PART II — INFORMATION REQUIRED IN OFFERING CIRCULAR
Preliminary Offering Circular dated February 9, 2022
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.
Boatim, Inc.
$5,000,000
41,666,667 SHARES OF COMMON STOCK
$0.12 PER SHARE
This is the public offering of securities of Boatim, Inc., a Nevada corporation (hereinafter the “Company”, “Our”, “We”, or “Us”). We are offering 41,666,667 shares of our Common Stock, par value $0.001 (“Common Stock”), at an offering price of $0.12 per share (the “Offered Shares”) by the Company. This Offering will terminate on twelve months from the day the Offering is qualified or the date on which the maximum offering amount is sold (such earlier date, the “Termination Date”). The minimum purchase requirement per investor is 41,667 Offered Shares ($5,000); however, we can waive the minimum purchase requirement on a case-by-case basis in our sole discretion.
These securities are speculative securities. Investment in the Company’s stock involves significant risk. You should purchase these securities only if you can afford a complete loss of your investment. See the “Risk Factors” section on page 4 of this Offering Circular.
No Escrow
The proceeds of this offering will not be placed into an escrow account. We will offer our Common Stock on a best efforts basis. As there is no minimum offering, upon the approval of any subscription to this Offering Circular, the Company shall immediately deposit said proceeds into the bank account of the Company and may dispose of the proceeds in accordance with the Use of Proceeds.
Subscriptions are irrevocable and the purchase price is non-refundable as expressly stated in this Offering Circular. All proceeds received by the Company from subscribers for this Offering will be available for use by the Company upon acceptance of subscriptions for the Securities by the Company.
The Company, by determination of the Board of Directors, in its sole discretion, may issue the Securities under this Offering for cash, promissory notes, services, and/or other consideration without notice to subscribers. The aggregate offering price is based on the price at which the securities are offered for cash. Any portion of the aggregate offering price or aggregate sales attributable to cash received in a foreign currency will be translated into United States currency at a currency exchange rate in effect on, or at a reasonable time before, the date of the sale of the securities. If securities are not sold for cash, the aggregate offering price or aggregate sales will be based on the value of the 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. Valuations of non-cash consideration will be reasonable at the time made.
Sale of these shares will commence within two calendar days of the qualification date and it will be a continuous Offering pursuant to Rule 251(d)(3)(i)(F).
This Offering will be conducted on a “best-efforts” basis, which means our Officers will use their commercially reasonable best efforts in an attempt to offer and sell the Shares. Our Officers will not receive any commission or any other remuneration for these sales. In offering the securities on our behalf, the Officers will rely on the safe harbor from broker-dealer registration set out in Rule 3a4-1 under the Securities Exchange Act of 1934, as amended.
Our Common Stock is quoted on the OTCQB Marketplace under the stock symbol “BTIM.”
Per Share | Total Maximum | |||||||
Public Offering Price (1)(2) | $ | 0.12 | $ | 5,000,000 | ||||
Underwriting Discounts and Commissions (3)(4) | $ | 0.012 | $ | 500,000 | ||||
Proceeds to Company | $ | 0.108 | $ | 4,500,000 |
(1) | We are offering shares on a continuous basis. See “Distribution – Continuous Offering.” |
(2) | This is a “best-efforts” offering. The proceeds of this offering will not be placed into an escrow account. We will offer our Common Stock on a best-efforts basis primarily through an online platform. As there is no minimum offering, upon the approval of any subscription to this Offering Circular, the Company shall immediately deposit said proceeds into the bank account of the Company and may dispose of the proceeds in accordance with the Use of Proceeds. See “How to Subscribe.” |
(3) | We are offering these securities without an underwriter. |
(4) | Excludes estimated total offering expenses, including underwriting discount and commissions, estimated to be approximately $500,000 assuming the maximum offering amount is sold. |
Our Board of Directors used its business judgment in setting a value of $0.12 per share to the Company as consideration for the stock to be issued under the Offering. The sales price per share bears no relationship to our book value or any other measure of our current value or worth.
No sale may be made to you in this offering, if you do not satisfy the investor suitability standards described in this Offering Circular under “Distribution—State Law Exemption and Offerings to ‘Qualified Purchasers’” (page 19). No sale may be made to you in this offering if the aggregate purchase price you pay is more than 10% of the greater of your annual income or your net worth. Different rules apply to accredited investors and non-natural persons. 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. For general information on investing, we encourage you to refer to www.investor.gov.
THE U.S. SECURITIES AND EXCHANGE COMMISSION 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 SOLICITATION MATERIALS. THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE COMMISSION; HOWEVER, THE COMMISSION HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED ARE EXEMPT FROM REGISTRATION.
The date of this Offering Circular is February 9, 2022.
We are offering to sell, and seeking offers to buy, our securities only in jurisdictions where such offers and sales are permitted. You should rely only on the information contained in this Offering Circular. We have not authorized anyone to provide you with any information other than the information contained in this Offering Circular. The information contained in this Offering Circular is accurate only as of its date, regardless of the time of its delivery or of any sale or delivery of our securities. Neither the delivery of this Offering Circular nor any sale or delivery of our securities shall, under any circumstances, imply that there has been no change in our affairs since the date of this Offering Circular. This Offering Circular will be updated and made available for delivery to the extent required by the federal securities laws.
In this Offering Circular, unless the context indicates otherwise, references to “Boatim”, “we”, the “Company”, “our” and “us” refer to the activities of and the assets and liabilities of the business and operations of Boatim, Inc.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under “Summary”, “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Our Business” and elsewhere in this Offering Circular constitute forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar matters that are not historical facts. In some cases, you can identify forward-looking statements by terms such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “potential”, “should”, “will” and “would” or the negatives of these terms or other comparable terminology.
You should not place undue reliance on forward looking statements. The cautionary statements set forth in this Offering Circular, including in “Risk Factors” and elsewhere, identify important factors which you should consider in evaluating our forward-looking statements. These factors include, among other things:
● | The speculative nature of the business we intend to develop; |
● | Our reliance on suppliers and customers; |
● | Our dependence upon external sources for the financing of our operations, particularly given that there are concerns about our ability to continue as a “going concern; |
● | Our ability to effectively execute our business plan; |
● | Our ability to manage our expansion, growth and operating expenses; |
● | Our ability to finance our businesses; |
● | Our ability to promote our businesses; |
● | Our ability to compete and succeed in highly competitive and evolving businesses; |
● | Our ability to respond and adapt to changes in technology and customer behavior; and |
● | Our ability to protect our intellectual property and to develop, maintain and enhance strong brands. |
Although the forward-looking statements in this Offering Circular are based on our beliefs, assumptions and expectations, taking into account all information currently available to us, we cannot guarantee future transactions, results, performance, achievements or outcomes. No assurance can be made to any investor by anyone that the expectations reflected in our forward-looking statements will be attained, or that deviations from them will not be material and adverse. We undertake no obligation, other than as maybe be required by law, to re-issue this Offering Circular or otherwise make public statements updating our forward-looking statements.
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This summary highlights selected information contained elsewhere in this Offering Circular. This summary is not complete and does not contain all the information that you should consider before deciding whether to invest in our Common Stock. You should carefully read the entire Offering Circular, including the risks associated with an investment in the Company discussed in the “Risk Factors” section of this Offering Circular, before making an investment decision. Some of the statements in this Offering Circular are forward-looking statements. See the section entitled “Cautionary Statement Regarding Forward-Looking Statements.”
Company Information
Boatim Inc. (“we”, “our, “Boatim”, the “Company”) is a for profit corporation established under the corporate laws of the State of Nevada on August 15, 2014 as Emerald Data Inc. On January 24, 2019, the company name was changed to Boatim Inc. Its fiscal year end is August 31.
Boatim, Inc. established Boatim Europe S.L. (“Boatim Europe”) as a private limited company pursuant to the laws of Spain on December 18, 2019, with the Company having indirect control of one hundred percent of the issued and outstanding membership interests of Boatim Europe. Boatim Europe commenced operations in February 2020 and is engaged in the business of providing software development, marketing, and selling services for Boatim Inc.
All membership interests of Boatim Europe are currently held in trust by the Company´s CEO for practical reasons and only until the formal transfer into the name of Company has been completed according to the requirements of applicable Spanish law. In December 2020, the Company finalized the process of collecting and submitting all required paperwork to the Spanish authorities to enter Boatim Inc. as direct owner on public records in Spain, making Boatim Europe a wholly owned subsidiary of the Company.
Originally in the business of producing and distributing furniture, the business was changed to online food blogging as a promotion channel for restaurants, bars and fine dining. Subsequently, following the acquisition of the Boatim software platform, the Company expanded into the boating industry by further developing the software platform. The Boatim software platform is an online boat trading marketplace, combining data-driven technology and our digital marketing capabilities to offer a rolling subscription for service model of access to the platform for the extensive market of global boat dealers.
The trading symbol for our Common Stock is “BTIM.”
The Issuer’s offices are located at 7950 NW 53rd Ave, Suite 337, Miami, FL 33166, Phone: 305-239-9993, Email hello@boatim.com. We maintain a website at http://www.boatim.com. We do not incorporate the information on or accessible through our website into this Offering Circular, and you should not consider any information on, or that can be accessed through, our website a part of this Offering Circular.
Section 15(g) of the Securities Exchange Act of 1934
Our shares are covered by section 15(g) of the Securities Exchange Act of 1934, as amended that imposes additional sales practice requirements on broker/dealers who sell such securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouses). For transactions covered by the Rule, the broker/dealer must make a special suitability determination for the purchase and have received the purchaser’s written agreement to the transaction prior to the sale. Consequently, the Rule may affect the ability of broker/dealers to sell our securities and also may affect your ability to sell your shares in the secondary market.
Section 15(g) also imposes additional sales practice requirements on broker/dealers who sell penny securities. These rules require a one-page summary of certain essential items. The items include the risk of investing in penny stocks in both public offerings and secondary marketing; terms important to in understanding of the function of the penny stock market, such as bid and offer quotes, a dealers spread and broker/dealer compensation; the broker/dealer compensation, the broker/dealers’ duties to its customers, including the disclosures required by any other penny stock disclosure rules; the customers’ rights and remedies in cases of fraud in penny stock transactions; and, the FINRA’s toll free telephone number and the central number of the North American Securities Administrators Association, for information on the disciplinary history of broker/dealers and their associated persons.
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Dividends
The Company has not declared or paid a cash dividend to stockholders since it was organized and does not intend to pay dividends in the foreseeable future. The board of directors presently intends to retain any earnings to finance our operations and does not expect to authorize cash dividends in the foreseeable future. Any payment of cash dividends in the future will depend upon the Company’s earnings, capital requirements and other factors.
Trading Market
Our Common Stock is quoted on the OTCQB Marketplace under the symbol “BTIM.”
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Issuer: | Boatim, Inc. | |
Securities offered: | A maximum of 41,666,667 shares of our Common Stock, par value $0.001 (“Common Stock”) at an offering price of $0.12 per share (the “Offered Shares”). (See “Distribution”). | |
Number of shares of Common Stock outstanding before the offering | 58,271,539 issued and outstanding as of February 7, 2022. | |
Number of shares of Common Stock to be outstanding after the offering | 99,938,206 shares, if the maximum amount of Offered Shares are sold. | |
Price per share: | $0.12 | |
Maximum offering amount: | 41,666,667 shares at $0.12 per share, or $5,000,000 (See “Distribution”). | |
Trading Market: | Our Common Stock is quoted on the OTCQB Marketplace under the symbol “BTIM.” | |
Investor Suitability Standards: | The Offered Shares are being offered and sold only to “qualified purchasers” (as defined in Regulation A under the Securities Act). “Qualified purchasers” include: (a) “accredited investors” under Rule 501(a) of Regulation D and (b) all other investors so long as their investment in the Offered Shares does not represent more than 10% of the greater of their annual income or net worth (for natural persons), or 10% of the greater of annual revenue or net assets at fiscal year-end (for non-natural persons). | |
Use of proceeds: | If we sell all of the shares being offered, our net proceeds (after our estimated offering expenses) will be $4,500,000. We will use these net proceeds for working capital and other general corporate purposes. | |
Risk factors: | An investment in the Offered Shares involves a high degree of risk and should not be purchased by investors who cannot afford the loss of their entire investments. You should carefully consider the information included in the Risk Factors section of this Offering Circular, as well as the other information contained in this Offering Circular, prior to making an investment decision regarding the Offered Shares. | |
Continuing Reporting Requirements Under Regulation A: | We are required to file periodic and other reports with the SEC, pursuant to the requirements of Section 13(a) of the Securities Exchange Act of 1934. Our continuing reporting obligations under Regulation A are deemed to be satisfied, as long as we comply with our Section 13(a) reporting requirements. As a Tier 2 issuer under Regulation A, we will be required to file with the SEC a Form 1-Z (Exit Report Under Regulation A) upon the termination of this offering. |
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You should carefully consider the risks described below and other information in this prospectus, including the financial statements and related notes that appear at the end of this prospectus, before deciding to invest in our securities. These risks should be considered in conjunction with any other information included herein, including in conjunction with forward-looking statements made herein. If any of the following risks actually occur, they could materially adversely affect our business, financial condition, operating results or prospects. Additional risks and uncertainties that we do not presently know or that we currently deem immaterial may also impair our business, financial condition, operating results and prospects.
Risks Relating to Our Company
We have incurred significant losses and anticipate future losses.
As of November 30, 2021, we had an accumulated deficit of $5,345,646 and a stockholders’ deficit of approximately $2,248,399.
Future losses are likely to occur as, until we are able to merge with another entity with experienced management and opportunities for growth in return for shares of our common stock to create value for our shareholders as we have no sources of income to meet our operating expenses. As a result of these, among other factors, the report of our registered independent public accountants on our financial statements for the years ended August 31, 2021 and 2020 included an explanatory paragraph stating that there is substantial doubt about our ability to continue as a going concern.
Our existing financial resources are insufficient to meet our ongoing operating expenses.
We have minimal sources of income at this time and minimal existing cash balances to meet our ongoing operating expenses. In the short term, unless we are able to raise additional debt and/or equity we shall be unable to meet our ongoing operating expenses. On a longer-term basis, we intend to raise the debt and/or equity to meet our ongoing operating expenses and merge with another entity with experienced management and opportunities for growth in return for shares of our common stock to create value for our shareholders. There can be no assurance that this series of events will be successfully completed.
Scarcity of, and competition for, business opportunities and combinations.
We believe we are an insignificant participant among the firms which engage in the acquisition of business opportunities. There are many established venture capital and financial concerns that have significantly greater financial and personnel resources and technical expertise than we have. Nearly all such entities have significantly greater financial resources, technical expertise and managerial capabilities than us and, consequently, we will be at a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. Moreover, we will also compete in seeking merger or acquisition candidates with numerous other small public companies. In view of our limited financial resources and limited management availability, we will continue to be at a significant competitive disadvantage compared to our competitors.
We may be negatively affected by adverse general economic conditions.
Current conditions in domestic and global economies are extremely uncertain. Adverse changes may occur as a result of softening global economies, wavering consumer confidence caused by the threat of terrorism and war, and other factors capable of affecting economic conditions. Such changes could have a material adverse effect on our business, financial condition, and results of operations.
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Because our principal shareholder controls our activities, he may cause us to act in a manner that is most beneficial to himself and not to other shareholders which could cause us not to take actions that outside investors might view favorably.
Our principal shareholder has voting authority for approximately fifty six percent (56%) of our outstanding common stock. As a result, they effectively control all matters requiring stockholder approval, including the election of directors, the approval of significant corporate transactions, such as mergers and related party transaction. These insiders also have the ability to delay or perhaps even block, by their ownership of our stock, an unsolicited tender offer. This concentration of ownership could have the effect of delaying, deterring or preventing a change in control of our company that you might view favorably.
Our directors may have conflicts of interest which may not be resolved favorably to us.
Certain conflicts of interest may exist between our directors and us. Our directors have other business interests to which they devote their attention and may be expected to continue to do so although management time should be devoted to our business. As a result, conflicts of interest may arise that can be resolved only through exercise of such judgment as is consistent with fiduciary duties to us. See “Executive Officers and Directors” (page 33 below), and “Conflicts of Interest” (page 34 below).
We may depend upon outside consultants/advisors who may not be available on reasonable terms and as needed.
To supplement the business experience of our officers and directors, we may be required to employ accountants, technical experts, appraisers, attorneys, or other consultants or advisors. Our Board without any input from stockholders will make the selection of any such advisors. Furthermore, it is anticipated that such persons may be engaged on an “as needed” basis without a continuing fiduciary or other obligation to us. In the event we consider it necessary to hire outside advisors, we may elect to hire persons who are affiliates, if they are able to provide the required services.
We have material weakness in our controls and procedures.
We have conducted an evaluation of our internal control over financial reporting based on the framework in “Internal Control Integrated Framework” issued by the Committee of Sponsoring Organizations for the Treadway Commission (“COSO”) and published in 2013, and subsequent guidance prepared by COSO specifically for smaller public companies. Based on that evaluation, management concluded that our internal control over financial reporting was not effective as of August 31, 2021 for the reasons discussed below:
Management identified the following material weakness and significant deficiencies in its assessment of the effectiveness of internal control over financial reporting as of August 31, 2021:
● | The Company’s lack of segregation of duties. | |
● | Lack of an audit committee | |
● | Lack of control procedures that include multiple levels of review over financial reporting. | |
● | Management has not established appropriate and rigorous procedures for evaluating internal controls over financial reporting. Due to limited resources and lack of segregation of duties, documentation of the limited control structure has not been accomplished. | |
● | We employ policies and procedures for reconciliation of the financial statements and note disclosures, however, these processes are not appropriately documented. | |
● | Management has not established methodical and consistent data back-up procedures to ensure loss of data will not occur. |
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The management of the Company believes that these material weaknesses will remain until such time that the Company has the resources to increase the number of personnel committed to the performance of its financial duties that such weaknesses can be specifically addressed. This will include, but not limited to, the following:
● | Hiring of additional personnel to adequately segregate financial reporting duties. |
● | The retention of outside consultants to review our controls and procedures |
A significant deficiency is a deficiency, or combination of deficiencies in internal control over financial reporting, that adversely affects the entity’s ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the entity’s financial statements that is more than inconsequential will not be prevented or detected by the entity’s internal control.
A material weakness is a deficiency or a combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
We expect to incur substantial expenses to meet our reporting obligations as a public company. In addition, failure to maintain adequate financial and management processes and controls could lead to errors in our financial reporting and could harm our ability to manage our expenses.
We estimate that it will cost approximately $75,000 annually to maintain the proper management and financial controls for our filings required as a public reporting company. In addition, if we do not maintain adequate financial and management personnel, processes and controls, we may not be able to accurately report our financial performance on a timely basis, which could cause a decline in our stock price and adversely affect our ability to raise capital.
Other recreational activities, poor industry perception, and potential health risks from environmental conditions can adversely affect the levels of boat purchases.
Demand for our products can be adversely affected by competition from other activities that occupy consumers’ time, including other forms of recreation as well as religious, cultural and community activities. In addition, real or perceived health risks from engaging in outdoor activities and local environmental conditions in the areas in which we operate dealerships could adversely affect the levels of boat purchases. Further, as a seller of high-end consumer products, we must compete for discretionary spending with a wide variety of other recreational activities and consumer purchases. In addition, perceived hassles of boat ownership and customer service and lack of customer education throughout the retail boat industry, which has traditionally been perceived to be relatively poor, represent impediments to boat purchases.
Economic conditions and consumer spending patterns can have a material adverse effect on our business, financial condition, and results of operations.
General economic conditions and consumer spending patterns can negatively impact our operating results. Unfavorable local, regional, national, or global economic developments or uncertainties regarding future economic prospects could reduce consumer spending in the markets we serve and adversely affect our business.
In an economic downturn, consumer discretionary spending levels generally decline, at times resulting in disproportionately large reductions in the sale of luxury goods. Consumer spending on luxury goods also may decline as a result of lower consumer confidence levels, even if prevailing economic conditions are favorable. As a result, an economic downturn could impact us more than certain of our competitors due to our strategic focus on a higher end of our market.
More recently, inflation has increased in the United States and throughout the world. To the extent such inflation continues, increases, or both, it may reduce our margins and have a material adverse effect on our financial performance.
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Our sales may be adversely impacted by a material increase in interest rates and adverse changes in fiscal policy or credit market conditions.
Over the past several years, our economy has been positively impacted by historically unprecedented low interest rates. Such interest rates, driven by the policies of the Federal Reserve, can be a political issue in the United States. Any change by the Federal Reserve to raise its benchmark interest rate in the future or market expectations of such change may result in significantly higher long-term interest rates, which may negatively impact our customers’ willingness or desire to purchase our products.
Our ability to use our net operating loss carry-forwards and certain other tax attributes may be limited.
We have incurred substantial losses during our history. To the extent that we continue to generate taxable losses, unused losses will carry forward to offset future taxable income, if any, until such unused losses expire. Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carry-forwards, or NOLs, and other pre-change tax attributes (such as research tax credits) to offset its post-change income may be limited. We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership. As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carry-forwards to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.
Being a public company significantly increases the Company’s administrative costs.
The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and listing requirements subsequently adopted by the NYSE Amex in response to Sarbanes-Oxley, have required changes in corporate governance practices, internal control policies and audit committee practices of public companies. Although the Company is a relatively small public company, these rules, regulations, and requirements for the most part apply to the same extent as they apply to all major publicly traded companies. As a result, they have significantly increased the Company’s legal, financial, compliance and administrative costs, and have made certain other activities more time consuming and costly, as well as requiring substantial time and attention of our senior management. The Company expects its continued compliance with these and future rules and regulations to continue to require significant resources. These rules and regulations also may make it more difficult and more expensive for the Company to obtain director and officer liability insurance in the future and could make it more difficult for it to attract and retain qualified members for the Company’s Board of Directors, particularly to serve on its audit committee.
General Business Risks
We are a development stage company and have commenced limited operations in our business. We expect to incur significant operating losses for the foreseeable future
We are authorized to issue up to 500,000,000 shares of common stock. As of the date of this filing, there are 58,271,539 issued and outstanding shares of common stock. Consequently, our stockholders may experience more dilution in their ownership of our Company in the future, which could have an adverse effect on the trading market for our shares of common stock.
The report of our independent registered public accounting firm on our financial statements for the year ended August 31, 2021 contains an explanatory paragraph regarding our ability to continue as a going concern based upon our minimal cash and no source of revenues which are insufficient to cover our operating costs. These factors, among others, raise substantial doubt about our ability to continue as a going concern.
While operating our online systems and attracting a good number of followers to date, we have not yet generated any meaningful revenue from marketplace users. At the date of this document, we do not have any paying customers and we cannot guarantee we ever will have any. Even if we obtain new customers, there is no guarantee that we will generate a profit. If we cannot generate a profit, we will have to suspend or cease operations.
The company is reliant upon its management, creditors and related parties to pay for operating expenses until we generate revenues sufficient to cover our expenses. There is no obligation of these parties to continue making such payments.
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Anti-takeover effects of certain provisions of Nevada state law hinder a potential takeover of the Company
Though not now, we may be or in the future we may become subject to Nevada’s control share law. A corporation is subject to Nevada’s control share law if it has more than 200 stockholders, at least 100 of whom are stockholders of record and residents of Nevada, and it does business in Nevada or through an affiliated corporation. The law focuses on the acquisition of a “controlling interest” which means the ownership of outstanding voting shares sufficient, but for the control share law, to enable the acquiring person to exercise the following proportions of the voting power of the corporation in the election of directors: (i) one-fifth or more but less than one-third, (ii) one-third or more but less than a majority, or (iii) a majority or more. The ability to exercise such voting power may be direct or indirect, as well as individual or in association with others.
The effect of the control share law is that the acquiring person, and those acting in association with it, obtains only such voting rights in the control shares as are conferred by a resolution of the stockholders of the corporation, approved at a special or annual meeting of stockholders. The control share law contemplates that voting rights will be considered only once by the other stockholders. Thus, there is no authority to strip voting rights from the control shares of an acquiring person once those rights have been approved. If the stockholders do not grant voting rights to the control shares acquired by an acquiring person, those shares do not become permanent non-voting shares. The acquiring person is free to sell its shares to others. If the buyers of those shares themselves do not acquire a controlling interest, their shares do not become governed by the control share law.
If control shares are accorded full voting rights and the acquiring person has acquired control shares with a majority or more of the voting power, any stockholder of record, other than an acquiring person, who has not voted in favor of approval of voting rights is entitled to demand fair value for such stockholder’s shares.
Nevada’s control share law may have the effect of discouraging takeovers of the corporation. In addition to the control share law, Nevada has a business combination law which prohibits certain business combinations between Nevada corporations and “interested stockholders” for three years after the “interested stockholder” first becomes an “interested stockholder,” unless the corporation’s board of directors approves the combination in advance. For purposes of Nevada law, an “interested stockholder” is any person who is (i) the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the outstanding voting shares of the corporation, or (ii) an affiliate or associate of the corporation and at any time within the three previous years was the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the then outstanding shares of the corporation. The definition of the term “business combination” is sufficiently broad to cover virtually any kind of transaction that would allow a potential acquirer to use the corporation’s assets to finance the acquisition or otherwise to benefit its own interests rather than the interests of the corporation and its other stockholders. The effect of Nevada’s business combination law is to potentially discourage parties interested in taking control of us from doing so if it cannot obtain the approval of our board of directors.
We will need to raise additional capital to continue operations over the coming year.
We anticipate the need to raise approximately $5,000,000 in capital to fund our operations through August 31, 2023 based on the capital expenditures of our Boatim.com online boating platform that connects buyers and sellers of new and used boats and yachts. We cannot guarantee that we will be able to raise these required funds or generate sufficient revenue to remain operational.
We may be unable to manage growth, which may impact our potential profitability.
Successful implementation of our business strategy requires us to manage our growth. Growth could place an increasing strain on our management and financial resources. To manage growth effectively, we will need to:
● | Establish definitive business strategies, goals and objectives; |
● | Maintain a system of management controls; and |
● | Attract and retain qualified personnel, as well as, develop, train and manage management-level and other employees. |
If we fail to manage our growth effectively, our business, financial condition or operating results could be materially harmed, and our stock price may decline.
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Our lack of adequate D&O insurance may also make it difficult for us to retain and attract talented and skilled directors and officers.
We may in the future be subject to additional litigation, including potential class action and stockholder derivative actions. Risks associated with legal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. To date, we have not obtained directors and officers liability (“D&O”) insurance. While neither Nevada law nor our Articles of Incorporation or bylaws require us to indemnify or advance expenses to our officers and directors involved in such a legal action, we have entered into an indemnification agreement with our President and intend to enter into similar agreements with other officers and directors in the future. Without adequate D&O insurance, the amounts we would pay to indemnify our officers and directors should they be subject to legal action based on their service to the Company could have a material adverse effect on our financial condition, results of operations and liquidity. Furthermore, our lack of adequate D&O insurance may make it difficult for us to retain and attract talented and skilled directors and officers, which could adversely affect our business.
If the registration of our common stock is revoked in the future, our business opportunities will cease to exist.
In the event our securities registration was to be revoked, we would not have the ability to raise money through the issuance of shares and would lose the ability to continue the business plan set out in this filing. Common stock issued and outstanding at that time would no longer be tradable.
Our business operations have been and may continue to be materially and adversely affected by the outbreak of the novel respiratory illness coronavirus (“COVID-19”).
On March 11, 2020, the World Health Organization declared the outbreak of the novel respiratory illness COVID-19 a pandemic. The new strain of COVID-19 is considered to be highly contagious and poses a serious public health threat.
Any outbreak of such epidemic illness or other adverse public health developments may materially and adversely affect the global economy, our markets and our business.
We cannot foresee whether the outbreak of COVID-19 will be effectively contained, nor can we predict the severity and duration of its impact. If the outbreak of COVID-19 is not effectively and timely controlled, our business operations and financial condition may be materially and adversely affected as a result of the deteriorating market outlook for retail and online sales, the slowdown in regional and national economic growth, weakened liquidity and financial condition of our customers or other factors that we cannot foresee. Any of these factors and other factors beyond our control could have an adverse effect on the overall business environment, cause uncertainties in the regions where we conduct business, cause our business to suffer in ways that we cannot predict and materially and adversely impact our business, financial condition and results of operations.
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Risk to Our Common Stock
If we fail to remain current on our reporting requirements, we could be removed from the OTC Bulletin Board which would limit the ability of broker-dealers to sell our securities in the secondary market.
Companies trading on the Over The Counter Bulletin Board must be reporting issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and must be current in their reports under Section 13, in order to maintain price quotation privileges on the OTC Bulletin Board. As a result, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market. In addition, we may be unable to get relisted on the OTC Bulletin Board, which may have an adverse material effect on the Company.
Restrictions on the Use of Rule 144 by Shell Companies or Former Shell Companies.
