval of Members as and to the

 

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extent required hereby) shall be permitted, in the event of any breach thereof or default thereunder, to take such action and to exercise and pursue such other rights, powers or remedies against the Company or against any other obligor, which rights, powers or remedies is or are available to such Member by law, in equity or by contract; and the taking of any such action, the exercise and pursuit of any such right power or remedy, and the execution or foreclosure on any Company property in connection therewith, shall each be understood to be for the benefit of the creditor/Member only and shall not be deemed or understood to cause or permit a reconstitution of the Company for the benefit of any other Member.

6.6 Non Partition. No Member shall be entitled to seek or obtain partition of any Company property, or to own or use particular or individual assets of the Company, whether by court decree or otherwise.

6.7 No Distributions of Property. No Member may demand or receive property other than cash in return for its contributions, loans or advances or upon dissolution as provided herein, except upon the written approval of the Manager.

6.8 Limitation of Liability. Except as otherwise provided by non-waivable provisions of the Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and no Member, Licensor or Manager shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being or acting as a Member, Licensor or Manager. A Member’s liability (in its capacity as such) for debts, liabilities and losses of the Company shall be limited to such Member’s share of the Company’s assets; provided that a Member shall be required to return to the Company any Distribution made to it in clear and manifest accounting error or similar error. The immediately preceding sentence shall constitute a compromise to which all Members have consented within the meaning of the Act. Notwithstanding anything herein to the contrary, except as required by applicable law, the failure of the Company to observe any formalities or requirements relating to the exercise of its powers or management of its business and affairs under this Agreement or the Act shall not be grounds for imposing personal liability on any Member, Licensor or Manager for liabilities of the Company.

6.9 Lack of Authority and Agency. No Member or Licensor, in its capacity as such, has the authority or power to act for or on behalf of the Company in any manner or way, to bind or sign for the Company, to undertake or enter into any transactions on behalf of the Company, or do any act that would be (or could be construed as) binding on the Company, in any manner or way, or to make any expenditures on behalf of the Company.

6.10 Information Requests. In order for the Company to comply with applicable laws, rules, regulations, orders, directives, or special measures that may be required by government regulators, or interpretation thereof by the appropriate regulatory authority having jurisdiction thereover, and to which the Company or Manager is subject, or to comply with its obligations to third parties who desire to access the Database, at the reasonable request of the Manager and in the timeframes reasonably determined by the Manager, each Member and Licensor agrees to use his or her reasonable best efforts to provide the Manager additional documentation verifying, among other things, such Member’s or Licensor’s identity and taxpayer identification number or equivalent. Requests for documentation may be made at any time during which a Person is a Member or Licensor. Each Member and Licensor acknowledges that the Manager may (i) provide such information, or report the failure to comply with such requests, to Governmental Authorities, and (ii) make such disclosure or report without notifying such Member or Licensor that the information has been provided.

6.11 Resignation and Removal. A Member may resign as a Member for all purposes at any time by redeeming all of its LLC Interests as provided in Section 8.2. A Member shall automatically cease to be a Member for all purposes immediately upon such Member ceasing to own of record any LLC Interests, whether due to redemption of all of his or her LLC Interests by the Member or by the Company, by permitted assignment of all of his or her LLC Interests, or otherwise, without the need for any action by the Company or such Member. Upon such resignation or ceasing to be a Member, (a) the prior Member shall no longer be entitled to the rights of a Member under this Agreement, including any rights to further Distributions, irrespective of whether Distributable Cash was available for Distribution at or prior to such time, and (b) the Manager shall update or cause to be updated the Schedule of Members.

6.12 Licensors. If a Member ceases to be a member for any reason, such former Member shall become a Licensor of any Member Data that, by prior request of such Member, has been Archived, Licensed or Donated, and

 

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the Company shall Purge any other Member Data which such Member Contributed. A Licensor may at any time request the Company to Purge his or her Archived or Licensed Member Data. If all of a Licensor’s Member Data has been Purged, such Licensor shall forthwith cease to be a Licensor.

6.13 Indemnification and Reimbursement. Except as otherwise provided in Section 4.4 or 6.8, if the Company is required by law to make any payment to a Governmental Authority that is specifically attributable to a Member or a Member’s status as such (including federal withholding taxes, state personal property taxes, and state unincorporated business taxes), then such Member shall indemnify and contribute to the Company in full for the entire amount paid (including interest, penalties and related expenses). A Member’s obligation to indemnify and make contributions to the Company under this this Section 6.13 shall survive the termination, dissolution, liquidation and winding up of the Company, and for purposes of this Section 6.13, the Company shall be treated as continuing in existence.

6.14 Substituted Members. In connection with the assignment of any LLC Interests of a Member permitted under the terms of this Agreement and any applicable Subscription Agreements, and any other agreements contemplated hereby and thereby, the Transferee shall become a substituted Member (a “Substituted Member”) with respect to the assigned LLC Units on the later of (a) the effective date of such assignment and the Substituted Member’s Joinder, and (b) the date on which the Manager approves such Transferee as a Substituted Member and updates or causes to be updated the Schedule of Members to reflect such assignment and admission.

6.15 Additional Members. Subject to the terms and conditions of this Agreement, the Manager has the right and power, but not the obligation, from time to time to admit any Person to the Company as an additional Member (an “Additional Member”), without the consent of any Member or group of Members, on such terms the Manager may determine from time to time, and in connection therewith, shall have the rights and powers set forth in Section 3.1; provided that such new member furnishes to the Company (a) a Joinder, and (b) such other documents or instruments as may be deemed necessary or appropriate by the Manager to effect such Person’s admission as a Member. Such admission shall become effective on the date on which such conditions have been satisfied and the Manager updates or causes to be updated the Schedule of Members to reflect such admission.

ARTICLE 7

BOOKS AND RECORDS;

TAX MATTERS

7.1 Accounting. Except as may be otherwise directed by the Manager or required by the Code, the Company shall maintain its books and records on the accrual method of accounting, in accordance with generally accepted accounting principles consistently applied, and on a calendar year basis, which shall be the Company’s fiscal year. Appropriate records will be kept so that upon each closing of the Company’s books it is possible to determine, among other items defined in this Agreement: (a) the Contributions made by each Member; (b) the amount of cash or other property distributed to each Member; (c) the Base Percentages and (d) the amount of Distributable Cash.

7.2 Financial Statements. Within the time period required under SEC regulations, the Company shall furnish to each Member (or make publicly available via EDGAR), with respect to such period, such audited financial statements as are required to be filed with the SEC under applicable regulations.

7.3 Books and Records. The Company shall keep, or cause to be kept, appropriate books and records with respect to the Company’s business, including all books and records necessary to provide any information, lists and copies of documents required to be provided pursuant to Section 7.4 or pursuant to applicable laws (subject to the limitations set forth in Section 7.4). All books of account and all other records of the Company (including an executed counterpart of this Agreement and all amendments hereto, an executed counterpart of the Certificate and all amendments thereto) shall at all times be kept by the Manager at the Company’s principal office address; provided that the Company may maintain all books and records, including the Schedule of Members, as Electronic Records at such principal office address. The Manager hereby agrees to preserve, and to cause the Company to preserve, all financial and accounting records pertaining to the Company and the Database during the existence of the Company and any extension thereof and for six (6) years thereafter.

7.4 Inspection; Limitations.

 

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(a) Each Member (or any representative of such Member), from time to time, upon reasonable notice, shall have the right to inspect and duplicate (1) a copy of this Agreement and the Certificate and all amendments hereto and thereto, and (2) copies of the financial statements referred to in Section 7.2. To the maximum extent permitted by law, the above list constitutes the only Company records to which any Member qua member has a right to access.

(b) Notwithstanding anything to the contract in the Act or this Agreement, and without limiting the generality of Section 7.4(a), to the maximum extent permitted by law, and pursuant to Section 18-305(g) of the Act, no Member shall have the right to access, inspect or duplicate, and no Member may access, inspect or duplicate: (1) the Schedule of Members, (2) any other Member’s Member Data, Commitments, Contributions, name, or address or (3) any other information about any other Member (collectively, the “Member Information”).

(c) The Manager is hereby expressly granted the right, power and authority, pursuant to Section 18-305(g) of the Act, to expand the definition of Member Information and to restrict any right of any Member to obtain, inspect or otherwise access the same.

(d) Each Member agrees that preserving the privacy of such Member’s Member Data and other personal or personally identifiable information from inspection by other Members is critical and of the essence of this Agreement and such Member’s decision to become a Member, and accordingly irrevocably agrees to and approves all of the provisions of this Section 6.4. To the maximum extent permitted by the Act and other applicable law, each Member hereby waives any right it may from time to time have, including pursuant to Section 18-305 of the Act, to obtain, inspect or otherwise access, directly or indirectly, any other Member’s Member Information, or any part thereof, from the Company.

ARTICLE 8

TRANSFER AND REDEMPTION OF

LIMITED LIABILITY COMPANY INTERESTS

8.1 Transfer of LLC Interests by Members.

(a) Transfers Void. No Member may sell, convey, assign, pledge, hypothecate, transfer or otherwise dispose of or encumber any LLC Interests or any part thereof or interest therein, either directly or indirectly (any of the foregoing, a “Transfer”), and no purported Transferee will be registered as a holder of any such Equity Securities (or any economic interest therein) or admitted as a Substituted Member; provided that, with the prior written consent of the Company, which may be granted or withheld in the Manager’s sole discretion, a Member may assign its Shares so long as all Shares issued in connection with the Contribution of any item of Member Data are assigned as a block. Subject to Section 8.2, any purported Transfer which is attempted to be made without strict compliance with the foregoing requirements shall be null and void ab initio and without any force or effect. Unless expressly provided otherwise by the Manager in its written consent to a proposed Transfer under this Section 8.1, such Transfer shall be subject to the other applicable provisions of this Article 8.

(b) Permitted Assignments. In the event the Manager elects, in its sole discretion, to permit an assignment of LLC Interests:

(1) Instruments of Transfer. The Transferor and Transferee shall deliver to the Manager (A) a duly executed and acknowledged instrument of assignment, setting forth the intention of the assignor that the assignee become a Substituted Member in its place, in form and substance satisfactory to the Manager, including such information or supplemental information about the Transferee or the assignment as the Manager may reasonably request, and (B) such other instruments, in such form and substance, as the Manager deems necessary or desirable to effect such Transfer or admission.

(2) Additional Assurances. The Manager may request adequate assurances that the proposed Transfer (i) will have any adverse tax consequences (federal, state, or local) to the Company, the Manager or any Members, (ii) may be lawfully effected without registration under the Securities Act, (iii) does not violate state securities or “blue sky” laws, (iv) will not cause the Company to be subject to any additional regulatory requirements, (v) complies with any Transfer restrictions set forth in any applicable

 

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Subscription Agreement, and (vi) is consistent with the purpose of the Business and the values of the Member community. Such assurances may include such opinions of counsel and such representations, warranties, covenants and conditions as the Manager may reasonably request.

(3) Transferor Loss or Rights. Any Member who assigns any LLC Interests in the Company shall cease to be a Member with respect to such LLC Interests and shall no longer have any rights or privileges of a Member with respect thereto. If after the assignment of LLC Interests a Member no longer holds any LLC Interests, such Member shall cease to be a Member as provided in Section 6.11.

(4) Joinder to This Agreement. Each assignee of LLC Interests who is not already a Member shall, as a condition prior to the assignment thereof, execute and deliver to the Company a Joinder; provided that any assignee of any LLC Interests, irrespective of whether such assignee has accepted and adopted in writing the terms and provisions of this Agreement, shall be deemed by the acceptance of the benefits of the assignment thereof to have agreed to be subject to and bound by all of the terms and conditions of this Agreement that the assignor was subject to or by which such the assignor was bound.

(5) Assignment Fees and Expenses. The assignor and assignee of any LLC Interests shall be jointly and severally obligated to reimburse the Company for all reasonable expenses (including attorneys’ fees and expenses) of any assignment or proposed assignment, whether or not consummated. All costs incurred by the assignee or assignor associated with a proposed assignment, including any legal opinion delivered pursuant to Section 8.1(b)(2), shall also be borne by the assignor and assignee.

(6) Effective Time. A permitted assignment shall be effective upon the latest to occur of (A) the Manager approving the assignment and all instruments of transfer associated therewith, (B) the Manager admitting the assignee as a Member (if the assignee was not already a Member) as provided in Section 6.14 or 6.15, and (C) the Manager updating (or causing to be updated) the Schedule of Members to reflect such assignment and, if applicable, admission.

8.2 Redemption of Shares.

(a) Redemption by Member. A Member or Licensor may, at any time and from time to time, elect to terminate the License for Member Data he or she Contributed to the Company by written notice to the Company made in accordance with the then current Member Data Policies and applicable Subscription Agreement (i) identifying the Member Data for which the License is to be terminated, and (ii) requesting the redemption of the outstanding Shares issued in connection with the Contribution thereof in exchange for such termination. The provisions of the Member Data Policies applicable to redemptions of outstanding Shares may not unreasonably restrict, condition or delay any Member’s or Licensor’s election right as set forth in the immediately prior sentence. A Member may elect, either at the time of an elective redemption or prior thereto (in which event such election may be revoked), either to authorize the Company to Archive or License, or to Donate, all or specified portions of such Member Data.

(b) Voluntary Transfer. In the event a Member attempts to Transfer any Shares without the prior written consent of the Company (as required by Section 8.1), in addition to not registering or otherwise giving effect to such purported Transfer, the Manager may in its discretion cause the Company to redeem all of such Shares.

(c) Member Death. In the event of the death of a Member, the Company shall redeem all outstanding Shares held by such Member. A Member may however elect at any time to Donate all or specified portions of such Member’s Member Data in the event of such Member’s death (in which event such Member Data need not be Purged upon such redemption of such Member’s Shares, unless, in the Manager’s opinion, not to do so would violate any applicable law, order, judgment, stipulation or decree), or to revoke such an election.

(d) Other Involuntary Transfer. In the event of a purported Transfer of outstanding Shares not subject to the foregoing subsections of this Section 8.2, whether by order or decree (such as in the case of the entry of a final judgment in a divorce or attachment proceeding), bankruptcy, or otherwise, to the maximum permitted by applicable law, order, judgment, stipulation or decree, the Company shall redeem all such Shares. A Member may elect at any time after becoming a Member either to authorize the Company to Archive or License, or to Donate, all or specified portions of his or her Member Data contributed in connection with the issuance of such Shares in the

 

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event of such a purported Transfer thereof; provided that the Company shall nonetheless not maintain a Licensed or Archived copy of, or accept a Donation of, such Member Data and instead Purge such Member Data if, in the Manager’s opinion, to do so would violate any applicable law, order, judgment, stipulation or decree.

(e) Unacceptable Member Data. In the event that the Manager determines, in its discretion, that a Member has deliberately provided false, incorrect or otherwise unusable Member Data, including Member Data which has been altered after collection or which pertains to an individual other than the Member, after issuance of Shares in connection with the Contribution thereof, the Manager (i) shall redeem all of the Shares issued in connection with the Contribution of such Member Data, and (ii) may redeem all Shares issued to such Member in connection with such Member’s Contribution of other Member Data selected by the Manager, up to and including all such Member’s other Member Data.

(f) Purging Specified Member Data. If at any time the Manager determines that a certain type or class of Member Data is no longer desirable for the Company to maintain in any Database, the Manager may elect by written notice to Members who have Contributed such Member Data to redeem all Shares issued in connection with the Contribution of such Member Data.

(g) Additional Redemptions. In the event any Shares are to be redeemed pursuant to the foregoing subsections of this Section 8.2, the Company shall at the same time redeem the following additional Shares (if any).

(1) In the event some (but not all) Shares issued in connection with the Contribution of particular Member Data are to be redeemed, the Company shall also redeem all other Shares issued in connection with the Contribution of such Member Data.

(2) In the event the Contribution of a particular type of Member Data (the “Dependent Member Data”) is conditioned upon the Contribution of other specified types of Member Data (the “Underlying Member Data”), and all of the Shares issued for the Contribution of Underlying Member Data are redeemed, then the Company shall also redeem all of Shares issued for the Contribution of such Dependent Member Data.

