Complaint Review: Kristen Faulkner

This is the story about how my co-founder Kristen Faulkner destroyed my startup and lied to my investors.

 LEGAL NARRATIVE AND HISTORY OF  NUTRITAS, LLC., PREVENTLY, INC., AND FRUIT STREET HEALTH, INC. 

Laurence Girard, author, edited by Christopher F. Meatto, Esq.

Updated:  October 17, 2014

 Introduction

 This memorandum  is a legal narrative and chronology of the three companies that were founded by Laurence Girard, a Harvard student who first conceived of this concept in September 2012.

This narrative commences with the founding of  Nutritas LLC (“Nutritas”) in 2012  through the launch of the Fruit Street website and SaaS on October 1, 2014.  The term “legal narrative” is utilized here since included are legal opinions and conclusions made by Christopher F. Meatto, Esq. (“Meatto”), startup legal adviser (also a former Harvard student) and founder of HarvardLaw74.com.  Christopher is a graduate of Harvard Law School and has 40 years of experience as an attorney. As a disclosure, Meatto currently serves as counsel for Fruit Street Health, Inc. and is significantly involved in its day to day operations, although he owns no equity in Fruit Street.

 Laurence Girard’s vision in founding Nutritas, Prevently Inc. (“Prevently”) and Fruit Street, Inc. (“Fruit Street”) has always been to create a disruptive online health portal and mobile application that would combine health content, e-commerce, telemedicine, personal health records, and social networking tools in a unique and compelling way for the mutual benefit of patients and the medical profession.

 From commencement until the present, Girard’s business and customer acquisition  strategy has been to primarily seek investments and support from a group of investors already established as health care professionals and to engage several of these investors as his key advisers.  This strategy is central to Girard’s vision, since he has intended from the start to operate a health portal with revenue obtained by patient utilization and physician licensing of software.

 Girard Personal and Educational History

 Laurence Girard was born on January 19, 1992 at Huntington Hospital in Huntington, NY.   He was 20 years old when he launched this project, a fact which all investors and vendors were acutely aware.

 Laurence graduated from Harborfields High School, Greenlawn, New York,  in 2010 and then spent 2010-2011 volunteering in his local emergency room at Huntington Hospital in the North Shore LIJ Health System.

  Laurence commenced his Harvard education by taking  3 requisite online courses at the Harvard Extension School (“HES”) in the Fall of 2010 and the Spring of 2011. Laurence received an A, A, and A- in these three requisite courses which made him eligible to apply for acceptance to the HES undergraduate degree program at HES. Upon his acceptance, Girard moved to Cambridge and attended HES on a full time basis.

 Girard completed two academic years at Harvard University and lived off-campus in Cambridge during the majority of this period.  During the tenure at Harvard, Girard completed 18 courses, 11 courses of which were medical courses, and 7 of which Girard attended lectures alongside Harvard College students. 

 In further pursuit of medical knowledge and his entrepreneurial dream,  Girard’s extracurricular activities included pediatric emergency medicine research at Boston Children’s Hospital, neurobiology research at Cold Spring Harbor Laboratories, attendance of entrepreneurial lectures at the Harvard Innovation Lab on the Harvard Business School campus, attendance of entrepreneurial conferences with the Kairos Society, and a primary author publication in the journal Pain: International Research in Pain Management which he co-authored with established physicians.

 While at Harvard, Girard  learned about entrepreneurship at the Harvard Innovation Lab and via the Kairos Society. He also volunteered for a non-profit organization called Learn to Be which provided free online tutoring for K-12 students.

 Finally, Girard had a passion for programming, and for a period of three months while at Harvard spent 60 to 80 hours per week teaching himself to code from Harvard computer science recorded lectures.  Until he decided to leave Harvard to work on Prevently, he intended to enroll as a full course load computer science student his Junior year.

           Girard took a leave from his Harvard studies his Junior year to work full time on Prevently at the Harvard Innovation Lab. This year while working full time on Fruit Street Health, Laurence opted to take two online courses in “Lifestyle Medicine” and “Nutrition” through Harvard since they are highly relevant to this business.

 The Founding of Nutritas LLC

 Nutritas was formed in the fall of 2012 by Girard and Stephen Lane a Girard high school   friend  finishing his senior year at Cornell University.

 Girard owned 51 percent of Nutritas at formation and Lane owned 49 percent. The co-founders had an understanding that since Stephen was graduating a semester early from Cornell University that Stephen would work full time for Nutritas starting in February of 2013.  It is important to note that the entire Nutritas concept was conceived and put together by Girard, and Lane’s grant of equity was premised on his promise to work on this project on a full time basis.  The amount of equity shared with Lane was more than an experienced startup founder would have offered.