Rule 144 is not available for the resale of securities initially issued by shell companies (other than business combination related shell companies) or issuers that have been at any time previously a shell company. However, Rule 144 also includes an important exception to this prohibition if the following conditions are met:
● | the issuer of the securities that was formerly a shell company has ceased to be a shell company; |
● | the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act; |
● | the issuer of the securities has filed all Exchange Act reports and materials required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was required to file such reports and materials), other than Current Reports on Form 8-K; and |
● | at least one year has elapsed from the time that the issuer filed current Form 10 type information with the SEC reflecting its status as an entity that is not a shell company. |
At the present time, the Company is not classified as a “shell company” under Rule 405 of the Securities Act.
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We do not expect to pay dividends in the future; any return on investment may be limited to the value of our common stock.
We do not currently anticipate paying cash dividends in the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting it at such time as the board of directors may consider relevant. Our current intention is to apply net earnings, if any, in the foreseeable future to increasing our capital base and development and marketing efforts. There can be no assurance that the Company will ever have sufficient earnings to declare and pay dividends to the holders of our common stock, and in any event, a decision to declare and pay dividends is at the sole discretion of our board of directors. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if its stock price appreciates.
The market price for our common stock may be particularly volatile given our status as a relatively unknown company, with a limited operating history and lack of profits which could lead to wide fluctuations in our share price. You may be unable to sell your common stock at or above your purchase price, which may result in substantial losses to you.
Our stock price may be particularly volatile when compared to the shares of larger, more established companies that trade on a national securities exchange and have large public floats. The volatility in our share price will be attributable to a number of factors. First, our common stock will be compared to the shares of such larger, more established companies, sporadically and thinly traded. As a consequence of this limited liquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately influence the price of those shares in either direction. The price for our shares could decline precipitously in the event that a large number of shares of our common stock are sold on the market without commensurate demand. Second, we are a speculative or “risky” investment due to our limited operating history and lack of profits to date, and uncertainty of future market acceptance for our potential products. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a larger, more established company that trades on a national securities exchange and has a large public float. Many of these factors are beyond our control and may decrease the market price of our common stock, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common stock will be at any time. Moreover, the OTC Bulletin Board is not a liquid market in contrast to the major stock exchanges. We cannot assure you as to the liquidity or the future market prices of our common stock if a market does develop. If an active market for our common stock does not develop, the fair market value of our common stock could be materially adversely affected.
Existing stockholders will experience significant dilution from our sale of shares under potential Securities Purchase Agreements.
The sale of shares pursuant to any Securities Purchase Agreements executed by the Company in the future will have a dilutive impact on our stockholders. As a result, the market price of our common stock could decline significantly, as we sell shares pursuant to the Securities Purchase Agreement. In addition, for any particular advance, we will need to issue a greater number of shares of common stock under the Securities Purchase Agreement as our stock price declines. If our stock price is lower, then our existing stockholders would experience greater dilution.
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Our shares are subject to the U.S. “Penny Stock” Rules and investors who purchase our shares may have difficulty re-selling their shares as the liquidity of the market for our shares may be adversely affected by the impact of the “Penny Stock” Rules.
Our stock is subject to U.S. “Penny Stock” rules, which may make the stock more difficult to trade on the open market. Our common shares are not currently traded on the OTC Bulletin Board, but it is the Company’s plan that the common shares be quoted on the OTC Bulletin Board. A “penny stock” is generally defined by regulations of the U.S. Securities and Exchange Commission (“SEC”) as an equity security with a market price of less than US$5.00 per share. However, an equity security with a market price under US $5.00 will not be considered a penny stock if it fits within any of the following exceptions:
(i) | the equity security is listed on NASDAQ or a national securities exchange; |
(ii) | the issuer of the equity security has been in continuous operation for less than three years, and either has (a) net tangible assets of at least US $5,000,000, or (b) average annual revenue of at least US $6,000,000; or |
(iii) | the issuer of the equity security has been in continuous operation for more than three years and has net tangible assets of at least US $2,000,000. |
Our common stock does not currently fit into any of the above exceptions.
If an investor buys or sells a penny stock, SEC regulations require that the investor receive, prior to the transaction, a disclosure explaining the penny stock market and associated risks. Furthermore, trading in our common stock will be subject to Rule 15g-9 of the Exchange Act, which relates to non-NASDAQ and non-exchange listed securities. Under this rule, broker/dealers who recommend our securities to persons other than established customers and accredited investors must make a special written suitability determination for the purchaser and receive the purchaser’s written agreement to a transaction prior to sale. Securities are exempt from this rule if their market price is at least $5.00 per share. Since our common stock is currently deemed penny stock regulations, it may tend to reduce market liquidity of our common stock, because they limit the broker/dealers’ ability to trade, and a purchaser’s ability to sell, the stock in the secondary market.
The low price of our common stock has a negative effect on the amount and percentage of transaction costs paid by individual shareholders. The low price of our common stock also limits our ability to raise additional capital by issuing additional shares. There are several reasons for these effects. First, the internal policies of certain institutional investors prohibit the purchase of low-priced stocks. Second, many brokerage houses do not permit low-priced stocks to be used as collateral for margin accounts or to be purchased on margin. Third, some brokerage house policies and practices tend to discourage individual brokers from dealing in low-priced stocks. Finally, broker’s commissions on low-priced stocks usually represent a higher percentage of the stock price than commissions on higher priced stocks. As a result, the Company’s shareholders may pay transaction costs that are a higher percentage of their total share value than if our share price were substantially higher.
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Because we can issue additional shares of common stock, purchasers of our common stock may incur immediate dilution and experience further dilution.
We are authorized to issue up to 500,000,000 shares of common stock, of which 58,271,539 are issued and outstanding as of the date of this filing. Our Board of Directors has the authority to cause us to issue additional shares of common stock and to determine the rights, preferences and privileges of such shares, without consent of any of our stockholders. Consequently, the stockholders may experience more dilution in their ownership of our stock in the future. Please see NOTE-8 COMMON STOCK within the Company’s consolidated financial statements for the three months ended November 30, 2021 for further information.
You may be diluted by conversions of the Company’s convertible notes,
As of November 30, 2021, we had outstanding Convertible Promissory Notes in an aggregate principal amount of $1,613,556 that could be converted into 5,444,974 shares of common stock based on the inherit conversion features.
The conversion of the Convertible Promissory Notes will result in further dilution of your investment. In addition, you may experience additional dilution if we issue common stock in the future. As a result of this dilution, you may receive significantly less in net tangible book value than the full purchase price you paid for the shares in the event of liquidation. Please see NOTE 7 – CONVERTIBLE NOTES and NOTE 10 - SUBSEQUENT EVENTS within the Company’s consolidated financial statements for the three months ended November 30, 2021 for further information.
Issuances of shares of common stock or securities convertible into or exercisable for shares of common stock following this offering, will dilute your ownership interests and may adversely affect the future market price of our common stock.
The issuance of additional shares of our common stock or securities convertible into or exchangeable for our common stock could be dilutive to stockholders if they do not invest in future offerings. We may seek additional capital through a combination of private and public offerings in the future.
The Company’s shares of common stock are quoted on the OTCQB Marketplace, which limits the liquidity and price of the Company’s common stock.
The Company’s shares of Common Stock are traded on the OTCQB Marketplace under the symbol “BTIM.” Quotation of the Company’s securities on the OTCQB Marketplace limits the liquidity and price of the Company’s Common Stock more than if the Company’s shares of Common Stock were listed on The Nasdaq Stock Market or a national exchange.
FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our stock.
The Financial Industry Regulatory Authority, Inc. (“FINRA”) has adopted rules requiring that, in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative or low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA has indicated its belief that there is a high probability that speculative or low-priced securities will not be suitable for at least some customers. If these FINRA requirements are applicable to us or our securities, they may make it more difficult for broker-dealers to recommend that at least some of their customers buy our common stock, which may limit the ability of our stockholders to buy and sell our common stock and could have an adverse effect on the market for and price of our common stock.
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If we take advantage of specified reduced disclosure requirements applicable to an “emerging growth company” under the JOBS Act, the information that we provide to shareholders may be different than they might receive from other public companies.
We qualify as an “emerging growth company” under the JOBS Act. As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. The Company has elected not to use the extended transition period for complying with new or revised financial accounting standards but does still have reduced reporting requirements. These provisions include:
● | only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure; |
● | reduced disclosure about our executive compensation arrangements; |
● | no non-binding advisory votes on executive compensation or golden parachute arrangements; and |
● | exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting. |
We may take advantage of these exemptions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1.07 billion in annual revenues, we have more than $700 million in market value of our stock held by non-affiliates, or we issue more than $1 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all of these reduced burdens. We may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our shareholders may be different than you might receive from other public reporting companies in which you hold equity interests.
Because our largest shareholder of common stock currently and for the foreseeable future will continue to control Boatim, it is not likely that you will be able to elect directors or have any say in the policies of the Company.
Our shareholders are not entitled to cumulative voting rights. Consequently, the election of directors and all other matters requiring shareholder approval will be decided by majority vote. The Company’s largest shareholder of common stock beneficially owns approximately 56% of our outstanding common stock either through direct ownership or through another class of capital stock that may be convertible into shares of our common stock. Due to such significant ownership position held by our insiders, new investors may not be able to effect a change in our business or management, and therefore, shareholders would have no recourse as a result of decisions made by management.
Cautionary Note.
We have sought to identify what we believe to be the most significant risks to our business, but we cannot predict whether, or to what extent, any of such risks may be realized nor can we guarantee that we have identified all possible risks that might arise. Investors should carefully consider all of such risk factors before making an investment decision with respect to our common stock.
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If we sell all of the shares being offered, our net proceeds (after our estimated offering expenses of $500,000) will be $4,500,000. We will use these net proceeds for:
If 41,666,667 Shares (100%) are sold: |
Planned Actions | Estimated Cost to Complete | |||
Current SaaS support and development | 385,000 | |||
Current Marketplace support and development | 385,000 | |||
Salaries, Administrative, Accounting, Legal (transactional and SEC), Regulatory | 634,000 | |||
Marketing and Sales | 1,197,000 | |||
Insurance | 120,000 | |||
Debt Coverage | 273,000 | |||
Future Product development and acquisition | 1,056,000 | |||
Working capital / Cash Reserve | 450,000 | |||
Commissions and Underwriting Fees | 500,000 | |||
TOTAL | $ | 5,000,000 |
If 31,250,000 Shares (75%) are sold: |
Planned Actions | Estimated Cost to Complete | |||
Current SaaS support and development | 280,000 | |||
Current Marketplace support and development | 280,000 | |||
Salaries, Administrative, Accounting, Legal (transactional and SEC), Regulatory | 550,000 | |||
Marketing and Sales | 890,000 | |||
Insurance | 120,000 | |||
Debt Coverage | 273,000 | |||
Future Product development and acquisition | 782,000 | |||
Working capital / Cash Reserve | 200,000 | |||
Commissions and Underwriting Fees | 375,000 | |||
TOTAL | $ | 3,750,000 |
If 20,833,334 Shares (50%) are sold: |
Planned Actions | Estimated Cost to Complete | |||
Current SaaS support and development | 210,000 | |||
Current Marketplace support and development | 210,000 | |||
Salaries, Administrative, Accounting, Legal (transactional and SEC), Regulatory | 412,000 | |||
Marketing and Sales | 534,000 | |||
Insurance | 120,000 | |||
Debt Coverage | 273,000 | |||
Future Product development and acquisition | 391,000 | |||
Working capital / Cash Reserve | 100,000 | |||
Commissions and Underwriting Fees | 250,000 | |||
TOTAL | $ | 2,500,000 |
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If 10,416,667 Shares (25%) are sold: |
Planned Actions | Estimated Cost to Complete | |||
Current SaaS support and development | 81,000 | |||
Current Marketplace support and development | 81,000 | |||
Salaries, Administrative, Accounting, Legal (transactional and SEC), Regulatory | 368,000 | |||
Marketing and Sales | 120,000 | |||
Insurance | 120,000 | |||
Debt Coverage | 273,000 | |||
Future Product development and acquisition | 32,000 | |||
Working capital / Cash Reserve | 50,000 | |||
Commissions and Underwriting Fees | 125,000 | |||
TOTAL | $ | 1,250,000 |
The precise amounts that we will devote to each of the foregoing items, and the timing of expenditures, will vary depending on numerous factors.
As indicated in the table above, if we sell only 25%, 50% or 75% of the shares offered for sale in this Offering, we would expect to use the resulting net proceeds for the same purposes as we would use the net proceeds from a sale of 100% of the shares, and in approximately the same proportions, until such time as such use of proceeds would leave us without working capital reserve. At that point we would expect to modify our use of proceeds by limiting our expansion, leaving us with the working capital reserve indicated.
The expected use of net proceeds from this Offering represents our intentions based upon our current plans and business conditions, which could change in the future as our plans and business conditions evolve and change. The amounts and timing of our actual expenditures, specifically with respect to working capital, may vary significantly depending on numerous factors. The precise amounts that we will devote to each of the foregoing items, and the timing of expenditures, will vary depending on numerous factors. As a result, our management will retain broad discretion over the allocation of the net proceeds from this Offering.
In the event we do not sell all of the shares being offered, we may seek additional financing from other sources in order to support the intended use of proceeds indicated above. If we secure additional equity funding, investors in this Offering would be diluted. In all events, there can be no assurance that additional financing would be available to us when wanted or needed and, if available, on terms acceptable to us.
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If you purchase shares in this Offering, your ownership interest in our Common Stock will be diluted immediately, to the extent of the difference between the price to the public charged for each share in this Offering and the net tangible book value per share of our Common Stock after this Offering.
Our historical net tangible book value as of November 30, 2021 was ($2,777,926) or ($0.05) per then outstanding share of our Common Stock. Historical net tangible book value per share equals the amount of our total tangible assets less total liabilities, divided by the total number of shares of our Common Stock outstanding, all as of the date specified.
The following table illustrates the per share dilution to new investors discussed above, assuming the sale of, respectively, 100%, 75%, 50% and 25% of the shares offered for sale in this Offering (after deducting estimated offering expenses of $500,000, $375,000, $250,000 and $125,000, respectively):
Percentage of shares offered that are sold | 100% | 75% | 50% | 25% | ||||||||||||
Price to the public charged for each share in this Offering | $ | 0.12 | $ | 0.12 | $ | 0.12 | $ | 0.12 | ||||||||
Historical net tangible book value per share as of November 30, 2021 (1) | (0.05 | ) | (0.05 | ) | (0.05 | ) | (0.05 | ) | ||||||||
Increase in net tangible book value per share attributable to new investors in this Offering (2) | $ | 0.07 | 0.07 | $ | 0.06 | $ | 0.06 | |||||||||
Net tangible book value per share, after this Offering | $ | 0.02 | 0.02 | $ | 0.01 | $ | 0.01 | |||||||||
Dilution per share to new investors | $ | 0.10 | 0.10 | $ | 0.11 | $ | 0.11 |
(1) | Based on net tangible book value as of November 30, 2021 of ($2,777,926) and 53,711,394 outstanding shares of Common stock. |
(2) | After deducting estimated offering expenses of $500,000, $375,000, $250,000 and $125,000, respectively. |
Future Dilution
Dilution may also result from future actions by our Company, and specifically from any increase in the number of shares of the Company’s capital stock outstanding resulting from a stock offering (such as a public offering, a crowdfunding round, a venture capital round or an angel investment), employees exercising stock options, or conversion of certain instruments (such as convertible bonds, preferred shares or warrants) into stock.
If we decide to issue more shares, an investor could experience value dilution, with each share being worth less than before, and control dilution, with the total percentage an investor owns being less than before. There may also be earnings dilution, with a reduction in the amount earned per share (though this typically occurs only if we offer dividends, and most early-stage companies are unlikely to offer dividends, preferring to invest any earnings into the Company).
Dilution might also happen upon conversion of convertible notes into shares. Typically, the terms of convertible notes issued by early-stage companies provide that in the event of another round of financing, the holders of the convertible notes get to convert their notes into equity at a “discount” to the price paid by the new investors, i.e., they get more shares than the new investors would for the same price. Additionally, convertible notes may have a “price cap” on the conversion price, which effectively acts as a share price ceiling. Either way, the holders of the convertible notes get more shares for their money than new investors. In the event that the financing is a “down round” the holders of the convertible notes will dilute existing equity holders, and even more than the new investors do, because they get more shares for their money. Investors should pay careful attention to the amount of convertible notes that the company has issued (and may issue in the future), and the terms of those notes.
If you are making an investment expecting to own a certain percentage of our Company or expecting each share to hold a certain amount of value, it’s important to realize how the value of those shares can decrease by actions taken by us. Dilution can make drastic changes to the value of each share, ownership percentage, voting control, and earnings per share.
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Percentage Ownership Including All Shares Issued and Outstanding
Share Structure | Number of Shares Beneficially Owned |
Percent of Class Before Offering |
Percent of Class After Offering |
|||||||||
Shares outstanding prior to offering | 58,271,539 | 100.00 | % | 58.31 | % | |||||||
Shares offered in offering | 41,666,667 | 0 | % | 41.69 | % | |||||||
Total shares (a) | 99,938,206 | 100.00 | % | 100.00 | % |
(a) | Total shares outstanding after the offering equals 99,938,206 and assumes that all shares in the offering are sold. |
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This Offering Circular is part of an Offering Statement that we filed with the SEC, using a continuous offering process. Periodically, as we have material developments, we will provide an Offering Circular supplement that may add, update or change information contained in this Offering Circular. Any statement that we make in this Offering Circular will be modified or superseded by any inconsistent statement made by us in a subsequent Offering Circular supplement. The Offering Statement we filed with the SEC includes exhibits that provide more detailed descriptions of the matters discussed in this Offering Circular. You should read this Offering Circular and the related exhibits filed with the SEC and any Offering Circular supplement, together with additional information contained in our annual reports, semi-annual reports and other reports and information statements that we will file periodically with the SEC. See the section entitled “Additional Information” below for more details.
Exchange Listing
Our Common Stock is quoted on the OTCQB Marketplace” under the symbol “BTIM.”
Pricing of the Offering
Prior to the Offering, there has been a limited public market for the Offered Shares. The initial public offering price was determined by us. The principal factors considered in determining the initial public offering price include:
● | the information set forth in this Offering Circular and otherwise available; |
● | our history and prospects and the history of and prospects for the industry in which we compete; |
● | our past and present financial performance; |
● | our prospects for future earnings and the present state of our development; |
● | the general condition of the securities markets at the time of this Offering; |
● | the recent market prices of, and demand for, publicly traded common stock of generally comparable companies; and |
● | other factors deemed relevant by us. |
Offering Period and Expiration Date
This Offering will start on or after the Qualification Date and will terminate if the Maximum Offering is reached or, if it is not reached, on the Termination Date.
Minimum Purchase Requirements
The minimum purchase requirement per investor is 41,667 Offered Shares ($5,000); however, we can waive the minimum purchase requirement on a case-by-case basis in our sole discretion. If you have satisfied the minimum purchase requirement, any additional purchase must be in an amount of at least $5,000.
State Law Exemption and Offerings to “Qualified Purchasers”
The Offered Shares are being offered and sold only to “qualified purchasers” (as defined in Regulation A under the Securities Act). As a Tier 2 offering pursuant to Regulation A under the Securities Act, this offering will be exempt from state “Blue Sky” law review, subject to certain state filing requirements and anti-fraud provisions, to the extent that the Offered Shares offered hereby are offered and sold only to “qualified purchasers”. “Qualified purchasers” include: (a) “accredited investors” under Rule 501(a) of Regulation D and (b) all other investors, so long as their investment in Offered Shares does not represent more than 10% of the greater of their annual income or net worth (for natural persons), or 10% of the greater of annual revenue or net assets at fiscal year-end (for non-natural persons). Accordingly, we reserve the right to reject any investor’s subscription in whole or in part for any reason, including if we determine, in our sole and absolute discretion, that such investor is not a “qualified purchaser” for purposes of Regulation A. We intend to offer and sell the Offered Shares to qualified purchasers in every state of the United States.
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Transferability of the Offered Shares
The Offered Shares will be generally freely transferable, subject to any restrictions imposed by applicable securities laws or regulations.
Procedures for Subscribing
When you decide to subscribe for Offered Shares in this Offering, you should:
Go to www.minivest.com, click on the “Invest Now” button and follow the procedures as described.
1. | Electronically receive, review, execute and deliver to us a subscription agreement; and |
2. | Deliver funds directly by wire or electronic funds transfer via ACH to the specified account maintained by us. |
Any potential investor will have ample time to review the subscription agreement, along with their counsel, prior to making any final investment decision. We shall only deliver such subscription agreement upon request after a potential investor has had ample opportunity to review this Offering Circular.
Right to Reject Subscriptions. After we receive your complete, executed subscription agreement and the funds required under the subscription agreement have been transferred to the escrow account, we have the right to review and accept or reject your subscription in whole or in part, for any reason or for no reason. We will return all monies from rejected subscriptions immediately to you, without interest or deduction.
Acceptance of Subscriptions. Upon our acceptance of a subscription agreement, we will countersign the subscription agreement and issue the shares subscribed at closing. Once you submit the subscription agreement and it is accepted, you may not revoke or change your subscription or request your subscription funds. All accepted subscription agreements are irrevocable.
Under Rule 251 of Regulation A, non-accredited, non-natural investors are subject to the investment limitation and may only invest funds which do not exceed 10% of the greater of the purchaser’s revenue or net assets (as of the purchaser’s most recent fiscal year end). A non-accredited, natural person may only invest funds which do not exceed 10% of the greater of the purchaser’s annual income or net worth (please see below on how to calculate your net worth).
NOTE: For the purposes of calculating your net worth, it is defined as the difference between total assets and total liabilities. This calculation must exclude the value of your primary residence and may exclude any indebtedness secured by your primary residence (up to an amount equal to the value of your primary residence). In the case of fiduciary accounts, net worth and/or income suitability requirements may be satisfied by the beneficiary of the account or by the fiduciary, if the fiduciary directly or indirectly provides funds for the purchase of the Offered Shares.
In order to purchase offered Shares and prior to the acceptance of any funds from an investor, an investor will be required to represent, to the Company’s satisfaction, that he is either an accredited investor or is in compliance with the 10% of net worth or annual income limitation on investment in this Offering.
No Selling Security holders
There are no selling security holders in this Offering.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of our operations together with our consolidated financial statements and the notes thereto appearing elsewhere in this Offering Circular. This discussion contains forward-looking statements reflecting our current expectations, whose actual outcomes involve risks and uncertainties. Actual results and the timing of events may differ materially from those stated in or implied by these forward-looking statements due to a number of factors, including those discussed in the sections entitled “Risk Factors”, “Cautionary Statement Regarding Forward-Looking Statements” and elsewhere in this Offering Circular. Please see the notes to our Financial Statements for information about our Critical Accounting Policies and Recently Issued Accounting Pronouncements.
COVID-19
On January 30, 2020, the World Health Organization declared the COVID-19 (coronavirus) outbreak a “Public Health Emergency of International Concern” and on March 10, 2020, declared it to be a pandemic. The virus and actions taken to mitigate its spread have had and are expected to continue to have a broad adverse impact on the economies and financial markets of many countries, including the geographical areas in which the Company operates. The Company continues to execute its business plan. At the present time, the Company cannot predict the full impact of the COVID-19 virus on its business. Our projections on spending, product development and milestone achievements are likely to be further revised as new information is obtained.
Management’s Discussion and Analysis
Overview
Boatim Inc. (“we”, “our, “Boatim”, the “Company”) is a for profit corporation established under the corporate laws of the State of Nevada on August 15, 2014 as Emerald Data Inc. On January 24th, 2019, the company name was changed to Boatim Inc. Its fiscal year end is August 31.
Boatim, Inc. established Boatim Europe S.L. (“Boatim Europe”) as a private limited company pursuant to the laws of Spain on December 18, 2019, with the Company having indirect control of one hundred percent of the issued and outstanding membership interests of Boatim Europe. Boatim Europe commenced operations in February 2020 and is engaged in the business of providing software development, marketing, and selling services for Boatim Inc.
All membership interests of Boatim Europe are currently held in trust by the Company´s CEO for practical reasons and only until the formal transfer into the name of Company has been completed according to the requirements of applicable Spanish law. In December 2020, the Company finalized the process of collecting and submitting all required paperwork to the Spanish authorities to enter Boatim Inc. as direct owner on public records in Spain, making Boatim Europe a wholly owned subsidiary of the Company.
Originally in the business of producing and distributing furniture, the business was changed to online food blogging as a promotion channel for restaurants, bars and fine dining. Subsequently, following the acquisition of the Boatim software platform, the Company expanded into the boating industry by further developing the software platform. The Boatim software platform is an online boat trading marketplace, combining data-driven technology and our digital marketing capabilities to offer a rolling subscription for service model of access to the platform for the extensive market of global boat dealers.
Plan of Operation for the Next Twelve Months
The Company believes that the proceeds of this Offering will satisfy its cash requirements for the next twelve months. To complete the Company’s entire development plan, it may have to raise additional funds in the next twelve months.
The Company may make significant changes in the number of employees at the corporate level, as well as retaining the services of software developers as contract labor or employees.
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Investments. The Company intends to make substantial investment in continued software development and marketing of the three main product categories: consumer applications, “Everything Boat” marketplace, and SaaS which all link together into the Boatim Boat Ecosystem.
Marketing and sales. The Company will incur substantial marketing and sales expenses which will consist primarily of salaries, and benefits for employees engaged in sales, sales support, marketing, business development, and customer service functions. Our marketing and sales expenses also include marketing and promotional expenditures.
Cost of revenue. The Company expects that the cost of revenue for its operations will consist primarily of expenses associated with the acquisition of users, development of proprietary software and technologies and acquisition and partnerships of/with industry participants. These include expenses related to providing products and services and salaries and benefits for employees on our operations teams. licensing and patent costs, data storage and infrastructure, and marketing and sales events.
Research and development. The Company will continue to engage in research and development expenses. These will consist primarily of salaries, and benefits for employees who are responsible for building new products as well as improving existing products. We will expense all of our research and development costs as they are incurred.
General and administrative. The majority of our general and administrative expenses will consist of salaries, benefits, and share-based compensation for certain of our executives as well as our legal, finance, human resources, corporate communications and policy employees, and other administrative employees. In addition, general and administrative expenses include professional and legal services. The Company expects to incur substantial expenses in marketing the current Offering, in closing sales, and in promoting and managing its operations.
Results of Operations
Three Months Ended November 30, 2021 Compared to Three Months Ended November 30, 2020
The following table sets forth information comparing the components of net (loss) income for the three months ended November 30, 2021 and 2020:
Three Months Ended November 30, |
Period over Period Change |
|||||||||||||||
2021 | 2020 | $ | % | |||||||||||||
Revenues, net | $ | - | $ | - | $ | - | - | |||||||||
Cost of revenues | - | - | - | - | ||||||||||||
Gross profit | - | - | - | - | ||||||||||||
Operating expenses: | ||||||||||||||||
General and administrative | 1,435,686 | 278,528 | 1,157,158 | 415.45 | % | |||||||||||
Total operating expenses | 1,435,686 | 278,528 | 1,157,158 | 415.45 | % | |||||||||||
Operating loss | (1,435,686 | ) | (278,528 | ) | (1,157,158 | ) | -415.45 | % | ||||||||
Other (expense) income: | ||||||||||||||||
Change in fair value of derivative liability | - | (280,905 | ) | 280,905 | 100.00 | % | ||||||||||
Interest Income (expense) | 16 | (385,383 | ) | 385,399 | 100.00 | % | ||||||||||
Gain on foreign exchange | 3,499 | 5,497 | (1,998 | ) | -36.35 | % | ||||||||||
Total other income (expenses) | 3,515 | (660,791 | ) | 664,306 | 100.53 | % | ||||||||||
Loss before income taxes | (1,432,171 | ) | (939,319 | ) | (492,852 | ) | -52.47 | % | ||||||||
Income tax expense | - | - | - | - | ||||||||||||
Net loss | $ | (1,432,171 | ) | $ | (939,319 | ) | $ | (492,852 | ) | -52.47 | % | |||||
Foreign currency translation adjustment | 208 | (15,814 | ) | 16,022 | 101.32 | % | ||||||||||
Total comprehensive loss | $ | (1,431,963 | ) | $ | (955,133 | ) | $ | (476,830 | ) | -49.92 | % |
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Revenue
For the three months ended November 30, 2021 and 2020, we generated revenue of $- and $-, respectively.
Cost of Revenues
For the three months ended November 30, 2021 and 2020, cost of revenues was $- and $-, respectively.
Gross Profit
For the three months ended November 30, 2021 and 2020, gross profit was $- and $-, respectively.
Operating Expenses
Selling, general and administrative expenses were $1,435,686 and $278,528 for the three months ended November 30, 2021 and 2020, respectively, representing an increase of $1,157,158, or 415.45%. The increase is largely attributable to stock issued for consulting services totaling $743,126 associated with a concentration of resources on marketing and stock-based compensation expense of $225,000 to our CEO.
Other Expenses
Other income (expenses) were $3,515 and ($660,791) for the three months ended November 30, 2021 and 2020, respectively, representing an increase of $664,306, or 100.53%. The increase is largely attributable to a decrease in interest expense and change in fair value of derivative liability.