(h) Effect of Redemption. In the event of the redemption of Shares as provided in this Section 8.2, (i) the Company shall promptly (A) cancel such Shares, without any further consideration to such Member, and (B) unless otherwise provided in or pursuant to the foregoing subsections of this Section 8.2 (in which case such other provision shall apply), the Company shall promptly Purge the Member Data which was Contributed in connection with the issuance of such Shares, and (ii) without limiting the generality of immediately preceding clause (i), such Member shall no longer be entitled to any rights to Distributions in respect of such Shares, irrespective of whether Distributable Cash was available for Distribution at or prior to the time of such redemption. If after the redemption of Shares a Member no longer holds any LLC Interests, such Member shall forthwith cease to be a Member as provided in Section 6.11.

(i) Surrender of Share Certificates. Each Member agrees that upon the redemption of Shares as provided in this Section 8.2, if such Shares were certificates, such Member or his or her legal representative shall promptly deliver the certificates for such Shares to the Company for cancellation. If the Member or his or her legal representative does not do so, the Company shall nevertheless enter the transfer on its records. In the event such certificate evidenced Shares in addition to the Shares being redeemed, the Company shall forthwith issue and deliver to or upon the order of such Member a new certificate of like tenor, in the name of such Member, providing on the face thereof for the number of Shares which such certificate represented which have not been so redeemed.

8.3 Status of LLC Interests Transferred. In the event of any transfer, assignment or conveyance (or retransfer, reassignment or reconveyance) of any LLC Interest by a Member or other Person, by the express terms of this Agreement or by operation of law, the transferee or assignee shall succeed to the same Base Percentages, distribution priorities and ownership rights as were incident to the interest so transferred, assigned or conveyed.

8.4 Legend. In the event the Company issues certificated LLC Interests or other Equity Securities, such certificated Equity Securities shall bear a legend similar to the following:

 

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“THE LLC INTERESTS REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE SECURITIES OR “BLUE SKY” LAWS (“STATE ACTS”), AND MAY NOT BE SOLD, ASSIGNED, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OR QUALIFICATION UNDER THE ACT OR STATE ACTS OR AN EXEMPTION FROM REGISTRATION OR QUALIFICATION THEREUNDER.

“THE TRANSFER OF THE SECURITIES, OR ANY INTEREST THEREIN, IS SUBJECT TO THE RESTRICTIONS AND CONDITIONS SPECIFIED IN THAT CERTAIN LIMITED LIABILITY COMPANY AGREEMENT, DATED AS OF APRIL 23, 2018, AS AMENDED AND MODIFIED FROM TIME TO TIME (THE “LLC AGREEMENT”), GOVERNING THE ISSUER HEREOF (THE “COMPANY”), BY AND AMONG ITS MEMBERS. THE SECURITIES MAY ALSO BE SUBJECT TO ADDITIONAL TRANSFER RESTRICTIONS, CERTAIN VESTING PROVISIONS, REPURCHASE OPTIONS, OFFSET RIGHTS AND REDEMPTION PROVISIONS SET FORTH IN THE LLC AGREEMENT OR A SEPARATE AGREEMENT WITH THE INITIAL HOLDER. A COPY OF THE LLC AGREEMENT, AND ANY SUCH SEPARATE AGREEMENT, SHALL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE.”

If a holder of certificated Equity Securities delivers to the Company an opinion of counsel, satisfactory in form and substance to the Manager (which opinion may be waived by the Manager), that no subsequent transfer of such Equity Securities shall require registration under the Securities Act or qualification under state securities or “blue sky” laws for further transfers, then the Company shall promptly upon such contemplated transfer deliver new Equity Securities of like tenor which do not bear the portion of the restrictive legend relating to the Securities Act and state securities or “blue sky” laws set forth in this Section 8.4.

ARTICLE 9

DISSOLUTION AND TERMINATION

9.1 Dissolution.

(a) The Company will have a perpetual existence, except that the Company shall be dissolved upon the occurrence of any of the following (and under no other) circumstances:

(i)    one hundred eighty (180) days after the resignation or dissolution of the Manager, unless prior to such date a successor manager assumes the powers, authorities, rights, liabilities, and obligations of the Manager under this Agreement and the Management Agreement in accordance with the terms hereof and thereof or pursuant to the order of a court of competent jurisdiction;

(ii) the written approval of the Manager; and

(iii) the entry of a decree of judicial dissolution of the Company under Section 35-5 of the Act or an administrative dissolution under Section 18-802 of the Act;

provided, however, that the Company shall not terminate until its affairs have been wound up and its assets distributed as provided herein.

(b) Notwithstanding the dissolution of the Company, prior to the termination of the Company, the business of the Company and the affairs of the Members, as such, shall continue to be governed by this Agreement, including making amendments to this Agreement pursuant to Section 10.9 or granting waivers or consents hereunder.

9.2 The Liquidator.

(a) Upon the dissolution of the Company, (i) if the Manager is the manager of the Company, the Manager shall act as Liquidator or appoint a Member or other Person to act as Liquidator; or (ii) otherwise, then a

 

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Majority in Interest (or their legal representatives, successors or assigns) shall select a Member (or, if no Member is willing to accept such appointment, any Person reasonably competent to act in that capacity) to act as Liquidator.

(b) The Liquidator, as trustee for the benefit of all Members, will take any and all action necessary or appropriate to complete the liquidation and distribution as provided in this Article 9, and in performing its duties shall have all of the rights, powers and obligations of the Manager hereunder.

(c) The Liquidator shall proceed diligently to wind up the affairs of the Company and distribute its assets in the manner provided in this Agreement and the Act (including in a manner that avoids the imposition of personal liability upon the Manager or any Member pursuant to such requirements); provided that a reasonable period of time shall be allowed for the orderly winding-up of the business and affairs of the Company and the liquidation of its assets pursuant to this Article 9 in order to minimize any losses otherwise attendant upon such winding-up.

(d) The costs of liquidation, including reasonable compensation to the Liquidator for his or her services, shall be borne as a Company expense.

(e) The Liquidator shall not be personally liable for the return or payment of Capital Contributions, or any portion thereof, to the Members.

(f) The Liquidator will prepare a final statement of the accounts of the Company as of the date of termination.

9.3 Distributions and Other Matters. Promptly upon the dissolution of the Company, the Liquidator shall (i) Purge all Member Data that remains under the Company’s possession or control, (ii) liquidate any non-cash assets of the Company (for avoidance of doubt, Member Data shall not be liquidated), and (iii) apply and distribute any cash and any proceeds of liquidation, to the extent available, in the following order of priority:

(a) to payment of the debts and liabilities of the Company (other than those to Members) in the order of priority provided by law;

(b) to payment of the expenses of liquidation of the Company in the order of priority provided by law;

(c) to the setting up of such reserves as the Liquidator may deem reasonably necessary for any contingent or unforeseen liabilities or obligations of the Company arising out of or in connection with the Company business; provided that any such reserve will be held by the Liquidator for the purposes of disbursing such reserves in payment of any of the aforementioned contingencies and, at the expiration of such period as the Liquidator shall deem advisable (but in no case to exceed eighteen (18) months from the date of dissolution unless an extension of time is consented to by a Majority in Interest), to distribute the balance thereafter remaining in the manner hereinafter provided;

(d) to the Members or Manager in repayment of the entire principal amounts of any outstanding loans from any such Member or Manager made to the Company together with all accrued but unpaid interest thereon, first on account of accrued interest thereon (in proportion to the interest so accrued) and then in repayment of the principal amounts thereof (in proportion to the respective outstanding amounts of principal); and, thereafter,

(e) to the Members in accordance with their respective Base Percentages.

9.4 Compromise. The distribution of cash or property to the Members in accordance with the provisions of Section 9.3 constitutes a complete return to each Member of its Contributions and a complete distribution to the Members of their respective interests in the Company and all Company property, and constitutes a compromise to which all Members have consented within the meaning of the Act. To the extent that a Member returns funds to the Company, it has no claim against any other Member for those funds.

9.5 Securityholders Agreement. To the extent that equity securities of any Subsidiary of the Company are distributed to any Members, unless otherwise agreed to by the Liquidator, such Members shall, as a condition to being

 

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assigned such equity securities, enter into a securityholders agreement with such Subsidiary and each other such Member which contains restrictions on the Transfer of such equity securities and other provisions (including with respect to the governance and control of such Subsidiary) in form and substance similar to the provisions and restrictions set forth herein (including Article 4).

9.6 Cancellation of Certificate. Upon completion of the distribution of Company assets as provided in this Article 9, the Company shall be terminated (and the Company shall not be terminated prior to such time), and the Liquidator (or such other Person or Persons as the Act may require or permit) shall file a certificate of cancellation with the Secretary of State of the State of Delaware, cancel any other filings made pursuant to this Agreement that are or should be canceled and take such other actions as may be necessary to terminate the Company. The Company shall be deemed to continue in existence for all purposes of this Agreement until it is terminated pursuant to this Section 9.6.

ARTICLE 10

MISCELLANEOUS

10.1 Notices.

(a) All notices, demands, requests, calls and other communications required by or permitted under this Agreement shall be in writing (whether or not a writing is expressly required hereby) and shall be directed if to a Member, at its respective address appearing on the records of the Company and if to the Company or the Manager as follows (or to such other address as the Company or Manager may notify to the Members from time to time):

To the Company:

LunaDNA, LLC

415 South Cedros Avenue, Suite 260

Solana Beach, California, 92075

Attention: Manager

Email: Members@lunadna.com

To the Manager:

LunaPBC, Inc.

415 South Cedros Avenue, Suite 260

Solana Beach, California, 92075

Attention: Member Relations

Email: Members@lunapbc.com

(b) Any Member may specify a different address by sending to the Company and to the Manager a notice of such different address, which must include a valid email address. If the address of the Company or of the Manager is changed, a written notice of such change of address shall be sent by the Manager to each Member.

(c) All notices, demands or requests required or permitted under this Agreement must be in writing, and shall be made by hand delivery, registered or certified mail (with return receipt requested), overnight courier service by a reputable overnight courier service (with tracking enabled), or electronic mail, in each case, to the address or electronic mail address provided by such Member at the time of admission, subject to Section 10.1(b). Any such notice or communication shall be deemed duly given: (i) if delivered by hand, (A) if delivered on a Business Day, upon delivery, or (B) otherwise, on the next Business Day after delivery; (ii) if deposited for next day delivery with a courier service with tracking enabled; (iii) if sent via registered or certified mail, five (5) Business Days after being deposited in the mail, postage prepaid, return receipt requested; and (iv) if sent by electronic mail, when receipt is acknowledged by return electronic mail (excluding any automated replies) or other written notice.

10.2 Mandatory Arbitration. To the maximum extent permitted by law, all Claims (collectively, but subject to Section 10.2(c), the “Covered Claims”), will be resolved by final and binding arbitration in San Diego, California, as follows:

 

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(a) Administrator. The arbitration of all Covered Claims will be administered by the American Arbitration Association (“AAA”) in accordance with the AAA Commercial Arbitration Rules then in effect, except that the arbitration proceedings will be governed by California procedural law as if the Covered Claims had been brought in a state court of California; provided, however, that (i) the parties hereto waive any right to jury; (ii) there shall be no interlocutory appellate relief (such as writs) available; (iii) discovery will be limited to matters which are directly relevant to the issues in the arbitration; and (iv) any award of the Arbitrator shall be final and binding and non-appealable.

(b) Selection of Arbitrator. The arbitration will take place in the San Diego office of AAA and be conducted by a single, neutral arbitrator (“Arbitrator”), to be selected as follows. Within seven (7) Business Days from service of an arbitration complaint, the parties thereto will endeavor in good faith to agree upon an Arbitrator. Failing such agreement, (i) the parties, or any party, thereto will ask AAA to supply the parties thereto with a list of no less than seven arbitrators (all of whom shall disclose and clear any potential conflicts) having no less than five (5) years’ experience in arbitrating complex business arrangements; (ii) upon receipt of that list of potential arbitrators, each of the parties thereto will communicate within seven (7) days to AAA the names of four arbitrators from the list that such party would agree to use, or its right to participate in the selection of the arbitrator will be forfeited; (iii) as soon as AAA receives the selections from affected parties, AAA will review the selected arbitrators and appoint one of those arbitrators whose name appears on all of the lists submitted by the parties; and (iv) AAA will have the discretion to select the arbitrator that it believes is best suited for the arbitration in terms of experience and availability, and AAA’s selection will be final.

(c) Excluded Claims. The term “Covered Claims” as used in this Agreement does not include (1) compulsory or permissive cross-claims between or among the parties that arise in a legal action brought by or against a non-signatory hereto (a “Non-Signatory Action”), or (2) claims or counterclaims brought by a Member pursuant to the Securities Act or the Exchange Act, or the rules and regulations thereunder. However, a party that has the right to assert a permissive cross-claim against another party in a Non-Signatory Action or pursuant to the Securities Act or Exchange Act, or the rules and regulations thereunder. may choose to treat that claim as a Covered Claim and assert it in accordance with the terms of this Agreement. The term “Covered Claims” as used in this Agreement also does not limit the right of any party to (i) foreclose against real or personal property collateral; (ii) exercise self-help remedies relating to collateral or proceeds of collateral such as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before, during or after the pendency of any arbitration proceeding. The exclusions from “Covered Claims” set forth in this Section 10.2(c) do not constitute a waiver or the right or obligation of any party hereto to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in this Section 10.2(c). Issues of arbitrability, both substantive and procedural, shall be decided by arbitration.

(d) Record and Proceedings. A full stenographic or electronic record of all proceedings in the arbitration will be maintained, and the Arbitrator will issue rulings, a statement of decision and a judgment as if the Arbitrator were a sitting judge of the state court of California, with all of the powers (including with respect to remedies) vested in such a judge. The fees and costs of creating and maintaining a stenographic or electronic record will be initially borne by the parties to the arbitration in equal amounts, pro rata.

(e) Res Judicata, Collateral Estoppel and Law of the Case. A decision of the Arbitrator will have the same force and effect with respect to collateral estoppel, res judicata and the law of the case that such decision would have been entitled to if decided in a court of law, but in no event will such a decision be used by or against a party to this Agreement in a Non-Signatory Action.

(f) Jurisdiction/Venue/Enforcement of Award. The parties hereto consent and submit to the exclusive personal jurisdiction and venue of the state and federal courts located in San Diego, California to confirm any arbitration award granted pursuant to this Agreement, including any award granting equitable relief, and to otherwise enforce this Agreement and carry out the intentions of the parties hereto to resolve all Covered Claims through arbitration. This Section 10.2(f) does not prevent the parties hereto from enforcing the award of the arbitrator in the court of any other jurisdiction, to the extent permitted by law (for example, if property that is the subject of the award is located in another jurisdiction).

(g) Confidentiality. All arbitration proceedings will be closed to the public and confidential, and all records relating thereto will be permanently sealed, except to the extent reasonably necessary to obtain court

 

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confirmation of the judgment of the Arbitrator or to give effect to Section 10.2(e) (e.g., in a dispute between the parties hereto that is not a Covered Claim), in which case all filings with any court will be sealed to the extent permitted by the court. A party hereto (including such party’s counsel or other representatives) may disclose to the media only the fact and generic nature of a Covered Claim that is being, or has been, arbitrated pursuant to this Agreement. Nothing in this Section 10.2(g) is intended to, or shall, preclude a party hereto from communicating with, or making disclosures to, its lawyers, tax advisors, auditors, lenders, investors, landlords, regulators and insurers, as necessary and appropriate or from making such other disclosures as may be required by law.