 Nutritas also had a group of founding advisors which Laurence and Stephen recruited to help them with tasks such as writing a business plan, completing financial projections, creating investor presentations, and building software. The founding advisors consisted of Maulik Majmudar, George Ellis, Fabrizio Fantini, Robert Darling, Natanel Barookhian, and William Fruhan. The CTO of the company at the time was Adib Haque.   Girard promised these advisors equity which by most objective standards published on the Internet exceeded 300 percent of traditional advisor grants.  The reason for this generous grant was that Girard expected the advisors to actively guide him on a weekly basis and teach him the essentials of managing the risks of a medical startup. Sadly, the basics of even teaching basic bookkeeping practices were not taught and the advisors failed miserably in fulfilling their duties as advisors. In Girard’s opinion, Fabrizio Fantini was the only advisor listed above that met or exceeded his obligations as an advisor.

 Maulik was finishing his cardiology fellowship at Brigham & Women’s Hospital at the time and met Laurence at the Harvard Innovation Lab on the campus of Harvard Business School. George Ellis, Fabrizio Fantini, and William Fruhan were recruited by the co-founders through the Harvard Business School alumni database. Robert Darling was recruited via LinkedIn and Natanel Barookhian was recruited via an MIT technology email list.

 The Nutritas advisors conducted weekly conference calls with the co-founders.  The original business plan, financial projections, and investor presentation were completed sometime in the fall of 2012.   These carefully constructed plans became the nucleus of the Prevently business plan and operation.

 Kristen Faulkner’s Introduction to Stephen and Laurence

 Laurence and Stephen were looking for additional technology expertise and Kristen responded to a social media advertisement for a CTO  posted by Nutritas in a “Harvard Women’s Computer Science” group.

 Laurence and Stephen were originally offering Kristen equity in the range of 5% to be the CTO.  When Stephen decided to accept an offer at Citibank with a lucrative salary and excused himself from the project,  Laurence began to treat Kristen as a co-founder.  Cooley LLP, Nutritas attorneys, had advised Laurence to retain 75 percent of founder equity and to give Kristen  no more than 25 percent, and, indeed, had validated Laurence’s initial instinct that a CTO ought to receive equity in the 5% range.  (Stephen subsequently renounced in writing any claims to Nutritas and Prevently shares in exchange for 0.25% in Prevently stock options and a payment of $2,000 for expenses.)

  Based upon her oral commitment to work with Laurence full time as a co-founder, Laurence set in motion the documents that would eventually give Kristen her virtually equal share of founder  equity position  Prevently.   This decision to grant above industry equity to a CTO was significantly influenced by Kristen’s refusal to work at all without an abnormally large CTO equity position.

  In or around April 2013, Laurence and Kristen began a romantic relationship.  She moved into one of the two bedrooms in  Girard’s apartment in Cambridge, Massachusetts in late May or early June 2013 after the end of the Harvard semester.

 Nutritas Becomes Prevently

 Nutritas had retained Cooley LLP in December, 2012. Cooley had suggested that Nutritas become a Delaware C Corporation because this legal structure is the most commonly favored by investors. Based upon Cooley’s advice, Prevently, Inc. was organized as a corporation in the State of Delaware and Girard received  approximately 33 percent of its shares and Kristen 32 percent.  Additional shares were issued to  founding advisors in various single digit quantities.

 Girard Successfully Raises Three Rounds of Prevently Financing

 On the advice of Cooley, Nutritas, which was a New York LLC, became dormant and the project was incorporated in Delaware by the formation of Prevently, Inc by Cooley.

 Cooley advised that Prevently raise money by multiple rounds of financing.

 Round 1 was an offering of $50,000 worth of common stock at a valuation of $500,000 “pre-money”, which means Prevently was valued by investors in this round at $500,000 and this valuation was approved by Cooley. The per-share price was $0.05.   Round 1 was oversubscribed.

 Round 2 was an offering of common stock priced at a pre-money valuation of $2,000,000.  Again, this valuation was made by investors and approved by Cooley.  The per-share price was $0.16.  Approximately $550,000 worth of common stock was sold.

 Round 3 was an offering of preferred stock prices at a pre-money valuation of $5,000,000.  Again, this valuation was made by investors and approved by Cooley.   The per-share price was approximately $0.32.  Approximately $330,000 worth of preferred stock was sold against a target of $1,000,000

 All of the investment rounds were equity rounds.  Each investor was presented with and signed a stock purchase agreement and all such agreements complied with applicable provisions of United States securities laws and these offerings were publicly  filed by Cooley as required by law.

 Each investors, by signing the accredited investor letter, represented that he or she had the requisite knowledge and sophistication required to make an informed decision about investing in an early stage startup.

 Girard takes the position that he gave investors the opportunity to ask every possible question before investing and Girard answered all of those questions truthfully to the best of his knowledge.  The investor documents themselves recite that such opportunity was afforded to the investor.

 The History of Prevently Software Development

 Prevently hired Ingenuity Technology Consulting, a 50 person established software development firm in the Philippines to build a website and mobile application to accomplish Prevently’s business development and technology goals. The developers met with Laurence/Kristen on a daily basis through Skype and used tools such as Pivotal Tracker to track their software development needs.   The engagement was made on a $25-30 per developer hour with a reserve of 50 percent pending project segment completions.