Income tax expense
There was no income tax expense for the three months ended November 30, 2021 and September 30, 2020.
Net Income (loss)
For the three months ended November 30, 2021, our net loss increased to ($1,432,171), as compared to a net loss of ($939,319) for three months ended November 30, 2020, an increase of ($492,852). The increase in net loss for the three months ended November 30, 2021 was largely attributable to the increase in general and administrative expenses.
Total Comprehensive Income (loss)
For the three months ended November 30, 2021, our total comprehensive loss increased to ($1,431,963), as compared to a total comprehensive loss of ($955,133) for the three months ended November 30, 2020, an increase of ($476,830).
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Year Ended August 31, 2021 Compared to Year Ended August 31, 2020
The following table sets forth information comparing the components of net (loss) income for the years ended August 31, 2021 and 2020:
Years Ended August 31, | Period over Period Change | |||||||||||||||
2021 | 2020 | $ | % | |||||||||||||
Revenues, net | $ | 900 | $ | 118 | $ | 782 | 662.71 | % | ||||||||
Cost of revenues | - | (4 | ) | 4 | 100.00 | % | ||||||||||
Gross profit | 900 | 114 | 786 | 689.47 | % | |||||||||||
Operating expenses: | ||||||||||||||||
General and administrative | 2,317,196 | 680,470 | 1,636,726 | 240.53 | % | |||||||||||
Total operating expenses | 2,317,196 | 680,470 | 1,636,726 | 240.53 | % | |||||||||||
Operating loss | (2,316,296 | ) | (680,356 | ) | (1,635,940 | ) | -240.45 | % | ||||||||
Other (expense) income: | ||||||||||||||||
Change in fair value of derivative liability | (209,068 | ) | 456,698 | (665,766 | ) | -145.78 | % | |||||||||
Interest expense | (617,934 | ) | (168,794 | ) | (449,140 | ) | -266.09 | % | ||||||||
Gain/(Loss) on foreign exchange | 27,129 | (17,462 | ) | 44,591 | 255.36 | % | ||||||||||
Total other income (expenses) | (799,873 | ) | 270,442 | (1,070,315 | ) | -395.77 | % | |||||||||
Loss before income taxes | (3,116,169 | ) | (409,914 | ) | (2,706,255 | ) | -660.20 | % | ||||||||
Income tax expense | - | - | - | - | ||||||||||||
Net loss | $ | (3,116,169 | ) | $ | (409,914 | ) | $ | (2,706,255 | ) | -660.20 | % | |||||
Foreign currency translation adjustment | 87,943 | (20,299 | ) | 108,242 | 533.24 | % | ||||||||||
Total comprehensive loss | $ | (3,028,226 | ) | $ | (430,213 | ) | $ | (2,598,013 | ) | -603.89 | % |
Revenues
For the years ended August 31, 2021 and 2020, we generated $900 and $118 in revenue, respectively.
For the years ended August 31, 2021 and 2020, our cost of goods sold was $0 and ($4), respectively.
Operating Expenses
Our operating expenses were $2,317,196 and $680,470 for years ended August 31, 2021 and 2020, respectively, for an increase of $1,636,726. The increase is largely attributable to operating expenses associated with a concentration of resources in product development, engineering, marketing, reporting and administrative tasks post the acquisition of the Boatim platform as well as operating expenses associated with the new Spanish subsidiary, Boatim Europe.
Other Income (Expenses)
Other Income (Expenses) were ($799,873) and $270,442 during the years ended August 31, 2021 and 2020, respectively, representing a decrease of ($1,070,315). The decrease is largely attributable to an increase in interest expense and change in fair value of derivative liability.
Income tax expense
There was no income tax expense for the years ended August 31, 2021 and 2020.
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Net Income (Loss)
For the year ended August 31, 2021, our net loss increased to ($3,116,169), as compared to a net loss of ($409,914) for the year ended August 31, 2020, an increase of ($2,706,255). The increase in net loss is largely attributable to the Company’s increase in general and administrative expenses.
Total Comprehensive Income (loss)
For the year ended August 31, 2021, our total comprehensive loss increased to ($3,028,226), as compared to a total comprehensive loss of ($430,213) for the year ended August 31, 2020, an increase of ($2,598,013).
Liquidity and Capital Resources
The following table summarizes the cash flows for the three months ended November 30, 2021 and 2020:
2021 | 2020 | |||||||
Cash Flows: | ||||||||
Net cash (used in) operating activities | (248,198 | ) | (297,054 | ) | ||||
Net cash provided by (used in) investing activities | - | (185,769 | ) | |||||
Net cash provided by financing activities | 201,244 | 504,750 | ||||||
Effect of exchange rate changes on cash | (9,597 | ) | (15,814 | ) | ||||
Net (decrease) increase in cash | (56,551 | ) | 6,113 | |||||
Cash at beginning of period | 69,827 | 38,427 | ||||||
Cash at end of period | $ | 13,276 | $ | 44,540 |
At November 30, 2021, we had $13,276 in cash and there were outstanding liabilities of $2,832,735 (cash of $69,827 and liabilities of $2,489,789 on August 31, 2021, respectively). The stockholders’ deficit was $2,248,399 as of November 30, 2021 and $1,804,402 as of August 31, 2021.
There was $248,198 cash used by operations in the three months ended November 30, 2021 ($297,054 net cash used in operating activities during the three months ended November 30, 2020), $0 used in cash for investing activities for the three months ended November 30, 2021 ($185,769 used in cash for investing activities during the three month period ended November 30, 2020) and $201,244 cash provided through financing activities during the three months ended November 30, 2020 ($504,750 for the three months ended November 30, 2020). This resulted in $56,551 changes in net cash during the three months ended November 30, 2021 and $6,113 change in net cash during the three months ended November 30, 2020, respectively.
Cayo Ventures GmbH has verbally agreed to continue to loan the Company funds for operating expenses in a limited scenario, but it has no legal obligation to do so.
There is limited historical financial information about us upon which to base an evaluation of our performance. We have meaningfully commenced business operations based upon the amount of revenue we have been able to generate. We are in start-up stage of operations. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns due to price and cost increases in services and products.
We have no assurance that future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations. Equity financing could result in additional dilution to existing shareholders.
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OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, results of operations, liquidity, or capital expenditures.
Recent Financing Transactions
Convertible Notes Payable
For the three months ended November 30, 2021 and year ended August 31, 2021, the Company issued the following new convertible notes payable:
On July 21, 2020, the Company issued convertible notes in the amount of $500,000 and $560,000 to two unrelated parties, in exchange for their assumption of the December 8, 2018 note and related party loans owed to Cayo for the same amounts. The notes do not bear interest and matured on January 22, 2021. The first note in the amount of $500,000 is convertible into common shares at the rate equivalent to 70% of the Company’s 30-day average stock price prior to conversion. The second note in the amount of $560,000 is convertible into common stock at the rate equivalent to 80% of the Company’s 30-day average stock price prior to conversion.
On September 22, 2020, the Board approved the issuance of up to $5,000,000 in new convertible notes, in multiple tranches, convertible at maturity into common shares. During the second, third and fourth fiscal quarters ended August 31, 2021 the Company received tranches of $62,500, $45,000, $60,000, $110,000, $130,000, $83,000 and $48,100, respectively from unrelated parties under this facility. The note in the amount of $62,500 matures on March 31, 2021 and is convertible into common stock at the rate equivalent to 80% of the Company’s 30-day average stock price prior to conversion. The note in the amount of $45,000 matures on June 22, 2021, the note in the amount of $60,000 matures on July 22, 2021, the note in the amount of $110,000 matures on August 22, 2021, the note in the amount of $130,000 matures on September 22, 2021, the note in the amount of $48,100 matures on October 1, 2021 and the note in the amount of $83,000 matures on October 1, 2021; these notes are convertible into common stock at the rate equivalent to 80% of the Company’s 30-day average stock price prior to conversion but no less than $0.10 value per share of common stock.
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On January 10, 2021 the holder of the note in the amount of $500,000 converted $500,000 of its note into 578,681 shares of common stock and the unamortized discount at the date of conversion of $27,838 was written off to interest expense.
On January 10, 2021 the holder of the note in the amount of $560,000 converted $560,000 of its note into 567,108 shares of common stock and the unamortized discount at the date of conversion of $22,439 was written off to interest expense.
On April 23, 2021 the holder of the note in the amount of $62,500 converted $62,500 of its note into 135,038 shares of common stock.
On June 7, 2021 and June 8, 2021, the Company issued convertible notes in the amount of $696,000 and $441,000 to two unrelated parties, in exchange for their assumption of related party loans owed to Cayo for the same amounts. These notes are convertible into common stock at the rate equivalent to 80% of the Company’s 30-day average stock price prior to conversion but no less than $0.10 value per share of common stock.
Please see NOTE 7 – CONVERTIBLE NOTES and NOTE 10 - SUBSEQUENT EVENTS within the Company’s consolidated financial statements for the three months ended November 30, 2021 for further information.
Quantitative and Qualitative Disclosures about Market Risk
In the ordinary course of our business, we are not exposed to market risk of the sort that may arise from changes in interest rates or foreign currency exchange rates, or that may otherwise arise from transactions in derivatives.
The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s significant estimates and assumptions include the fair value of the Company’s common stock, stock-based compensation, the recoverability and useful lives of long-lived assets, and the valuation allowance relating to the Company’s deferred tax assets.
Contingencies
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company’s management, in consultation with its legal counsel as appropriate, assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company, in consultation with legal counsel, evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates a potentially material loss contingency is not probable, but is reasonably possible, or is probable, but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.
We are required to file periodic and other reports with the SEC, pursuant to the requirements of Section 13(a) of the Securities Exchange Act of 1934. Our continuing reporting obligations under Regulation A are deemed to be satisfied, as long as we comply with our Section 13(a) reporting requirements. As a Tier 2 issuer under Regulation A, we will be required to file with the SEC a Form 1-Z (Exit Report Under Regulation A) upon the termination of this offering.
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Boatim Inc. (“we”, “our, “Boatim”, the “Company”) is a for profit corporation established under the corporate laws of the State of Nevada on August 15, 2014 as Emerald Data Inc. On January 24th, 2019, the company name was changed to Boatim Inc. Its fiscal year end is August 31.
Boatim, Inc. established Boatim Europe S.L. (“Boatim Europe”) as a private limited company pursuant to the laws of Spain on December 18, 2019, with the Company having indirect control of one hundred percent of the issued and outstanding membership interests of Boatim Europe. Boatim Europe commenced operations in February 2020 and is engaged in the business of providing software development, marketing, and selling services for Boatim Inc.
All membership interests of Boatim Europe are currently held in trust by the Company´s CEO for practical reasons and only until the formal transfer into the name of Company has been completed according to the requirements of applicable Spanish law. In December 2020, the Company finalized the process of collecting and submitting all required paperwork to the Spanish authorities to enter Boatim Inc. as direct owner on public records in Spain, making Boatim Europe a wholly owned subsidiary of the Company.
Originally in the business of producing and distributing furniture, the business was changed to online food blogging as a promotion channel for restaurants, bars and fine dining. Subsequently, following the acquisition of the Boatim software platform, the Company expanded into the boating industry by further developing the software platform. The Boatim software platform is an online boat trading marketplace, combining data-driven technology and our digital marketing capabilities to offer a rolling subscription for service model of access to the platform for the extensive market of global boat dealers.
Principal Products, Services, and Their Markets
Since the acquisition of the Boatim software platform and the creation of an additional business line, management has focused on operating a global online boat marketplace as its primary business line.
We intend to combine our strengths in data-driven technology businesses, the growing online boating community, and our digital marketing capabilities to offer a rolling subscription for service model of access to the Boatim platform for the extensive market of global boat dealers and intend to establish steady revenue streams this way. Our connection with the online communities in key markets, as well as our presence in the key boating communities of Florida and Barcelona, Spain, will be of substantial benefit when further rolling out our online marketplace product to dealers. Dealers will be able to purchase additional options to boost their listings, for example “Featured Listings”. In order to make the process as smooth and seamless as possible for new customers, Boatim recently launched in beta its Smart Connected InventoryTM offering, allowing dealers to automatically connect and manage their inventory on the Boatim platform.
With the Boatim platform intended to attract many boat owners and sellers, we are creating a growing social and commercial community around the subject of boats. The community will be enhanced by relevant boating content from various sources, including internally developed by Boatim’s own team. As the community grows in size and activity, it is intended to attract boat manufacturers, boat show promoters, and other trade players, which will create an additional revenue stream for paid advertising and sponsored content.
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Milestones and Budget
We have created the following milestones and budgets. It is important to note that achievement of these milestones and their budget targets is subject to substantial risk. Please see “Risk Factors” and “Forward Looking Statements.”
Operational Objectives February 1, 2022 to April 30, 2022:
Expected proceeds from Reg A offering | Operational Objectives | |||
$ | 290,000 | Marketing Ramp-up of selling current SaaS and continued development / support | ||
205,000 | Continued App and consumer marketplace software development | |||
91,000 | Debt Coverage | |||
60,000 | Insurance | |||
80,000 | Office, Administrative, Salaries, Business travel | |||
27,000 | Legal and outside accounting for business transactions | |||
10,000 | Filing of February 28, 2022 Quarterly report- legal, auditor review, edgar | |||
50,000 | User incentivization and brand partnerships | |||
150,000 | Cash reserve | |||
$ | 963,000 | TOTAL |
Operational Objectives May 1, 2022 to July 31, 2022:
Expected proceeds from Reg A offering | Operational Objectives | |||
$ | 176,000 | Marketing and selling current SaaS and continued development / support | ||
180,000 | Continued App and consumer marketplace software development | |||
91,000 | Debt Coverage | |||
60,000 | Insurance | |||
120,000 | Office, Administrative, Salaries, Business travel | |||
27,000 | Legal and outside accounting for business transactions | |||
10,000 | Filing of May 31, 2022 Quarterly report- legal, auditor review, edgar | |||
236,000 | Boat Ecosystem development and marketing | |||
140,000 | E-Commerce Platform build and marketing | |||
75,000 | User incentivization and brand partnerships | |||
150,000 | Cash reserves | |||
$ | 1,265,000 | TOTAL |
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Operational Objectives August 1, 2022 to October 31, 2022:
Expected proceeds from Reg A offering | Operational Objectives | |||
$ | 140,000 | Marketing and supporting current products | ||
170,000 | Boat Ecosystem development and marketing | |||
91,000 | Debt Coverage | |||
80,000 | Boat Show Participation | |||
120,000 | Office, Administrative, Salaries, Business travel | |||
30,000 | Legal- business transactions | |||
260,000 | E-Commerce Platform build and marketing | |||
95,000 | User incentivization and brand partnerships | |||
$ | 986,000 | TOTAL |
Operational Objectives November 1, 2022 to January 31, 2023:
Expected proceeds from Reg A offering | Operational Objectives | |||
$ | 180,000 | Marketing and Support of current products | ||
340,000 | Boat Ecosystem development and marketing | |||
310,000 | New market expansion and product development | |||
180,000 | Office, Administrative, Salaries, Business travel | |||
95,000 | User Incentivization and brand partnerships | |||
30,000 | Filing of August 31, 2022 Annual report- legal, auditor review, edgar | |||
150,000 | Cash reserves | |||
$ | 1,285,000 | TOTAL |
Competition for the Company’s current operations
Prior to the pandemic, Boaters found their boats through word of mouth, but due to social distancing, online sales increased, with dealerships like MarineMax, Inc (NYSE: HZO) leading the way for large profits with 37% year over year increases during the pandemic. For the nine months ended June 30, 2021, MarineMax revenue was up over 44% to $1.6 billion compared with $1.1 billion for the same period last year. MarineMax’s success in part relies on its standardized buying process for all of its dealers in the United States. Boatim’s Ecosystem, including its SaaS and marketplace, standardizes the entire industry at a click not even MarineMax can keep up with. Buyers are begging for a standard system to find and purchase boats, as well as “trade up” their current boat. Boatim has built this and continues to perfect its process so that it not only is everything boat but provides the entire boat buying process with a few swipes on a smartphone.
While other companies come into the boating marketplace, Boatim is unique as it seeks to unify all boat offerings - dealers, services, charters, clubs, etc., into one platform that is consumer based so that boaters can find what they need with ease. Boatim does not compete directly with but is complimentary to the currently existing boating equipment, vessels and services in the industry.
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Market Opportunity for Online Boats Sales
The world has arrived solidly in the next generation of connectivity and digital services and products. Regardless of industry, digital marketing and selling is increasingly used as a company’s primary marketing tool for sales and services, thus increasing market reach and even introducing entirely new distribution channels.
The boating market has 24.2 million private boat owners, and more than 1.5 million used boats are traded annually. For every boat owner, there are 5 prospective owners or those who are seriously interested in owning one. We estimate that there are over 100,000 relevant participants in the boat and yacht industry worldwide.
According to research by Grand View Research, Inc., in 2019 the global market size for the new and used leisure boat market was $39.75 billion, and for the leisure boat rental market, $6.5 billion.
Initial observations and media articles indicate that boating as a leisure and recreational activity has not suffered from a loss of interest as a result of the current global novel coronavirus pandemic. In fact, several market participants have noticed an increase in demand for leisure boats, given their ability to support distancing from other watercraft and their users, and the benefits of outdoor activity.
Growth Issues
Scalability
Boatim began marketing its Customer Relationship Management Software-as-a-service (SaaS) to European boat brokers in the end of 2020 and grew to be adopted by approximately 8% of the entire global market. By building a SaaS that contains self-onboarding and AI to help users navigate not only the marketing process but the software itself, Boatim created a system that is “hands off” and requires minimal backend support. As Boatim continues to build new features into the SaaS, such as accounting, boat verification, and social media integration, its robust backend will continue to support the self-onboarding allowing even the least technological dealer to adopt Boatim’s system. In conjunction with its SaaS, Boatim has built and continues to build a globally compliant marketplace to connect everything boat. Boatim’s current capacity allows for over 300,000 unique users at a time, which if exceeded, would automatically increase as its elastic data structure and load balancing can support several times this amount. Boatim continues development of its mobile applications and unique partnerships within the boating industry to roll out each new product and feature to get more people on the water and using Boatim’s tools without difficulty.
Insufficient Capital
Boatim built a tremendous SaaS in 2020 to 2021, exhausting it of resources. While the company’s SaaS integrates the boat buying and selling process into the digital world better than any product before it, without the ability to properly market the SaaS and continue to build user interactions on Boatim’s marketplace and mobile applications, continued growth and adoption will take much more time than hoped. If Boatim is not funded properly, it will prevent us from capturing a significant portion of the market. To establish a first mover advantage in this space, Boatim is seeking funding from the capital markets which may include debt and equity offerings.
Development Lead Time
We anticipate that the lead time for the development of our entire Ecosystem is approximately 10 months. This reflects continued SaaS marketing, professional boating partnerships and onboarding onto our marketplace, digitization of boat records, designs, service manuals and the prototyping and testing of each digital boat model and manufacturer to ensure accurate data and seamless integration with the manufacturers and consumers, as well as, operational readiness, and market readiness.
Marketing Strategy
Boatim already markets its products through a small sales force based in Barcelona, Spain. The primary source of marketing is through direct selling and marketing. Boatim also attends and will exhibit its mobile applications to consumers at boat shows and events, to help market the Ecosystem and marketplace. Boatim has approximately 40,000 social media followers and over 100,000 interactions each month with consumers who will use its products once these products are built and launched.
The Company will implement a direct sales and marketing strategy to reach potential customers and generate revenues.
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Seasonality
We do not expect any seasonality in our business.
Employees
As of February 7, 2022, the group employed 7 people on a full-time basis, including its officers and directors, and regularly utilized the services of 10 independent contractors.
Government Regulation
We are required to comply with all regulations, rules and directives of governmental authorities and agencies applicable to the e-commerce trading platforms industry in any jurisdiction which we would conduct activities. We do not believe that regulation will have a material impact on the way we conduct our business.
Legal Proceedings
We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.
Description of Property
Since January 23, 2019, the principal executive offices are located at 7950 NW 53rd Street, Suite 337, Miami, FL 33166, our phone number is (305)-239-9993.
The Company’s subsidiary, Boatim Europe, has one office lease located at Marina Port Vell Carrer de l’Escar, 26, 08039 Barcelona Spain with OneCoWork. This new lease calls for rent payments of €1,800 plus VAT in monthly payments. In addition, the lease also includes the use of a flexible work desk for an additional €150 plus VAT. The lease begins May 1, 2021, is month to month with no permanency clause, of which management intends to renew.
We currently have no investment policies as they pertain to real estate, real estate interests or real estate mortgages.
Patents, Trademarks, Licenses, Agreements, or Contracts
As part of our business, we will seek to protect our intellectual property rights in various ways, including through trademarks, copyrights, trade secrets, including know-how, patents, patent applications, employee and third-party nondisclosure agreements, intellectual property licenses and other contractual rights. We currently hold the following patent, trademark, or product license: Smart Connected InventoryTM; BoatimTM. We have not entered into any vendor agreements or contracts that give or could give rise to any obligations or concessions.
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Directors and Executive Officers
Set forth below are the present directors, director nominees and executive officers of the Company as of August 31, 2021. There are no other persons who have been nominated or chosen to become directors nor are there any other persons who have been chosen to become executive officers. There are no arrangements or understandings between any of the directors, officers and other persons pursuant to which such person was selected as a director or an officer. Directors are elected to serve until the next annual meeting of stockholders and until their successors have been elected and have qualified. Officers are appointed to serve until the meeting of the board of directors following the next annual meeting of stockholders and until their successors have been elected and qualified.
NAME | AGE | POSITION | ||
Joseph Johnson | 43 | Director and Chief Executive Officer | ||
Wolfgang Tippner | 64 | Director | ||
Mario Beckles | 47 | Director and Chief Financial Officer |
The persons named above are expected to hold their offices/positions until the next annual meeting of our stockholders. The officer and director set forth herein is our only officer, director, promoter and control person, as that term is defined in the rules and regulations promulgated under the Securities and Exchange Act of 1933.
Information about our Executive Officers
The business experience during the past five years of the person presently listed above as an Officer or Director of the Company is as follows:
Mr. Joseph Johnson
Mr. Johnson, an expert in strategy, growth, and business restructuring, recently served as Chief Executive Officer and President of the Board of Directors of a U.S. publicly traded real estate technology company, taking the company from the OTC Pink to the Venture Exchange (OTCQB), doubling share value. He has worked with hundreds of companies as an attorney and consultant ranging from watersports to nutraceuticals to ERP to telemedicine. Throughout his 18-year career he has served as inside and outside legal counsel, board member and C-Level Management with numerous private and public companies and has a track record of successfully scaling businesses. Mr. Johnson is a licensed attorney in California and also holds an M.B.A. Mr. Johnson’s undergraduate degree is in business finance from California Polytechnical State University, Pomona.
Mr. Wolfgang Tippner
Mr. Tippner, age 64, is a seasoned venture capitalist and financier with over 40 years of experience as a capital-markets professional and as director of public and private companies. Boatim benefits from Mr. Tippner’s wealth of experience as a savvy deal maker, an adept financier and as a results-driven leader of dynamic public companies.
Mario A. Beckles
Mr. Beckles has over 20 years of experience in financial reporting, financial accounting, tax and audit works. He is US based (FL) and his areas of expertise include, inter alia, information technology and retail. He began his career as a Senior Auditor with Deloitte and has since held positions as CFO of First Liberty Power Corp, a publicly traded mining company, was a Partner at Jersey Fortress Capital Partners, a boutique investment banking firm or was a Senior Financial Reporting Analyst with SimplexGrinnell, a $2B Fire & Security Contractor. Mario is a member of the American Institute of Certified Public Accountants and holds a CPA license with the state board of Florida.
Mario replaces Boatim Inc.´s prior CFO, Mr. Benjamin L. Salter, who´s resignation was accepted by the shareholders on that same date as part of reorganizing leadership with stronger emphasis on US markets. Mr. Salter´s resignation was not due to any disagreement with the Company, its policies or practices.
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Family Relationships
There are no family relationships among the directors and executive officers.
Conflicts of Interest- General
Our directors and officers are, or may become, in their individual capacities, officers, directors, controlling shareholder and/or partners of other entities engaged in a variety of businesses. Thus, there exist potential conflicts of interest including, among other things, time, efforts and corporation opportunity, involved in participation with such other business entities. While our certain of our officers and directors are engaged in business activities outside of our business, they devote to our business such time as they believe to be necessary.
Conflicts of Interest- Corporate Opportunities
Presently no requirement contained in our Articles of Incorporation, Bylaws, or minutes which requires officers and directors of our business to disclose to us business opportunities which come to their attention. Our officers and directors do, however, have a fiduciary duty of loyalty to us to disclose to us any business opportunities which come to their attention, in their capacity as an officer and/or director or otherwise. Excluded from this duty would be opportunities which the person learns about through his involvement as an officer and director of another company. We have no intention of merging with or acquiring an affiliate, associate person or business opportunity from any affiliate or any client of any such person.
Committees to the Board of Directors
In the ordinary course of business, the board of directors maintains a compensation committee and an audit committee.
The primary function of the compensation committee is to review and make recommendations to the board of directors with respect to the compensation, including bonuses, of our officers and to administer the grants under our stock option plan.
The functions of the audit committee are to review the scope of the audit procedures employed by our independent auditors, to review with the independent auditors our accounting practices and policies and recommend to whom reports should be submitted, to review with the independent auditors their final audit reports, to review with our internal and independent auditors our overall accounting and financial controls, to be available to the independent auditors during the year for consultation, to approve the audit fee charged by the independent auditors, to report to the board of directors with respect to such matters and to recommend the selection of the independent auditors.
In the absence of a separate audit committee our board of directors’ functions as audit committee and performs some of the same functions of an audit committee, such as recommending a firm of independent certified public accountants to audit the annual financial statements; reviewing the independent auditor’s independence, the financial statements and their audit report; and reviewing management’s administration of the system of internal accounting controls.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers has, during the past ten years:
(1) had a petition under the Federal bankruptcy laws or any state insolvency law filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;
(2) has been convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);
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(3) has been the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:
(i) Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;
(ii) Engaging in any type of business practice; or
(iii) Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;
(4) has been the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in (3)(i) above, or to be associated with persons engaged in any such activity;
(5) has been found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;
(6) has been found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;
(7) has been the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:
(i) Any Federal or State securities or commodities law or regulation; or
(ii) Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or
(iii) Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
(8) has been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
Code of Business Conduct and Ethics
The Company has adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer or controller, or persons performing similar functions. The code of business conduct and ethics is posted on our website at: conduct.boatim.com.
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Summary Compensation Table
The following summary compensation table indicates the cash and non-cash compensation earned from the Company during the fiscal years ended August 31, 2021 and 2020 by the current and former executive officers of the Company and each of the other two highest paid executives or directors, if any, whose total compensation exceeded $100,000 during those periods.
Summary Compensation Table | |||||||||||||||||||||||||||
Name and Principal Position | Year | Fees earned or paid in cash ($) | Bonus ($) | Common Stock Awards (#) | Common Stock Awards ($) | All
Other ($) | Total ($) | ||||||||||||||||||||
Joseph Johnson (1) | 2021 | 41,666 | - | - | - | - | 41,666 | ||||||||||||||||||||
President CEO, (Principal Executive Officer) Director | |||||||||||||||||||||||||||
Wolfgang Tippner (2) | 2021 | 120,000 | - | - | - | - | 120,000 | ||||||||||||||||||||
Former President CEO, (Principal Executive Officer) Director | 2020 | 48,000 | - | - | - | - | 48,000 | ||||||||||||||||||||
Mario Beckles (3) | 2021 | 19,500 | - | - | - | - | 19,500 | ||||||||||||||||||||
Chief Finance Officer, Director | |||||||||||||||||||||||||||
Ben Salter (4) | 2021 | 122,671 | - | - | 64,493 | - | 187,164 | ||||||||||||||||||||
Former Chief Finance Officer, Director | |||||||||||||||||||||||||||
Teck Sion Lim (5) | 2020 | - | - | - | - | - | - | ||||||||||||||||||||
Former Chief Finance Officer, Director |
(1) | Mr. Johnson was appointed as a Director on June 30, 2021 and as the Company’s Chief Executive Officer on July 1, 2021. |
(2) | Mr. Tippner was appointed as a Director and as the Company’s Chief Executive Officer on April 29, 2019. Mr. Tippner resigned as the Company’s Chief Executive Officer on June 30, 2021 effective as of July 1, 2021. |
(3) | Mr. Beckles was appointed as a Director and as the Company’s Chief Financial Officer on March 19, 2021. |
(4) | Mr. Salter resigned as a Director and as the Company’s Chief Financial Officer on March 19, 2021. Mr. Salter resigned as head of Business Development and Operations in Europe on January 1, 2022. |
(5) | Mr. Lim received no compensation during the year ended August 31, 2020. Mr. Lim resigned as the Company’s Chief Financial Officer on December 15, 2020. |
Employment Agreements
On June 22, 2021, the Company entered into an Employment Agreement (the “Agreement”) with Joseph Johnson (the “Executive”) for his role as Chief Executive Officer and President of the Board of Directors. Under the terms of the Agreement, the Executive shall receive $250,000 as a base salary per annum and an annual bonus of 200% of his base salary. The Executive was to receive 1,000,000 shares of unrestricted common stock upon entry into the Agreement and up to an additional 5,00,000 shares of common stock based on milestones of capital raised during the first six (6) months of the Agreement. As of the date of this filing, the Executive has not received any shares of common stock under the terms of the Agreement.