(h) Class Actions. Any arbitration of any Covered Claim will take place on an individual basis without resort to any form of class or representative action. THE PARTIES HERETO, INCLUDING EACH MEMBER AND THE MANAGER, WAIVE ANY RIGHT TO ASSERT ANY CLAIMS AGAINST ANY OTHER PARTY TO AN ARBITRATION AS A REPRESENTATIVE OR MEMBER IN ANY CLASS OR REPRESENTATIVE ACTION, EXCEPT WHERE SUCH WAIVER IS PROHIBITED BY LAW AS AGAINST PUBLIC POLICY. TO THE EXTENT ANY SUCH PARTY IS PERMITTED BY LAW OR ANY COURT OF LAW TO PROCEED WITH A CLASS OR REPRESENTATIVE ACTION AGAINST ANY OTHER SUCH PARTY, THE PARTIES HEREBY AGREE THAT THE PREVAILING PARTY SHALL NOT BE ENTITLED TO RECOVER ATTORNEYS’ FEES OR COSTS ASSOCIATED WITH PURSUING THE CLASS OR REPRESENTATIVE ACTION (NOT WITHSTANDING ANY OTHER PROVISION IN THIS AGREEMENT).

(i) Fees and Costs. The parties to an arbitration will share equally in the fees of the Arbitrator and the administrative costs of the arbitration; provided, however, that the prevailing party in the arbitration will be entitled to recover its fees and costs (including attorneys’ fees) from the other party or parties. For purposes of this Section 10.2(i), the prevailing party shall be the party who is the net winner of the issues in the dispute, taking into account the claims pursued, the claims on which the pursuing party was successful, the amount of money sought, the amount of money awarded, and offsets or counterclaims pursued (successfully or unsuccessfully) by the other party; provided that if a written settlement offer is rejected and the judgment or award finally obtained is equal to or more favorable to the offeror than an offer made in writing to settle, then the offeror is deemed to be the prevailing party from the date of the offer forward.

10.3 Further Assurances. Each Member agree that he or she shall from time to time sign, acknowledge and file any certificates, instruments and documents which may be required to be filed by the Company under the laws of the United States, any state, or any political subdivision thereof, or by any Governmental Authority, or which the Manager reasonably deems it advisable to file, at the cost and expense of the Company.

10.4 Other Remedies. Any Member shall have and shall maintain all rights or remedies it may have against any other Member, at law or in equity or by this Agreement, including rights or remedies for or in respect of conduct constituting a fraud on the Company or on any Member, or for or in respect of a breach of any fiduciary obligation.

10.5 Partial Invalidity. If any one or more of the provisions contained in this Agreement, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason, then the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired, unless the provisions held invalid, illegal or unenforceable shall substantially impair the benefits of the remaining provisions of this Agreement. The Members agree that, pursuant to Section 10.9, the Manager may replace such invalid, illegal or unenforceable provision of this Agreement with a valid, legal and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such invalid, illegal or unenforceable provision, without providing the notice to Members that may otherwise be required.

10.6 Waiver. No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute a waiver of any such breach or any other covenant, duty, agreement or condition.

10.7 Governing Law. This Agreement will be governed by and construed according to the laws of the State of Delaware, without regard to any conflicts of law principles (whether of the State of Delaware or any other jurisdiction) that would cause the application of the substantive laws of any jurisdiction other than the State of Delaware.

 

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10.8 Jurisdiction; Venue; Service of Process. Subject to Section 10.2, any action, suit or other proceeding arising out of or in connection with or related to this Agreement, including claims or counterclaims under the federal securities laws or the rules and regulations thereunder, shall be conducted only in San Diego, California. Each Member, the Manager, the Liquidator and any other party or signatory hereto hereby (a) irrevocably consents and submits to the exclusive personal jurisdiction of and venue in the state and federal courts located in San Diego, California in any legal action, equitable suit or other proceeding arising out of or related to this Agreement or any other Transaction Document (unless expressly otherwise provided in such Transaction Document); (b) waives any right it may have to assert the doctrine of forum non conveniens or similar doctrine or to object to venue with respect to any proceeding brought in accordance with this Section 10.8; (c) stipulates that the state and federal courts located in San Diego, California shall have in personam jurisdiction and venue over each of them for the purposes of litigating any dispute, controversy or proceeding arising out of or related to this Agreement or any such Transaction Document; and (d) agrees that, to the fullest extent permitted by law, service of process may also be made on such party by prepaid certified mail with a proof of mailing receipt validated by the U.S. Postal Service constituting evidence of valid service, and that, to the fullest extent permitted by applicable law, service so made shall have the same legal force and effect as if served upon such party personally within the State of California. By agreeing to the foregoing, a Member will not be deemed to have waived the Company’s or the Manager’s compliance with any federal securities laws or any rules and regulations thereunder.

10.9 Amendment. This Agreement may be amended, modified, or waived, at any time or from time to time, with the written consent of and approval by the Manager, without the consent of any Member. If any such amendment, modification or waiver not specifically authorized hereby may reasonably have an adverse effect on the rights or obligations of any Member, such amendment, modification or waiver shall not be effective until the date thirty (30) days after notice thereof to the Members (and any Member who does not wish to agree to such amendment, modification or waiver may redeem all of its Shares and resign as a Member per Section 6.11). Notwithstanding the foregoing, (a) the provisions of Section 6.8 of this Agreement may not be amended, modified or waived in a manner adverse to any Member, Licensor or Manager without the consent of each affected Member, Licensor or Manager; and (b) the provisions of Section 8.2(a) may not be amended, modified or waived in a manner adverse to any Member or Licensor without the consent of each affected Member or Licensor.

10.10 Grant of Power of Attorney.

(a) Each Member, by executing a Joinder or accepting Shares, irrevocably constitutes and appoints the Manager (and each future Manager and any future Liquidator) such Member’s true and lawful attorney-in-fact, with full power of substitution, with such attorney-in-fact having full power and authority in the Member’s name, place and stead to execute, acknowledge, deliver, swear to, certify, verify, publish, file and record at the appropriate public offices such documents as may be necessary or appropriate to carry out the provisions of this Agreement, including:

(1) all certificates and other instruments (including counterparts of this Agreement necessary or appropriate to reflect the admission of Substituted Members or Additional Members or any other change in the Company and fictitious name certificates), and any amendment thereof, which the Manager deems appropriate to form, qualify or continue the qualification of Company as a limited liability company in the jurisdictions in which the Company may conduct business or own property;

(2) all instruments which the Manager deems necessary or appropriate to reflect any appropriately authorized amendment, change, modification or restatement of this Agreement in accordance with its terms;

(3) all conveyances and other instruments which the Manager or Liquidator deems necessary or appropriate to effect a dissolution, termination and liquidation of the Company, including a certificate of cancellation, to the extent such dissolution, termination and liquidation is pursuant to the terms of this Agreement; and

(4) all instruments relating to the admission, withdrawal or substitution of any Member as provided in Article 6.

 

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(b) Each Member authorizes such attorney-in-fact to take any further action which such attorney-in-fact shall consider necessary or advisable in connection with any of the foregoing, hereby giving such attorney-in-fact full power and authority to do and perform each and every act or thing whatsoever requisite or advisable to be done in and about the foregoing as fully and to the same extent as such Member might or could do if personally present, hereby ratifying and confirming all that such attorney-in-fact shall lawfully do or cause to be done by virtue hereof. Each Member has and does hereby agree to execute any and all additional forms, documents or instruments as may be reasonably necessary or required by the Manager to evidence the power of attorney granted in this Section 10.10.

(c) The appointment by all Members of the Manager and Liquidator as attorney-in-fact is irrevocable and coupled with an interest, in recognition of the fact that each of the Members under this Agreement will be relying upon the power of the Manager or Liquidator to act as contemplated by this Agreement in any filing and other action on behalf of the Company, and shall survive the bankruptcy, death or incompetence of any Member hereby giving such power and the sale, transfer or other assignment of all or any part of the interest of such Member and shall extend to such Member’s heirs, successors, assigns and personal representatives; provided, however, that in the event of the assignment by a Member of all or any part of such Member’s interest, the foregoing power of attorney shall terminate as to the assignor Member if, and at such time as, a Substitute Member is admitted to the Company with respect to the assigned interest and all required documents and instruments, including a power of attorney executed by the substitute Member (including the power of attorney granted in this Section 10.10 upon execution of a Joinder) shall have been duly executed, filed and recorded to effect such substitution.

10.11 Execution in Counterparts. This Agreement may be executed in counterparts (including by means of facsimile or other form of electronic or digital image transmission), each of which shall be deemed an original but all of which taken together shall constitute one and the same agreement. Any Member may become a party to this Agreement by executing a Joinder, including through the Company’s website (or such other method as determined by the Manager).

10.12 Successors and Assigns. Except as otherwise provided herein, all covenants and agreements contained in this Agreement shall bind and inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors, legal representatives and permitted assigns, whether so expressed or not.

10.13 Computation of Time. In computing any period of time pursuant to this Agreement, the day of the act, date of notice, event or default from which the designated period of time begins to run will not be included. The last day of the period so computed will be included, unless it is a Saturday, Sunday or a legal holiday in the State of California, in which event the period runs until the end of the next day which is not a Saturday, Sunday or such legal holiday.

10.14 Table of Contents; Titles and Captions. The Table of Contents preceding this Agreement and all article, section or subsection titles or captions contained herein are for convenience only and are not a substantive part hereof.

10.15 Interpretation. Unless otherwise stated or the context clearly requires otherwise: (a) all article, section, schedule and exhibit references are to the corresponding article or section of, or schedule or exhibit to, this Agreement, (b) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, (c) the singular form of nouns, pronouns and verbs shall include the plural and vice versa, (d) the use of the words “includes,” “including” and words of similar import in this Agreement shall be by way of example rather than by limitation (thus shall be deemed to be followed by the phrase “without limitation”), (e) reference to any agreement, document or instrument means such agreement, document or instrument as amended or otherwise modified from time to time in accordance with the terms thereof, and if applicable, the terms hereof, (f) references to a Fiscal Year shall refer to a portion thereof, and (g) the use of the words “or,” “either” and “any” shall not be exclusive. In the event that an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement. Without limiting the Manager’s authority under Section 14 of the Management Agreement and Section 10.9 of the Operating Agreement or, the Manager may interpret this Agreement in any reasonable manner that resolves any conflicts between the provisions of this Agreement, the Management Agreement and any other Transaction Documents, and such interpretations shall be binding on the Company, the Manager and the Members.

 

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10.16 Entire Agreement. This Agreement, any Subscription Agreement executed in connection with the acquisition of a LLC Interest and any other Transaction Documents contain the entire understanding and agreements among the Members, are intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein, and supersedes any prior understandings and agreements among them respecting the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein or therein. The parties hereto have voluntarily agreed to define their rights, liabilities and obligations respecting the subject matter hereof exclusively in contract pursuant to the express terms and provisions of this Agreement and the other Transaction Documents; and the parties hereto expressly disclaim that they are owed any duties or are entitled to any remedies not expressly set forth in this Agreement or any other Transaction Document.

10.17 Creditors. None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditors of the Company or any of its Subsidiaries, and no creditor who makes a loan to the Company or any of its Subsidiaries may have or acquire (except pursuant to the terms of a separate agreement executed by the Company or any Subsidiary in favor of such creditor) at any time as a result of making the loan any direct or indirect interest in Profits, Losses, Distributions, or capital or property of the Company.

10.18 Consent to Disclosure. The Members hereby consent to the Manager disclosing information it has collected regarding the Members, including the Database and personally identifiable information about the Members, to the Company’s Affiliates, officers, employees and agents, when necessary to accomplish the acquisition, maintenance, operation or licensing of the Database and as otherwise may be required by law, subject to the Company’s published privacy policy applicable to Members or Licensors and Member Data as in effect from time to time.

10.19 Electronic or Digital Delivery of Signatures. This Agreement, any Subscription Agreement or other agreements referred to herein, and each other agreement or instrument entered into in connection herewith or therewith or contemplated hereby or thereby, and any schedules hereto or thereto (collectively, the “Transaction Documents”), and any amendments hereto or thereto or waivers hereof or thereof, to the extent signed and delivered by means of a facsimile machine or electronic or digital transmission in portable document format or other image format or by clickwrap agreement, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any party hereto or to any such other Transaction Document, each other party hereto or thereto shall re-execute original forms thereof and deliver them to all other parties. No party hereto or to any such other Transaction Document and no Member may raise the use of a facsimile machine or electronic or digital transmission to so deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine or electronic or digital transmission or was agreed to via a clickwrap agreement as a defense to the formation or enforceability of a contract and each such party and each Member forever waives any such defense. For purposes of this Section 10.19, “clickwrap agreement” means assent to an agreement evidenced by a user affirmatively clicking a box on a website agreeing to be legally bound by such agreement before such user is allowed to proceed (or any substantially similar mechanism to signal assent).

10.20 Survival. Sections 4.4, 4.5 and 6.13 and this Article 10 shall survive and continue in full force in accordance with their respective terms notwithstanding any termination of this Agreement or the dissolution and liquidation of the Company.

10.21 Acknowledgments. Each Person executing and delivering a Joinder shall be deemed to acknowledge to each other Member as follows: (a) the determination of such Person to acquire LLC Interests has been made by such Person independent of any other Member and independent of any statements or opinions as to the advisability of such purchase or as to the properties, business, prospects or condition (financial or otherwise) of the Company which may have been made or given by any other Member or by any agent or employee of any other Member; (b) no other Member has acted as an agent of such Person in connection with making its investment hereunder and no other Member shall be acting as an agent of such Member in connection with monitoring its investment hereunder; and (c) such Person shall, if he or she wishes counsel on the agreements and transactions contemplated hereby, retain its own independent counsel.

[ the signature page follows ]

 

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IN WITNESS WHEREOF, the parties have executed this Agreement the day and year first written above.

 

“Initial Member”				LunaPBC, Inc.
				By:		/s/ David Lewis
				Name:		David Lewis
				Title:		Chief Financial Officer
“Manager”				LunaPBC, Inc.
				By:		/s/ David Lewis
				Name:		David Lewis
				Title:		Chief Financial Officer

Signature Page to LLC Agreement

 

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Exhibit 11(a)

CONSENT OF INDEPENDENT AUDITOR

We consent to the use in this Offering Circular constituting a part of this Offering Statement on Form 1-A, of our report dated June 8, 2018 relating to the balance sheet of LunaDNA, LLC as of April 23, 2018 (inception) and related notes to the balance sheet (which report includes an explanatory paragraph relating to the uncertainty of LunaDNA, LLC’s ability to continue as a going concern), and to the reference to us under the heading “Experts.”

 

/s/ Mayer Hoffman McCann P.C.

San Diego, California

November 5, 2018

Exhibit 13(a)

 

EXHIBIT 13 (a) “TESTING THE WATERS” MATERIALS

LUNADNA, LLC and LUNAPBC, INC. WEBSITES

The Future of Medicine Depends on Our Health Data
The first people-powered platform where you share health data, advance science & take part in the value created.