 Although one consultant suggested that Prevently could have developed the code at a lower price, there is no dispute that the Ingenuity work was competent and useable.  Eventually, Girard decided to engage Keath Chan as its technical consultant to give an overall assessment. Chan has a computer science degree from Cornell and 15 years of software engineering experience. Keath’s assessment of the Ingenuity code was:

 “From a technical perspective, I can give the following assessments:

- While there are a plethora of free and open source CMS solutions out there (Wordpress, Joomla, Drupal, etc.), CMS do not work out of the box for a site/web application without customization and integration.  Prevently had specific business requirements and a unique user experience.  Regardless of which CMS solution was chosen, there would have been a non-trivial programming effort associated with it in order to tailor it to the needs of the site which would translate to the cost of the project.  For example, I have recently scoped out a CMS based project for a consumer packaged goods client that uses an open source CMS platform, and it came up to 6-month, 4 developer project that would have priced out at around $500k at market-priced development rates.

- My understanding of Prevently was that it was following a lean startup model.  That is, it came up with core business hypothesis that needed to be implemented as a viable product in order to bring to the market where it can be tested, analyzed, and refined as needed.   On the point of eCommerce, the solution was developed with this thought in process.  While the initial solution may seem 'low fidelity', it actually was the right initial steps in sussing out consumer requirements and solidifying a good foundation before engaging in full-on large scale ecommerce solutions such as a Magento, Hybris, or Oracle platform. 

- Many technical startups follow a 'loose Agile' methodology when it comes to development.  In conjunction with the Lean startup mindset, this methodology avoids the initial mountain of documentation and specifications in favor of starting with higher level functional components and then fleshing each component in a series of development scripts, with the possibility of having to rework entire portions if analysis shows that it needs to happen.  This approach allows the technology platform to be nimble and adaptable to business driven pivots and reduces the amount of wasted effort in working on the parts that are needed.  This can be seen as a lack of plan or architecture but as long as the foundation's integrity is held and the platform maintains its extensibility and scalability, it is often a preferred methodology in a technology focused start up.”

 At the time Girard was fired, the website and mobile application that Ingenuity developed was highly functional and was capable of the following:

1. Content Management System (“CMS”): The bulk of the engineering was spent developing a content management system which was capable of handling article submissions from tens of thousands of writers on a daily basis and publishing thousands of articles per day. One might argue this CMS was on par with that of a large public digital media company such as Yahoo! Payment systems and feedback mechanisms were highly automated. Keath Chan was highly impressed with the CMS which was developed and thought it was a better solution than an off-the-shelf product such as WordPress.

2. Ecommerce: The e-commerce portal had sold $3,000 worth of products and administrators had the ability to upload products and sort them into different categories among other functionality. Consumers could add products to their cart and checkout using their credit card.

3. Telemedicine: Patients could pay to subscribe to a wellness coach.

4. Personal Health Record: Using Validic the personal health record aggregated data from multiple wearable fitness devices such as FitBit, Nike Fuel Band, JawboneUP, iHealth, and Withings. In  addition, Prevently’s approved iPhone app allowed users to take pictures of their food and upload it to the personal health record for their wellness coach to view.

5. Social Networking: A robust social network which was approaching similar functionality to Facebook i.e. live chat, friend requests, groups, search etc. had been developed.

 This was all among other features that were being used on the website. In short, the website was highly functional with a few bugs, but was capable of supporting a significant quantity of paying customers and in fact 1,600 users had officially registered to use the website. The bugs were almost completely resolved at the time Girard was fired, but even established software products such as VSee have bugs.

 Financial Accounting at Prevently

 Approximately 2 months after its funding commenced, Prevently engaged Joshua Zimmerman, CPA, as its account and bookkeeper. Joshua was strongly recommended by Natanel Barookhian, a Prevently advisor, who has an MBA degree from MIT and was a CPA at Ernst & Young. Joshua’s responsibilities were self-defined, since neither Girard nor Faulkner had any experience in either bookkeeping or accounting.  Joshua’s company, Westwood Tax and Consulting,  was compensated regularly at customary hourly rates.

 It is true that Joshua failed to properly account for many legitimate transactions in a timely fashion.  This frustrated several investors.  Joshua also failed to provide specific instructions and protocols to Prevently’s young founders as to how to execute and record certain expenditures.  At no time, did Girard ever fail to disclose to Joshua company transactions or expenditures. It is also surprising how nonchalant Natanel Barookhian’s advice was regarding accounting practices considering his background as a CPA at Ernst & Young. 

  Founder Housing Provided by Prevently

  Laurence Girard met Kristen Faulkner in March of 2013. Kristen moved into Laurence’s 2BR apartment in Cambridge in June of 2013. The two dated each other that summer and worked out of the Harvard Innovation Lab on the campus of Harvard Business School. The Harvard Innovation was obtained at no cost to Prevently.

 Laurence Girard and Kristen Faulkner left school in September and moved to Huntington, NY to join a business incubator called Long Island COMETS. They were given dedicated office space in Mineola, NY. Kristen had a private bedroom and lived with Laurence, his parents, and his brother in Huntington NY at their home. The Mineola office was obtained at no cost to Prevently.