Stock Option Plan and other Employee Benefits Plans
Overview of Compensation Program
We currently do not maintain a Compensation Committee of the Board of Directors. Until a formal committee is established, our entire Board of Directors has responsibility for establishing, implementing and continually monitoring adherence with the Company’s compensation philosophy. The Board of Directors ensures that the total compensation paid to the executives is fair, reasonable, and competitive.
Role of Executive Officers in Compensation Decisions
The Board of Directors makes all compensation decisions for, and approves recommendations regarding equity awards to, the executive officers and directors of the Company.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
To the best of our knowledge, from January 1, 2019 to November 30, 2021, other than as set forth above, there were no material transactions, or series of similar transactions, or any currently proposed transactions, or series of similar transactions, to which we were or are to be a party, in which the amount involved exceeds $120,000, and in which any director or executive officer, or any security holder who is known by us to own of record or beneficially more than 5% of any class of our Common Stock, or any member of the immediate family of any of the foregoing persons, has an interest (other than compensation to our officers and directors in the ordinary course of business).
Statement of Policy
We have adopted a related-party transactions policy under which our executive officers, directors, nominees for election as a director, beneficial owners of more than 5% of any class of our Common Stock, and any members of the immediate family of any of the foregoing persons are not permitted to enter into a related-party transaction with us without the consent of our audit committee. If the related party is, or is associated with, a member of our audit committee, the transaction must be reviewed and approved by another independent body of our Board of Directors, such as our governance committee. Any request for us to enter into a transaction with a related party in which the amount involved exceeds $120,000 and such party would have a direct or indirect interest must first be presented to our audit committee for review, consideration and approval. If advance approval of a related-party transaction was not feasible or was not obtained, the related-party transaction must be submitted to the audit committee as soon as reasonably practicable, at which time the audit committee shall consider whether to ratify and continue, amend and ratify, or terminate or rescind such related-party transaction. All of the transactions described above were reviewed and considered by, and were entered into with the approval of, or ratification by, our Board of Directors.
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The following table sets forth the beneficial ownership of our Common Stock as of February 7, 2022 by:
● | each shareholder known by us to beneficially own more than 5% of our outstanding Common Stock; | |
● | each of our directors; | |
● | each of our named executive officers; and | |
● | all of our directors and executive officers as a group. |
We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally provide that a person is the beneficial owner of securities if such person has or shares the power to vote or direct the voting of securities, or to dispose or direct the disposition of securities. A security holder is also deemed to be, as of any date, the beneficial owner of all securities that such security holder has the right to acquire within 60 days after such date through (i) the exercise of any option or warrant, (ii) the conversion of a security, (iii) the power to revoke a trust, discretionary account or similar arrangement, or (iv) the automatic termination of a trust, discretionary account or similar arrangement. Except as disclosed in the footnotes to this table and subject to applicable community property laws, we believe that each person identified in the table has sole voting and investment power over all of the shares shown opposite such person’s name.
Percentage ownership in the following table is based on 58,271,539 shares of common stock outstanding as of February 7, 2022 and includes:
● | 2,115,385 shares of common stock issuable upon conversion of the Secured Convertible Promissory Note issued to Medithority, LLC on December 20, 2021 | |
● | 1,100,000 shares of common stock issuable upon exercise of a Warrant issued to Medithority, LLC on December 20, 2021 | |
● | 1,282,046 shares of common stock issuable upon conversion of the Amended and Restated Secured Convertible Promissory Note issued to Quick Capital, LLC on January 7, 2022 | |
● | 724,058 shares of common stock issuable upon exercise of an Amended and Restated Warrant issued to Quick Capital, LLC on January 7, 2022 |
Name of Beneficial Owner (1)(2) | Common Stock Beneficially Owned | Percentage of Common Stock |
||||||
Joseph Johnson (3) | 0 | 0.00 | % | |||||
Mario Beckles (3) | 0 | 0.00 | % | |||||
Wolfgang Tippner (3) | 0 | 0.00 | % | |||||
Directors and Officers as a Group (3 individuals) | 0 | 0.00 | % | |||||
JTT Global Ventures Ltd. (4) | 32,766,667 | 51.61 | % | |||||
Medithority, LLC (5) | 5,965,385 | 9.40 | % | |||||
Quick Capital, LLC (6) | 3,816,249 | 6.01 | % |
(1) | Beneficial Ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock subject to options, warrants, or convertible debt currently exercisable or convertible, or exercisable or convertible within 60 days of February 7, 2022 are deemed outstanding for computing percentage of the person holding such option or warrant but are not deemed outstanding for computing the percentage of any person. Percentages are based on a total of shares of Class A common stock outstanding on February 7, 2022, and the shares issuable upon exercise of options, warrants exercisable, and debt convertible on or within 60 days of February 7, 2022. |
(2) | The number of common shares outstanding used in computing the percentages is 63,493,028. |
(3) | The address for Messrs. Johnson, Beckles and Tippner is 7950 NW 53rd St, Suite 337, Miami, FL 33166. |
(4) | The address for JTT Global Ventures Ltd. is Ground floor, Coastal Building, Wickhams Cay II, Road Town, Tortola, BVI and its principal is a private trust. |
(5) | The address for Medithority, LLC is 2880 Bicentennial Pkwy, Suite 100, #152 Henderson, NV 89044 and its manager is Christopher Lewis. Includes 2,115,385 shares of common stock issuable under a Secured Convertible Promissory Note, 1,100,000 shares issuable under a Warrant and 2,750,000 commitment shares. |
(6) | The address for Quick Capital, LLC is 66 West Flagler St., 900-#2292, Miami, FL 33130 and its manager is Eilon D. Natan. Includes 1,282,046 shares of common stock issuable under an Amended and Restated Secured Convertible Promissory Note, 724,058 shares issuable under a Warrant and 1,810,145 commitment shares. |
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INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Director Independence
For purposes of determining director independence, we have applied the definitions set out in NASDAQ Rule 5605(a)(2). The OTCBB on which shares of common stock are quoted does not have any director independence requirements. The NASDAQ definition of “Independent Director” means a person other than an Executive Officer or employee of the Company or any other individual having a relationship which, in the opinion of the Company’s Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
According to the NASDAQ definition, we do not have any independent directors because each is also an executive officer of the Company. All current directors are or may become in the future shareholders of the Company.
Related Party Transactions
Mr. Robert Glass, a lawyer, is providing services free of charge from time to time, such services involving advice on accounting matters and processing of information for reporting services.
During the fiscal year ended August 31, 2021, Cayo Ventures GmbH (“Cayo”), a related party, advanced a total of $1,216,420 to the Company. Cayo is owned by the former majority shareholder and former officer, Mr. Yves Toelderer. On June 7, 2021 and June 8, 2021, the Company issued convertible notes in the amount of $696,000 and $441,000 to two unrelated parties, in exchange for their assumption of related party loans owed to Cayo for the same amounts. There was no gain or loss on extinguishment recorded on the old Cayo Venture loan. During the three months ended November 30, 2021 and 2020, Cayo Ventures advanced the Company a total of $192,541 and $490,212, respectively. As of November 30, 2021 and August 31, 2021, the Company owed a total of $619,992 and 427,451, respectively, to Cayo, which includes $2,833 owed to Yves Toelderer. These loans are unsecured, non-interest bearing and due on demand.
On June 1, 2020, the Company entered into services agreement with Mr. Wolfgang Tippner, as Chief Executive Officer. The agreement calls for a sign-on bonus of $24,000, payable within 6 months from the date of the agreement and a cash compensation for his services of $8,000 per month. During the three months ended November 30, 2021 and August 31, 2020, a total of $0 has been paid to Mr. Tippner, respectively. As of November 30, 2021 and August 31, 2021, $120,000 in accrued compensation remains outstanding.
On July 1, 2020, the Company entered into a service agreement with Mr. Patrick Burkert, as Chief Marketing Officer. The agreement calls for a sign on bonus of 500,000 shares of restricted common stock, of which 50,000 shares are due within two weeks of the date of the agreement, 200,000 shares after 6 months, and the remaining shares after 12 months. He will also receive a base salary of €144,000 per year. In addition, Mr. Burkert is eligible to receive a performance bonus equal to 50% of his base salary, based upon targets set by the board of directors of the Company. None of the bonus has been earned to date. Mr. Patrick Burkert resigned as a member of the Board of Directors on February 12, 2021. During the three months ended November 30, 2021 and 2020, a total of $0 and $38,794, respectively, has been paid to Mr. Burkert in cash compensation. As of November 30, 2021 and August 31, 2021, $0 in accrued cash compensation remains outstanding.
On January 1, 2021, the Company entered into a service agreement with Mr. Benjamin Salter, as Director and Chief Financial Officer. The agreement calls for a sign on bonus of options for 500,000 shares of common stock at a strike price of $0.10 per share. See Note 10. The options must be exercised within 15 months from the date of the agreement and can be executed no earlier as follows: 50,000 within two weeks of the date of the agreement, 200,000 shares after 6 months, and the remaining shares after 12 months. The agreement calls for a base salary of Swiss francs (CHF) 150,000 per year, increasing to CHF 180,000, payable in increments of CHF 15,000 per month from April 1, 2021 onward. In addition, Mr. Salter is eligible to receive a performance bonus equal to 50% of his base salary, based upon targets set by the board of directors of the Company. During the three months ended November 30, 2021 a total of $43,992 has been paid to Mr. Salter in cash compensation. As of November 30, 2021 and August 31, 2021, $87,889 and $78,679 in accrued cash compensation remains outstanding, respectively. As of August 31, 2021, there was $0 earned or accrued for a performance-based bonus. Mr. Salter resigned as a member of the Board of Directors and as CFO on March 19, 2021 but continues with the Company heading business development and operations in Europe.
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On April 1, 2021, the Company entered into an independent contractor agreement with Mr. Salter, as Head of Operations. The agreement calls for a monthly payment of CHF 14,000 per month with CHF 8,000 to be paid in cash and the balance of $6,000 to be deferred on a monthly basis up to an amount not exceeding CHF 70,000 with payment terms to be decided by the Company. In addition, Mr. Salter is to receive options for 25,000 shares of common stock each month at a strike price of $0.10 per share with a term of 15 months. The Company agreed to also make a cash payment to Mr. Salter on exercise of his options of $2,500. During the year ended August 31, 2021, the Company recognized $31,331 of stock-based compensation expense for the options granted under this agreement. During the three months ended November 30, 2021 a total of $26,480 in cash compensation was paid to Mr. Salter under this agreement, and $19,840 of stock options were granted. On January 1, 2022, Mr. Salter resigned as head of business development and operations in Europe.
On March 19, 2021, the Company entered into a service agreement with Mr. Mario Beckles, as Director and Chief Financial Officer, commencing on April 1, 2021. The agreement calls for cash compensation in the amount of $3,000 per month to be paid monthly. During the three months ended November 30, 2021 a total of $6,000 has been paid to Mr. Beckles in cash compensation. As of November 30, 2021 and August 31, 2021, $7,500 and $4,500 unpaid cash compensation is outstanding, respectively.
On June 22, 2021, the Company entered into an employment agreement with Mr. Joseph Johnson, as a member of the Board of Directors and as Chief Executive Officer. The agreement provides for a base salary of $250,000 per year, subject to an inflationary increase using the US Consumer Price Index. The agreement also provides for an annual incentive bonus equal to 200% of his base salary and a sign on bonus of 1,000,000 shares of unrestricted common stock which will be fully vested with a service period of six (6) months from the date of the agreement. In addition, Mr. Johnson is eligible to receive a performance bonus equal to 1,000,000 fully vested shares of common stock for each net liquid $1,000,000 in equity raised by the Company during his first six (6) months of tenure as CEO, up to a maximum of 5,000,000 shares. During the three months ended November 30, 2021 a total of $62,499 was earned but unpaid to Mr. Johnson and $225,000 in stock based compensation has been earned but not issued to Mr. Johnson to date. As of November 30, 2021, there was $0 earned or accrued for the incentive-based bonus. As of November 30, 2021 and August 31, 2021, $83,332 and $20,833 unpaid cash compensation is outstanding, respectively.
With regard to any future related party transaction, we plan to fully disclose any and all related party transactions in the following manner:
● | Disclosing such transactions in reports where required; |
● | Disclosing in any and all filings with the SEC, where required; |
● | Obtaining disinterested directors consent; and |
● | Obtaining shareholder consent where required. |
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Boatim, Inc. (“Boatim,” “We,” or the “Company”) is offering up to $5,000,000 total of Securities, consisting of Common Stock, $0.001 par value (the “Common Stock” or collectively the “Securities”).
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Securities Being Offered
The following is a summary of the rights of our capital stock as provided in our articles of incorporation and bylaws. For more detailed information, please see our articles of incorporation and bylaws, which have been filed as exhibits to the Offering Statement of which this Offering Circular is a part.
Common Stock
The holders of our common stock currently have (i) equal ratable rights to dividends from funds legally available therefore, when, as and if declared by the Board of Directors of the Company; (ii) are entitled to share ratably in all of the assets of the Company available for distribution to holders of common stock upon liquidation, dissolution or winding up of the affairs of the Company (iii) do not have preemptive, subscription or conversion rights and there are no Our or sinking fund provisions or rights applicable thereto; and (iv) are entitled to one non-cumulative vote per share on all matters on which stock holders may vote. Please refer to the Company’s Articles of Incorporation, Bylaws and the applicable statutes of the State of Nevada for a more complete description of the rights and liabilities of holders of the Company’s securities.
Common Stock
The Company is authorized to issue 500,000,000 shares of Common Stock, par value $.001.
Capitalization
Security | Par Value | Authorized | Outstanding | Voting Rights | ||||||||
Common Stock | 0.001 | 500,000,000 | 58,271,539 | 1:1 |
Preferred stock
We do not have an authorized class of preferred stock.
Nevada Anti-Takeover Law
The provisions of Nevada law and our bylaws may have the effect of delaying, deferring or preventing another party from acquiring control of the company. These provisions may discourage and prevent coercive takeover practices and inadequate takeover bids.
Nevada Law
Nevada law contains a provision governing “acquisition of controlling interest.” This law provides generally that any person or entity that acquires 20% or more of the outstanding voting shares of a publicly-held Nevada corporation in the secondary public or private market may be denied voting rights with respect to the acquired shares, unless a majority of the disinterested stockholders of the corporation elects to restore such voting rights in whole or in part. The control share acquisition act provides that a person or entity acquires “control shares” whenever it acquires shares that, but for the operation of the control share acquisition act, would bring its voting power within any of the following three ranges: 20 to 33-1/3%; 33-1/3 to 50%; or more than 50%.
A “control share acquisition” is generally defined as the direct or indirect acquisition of either ownership or voting power associated with issued and outstanding control shares. The stockholders or Board of Directors of a corporation may elect to exempt the stock of the corporation from the provisions of the control share acquisition act through adoption of a provision to that effect in the articles of incorporation or bylaws of the corporation. Our articles of incorporation and bylaws do not exempt our common stock from the control share acquisition act.
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The control share acquisition act is applicable only to shares of “Issuing Corporations” as defined by the Nevada law. An Issuing Corporation is a Nevada corporation which (i) has 200 or more stockholders, with at least 100 of such stockholders being both stockholders of record and residents of Nevada, and (ii) does business in Nevada directly or through an affiliated corporation.
At this time, we do not believe we have 100 stockholders of record resident of Nevada and we do not conduct business in Nevada directly. Therefore, the provisions of the control share acquisition act are believed not to apply to acquisitions of our shares and will not until such time as these requirements have been met. At such time as they may apply, the provisions of the control share acquisition act may discourage companies or persons interested in acquiring a significant interest in or control of us, regardless of whether such acquisition may be in the interest of our stockholders.
The Nevada “Combination with Interested Stockholders Statute” may also have an effect of delaying or making it more difficult to effect a change in control of us. This statute prevents an “interested stockholder” and a resident domestic Nevada corporation from entering into a “combination,” unless certain conditions are met. The statute defines “combination” to include any merger or consolidation with an “interested stockholder,” or any sale, lease, exchange, mortgage, pledge, transfer or other disposition, in one transaction or a series of transactions with an “interested stockholder” having (i) an aggregate market value equal to 5% or more of the aggregate market value of the assets of the corporation, (ii) an aggregate market value equal to 5% or more of the aggregate market value of all outstanding shares of the corporation, or (iii) representing 10% or more of the earning power or net income of the corporation.
An “interested stockholder” means the beneficial owner of 10% or more of the voting shares of a resident domestic corporation, or an affiliate or associate thereof. A corporation affected by the statute may not engage in a “combination” within three years after the interested stockholder acquires its shares unless the combination or purchase is approved by the Board of Directors before the interested stockholder acquired such shares. If approval is not obtained, then after the expiration of the three-year period, the business combination may be consummated with the approval of the Board of Directors or a majority of the voting power held by disinterested stockholders, or if the consideration to be paid by the interested stockholder is at least equal to the highest of (i) the highest price per share paid by the interested stockholder within the three years immediately preceding the date of the announcement of the combination or in the transaction in which he became an interested stockholder, whichever is higher, (ii) the market value per common share on the date of announcement of the combination or the date the interested stockholder acquired the shares, whichever is higher, or (iii) if higher for the holders of preferred stock, the highest liquidation value of the preferred stock.
Articles of Incorporation and Bylaws
Our articles of incorporation are silent as to cumulative voting rights in the election of our directors. Nevada law requires the existence of cumulative voting rights to be provided for by a corporation’s articles of incorporation. In the event that a few stockholders end up owning a significant portion of our issued and outstanding common stock, the lack of cumulative voting would make it more difficult for other stockholders to replace our Board of Directors or for a third party to obtain control of us by replacing our Board of Directors. Our articles of incorporation and bylaws do not contain any explicit provisions that would have an effect of delaying, deferring or preventing a change in control of us.
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Since our inception, we have not paid any dividends on our common stock, and we currently expect that, for the foreseeable future, all earnings (if any) will be retained for the development of our business and no dividends will be declared or paid. In the future, our Board of Directors may decide, at their discretion, whether dividends may be declared and paid, taking into consideration, among other things, our earnings (if any), operating results, financial condition and capital requirements, general business conditions and other pertinent facts.
Transfer Agent
Our Transfer Agent is Globex Transfer, LLC whose address is 780 Deltona Blvd., Deltona, FL 32725. Telephone (813) 344-4490. Fax (386) 267-3124. The transfer agent is registered under the Exchange Act and operates under the regulatory authority of the SEC and FINRA.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this Offering, there has been a limited market for our Common Stock. Future sales of substantial amounts of our Common Stock, or securities or instruments convertible into our Common Stock, in the public market, or the perception that such sales may occur, could adversely affect the market price of our Common Stock prevailing from time to time. Furthermore, because there will be limits on the number of shares available for resale shortly after this Offering due to contractual and legal restrictions described below, there may be resales of substantial amounts of our Common Stock in the public market after those restrictions lapse. This could adversely affect the market price of our Common Stock prevailing at that time.
Rule 144
In general, a person who has beneficially owned restricted shares of our Common Stock for at least twelve months, in the event we are a reporting company under Regulation A, or at least six months, in the event we have been a reporting company under the Exchange Act for at least 90 days before the sale, would be entitled to sell such securities, provided that such person is not deemed to be an affiliate of ours at the time of sale or to have been an affiliate of ours at any time during the 90 days preceding the sale. A person who is an affiliate of ours at such time would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of shares that does not exceed the greater of the following:
● | 1% of the number of shares of our Common Stock then outstanding; or |
● | the average weekly trading volume of our Common Stock during the four calendar weeks preceding the filing by such person of a notice on Form 144 with respect to the sale; |
provided that, in each case, we are subject to the periodic reporting requirements of the Exchange Act for at least 90 days before the sale. Rule 144 trades must also comply with the manner of sale, notice and other provisions of Rule 144, to the extent applicable.
44
Certain legal matters with respect to the shares of common stock offered hereby will be passed upon by Law Offices of Thomas J. Beener whose address is 2244 Faraday Avenue, Carlsbad, CA 92008. Telephone: (760) 603-1238.
The financial statements for the years ended August 31, 2021 and 2020 for Boatim, Inc. included in this prospectus and elsewhere in the registration statement have been audited by MaloneBailey, LLP, as indicated in its report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in auditing and accounting in giving said reports.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a Regulation A Offering Statement on Form 1-A under the Securities Act with respect to the shares of common stock offered hereby. This Offering Circular, which constitutes a part of the Offering Statement, does not contain all of the information set forth in the Offering Statement or the exhibits and schedules filed therewith. For further information about us and the common stock offered hereby, we refer you to the Offering Statement and the exhibits and schedules filed therewith. Statements contained in this Offering Circular regarding the contents of any contract or other document that is filed as an exhibit to the Offering Statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the Offering Statement. Upon the completion of this Offering, we will be required to file periodic reports, proxy statements, and other information with the SEC pursuant to the Securities Exchange Act of 1934. You may read and copy this information at the SEC’s Public Reference Room, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website that contains reports, proxy statements and other information about issuers, including us, that file electronically with the SEC. The address of this site is www.sec.gov.
45
F-1
PART 1 – FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying interim consolidated financial statements of BOATIM Inc. (“the Company”, “we”, “us” or “our”), have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States generally accepted principles have been condensed or omitted pursuant to such rules and regulations.
The interim consolidated financial statements should be read in conjunction with the company’s latest annual financial statements.
In the opinion of management, the financial statements contain all material adjustments, consisting only of normal adjustments considered necessary to present fairly the financial condition, results of operations, and cash flows of the Company for the interim periods presented.
F-2
CONSOLIDATED BALANCE SHEETS
November 30, | August 31 | |||||||
2021 | 2021 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash | $ | 13,276 | $ | 69,827 | ||||
Prepaid expenses | 6,873 | 7,500 | ||||||
VAT receivable | 20,533 | 17,810 | ||||||
Total current assets | 40,682 | 95,137 | ||||||
Deposits | 9,240 | 9,440 | ||||||
Fixed assets, net | 4,887 | 14,434 | ||||||
Capitalized software costs | 481,676 | 510,633 | ||||||
Right of use asset – operating lease | 47,851 | 55,743 | ||||||
Total non-current assets | 543,654 | 590,250 | ||||||
TOTAL ASSETS | $ | 584,336 | $ | 685,387 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
LIABILITIES | ||||||||
Current Liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 534,083 | $ | 373,039 | ||||
Related party loan | 619,992 | 427,451 | ||||||
Loan payable | 20,000 | 20,000 | ||||||
Convertible notes, net of unamortized discount | 1,613,556 | 1,613,556 | ||||||
Current portion - operating lease obligation | 23,716 | 33,333 | ||||||
Total current liabilities | 2,811,347 | 2,467,379 | ||||||
Non-current Liabilities: | ||||||||
Operating lease obligation, net of current portion | 21,388 | 22,410 | ||||||
TOTAL LIABILITIES | 2,832,735 | 2,489,789 | ||||||
STOCKHOLDERS’ DEFICIT | ||||||||
Common stock: authorized 500,000,000; $0.001 par value; 53,711,394 and 51,780,838 shares issued and outstanding as of November 30, 2021 and August 31, 2021 | 53,712 | 51,781 | ||||||
Additional Paid in Capital | 2,976,090 | 1,990,055 | ||||||
Accumulated deficit | (5,345,646 | ) | (3,913,475 | ) | ||||
Accumulated other comprehensive income | 67,445 | 67,237 | ||||||
Total Stockholders’ deficit | (2,248,399 | ) | (1,804,402 | ) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 584,336 | $ | 685,387 |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
F-3
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
For
the | ||||||||
2021 | 2020 | |||||||
Operating expenses: | ||||||||
General and administrative expenses | $ | 1,435,686 | $ | 278,528 | ||||
Total operating expenses | 1,435,686 | 278,528 | ||||||
Loss from operations | (1,435,686 | ) | (278,528 | ) | ||||
Other Income (Expense): | ||||||||
Change in fair value of derivative liability | - | (280,905 | ) | |||||
Interest Income (expense) | 16 | (385,383 | ) | |||||
Gain (loss) on foreign exchange | 3,499 | 5,497 | ||||||
Total other income (expense) | 3,515 | (660,791 | ) | |||||
Net loss before income tax provision | (1,432,171 | ) | (939,319 | ) | ||||
Provision for income tax | - | - | ||||||
Net loss | $ | (1,432,171 | ) | $ | (939,319 | ) | ||
Other comprehensive income: | ||||||||
Foreign currency translation adjustment | 208 | (15,814 | ) | |||||
Total Comprehensive loss | $ | (1,431,963 | ) | $ | (955,133 | ) | ||
Net loss per common share | ||||||||
Basic and diluted | $ | (0.03 | ) | $ | (0.02 | ) | ||
Weighted average common shares outstanding | ||||||||
Basic and diluted | 52,326,168 | 50,500,011 |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
F-4
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020
(Unaudited)
Common Stock: Shares | Common Stock: Amount | Additional Paid in Capital | Accumulated
| Accumulated | Totals | |||||||||||||||||||
Balance – August 31, 2020 | 50,500,011 | $ | 50,500 | $ | (259,635 | ) | $ | (20,706 | ) | $ | (797,306 | ) | (1,027,147 | ) | ||||||||||
Foreign currency translation adjustment | - | - | - | (15,814 | ) | - | (15,814 | ) | ||||||||||||||||
Net loss | - | - | - | - | (939,319 | ) | (939,319 | ) | ||||||||||||||||
Balance November 30, 2020 | 50,500,011 | $ | 50,500 | $ | (259,635 | ) | $ | (36,520 | ) | $ | (1,736,625 | ) | (1,982,280 | ) |
Common
Stock: | Common Stock: Amount | Additional Paid in Capital | Accumulated
| Accumulated | Totals | |||||||||||||||||||
Balance – August 31, 2021 | 51,780,838 | $ | 51,781 | $ | 1,990,055 | $ | 67,237 | $ | (3,913,475 | ) | (1,804,402 | ) | ||||||||||||
Common stock issued for services | 1,930,556 | 1,931 | 741,195 | - | - | 743,126 | ||||||||||||||||||
Stock-based compensation | 244,840 | 244,840 | ||||||||||||||||||||||
Foreign currency translation adjustment | - | - | - | 208 | - | 208 | ||||||||||||||||||
Net loss | - | - | - | - | (1,432,171 | ) | (1,432,171 | ) | ||||||||||||||||
Balance November 30, 2021 | 53,711,394 | $ | 53,712 | $ | 2,976,090 | $ | 67,445 | $ | (5,345,646 | ) | (2,248,399 | ) |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For
the | ||||||||
2021 | 2020 | |||||||
OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (1,432,171 | ) | $ | (939,319 | ) | ||
Adjustments to reconcile net loss to net cash (used in) operating activities: | ||||||||
Shares issued for services | 743,126 | - | ||||||
Stock-based compensation | 244,840 | |||||||
Change in fair value of derivative liability | - | 280,905 | ||||||
Depreciation expense | 8,658 | - | ||||||
Amortization of debt discount | - | 385,383 | ||||||
Amortization of right of use assets | 7,892 | 34,585 | ||||||
Amortization of capitalized software costs | 28,956 | - | ||||||
Gain on foreign exchange | (3,499 | ) | (5,497 | ) | ||||
Change in operating assets and liabilities, | ||||||||
Prepaid expenses | 627 | - | ||||||
VAT receivable | (3,589 | ) | (17,810 | ) | ||||
Deposits | - | (4,683 | ) | |||||
Accounts payable and accrued expenses | 164,854 | 3,968 | ||||||
Operating lease obligation | (7,892 | ) | (34,586 | ) | ||||
NET CASH USED IN OPERATING ACTIVITIES | (248,198 | ) | (297,054 | ) | ||||
INVESTING ACTIVITIES: | ||||||||
Fixed asset purchases | - | (10,922 | ) | |||||
Software development costs | - | (174,847 | ) | |||||
NET CASH USED IN INVESTIING ACTIVITIES | - | (185,769 | ) | |||||
FINANCING ACTIVITIES: | ||||||||
Proceeds from related party loan | 201,244 | 490,212 | ||||||
Proceeds from convertible note | - | 62,500 | ||||||
Repayment of loan | - | (47,962 | ) | |||||
NET CASH PROVIDED BY FINANCING ACTIVITIES | 201,244 | 504,750 | ||||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH | (9,597 | ) | (15,814 | ) | ||||
NET INCREASE/(DECREASE) IN CASH | (56,551 | ) | 6,113 | |||||
CASH – BEGINNING OF PERIOD | 69,827 | 38,427 | ||||||
CASH – END OF PERIOD | $ | 13,276 | $ | 44,540 | ||||
SUPPLEMENTAL CASHFLOW INFORMATION: | ||||||||
Cash paid for: | ||||||||
Income tax | $ | - | $ | - | ||||
Interest | $ | - | $ | - | ||||
NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
Debt discount from derivative liability | $ | - | 26,179 |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
F-6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2021
(Unaudited)
NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS
Boatim Inc. (“we”, “our, “Boatim”, the “Company”) is a for profit corporation established under the corporate laws of the State of Nevada on August 15, 2014. Its fiscal year end is August 31.