Leading Experts Endorse LunaDNA ‘LunaDNA is the first commercial platform I’m aware of that will achieve the quality and quantity of genomics and health data needed for comprehensive breakthroughs in medicine. Being transparent and engaging the community in discovery activities is a critical component of success.’ — Aristides A.N. Patrinos. Ph.O, DOE Load. Human Genome Project This website uses cookies to improve your experience. Visit our privacy policy to

Discoveries Require Diverse Data Medical breakthroughs and improving quality of Iife depend on comprehensive. real-world health data organized to support medical discovery. Today’s research data is not complete. not easily accessible
and not controlled by the data ownor. you. At LunaDNA. wo believe that you should always own your data, oven as you contribute your health data to the advancement of science. Let’s Reshape Research Together Powered by transparency, individual control, and
shared equity. LunaDNA is putting people first to bring true health states and rich uniqueness to research. The next evolution of medical discoveries depend on a collective community of data contributors. As research partners. wo can all reshape research together by creating the scale and depth of information nodded to make a real difference the future of humanity.
How it Works Safe and easy to join Join LunaDNA This website uses cookies to improve your experience Visit our privacy policy to learn more, Accept

YOUR COMMITMENT TO THE COMMUNITY
You maintain control of your data Your data is never shared outside of our closed platform We ensure researchers only across data stripped of personal identifiers and that has passed our quality standards. As proceeds are earned from research studios you shore in financial rewards. We will be transparent in our business processes and ensure the highest standards of privacy and security
You are joining a community that is changing how health research is done. Your ongoing engagement with us and willingness to contribute health and lifestyle data over time is essential to create rich data for discovery. Together wo are making progross towards a healthier tomorrow
Contribute your health and DNA data from the
following types of sources
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Important Testing the Waters Disclosure
LunaDNA LLC (LunaDNA) is testing the waters to gauge interest in a potential securities offering under Regulation A+ of the federal securities laws. No money or other consideration is being solicited for any securities at this time, and if sent in to LunaDNA will not bo accepted. No offer to buy securities in an Regulation At offering by LunaDNA can be accepted and no part of the purchase price can bo received until LunaDNA’s offering statement is qualified with the SEC. and any such offer may be withdrawn or revoked. without obligation or commitment of any kind, at any time before notice of its acceptance given after the qualification date. Any indications of interest in LunaDNA’s offering involves no obligation or commitment of any kind. Luna DNA is under no obligation to make an offering of any securities under Regulation At or otherwise, and may choose to make an offering to some. but not all. of the people who indicate an interest in investing and participating. LunaDNA’s Preliminary Offering Statement may be obtained hero.
LunaDNA and the moon logo are trademarks of LunaPBC. Inc. At other trademarks depicted herein are the property of their respective owners and there is no sponsorship, association, or affiliation between LunaPBC. Inc. and those trademark owners.
This website uses cookies to improve your experience. Visit our privacy policy to loam more. Accept

Important Testing the Waters Disclosure LunaDNA LLC (LunaDNA) is testing the waters to gauge interest in a potential securities offering under Regulation A+ of the federal securities laws. No money or other consideration is being solicited for any securities at this time, and if sent in to LunaDNA will not bo accepted. No offer to buy securities in an Regulation At offering by LunaDNA can be accepted and no part of the purchase price can bo received until LunaDNA’s offering statement is qualified with the SEC. and any such offer may be withdrawn or revoked. without obligation or commitment of any kind, at any time before notice of its acceptance given after the qualification date. Any indications of interest in LunaDNA’s offering involves no obligation or commitment of any kind. Luna DNA is under no obligation to make an offering of any securities under Regulation At or otherwise, and may choose to make an offering to some. but not all. of the people who indicate an interest in investing and participating. LunaDNA’s Preliminary Offering Statement may be obtained hero. LunaDNA and the moon logo are trademarks of LunaPBC. Inc. At other trademarks depicted herein are the property of their respective owners and there is no sponsorship, association, or affiliation between LunaPBC. Inc. and those trademark owners. This website uses cookies to improve your experience. Visit our privacy policy to loam moro. Accept LunaDNA Regulation A Offering & SEC Filings LunaDNA is a community- owned health research platform geared towards the improvement of human health. Members who share health date such os DNA from homo DNA tests clinical tests heath records and health surveys receive shares of ownership in LunaDNA. a public company We will make this platform available to quanted researchers to facilitate the discovery of innovations which lead to now treatments increased actionability and greater predictive power of genomic information for disease and wellness applications A portion of LunaDNA s proceeds from medical discoveries and research will be shared with our members; the very individuals who contributed the data necessary to moke those discoveries.
View Offering Statement LunaDNA is currently testing the waters to gauge interest in a potential securities offering under Regulation A+ of the federal securities laws No money or other consideration is being solicited for any securities at this time and if sent in to LunaDNA. will not bo accepted No offer to buy securities in an Regulation A offering by LunaDNA can be accepted and no part of the purchase price can bo received until LunaDNA s offering statement is qualified with the SEC and any such offer may bo withdrawn or revoked without obligation or commitment of any kind at any time before notice of its acceptance given alter the qualification date. Any indications of interest in LunaDNA’s offing involves no obligation or commitment of any kind LunaDNA is under no obligation to make an offering of any securities under Regulation A or otherwise, and may choose to make an offering to some. but not ail of the people who indicate an interest in investing and participating

Transforming your Health Data into Health Breakthroughs LunaDNA is a community-owned platform for health research. Anyone can join the community, share their health data and receive ownership shares in the organisation About LunaDNA LunaDNA was created by the Public Benefit Corporation. LunaPBC a team of passionate genomics and technology veterans LunaPBC is responsible for managing the LunaDNA platform including developing research projects with non-profits and for profits to drive medical discoveries with the health data on the platform Our Passion The LunaPBC team holds integrity honesty. and transparency as top values We are passionate about science. technology and the promise they hold for medicine. PURPOSE DRIVEN Inspired by Mo experiences to improve health and quality of Mo for everyone HIGH INTEGRITY Creating an opportunity for all stakeholders by establishing a community based on understanding authenticity honesty, and transparency PEOPLE FIRST Sharing a deep-rooted desire to solve important problems for the

I co-founded LunaDNA because of my strong belief that health data sharing and community ownership ore the new philanthropy. People should have control over how their data is used and should bo rewarded as well Dawn Barry E3
President founder We sow a need to brook health data out of s4os, got it together responsibly and transparently while protecting privacy for research and medical discoveries and reward the members
whoso data helped make it an possible Bob Kain
Chief executive Officer & founder
Our Team Passionate about improving health and well-being wo believe the LunaDNA platform will unite a community towards this same goal David Lewis in Chief financial Officer Co-founder Scott Kahn. Ph.D. in Chief information Officer Debora Thompson VP of Strategy & Aaron Mendes in VP of Marketing

I co-founded LunaDNA because of my strong belief that health data sharing and community ownership ore the new philanthropy. People should have control over how their data is used and should bo rewarded as well Dawn Barry E3
President founder Wo sow a need to brook health data out of s4os, got it together responsibly and transparently while protecting privacy for research and medical discoveries and reward the members whoso data helped make it an possible
Bob Kain Chief executive Officer & founder Our Team Passionate about improving health and well-being wo believe the LunaDNA platform will unite a community towards this same goal David Lewis in Chief financial Officer
Co-founder Scott Kahn. Ph.D. in Chief information Officer Debora Thompson VP of Strategy & Aaron Mendes in VP of Marketing LunaPBC Advisors
Representing seasoned healthcare and patient advocates. data scientists, and consumer engagement leaders, our advisory board
exemplifies the expertise needed to help build a member-centric, future-focused Public Benefit Corporation. Michael Witz in
Co-Founder lunodna Co-Founder Redemption Games, Blockchain Investor * V Combinator Alumni Dan Lin in
Co-Founder lunadna CIO & Co-Founder of Redemption Games Blackhain Developer & Combinator Alumni Sharon Terry in
Advisor. CEO at Conotic Al once Chair of the Condition for Genetic fairness Ed Yu in
Advisor, Chairman of Vesctar Cure*, Former partner of PwC Strategy & Healthcare
Ashley Van Zeeland. Ph.D in Advisor. VP. Product Development Business operation terms integration Kumma Former CTO at Human longevity. Former Co-Founder Cypher Genomic
Aristides Patinos. Ph.D in Advisor. Former President Synthetic Genomics. load at Human Genomic Project
David Barker. PhD in
Advisor, Former Chief Scientific Officer of alumina
Alex Casdin in
Advisor, Founder S CEO of Renoo Capital healthcare fund, forma Pharmaceutic
Francisco Garcia. PhD in Advisor. VP Softworo Engineering at alumina

LunaPBC Investors
LunaPBC. the company that manages LunaDNA. is funded by top biotech and technology financial institutions that backed LunaPBC for its scalable and innovative approach to accelerating medical discoveries.
David R. Walt
Professor of Pathology
Harvard Medical School
“LunaDNA’s novel approach to transparency, rewards, and focus on
discovery for the greater good will drive community participation and
improved medical research.”
— Robert Nelsen. Managing Partner. Arch Venture Partners
READ THE NEWEST ARTICLES ONLINE

Important Testing the Waters Disclosure
LunaDNA LLC (LunaDNA) is testing the waters to gauge interest in a potential securities offering under Regulation A+ of the federal securities laws. No money or other consideration is being solicited for any securities at this time. and if sent in to LunaDNA, will not bo accepted. No offer to buy securities in an Regulation A offering by LunaDNA can bo accepted and no part of the purchase price can bo received until LunaDNA’s offering statement is qualified with the SEC, and any such offer may bo withdrawn or revoked. without obligation or commitment of any kind, at any time before notice of its acceptance given after the qualification date. Any indications of interest in LunaDNA’s offering involves no obligation or commitment of any kind. LunaDNA is under no obligation to make an offering of any securities under Regulation A+ or otherwise. and may choose to make an offering to some. but not all. of the people who indicate an interest in investing and participating. LunaDNA’s Preliminary Offering Statement may be obtained here.
This website uses cookies to improve your experience Visit our privacy policy o learn more. accept

Share Health Data, Earn Shares, Drive Discovery
Share
Join LunaDNA and share your data in a few steps Your data is do-identified and encrypted to ensure privacy and security.
Discover
Researchers pay to conduct research on the aggregated data
Benefit
Proceeds earned from research on the platform are passed back to the shareholders who shared their data like.

1 Share When you join LunaDNA you become a member of a community embarking on a journey to drive medical breakthroughs. When you become a member, you consent to share your health and DNA data for health research. Your data privacy and security is our highest priority. SECURE All health and DNA data is stripped of personal identifiers, making it de-identified. Personal information is stored in a separate database from health and DNA data, and all data is securely encrypted. CONTROL You maintain control of your data at all times. It never leaves the LunaDNA platform, and you may choose to delete it at any time. Researchers only have access to de-identified data within our platform. Data cannot be exported by them. PRIVACY LunaDNA uses best practices including HIPAA and GDPR compliance ensuring your privacy, security, as well as transparency in how your data is used.

2 Discover Researchers pay to access the LunaDNA platform to perform research studies. Health and DNA data from millions of people like you will empower researchers to perform studies at the scale needed for medical breakthroughs. Your continuous contributions of new health and lifestyle data will help researchers discover correlations between DNA, conditions, medications and outcomes. Such correlations can be deployed to drive more precise healthcare based on people’s uniqueness and inform prevention strategies. 3 Benefit You earn shares in LunaDNA based on the data that you share. As researchers complete studies, proceeds from those contracts flow back to LunaDNA members in the form of dividends. You have the choice to donate or keep your shares.

Join the Community and Help Drive Discovery Join LunaDNA WHERE WE’RE HEADED NEXT As we continue to scale our platform, we will accept additional data types including medical records and wearables, provide more community resources, and deliver new ways for you to explore your health. We will drive research through partnerships with disease foundations, academic institutions, and drug development companies. 2018 LunaDNA Get started Log in Join LunaDNA About LunaDNA About How it Works FAQ Newsroom Support Help Center Terms of Use Privacy Policy SEC Filings Connect with us Important Testing the Waters Disclosure LunaDNA LLC (LunaDNA) is testing the waters to gauge interest in a potential securities offering under Regulation A+ of the federal securities laws. No money or other consideration is being solicited for any securities at this time, and if sent in to LunaDNA, will not be accepted. No offer to buy securities in an Regulation A+ offering by LunaDNA can be accepted and no part of the purchase price can be received until LunaDNA’s offering statement is qualified with the SEC, and any such offer may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of its acceptance given after the qualification date. Any indications of interest in LunaDNA’s offering involves no obligation or commitment of any kind. LunaDNA is under no obligation to make an offering of any securities under Regulation A+ or otherwise, and may choose to make an offering to some, but not all, of the people who indicate an interest in investing and participating. LunaDNA’s Preliminary Offering Statement may be obtained here. This website uses cookies to improve your experience. Visit our privacy policy to learn more.

LunaDNA Frequently Asked Questions About LunaDNA What is LunaDNA? LunaDNA is the first health and DNA research platform owned by its community of individual health and DNA data contributors. LunaDNA empowers individuals to securely and privately share their health and DNA data to accelerate health research and discoveries, improve quality of life, drive smarter healthcare, and share in the monetary value that flows from that platform. We believe community participation and engagement will create a research platform at sufficiently great scale, information scope, and diversity to yield actionable and broadly applicable medical discoveries. People who share their health and DNA data also share in the value created from research and discoveries made through the LunaDNA platform. Healthy or sick, we all can help the world by making it easier to conduct robust health research. What is LunaPBC and its relationship LunaDNA? What is unique about LunaDNA? Your Data What kind of data can I share in LunaDNA? LunaDNA accepts DNA files from 23andMe, AncestryDNA, MyHeritage and FamilyTree DNA as well as LunaDNA-generated health surveys. Soon we will accept additional data types such as whole genome and exome DNA files, RNA, microbiome, electronic health records (EHRs), fitness/activity trackers, smart devices, medical devices, and many more. The more comprehensive data collected from each member, the more valuable the data is for driving medical breakthroughs. How will research be done with my data and what types will be done?

Security & Privacy How is my data kept secure and private? Your privacy and security are extremely important to us. We use industry best practices to protect your data and your anonymity. Members’ information is stored, transferred, and processed using HIPAA-compliant privacy and state-of-art security measures. Data is stripped of personal identifiers (de-identified), all personal information and health and DNA data is encrypted, and personal information is stored in a separate environment from your health and DNA data. Additionally, your data never leaves the LunaDNA platform. You are in control of your data at all times, and can delete it completely at any time. Your data file de-identified or otherwise is never shared with third parties. Privacy is a key pillar of our business, and these are just some of the ways we will protect it. For additional information, please review our Privacy Policy. Will my data ever be made public or shared with third parties? What type of control do I have over my data? Are there any risks involved in sharing my health data with LunaDNA?

Shares in LunaDNA What does community ownership mean and what does it mean to own shares in LunaDNA? Community ownership means people who join LunaDNA and contribute health and DNA data are issued shares of ownership in LunaDNA for each approved data contribution (pending approval by the U.S. Securities and Exchange Commission (SEC)). As such, individuals can obtain shares in LunaDNA similar to owning other public stocks and securities. Proceeds generated from the research conducted in the platform will be paid to shareholders in LunaDNA as dividends (cash distributions) in proportion to how many shares they own. Share ownership is based on the amount of data shared on the platform. Shares are non-transferable, meaning that they cannot be sold at this time. If a community member decides to remove data and/or leave the community, the specified data will be deleted and the corresponding shares will be returned to LunaDNA. 2018 LunaDNA Get started Log in Join LunaDNA About LunaDNA About How it Works FAQ Newsroom Support Help Center Terms of Use Privacy Policy SEC Filings Connect with us Important Testing the Waters Disclosure LunaDNA LLC (LunaDNA) is testing the waters to gauge interest in a potential securities offering under Regulation A+ of the federal securities laws. No money or other consideration is being solicited for any securities at this time, and if sent in to LunaDNA, will not be accepted. No offer to buy securities in an Regulation A+ offering by LunaDNA can be accepted and no part of the purchase price can be received until LunaDNA’s offering statement is qualified with the SEC, and any such offer may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of its acceptance given after the qualification date. Any indications of interest in LunaDNA’s offering involves no obligation or commitment of any kind. LunaDNA is under no obligation to make an offering of any securities under Regulation A+ or otherwise, and may choose to make an offering to some, but not all, of the people who indicate an interest in investing and participating. LunaDNA’s Preliminary Offering Statement may be obtained here.