 Laurence Girard and Kristen Faulkner moved to San Francisco to participate in a co-working space called Runway which was located in the Twitter building on Market and 9th in San Francisco. Laurence and Kristen were still dating at the time and Kristen voluntarily executed a residential lease on an apartment across from their office with Sagar Patel and  Girard. Since Girard and Faulkner did not obligate Prevently to a commercial lease in San Francisco, and since neither was receiving a stipulated salary from Prevently, the co-founders decided as a matter of business judgment to make the payments on the San Francisco leased premises from which they performed substantial services for Prevently.

 After reviewing email communication between Girard and Faulkner, Meatto has concluded that there is no factual basis in those communications for Faulkner’s allegations that a mutual consensual relationship did not exist.

 Girard’s Voluntary Expansion of the Board of Directors

 Girard felt that expanding the board of directors would improve corporate governance and allow him to make better decisions under the guidance of senior directors mentoring him as the CEO. He expanded the Board  in late February 2014 because he felt the individuals he elected to to the Board were among his most loyal supporters and  with their help he could significantly improve Prevently.

 Girard would only learn later through emails and audio recordings  that, at the time of their appointments, Kristen and other appointed directors were already planning to seize control of Prevently and remove Girard completely from Prevently’s management. Several of the appointed directors, before appointment, disingenuously assured Laurence that they would not fire him and that they would be his ally.

 Girard also expanded the Board because he was becoming highly concerned about Kristen and felt that he had a conflict with her, and, because of his personal relationship with her,  he could not make any decisions relating to Kristen financially or regarding her employment.

  Laurence expanded the board of directors through a board consent to include himself, Andrew Scott, Hien Nguyen, Maulik Majmudar, and Alec Bowers.” Maulik Majmudar immediately resigned from the board of directors after being appointed.

 Cooley’s Careless Drafting of Founder Repurchase Agreements Enable Faulkner to “Blackmail” the new Prevently Boar

Too much by all sides has already been written about the fiasco that surrounded Faulkner’s claims of sexual harassment and the Board’s response to these unfounded allegations.

During the 30 day period before appointment on the expanded Board, Faulkner departed from San Francisco,  abandoned her day to day responsibilities at Prevently’s San Francisco offices, increased the volume on her unproven allegations, and fled to the wilderness, from where she continued to make  irrational monetary demands on the Company totalling $165,000.

Here is a succinct legal analysis of Faulkner’s claims.  A brief summary of startup contract law is necessary.

In the vast majority of startups organized by major law firms and competent counsel, there are significant safeguards to protect the Company from being blackmailed by a founder who has stopped working.  This blackmail can be avoided by the rational combination of vesting provisions and repurchase calculations that achieve a repurchase without the significant outlay of Company funds.  The expenditure of investor funds to buy out a founder is frowned upon by all, especially when the Company has no earnings or cash flow of its own. 

 In particular, unvested shares are always repurchased at a de minimis value (e.g. $0.000000001 per share), since the Founder has not earned these shares.

For some unknown reason, Cooley set the repurchase price for unvested founder equity at the “original issue price”, which, again by Cooley’s hand, was $0.05 per share.  This valued Faulkner’s shares at $165,000.00

Meatto has reviewed the attorney-client communications between Girard and Cooley furnished to him and can find no evidence of Giard requesting either the $0.05 per share original issue price or the omission of the typical de minimis repurchase clause.

These gaffes by Cooley LLP convinced Kristen that she could hold Prevently hostage and demand $160,500  for repurchase, since the alternative valuation (fair market value) had been de facto set by a significant round of Prevently financing (approximately $330,000) at $0.32 per share.

Finally, one can only speculate as to whether the sexual harassment/hostile workplace claims raised by Faulkner were invented to unduly and artificially influence the Prevently Board of Directors to repurchase her shares at the inflated price of $165,000.00.  Indeed, Faulkner subsequently agreed to sign general releases, non-disparagement agreements, and an Non-Disclosure Agreement in exchange for the $165,000 repurchase.

 Girard, despite being personally distraught by Faulkner’s accusations and economic demands, took every prudent and reasonable measure to meet her demands.  He had already voluntarily expanded the Board of Directors to five members for improved corporate governance. Girard spoke many, many times with Faulkner and her father (who represented her interests).  He advocated to other Board members that this issue be resolved and these individuals also had extensive discussions with Kristen on behalf of Prevently.  Jim Fulton of Cooley also intervened. Most importantly, Girard had Prevently appoint Hien Nguyen as the Interim CEO to handle negotiations with Kristen as a more neutral party, which Girard thought might yield better success in reaching an amicable resolution.

The expanded Board agreed to pay Kristen the $165,000, but requested that Kristen give the company an extended repurchase period of 6-12 months with a $25,000.00 upfront payment. Kristen was extremely unreasonable and would not give the company an extended repurchase period despite the fact that she knew that the company had less than $50,000.00 in the bank. Further, she also knew that it would be impossible to raise new investor funds with her claim as a supposed sexually harassed founder outstanding.

The only concession that  Kristen made was to give Prevently 30-60 days to raise capital before making any decisions.