Boatim, Inc. established Boatim Europe S.L. (“Boatim Europe”) as a private limited company pursuant to the laws of Spain on December 18, 2019, with the Company having indirect control of one hundred percent of the issued and outstanding membership interests of Boatim Europe. Boatim Europe commenced operations in February 2020 and is engaged in the business of providing software development, marketing, and selling services for Boatim Inc.
We acquired and further developed the Boatim software platform which is an online boat trading marketplace that combines data-driven technology and our digital marketing capabilities to offer a rolling subscription for service model of access to the platform for the extensive market of global boat dealers.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The Company prepares its consolidated financial statements on the accrual basis of accounting. The accompanying consolidated financial statements include the accounts of the Company, and its wholly owned subsidiary. All intercompany accounts, balances and transactions have been eliminated in the consolidation as at November 30, 2021.
Basis of Presentation
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for financial information and with the instructions to Form 10-Q. They do not include all information and footnotes required by United States generally accepted accounting principles for complete financial statements. The unaudited interim financial statements should be read in conjunction with those financial statements included in the Form 10-K. In the opinion of Management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the three months ended November 30, 2021 are not necessarily indicative of the results that may be expected for the year ending August 31, 2022.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
Fixed Assets
Fixed assets are stated at historical cost less accumulated depreciation. The historical cost of acquiring an item of fixed assets includes the costs necessarily incurred to bring it to the condition and location necessary for its intended use. Costs associated with repairs and maintenance are expensed as incurred. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, which are 3 years.
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients.
F-7
Fair Value of Financial Instruments
ASC 825, “Disclosures about Fair Value of Financial Instruments”, requires disclosure of fair value information about financial instruments. ASC 820, “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of November 30, 2021 and August 31, 2021.
Authoritative literature provides a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement as follows:
Level 1 - Quoted market prices available in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.
The respective carrying values of certain on-balance-sheet financial instruments approximate their fair values. These financial instruments include cash, accounts payable, convertible notes and notes payable. Fair values were assumed to approximate carrying values for these financial instruments due to their short term maturities.
Foreign Currency
Assets and liabilities of Boatim Europe are translated into U.S. dollars at the respective rates of exchange prevailing at the end of the reporting period. Income and expense accounts are translated at average exchange rates prevailing during the reporting period. Translation adjustments resulting from this process are recorded directly in equity as accumulated other comprehensive income (loss) (“AOCI”) and will be included as income or expense only upon sale or liquidation of the underlying entity. Boatim Europe considers its local currency (EURO) as its functional currency.
In accordance with ASC Topic 830-30, “Translation of Financial Statements”, monetary asset and liability accounts are translated into the Company’s reporting currency, the US dollar, using the closing exchange rate in effect at the balance sheet date, nonmonetary accounts are translated using historical exchange rates and income and expense accounts are translated using the average exchange rate prevailing during the reporting period.
Translation of amounts from the local currency of Boatim Europe into US$ has been made at the following exchange rates:
November 30, | August 31, | |||||||
Current EUR: US$ exchange rate | 1.1288 | 1.1771 | ||||||
Average EUR: US$ exchange rate | 1.1595 | 1.1951 |
F-8
Capitalized Software Development Costs
Computer software development costs related to software developed for internal use falls under the accounting guidance of ASC Topic 350-40, Intangibles Goodwill and Other–Internal Use Software, in which computer software costs are expensed as incurred during the preliminary project stage and capitalization begins in the application development stage once the capitalization criteria are met. Costs associated with post implementation activities are expensed as incurred.
Costs capitalized during the application development stage include external direct costs of materials and services consumed in developing or obtaining internal-use software. During the three months ended November 30, 2021 and for the fiscal year ended to August 31, 2021, a total of $0 and $321,562 in software development costs has been incurred, respectively.
Impairment of Long-Lived Assets
The Company’s long-lived assets, including intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the historical-cost carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the asset by comparing the undiscounted future net cash flows expected to result from the asset to its carrying value. If the carrying value exceeds the undiscounted future net cash flows of the asset, an impairment loss is measured and recognized. An impairment loss is measured as the difference between the net book value and the fair value of the long-lived asset. Long-lived assets were evaluated for impairment and the Company recorded impairment loss on Capitalized software development costs of $0 during the three months ended November 30, 2021 and 2020, respectively.
Leases
As of September 1, 2019, the Company adopted the provisions of “Accounting Standards Codification Topic 842 Leases (ASC 842)” using the modified retrospective basis for all agreements
The Company recognizes a right-of-use asset and lease liability for all financing and operating leases with terms greater than twelve months. The lease liability is measured based on the present value of the lease payments not yet paid. The right-of-use asset is measured based on the initial measurement of the lease liability adjusted for any direct costs incurred upon commencement of the lease. The right-of-use assets are amortized on a straight-line basis over the lease term, and are tested for impairment in a manner consistent with the other long-lived assets held by the Company.
Use of Estimates
The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Management makes its best estimate of the outcome for these items based on information available when the financial statements are prepared. Actual results could differ from those estimates.
Basic and Diluted Loss Per Share
The Company computes earnings (loss) per share in accordance with ASC 260-10-45 “Earnings per Share”, which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic earnings (loss) per share is computed by dividing net earnings (loss) available to common stockholders by the weighted average number of outstanding common shares during the period. Diluted earnings (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive earnings (loss) per share excludes all potential common shares if their effect is anti-dilutive. For the three months ended November 30, 2021 and 2020 [LG2], potential dilutive instruments were anti-dilutive due to the Company’s net losses.
Stock Based Compensation
The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors and non-employees (effective September 1, 2019), the fair value of the award is measured on the grant date. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period. Stock-based compensation expense is recorded by the Company in the same expense classifications in the consolidated statements of operations, as if such amounts were paid in cash.
F-9
Recent Accounting Pronouncements
On December 18, 2019, the FASB issued ASU 2019-12, which modifies ASC 740 to simplify the accounting for income taxes. The ASU’s amendments are based on changes that were suggested by stakeholders as part of the FASB’s simplification initiative (i.e., the Board’s effort to reduce the complexity of accounting standards while maintaining or enhancing the helpfulness of information provided to financial statement users. This ASU was adopted by the Company on September 1, 2021. The Company evaluated and concluded that the adoption did not have a material impact on the Company’s financial position, results of operations or cash flows.
In May 2021, the FASB issued ASU 2021-04 in response EITF consensus. This ASU addresses how the issuer should account for modifications or exchanges of Freestanding Equity Classified Written Call Options. Freestanding written call options (such as warrants) are sometimes issued to enhance the marketability of a company’s debt or common stock offering. Some of these warrants are classified as equity in the issuer’s financial statements but are not accounted for as either stock compensation or derivatives. US GAAP does not address how the issuer should account for modifications of these instruments. The FASB has approved an EITF consensus to fill that void. Under the new guidance, if the modification does not change the instrument’s classification as equity, the company that issued the warrants accounts for the modification as an exchange of the original instrument for a new instrument. In general, if the fair value of the ‘new’ instrument is greater than the fair value of the ‘original’ instrument, the excess is recognized based on the substance of the transaction, as if the issuer had paid cash. The new rule is effective for fiscal years beginning after December 15, 2021 for both public and private companies. Transition is prospective. Early adoption is permitted, as discussed further below. The Company is evaluating whether this will have any impact of on its consolidated financial statements.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC did not or in management’s opinion will not have a material impact on the Company’s present or future consolidated financial statements.
NOTE 3 – GOING CONCERN
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. However, the Company had no revenues for the three months ended November 30, 2021 and incurred recurring losses. In addition, the Company had a negative working capital as of November 30, 2021 and has not completed its efforts to establish a stable source of revenues sufficient to cover operating costs over an extended period of time. Therefore, there is substantial doubt about the Company’s ability to continue as a going concern.
Management anticipates that the Company will be dependent, for the near future, on borrowings from related party to fund operating expenses. In light of management’s efforts, there are no assurances that the Company will be successful in any of its endeavors or become financially viable and continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.
NOTE 4 – RELATED PARTY TRANSACTIONS
Mr. Robert Glass, a lawyer, is providing services free of charge from time to time, such services involving advice on accounting matters and processing of information for reporting services.
During the fiscal year ended August 31, 2021, Cayo Ventures GmbH (“Cayo”), a related party, advanced a total of $1,216,420 to the Company. Cayo is owned by the former majority shareholder and former officer, Mr. Yves Toelderer. On June 7, 2021 and June 8, 2021, the Company issued convertible notes in the amount of $696,000 and $441,000 to two unrelated parties, in exchange for their assumption of related party loans owed to Cayo for the same amounts. There was no gain or loss on extinguishment recorded on the old Cayo Venture loan. During the three months ended November 30, 2021 and 2020, Cayo Ventures advanced the Company a total of $192,541 and $490,212, respectively. As of November 30, 2021 and August 31, 2021, the Company owed a total of $619,992 and 427,451, respectively, to Cayo, which includes $2,833 owed to Yves Toelderer. These loans are unsecured, non-interest bearing and due on demand.
F-10
On June 1, 2020, the Company entered into services agreement with Mr. Wolfgang Tippner, as Chief Executive Officer. The agreement calls for a sign-on bonus of $24,000, payable within 6 months from the date of the agreement and a cash compensation for his services of $8,000 per month. During the three months ended November 30, 2021 and August 31, 2020, a total of $0 has been paid to Mr. Tippner, respectively. As of November 30, 2021 and August 31, 2021, $120,000 in accrued compensation remains outstanding.
On July 1, 2020, the Company entered into a service agreement with Mr. Patrick Burkert, as Chief Marketing Officer. The agreement calls for a sign on bonus of 500,000 shares of restricted common stock, of which 50,000 shares are due within two weeks of the date of the agreement, 200,000 shares after 6 months, and the remaining shares after 12 months. He will also receive a base salary of €144,000 per year. In addition, Mr. Burkert is eligible to receive a performance bonus equal to 50% of his base salary, based upon targets set by the board of directors of the Company. None of the bonus has been earned to date. Mr. Patrick Burkert resigned as a member of the Board of Directors on February 12, 2021. During the three months ended November 30, 2021 and 2020, a total of $0 and $38,794, respectively, has been paid to Mr. Burkert in cash compensation. As of November 30, 2021 and August 31, 2021, $0 in accrued cash compensation remains outstanding.
On January 1, 2021, the Company entered into a service agreement with Mr. Benjamin Salter, as Director and Chief Financial Officer. The agreement calls for a sign on bonus of options for 500,000 shares of common stock at a strike price of $0.10 per share. See Note 10. The options must be exercised within 15 months from the date of the agreement and can be executed no earlier as follows: 50,000 within two weeks of the date of the agreement, 200,000 shares after 6 months, and the remaining shares after 12 months. The agreement calls for a base salary of Swiss francs (CHF) 150,000 per year, increasing to CHF 180,000, payable in increments of CHF 15,000 per month from April 1, 2021 onward. In addition, Mr. Salter is eligible to receive a performance bonus equal to 50% of his base salary, based upon targets set by the board of directors of the Company. During the three months ended November 30, 2021 a total of $43,992 has been paid to Mr. Salter in cash compensation. As of November 30, 2021 and August 31, 2021, $87,889 and $78,679 in accrued cash compensation remains outstanding, respectively. As of August 31, 2021, there was $0 earned or accrued for a performance-based bonus. Mr. Salter resigned as a member of the Board of Directors and as CFO on March 19, 2021 but continued with the Company heading business development and operations in Europe.
On April 1, 2021, the Company entered into an independent contractor agreement with Mr. Salter, as Head of Operations. The agreement calls for a monthly payment of CHF 14,000 per month with CHF 8,000 to be paid in cash and the balance of $6,000 to be deferred on a monthly basis up to an amount not exceeding CHF 70,000 with payment terms to be decided by the Company. In addition, Mr. Salter is to receive options for 25,000 shares of common stock each month at a strike price of $0.10 per share with a term of 15 months. The Company agreed to also make a cash payment to Mr. Salter on exercise of his options of $2,500. During the year ended August 31, 2021, the Company recognized $31,331 of stock-based compensation expense for the options granted under this agreement. During the three months ended November 30, 2021 a total of $26,480 in cash compensation was paid to Mr. Salter under this agreement, and $19,840 of stock options were granted. On January 1, 2022, Mr. Salter resigned as head of business development and operations in Europe.
On March 19, 2021, the Company entered into a service agreement with Mr. Mario Beckles, as Director and Chief Financial Officer, commencing on April 1, 2021. The agreement calls for cash compensation in the amount of $3,000 per month to be paid monthly. During the three months ended November 30, 2021 a total of $6,000 has been paid to Mr. Beckles in cash compensation. As of November 30, 2021 and August 31, 2021, $7,500 and $4,500 unpaid cash compensation is outstanding, respectively.
On June 22, 2021, the Company entered into an employment agreement with Mr. Joseph Johnson, as a member of the Board of Directors and as Chief Executive Officer. The agreement provides for a base salary of $250,000 per year, subject to an inflationary increase using the US Consumer Price Index. The agreement also provides for an annual incentive bonus equal to 200% of his base salary and a sign on bonus of 1,000,000 shares of unrestricted common stock which will be fully vested with a service period of six (6) months from the date of the agreement. In addition, Mr. Johnson is eligible to receive a performance bonus equal to 1,000,000 fully vested shares of common stock for each net liquid $1,000,000 in equity raised by the Company during his first six (6) months of tenure as CEO, up to a maximum of 5,000,000 shares. During the three months ended November 30, 2021 a total of $62,499 was earned but unpaid to Mr. Johnson and $225,000 in stock based compensation has been earned but not issued to Mr. Johnson to date. As of November 30, 2021, there was $0 earned or accrued for the incentive-based bonus. As of November 30, 2021 and August 31, 2021, $83,332 and $20,833 unpaid cash compensation is outstanding, respectively.
F-11
NOTE 5 – LEASES
On February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842). The ASU introduces a new leasing model for both lessees and lessors. Topic 842 provides guidance in how to identify whether a lease arrangement exists. Management has evaluated its leasing arrangements and has classified these as operating leases. Additionally, the lease terms of each of our office leases are short term in nature, however, the Company elected to apply ASC Topic 842 to these leases, because we intend to renew each lease for terms longer than 12 months. As a result of the adoption of ASC Topic 842, the Company recognized a right-of-use asset and operating lease liabilities based on the present value of the minimum rental payments.
Operating Lease Obligations
On August 1, 2019, the Company entered into an office lease for a six person office space located at Marina Port Vell Carrer de l’Escar, 26, 08039 Barcelona Spain with OneCoWork. The lease calls for rent payments of €2,340 plus VAT in monthly payments. The lease begins August 01, 2019, is month to month with a six month permanency clause, of which management intends to renew. On April 30, 2021, the Company terminated this six person office lease and it was not renewed. As a result of the early termination of this lease, the Company wrote off $6,842 in remaining operating lease obligation and right of use asset on April 30, 2021, in accordance with ASC Topic 842.
On December 1, 2019, the Company entered into an office lease for a nine person office space located at Marina Port Vell Carrer de l’Escar, 26, 08039 Barcelona Spain with OneCoWork. The lease calls for rent payments of €3,120 plus VAT in monthly payments. The lease begins December 1, 2019, is month to month with a six month permanency clause, of which management intends to renew. On April 30, 2021, the Company ended this nine person office lease and entered into an 8 person lease contract on May 1, 2021. As a result of the early termination of this lease, the Company wrote off $27,318 in remaining operating lease obligation on April 30, 2021, in accordance with ASC Topic 842. This new lease calls for rent payments of €1,800 plus VAT in monthly payments. In addition, the lease also includes the use of a flexible work desk for an additional €150 plus VAT. The lease begins May 1, 2021, is month to month with no permanency clause, of which management intends to renew for 24 months. Management has evaluated this new leasing arrangement and has classified this as an operating lease and has accounted for it as a separate new lease contract due to the changes that were noted in this lease. The Company has elected to apply ASC Topic 842 to this lease, because we intend to renew this lease for a term longer than 12 months. As a result of the adoption of ASC Topic 842, the Company has recognized a right-of-use asset of $68,397 and operating lease liability of $68,397 on this lease.
On April 20, 2020, the Company entered into an office lease for a six-person office space located at Marina Port Vell Carrer de l’Escar, 26, 08039 Barcelona Spain with OneCoWork. The lease calls for rent payments of €2,550 plus VAT in monthly payments. The lease begins April 20, 2020 is month to month with a six month permanency clause, of which management intends to renew. On April 30, 2021, the Company terminated this six-person office lease and it was not renewed. As a result of the early termination of this lease, the Company wrote off $41,859 in remaining operating lease obligation on April 30, 2021, in accordance with ASC Topic 842.
The Company has recorded operating lease expense in the amount of $7,078 and $29,307 during the three months ended November 30, 2021 and 2020, respectively. As of November 30, 2021, the Company had $47,851 ($55,743, August 31, 2021) in Right of Use Asset and $45,104 (55,743, August 31, 2021) Operating lease liability. As of November 30, 2021, the discount rate for these leases is 2.04% and the weighted average remaining term is 17 months.
Future minimum operating lease payments at November 30, 2021 consist of:
2021 | $ | - | ||
2022 | 24,062 | |||
2023 | 21,388 | |||
Total minimum lease payments | 45,450 | |||
Less: present value discount | (346 | ) | ||
Present value of minimum lease payments | 45,104 | |||
Current portion of operating lease obligation | 23,716 | |||
Operating Lease obligation, less current portion | $ | 21,388 |
F-12
NOTE 6 – LOAN PAYABLE
On February 11, 2021, the Company received a short-term loan from an unrelated third party in the amount of $20,000. The loan is unsecured, has no maturity date and is non-interest bearing. On August 28, 2020, this loan was assigned to an unrelated third party for the full amount of the loan. The loan is also unsecured, has not maturity and is non-interest. As of November 30, 2021 and August 31, 2021, $20,000 remains outstanding.
NOTE 7 – CONVERTIBLE NOTES
On July 21, 2020, the Company issued convertible notes in the amount of $500,000 and $560,000 to two unrelated parties, in exchange for their assumption of the December 8, 2018 note and related party loans owed to Cayo for the same amounts. (See Note 4). The notes do not bear interest and matured on January 22, 2021. The first note in the amount of $500,000 is convertible into common shares at the rate equivalent to 70% of the Company’s 30-day average stock price prior to conversion. The second note in the amount of $560,000 is convertible into common stock at the rate equivalent to 80% of the Company’s 30-day average stock price prior to conversion.
On September 22, 2020, the Board approved the issuance of up to $5,000,000 in new convertible notes, in multiple tranches, convertible at maturity into common shares. During the second, third and fourth fiscal quarters ended August 31, 2021 the Company has received tranches of $62,500, $45,000, $60,000, $110,000, $130,000, $83,000 and $48,100, respectively from unrelated parties under this facility. The note in the amount of $62,500 matures on March 31, 2021 and is convertible into common stock at the rate equivalent to 80% of the Company’s 30-day average stock price prior to conversion. The note in the amount of $45,000 matures on June 22, 2021, the note in the amount of $60,000 matures on July 22, 2021, the note in the amount of $110,000 matures on August 22, 2021, the note in the amount of $130,000 matures on September 22, 2021, the note in the amount of $48,100 matures on October 1, 2021 and the note in the amount of $83,000 matures on October 1, 2021; these notes are convertible into common stock at the rate equivalent to 80% of the Company’s 30-day average stock price prior to conversion but no less than $0.10 value per share of common stock.
Due to these provisions, the embedded conversion option of the notes issued under the September 22, 2020 issuances do not qualify for derivative accounting under ASC 815-15, Derivatives and Hedging.
On January 10, 2021 the holder of the note in the amount of $500,000 converted $500,000 of its note into 578,681 shares of common stock and the unamortized discount at the date of conversion of $27,838 was written off to interest expense.
On January 10, 2021 the holder of the note in the amount of $560,000 converted $560,000 of its note into 567,108 shares of common stock and the unamortized discount at the date of conversion of $22,439 was written off to interest expense.
On April 23, 2021 the holder of the note in the amount of $62,500 converted $62,500 of its note into 135,038 shares of common stock.
On June 7, 2021 and June 8, 2021, the Company issued convertible notes in the amount of $696,000 and $441,000 to two unrelated parties, in exchange for their assumption of related party loans owed to Cayo for the same amounts. These notes are convertible into common stock at the rate equivalent to 80% of the Company’s 30-day average stock price prior to conversion but no less than $0.10 value per share of common stock. Due to these provisions, the embedded conversion option does not qualify for derivative accounting under ASC 815-15, Derivatives and Hedging.
A summary of value changes to the notes for the three months ended November 30, 2021 is as follows:
Carrying value of Convertible Notes at August 31, 2021 | $ | 1,613,556 | ||
New principal | - | |||
Total principal | 1,613,556 | |||
Less: conversion of principal | - | |||
Less: discount related to fair value of the embedded conversion feature | - | |||
Less: discount related to original issue discount | - | |||
Add: amortization of discount | - | |||
Carrying value of Convertible Notes at November 30, 2021 | $ | 1,613,556 |
F-13
NOTE 8 – COMMON STOCK
On October 26, 2021, the Company issued 875,000 common shares to an unrelated third party vendor for marketing services valued at $0.415 per share for a total $363,126.
On November 12, 2021, the Company issued 1,055,556 common shares to an unrelated third party vendor for marketing services valued at $0.36 per share for a total $380,000. As of November 30, 2021, and August 31, 2020, a total of 53,711,394 and 51,780,838 shares of common stock were issued and outstanding, respectively.
NOTE 9 – SHARE-BASED COMPENSATION
Stock Options
During the three months ended November 30, 2021, the Company granted options for the purchase of the Company’s common stock to certain employees and consultants as consideration for services rendered. The terms of the stock option grants are determined by the Company’s Board of Directors. The Company’s stock options generally vest upon the one-year anniversary date of the grant and have a maximum term of fifteen months.
The following summarizes the stock option activity for the three months ended November 30, 2021:
Options | Weighted-Average | |||||||
Balance as of August 31, 2021 | 175,000 | $ | 0.10 | |||||
Grants | 75,000 | 0.10 | ||||||
Exercised | - | - | ||||||
Forfeited | - | - | ||||||
Balance as of November 30, 2021 | 250,000 | $ | 0.10 |
The total share-based compensation expense in connection with issuance of stock options recognized during the three months ended November 30, 2021 was $19,840. The fair value of each stock option is estimated on the date of grant using the Black-Scholes-Merton option pricing model with the following weighted average assumptions for stock options granted during the three months ended November 30, 2021:
Expected term (years) | 1.25 years | |||
Expected stock price volatility | 144-154 | % | ||
Weighted-average risk-free rate | 0.10-0.20 | % | ||
Expected dividend | - |
Volatility is a measure of the amount by which a financial variable such as share price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. The Company estimates expected volatility giving primary consideration to the historical volatility of its common stock. The risk-free interest rate is based on the published yield available on U.S. Treasury issues with an equivalent term remaining equal to the expected life of the stock option. The expected lives of the stock options represent the estimated period of time until exercise or forfeiture and are based on the simplified method of using the mid-point between the vesting term and the original contractual term.
F-14
The following summarizes certain information about stock options vested and expected to vest as of November 30, 2021:
Number
of | Weighted-Average | Weighted-Average | ||||||||||
Outstanding | 250,000 | 0.83 | $ | 0.10 | ||||||||
Exercisable | 250,000 | 0.83 | $ | 0.10 | ||||||||
Expected to vest | 0 | 0.83 | $ | 0.10 |
Restricted Stock Awards
The following summarizes the restricted stock activity for the three months ended November 30, 2021:
Weighted-Average | ||||||||
Shares | Exercise Price | |||||||
Balance as of August 31, 2021 | 450,000 | $ | 1.25 | |||||
Shares of restricted stock granted | - | - | ||||||
Exercised | - | - | ||||||
Cancelled | - | 1.25 | ||||||
Balance as of November 30, 2021 | 450,000 | $ | 1.25 |
November 30, | August 31, | |||||||
2021 | 2021 | |||||||
Number of Restricted Stock Awards | ||||||||
Vested | 450,000 | 450,000 | ||||||
Non-vested | - | - | ||||||
450,000 | 450,000 |
As of November 30, 2021 and August 31, 2021, there was unrecognized compensation cost of $0, related to non-vested share-based compensation, respectively, which is expected to be recognized over the next year. In addition, none of the restricted share awards presented above has been issued or outstanding as of November 30, 2021.
NOTE 10 – SUBSEQUENT EVENTS
On January 4, 2022, the Company received $217,500 in exchange for a December 20, 2021 secured convertible note in the amount of $275,000 from an unrelated third party. This note was issued with a $27,500 original issue discount, a $27,500 one-time interest charge and a $2,500 charge for legal fees. The note matures 12 months after the issuance date and bears a 10% interest rate. The note is convertible at any time at a fixed price of $0.13 or the finalized price in a Reg A offering and in the event of default notice a conversion price of $0.01 per share. In addition, the Company issued to the noteholder 2,750,000 shares of common stock as commitment shares as well as 1,100,000 warrant shares to purchase common stock at an exercise price of $0.25 per share.
On January 7, 2022, the Company received $143,166 in exchange for a December 22, 2021 secured convertible note in the amount of $166,666 from an unrelated third party, This note was issued with a $16,666 original issue discount, $3,333 one-time commission charge and a $3,500 charge for legal fees. The note matures eight months from the date of issuance and bears a 5% interest rate. The note is convertible at any time at a fixed price of $0.15 or the finalized price in a Reg A offering, and in the event of default notice, a conversion price of $0.01 per share. In addition, the Company issued to the noteholder 456,621 shares of common stock as commitment shares as well as 277,778 warrant shares to purchase common stock at an exercise price of $0.30 per share. On February 1, 2022, the Company entered into an amendment of the convertible note, whereby the lender was issued an additional 1,353,524 shares of common stock as commitment shares and a new warrant for 724,058 warrant shares to purchase common stock at an exercise price of $0.25 per share. The original warrant for 277,778 warrant shares was canceled.
On January 20, 2022, the Company issued a total of 3,500,000 warrant shares to purchase common stock with an exercise price of $0.001 per share and a term of 1 year to two individuals for services rendered on behalf of the Company.
F-15
INDEX TO FINANCIAL STATEMENTS
F-16
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
Boatim Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Boatim Inc. and its subsidiary (collectively, the “Company”) as of August 31, 2021 and 2020, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2021 and 2020, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Matter
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ MaloneBailey, LLP
www.malonebailey.com
We have served as the Company’s auditor since 2018.