Unlocking the Power of Data to Improve Health Worldwide LunaPBC is the founder and manager of the first community-owned health and DNA research platform. Learn More at LunaDNA.com Top of Form Bottom of Form LEARN MORE AT LUNADNA.COM JOIN OUR NEWSLETTER JOINTODAY

Now, more than ever, we have an opportunity to harness data to improve health for everyone worldwide. Expanding our Ability to Learn from Data Enhancing Privacy, Security, and Transparency Breaking Silos to Access and Enrich Data for Discovery

Transforming Your Health Data Into Health Breakthroughs LunaDNA, founded by Luna Public Benefit Corporation (LunaPBC) is a community-owned platform for health research. Anyone can join, share their health data, and receive ownership shares in the company. When researchers conduct studies on the data in our secure platform, the proceeds are passed back to the community as dividends. About LunaDNA LunaDNA was created by LunaPBC, a team of passionate genomics and technology veterans. LunaPBC is responsible for managing the LunaDNA platform, including developing research projects with non-profits and for-profits to make medical discoveries with the health data on the platform. Our Passion The LunaPBC team holds integrity, honesty, and transparency as top values. We are passionate about science, technology, and the promise they hold for medicine. PURPOSE DRIVEN Inspired by life experiences to improve health and quality of life for everyone HIGH INTEGRITY Creating an opportunity for all stakeholders by establishing a community based on understanding, authenticity, honesty, and transparency PEOPLE FIRST Sharing a deep-rooted desire to solve important problems for the greater good of humanity INCLUSIVE INNOVATION Making a people-centered platform that reflects the diversity seen all over the world

The Team Leading LunaPBC The LunaPBC team combines a deep background in medicine, DNA sequencing, big data, and large scale Internet communities. Bob Kain Chief Executive Officer & Co-Founder Bob Kain is a renowned pioneer in genomics. At Illumina, Bob led the invention of the modern, high throughput genome sequencer that brought the cost from millions of dollars down to less than $1000. He joined Illumina pre-IPO in 1999 and retired in 2014, as the Chief Engineering Officer. Bob is lead inventor on 28 U.S. patents that led to the breakthroughs that have revolutionized genome sequencing. Prior to joining Illumina, Bob was the Director of the Microarray Business Unit at Molecular Dynamics. He is also on the Scientific Advisory Boards of Dovetail Genomics, Singular Genomics, and Edenroc Biosecurity, and is the co-founder of Revere Biosensor. Additionally, he is the co-founder and chairman of the board of a successful health & fitness business, Mesa Rim Climbing and Fitness Center, with multiple locations in San Diego and Reno, Nevada. Bob received a BS in Physics from San Diego State University and an MBA from Saint Mary’s College of California. Dawn Barry President & Co-Founder Dawn served as the Vice President of Applied Genomics at Illumina, Inc. Dawn integrated market development strategies with product and business model innovation to accelerate the application of genomics in medicine and personal healthcare. Dawn joined Illumina in 2005. Prior to Illumina, Dawn spent seven years at Genaissance Pharmaceuticals, one of the first genomics startups focused on individualized medicine and DNA-based diagnostic testing. She holds a BS in biology from the University of Vermont and a MBA from the University of Connecticut School of Business.

Scott Kahn, Ph.D Chief Information Officer, Former CIO and VP of Commercial and Enterprise Informatics at Illumina David Lewis Chief Financial Officer & Co-Founder, Chief Investment Officer & Co-Founder at Ganley Investments, Former Citigroup Executive Aaron Mendes VP Marketing, Former VP at 1010data, CEO at Quantio, CMO at Wellness.com Debora Thompson Vice President, Strategy & Business Operations, Former Director, Market Strategy and Innovation, Clinical Genomics at Illumina Kirby Bloom Chief Architect, Former Head of Software & Informatics, Applied Genomics at Illumina Bojil Velinov Head of Dev Ops & Automation, Former Sr. DevOps Architect, Clinical Genomics at Illumina LunaPBC Advisors Representing seasoned healthcare and patient advocates, data scientists, and consumer engagement leaders, our advisory board exemplifies the expertise needed to help build a member-centric, future-focused Public Benefit Corporation. Michael Witz Co-Founder, Co-Founder Redemption Games, Blockchain Investor and Y Combinator Alumni Dan Lin Co-Founder, CTO & Co-Founder of Redemption Games, Blockchain Developer and Y Combinator Alumni Sharon Terry Advisor, CEO at Genetic Alliance, Chair of the Coalition for Genetic Fairness Ed Yu Advisor, Chairman of Vascular Cures, Former partner at PwC Strategy & Healthcare Ashley Van Zeeland, Ph.D Advisor, VP, Product Development Business Operations & Systems Integration at Illumina, Former CTO at Human Longevity, Former Co-Founder Cypher Genomics Carlos Bustamante, Ph.D Advisor, Professor of Biomedical Data Science and Genetics at Stanford University Aristides A.N. Patrinos, Ph.D Advisor, Former President Synthetic Genomics, Lead at Human Genome Project David Barker, Ph.D Advisor, Former Chief Scientific Officer of Illumina Alex Casdin Advisor, Founder & CEO of Reneo Capital healthcare fund; former VP Amylin Pharmaceuticals Francisco Garcia, Ph.D Advisor, VP Software Engineering at Illumina

Investors LunaPBC is backed by leading healthcare and technology investors including: Illumina Ventures Biotech VC Fund Arch Venture Partners Biotech VC Fund Hemispshere Ventures Future-Tech VC Fund Bridgelink Capital UK Tech VC Fund Gavin Saitowitz CEO of Prelude Capital David Walt Co-Founder of Illumina 2018 LunaPBC Get started Join LunaDNA News Legal Privacy Connect with us

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Subscribe Share Past Issues Translate Hi <<First Name>>, It has been an exciting few months at LunaDNA and we’re proud to share with you so many positive updates. 1. We’ve grown our team to 10 amazing leaders in their respective industries. 2. We’ve o!cially filed with the SEC and are just weeks away from launching our platform. 3. The management company of LunaDNA is now called LunaPBC. Our primary responsibility is to safeguard members and their data, establish partnerships and raise awareness about LunaDNA. 4. We’re making waves the in the media as pioneers of the first and largest community-owned health and DNA database for research. Check out our exclusive feature on Bloomberg, “Share Your DNA, Get Shares: Startup Files an Unusual Offering”

Important Notice: lunadna.com/offering.html

We expect to go live in Fall 2018. Visit our website for LunaDNA updates, events, and opportunities to join the first people-powered health data platform. Visit Website Follow us on social media Important Testing the Waters Disclosure LunaDNA LLC (LunaDNA) is testing the waters to gauge interest in a potential securities offering under Regulation A+ of the federal securities laws. No money or other consideration is being solicited for any securities at this time, and if sent in to LunaDNA, will not be accepted. No offer to buy securities in an Regulation A+ offering by LunaDNA can be accepted and no part of the purchase price can be received until LunaDNA’s offering statement is qualified with the SEC, and any such offer may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of its acceptance given after the qualification date. Any indications of interest in LunaDNA’s offering involves no obligation or commitment of any kind. LunaDNA is under no obligation to make an offering of any securities under Regulation A+ or otherwise, and may choose to make an offering to some, but not all, of the people who indicate an interest in investing and participating. LunaDNA’s Preliminary Offering Statement may be obtained here. Copyright © 2018 LunaDNA, All rights reserved. Want to change how you receive these emails? You can update your preferences or unsubscribe from this list.

LISTEN TO ARTICLE 3:47 In this article ILMN ILLUMINA INC 290.40 USD -4.70 -1.59% Start your day with what’s moving markets Enter your email SIGN UP Sharing DNA data may soon provide people with more than just the answer to whether they’ve got any Irish relatives. LunaDNA, a startup backed by the genome-sequencing giant Illumina Inc., has asked the U.S. Securities and Exchange Commission to approve its novel plan to pay consumers for sharing their DNA data. It’s a departure from the current standard in which companies like 23andMe charge people to analyze their genes, then use that data for research. Luna aims to build a DNA marketplace where people could upload their data from genetic-testing companies like Ancestry or 23andMe. The data would then be stripped of identifying details and encrypted. Users would receive shares of LunaDNA, which will house the platform where the DNA data is stored. Researchers would pay Luna to access that data, and some of the profits from research Luna files with agency to sell shares in DNA marketplace California company wants to boost sharing of biomedical data Prognosis By Kristen V Brown October 5, 2018, 5:46 AM PDT Share Your DNA, Get Shares: Startup Files an Unusual Offering

studies would be passed along to shareholders as dividends. “We’re recognizing data donors as having currency to acquire shares in the company,’’ said Dawn Barry, president of Luna and a former Illumina vice president. “People should be rewarded when value is created from their data. We can’t say something has value and then just sort of take it from people.’’ On Friday, the Solana Beach, California-based startup filed a Form 1-A to offer shares in LunaDNA, which will house the DNA platform. LunaDNA is overseen by LunaPBC, a separate corporation that isn’t selling shares to the public. The filing will be followed by a minimum 21-day period for public comment. After that, if the SEC gives the green light, Luna’s platform will officially launch. The idea is to increase the incentives for the broad sharing of biomedical data that, Luna says, may help advance science and medicine while encouraging more transparency in how that data is used. Other Players Founded in 2017 by former Illumina executives, Luna has raised $4 million from investors including Illumina Ventures and Arch Venture Partners. While it’s the first company to file with the SEC, Luna isn’t the only startup exploring whether compensating people for their DNA data might encourage more robust donations. EncrypGen is a blockchain-based DNA marketplace currently in beta testing where data is bought and sold using a custom cryptocurrency called DNA. Earlier this year, the Harvard geneticist George Church announced plans for a company called Nebula Genomics, which would not only reward users for their data but sequence their entire genome as well. Health records stripped of identifying markers are an increasingly sought-after commodity. Luna is part of a small but growing number of “biobrokers” that give people tools

Terms of Service Trademarks Privacy Policy ©2018 Bloomberg L.P. All Rights Reserved Careers Made in NYC Advertise Ad Choices Contact Us Help to control the sharing of their health data. “We pay people to participate in clinical trials -- I don’t see why people shouldn’t be compensated for their genes,’’ said Peter Pitts, president of the Center for Medicine in the Public Interest and a former associate commissioner of the U.S. Food and Drug Administration. Pitts said that as long as companies are upfront with consumers about the way their data is used, paying people for their information seems like a good thing. “A person’s data is their property,’’ he said. In the world of biobrokering, though, not all information is created equal. “Different file types have different share values,’’ said Barry. “Generally speaking, the richer the data, the more shares are allocated to that data.’’ The genotyping data a customer gets from 23andMe, for example, would be worth 50 shares, while a whole genome would equal 300 shares, according to Luna. The company will also collect other kinds of data, like that answered in surveys or collected from fitness trackers. Each share, according to the filing, will be worth about 7 cents. That makes the going rate for a person’s whole genome $21. “We’re not talking about life-changing money here,’’ said Barry. “What we’d like to focus on is really the transparency of this model.’’ Have a confidential tip for our reporters? GET IN TOUCH Before it’s here, it’s on the Bloomberg Terminal. LEARN MORE

SOCIAL MEDIA POSTS

Bob Kain @bob_kain · Oct 5 v Well said @DawnBarryDNA “People should be rewarded when value is created from their data.” Own the data, never have it comprised, know studies conducted w/pooled data, & receive benefits. Leave a legacy of health! @Luna_DNA Important Notice: lunadna.com/offering.html LunaDNA @Luna_DNA LunaDNA officially files with #SEC to become 1st ever to offer shares in exchange for #health data! A monumental step in advancing science by putting #peoplefirst, in control, & including them in the value created. bloomberg.com/news/articles/... Important Notice: ....

Dawn Barry • 1st ••• President & Co-founder at LunaPBC 3w #PeopleDrivenResearch, beneficial for people & positive for science as we empower people to curate their own health data for research (versus incomplete profiles assembled by others). Congrats to the team for publishing the first ever offering of shares in exchange for health data to reshape medical research. This is a big step in accelerating science by inviting people in as research partners; honoring their needs for privacy, transparency and control in data usage; and including them in the value created. Important Notice: lunadna.com/offering.html lllumina Ventures 788 followers +Follow 3w Portfolio partner, LunaDNA, has asked the SEC to approve its plan to pay people who upload data from genetic-testing companies in shares of LunaDNA. Researchers would pay Luna to access that data, and ... see more

LunaDNA ••• Published by G Aaron Mendes [?] · October 5 at 9:20 AM · LunaDNA has officially filed with the #SEC to become the first ever to offer shares in exchange for health data! This is a monumental step in accelerating science by putting people first, people in control, and including them in the value created. Check out our feature on Bloomberg! Important Notice: lunadna.com/offering.html BLOOMBERG.COM Share Your DNA, Get Shares: Startup Files an Unusual Offering

Luna DNA ••• Luna Published by Genevieve Lopez DNA [?] · October 8 at 10:33 AM · 0 “Great things are done by a series of small things brought together.” -Vincent Van Gogh A Each and every one of us has the power to change the world. That’s why we’re rallying the community to help drive medical discoveries by sharing their health information in one secure platform. And if a healthier tomorrow isn’t a big enough incentive already, we’re providing you shares in the process. #SharesForShares. We believe you should own your data, control your data, and take part in the value it creates for the world. Read how LunaDNA is making history, one unique dataset at a time via Bloomberg r r https://bloom.bg/2Rrp3Mh (Important Notice: lunadna.comjoffering.html)

Luna DNA ••• Luna Published by Genevieve Lopez [?) ·October 12 at 3:24PM· 0 D~A Our President Dawn Barry sums it up best: “The greatest and fastest change can happen at the level of #community.” 0 ·· C . Beyond excited for our journey towards reshaping health by positioning people at the center. Thanks for the feature, San Diego Business Journal! (Important Notice: http://lunadna .com/offering.html) SANDIEGOUNIONTRIBUNE.COM Luna DNA seeks approval to issue shares to people who contribute genetic data

lunadna • Following luna DNA lunadna .. Great things are done by a series of small things brought together...    -Vincent Van Gogh J. Each and every one of us has the power to change the world. That’s why we’re rallying the community to help drive medical discoveries by sharing their health information in one secure platform. And if a healthier tomorrow isn’t a big enough incentive already, we’re providing you shares in the process. #SharesForShares. We believe you should own your data, control your data, and take part in the value it creates for the world. 0 Click the link in bio to read how LunaDNA is making history, one unique dataset at a time. (Important Notice: lunadna.comjoffering.html) 22 likes OCTOBER 8 Add a comment

People should be rewarded when value is created from their data. DAWN BARRY, COFOUNDER & PRESIDENT lunadna • Following luna DNA lunadna Luna DNA has officially filed with the #SEC to become the first ever to offer shares in exchange for #health data! ‘ This is a monumental step in accelerating science by putting #peoplefirst, people in control, and including them in the value created. Read our feature on @bloombergbusiness in link in bio. (Important notice: lunadna.com/offering.html) lunadna #dna #genomics #genes #genetics #science #advancescience #stem #bloomberg #bloombergbusiness #business Q #shares #value #community #startup #illumina #peoplepowered #peoplefirst westr 76 likes OCTOBER 5 Add a comment... •••

LunaPBC 825 followers luna PBC 2w ICYMI: Luna DNA has officially filed with the #SEC to become the first ever to offer shares in exchange for health data! This is a monumental step in accelerating science by putting people first, people in control, and including them in the value created. · ·· ‘ ·· ‘ Check out our feature on Bloomberg! (Important Notice: lunadna.com/offering.html) https://bloom.bg/2Rrp3Mh #bloomberg #science

LunaPBC 825 followers Luna P BC 2w Our President Dawn Barry sums it up best: ‘The greatest and fastest change can happen at the level of #community.” 0 o• ·· Beyond excited for our journey towards reshaping health by positioning people at the center. Thanks for the feature, San Diego Business Journal! (Important Notice: https://lnkd.in/gibGa6Y)

Pinned Tweet LunaDNA @Luna_DNA · Oct 5 v LunaDNA officially files with #SEC to become 1st ever to offer shares in exchange for #health data! A monumental step in advancing science by putting #peoplefirst, in control, & including them in the value created. bloomberg.com/news/articles/ ... Important Notice: lunadna.com/offering.html Share Your DNA, Get Shares: Startup Files an Unusual Offering Sharing DNA data may soon provide people with more than just the answer to whether they’ve got any Irish relatives. bloomberg.com

LunaDNA @Luna_DNA · Oct 24 v Our infrastructure was designed to embrace certain conceptions of #privacy, “in which individuals are in total control of their #data, including the ability to have their data be ‘forgotten’ at any time.” blt.ly/201Jmai (Important Notice: bit.ly/2EGFn9N) Selling yourself? These companies want to pay for your genetic infor... Some companies want to rent your DNA—should you let them? geneticliteracyproject.org