The Prevently Board Meeting of March 30, 2014[1] 

In attendance as board members were Laurence Girard, Andrew Scott, Alec Bowers, Hien Nguyen and as observers Maulik Majmudar and Robert Darling.  The meeting was conducted by telephone conference.

 Nguyen opened the meeting by informing Girard that the requisite majority vote of shareholders had been obtained to remove Laurence as a director “for cause”.

 Nguyen offered Girard the option of “resigning with dignity.”

 Girard asked for a few days to engage counsel and discuss with an attorney.

 Scott and Nguyen demanded that Laurence decide now on the board call.

 When Girard asked if he would be retained as a paid employee, Hien and others said that they did not know at this time whether or not Laurence would continue to be paid as an employee of the company going forward. Girard asked if at minimum the board could pay him $1200 per month to pay for his student loan and food and in return he would raise money from his free housing with his parents in New York. Laurence thought this was a fair request in return for raising hundreds of thousands of dollars per month and was minimal compensation. The board said that they could not commit to even paying for Laurence’s food, shelter, or student loan at the time despite the fact that at the time of this meeting Laurence was the only full time employee of the corporation. This was despite the fact they knew perfectly well (and concealed this fact from Girard) that they had fired him at a secret board meeting on March 27th. The board of directors could have been more straightforward and told Laurence that he had already been terminated and would not be paid for future work.

 At this board meeting, Laurence Girard was asked to resign from the Prevently board of directors in the best interest of the company. The individuals who were directors of the corporation at this time were Laurence Girard, Andrew Scott, Hien Nguyen, and Alec Bowers. The board observers were Maulik Majmudar and Robert Darling. All of these individuals were on the teleconference for this board of directors meetings. The transcript of this meeting reflects the following to recap:

 1. Hien Nguyen (the Interim CEO) told Laurence Girard that the other board members and observers had accumulated 63% of the shareholders to vote to remove Laurence Girard from the Prevently board of directors “for cause” through a shareholder consent. Hien claimed that the board of directors was not going to exercise its right to remove Laurence as a director because they thought it would be more noble of them to give Laurence Girard the opportunity to resign with dignity before getting fired.

 2.   At first, Laurence Girard was outraged and began asking questions such as whether or not this decision was done because Jim Meehan was threatening to sue the corporation and was angry since Laurence had fired Meehan as an advisor. Girard asked to speak with legal counsel, but Andrew Scott and Hien Nguyen said that this was time sensitive and that Laurence Girard needed to decide immediately if he was going to resign from the board of directors on that phone call. Laurence asked several times if he could consult his legal counsel first and speak to other shareholders, but the other board members continued pressuring him to resign from the board immediately due to what they claimed was time sensitive. Because of his belief that 63% of the shareholders had voted to remove him as a director, Laurence did reign from the board at this meeting.

 3. The next day Laurence Girard called almost all of the Prevently shareholders and could not find a single shareholder that had been asked by the Prevently board of directors to sign a voting document to remove Laurence Girard as a director for cause. In fact, every single shareholder that Laurence had called (which was at least 30-40 shareholders within a day or two had never received ANY communication, written or verbal, from Hien Nguyen who was the CEO of the company at the time. Therefore, it started to become apparent that when the board of directors claimed that they had a 63%  shareholder vote that in reality they did not have a single vote.

  It was later confirmed by Hien’s own admission on the phone to Laurence that “We did not actually have the vote, but we assumed that we could get the votes if you did not resign. Therefore, that’s why we told you that we had 63% - because that’s the amount of shareholders we estimated would have voted to remove you with cause if we had done an actual vote.”

 The intentional misrepresentation to Girard that a shareholder vote had taken place to remove him as a director, combined with the concealed prior termination of Girard at the March 27 Board meeting and the repurchase of his stock, if proven, would entitle Girard to substantial damages for fraudulent misrepresentation.  These actions would also subject the directors to civil liability claims by Prevently itself and its shareholders derivatively.

 The Prevently Secret Board Meeting of March 27, 2014

 On or about April 1st, 2014, after the March 30 meeting, and with no courtesy email or telephone call, Girard received a letter by federal express, dated March 28, 2014 executed by Hien as Chief Executive Officer. 

 Incredibly, the letter recounts a supposed Prevently Board Meeting of March 27, 2014, to which Girard was neither aware nor invited as required by Delaware law.

 At the March 27 meeting, Hien reports the following occurred:

 "On March 27, 2014 at a meeting of the Company's Board of Directors it was determined to terminate your relationship as a Service Provider to the company.

  It was further determined by the Board that owing to the current status of the Company that the Fair Market Value of the Common Stock of the company is $0.00001.

  It was further determined by the Board that it would exercise its Repurchase Right with respect to the unvested shares of stock under the RSPA.”

 The board repurchased 2,406,917 of Laurence's unvested stock for $240.07 and enclosed a western union check for said amount in an envelope.

 Laurence’s Check for 2,406,917 shares repurchased for $24.07 at $0.00001 per share.