Houston, Texas
January 3, 2022
F-17
CONSOLIDATED BALANCE SHEETS
August 31 | August 31 | |||||||
2021 | 2020 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash | $ | 69,827 | $ | 38,427 | ||||
Prepaid expenses | 7,500 | - | ||||||
VAT receivable | 17,810 | 34,265 | ||||||
Total current assets | 95,137 | 72,692 | ||||||
Deposits | 9,440 | 4,787 | ||||||
Fixed assets, net | 14,434 | 11,350 | ||||||
Capitalized software costs, net | 510,633 | 259,156 | ||||||
Right of use asset – operating lease | 55,743 | 162,304 | ||||||
Total other assets | 590,250 | 437,597 | ||||||
TOTAL ASSETS | $ | 685,387 | $ | 510,289 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
LIABILITIES | ||||||||
Current Liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 373,039 | $ | 189,680 | ||||
Related party loan | 427,451 | 348,031 | ||||||
Loan payable | 20,000 | 47,962 | ||||||
Convertible notes, net of unamortized discount | 1,613,556 | 464,650 | ||||||
Derivative liability | - | 307,446 | ||||||
Current portion - operating lease obligation | 33,333 | 141,276 | ||||||
Total current liabilities | 2,467,379 | 1,499,045 | ||||||
Non-current Liabilities: | ||||||||
Operating lease obligation, net of current portion | 22,410 | 38,391 | ||||||
TOTAL LIABILITIES | 2,489,789 | 1,537,436 | ||||||
STOCKHOLDERS’ DEFICIT | ||||||||
Common stock: authorized 500,000,000; $0.001 par value; 51,780,838 and 50,500,011 shares issued and outstanding at August 31, 2021 and 2020, respectively | 51,781 | 50,500 | ||||||
Additional paid in capital | 1,990,055 | (259,635 | ) | |||||
Accumulated deficit | (3,913,475 | ) | (797,306 | ) | ||||
Accumulated other comprehensive loss | 67,237 | (20,706 | ) | |||||
Total Stockholders’ deficit | (1,804,402 | ) | (1,027,147 | ) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 685,387 | $ | 510,289 |
The accompanying notes are an integral part of these consolidated financial statements
F-18
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS
Year Ended | Year Ended | |||||||
August 31, | August 31, | |||||||
Revenue | $ | 900 | $ | 118 | ||||
Cost of Sales | - | (4 | ) | |||||
Gross Profit | 900 | 114 | ||||||
Operating Expenses | ||||||||
General and administrative | 2,317,196 | 680,470 | ||||||
Total Expenses | 2,317,196 | 680,470 | ||||||
Loss from operations | (2,316,296 | ) | (680,356 | ) | ||||
Other Income (Expenses) | ||||||||
Change in fair value of derivative liability | (209,068 | ) | 456,698 | |||||
Interest expense | (617,934 | ) | (168,794 | ) | ||||
Gain/(Loss) on foreign exchange | 27,129 | (17,462 | ) | |||||
Total other income (expenses) | (799,873 | ) | 270,442 | |||||
Net loss before income tax provision | (3,116,169 | ) | (409,914 | ) | ||||
Provision for income tax | - | - | ||||||
Net loss | $ | (3,116,169 | ) | $ | (409,914 | ) | ||
Other comprehensive loss: | ||||||||
Foreign currency translation adjustment | 87,943 | (20,299 | ) | |||||
Total Comprehensive loss | $ | (3,028,226 | ) | $ | (430,213 | ) | ||
Net loss per common share | ||||||||
Basic and diluted | $ | (0.06 | ) | $ | (0.01 | ) | ||
Weighted average number of common shares outstanding | ||||||||
Basic and diluted | 51,780,838 | 50,500,011 |
The accompanying notes are an integral part of these consolidated financial statements
F-19
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE YEARS ENDED AUGUST 31, 2021 AND 2020
Common Stock | Accumulated Other Comprehensive |
Total | ||||||||||||||||||||||
Number of Shares | Par Value | Capital Deficiency | Income (Loss) | Accumulated Deficit | Stockholders’ Deficit | |||||||||||||||||||
Balance - August 31, 2019 | 50,500,011 | $ | 50,500 | $ | (403,425 | ) | $ | (407 | ) | $ | (387,392 | ) | $ | (740,724 | ) | |||||||||
Forgiveness of related party loan | - | - | 81,290 | - | - | 81,290 | ||||||||||||||||||
Stock based compensation | - | - | 62,500 | - | - | 62,500 | ||||||||||||||||||
Foreign currency translation adjustment | - | - | - | (20,299 | ) | - | (20,299 | ) | ||||||||||||||||
Net loss | - | - | - | - | (409,914 | ) | (409,914 | ) | ||||||||||||||||
Balance - August 31, 2020 | 50,500,011 | $ | 50,500 | $ | (259,635 | ) | $ | (20,706 | ) | $ | (797,306 | ) | $ | (1,027,147 | ) | |||||||||
Stock based compensation | - | - | 595,824 | - | - | 595,824 | ||||||||||||||||||
Conversion of convertible notes payable to common stock | 1,280,827 | $ | 1,281 | 1,121,219 | - | - | 1,122,500 | |||||||||||||||||
Resolution of derivative liability | - | - | 532,647 | - | - | 532,647 | ||||||||||||||||||
Foreign currency translation adjustment | - | - | - | 87,943 | - | 87,943 | ||||||||||||||||||
Net loss | - | - | - | (3,116,169 | ) | (3,116,169 | ) | |||||||||||||||||
Balance - August 31, 2021 | 51,780,838 | $ | 51,781 | $ | 1,990,055 | $ | 67,237 | $ | (3,913,475 | ) | $ | (1,804,402 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
F-20
CONSOLIDATED STATEMENTS OF CASH FLOWS
For
the year ended | ||||||||
2021 | 2020 | |||||||
OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (3,116,169 | ) | $ | (409,914 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation expenses | 8,597 | - | ||||||
Change in fair value of derivative liability | 209,068 | (456,698 | ) | |||||
Amortization of debt discount | 617,934 | 168,794 | ||||||
Stock based compensation | 595,824 | 62,500 | ||||||
Amortization of right of use assets | 119,572 | 87,762 | ||||||
Amortization capitalized software | 70,085 | - | ||||||
(Gain)/loss on foreign exchange | (17,362 | ) | 17,462 | |||||
Changes in operating assets and liabilities | ||||||||
VAT receivable | 16,455 | (34,265 | ) | |||||
Prepaid expense | (7,500 | ) | - | |||||
Deposits | (4,654 | ) | - | |||||
Accounts payable and accrued expenses | 183,358 | 143,028 | ||||||
Operating lease obligation | (119,572 | ) | (87,861 | ) | ||||
NET CASH USED IN OPERATING ACTIVITIES | (1,444,364 | ) | (509,192 | ) | ||||
INVESTING ACTIVITIES | ||||||||
Fixed asset purchases | (11,681 | ) | (11,350 | ) | ||||
Software development costs | (321,562 | ) | (259,156 | ) | ||||
NET CASH USED IN INVESTING ACTIVITIES | (333,243 | ) | (270,506 | ) | ||||
FINANCING ACTIVITIES: | ||||||||
Proceeds from related party loans | 1,216,420 | 774,771 | ||||||
Proceeds from loan payable | 20,000 | 47,962 | ||||||
Proceeds from issuance of convertible notes | 532,606 | - | ||||||
Repayment of loan payable | (47,962 | ) | - | |||||
NET CASH PROVIDED BY FINANCING ACTIVITIES | 1,721,064 | 822,733 | ||||||
EFFECT OF EXCHANGE RATE CHANGES IN CASH | 87,943 | (20,299 | ) | |||||
NET INCREASE IN CASH | 31,400 | 22,736 | ||||||
CASH – BEGINNING OF PERIOD | 38,427 | 15,691 | ||||||
CASH – END OF PERIOD | $ | 69,827 | $ | 38,427 | ||||
SUPPLEMENTAL CASHFLOW INFORMATION: | ||||||||
Cash paid for: | ||||||||
Income tax | $ | - | $ | - | ||||
Interest | $ | - | $ | - | ||||
Non-cash investing and financing activities: | ||||||||
Conversion of related party loan into convertible debt | $ | 1,137,000 | $ | 1,060,000 | ||||
Termination of lease contracts | $ | 73,554 | $ | - | ||||
Resolution of derivative liability | $ | 532,647 | $ | - | ||||
Debt discount from derivative liability | $ | 16,133 | $ | 764,144 | ||||
Conversion of convertible note to common stock | $ | 1,122,500 | $ | - | ||||
Right of use asset and operating lease liability recognized from adoption of ASC 842 | $ | 68,397 | $ | 250,066 | ||||
Forgiveness of related party loan | $ | - | $ | 81,290 |
The accompanying notes are an integral part of these consolidated financial statements
F-21
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS
Boatim Inc. (“we”, “our, “Boatim”, the “Company”) is a for profit corporation established under the corporate laws of the State of Nevada on August 15, 2014. Its fiscal year end is August 31.
Boatim, Inc. established Boatim Europe S.L. (“Boatim Europe”) as a private limited company pursuant to the laws of Spain on December 18, 2019, with the Company having indirect control of one hundred percent of the issued and outstanding membership interests of Boatim Europe. Boatim Europe commenced operations in February 2020 and is engaged in the business of providing software development, marketing, and selling services for Boatim Inc.
All membership interests of Boatim Europe are currently held in trust by the Company´s CEO for practical reasons and only until the formal transfer into the name of Company has been completed according to the requirements of applicable Spanish law. In December 2020, the Company finalized the process of collecting and submitting all required paperwork to the Spanish authorities to enter Boatim Inc. as direct owner on public records in Spain, making Boatim Europe a wholly owned subsidiary of the Company.
Originally in the business of producing and distributing furniture, the business was changed to online food blogging as a promotion channel for restaurants, bars and fine dining. Subsequently, following the acquisition of the Boatim software platform, the Company expanded into the boating industry by further developing the software platform. The Boatim software platform is an online boat trading marketplace, combining data-driven technology and our digital marketing capabilities to offer a rolling subscription for service model of access to the platform for the extensive market of global boat dealers.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The Company prepares its consolidated financial statements on the accrual basis of accounting. The accompanying consolidated financial statements include the accounts of the Company with its fiscal year end of August 31, and its wholly owned subsidiary. All intercompany accounts, balances and transactions have been eliminated in the consolidation as of August 31.
Basis of Presentation
The accompanying consolidated financial statements of the Company for the years ended August 31, 2021 and 2020 have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
Fixed Assets
Fixed assets are stated at historical cost less accumulated depreciation. The historical cost of acquiring an item of fixed assets includes the costs necessarily incurred to bring it to the condition and location necessary for its intended use. Costs associated with repairs and maintenance are expensed as incurred. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, which are 3 years.
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients.
F-22
Fair Value of Financial Instruments
ASC 825, “Disclosures about Fair Value of Financial Instruments”, requires disclosure of fair value information about financial instruments. ASC 820, “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of August 31, 2021 and 2020.
Authoritative literature provides a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement as follows:
Level 1 - Quoted market prices available in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.
The respective carrying values of certain on-balance-sheet financial instruments approximate their fair values. These financial instruments include cash, accounts payable, convertible notes and notes payable. Fair values were assumed to approximate carrying values for these financial instruments due to their short term maturities.
Foreign Currency
Assets and liabilities of Boatim Europe are translated into U.S. dollars at the respective rates of exchange prevailing at the end of the reporting period. Income and expense accounts are translated at average exchange rates prevailing during the reporting period. Translation adjustments resulting from this process are recorded directly in equity as accumulated other comprehensive (loss) income (“AOCI”) and will be included as income or expense only upon sale or liquidation of the underlying entity. Boatim Europe considers its local currency (EURO) as its functional currency.
In accordance with ASC Topic 830-30, “Translation of Financial Statements”, monetary asset and liability accounts are translated into the Company’s reporting currency, the US dollar, using the closing exchange rate in effect at the balance sheet date, nonmonetary accounts are translated using historical exchange rates and income and expense accounts are translated using the average exchange rate prevailing during the reporting period.
Translation of amounts from the local currency of Boatim Europe into US$ has been made at the following exchange rates:
August 31, 2021 | August 31, 2020 | |||||||
Current EUR: US$ exchange rate | 1.1771 | 1.1991 | ||||||
Average EUR: US$ exchange rate | 1.1951 | 1.1136 |
F-23
Capitalized Software Development Costs
Computer software development costs related to software developed for internal use falls under the accounting guidance of ASC Topic 350-40, Intangibles Goodwill and Other–Internal Use Software, in which computer software costs are expensed as incurred during the preliminary project stage and capitalization begins in the application development stage once the capitalization criteria are met. Costs associated with post implementation activities are expensed as incurred.
Costs capitalized during the application development stage include external direct costs of materials and services consumed in developing or obtaining internal-use software. During the year ended August 31, 2021 and for the fiscal year ended to August 31, 2020, the Company capitalized $321,562 and $259,156 in software development costs. Software costs are included in “Capitalized software costs, net” on the Company’s consolidated balance sheets and are depreciated using the straight-line method over their estimated useful life of five years.
Impairment of Long-Lived Assets
The Company’s long-lived assets, including intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the historical-cost carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the asset by comparing the undiscounted future net cash flows expected to result from the asset to its carrying value. If the carrying value exceeds the undiscounted future net cash flows of the asset, an impairment loss is measured and recognized. An impairment loss is measured as the difference between the net book value and the fair value of the long-lived asset. No impairment losses were required to be recognized during the fiscal years ended August 31, 2021 and 2020.
Leases
As of September 1, 2019, the Company adopted the provisions of “Accounting Standards Codification Topic 842 Leases (ASC 842)” using the modified retrospective basis for all agreements
The Company recognizes a right-of-use asset and lease liability for all financing and operating leases with terms greater than twelve months. The lease liability is measured based on the present value of the lease payments not yet paid. The right-of-use asset is measured based on the initial measurement of the lease liability adjusted for any direct costs incurred upon commencement of the lease. The right-of-use assets are amortized on a straight-line basis over the lease term, and are tested for impairment in a manner consistent with the other long-lived assets held by the Company.
Derivative Instrument Liability
The Company accounts for derivative instruments in accordance with ASC 815, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedging relationships and the types of relationships designated are based on the exposures hedged. At August 31, 2021 and 2020, the Company had $0 and $307,446 derivative liability, respectively.
Use of Estimates
The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Management makes its best estimate of the outcome for these items based on information available when the financial statements are prepared. Actual results could differ from those estimates.
F-24
Basic and Diluted Loss Per Share
The Company computes earnings (loss) per share in accordance with ASC 260-10-45 “Earnings per Share”, which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic earnings (loss) per share is computed by dividing net earnings (loss) available to common stockholders by the weighted average number of outstanding common shares during the period. Diluted earnings (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive earnings (loss) per share excludes all potential common shares if their effect is anti-dilutive. For the years ended August 31, 2021 and 2020, potential dilutive instruments were anti-dilutive due to the Company’s net losses.
Income Taxes
We use the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.
ASC Topic 740-10-30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740-10-40 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the reporting periods presented.
The Company has evaluated Staff Accounting Bulletin No. 118 regarding the impact of the decreased tax rates of the Tax Cuts & Jobs Act. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The U.S. federal income tax rate of 21% is being used due to the new tax law recently enacted.
Stock Based Compensation
The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors and non-employees (effective September 1, 2019), the fair value of the award is measured on the grant date. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period. Stock-based compensation expense is recorded by the Company in the same expense classifications in the consolidated statements of operations and comprehensive loss, as if such amounts were paid in cash.
Recent Accounting Pronouncements
On December 18, 2019, the FASB issued ASU 2019-12, which modifies ASC 740 to simplify the accounting for income taxes. The ASU’s amendments are based on changes that were suggested by stakeholders as part of the FASB’s simplification initiative (i.e., the Board’s effort to reduce the complexity of accounting standards while maintaining or enhancing the helpfulness of information provided to financial statement users. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. This ASU will be effective for the Company on September 1, 2021 and will have an impact on the consolidated financial statements once adopted. The Company is still evaluating how much of an impact this ASU will have on its consolidated financial statements.
F-25
On January 16, 2020, the FASB issued ASU 2020-01 in response to an EITF consensus. The ASU makes improvements related to the following two topics: (a) Accounting for certain equity securities when the equity method of accounting is applied or discontinued — The ASU clarifies that “an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method.” (b) Scope considerations related to forward contracts and purchased options on certain securities — The ASU clarifies that “for the purpose of applying paragraph 815-10- 15-141(a) an entity should not consider whether, upon the settlement of the forward contract or exercise of the purchased option, individually or with existing investments, the underlying securities would be accounted for under the equity method in Topic 323 or the fair value option in accordance with the financial instruments guidance in Topic 825.” This ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company does not believe this ASU will have an impact on its consolidated financial statements upon adoption of this ASU on September 1, 2021.
In May 2021, the FASB issued ASU 2021-04 in response EITF consensus. This ASU addresses how the issuer should account for modifications or exchanges of Freestanding Equity Classified Written Call Options. Freestanding written call options (such as warrants) are sometimes issued to enhance the marketability of a company’s debt or common stock offering. Some of these warrants are classified as equity in the issuer’s financial statements but are not accounted for as either stock compensation or derivatives. US GAAP does not address how the issuer should account for modifications of these instruments. The FASB has approved an EITF consensus to fill that void. Under the new guidance, if the modification does not change the instrument’s classification as equity, the company that issued the warrants accounts for the modification as an exchange of the original instrument for a new instrument. In general, if the fair value of the ‘new’ instrument is greater than the fair value of the ‘original’ instrument, the excess is recognized based on the substance of the transaction, as if the issuer had paid cash. The new rule is effective for fiscal years beginning after December 15, 2021 for both public and private companies. Transition is prospective. Early adoption is permitted, as discussed further below. The Company is evaluating whether this will have any impact of on its consolidated financial statements.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC did not or in management’s opinion will not have a material impact on the Company’s present or future consolidated financial statements.
NOTE 3 – GOING CONCERN
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. The Company had minimal revenues during year ended August 31, 2021 of $900 and $118 revenues for the year ended August 31, 2020 and has recurring losses. In addition, the Company had a negative working capital as of August 31, 2021 and has not completed its efforts to establish a source of revenues sufficient to cover operating costs over an extended period of time. Therefore, there is substantial doubt about the Company’s ability to continue as a going concern.
Management anticipates that the Company will be dependent, for the near future, on borrowings from related parties to fund operating expenses. In light of management’s efforts, there are no assurances that the Company will be successful in any of its endeavors or become financially viable and continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.
NOTE 4 – RELATED PARTY TRANSACTIONS
Mr. Robert Glass, a lawyer, is providing services free of charge from time to time, such services involving advice on accounting matters and processing of information for reporting services.
The former Chief Technology Officer of the Company, Mr. Patrick Heneise is also the owner of Zentered OÜ (fka Heneise Consulting OÜ, “Zentered”). Zentered has provided software development and maintenance services to the Company and has recognized expenses for such services of $39,231 during the year ended August 31, 2020. As of August 31, 2021 and 2020 nothing remains outstanding.
F-26
During the fiscal year ended August 31, 2020, Cayo Ventures GmbH (“Cayo”), a related party, advanced a total of $774,771 to the Company. During the fiscal year ended August 31, 2021, Cayo Ventures GmbH (“Cayo”), a related party, advanced a total of $1,216,420 to the Company. Cayo is owned by the former majority shareholder and former officer, Mr. Yves Toelderer. On June 7, 2021 and June 8, 2021, the Company issued convertible notes in the amount of $696,000 and $441,000 to two unrelated parties, in exchange for their assumption of related party loans owed to Cayo for the same amounts. There was no gain or loss on extinguishment recorded on the old Cayo Ventures loan. As of August 31, 2021 and 2020, the Company owed a total of $427,451 and 348,031, respectively, to Cayo, which includes $2,833 owed to Yves Toelderer. These loans are unsecured, non-interest bearing and due on demand.
During the year ended August 31, 2019, the Company issued a note in the amount of $500,000 to Cayo for the purchase of the Boatim software platform. The note matured on January 23, 2020 but was extended to January 23, 2021. On July 21, 2020, the Company cancelled the note when Cayo transferred its claim against the Company to an unrelated party. On the same date, Cayo also assigned a portion of the related party loans (see above) amounting to $560,000 to another unrelated party. The Company then issued convertible notes to these unrelated parties. (See Note 7).
On June 1, 2020, the Company entered into services agreement with Mr. Wolfgang Tippner, as Chief Executive Officer. The agreement calls for a sign-on bonus of $24,000, payable within 6 months from the date of the agreement and a cash compensation for his services of $8,000 per month. During the years ended August 31, 2021 and August 31, 2020, a total of $8,000 and $0 has been paid to Mr. Tippner, respectively. As of August 31, 2020, $48,000 in accrued compensation remained outstanding. As of August 31, 2021, $120,000 in accrued compensation remains outstanding.
On June 1, 2020, the Company entered into a service agreement with Mr. Patrick Heneise, as Chief Technology Officer. The agreement calls for an equity bonus of 200,000 common shares of the company within 6 months of the date of the agreement. As cash compensation for his services he is to receive a total of €35,000, payable at €2,500 per month for technology consulting services and a €5,000 executive services fee payable annually. During the year ended August 31, 2021 and 2020, a total of $14,922 and $2,968 has been paid to Mr. Heneise, respectively. On June 02, 2021 Patrick Heneise resigned as Director and CTO which took effect on June 30, 2021 but continues with the Company as a consultant. As of August 31, 2021 and 2020, $24,301 and $8,864 in accrued compensation remains outstanding, respectively. During the year ended August 31, 2021, the Company recognized $250,000 of stock-based compensation expense for the 200,000 shares earned by Mr. Heneise.
On June 15, 2020, the Company entered into a service agreement with Mr. Chris Roy, as Chief Product Officer. The agreement calls for a base salary of €125,000 per year. In addition, Mr. Roy is eligible to receive a performance bonus equal to 50% of his base salary, based upon targets set by the board of directors of the Company. During the years ended August 31, 2021 and 2020, this performance bonus was not earned or paid to Mr. Roy. During the year ended August 31, 2020, a total of $33,145 has been paid to Mr. Roy. During the year ended August 31, 2021 a total of $112,801, had been paid to Mr. Roy. Mr. Chris Roy resigned as a member of the Board of Directors on February 12, 2021. As of August 31, 2021 and 2020, $0 and $23,140 in accrued compensation remains outstanding, respectively.
On July 1, 2020, the Company entered into a service agreement with Mr. Patrick Burkert, as Chief Marketing Officer. The agreement calls for a sign on bonus of 500,000 shares of restricted common stock, of which 50,000 shares are due within two weeks of the date of the agreement, 200,000 shares after 6 months, and the remaining shares after 12 months. He will also receive a base salary of €144,000 per year. In addition, Mr. Burkert is eligible to receive a performance bonus equal to 50% of his base salary, based upon targets set by the board of directors of the Company. None of the bonus has been earned to date. Mr. Patrick Burkert resigned as a member of the Board of Directors on February 12, 2021. During the year ended August 31, 2020, a total of $71,400 has been paid to Mr. Burkert in cash compensation. As of August 31, 2021 and 2020, $0 in accrued cash compensation remains outstanding. During the year ended August 31, 2021, the Company paid $100,389 in cash compensation and recognized $312,500 of stock-based compensation expense for the 250,000 shares earned by Mr. Burkert.
On January 1, 2021, the Company entered into a service agreement with Mr. Benjamin Salter, as Director and Chief Financial Officer. The agreement calls for a sign on bonus of options for 500,000 shares of common stock at a strike price of $0.10 per share. See Note 10. The options must be exercised within 15 months from the date of the agreement and can be executed no earlier as follows: 50,000 within two weeks of the date of the agreement, 200,000 shares after 6 months, and the remaining shares after 12 months. The agreement calls for a base salary of Swiss francs (CHF) 150,000 per year, increasing to CHF 180,000, payable in increments of CHF 15,000 per month from April 1, 2021 onward. In addition, Mr. Salter is eligible to receive a performance bonus equal to 50% of his base salary, based upon targets set by the board of directors of the Company. During the year ended August 31, 2021, a total of $43,992 has been paid to Mr. Salter in cash compensation. As of August 31, 2021, $78,679 in accrued cash compensation remains outstanding. As of August 31, 2021, there was $0 earned or accrued for a performance-based bonus. During the year ended August 31, 2021 the Company recognized $64,493 of stock-based compensation expense for the options granted under this service agreement. Mr. Salter resigned as a member of the Board of Directors and as CFO on March 19, 2021 but continues with the Company heading business development and operations in Europe.
F-27
On April 1, 2021, the Company entered into an independent contractor agreement with Mr. Salter, as Head of Operations. The agreement calls for a monthly payment of CHF 14,000 per month with CHF 8,000 to be paid in cash and the balance of $6,000 to be deferred on a monthly basis up to an amount not exceeding CHF 70,000 with payment terms to be decided by the Company. In addition, Mr. Salter is to receive options for 25,000 shares of common stock each month at a strike price of $0.10 per share with a term of 15 months. The Company agreed to also make a cash payment to Mr. Salter on exercise of his options of $2,500. During the year ended August 31, 2021, the Company recognized $31,331 of stock-based compensation expense for the options granted under this agreement.
On March 19, 2021, the Company entered into a service agreement with Mr. Mario Beckles, as Director and Chief Financial Officer, commencing on April 1, 2020. The agreement calls for cash compensation in the amount of $3,000 per month to be paid monthly. As of August 31, 2021, $15,000 has been paid to Mr. Beckles in cash compensation. As of August 31, 2021, $4,500 unpaid cash compensation is outstanding.
On June 22, 2021, the Company entered into an employment agreement with Mr. Joseph Johnson, as a member of the Board of Directors and as Chief Executive Officer. The agreement provides for a base salary of $250,000 per year, subject to an inflationary increase using the US Consumer Price Index. The agreement also provides for an annual incentive bonus equal to 200% of his base salary and a sign on bonus of 1,000,000 shares of unrestricted common stock which will be fully vested with a service period of six (6) months from the date of the agreement. In addition, Mr. Johnson is eligible to receive a performance bonus equal to 1,000,000 fully vested shares of common stock for each net liquid $1,000,000 in equity raised by the Company during his first six (6) months of tenure as CEO, up to a maximum of 5,000,000 shares. As of August 31, 2021, $20,833 has been paid to Mr. Johnson in cash compensation. As of August 31, 2021, $20,833 unpaid cash compensation is outstanding.
NOTE 5 – LEASES
On February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842). The ASU introduces a new leasing model for both lessees and lessors. Topic 842 provides guidance in how to identify whether a lease arrangement exists. Management has evaluated its leasing arrangements and has classified these as operating leases. Additionally, the lease terms of each of our office leases are short term in nature, however, the Company elected to apply ASC Topic 842 to these leases, because we intend to renew each lease for terms longer than 12 months. As a result of the adoption of ASC Topic 842, the Company recognized a right-of-use asset and operating lease liabilities based on the present value of the minimum rental payments.
Operating Lease Obligations
On August 1, 2019, the Company entered into an office lease for a six person office space located at Marina Port Vell Carrer de l’Escar, 26, 08039 Barcelona Spain with OneCoWork. The lease calls for rent payments of €2,340 plus VAT in monthly payments. The lease begins August 01, 2019, is month to month with a six month permanency clause, of which management intends to renew. On April 30, 2021, the Company terminated this six person office lease and it was not renewed. As a result of the early termination of this lease, the Company wrote off $6,842 in remaining operating lease obligation and right of use asset on April 30, 2021, in accordance with ASC Topic 842.
On December 1, 2019, the Company entered into an office lease for a nine person office space located at Marina Port Vell Carrer de l’Escar, 26, 08039 Barcelona Spain with OneCoWork. The lease calls for rent payments of €3,120 plus VAT in monthly payments. The lease begins December 1, 2019, is month to month with a six month permanency clause, of which management intends to renew. On April 30, 2021, the Company ended this nine person office lease and entered into an 8 person lease contract on May 1, 2021. As a result of the early termination of this lease, the Company wrote off $27,318 in remaining operating lease obligation on April 30, 2021, in accordance with ASC Topic 842. This new lease calls for rent payments of €1,800 plus VAT in monthly payments. In addition, the lease also includes the use of a flexible work desk for an additional €150 plus VAT. The lease begins May 1, 2021, is month to month with no permanency clause, of which management intends to renew for 24 months. Management has evaluated this new leasing arrangement and has classified this as an operating lease and has accounted for it as a separate new lease contract due to the changes that were noted in this lease. The Company has elected to apply ASC Topic 842 to this lease, because we intend to renew this lease for a term longer than 12 months. As a result of the adoption of ASC Topic 842, the Company has recognized a right-of-use asset of $68,397 and operating lease liability of $68,397 on this lease.
F-28
On April 20, 2020, the Company entered into an office lease for a six-person office space located at Marina Port Vell Carrer de l’Escar, 26, 08039 Barcelona Spain with OneCoWork. The lease calls for rent payments of €2,550 plus VAT in monthly payments. The lease begins April 20, 2020 is month to month with a six month permanency clause, of which management intends to renew. On April 30, 2021, the Company terminated this six-person office lease and it was not renewed. As a result of the early termination of this lease, the Company wrote off $41,859 in remaining operating lease obligation on April 30, 2021, in accordance with ASC Topic 842.
The Company has recorded operating lease expense in the amount of $119,572 during the fiscal year ended August 31, 2021. As of August 31, 2021, the Company had $55,743 in Right of Use Asset and Operating lease liability. As of August 31, 2021, the discount rate for these leases is 2.04% and the weighted average remaining term is 20 months.
Future minimum operating lease payments at August 31, 2021 consist of:
For the year ending August 31, | ||||
2022 | $ | 33,745 | ||
2023 | 22,497 | |||
Total minimum lease payments | 56,242 | |||
Less: present value discount | (499 | ) | ||
Present value of minimum lease payments | 55,743 | |||
Current portion of operating lease obligations | 33,333 | |||
Operating lease obligations, net of current portion | $ | 22,410 |
NOTE 6 – LOAN PAYABLE
On July 27, 2020, the Company received a short-term loan from an unrelated third party in the amount of €40,000. The loan is unsecured, has no maturity date and is non-interest bearing. As of August 31, 2020, the USD equivalent of $47,962 remains outstanding. The loan was repaid on September 30, 2020.
On February 11, 2021, the Company received a short-term loan from an unrelated third party in the amount of $20,000. The loan is unsecured, has no maturity date and is non-interest bearing. On August 28, 2020, this loan was assigned to an unrelated third party for the full amount of the loan. The loan is also unsecured, has not maturity and is non-interest. As of August 31, 2021, $20,000 remains outstanding.
NOTE 7 – CONVERTIBLE NOTES
On July 21, 2020, the Company issued convertible notes in the amount of $500,000 and $560,000 to two unrelated parties, in exchange for their assumption of the December 8, 2018 note and related party loans owed to Cayo for the same amounts. (See Note 4). The notes do not bear interest and matured on January 22, 2021. The first note in the amount of $500,000 is convertible into common shares at the rate equivalent to 70% of the Company’s 30-day average stock price prior to conversion. The second note in the amount of $560,000 is convertible into common stock at the rate equivalent to 80% of the Company’s 30-day average stock price prior to conversion.