LunaDNA @Luna_DNA · Oct 18 v Great things are happening in #science! Thanks @jyinglir g! (Important Notice: lunadna.com/offer;ng.html ) Jessica Yingling @jyingling This weekls #SanDiego #biotech briefing includes 1 1 @ReflexionHealth S data on VERA s #healthcarecost savings, Allele Is #sepsis NIH grant, and @Luna_DNA SEC filing to issue shares for people Is #genome and data

LunaDNA @Luna_DNA · Oct 17 v Amazing evening at @ilium ina Array Event! Thank you @DawnBarryDNA, @Regeneron and @23andMe for leading an important conversation on the latest developments in consumer #genomics and #precisionhealthcare. #ASHG18 (Important Notice: lunadna.com/offering.html) Sema4 @sema4 Insightful panel discussion at @illumina’s Democratization of Consumer Driven Genomic Data Sharing event with @Regeneron, @Luna_DNA, and @23andMe at #ASHG2018 #ASHG18

LunaDNA @Luna_DNA · Oct 12 v “The greatest and fastest change can happen at the level of -~:~community.” -@Dawn Bar ·vDNA Beyond excited for our journey towards reshaping health. Thanks for the feature, @SDbusiness! blt.ly/2yznLGs (Important Notice: lunadna.com/offering.r.tml) Luna DNA seeks approval to issue shares to people ... In an unusual filing with the U.S. Securities and Exchange Commission, LunaDNA is seeking to register 714 million shares to build a credit union like co-op ar... sandiegouniontribune.com

Luna DNA @Luna_DNA · Oct 10 v Special delivery! We got such a sweet surprise this morning from our friends at @BamComm! Thank you for all of your hard work and celebrating our recent milestone filing with the #SEC. We appreciate you! ©SDCakePopShop @SaramayaFaye Important Notice: lunddna.com/offering.html

Exhibit 15(a)

July 27, 2018

Office of Electronics and Machinery

Division of Corporation Finance

Securities and Exchange Commission

100 F. Street, NE

Washington, DC 20549

 

		Re:		LunaTrust LLC Draft Offering Statement on Form 1-A Submitted June 11, 2018 CIK No. 0001741687

Ladies and Gentlemen:

This letter sets forth the responses of LunaTrust LLC, a Delaware limited liability company (the “Company,” “LunaTrust” or “we”), to the comments received from the Staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “Commission”) by letter dated July 11, 2018 (the “Comment Letter”) concerning the Company’s draft offering statement on Form 1-A. In conjunction with this letter, the Company is submitting an amended draft offering statement on Form 1-A (the “Offering Statement”) to the Commission. For convenient reference, we have set forth below in bold each of the Staff’s comments set forth in the Comment Letter and have set forth our responses to the numbering of the comments and the headings used in the Comment Letter.

Part I

Item 3. Application of Rule 262, page v

1. We note you checked the box that “bad actor” disclosure under Rule 262(d) is provided in Part II of the offering statement; however, no such disclosure has been provided. Please provide such disclosure or advise.

Response: The box indicating that “bad actor” disclosure under Rule 262(d) is provided in Part II of the Offering Statement should not have been checked. Such box is not checked in the amended Offering Statement.

Item 4. Summary Information Regarding the Offering and Other Current or Proposed Offerings page v.

2. We note that your aggregate offering price appears to be $50,050,000 based on the number of common limited liability company interests offered and the price per unit. Revise the number of securities offered or the price per security such that the disclosure regarding the portion of the aggregate offering price attributable to securities being offered is correct.

Response: We have revised and reduced the number of securities offered. The aggregate offering price attributable to securities being offered does not exceed $50,000,000.

 

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3. We note your securities will not be offered for cash. Revise your offering circular to disclose how the aggregate offering price will be based on the value of the member data provided as consideration as established by bona fide sales of that consideration made within a reasonable time, or, in the absence of sales, on the fair value as determined by an accepted standard. Also disclose how your valuations of the member data provided as non-cash consideration will be reasonable at the time made. In addition, refer to the Note to Paragraph (A) of Rule 251 of Regulation A and provide us with your analysis as to how your offering falls within the scope of the exemption provided by that rule. Also provide us with your analysis as to how you intend to comply with Rule 251(d)(2)(i)(C) and include disclosure as appropriate. In each analysis you provide in response to this comment, cite any authority on which you rely.

Response: We are not aware of any bona fide sales of the limited and revocable rights we will acquire for any of the Member Data types indicated on the cover page. We have added disclosure to the cover page and beginning at page 41 to the Offering Statement describing the accepted standards we used to value each data type.

We intend to comply with Rule 251(d)(2)(i)(C) by verifying that, for prospective investors who are not accredited investors, the aggregate purchase price to be paid by him or her for the shares is no more than ten percent (10%) of the greater of his or her annual income or net worth (determined as provided in Rule 501 (§ 230.501)), using the purchase price determined based on the value of the member data he or she is contributing. As authorized by Rule 251(d)(2)(i)(D), we intend to rely on the representations of the prospective investor regarding when determining his or her annual income or net worth, unless we know at the time of the transaction that the representation is untrue. The Offering Statement includes this disclosure on the cover page.

Part II

Preliminary Offering Circular, page 1

4. Throughout your offering circular where you discuss the declaration of distributions, such as on page 12, revise to make clear that distributions may never be declared and that such distributions are in the sole discretion of your manager. Furthermore, in an appropriate section of your offering circular, disclose the methodology by which the funds available for distributions will be determined.

Response: We have revised the Offering Statement at pages 2, 13, 37, 42, and 43 to clarify that distributions may never be declared and that any distributions are effectively in the sole discretion of the Manager, as the Manager may unilaterally amend the terms of our operating agreement and the management agreement. We have also included disclosure discussing the methodology by which the funds available for distributions will be determined under the heading “Our Limited Liability Company Operating Agreement— Distributions and Dividends” beginning on page 43.

 

 

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5. In each instance where you discuss the terms of your operating agreement, management agreement or license agreement, please include disclosure that such terms may be changed unilaterally by your manager. Moreover, where you discuss your manager’s discretion not to effectuate a distribution in the event the distribution is less than a certain amount, please clarify whether the manager has the discretion to not effectuate a distribution at all under your current operating agreement or by unilateral amendment to your operating agreement. Also, tell us whether your manager can unilaterally waive or change the provisions in section 6.8 of your operating agreement.

Response: In each portion of the Offering Statement in which we discuss the terms of our operating agreement, management agreement or license agreement, we have included disclosure that such terms may effectively be changed unilaterally by the Manager. We have also specifically disclosed that the Manager has the discretion to reduce or eliminate some or all distributions by unilaterally amending our operating agreement. We have amended and restated our operating agreement to provide that the Manager may not amend the provisions of section 6.8 without the affirmative consent of each member adversely affected by the amendment, and we have filed the amended and restated operating agreement with the Offering Statement.

6. We note your disclosure, such as on page 12, that the manager is “generally, but not always” required to provide advance notice to members of unilateral modification to the operating agreement or management agreement (including the Database IP license terms contained therein). In an appropriate location, disclose the circumstances under which your manager is not required to provide advance notice of such modifications.

Response: We have added disclosure regarding the circumstances under which the Manager is not required to provide advance notice of unilateral modification to the Operating Agreement or Management Agreement (including the Database IP license terms contained therein) in “Our Limited Liability Company Operating Agreement—Unilateral Modification” beginning on page 46 and “Our Management Agreement— Amendment, Modification, or Waiver” beginning on page 49 of the Offering Statement.

7. In an appropriate section of your offering circular, discuss the material terms of any required compliance with the Health Insurance Portability and Accountability Act of 1996 (HIPAA), as amended, and any other material federal, state or local regulations, including how your business and database will comply with those rules and regulations, how the blockchain aspects of your database will comply with those rules and regulations, the anticipated costs associated with such compliance, and the risks and consequences of non-compliance.

Response: We have added disclosure concerning HIPAA under the heading “Privacy Policy—Health Insurance Portability and Accountability Act of 1996 (HIPAA)” on page 28 of the Offering Statement and concerning other health care data regulatory compliance and the risks and consequences of non-compliance at “Risk Factors—Risks Related to the Company—Failure to comply with federal, state and local laws and regulations or our contractual obligations relating to data privacy, protection and security of Member Data, and civil liabilities relating to breaches of privacy and security of Member Data, could, damage our reputation and harm our business” on page 11 of the Offering Statement. Supplementally, we note that we will store the Member Data in a conventional SQL database rather than in a distributed ledger, and hence the blockchain component of our business plan will not affect our compliance with any health or medical privacy laws. Please also see our response to Comment 18.

 

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Preliminary Offering Circular Cover Page, page 1

8. Disclose on your cover page that the securities you are offering will not have any voting, consent or management rights relating to the management and operation of the company, except to appoint a liquidator upon the dissolution of the company if you do not have a manager at that time, that the holders of your securities will not be entitled to the profits that you or your manager derive from the database or your respective businesses and will only be entitled to receive dividends or distributions, if any, as and when determined by the manager, will be transferable only under limited circumstances and will have extremely limited rights and remedies due to your governance provisions, including the elimination of your manager’s fiduciary duties to your security holders. Given these limited rights and remedies, avoid referring throughout your filing to the securities you are offering as “shares” or “common shares.”

Response: We have added disclosure responsive to this comment on the cover page of the Offering Statement. We have also removed all usages of the term “common shares” from the Offering Statement.

Per comment 24, we have added disclosure regarding the material differences between the shares we are offering and typical common stock. We believe that the term “shares” appropriately describes the securities we are offering, as each of these securities entitles the holder to an equal share of our profits. (E.g., Investopedia states “Shares are units of ownership interest in a corporation or financial asset that provide for an equal distribution in any profits, if any are declared, in the form of dividends. . . .”, available at https://www.investopedia.com/terms/s/shares.asp (last accessed July 26, 2018).)

9. In an appropriate location in your offering circular, disclose how you determined the number of securities to be issued for each type of member data provided and how you determined the estimated fair market value of such data.

Response: We have added disclosure regarding how we determined the number of securities to be issued for each type of member data provided and how we determined the estimated fair market value for the divers categories of Member Data under the heading “Securities Being Offered—Value of Consideration” beginning on page 41 of the Offering Statement.

10. It does not appear your disclosed website is operable. Please advise or revise.

Response: We advise the Staff that at the current time the LunaTrust website is not operable to the public as we are in confidential registration with the Commission. We intend to launch public access to the LunaTrust website in connection with the qualification of the Offering Statement, as the website will offer and sell the shares. We will provide the current development version of the website to the SEC staff supplementally upon request.

Summary of Information in Offering Circular, page 4

11. Provide a summary of the material risks to members who provide their data to you. We note some examples in various locations in your filing such as revelation of surname, non-paternity and of various hereditary diseases and traits, and that such data could be released into the public domain unintentionally.

Response: We have provided a summary of the material risks to members who provide their data to us in the “Summary of Information in Offering Circular” under the heading “Risk Factors” at page 5 of the Offering Statement.

12. Disclose what consideration would be paid to members if their interests were redeemed.

Response: A member is allowed to redeem his or her shares at any time, at which point he or she may elect to revoke his or her purchaser consent provided in connection with purchase of those shares. We have disclosed at page 6 of the Offering Statement that no consideration will be paid to a member if his or her shares are redeemed.

 

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Risk Factors, page 7

13. We note your disclosure on page 44 regarding mandatory arbitration, class action waiver, exclusive forum, and fee shifting provisions in your operating agreement. We also note the waiver of liability provision in section 4.4(a) of your operating agreement. Please add risk factor disclosure to address the specific material risks to your members from each of these provisions and the similar provisions contained in your management agreement.

Response: We have added risk factor disclosure at page 14 of the Offering Statement to address the specific material risks to our members from the provisions noted in this comment and the similar provisions contained in our management agreement.

Our business is subject to complex and evolving U.S. and foreign laws..., page 8

14. If you will be subject to the European General Data Protection Regulation (GDPR) that took effect in May 2018, expand your risk factor disclosure as appropriate. If you will not market to European-based customers, disclose how this will limit your ability to market to global pharmaceutical and life sciences companies.

Response: At this time, the Company can accept only members who are residents of the United States. We plan to accept European Union members in the future, subject to compliance with appropriate European laws and regulations. We have added risk factor disclosure at page 8 of the Offering Statement to the effect that GDPR may apply to us in the future and at page 28 of the Offering Statement concerning our readiness for GDPR.

Our Manager may have conflicts of interest..., page 13

15. We note public announcements regarding your manager’s Luna Coin project. If that project is still active, update your disclosure as appropriate. If that project would compete with your planned business operations, expand your risk factor disclosure to discuss the potential conflicts of interest, including the risk of competing with your manager.

Response: While the Manager in the past anticipated and continues to consider issuing a “Luna Coin,” the Manager has no current plans to do so. Among other things, the Manager does not know (a) if or when it may create a “Luna Coin”, (b) what the material terms of a “Luna Coin” may be, including whether or not the “Luna Coin” would be a security under the SEC’s evolving views and guidance on crypto-currencies, crypto-tokens and related products, or (c) whether a “Luna Coin” would be in any way related or supplemental to, or competitive with, our business or, if so, the materiality thereof. Given these unknowns, combined with the ability of members to redeem their shares and withdraw our continuing right to use their data any time should the Manager issue a Luna Coin (or at any other time or for any other reason), we believe a potential issuance of a “Luna Coin” is not material to our potential investors and any reference in the Offering Statement to a potential digital asset could cause investor confusion.

Our Operating Agreement eliminates our Manager’s fiduciary duties to our members, page 13

16. Expand your risk factor disclosure to address the lack of securityholders’ ability to seek accountability for wrongdoing given the elimination of fiduciary duties, governance provisions, and the unilateral discretion of your manager.

Response: We have added additional risk factors at page 15 of the Offering Statement to address the lack of securityholders’ ability to seek redress for wrongdoing given the elimination of fiduciary duties, governance provisions, and the unilateral discretion of the Manager.

 

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Description of Business, page 16

17. Clarify how you will create a longitudinal database if members do not continue to contribute personal data. Include appropriate risk factor disclosure.

Response: We have added a risk factor at page 9 of the Offering Statement concerning the need for members to recurrently provides us with data in order to create a longitudinal database as we intend.

18. We note that paragraph 2 of your management agreement indicates the database managed by your manager will be “designed to have key functions powered by the blockchain.” Please explain how you intend to incorporate blockchain technology into your database and how the technology will work. Include an outline of the stages of development for the blockchain technology solution for your database and where your manager is in each stage, including associated milestones, timeframes, and costs. Also, provide balanced disclosure regarding the potential risks and benefits of the technology.

Response: We do not intend to use any blockchain technology in connection with any Member Data or our Member Data database. We do, however, intend to use blockchain technology as a distributed and tamper-evident ledger to the extent disclosed in the Offering Statement under the heading “Description of Business—Our Solution—Blockchain Technology” beginning on page 27. We intend to deploy the blockchain technology for our intended application using off-the-shelf third party tools from reputable vendors. Given the limited scope of our intended usage of blockchain technology, the modest efforts we anticipate to be necessary to implement the technology, the early stage of our development plans and our current ability to collect and manage the same information solely using conventional database technology (albeit with less transparency to our members), we do not believe that an outline of the stages of its development or the Manager’s progress is in each stage is material to potential investors in our shares. Accordingly, we have not included disclosure regarding these items. As noted in our blockchain disclosure, we intend to use a blockchain to provide additional transparency to our members. Given that we plan for our blockchain not to contain any sensitive data, we believe the risks associated with this aspect of our business plan are relatively modest; nonetheless, we have added a risk factor at page 11 of the Offering Statement to disclose potential risks of this technology, including the risk that we may not implement this technology.

19. Please discuss government regulations of your blockchain technology solution for your database, if material. Provide appropriate risk factor disclosure, if applicable. Also, please tell us whether your blockchain technology solution will involve holding or trading digital assets or cryptocurrencies.

Response: As noted in our response to Comment 18 above, we do not intend to use any blockchain technology for our Member Data. We do not believe our the limited categories of information that would be stored in a blockchain would entail any additional material risks to our potential investors because the associated user identities will be masked and only accessible if our primary, conventional user database is compromised, for which we have already included a risk factor.