 The illegality of this purported action has been already fully addressed in the Meatto legal opinion letter from April 2014.  The salient points of that opinion are as follows:

 Meatto has also rendered the following legal conclusions:

 a.  Delaware Law required that Girard be given notice of the March 27 meeting.

 b.  The Board of Directors had no basis, nor the experience, to properly determine the fair market value of Girard’s shares.  Indeed, the same Board, was willing to accept the valuation of $0.05 a share for Faulkner’s shares.  Further, Prevently had recently sold shares at $0.32 per share.  In further support of this point, the Board was aware that Girard had a new group of investors will to pay  the $0.32 share price set out in Round 3, of which $330,000 as described had already been sold.

 c.  The existence of ready, willing, and able purchasers at $0.32 per share makes the repurchase of Girard’s and Faulkner’s shares breach of Prevently’s own corporate documents, the agreement among the parties, and a clear breach of fiduciary responsibility.

 The repurchase of founder shares had no corporate purpose, was punitive in nature, and only subjected Prevently to lawsuits that could be filed by the founders as well as investors who had invested on the basis of Girard being actively involved and invested in Prevently’s business.

 d.  Prevently failed to provide proper or any notice of the March 27 meeting to Girard.

Laurence was one of the directors of the corporation on March 27th.

 Section 21 of the Prevently Bylaws states as follows:

 “Notice of Special Meetings: Notice of the time and place of all special meetings of the Board of Directors shall be orally or in writing, by telephone, including a voice messaging system or other system or technology designed to record and communicate messages, facscmile, telegraph or telex, or by electronic mail or other electronic means, during normal business hours, at least twenty-four (24) hours before the date and time of the meeting. If notice is sent by US mail, it shall be sent by first class mail, postage prepaid at least three (3) days before the date of the meeting. Notice of any meeting may be waived in writing or by electronic transmission at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.”

 The fact, therefore, that Laurence Girard was not given notice of the March 27th board meeting was a breach of the bylaws and fiduciary responsibility by Andrew Scott, Hien Nguyen, and Alec Bowers at the time this meeting was held. The board of directors meeting on March 27th was not a lawfully called or convened meeting - yet the directors continued to act as if the meeting was lawfully convened.

 e.  The termination of Girard was imprudent and a breach of fiduciary responsibility by the directors.  Girard, at the time of his termination, was the only service provider and, in addition, was the only person raising funds for Prevently, which has no other source for meaningful cash flow.  His termination, apparently based primarily on the unfounded allegations of Faulkner and the self-interested antipathy of ex-advisor Jim Meehan, had no rational business basis and may well be the subject of legal action in the future.  Girard was willing to accept different responsibilities, titles, percentage ownership, and other compromises that might have saved the business of Prevently.  One compromise offered by Girard was that he would reduce his equity position from 22% to 1% and make his sole responsibility raising funds for the company to ensure that the company could pay off its debts and would not default, as it did. Unfortunately, Jim Meehan and Hien Nguyen who were both directors at the time made a decision to decline this offer.

 Election of the New Prevently Board of Directors on April 17

At a special shareholder meeting on April 17 the shareholders of Prevently Inc. elected Kristen Faulkner, Rahul Sharma, Robert Darling, and Jim Meehan to the Prevently board of directors.

 Subsequent “Criminal” Allegations

In an apparent effort to intimidate Mr. Girard, a 22 year old and his mother, the Prevently board of directors has indicated in writing that it is investigating Laurence for the following “criminal activities”:

 1. Theft of “corporate” Macbook Air

2. Criminal tortious interference with business by Fruit Street’s VSee agreement

3. Sexual harassment of Kristen

4. Criminal “underfunding” of the corporation

5. Securities violations and misrepresentations

6. Laurence is not a “real” Harvard student

7. Failure to have a real business model

8. Running a “ponzi scheme” in a similar way to Bernie Madoff

9. Mismanagement

10. Embezzlement of corporate funds.

11. Commingling of funds.

 If one is to believe each of the Director’s emails to shareholders and Laurence, Directors residing in Seattle, Oklahoma City, Anchorage, Washington DC, New York, and California have contacted the police in New York, the Securities and Exchange Commission, the Federal Bureau of Investigation, the Manhattan District Attorney, and any other law official that recently appeared on CNN or Fox News.

 The directors had even claimed that Laurence was going to get arrested several Wednesdays ago, although this never happened.

 To date, neither Laurence nor his counsel have received a single inquiry about missing luggage, used laptops, or any of the other frivolous and meritless claims listed above from any of the organizations listed above.

  Emergency Shareholder Meeting on June 10

At a meeting on June 10, Hien Nguyen informed the shareholders that Abraxas has called their loan and was taking possession of the assets of the company. Notice of this meeting was not provided to Laurence by the directors despite the fact that the directors were legally obligated to provide Laurence with notice since he was a shareholder of the corporation.

 On June 20, 2014 Alec Bowers purporting to represent an entity called Skini Mints LLC circulated a copy of a “Debt Equity Swap Agreement” between Prevently Inc. as the “Borrower” and Skini as the “Lender.” In the agreement, Skini claims that it is owed $69,385.71 by Prevently Inc.