On January 10, 2021 the holder of the note in the amount of $500,000 converted $500,000 of its note into 578,681 shares of common stock and the unamortized discount at the date of conversion of $27,838 was written off to interest expense.
On January 10, 2021 the holder of the note in the amount of $560,000 converted $560,000 of its note into 567,108 shares of common stock and the unamortized discount at the date of conversion of $22,439 was written off to interest expense.
On April 23, 2021 the holder of the note in the amount of $62,500 converted $62,500 of its note into 135,038 shares of common stock.
F-29
On September 22, 2020, the Board approved the issuance of up to $5,000,000 in new convertible notes, in multiple tranches, convertible at maturity into common shares. At May 31, 2021 the Company has received tranches of $62,500, $44,550, $60,000, $110,000, $130,000, and $82,700 respectively from unrelated parties under this facility. The note in the amount of $62,500 matures on March 31, 2021 and is convertible into common stock at the rate equivalent to 80% of the Company’s 30-day average stock price prior to conversion. The note in the amount of $44,550 matures on June 22, 2021, the note in the amount of $60,000 matures on July 22, 2021, the note in the amount of $110,000 matures on August 22, 2021, the note in the amount of $130,000 matures on September 22, 2021 and the note in the amount of $82,700 matures on October 1, 2021; these notes are convertible into common stock at the rate equivalent to 80% of the Company’s 30-day average stock price prior to conversion but no less than $0.10 value per share of common stock.
Due to these provisions, the embedded conversion option of the notes issued under the September 22, 2020 issuances do not qualify for derivative accounting under ASC 815-15, Derivatives and Hedging.
On June 7, 2021 and June 8, 2021, the Company issued convertible notes in the amount of $696,000 and $441,000 to two unrelated parties, in exchange for their assumption of related party loans owed to Cayo for the same amounts. These notes are convertible into common stock at the rate equivalent to 80% of the Company’s 30-day average stock price prior to conversion but no less than $0.10 value per share of common stock. Due to these provisions, the embedded conversion option does not qualify for derivative accounting under ASC 815-15, Derivatives and Hedging.
A summary of changes to the convertible notes for the year ended August 31, 2021 is as follows:
Carrying value of Convertible Notes at August 31, 2020 | $ | 464,650 | ||
New principal | 1,671,170 | |||
Total principal | 2,135,820 | |||
Less: conversion of principal | (1,122,500 | ) | ||
Less: discount related to fair value of the embedded conversion feature | (16,133 | ) | ||
Less: discount related to original issue discount | (1,565 | ) | ||
Add: amortization of discount | 617,934 | |||
Carrying value of Convertible Notes at August 31, 2021 | $ | 1,613,556 |
NOTE 8 – DERIVATIVE LIABILITY
The Company has determined that the variable conversion prices under its convertible notes that do not have a floor price caused the embedded conversion feature to be accounted for as a derivative instrument. The remaining notes as of August 31, 2021, are convertible into common stock at the rate equivalent to 80% of the Company’s 30-day average stock price prior to conversion but no less than $0.10 value per share of common stock.
The change in fair values of the derivative liabilities related to the Convertible Notes for the year ended August 31, 2021 is summarized as:
Fair value at August 31, | Quoted market prices for identical assets/liabilities | Significant other observable inputs | Significant unobservable inputs | |||||||||||||
2021 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Derivative Liability | $ | - | $ | - | $ | - | $ | - | ||||||||
Fair value of derivatives at August 31, 2020 | $ | 307,446 | ||||||||||||||
Addition of new derivative liabilities upon issuance of convertible notes as debt discount | 16,133 | |||||||||||||||
Reduction of derivative liabilities from conversion of convertible notes to shares of common stock | (532,647 | ) | ||||||||||||||
Loss on change in fair value of derivative liabilities | 209,068 | |||||||||||||||
Fair value of derivative liabilities at August 31, 2021 | $ | - |
F-30
NOTE 9 – COMMON STOCK
As of August 31, 2021, and 2020, a total of 51,780,838 and 50,500,011 shares of common stock were issued and outstanding, respectively. The Company has not issued the stock-based compensation of 250,000 shares of common stock to Patrick Burkert or the 200,000 shares of common stock to Patrick Heneise.
During the year ended August 31, 2021, the Company issued 1,280,827 common shares to satisfy the conversion of $1,122,500 of convertible promissory notes.
NOTE 10 – SHARE-BASED COMPENSATION
Stock Options
During the year ended August 31, 2021, the Company granted options for the purchase of the Company’s common stock to certain employees and consultants as consideration for services rendered. The terms of the stock option grants are determined by the Company’s Board of Directors. The Company’s stock options generally vest upon the one-year anniversary date of the grant and have a maximum term of fifteen months.
The following summarizes the stock option activity for the year ended August 31, 2021:
Options Outstanding | Weighted-Average Exercise Price | |||||||
Balance as of August 31, 2020 | - | - | ||||||
Grants | 625,000 | $ | 0.10 | |||||
Exercised | - | - | ||||||
Forfeited | (450,000 | ) | 0.10 | |||||
Balance as of August 31, 2021 | 175,000 | $ | 0.10 |
The weighted average grant date fair value of stock options granted during the year ended August 31, 2021 was $1.08. The total fair value of stock options granted during the year ended August 31, 2021 was approximately $676,262. The total fair value of stock options that was forfeited during the year ended August 31, 2021 was approximately $580,438. The total share-based compensation expense in connection with issuance of stock options recognized during the year ended August 31, 2021 was $95,825. The fair value of each stock option is estimated on the date of grant using the Black-Scholes-Merton option pricing model with the following weighted average assumptions for stock options granted during the year ended August 31, 2021:
Expected term (years) | 1.25 years | |||
Expected stock price volatility | 115-632 | % | ||
Weighted-average risk-free rate | 0.10-0.20 | % | ||
Expected dividend | - |
Volatility is a measure of the amount by which a financial variable such as share price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. The Company estimates expected volatility giving primary consideration to the historical volatility of its common stock. The risk-free interest rate is based on the published yield available on U.S. Treasury issues with an equivalent term remaining equal to the expected life of the stock option. The expected lives of the stock options represent the estimated period of time until exercise or forfeiture and are based on the simplified method of using the mid-point between the vesting term and the original contractual term.
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The following summarizes certain information about stock options vested and expected to vest as of August 31, 2021:
Number of Options | Weighted-Average Remaining Contractual Life (in Years) | Weighted-Average Exercise Price | ||||||||||
Outstanding | 175,000 | 0.58 | $ | 0.10 | ||||||||
Exercisable | 175,000 | 0.58 | $ | 0.10 | ||||||||
Expected to vest | - | 0.58 | $ | 0.10 |
Restricted Stock Awards
During the year ended August 31, 2021, the Company issued restricted stock awards for shares of common stock which have been reserved for the holders of the awards. Restricted stock awards were issued to certain employees and consultants as consideration for services rendered. The terms of the restricted stock units are determined by the Company’s Board of Directors. The Company’s restricted stock shares generally vest over a period of one year.
The following summarizes the restricted stock activity for the year ended August 31, 2021 and year ended August 31, 2020:
Shares | Weighted-Average Fair Value per Share | |||||||
Balance as of August 31, 2019 | - | - | ||||||
Shares of restricted stock granted | 500,000 | $ | 1.25 | |||||
Forfeited | - | - | ||||||
Balance as of August 31, 2020 | 500,000 | $ | 1.25 | |||||
Shares of restricted stock granted | 200,000 | - | ||||||
Forfeited | (250,000 | ) | - | |||||
Balance as of August 31, 2021 | 450,000 | $ | 1.25 |
August 31, | August 31, | |||||||
2021 | 2020 | |||||||
Number of Restricted Stock Awards | ||||||||
Vested | 450,000 | 50,000 | ||||||
Non-vested | - | 450,000 | ||||||
450,000 | 500,000 |
As of August 31, 2021 and 2020, there was unrecognized compensation cost of $0 and $500,000, related to non-vested share-based compensation, respectively, which is expected to be recognized over the next year. In addition, none of the restricted share awards presented above has been issued or outstanding as of August 31, 2021.
NOTE 11 – INCOME TAXES
The Company provides for income taxes under FASB ASC 740, Accounting for Income Taxes. FASB ASC 740 requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect currently.
FASB ASC 740 requires the reduction of deferred tax assets by a valuation allowance, if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. In the Company’s opinion, it is uncertain whether they will generate sufficient taxable income in the future to fully utilize the net deferred tax asset. Accordingly, a valuation allowance equal to the deferred tax asset has been recorded.
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On December 22, 2017, the US Congress enacted the Tax Cuts and Jobs Act (Tax Reform Legislation), which made significant changes to US federal income tax law including a reduction in the corporate tax rate to 21% for tax years beginning with 2018. These changes will impact the changes in the valuation allowance, components of the tax rate reconciliation and realization of loss carryforwards.
The Company has available net operating loss carry-forward of approximately $1,761,676. The availability of the Company’s net operating loss carry forwards are subject to limitation if there is a 50% or more positive change in the ownership of the Company’s stock.
For the year ended August 31, | 2021 | 2020 | ||||||
Net operating loss carryforwards | $ | (3,116,169 | ) | $ | (409,914 | ) | ||
Temporary differences: | ||||||||
Stock based compensation | 595,825 | 62,500 | ||||||
Accrued expenses | 373,038 | 189,680 | ||||||
Permanent differences: | ||||||||
Change in fair value of derivative liability | 209,068 | (456,698 | ) | |||||
Amortization of debt discount | 617,934 | 169,794 | ||||||
Amortization of right of use asset | 119,572 | - | ||||||
Amortization of capitalized software | 70,085 | - | ||||||
Depreciation | 8,597 | - | ||||||
Tax loss for the year | (1,122,050 | ) | (444,638 | ) | ||||
Estimated effective tax rate | 21 | % | 21 | % | ||||
Net Deferred tax asset | $ | 235,631 | $ | 149,919 | ||||
Less: valuation allowance | (235,631 | ) | (149,919 | ) | ||||
Total Deferred tax asset | $ | - | $ | - |
Uncertain Tax Positions
Unrecognized income tax benefits represent income tax positions taken on income tax returns but not yet recognized in the financial statements. If recognized, substantially all of the unrecognized tax benefits for the Company’s fiscal years ended August 31, 2021 and 2020 would affect the effective income tax rate. There were no unrecognized income tax benefits as of August 31, 2021 and 2020.
The Company recognizes the interest and penalties accrued related to unrecognized tax benefits in income tax expense. The Company did not recognize any expenses any interest and penalties as of August 31, 2021 and 2020, respectively.
All tax years since inception are open for examination by taxing authorities.
NOTE 12 – SUBSEQUENT EVENTS
From September 1, 2021 until the date of this document December 30, 2021 the Company borrowed from Cayo the total amount of $121,537. The advances are unsecured, due on demand and non-interest bearing.
On October 26, 2021, the Company issued 875,000 common shares to an unrelated third-party vendor for marketing services valued at $0.415 per share for a total $363,125.
On November 12, 2021, the Company issued 1,055,556 common shares to an unrelated third-party vendor for marketing services valued at $0.36 per share for a total $380,000.
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PART III — EXHIBITS
Index to Exhibits
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11.1* | Consent of Independent Registered Public Accounting Firm | |
11.2* | Consent of the Law Offices of Thomas J. Beener (included in the opinion filed as Exhibit 12.1) | |
12.1* | Legal Opinion of the Law Offices of Thomas J. Beener | |
21.1* | Articles of Organization for Boatim Europe S.L. | |
Graphic | Corporate logo- Boatim, Inc. |
* | Filed herewith |
** | Furnished herewith (not filed). |
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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 Miami, State of Florida, on February 9, 2022.
(Exact name of issuer as specified in its charter): | BOATIM, Inc. |
This Offering Statement has been signed by the following persons in the capacities and on the dates indicated.
By (Signature and Title): | /s/ Joseph Johnson |
Joseph Johnson, Chief Executive Officer (Principal Executive Officer). |
(Date): February 9, 2022
By (Signature and Title): | /s/ Mario A. Beckles |
Mario
A. Beckles, Chief Financial Officer (Principal Financial Officer, Principal Accounting Officer). |
(Date): February 9, 2022
SIGNATURES OF DIRECTORS:
Signature | Title | Date | ||
/s/ Joseph Johnson | Chief Executive Officer and Director | February 9, 2022 | ||
Joseph Johnson | (Principal Executive Officer) | |||
/s/ Mario A. Beckles | Chief Financial Officer and Director | February 9, 2022 | ||
Mario A. Beckles | (Principal Financial Officer) | |||
/s/ Wolfgang Tippner | Director | February 9, 2022 | ||
Wolfgang Tippner |
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Exhibit 4.1
Exhibit 4.2
BOATIM, INC.
SUBSCRIPTION AGREEMENT
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. THIS INVESTMENT IS SUITABLE ONLY FOR PERSONS WHO CAN BEAR THE ECONOMIC RISK FOR AN INDEFINITE PERIOD OF TIME AND WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT. FURTHERMORE, INVESTORS MUST UNDERSTAND THAT SUCH INVESTMENT IS ILLIQUID AND IS EXPECTED TO CONTINUE TO BE ILLIQUID FOR AN INDEFINITE PERIOD OF TIME. NO PUBLIC MARKET EXISTS FOR THE SECURITIES, AND NO PUBLIC MARKET IS EXPECTED TO DEVELOP FOLLOWING THIS OFFERING.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES OR BLUE SKY LAWS AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND STATE SECURITIES OR BLUE SKY LAWS. ALTHOUGH AN OFFERING STATEMENT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE “SEC”), THAT OFFERING STATEMENT DOES NOT INCLUDE THE SAME INFORMATION THAT WOULD BE INCLUDED IN A REGISTRATION STATEMENT UNDER THE ACT. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON THE MERITS OF THIS OFFERING OR THE ADEQUACY OR ACCURACY OF THE SUBSCRIPTION AGREEMENT OR ANY OTHER MATERIALS OR INFORMATION MADE AVAILABLE TO SUBSCRIBER IN CONNECTION WITH THIS OFFERING THROUGH THE WEBSITE MAINTAINED BY THE COMPANY OR THROUGH WEALTHFORGE SECURITIES, LLC (THE “BROKER”). ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
PROSPECTIVE INVESTORS MAY NOT TREAT THE CONTENTS OF THE SUBSCRIPTION AGREEMENT, THE OFFERING CIRCULAR OR ANY OF THE OTHER MATERIALS RELATING TO THE OFFERING AND PRESENTED TO INVESTORS ON THE COMPANY’S WEBSITE OR PROVIDED BY THE BROKER (COLLECTIVELY, THE “OFFERING MATERIALS”) OR ANY PRIOR OR SUBSEQUENT COMMUNICATIONS FROM THE COMPANY OR ANY OF ITS OFFICERS, EMPLOYEES OR AGENTS (INCLUDING “TESTING THE WATERS” MATERIALS) AS INVESTMENT, LEGAL OR TAX ADVICE. IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THIS OFFERING, INCLUDING THE MERITS AND THE RISKS INVOLVED. EACH PROSPECTIVE INVESTOR SHOULD CONSULT THE INVESTOR’S OWN COUNSEL, ACCOUNTANT AND OTHER PROFESSIONAL ADVISOR AS TO INVESTMENT, LEGAL, TAX AND OTHER RELATED MATTERS CONCERNING THE INVESTOR’S PROPOSED INVESTMENT.
THE OFFERING MATERIALS MAY CONTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION RELATING TO, AMONG OTHER THINGS, THE COMPANY, ITS BUSINESS PLAN AND STRATEGY, AND ITS INDUSTRY. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF, ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY’S MANAGEMENT. WHEN USED IN THE OFFERING MATERIALS, THE WORDS “ESTIMATE,” “PROJECT,” “BELIEVE,” “ANTICIPATE,” “INTEND,” “EXPECT” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS, WHICH CONSTITUTE FORWARD LOOKING STATEMENTS. THESE STATEMENTS REFLECT MANAGEMENT’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE THE 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. THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO REVISE OR UPDATE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER SUCH DATE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
THE COMPANY MAY NOT BE OFFERING THE SECURITIES IN EVERY STATE. THE OFFERING MATERIALS DO NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY STATE OR JURISDICTION IN WHICH THE SECURITIES ARE NOT BEING OFFERED.
THE INFORMATION PRESENTED IN THE OFFERING MATERIALS WAS PREPARED BY THE COMPANY SOLELY FOR THE USE BY PROSPECTIVE INVESTORS IN CONNECTION WITH THIS OFFERING. NO REPRESENTATIONS OR WARRANTIES ARE MADE AS TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED IN ANY OFFERING MATERIALS, AND NOTHING CONTAINED IN THE OFFERING MATERIALS IS OR SHOULD BE RELIED UPON AS A PROMISE OR REPRESENTATION AS TO THE FUTURE PERFORMANCE OF THE COMPANY.
THE COMPANY RESERVES THE RIGHT IN ITS SOLE DISCRETION AND FOR ANY REASON WHATSOEVER TO MODIFY, AMEND AND/OR WITHDRAW ALL OR A PORTION OF THE OFFERING AND/OR ACCEPT OR REJECT IN WHOLE OR IN PART ANY PROSPECTIVE INVESTMENT IN THE SECURITIES OR TO ALLOT TO ANY PROSPECTIVE INVESTOR LESS THAN THE AMOUNT OF SECURITIES SUCH INVESTOR DESIRES TO PURCHASE. EXCEPT AS OTHERWISE INDICATED, THE OFFERING MATERIALS SPEAK AS OF THEIR DATE. NEITHER THE DELIVERY NOR THE PURCHASE OF THE SECURITIES SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THAT DATE.
Ladies and Gentlemen:
1. Subscription.
(a) The undersigned (“Subscriber”) hereby irrevocably subscribes for and agrees to purchase Common Stock (the “Securities”), of Boatim, Inc., a Nevada corporation (the “Company”), at a purchase price of $0.12 per share of Common Stock (the “Per Security Price”), upon the terms and conditions set forth herein.
(b) Subscriber understands that the Securities are being offered pursuant to an offering circular (the “Offering Circular”) filed with the SEC as part of the Offering Statement. By executing this Subscription Agreement, Subscriber acknowledges that Subscriber has received this Subscription Agreement, copies of the Offering Circular and Offering Statement, including exhibits thereto, and any other information required by the Subscriber to make an investment decision.
(c) The Subscriber’s subscription may be accepted or rejected in whole or in part, at any time prior to a Closing Date (as hereinafter defined), by the Company at its sole discretion. In addition, the Company, at its sole discretion, may allocate to Subscriber only a portion of the number of Securities Subscriber has subscribed for. The Company will notify Subscriber whether this subscription is accepted (whether in whole or in part) or rejected. If Subscriber’s subscription is rejected, Subscriber’s payment (or portion thereof if partially rejected) will be returned to Subscriber without interest and all of Subscriber’s obligations hereunder shall terminate.
(d) The aggregate number of Securities sold shall not exceed 41,666,667 shares (the “Maximum Offering”). The Company may accept subscriptions until the termination date given in the Offering Circular, unless otherwise extended by the Company in its sole discretion in accordance with applicable SEC regulations for such other period required to sell the Maximum Offering (the “Termination Date”). The Company may elect at any time to close all or any portion of this offering, on various dates at or prior to the Termination Date (each a “Closing Date”).
(e) In the event of rejection of this subscription in its entirety, or in the event the sale of the Securities (or any portion thereof) is not consummated for any reason, this Subscription Agreement shall have no force or effect, except for Section 5 hereof, which shall remain in force and effect.
2. Purchase Procedure.
(a) Payment. The purchase price for the Securities shall be paid simultaneously with the execution and delivery to the Company of the signature page of this Subscription Agreement. Subscriber shall deliver a signed copy of this Subscription Agreement (which may be executed and delivered electronically), along with payment for the aggregate purchase price of the Securities by ACH electronic transfer or wire transfer to an account designated by the Company, or by any combination of such methods.
(b) No Escrow. The proceeds of this offering will not be placed into an escrow account. As there is no minimum offering, upon the approval of any subscription to this Offering Circular, the Company shall immediately deposit said proceeds into the bank account of the Company and may dispose of the proceeds in accordance with the Use of Proceeds.
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3. Representations and Warranties of the Company.
The Company represents and warrants to Subscriber that the following representations and warranties are true and complete in all material respects as of the date of each Closing Date, except as otherwise indicated. For purposes of this Agreement, an individual shall be deemed to have “knowledge” of a particular fact or other matter if such individual is actually aware of such fact. The Company will be deemed to have “knowledge” of a particular fact or other matter if one of the Company’s current officers has, or at any time had, actual knowledge of such fact or other matter.
(a) Organization and Standing. The Company is a corporation duly formed, validly existing and in good standing under the laws of the State of Nevada. The Company has all requisite power and authority to own and operate its properties and assets, to execute and deliver this Subscription Agreement and any other agreements or instruments required hereunder. The Company is duly qualified and is authorized to do business and is in good standing as a foreign corporation in all jurisdictions in which the nature of its activities and of its properties (both owned and leased) makes such qualification necessary, except for those jurisdictions in which failure to do so would not have a material adverse effect on the Company or its business.
(b) Issuance of the Securities. The issuance, sale and delivery of the Securities in accordance with this Subscription Agreement have been duly authorized by all necessary corporate action on the part of the Company. The Securities, when so issued, sold and delivered against payment therefor in accordance with the provisions of this Subscription Agreement, will be duly and validly issued, fully paid and non-assessable.
(c) Authority for Agreement. The execution and delivery by the Company of this Subscription Agreement and the consummation of the transactions contemplated hereby (including the issuance, sale and delivery of the Securities) are within the Company’s powers and have been duly authorized by all necessary corporate action on the part of the Company. Upon full execution hereof, this Subscription Agreement shall constitute a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies and (iii) with respect to provisions relating to indemnification and contribution, as limited by considerations of public policy and by federal or state securities laws.
(d) No filings. Assuming the accuracy of the Subscriber’s representations and warranties set forth in Section 4 hereof, no order, license, consent, authorization or approval of, or exemption by, or action by or in respect of, or notice to, or filing or registration with, any governmental body, agency or official is required by or with respect to the Company in connection with the execution, delivery and performance by the Company of this Subscription Agreement except (i) for such filings as may be required under Regulation A or under any applicable state securities laws, (ii) for such other filings and approvals as have been made or obtained, or (iii) where the failure to obtain any such order, license, consent, authorization, approval or exemption or give any such notice or make any filing or registration would not have a material adverse effect on the ability of the Company to perform its obligations hereunder.
(e) Capitalization. The authorized and outstanding securities of the Company immediately prior to the initial investment in the Securities is as set forth in “Securities Being Offered” in the Offering Circular. Except as set forth in the Offering Circular, there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal), or agreements of any kind (oral or written) for the purchase or acquisition from the Company of any of its securities.
(f) Financial statements. Complete copies of the Company’s financial statements consisting of the balance sheets of the Company given in the Offering Circular and the related statements of income, stockholders’ equity and cash flows for the two-year period then ended (the “Financial Statements”) have been made available to the Subscriber and appear in the Offering Circular. The Financial Statements are based on the books and records of the Company and fairly present in all material respects the financial condition of the Company as of the respective dates they were prepared and the results of the operations and cash flows of the Company for the periods indicated.
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(g) Proceeds. The Company shall use the proceeds from the issuance and sale of the Securities as set forth in “Use of Proceeds” to issuer in the Offering Circular.
(h) Litigation. There is no pending action, suit, proceeding, arbitration, mediation, complaint, claim, charge or investigation before any court, arbitrator, mediator or governmental body, or to the Company’s knowledge, currently threatened in writing (a) against the Company or (b) against any consultant, officer, manager, director or key employee of the Company arising out of his or her consulting, employment or board relationship with the Company or that could otherwise materially impact the Company.
4. Representations and Warranties of Subscriber. By executing this Subscription Agreement, Subscriber (and, if Subscriber is purchasing the Securities subscribed for hereby in a fiduciary capacity, the person or persons for whom Subscriber is so purchasing) represents and warrants, which representations and warranties are true and complete in all material respects as of such Subscriber’s respective Closing Date(s):
(a) Requisite Power and Authority. Such Subscriber has all necessary power and authority under all applicable provisions of law to execute and deliver this Subscription Agreement and other agreements required hereunder and to carry out their provisions. All action on Subscriber’s part required for the lawful execution and delivery of this Subscription Agreement and other agreements required hereunder have been or will be effectively taken prior to the Closing Date. Upon their execution and delivery, this Subscription Agreement and other agreements required hereunder will be valid and binding obligations of Subscriber, enforceable in accordance with their terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights and (b) as limited by general principles of equity that restrict the availability of equitable remedies.
(b) Investment Representations. Subscriber understands that the Securities have not been registered under the Securities Act of 1933, as amended (the “Securities Act”). Subscriber also understands that the Securities are being offered and sold pursuant to an exemption from registration contained in the Securities Act based in part upon Subscriber’s representations contained in this Subscription Agreement.
(c) Illiquidity and Continued Economic Risk. Subscriber acknowledges and agrees that there is a limited public market for the Securities and that there is no guarantee that a market for their resale will ever exist. Subscriber must bear the economic risk of this investment indefinitely and the Company has no obligation to list the Securities on any market or take any steps (including registration under the Securities Act or the Securities Exchange Act of 1934, as amended) with respect to facilitating trading or resale of the Securities. Subscriber acknowledges that Subscriber is able to bear the economic risk of losing Subscriber’s entire investment in the Securities. Subscriber also understands that an investment in the Company involves significant risks and has taken full cognizance of and understands all of the risk factors relating to the purchase of Securities.
(d) Company Information. Subscriber understands that the Company is subject to all the risks that apply to early-stage companies, whether or not those risks are explicitly set out in the Offering Circular. Subscriber has had such opportunity as it deems necessary (which opportunity may have presented through online chat or commentary functions) to discuss the Company’s business, management and financial affairs with managers, officers and management of the Company and has had the opportunity to review the Company’s operations and facilities. Subscriber has also had the opportunity to ask questions of and receive answers from the Company and its management regarding the terms and conditions of this investment. Subscriber acknowledges that except as set forth herein, no representations or warranties have been made to Subscriber, or to Subscriber’s advisors or representative, by the Company or others with respect to the business or prospects of the Company or its financial condition.
(e) Valuation. The Subscriber acknowledges that the price of the Securities was set by the Company on the basis of the Company’s internal valuation and no warranties are made as to value. The Subscriber further acknowledges that future offerings of Securities may be made at lower valuations, with the result that the Subscriber’s investment will bear a lower valuation.
(f) Domicile. Subscriber maintains Subscriber’s domicile (and is not a transient or temporary resident) at the address shown on the signature page.
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(g) No Brokerage Fees. There are no claims for brokerage commission, finders’ fees or similar compensation in connection with the transactions contemplated by this Subscription Agreement or related documents based on any arrangement or agreement binding upon Subscriber.
(h) Issuer-Directed Offering; No Underwriter. Subscriber understands that the offering is being conducted by the Company directly (issuer-directed) and the Company has not engaged a selling agent such as an underwriter or placement agent.
(i) Foreign Investors. If Subscriber is not a United States person (as defined by Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended), Subscriber hereby represents that it has satisfied itself as to the full observance of the laws of its jurisdiction in connection with any invitation to subscribe for the Securities or any use of this Subscription Agreement, including (i) the legal requirements within its jurisdiction for the purchase of the Securities, (ii) any foreign exchange restrictions applicable to such purchase, (iii) any governmental or other consents that may need to be obtained, and (iv) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale, or transfer of the Securities. Subscriber’s subscription and payment for and continued beneficial ownership of the Securities will not violate any applicable securities or other laws of the Subscriber’s jurisdiction.
5. Survival of Representations. The representations, warranties and covenants made by the Subscriber herein shall survive the Termination Date of this Agreement.
6. Governing Law; Jurisdiction. This Subscription Agreement shall be governed and construed in accordance with the laws of the State of Nevada.
7. Notices. Notice, requests, demands and other communications relating to this Subscription Agreement and the transactions contemplated herein shall be in writing and shall be deemed to have been duly given if and when (a) delivered personally, on the date of such delivery; or (b) mailed by registered or certified mail, postage prepaid, return receipt requested, in the third day after the posting thereof; or (c) emailed, telecopied or cabled, on the date of such delivery to the address of the respective parties as follows:
If to the Company, to:
Boatim, Inc.
7950 NW 53rd Street, Suite 337
Miami, FL 33166
If to a Subscriber, to Subscriber’s address as shown on the signature page hereto
or to such other address as may be specified by written notice from time to time by the party entitled to receive such notice. Any notices, requests, demands or other communications by telecopy or cable shall be confirmed by letter given in accordance with (a) or (b) above.
8. Miscellaneous.
(a) All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the person or persons or entity or entities may require.
(b) This Subscription Agreement is not transferable or assignable by Subscriber.
(c) The representations, warranties and agreements contained herein shall be deemed to be made by and be binding upon Subscriber and its heirs, executors, administrators and successors and shall inure to the benefit of the Company and its successors and assigns.