Additionally, as noted in our response to Comment 15, neither we nor the Manager has any current plans to issue crypto-currencies nor do we or the Manager know what the terms would be if we or the Manager elected to issue crypto-currencies in the future (including whether or not such crypto-currencies would utilize a blockchain or, if so, how they would do so).

 

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20. We note you have organized your business as a limited liability company with a public benefit corporation as your manager that will own the intellectual property to your database with your members holding limited liability company interests. Please revise to disclose why you have chosen this structure and the material advantages and disadvantages of this structure as compared to structuring your company as a typical corporation that offers common stock to its investors.

Response: We added disclosure at page 18 of the Offering Statement discussing the reasons for choosing our organizational structure. Per comment 24, we have added disclosure regarding the material differences between the shares we are offering and typical common stock which describes the advantages and disadvantages to investors of our governance structure.

21. To the extent you, or your manager, are affiliated with digital asset-related businesses, please disclose such affiliations. Also, tell us how Luna Coin relates to your business and how your manager plans to use Luna Coin for its business operations. Include in your response the costs to your manager of creating Luna Coin, the material risks your manager faces in implementing it, and how you expect your manager’s token generation to impact your planned operations. Also, explain how your manager intends to comply with the registration and other requirements of the federal securities laws.

Response: We advise you that neither our company nor the Manager has any affiliation with any digital asset related business that is material to potential investors.

Please see our response to Comment 15, which is incorporated into this response by reference. Due to the Manager’s significant uncertainly whether or not a “Luna Coin” would ever be issued, what its material terms would be if issued, or how it would relate, if at all, to our business or operations, we cannot provide good faith estimates as to costs to the Manager of creating a “Luna Coin,” the material risks our Manager would face in implementing it, or how we expect the Manager’s potential issuance of a “Luna Coin” to impact our planned operations. We further believe, as noted in our response to Comment 15, that given this fundamental uncertainty, these matters are not material to potential investors and any disclosure relating to a potential digital asset could cause investor confusion.

Supplementally, we advise you that if the Manager elects to issue a “Luna Coin” or other digital asset or token, and if such digital asset or token would be a security at the time of issuance as defined under the Securities Act of 1933, as amended, the SEC’s rules and regulations promulgated thereunder or applicable judicial interpretations thereof, our Manager intends either to register the offering or to offer the “Luna Coin” under an available exemption from registration.

22. We note your disclosure that large amounts of genomic and other data are already freely available from public databases which you disclose have been of little interest to the pharmaceutical industry due in part to the “high variation in data quality.” We also note your disclosure on page 24 that your database inputs will include self-reported genomic and phenotypic data, and medical data and DTC testing product data files which will be self-reported and originally sourced from third parties. Clarify how you will validate these inputs into your database and how you will control the variation in your data quality given that it is self-reported or made available from third parties. Also, disclose the risks to your business and the value proposition of your database if your inputs do not prove reliable.

Response: We have provided additional disclosure at page 25 of the Offering Statement concerning how we will validate inputs into our database and at page 25 of the Offering Statement how we will control the variation in our data quality. We have also added appropriate risk factor disclosure at page 10 of the Offering Statement to discuss the risks if our inputs do not prove to be reliable.

 

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Compensation of Our Manager, page 31

23. We note your disclosure on page 24 that you, your manager, and your members may receive compensation from research sponsors for identifying potential members for targeted research. Clarify in this section how that compensation will be determined and divided among the various parties.

Response: We have clarified on page 26 of the Offering Statement and on page 33 in the “Compensation of Our Manager” section how compensation from research sponsors will be determined and divided among the various parties.

Securities Being Offered, page 35

24. Disclose the material differences between the securities being offered and typical common stock.

Response: We have added disclosure at pages 37 of the Offering Statement the material differences between the securities being offered and typical common stock.

Arbitration; Governing Law; Class Actions, page 44

25. Disclose in this section the waiver of liability provision in section 4.4(a) of your operating agreement and then disclose how each provision described in this section may materially impact the rights of holders. To the extent that any of these provisions would apply to any claims under the federal securities laws or the rules and regulations thereunder, revise your disclosure to affirmatively state (in both the disclosure and in the related exhibit) that by agreeing to these provisions, investors will not be deemed to have waived the manager’s or the company’s compliance with any federal securities laws or the rules and regulations thereunder. In addition, address any question under applicable state law as to the enforceability of any of the provisions described in this section and, to the extent the transfer of any security is required by law, address whether these provisions would apply to transferees.

Response: We have disclosed at page 47 of the Offering Statement the waiver of liability provision in section 4.4(a) of our operating agreement and we have revised our disclose and added risk factors at page 15 of the Offering Statement explaining how these provisions may materially impact the rights of holders. We have revised Section 4.4(a) of our operating agreement to state that the waiver of liability does not apply to claims our apply to any claims members may have under United States securities laws or the rules and regulations thereunder with respect to the Manager’s or our compliance with any such United States securities laws or the rules and regulations thereunder. The disclosures in the Offering Statement concerning the waiver in section 4.4(a) indicate that exception. We have filed the amended and restated operating agreement with the Offering Statement.

We also added disclosure at page 49 of the Offering Statement concerning the limitation of liability provisions in our management agreement to state that by our company agreeing to these provisions, investors will not be deemed to have waived the Manager’s or our company’s compliance with any federal securities laws or the rules and regulations thereunder. We note that while section 4.4(a) of our operating agreement applies to the maximum extent permitted by the Delaware Limited Liability Company Act, we do not believe there to be any material question under such act as to the enforceability of this section as written and we therefore have not qualified the disclosure to suggest that investors may not be bound to these limitations as written. We have noted at page 48 of the Offering Statement that to the extent that the transfer of any security is required by law, these provisions would apply to transferees.

 

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Our Management Agreement, page 45

26. Disclose the waiver of liability provision in section 9, the mandatory arbitration provision in section 16.2, the exclusive forum provision in section 16.7, and the fee shifting provision in section 16.8. Also, disclose how you would initiate claims against the manager to enforce any terms of the agreement given that the manager controls you and you have no officers or directors.

Response: We have added disclosure at pages 49 of the Offering Statement to disclose the provisions referenced in this comment. We have also disclosed at page 49 of the Offering Statement to the effect that it is unlikely that the Manager would cause our company to initiate claims against the Manager to enforce the terms of the Management Agreement and that members’ recourse is generally limited to exercising the right to redeem their shares and withdraw their consent for us to use their Member Data.

Index to Financial Statements of LunaTrust, LLC, page F-1

27. Please tell us why you only presented an opening audited balance sheet and how this presentation complies with Part F/S(b)(4) of Form 1-A as specified by Part F/S(c)(1).

Response: We believe our presentation of an inception audited balance and notes thereto complies with the financial statement requirements of Part F/S(b)(4) of Form 1-A as specified by Part F/S(c)(1). The inclusion of a balance sheet dated as of the inception date is consistent with Part F/S(b)(3)(D) in that the filing is made during the period between inception (April 23, 2018) and three months after reaching the annual balance sheet date for the first time (which will be March 31, 2019). The date of the balance sheet (April 23, 2018) is within nine months of filing. The date of the balance sheet then determines which periods the statements of comprehensive income, cash flows and changes in stockholders’ equity must cover. Part F/S(b)(4) defines the periods for statements of comprehensive income, cash flows and changes in stockholders’ equity as “each of the two fiscal years preceding the date of the most recent balance sheet being filed or such shorter period as the issuer has been in existence.” For an entity that was not in existence prior to the balance sheet date, the shorter period is zero time and statements of comprehensive income, cash flows and changes in stockholders’ equity are therefore not required or possible to prepare.

28. We note that the manager is not entitled to reimbursement for operational expenses paid by the manager if such expenses would have been accrued by you under generally accepted accounting principles on or before March 31, 2020. Please tell us how you intend to account and reflect within your financial statements the expenses paid on your behalf by the manager. Refer to the guidance in SAB Topic 5T.

Response: Currently, the Manager is the sole member of LunaTrust. In accordance with our operating agreement, the Manager will automatically resign as, and cease to be, a member upon any other person being admitted as a member of the Company. Accordingly, we intend to account for the operational expenses paid on our behalf by the Manager while the Manager is the sole member as expenses of LunaTrust with a corresponding credit to paid in capital, in accordance with the guidance in SAB Topic 5T. Once an investor becomes a member, the sole relationship between our company and the Manager will be the contractual services relationship that exists pursuant to the operating agreement and the management agreement and the manager provisions of the Delaware Limited Liability Company Act (Chapter 18 of Title 6 of the Delaware Code), and we do not believe that the guidance in SAB Topic 5T would continue to apply. Accordingly, the Company plans not to record as expenses of the Company those expenses that the Manager bears after the Manager is no longer a member and for which the Manager does not have a contractual right of reimbursement. Our management agreement has been amended and restated to revise the description of expenses for which the Manager is not entitled to be reimbursed to those that are, or would be but for the applicable provisions of the management agreement, accrued by the Company under generally accepted accounting principles on or before March 31, 2020. We have filed the amended and restated operating agreement with the Offering Statement.

****

 

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If you have any further comments and/or questions, please contact me or John Tishler, Esq. at Sheppard, Mullin, Richter & Hampton LLP at (858) 720-8943.

 

cc:            John Tishler, Esq., Sheppard, Mullin, Richter & Hampton LLP

August 23, 2018

Office of Electronics and Machinery

Division of Corporation Finance

Securities and Exchange Commission

100 F. Street, NE

Washington, DC 20549

 

Re:		LunaTrust LLC
		Amendment No. 1 to Draft Offering Statement on Form 1-A
		Submitted July 30, 2018
		CIK No. 0001741687

Ladies and Gentlemen:

This letter sets forth the responses of LunaTrust LLC, a Delaware limited liability company (the “Company,” “LunaTrust” or “we”), to certain of the comments received from the Staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “Commission”) by letter dated August 16, 2018 (the “Comment Letter”) concerning the Company’s draft offering statement, as amended, on Form 1-A (the “Offering Statement”). As discussed with the Staff via telephone on August 20, 2018, we are providing written responses to comments 2, 3 and 4 of the Comment Letter. We will amend and re-submit the Offering Statement, and provide a full response to the Comment Letter, at a later date.

Draft Form 1-A submitted July 30, 2018

2. We note your added disclosure in the last paragraph on page 41 that you intend to revise the number of shares to be issued for types of Member Data from time to time based on bona fide sales or your updated determination of the fair value of such types of Member Data. Please revise your disclosure to be consistent with Rule 251(d)(3)(ii) of Regulation A which provides that you must offer the securities at a fixed price for the duration of the offering.

Response: Rule 251(d)(3)(ii) prohibits “at the market offerings” under Regulation A and defines the term “at the market offering” to mean an offering of equity securities into an existing trading market for outstanding shares of the same class at other than a fixed price. The offer described in the Offering Statement does not satisfy this definition of an at the market offering because it is not made into an existing trading market. The shares are non-transferable, except as required by law, and there will not be any public trading market for the shares. This is disclosed on pages 5, 13 and 16 in the Offering Statement.

 

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3. It appears from your disclosure on page 41 that you established the value for some of the Member Data categories by reference to sales of genomic information. Please identify which Member Data items you are valuing on the basis of an “accepted standard” and which you are valuing by reference to “bona fide sales within a reasonable time.” For valuations based on bona fide sales, provide us with your analysis of why those sales are comparable to the acquisitions of Member Data contemplated by your disclosure. Include in your analysis how the price consumers pay to acquire their own ancestry data, as described in your first analysis on page 41, related to your valuation methodology. Please also provide us with your analysis of how you considered other acquisitions of genomic or related personal data in determining bona fide sales for purposes of your valuations.

Response: We have not valued any Member Data based on bona fide sales within a reasonable time as we are unaware of any bona fide sales of the limited and revocable rights for any of the Member Data types indicated on the cover page of our Offering Statement that we will acquire from an undifferentiated (i.e., self-selected) population. We will revise the first sentence on page 41 of the Offering Statement to clarify that the fair value has been determined by an accepted standard due to the absence of bona fide sales of Member Data within a reasonable time.

The price that consumers pay to acquire their own ancestry data and/or health information from a direct to consumer genomics provider does not reflect a bona fide transaction in the limited and revocable rights that we will acquire for the DNA Genome-Wide Microarray or any other Member Data type. Today, consumers pay direct to consumer genomics providers a fee primarily for trait, genealogy and health analyses performed by such providers and only secondarily for their permanent access to the underlying genotype file, which many consumers do not access at all. Consumers also provide data rights to the direct to consumer genomics provider as part of the provider’s terms of service. If a consumer elects to download his or her genotype file, he or she may share that file with an unlimited number of other data repositories in addition to having shared it with the initial provider. The difference between the information and rights consumers receive from a direct to consumer genomics provider and the limited and revocable rights to the genotype file they will provide to us in exchange for shares is estimated in the analysis described in the second paragraph on page 41. See also our response to the Staff’s comment 4, below.

4. You indicate that you are not aware of any bona fide sales for the types of Member Data you intend to acquire. In the absence of such bona fide sales, please clarify how you determined that the valuation methodology you intend to use is an “accepted standard” for purposes of Note to Paragraph (A) of Rule 251. As part of your analysis, please specifically address whether the disclosed methodology has been recognized as an accepted standard or used by third parties to value genomic or similar data.

Response: None of Paragraph (A) of Rule 251, the proposing release for Regulation A amendments (Release No. 33-9497) or the adopting release for these amendments (Release No. 33-9741) define or clarify the meaning of an “accepted standard” for purposes of valuing non-cash consideration. We note that very similar language is used in Rule 419(g) (discussed further below), Rule 501(c) of Regulation D and Rule 701(c)(3)(i), the latter two of which contemplate non-cash consideration for offering limits in the exemption. The term “accepted standard” is not further defined in these exemptions or in their respective proposing or adopting releases.¹

 

1

See Release Nos. 33-6389 (1982) (adopting Regulation D with the “accepted standard” language), 33-6339 (1981) (proposing Regulation D with the “accepted standard” language), 33-6768 (1988) (adopting Rule 701 with the “accepted standard” language and no explanation) and 33-6683 (1987) (proposing Rule 701 but not including the “accepted standard” language). Release No. 33-6339, which proposed Regulation D, based the definition of “aggregate offering price” on Rule 242(c). See id., § V. B.3. Rule 242(c) was modeled on similar language in then Rule 254(c) of Regulation A. See Release No. 33-6180 (1980).Rule 254(c) was adopted in SEC Release No. 33-3663.

 

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Rule 419 concerning blank check companies states in Note 2: “If all or part of the consideration paid consists of securities or other non-cash consideration, the fair value shall be determined by an accepted standard, such as bona fide sales of the assets or similar assets made within a reasonable time, forecasts of expected cash flows, independent appraisals, etc. Such valuation must be reasonable at the time made.” Accordingly, we believe the term “accepted standard” should be understood to include, but not be limited to, reasonable forecasts of expected cash flows or reasonable independent appraisals.

We further note the Staff’s no-action letter to Clark Tank Lines (Sept. 22, 1984). The requesting issuer proposed to issue stock to an Employee Stock Ownership Plan (ESOP) in reliance on Rule 504 of Regulation D in exchange for wage concessions from its employees. The issuer represented that the wage concessions were being made for the stock but also (and primarily) for job security, and that both the amount of wage concessions (i.e., the aggregate number of hours employees receiving stock through the ESOP would work during the 5-year term of the plan) and the associated job security (i.e., how much of the wage concession was simply due to employees’ desire for the issuer to survive a major downturn) were impossible to value. The issuer proposed to value the consideration received by the value of the shares to be issued to the ESOP, with the shares valued through an independent appraisal performed in accordance with Revenue Ruling 59-60. The Chief Counsel of the Division of Corporation Finance concurred that the issuer could rely on Rule 504 using that calculation methodology in that case subject to various stated conditions.