 Even though the agreement calls itself a “Debt Equity Swap Agreement (the “DESA”),” there is no exchange of debt for equity, except for the poultry sum of $68.47 given debt. Instead, the agreement is an unabashed naked dilution of Prevently shareholders equity as the agreement requires Prevently to issue 6,846,500 shares of its common stock to Skini. This action violates the anti-dilution rights of the preferred stock holders in Prevently Inc. The transaction described above should have resulted in the preferred stock holders being issued new shares in a proportion necessary to prevent their dilution, but no such issuance occurred.

 The agreement, in Mr. Meatto’s opinion, also violates every conceivable fiduciary responsibility that the directors of Prevently Inc. including Alec Bowers, Robert Darling, Jim Meehan, Hien Nguyen, and Rahul Sharma had to Prevently shareholders under Delaware law at the time this transaction occurred. In addition, this was also a breach of loyalty by Alec Bowers due to the fact that this was a self-interested transaction between Prevently and Skini since Alec Bowers executes the document on behalf of Skini and is currently the sole director of Prevently Inc. and has been a director for quite some time.

 The DESA was authorized by an omnibus board resolution dated June 19, 2014 that accomplished the following:

1) Excepted the letters of resignation of the board of directors (Robert Darling, Jim Meehan, Rahul Sharma, and Hien Nguyen) and appointed Alec Bowers as sole director.

2) Arbitrarly reset, yet again, the fair market value of shareholder's stock to $0.00001 so that Skini could purchase almost 7 million shares for less than $70.00 and so that founder and

3) Founding advisor stock from Laurence, Kristen, George, Robert, Natanel, Maulik, and Fabrizio could be repurchased at $0.00001 per share, further solidifying Alec’s majority control of Prevently Inc.

4) Authorized the execution of the DESA.

5) Asked for majority shareholder consent to remove Kristen from the board and transfer all assets to Skini.

 As a result of this resolution, Girard and Kristen lost approximately 5.3 million shares combined which represented over a third of the company’s voting power before this transaction.

 The board of directors, apparently under duress from Alec Bowers, Skini and Abraxas, “voluntarily” resigned en masse so that Bowers could be appointed sole director and seize control of the company, all for $68.47. 

 The transactions described above, as must be obvious to all. were not intended to benefit the shareholders of Prevently.  Nor were they intended to satisfy the alleged debt to Skini, which still remains at over $70,000 and continues to accrue interest.  Nor were these transactions entered into to position Prevently to be a successful seller of its assets, since it appears from these documents that all assets were transferred to Skini or a related entity.

 The sole motivation for these self-dealing transactions, initiated by foreign investors and blessed by a timid and ineffectual Board, was the apparent attempt to seize Prevently’s substantial startup operating losses for the benefit of Bowers and his related investors and entities.

 The DESA and related documents essentially signal the event of Prevently.  Assets are gone, debt remains, founders terminated and in loss of the majority of their equity, and the Company is in the hands of hostile creditors.

 Pursuant to the DESA, Bowers has asked that Girard do the following:

 1.  Assign the Domain Prevently.com to Abraxas.

 2.  Return a laptop computer that Prevently had purchase for Girard’s use.

 3.  Have Girard remove himself as a signatory to Prevently’s bank account, which has had no funds for almost 90 days.

 4.  Assign Bowers as a Facebook page administrator to www.Facebook.com/Prevently.

 Although Girard has informed Bowers that he is willing to accomplish the above,  counsel for Bowers and his companies have not contacted Meatto with any instructions or documents to implement the above requests nor has Bowers himself.

 THE PREVENTLY BOARD OF DIRECTORS REFUSED TO ACCEPT BONA FIDE SERIES A INVESTMENTS

 Throughout the entire controversy described above, outside investors, with substantial knowledge of  Prevently’s difficulties continued to commit to making substantial investments in Prevently’s Series A offering totalling over $100,000.00 in the short term. Girard formally transmitted the amounts of these commitments to the Prevently board of directors, but he was continuously ignored for months. If the directors had accepted these offers, Prevently would not have defaulted on its debt and may have in fact still been a viable operating business today.  Apparently,  at some point in time after Kristen’s allegations came to light, the Board of Directors that Girard had appointed gave up on Prevently.  No better example can be cited, in addition to the termination of both Founders, than the Board’s refusal above to accept any Series  The Board even  refused to accept funds or issue shares to the grandmother of Girard.

 One of the reasons cited by the Board for its refusal to accept further investments was the negative balance sheet of Prevently.  It is true that Prevently owed moneys to its developers and to Harvard Health Publications, Cooley LLP, as well as a proportionately minor debt of 69K to Abraxas (Prevently’s investors from Mexico).

 These physician investors (who it appears must run their practices on a cash basis) failed to realize that virtually all Startups have a negative balance sheet, many startups incurring millions of dollar of debt before a single penny is earned.  New investors and new money lenders (convertible debenture holders, vendors, etc) look for potential earning power of a startup, not its balance sheet.  Further, other than the peanuts that Alec Bowers was trying to collect for his group, no other creditor was demanding repayment or threatening to interrupt the business flow of Prevently.

 Meatto has reviewed the Prevently balance sheet and has found no cause for legal concern.

 A startup cannot exist without the successful closing of multiple rounds of financing, especially when it had significant debt and monthly expenditure.  The Board’s shutting down of Series A financing was a serious breach of fiduciary duty.

 THE FOUNDING OF WELLIKO, INC. AND CHANGE OF THE CORPORATE NAME TO FRUIT STREET HEALTH, INC.

On May 5, 2014 Laurence Girard incorporated Welliko, Inc. in the state of Delaware. He immediately began negotiations with VSee Inc (http://www.vsee.com) to partner in helping him develop the company’s software. VSee.com is one of the leading companies in the world for the development of telemedicine software and has a HIPAA compliant FDA-registered telemedicine destop application. The spirit of the agreement is a joint venture between VSee Inc. and Welliko Inc. in which VSee does 100% of Welliko’s software engineering. In return, Welliko agreed to pay VSee $500K over the course of 10 months and split the net revenue 50/50 for 3 years after Welliko keeps the first $1M in net revenue. At the end of 3 years, Welliko has the exclusive option to renew the contract for another 7 years on the 50/50 net revenue split basis and in return VSee continues to act as Welliko’s full time software engineering team. VSee currently employs 36 full time software engineers and designers and there are currently 10 people working on Welliko from VSee.

 The primary intellectual property of Fruit Street is its license of the telehealth platform created by VSee (the “vSee License”).  There is no connection whatsoever between any intellectual property that may be owned by Prevently and the VSee license and, therefore, no remotely plausible claim exists on behalf of Prevently or its shareholders with respect to the VSee license.

 Fruit Street has raised almost $500,000 in convertible debt financing from accredited investors who are primarily in the medical profession and who function as advisors to the Company and Girard as its Chief Executive Officer.  In addition, several Prevently shareholders are now advisors to the Company, have received grants of the Company’s common stock, and have executed general releases in favor of the Company and Girard.

 FRUIT STREET WEBSITE LAUNCH

 The Fruit Street website and SAAS platform was officially launched on October 1, 2014.  Fruit Street has located its offices at Topline, a new highly selective technology incubator in California (www.gototopline.com) which was founded by two senior Silicon Valley investors and entrepreneurs. Topline is located in Richmond, California, adjacent to San Francisco Bay, and Girard has permanently relocated to Berkeley, California to work with both VSee and an in-house marketing staff.  Michael Caruso, who has managed hundreds of salespeople in the past, was in the first batch of Y Combinator, and helped sell the Internet Movie Database to Amazon for $60M. Photos of Topline:

NO PENDING LITIGATION AGAINST GIRARD OR THE COMPANY

As of the date of this narrative, it has been almost seven months since Girard’s resignation from Prevently.  There are currently no litigations commenced and we do not anticipate there will be. Any litigation, in any event, would be frivolous and without merit.

CLOSING ARGUMENT

Girard was the founder and sole driving force of Prevently.  He successfully raised over $900,000 and appeared capable of raising additional funds.

The vast majority of investor funds were properly utilized to develop and market Prevently website and mobile applications.  Both of these objectives were met.

An unproven claim of sexual harassment was made by Girard’s girlfriend, who no longer desired to work for Prevently.  Her remedy for this supposed faux pas was to ask the investors to cough up $160,000 of their invested funds, funds that had been used to support her living expenses for the last year.

The Board of Directors trampled all corporate and legal protocol and logic by summarily dismissing Girard.

In order to continue his passion to create a digital health portal that helps people improve their health and to maintain his moral/ethical commitment to provide the Prevently shareholders with a return on their investment he formed Fruit Street. He formed Fruit Street with the full intention of providing Prevently shareholders that had previously financially supported him at Prevently with an equity position in Fruit Street.

In order to further strengthen Fruit Street’s position in telemedicine, Girard diluted his own equity and engaged VSee, the leading telemedicine software company in the world, to develop 100 percent of Fruit Street’s software.  That software launched on October 1, 2014.

 Prevently’s assets have been foreclosed upon by creditor companies controlled by Prevently’s now sole director and CEO, Alec Bowers.  Prevently has ceased operations and is essentially bankrupt.

 For all of the foregoing facts set out here, the only opportunity for Prevently shareholders, who have not already become Fruit Street shareholders, is to accept Fruit Street’s offer for essentially free Fruit Street shares or options.  Fruit Street has already assembled a senior team of physician investors on their board of directors who are fully aware of the prior circumstances with Prevently. These investors, as Laurence is, are committed to ensuring Prevently shareholders have an opportunity to participate in Fruit Street. These men and women have pledged their support of Laurence’s decision to give Prevently shareholders an equity position in Fruit Street. Milton Chen CEO of VSee, who Laurence communicates with with multiple times per week/day,  is also fully committed to this moral position and to ensure that Fruit Street is successful.

 Finally, in light of all of the above, Girard continues to urge all Prevently shareholders to accept Fruit Street’s offer to Prevently shareholders to receive commensurate shares of Fruit Street for virtually no cost.

 Further questions on this offer may be directed to Meatto, who will promptly respond to all civilized inquiries at Christopher Meatto <christopher@harvardlaw74.com>.