We believe the additional language in Rule 419, the Clark Tank Lines letter and other Staff analyses² demonstrate that an accepted standard for valuing non-cash consideration is one supported by rational analysis of the attributes of the particular non-cash consideration and based on standards that are recognized for more general situations. This definition would preclude unilateral and unsupported declarations of value, such as a nominal price stated in transaction documents.³

We believe this authority further stands for the proposition that the requirement for an accepted standard does not preclude reliance on a dollar limited offering exemption simply because the fair value of the non-cash consideration is difficult to ascertain.

 

2

See, e.g., No Action Letter issued to Northwest Medical Resources, Inc. (May 10, 1976) (issuer allowed to use book value of shares as an “accepted standard” in Regulation A context where no trading history existed and the shares were being issued in a “pooling of interests” merger); Comment letter issued to RX Healthcare Systems Ltd. (Feb. 27, 2015) (issuer’s responsive disclosure to the Staff’s comment 62 was: “The aggregate value of non-cash consideration will be established by bona fide sales of that consideration made within a reasonable time, or, without sales, on the fair value or reasonable value as determined by the board of directors as a prudent purchaser.” (emphasis supplied)).

3

See Accounting & Valuation Guide for the Valuation of Privately-Held-Company Equity Securities Issued as Compensation prepared by the Equity Securities Task Force of the AICPA 8.03(d) (“It is important to carefully consider the rights and preferences of each class of equity when estimating the aggregate fair value implied by the transaction. In these cases, one approach would be to perform a specific valuation of the securities issued or the noncash consideration received. It would not be reasonable to rely solely on the nominal price specified in the documents.”)

 

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Turning to our calculation of the value of the specified types of genomic Member Data, we relied upon the following authoritative guidance related to business and equity security valuation as our accepted standard:

1. Accounting & Valuation Guide for the Valuation of Privately-Held-Company Equity Securities Issued as Compensation prepared by the Equity Securities Task Force of the AICPA (AICPA Accounting & Valuation Guide);

2. Statements on Standards for Valuation Services No. 1, issued June 2007 by the American Institute of Certified Public Accountants (SSVS No. 1); and

3. 2018-2019 Uniform Standards of Professional Appraisal Practice (USPAP) issued by the Appraisal Foundation.

Each of these publications is consistent in the recognition of three primary methods to determine fair value, namely, market approach, income approach, and the asset (or cost) approach, and apply consistent (although not identical) definitions to each method. The AICPA Accounting & Valuation Guide and SSVS No. 1 apply specifically to the valuation standards and methodologies used within the context of financial reporting activities. We relied primarily on the AICPA Accounting & Valuation Guide in developing our analysis and in referencing the definitions of each valuation method.

According to the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) glossary, the market approach is a valuation technique that uses prices and other relevant information generated by market transactions involving identical or comparable (that is, similar) assets, liabilities, or a group of assets and liabilities, such as a business. The market approach bases the value measurement on what other similar enterprises or comparable transactions indicate the value to be. Under this approach, the valuation specialist examines investments by unrelated parties in comparable equity securities (or assets) of the subject enterprise or examines transactions in comparable equity securities (or assets) of comparable enterprises. Financial and nonfinancial metrics may be used in conjunction with the market approach to estimate the fair value of the privately issued securities of the subject enterprise.

According to the FASB ASC glossary, the income approach is defined as “valuation techniques that convert future amounts (for example, cash flows or income and expenses) to a single current (that is, discounted) amount.” The fair value measurement is estimated on the basis of the value indicated by current market expectations about those future amounts. The income approach obtains its conceptual support from its basic assumption that value emanates from expectations of future income and cash flows.

The FASB ASC glossary defines the asset (or cost) approach as a general way of determining a value indication of an individual asset by quantifying the amount of money required to replace the future service capability of that asset. An asset’s value today is what it would cost today to acquire a substitute asset of equivalent utility. In applying the cost approach, replacement cost often serves as a starting point, and then, adjustments are made for depreciation and other factors.

We performed an analysis using three independent valuation methodologies under the market approach and income approach to determine the fair value of the Member Data types to be received in exchange for our shares. We deemed the asset approach not applicable to our analysis because it is not practical to replace or recreate the limited, revocable license to the diverse Member Data types. Our analysis was performed in a manner consistent with the literature referenced above, and, as such, we believe our analysis and value conclusions reflect the application of an accepted standard for purposes of Rule 251.

More specifically, the valuation methods first estimate the fair value of a single Genotype file, also known as a DNA Genome-Wide Microarray (GT file), based on observable, third-party market transaction data for the most directly comparable assets we could identify. Other genomic contributions were then valued in relation to the fair value of a GT file.

 

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Our first analysis consisted of a genotype contribution valuation. This analysis is a market approach based on market participant data, specifically the price that individuals pay to established genotype testing services for both trait, genealogy and health analyses and the right to access the underlying GT file (which right, as we noted in our response to the Staff’s comment 3, is often not exercised). We observed a typical market-based price for obtaining this suite of services and then subtracted the estimated value of the trait, genealogy and health report to obtain a residual value calculation for the right to access the GT file. We then divided the value of this right by the mean number of entities with which we project an individual would share (license) his or her GT file to determine the fair value of the GT file per licensee.

Our second analysis consisted of an electronic health record (EHR) valuation that was used to impute the value of a GT file. This analysis is also a market approach based on market participant data – specifically, the observable price of a de-identified EHR, which we observed in publicly available listings to be a range between $7 and $50. We note that in some cases, the observed prices were for data that appeared to have been unlawfully obtained. We were not able to obtain information on the content or comprehensiveness of the EHRs that were indicated to be for sale. In our analysis, we assumed a mid-price of $20 per EHR, and we then estimated that a mid-priced EHR record would contain 30% of the total information we would be able to obtain from a highly engaged member of our community. That is, we assumed that an individual who elects to provide an EHR to us will be more engaged with our community and likely also to provide multiple other data contributions in exchange for shares, such as various types of genomic data, wearable data and surveys. This analysis implies a value of $67 ($20/30%) for all data we would obtain from a single more engaged individual providing an EHR to us, including other data provided by the same individual. We estimate that the GT file for such an individual would represent 5% of the total value of all contributions by such individual, thereby implying a value of the GT file of $3.33 as indicated in the Offering Statement.

Our third analysis consisted of a terminal value analysis based on the value per record observed from two significant market transactions involving the acquisition of large volumes of patient medical data (described below under the heading “Transactional analyses”). These transactions are summarized below. We prepared a discounted cash flow (net present value or NPV) analysis under the income approach using reasonable estimates of the number of data files we anticipate collecting and the average acquisition cost observed via those two market transactions to arrive at an NPV per patient record. We then adjusted the NPV per patient record by the estimated percentage of the contribution of the GT file to the total value of the member record to determine the fair value of the GT information. The terminal value analysis also provides a reasonableness test with respect to the other two valuation methods in that it relates the fair value per GT file to the anticipated future value of the Company via anticipated cash flows.

After using the market approach and income approach to determine the fair value of the GT file, we determined the fair value of other data types by analyzing the respective values of contributions of those data types compared to a GT file or other closely related data type. We believe this approach is consistent with the accepted standard we used to value the GT file. The valuation standards and methodologies we reference above mandate that in the absence of a bona fide transaction involving the subject asset or security, the fundamental valuation approaches – market, income and asset – should be used to develop estimates of value predicated on adjustments to observable third-party datapoints and relative value concepts. Examples of this application of the accepted standard to other situations include, but are not limited to, intercompany transfer pricing analyses where the value of goods and services exchanged between related parties is determined based on qualitative and quantitative adjustments to market-based datapoints (e.g., a cost-plus or comparable profits analysis); stock-for-stock transactions involving privately held companies (e.g., a 3:2 exchange ratio where the relative value of each firm is determined); and using quantitative and qualitative adjustments to determine the value of a security relative to one that has been priced in the market (e.g., determining the fair value of common stock at a percentage of the value of recently transacted preferred stock after applying appropriate adjustments).

 

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Transactional analyses

The two significant market transactions that were analyzed in the third analysis above were Genentech Inc.’s (Genentech) partnership with 23andMe, Inc. (23andMe) announced in January 2015 (Genentech/23andMe transaction) and Roche’s acquisition of EHR software firm Flatiron Health announced in February 2018 (Roche/Flatiron transaction). Publicly announced details of these two transactions, plus two others that were not included in our terminal value analysis, are summarized below.

In reviewing these analyses, it is critical to understand that the value of de-identified medical data, including all of the Member Data types indicated on the cover page of our Offering Statement, is heavily dependent on what is known about the patient that provided that data. We are offering the same number of shares per Member Data type to any person who voluntarily chooses to submit that data type, regardless of what we already know about that person. We therefore refer to our population as “self-selected,” which in the marketplace is the equivalent of a random population. As noted in the summaries below, the transaction precedents we have identified involve data from persons with pre-identified traits, which, because of the nature of those pre-identified traits, make the data substantially more valuable. As a general rule, the value of data with a preidentified, sought after trait compared to data from a random population is:

 

Value (preidentified trait) =		value (random sample)
		percent of preidentified trait in random population

The application of this formula is illustrated below in the first summary below.

Genentech/23andMe transaction

Genentech and 23andMe announced a partnership in January 2015 to recruit 3,000 individuals who suffered from Parkinson’s disease (or their first-relative) for clinical trials. The incidence of Parkinson’s disease in the general population is approximately 0.013%, or 13 individuals for every random sample of 100,000 individuals. 23andMe publicly reported having approximately 800,000 unique genotypes in 2015. Through 23andMe’s involvement with the Michael J Fox Foundation, 23andMe had over 12,000 diagnosed Parkinson’s disease patients and 1,300 family members in its database, including detailed medical histories. Because of this relationship, the number of diagnosed Parkinson’s patients in 23andMe’s database was substantially higher than would have occurred in a self-selected population of 800,000 unique individuals, which would be predicted at approximately 100 individuals. Genentech paid 23andMe $10,000,000 at announcement and agreed to pay up to an additional $50,000,000 subject to milestones. The milestones were not disclosed. The collaboration is apparently ongoing. For purposes of the third analysis described above, we imputed a cost per million random individual records that would equate to the $5,000 cost per identified Parkinson’s record implied by the maximum $60,000,000 price over 12,000 available patient records, resulting in an imputed maximum transaction price over the available data of $0.65 per available individual data set.

 

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Although we used this transaction and the implied price per data set in our third analysis involving terminal value of a business model that uses health data, we do not believe it is useful as an indicator of the value of an average (i.e., self-selected) member’s GT file. First, the disclosed transaction price was between $10,000,000 and $60,000,000 depending on milestones that were not publicly available, and the imputed transaction price per available record could therefore range from $0.11 to $0.65. Second, the population was pre-identified as having Parkinson’s disease (or a close relative of a person with Parkinson’s disease). We or anyone else with only self-selected participants would need a database of over 92 million unique individuals to obtain a sample size of 12,000 individuals with Parkinson’s disease.⁴ Third, even if we somehow had a sufficient population of Parkinson’s disease members, we would have only the data those members voluntarily contributed. By contrast, 23andMe stores biobank samples their customers submitted for testing, and those samples are available to 23andMe for further sequencing and analysis at any time. Accordingly, the implied range of imputed transaction price per available record does not tie to the more limited genomic information in a GT file. The cost of fully sequencing the biobank samples for the 12,000 individuals (or 15,000, including family members) would be substantial (perhaps $20,000,000 or more), and may have been taken into account in either or both the consideration to be paid or the milestones. Finally, and most importantly, the disclosed purpose of the partnership was to identify participants for clinical trials. Our members will not be consenting to participate in clinical trials as part of their consideration for the shares, and accordingly, the milestone-based pricing of a transaction with the stated purpose of producing participants for clinical trials has limited relevance to the value of our members’ GT files.⁵ Put another way, we are not receiving from our members the primary value that Genentech appears to have been seeking in the Genentech/23andMe transaction, and which value was presumably incorporated into both the initial price, the maximum price and the milestones.

Roche/Flatiron transaction

The Roche Group (Roche) and Flatiron Health, Inc. (Flatiron Health) announced in February 2018 that Roche would acquire all shares of Flatiron Health for $1.9 billion. The transaction completed in April 2018. Flatiron Health is a healthcare technology and services company focused on accelerating cancer research and improving patient care. As of the announcement date, Flatiron Health disclosed partnerships with over 265 community cancer clinics, six major academic research centers and 14 out of the top 15 therapeutic oncology companies. Flatiron Health’s website claims 2,000,000 active patient records. We presumed these records to be of cancer patients given Flatiron Health’s mission and business.

Cancer has a 4.4% incidence in a general population. For purposes of the third analysis described above, we imputed a cost per million random individual records that would equate to the $950 cost per identified cancer patient record implied by the $1.9 billion purchase price over 2,000,000 available patient records, resulting in an imputed maximum transaction price over the available data of $42.25 per available individual data set. Although we used this transaction and the implied price per data set in third analysis involving discounted cash flow for a business model that uses health data, we do not believe it is useful as an indicator of the value of our member’s GT file.

Flatiron Health was purchased as an operating business and post-transaction is maintained as a separate legal entity. Roche’s disclosed rationale for the purchase was to “provide the technology and data analytics infrastructure needed not only for Roche, but for oncology research and development efforts across the entire industry.” In other words, this a purchase of a business and not a purchase of data, and the ongoing business purchased will provide Roche a flow of additional phenotypic data contributions for the existing patient base and continual access to new patient data. We found no indication that the purchase price related to the value of an individual GT file, or even that individual GT files are normally included in the available patient data. Accordingly, we do not believe that the implied price per available data record bears any relationship to the market value of an individual GT file, except to the extent used in the company terminal value analysis for our third methodology described above.

Pfizer/23andMe

Pfizer, Inc. (Pfizer) and 23andMe announced a collaboration in 2014 to recruit up to 10,000 individuals suffering from Inflammatory Bowel Disease (IBD) in a research initiative designed to explore the genetic factors associated with the onset, progression, severity and response to treatments for BID. Pfizer and 23andMe announced a further collaboration in 2015 for a longitudinal study involving lupus, which entailed enrolling and genotyping 5,000 people suffering from lupus. The announcement indicated that the collaboration would include the integration of medical records, targeted bio-sampling along with genetic information for all participants. Financial terms were not disclosed for either collaboration. Accordingly, we were unable to consider this transaction in our valuation analysis. We note that if we had available financial terms, similar factors that limit the comparability of the Genentech/23andMe transaction to our offer of shares would apply to these collaborations.

deCode/Amgen

deCode Genetics, Inc. (deCode) has a complicated history. deCode was founded in 1996, raised $199 million in its initial public offering in 2000, and filed for bankruptcy in 2009. Arch Venture Partners acquired deCode out of bankruptcy for $14,000,000 and further invested an undisclosed sum into the purchased assets. Amgen, Inc. (Amgen) acquired deCode for $415,000,000 in 2012, and then spun-out NextCode Health which was acquired by WuXi PharmaTech, Inc. for $65,000,000 in 2015. The acquisition of deCode gave Amgen genomic information, biobank specimens and medical histories of 160,000 individuals, representing over half of the adult population of Iceland. The population of Iceland is known as a “founder population,” meaning the genetic diversity is limited compared to a randomly sampled human population. The combination of genomic and family medical history from a founder population is significantly more valuable than genomic information from the self-selected population from which we will solicit our members because far fewer persons are needed from a founder population to identify statistically significant correlations between genomic information and observed medical traits (such as the occurrence of a particular disease). Moreover, the subject data derived from an Icelandic governmental study that was unique and is likely impossible to replicate. Finally, the data obtained was exclusive to Amgen and could be used by Amgen in perpetuity. Because of the unique nature of the population and data acquired, and the substantial difference in rights acquired, including the exclusivity and scarcity of the data, we did not consider this transaction in our analyses.

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4	We estimate the maximum number of individuals we could add as members through this offering would be 1.4 to 1.6 million members.

5

We note also that the Company will not earn any revenue should one of our members agree both to be identified to a customer that purchases a query of our Database and to participate in a clinical trial. Pursuant to our purchaser consent, our members will agree that we may contact them from time to time regarding opportunities for them to participate in targeted research. We will notify our members of the terms of participation, including any compensation offered by the sponsor of the study. Participation in targeted research will be completely voluntary.

 

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