(d) None of the provisions of this Subscription Agreement may be waived, changed or terminated orally or otherwise, except as specifically set forth herein or except by a writing signed by the Company and Subscriber.
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(e) In the event any part of this Subscription Agreement is found to be void or unenforceable, the remaining provisions are intended to be separable and binding with the same effect as if the void or unenforceable part were never the subject of agreement.
(f) The invalidity, illegality or unenforceability of one or more of the provisions of this Subscription Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Subscription Agreement in such jurisdiction or the validity, legality or enforceability of this Subscription Agreement, including any such provision, in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.
(g) This Subscription Agreement supersedes all prior discussions and agreements between the parties with respect to the subject matter hereof and contains the sole and entire agreement between the parties hereto with respect to the subject matter hereof.
(h) The terms and provisions of this Subscription Agreement are intended solely for the benefit of each party hereto and their respective successors and assigns, and it is not the intention of the parties to confer, and no provision hereof shall confer, third-party beneficiary rights upon any other person.
(i) The headings used in this Subscription Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof.
(j) This Subscription Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.
(k) If any recapitalization or other transaction affecting the stock of the Company is effected, then any new, substituted or additional securities or other property which is distributed with respect to the Securities shall be immediately subject to this Subscription Agreement, to the same extent that the Securities, immediately prior thereto, shall have been covered by this Subscription Agreement.
(l) | No failure or delay by any party in exercising any right, power or privilege under this Subscription Agreement shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. |
[SIGNATURE PAGE FOLLOWS]
6
Boatim, Inc.
SUBSCRIPTION AGREEMENT SIGNATURE PAGE
The undersigned, desiring to purchase Common Stock of Boatim, Inc., by executing this signature page, hereby executes, adopts and agrees to all terms, conditions and representations of the Subscription Agreement.
(a) | The number of shares of Common Stock the undersigned hereby irrevocably subscribes for is: |
(b) | The aggregate purchase price (based on a purchase price of $0.12 per Share) for the Common Stock the undersigned hereby irrevocably subscribes for is: |
(c) | The Securities being subscribed for will be owned by, and should be recorded on the Company’s books as held in the name of: |
(print name of owner or joint owners) |
Signature(s) | Signature | |
Name (Please Print) | Name (Please Print) | |
Entity Name (if applicable) | ||
Signatory title (if applicable) | ||
Email address | Email address | |
Address | Address | |
Telephone Number | Telephone Number | |
Social Security Number/EIN | Social Security Number | |
Date | Date |
This Subscription is accepted on ________________________, 2022
by | ||
(Name, Signature, Date) |
7
Exhibit 10.1
CONVERTIBLE PROMISSORY NOTE
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
Principal Amount: US$44,550.00 | Issue Date: 12/22/2020 |
CONVERTIBLE PROMISSORY NOTE
(Due: 06/22/2021)
FOR VALUE RECEIVED, the undersigned, BOATIM INC., a Nevada corporation (the “Company”) promises to pay to the order of AWT Management Services Sdn. Bhd., or permitted assigns (hereinafter, with any subsequent holder, the “Holder”) the non-interest bearing principal sum of US$44,550.00.
1. | Application of Payments. All payments shall be in lawful money of the United States of America, except as set forth below in connection with conversion of this Note. |
2. | Conversion Right. On Maturity Date, The Holder shall have the right at any time to convert all or any part of the outstanding and unpaid non-interest bearing principal into fully paid and non-assessable shares of Common Stock by submitting to the Borrower a Notice of Conversion. |
3. | Conversion Price. The “Conversion Price” per share shall be equal to 80% (eighty per cent) of the 30-day average price per share of BOATIM INC. as published on official trading records, but no less than $0.10 value per share of Common Stock. |
4. | Reservation of Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from pre-emptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note. |
5. | Successors and Assigns. Subject to the restrictions on transfer set forth in this Note, the rights and obligations of the Company and the Holder of this Note shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties. |
6. | Assignment. This Note shall be assignable by the Holder with written consent of the Company. |
7. | Waivers. The terms of this Note shall be construed and governed in accordance with the laws of Nevada. |
8. | Amendment or Waiver. Any term of this Note may be amended or waived with the written consent of the Company and Holder. Any amendment or waiver effected in accordance with this section shall be binding upon Holder at the time outstanding, each future Holder of any Note and the Company. |
9. | Notices. Any notice required or permitted under this Note shall be given in writing and shall be deemed effectively given (i) at the time of personal delivery, if delivery is in person; (ii) one (1) business day after transmission by email. Notices shall be delivered (i) if to the Holder, to the address and contact information for Holder set forth in the Company’s books and records, and (ii) if to the Company, to Company’s registered address at the time or at such other address as any party may designate by giving written notice to the other party. |
10. | Severability. In the event any one or more of the provisions contained in this Note shall, for any reason, be held to be invalid, illegal, or unenforceable in whole or in part or in any respect, or in the event any one or more of the provisions of this Note operate or would prospectively operate to invalidate this Note, such invalidity, illegality, or unenforceability shall not affect any other provision of this Note. In such instance, this Note shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein and the remaining provisions of this Note shall remain operative and in full force and effect and in no way shall be affected, prejudiced or disturbed thereby. |
11. | Delays or Omissions. No delay or omission on the part of the Holder in exercising any right under this Note shall operate as a waiver of such right or of any other right of the Holder, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same or any other right on any future occasion. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available. |
12. | Headings. The headings in this Note are for convenience of reference only and shall not define or limit any terms or provisions hereof. |
13. | Entire Agreement. This Note constitutes the entire agreement between the parties, and no party shall be liable or bound to any other party in any manner by any warranties, representations, or covenants except as specifically set forth herein or therein. |
IN WITNESS WHEREOF, Company has caused this Convertible Promissory Note to be signed in its name as of the date first above written.
BOATIM Inc. | |
Authorised Signatory |
Agreed and Accepted by the Holder: | |
Authorised Signatory |
EXHIBIT A
NOTICE OF CONVERSION
The undersigned hereby elects to convert $[●] of the principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of BOATIM Inc., a Nevada corporation (the “Borrower”), according to the conditions of the Convertible Promissory Note of the Borrower dated as of [●] (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.
Box Checked as to applicable instructions:
☐ | The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal At Custodian system (“DWAC Transfer”). |
Name of DTC Prime Broker:
Account Number:
☐ | The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto: |
Name: | ||||||
Address: | ||||||
Date of Conversion: | ||||||
Applicable Conversion Price: | $ | |||||
Number of Shares of Common Stock to be Issued Pursuant to Conversion of the Notes: | ||||||
Amount of Principal Balance Due remaining Under the Note after this conversion: | ||||||
HOLDER | ||||||
By: | ||||||
Name: | ||||||
Title: | ||||||
Date: |
Exhibit 10.2
ASSIGNEMENT OF
CONVERTIBLE PROMISSORY NOTE
This General Assignment Agreement (the “Assignment”) of the rights to receive and hold (a) Convertible Promissory Note(s) (the “Note(s)”) is made this December 22nd, 2020, by and between Step Well Advisory Ltd. of Macao (the “Assignor”) and AWT Management Services Sdn. Bhd. of Kuala Lumpur, Malaysia (the “Assignee”).
WHEREAS, payments were made by or on behalf of Assignor to Boatim Inc. (the “Borrower”) under a general convertible promissory note funding arrangement and Assignor wishes to assign its claims against Borrower from such payments to Assignee for valuable consideration received.
NOW THEREFORE, the undersigned agree as follows:
AGREEMENT
1. Assignment. Subject to the terms and conditions of this Assignment, on the Closing Date (as defined below) the Assignee will assume from Assignor all rights and obligations under the Note(s) as is/are to be entered into by Assignee for up to $500,000.00 as payments are made to Borrower and assignable claims arise for Assignor from time to time.
2. Assignment Price. The Assignee shall, under this Assignment, pay to Assignee the amount of 75% of the face value of any Note under this Agreement within 12 months of the date of each assignment for the assignment, where the transfer of the Note(s) to Assignee shall occur no later than 5 business days after any relevant payment from Assignor to Borrower has been affected or on such other date as Assignee and Assignor shall agree and confirm in writing (the “Assignment Date”).
3. Dispute Resolution.
a) Binding Arbitration. Any claim or dispute arising out of the terms, provisions or performance of this Agreement shall be resolved only by binding arbitration, which shall result in a final, binding and non-appealable ruling, as set forth below, with the exception of good faith and necessary applications for injunctive relief, which are the only matters that may be submitted to the courts.
The following procedural rules shall apply and shall be strictly adhered to. Written demand for arbitration shall be served on the other party and the proposed arbitrator. The arbitration hearing will be scheduled by the arbitrator immediately, and held within 30 days of demand, or acceptance by the arbitrator of the matter, whichever occurs last, unless otherwise agreed to, in writing, by the parties. Immediately upon acceptance of the matter, the arbitrator shall submit to the parties a briefing schedule. The arbitrator shall limit presentation of evidence and argument to no more than eight hours, and shall have the final ruling served on the parties no more than 48 hours after conclusion of the hearing, unless otherwise agreed to in writing by the parties.
Discovery shall be allowed only as specifically directed by the arbitrator, and in such a manner as to avoid delay of the time periods set forth herein.
b) Attorney Fees. If any action is commenced to enforce or interpret this Agreement, the prevailing Party shall be entitled to recover its reasonable attorneys’ fees and court costs in addition to any other remedy it may obtain or be awarded, as long as he has voluntarily complied with the arbitration provision set forth hereinabove. If such a prevailing party has refused or failed to participate in the above-described arbitration process, by, without limitation, non-compliance with the stated time requirements (except as modified by the parties in writing), initially filing an action in some other forum (except as provided for hereinabove), or otherwise, then he shall not be entitled to attorney’s fees or costs even if he is the prevailing party in any action arising out of the terms of this Agreement. Further, any attempt to file in some other forum may be opposed by the responding party by a motion to compel arbitration, or other relevant motion. In the arbitration proceeding, the “prevailing party” shall mean the party determined by the court to most nearly prevail and not necessarily the party in whose favor a judgment is rendered.
4. Miscellaneous.
a) Governing Law. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Nevada, without giving effect to principles of conflicts of law.
b) Entire Agreement; Enforcement of Rights. This Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter herein and merges all prior discussions between them. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.
c) Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms.
d) Construction. This Agreement is the result of negotiations between and has been reviewed by each of the parties hereto and their respective counsel, if any; accordingly, this Agreement shall be deemed to be the product of all of the parties hereto, and no ambiguity shall be construed in favor of or against any one of the parties hereto.
e) Notices. Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient when delivered personally or sent by fax or 48 hours after being deposited in the mail, as certified or registered mail, with postage prepaid, and addressed to the party to be notified at such party’s address or fax number as set forth below or as subsequently modified by written notice.
f) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.
g) Successors and Assigns. The rights and benefits of this Agreement shall inure to the benefit of, and be enforceable by the Seller’s successors and assigns. The rights and obligations of Purchaser under this Agreement may only be assigned with the prior written consent of the Seller.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
ASSIGNOR: | ASSIGNEE: | |||
By: | By: | |||
Name: | Step Well Advisory Ltd. | Name: | AWT Management Services Sdn. Bhd. | |
ACCEPTED AND AGREED TO FOR BORROWER: | ||||
By: | ||||
Name: | Boatim Inc. |
Exhibit 10.3
CONVERTIBLE PROMISSORY NOTE
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
Principal Amount: US$106,500.00 | Issue Date: 03/22/2021 |
CONVERTIBLE PROMISSORY NOTE
(Due: 09/22/2021)
FOR VALUE RECEIVED, the undersigned, BOATIM INC., a Nevada corporation (the “Company”) promises to pay to the order of AWT Management Services Sdn. Bhd., or permitted assigns (hereinafter, with any subsequent holder, the “Holder”) the non-interest bearing principal sum of US$106,500.00.
1. | Application of Payments. All payments shall be in lawful money of the United States of America, except as set forth below in connection with conversion of this Note. |
2. | Conversion Right. On Maturity Date, The Holder shall have the right at any time to convert all or any part of the outstanding and unpaid non-interest bearing principal into fully paid and non-assessable shares of Common Stock by submitting to the Borrower a Notice of Conversion. |
3. | Conversion Price. The “Conversion Price” per share shall be equal to 80% (eighty per cent) of the 30-day average price per share of BOATIM INC. as published on official trading records, but no less than $0.10 value per share of Common Stock. |
4. | Reservation of Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from pre-emptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note. |
5. | Successors and Assigns. Subject to the restrictions on transfer set forth in this Note, the rights and obligations of the Company and the Holder of this Note shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties. |
6. | Assignment. This Note shall be assignable by the Holder with written consent of the Company. |
7. | Waivers. The terms of this Note shall be construed and governed in accordance with the laws of Nevada. |
8. | Amendment or Waiver. Any term of this Note may be amended or waived with the written consent of the Company and Holder. Any amendment or waiver effected in accordance with this section shall be binding upon Holder at the time outstanding, each future Holder of any Note and the Company. |
9. | Notices. Any notice required or permitted under this Note shall be given in writing and shall be deemed effectively given (i) at the time of personal delivery, if delivery is in person; (ii) one (1) business day after transmission by email. Notices shall be delivered (i) if to the Holder, to the address and contact information for Holder set forth in the Company’s books and records, and (ii) if to the Company, to Company’s registered address at the time or at such other address as any party may designate by giving written notice to the other party. |
10. | Severability. In the event any one or more of the provisions contained in this Note shall, for any reason, be held to be invalid, illegal, or unenforceable in whole or in part or in any respect, or in the event any one or more of the provisions of this Note operate or would prospectively operate to invalidate this Note, such invalidity, illegality, or unenforceability shall not affect any other provision of this Note. In such instance, this Note shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein and the remaining provisions of this Note shall remain operative and in full force and effect and in no way shall be affected, prejudiced or disturbed thereby. |
11. | Delays or Omissions. No delay or omission on the part of the Holder in exercising any right under this Note shall operate as a waiver of such right or of any other right of the Holder, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same or any other right on any future occasion. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available. |
12. | Headings. The headings in this Note are for convenience of reference only and shall not define or limit any terms or provisions hereof. |
13. | Entire Agreement. This Note constitutes the entire agreement between the parties, and no party shall be liable or bound to any other party in any manner by any warranties, representations, or covenants except as specifically set forth herein or therein. |
IN WITNESS WHEREOF, Company has caused this Convertible Promissory Note to be signed in its name as of the date first above written.
BOATIM Inc. | |
Authorised Signatory |
Agreed and Accepted by the Holder: | |
Authorised Signatory |
EXHIBIT A
NOTICE OF CONVERSION
The undersigned hereby elects to convert $[●] of the principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of BOATIM Inc., a Nevada corporation (the “Borrower”), according to the conditions of the Convertible Promissory Note of the Borrower dated as of [●] (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.
Box Checked as to applicable instructions:
☐ | The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal At Custodian system (“DWAC Transfer”). |
Name of DTC Prime Broker:
Account Number:
☐ | The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto: |
Name: | ||||||
Address: | ||||||
Date of Conversion: | ||||||
Applicable Conversion Price: | $ | |||||
Number of Shares of Common Stock to be Issued Pursuant to Conversion of the Notes: | ||||||
Amount of Principal Balance Due remaining Under the Note after this conversion: | ||||||
HOLDER | ||||||
By: | ||||||
Name: | ||||||
Title: | ||||||
Date: |
Exhibit 10.4
CONVERTIBLE PROMISSORY NOTE
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
Principal Amount: US$82,700.00 | Issue Date: 04/01/2021 |
CONVERTIBLE PROMISSORY NOTE
(Due: 10/01/2021)
FOR VALUE RECEIVED, the undersigned, BOATIM INC., a Nevada corporation (the “Company”) promises to pay to the order of AWT Management Services Sdn. Bhd., or permitted assigns (hereinafter, with any subsequent holder, the “Holder”) the non-interest bearing principal sum of US$82,700.00.
1. | Application of Payments. All payments shall be in lawful money of the United States of America, except as set forth below in connection with conversion of this Note. |
2. | Conversion Right. On Maturity Date, The Holder shall have the right at any time to convert all or any part of the outstanding and unpaid non-interest bearing principal into fully paid and non-assessable shares of Common Stock by submitting to the Borrower a Notice of Conversion. |
3. | Conversion Price. The “Conversion Price” per share shall be equal to 80% (eighty per cent) of the 30-day average price per share of BOATIM INC. as published on official trading records, but no less than $0.10 value per share of Common Stock. |
4. | Reservation of Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from pre-emptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note. |
5. | Successors and Assigns. Subject to the restrictions on transfer set forth in this Note, the rights and obligations of the Company and the Holder of this Note shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties. |
6. | Assignment. This Note shall be assignable by the Holder with written consent of the Company. |
7. | Waivers. The terms of this Note shall be construed and governed in accordance with the laws of Nevada. |
8. | Amendment or Waiver. Any term of this Note may be amended or waived with the written consent of the Company and Holder. Any amendment or waiver effected in accordance with this section shall be binding upon Holder at the time outstanding, each future Holder of any Note and the Company. |
9. | Notices. Any notice required or permitted under this Note shall be given in writing and shall be deemed effectively given (i) at the time of personal delivery, if delivery is in person; (ii) one (1) business day after transmission by email. Notices shall be delivered (i) if to the Holder, to the address and contact information for Holder set forth in the Company’s books and records, and (ii) if to the Company, to Company’s registered address at the time or at such other address as any party may designate by giving written notice to the other party. |
10. | Severability. In the event any one or more of the provisions contained in this Note shall, for any reason, be held to be invalid, illegal, or unenforceable in whole or in part or in any respect, or in the event any one or more of the provisions of this Note operate or would prospectively operate to invalidate this Note, such invalidity, illegality, or unenforceability shall not affect any other provision of this Note. In such instance, this Note shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein and the remaining provisions of this Note shall remain operative and in full force and effect and in no way shall be affected, prejudiced or disturbed thereby. |
11. | Delays or Omissions. No delay or omission on the part of the Holder in exercising any right under this Note shall operate as a waiver of such right or of any other right of the Holder, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same or any other right on any future occasion. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available. |
12. | Headings. The headings in this Note are for convenience of reference only and shall not define or limit any terms or provisions hereof. |
13. | Entire Agreement. This Note constitutes the entire agreement between the parties, and no party shall be liable or bound to any other party in any manner by any warranties, representations, or covenants except as specifically set forth herein or therein. |
IN WITNESS WHEREOF, Company has caused this Convertible Promissory Note to be signed in its name as of the date first above written.
BOATIM Inc. | |
Authorised Signatory |
Agreed and Accepted by the Holder: | |
Authorised Signatory |
EXHIBIT A
NOTICE OF CONVERSION
The undersigned hereby elects to convert $[●] of the principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of BOATIM Inc., a Nevada corporation (the “Borrower”), according to the conditions of the Convertible Promissory Note of the Borrower dated as of [●] (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.
Box Checked as to applicable instructions:
☐ | The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal At Custodian system (“DWAC Transfer”). |
Name of DTC Prime Broker:
Account Number:
☐ | The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto: |
Name: | ||||||
Address: | ||||||
Date of Conversion: | ||||||
Applicable Conversion Price: | $ | |||||
Number of Shares of Common Stock to be Issued Pursuant to Conversion of the Notes: | ||||||
Amount of Principal Balance Due remaining Under the Note after this conversion: | ||||||
HOLDER | ||||||
By: | ||||||
Name: | ||||||
Title: | ||||||
Date: |
Exhibit 10.5
CONVERTIBLE PROMISSORY NOTE
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
Principal Amount: US$48,100.00 | Issue Date: 06/01/2021 |
CONVERTIBLE PROMISSORY NOTE
(Due: 11/01/2021)
FOR VALUE RECEIVED, the undersigned, BOATIM INC., a Nevada corporation (the “Company”) promises to pay to the order of AWT Management Services Sdn. Bhd., or permitted assigns (hereinafter, with any subsequent holder, the “Holder”) the non-interest bearing principal sum of US$48,100.00.
1. | Application of Payments. All payments shall be in lawful money of the United States of America, except as set forth below in connection with conversion of this Note. |
2. | Conversion Right. On Maturity Date, The Holder shall have the right at any time to convert all or any part of the outstanding and unpaid non-interest bearing principal into fully paid and non-assessable shares of Common Stock by submitting to the Borrower a Notice of Conversion. |
3. | Conversion Price. The “Conversion Price” per share shall be equal to 80% (eighty per cent) of the 30-day average price per share of BOATIM INC. as published on official trading records, but no less than $0.10 value per share of Common Stock. |
4. | Reservation of Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from pre-emptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note. |
5. | Successors and Assigns. Subject to the restrictions on transfer set forth in this Note, the rights and obligations of the Company and the Holder of this Note shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties. |
6. | Assignment. This Note shall be assignable by the Holder with written consent of the Company. |
7. | Waivers. The terms of this Note shall be construed and governed in accordance with the laws of Nevada. |
8. | Amendment or Waiver. Any term of this Note may be amended or waived with the written consent of the Company and Holder. Any amendment or waiver effected in accordance with this section shall be binding upon Holder at the time outstanding, each future Holder of any Note and the Company. |
9. | Notices. Any notice required or permitted under this Note shall be given in writing and shall be deemed effectively given (i) at the time of personal delivery, if delivery is in person; (ii) one (1) business day after transmission by email. Notices shall be delivered (i) if to the Holder, to the address and contact information for Holder set forth in the Company’s books and records, and (ii) if to the Company, to Company’s registered address at the time or at such other address as any party may designate by giving written notice to the other party. |
10. | Severability. In the event any one or more of the provisions contained in this Note shall, for any reason, be held to be invalid, illegal, or unenforceable in whole or in part or in any respect, or in the event any one or more of the provisions of this Note operate or would prospectively operate to invalidate this Note, such invalidity, illegality, or unenforceability shall not affect any other provision of this Note. In such instance, this Note shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein and the remaining provisions of this Note shall remain operative and in full force and effect and in no way shall be affected, prejudiced or disturbed thereby. |
11. | Delays or Omissions. No delay or omission on the part of the Holder in exercising any right under this Note shall operate as a waiver of such right or of any other right of the Holder, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same or any other right on any future occasion. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available. |
12. | Headings. The headings in this Note are for convenience of reference only and shall not define or limit any terms or provisions hereof. |
13. | Entire Agreement. This Note constitutes the entire agreement between the parties, and no party shall be liable or bound to any other party in any manner by any warranties, representations, or covenants except as specifically set forth herein or therein. |
IN WITNESS WHEREOF, Company has caused this Convertible Promissory Note to be signed in its name as of the date first above written.
BOATIM Inc. | |
Authorised Signatory |
Agreed and Accepted by the Holder: | |
Authorised Signatory |
EXHIBIT A
NOTICE OF CONVERSION
The undersigned hereby elects to convert $[●] of the principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of BOATIM Inc., a Nevada corporation (the “Borrower”), according to the conditions of the Convertible Promissory Note of the Borrower dated as of [●] (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.
Box Checked as to applicable instructions:
☐ | The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal At Custodian system (“DWAC Transfer”). |
Name of DTC Prime Broker:
Account Number:
☐ | The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto: |
Name: | ||||||
Address: | ||||||
Date of Conversion: | ||||||
Applicable Conversion Price: | $ | |||||
Number of Shares of Common Stock to be Issued Pursuant to Conversion of the Notes: | ||||||
Amount of Principal Balance Due remaining Under the Note after this conversion: | ||||||
HOLDER | ||||||
By: | ||||||
Name: | ||||||
Title: | ||||||
Date: |
Exhibit 10.6
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
Principal Amount: US$696,300.00 | Issue Date: June 06, 2021 |
CONVERTIBLE PROMISSORY NOTE
(Due: Immediately upon demand)
FOR VALUE RECEIVED, the undersigned, BOATIM INC., a Nevada corporation (the “Company”) promises to pay to the order of TEAM ALLIED PROFITS Limited, or permitted assigns (hereinafter, with any subsequent holder, the “Holder”) the non-interest bearing principal sum of US$696,000.00.
1. | Application of Payments. All payments shall be in lawful money of the United States of America, except as set forth below in connection with conversion of this Note. |
2. | Conversion Right. On Maturity Date, The Holder shall have the right at any time to convert all or any part of the outstanding and unpaid non-interest bearing principal into fully paid and non-assessable shares of Common Stock by submitting to the Borrower a Notice of Conversion. |
3. | Conversion Price. The “Conversion Price” per share shall be equal to 80% (eighty per cent) of the 30 day average price per share of BOATIM INC. as published on official trading records, but no less than $0.10 per share of the Company´s Common Stock. |
4. | Reservation of Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from pre-emptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note. |
5. | Successors and Assigns. Subject to the restrictions on transfer set forth in this Note, the rights and obligations of the Company and the Holder of this Note shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties. |
6. | Assignment. This Note shall be assignable by the Holder with written consent of the Company. |
7. | Waivers. The terms of this Note shall be construed and governed in accordance with the laws of Nevada. |
8. | Amendment or Waiver. Any term of this Note may be amended or waived with the written consent of the Company and Holder. Any amendment or waiver effected in accordance with this section shall be binding upon Holder at the time outstanding, each future Holder of any Note and the Company. |
9. | Notices. Any notice required or permitted under this Note shall be given in writing and shall be deemed effectively given (i) at the time of personal delivery, if delivery is in person; (ii) one (1) business day after transmission by email. Notices shall be delivered (i) if to the Holder, to the address and contact information for Holder set forth in the Company's books and records, and (ii) if to the Company, to Company´s registered address or at such other address as any party may designate by giving written notice to the other party. |
10. | Severability. In the event any one or more of the provisions contained in this Note shall, for any reason, be held to be invalid, illegal, or unenforceable in whole or in part or in any respect, or in the event any one or more of the provisions of this Note operate or would prospectively operate to invalidate this Note, such invalidity, illegality, or unenforceability shall not affect any other provision of this Note. In such instance, this Note shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein and the remaining provisions of this Note shall remain operative and in full force and effect and in no way shall be affected, prejudiced or disturbed thereby. |
11. | Delays or Omissions. No delay or omission on the part of the Holder in exercising any right under this Note shall operate as a waiver of such right or of any other right of the Holder, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same or any other right o n any future occasion. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available. |
12. | Headings. The headings in this Note are for convenience of reference only and shall not define or limit any terms or provisions hereof. |
13. | Entire Agreement. This Note constitutes the entire agreement between the parties, and no party shall be liable or bound to any other party in any manner by any warranties, representations, or covenants except as specifically set forth herein or therein. |
[SIGNATURE PAGES IMMEDIATELY FOLLOW]
IN WITNESS WHEREOF, Company has caused this Convertible Promissory Note to be signed in its name as of the date first above written.
BOATIM Inc. | |
Authorised Signatory | |
Agreed and Accepted by the Holder: | |
Authorised Signatory |
EXHIBIT
B
NOTICE OF CONVERSION
The undersigned hereby elects to convert $ ____________ principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of BOATIM Inc., a Nevada corporation (the “Borrower”), according to the conditions of the Convertible Promissory Note of the Borrower dated as of June 06, 2021 (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.
Box Checked as to applicable instructions:
☐ | The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal At Custodian system (“DWAC Transfer”). |
Name
of DTC Prime Broker:
Account Number:
☐ | The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto: |
Name: | ||||||
Address: | ||||||
Date of Conversion: | ||||||
Applicable Conversion Price: | $ | |||||
Number of Shares of Common Stock to be Issued Pursuant to Conversion of the Notes: | ||||||
Amount of Principal Balance Due remaining Under the Note after this conversion: | ||||||
TEAM ALLIED PROFITS Limited |
||||||
By: | ||||||
Name: | ||||||
Title: | ||||||
Date: |
Exhibit 10.7
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
Principal Amount: US$441,000.00 | Issue Date: June 07, 2021 |
CONVERTIBLE PROMISSORY NOTE
(Due: Immediately upon demand)
FOR VALUE RECEIVED, the undersigned, BOATIM INC., a Nevada corporation (the “Company”) promises to pay to the order of STEP WELL ADVISORY LIMITED, a Macao registered business with company registered No. SO53753 and address at Avenida Doutor Mario Soares, No. 320, Edificio Finance and IT Center of Macau, 5 andar A, Macao, or permitted assigns (hereinafter, with any subsequent holder, the “Holder”) the non-interest bearing principal sum of US$441,000.00.
1. | Application of Payments. All payments shall be in lawful money of the United States of America, except as set forth below in connection with conversion of this Note. |
2. | Conversion Right. On Maturity Date, The Holder shall have the right at any time to convert all or any part of the outstanding and unpaid non-interest bearing principal into fully paid and non-assessable shares of Common Stock by submitting to the Borrower a Notice of Conversion. |
3. | Conversion Price. The “Conversion Price” per share shall be equal to 80% (eighty per cent) of the 30 day average price per share of BOATIM INC. as published on official trading records, but no less than $0.10 per share of the Company´s Common Stock. |
4. | Reservation of Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from pre-emptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note. |
5. | Successors and Assigns. Subject to the restrictions on transfer set forth in this Note, the rights and obligations of the Company and the Holder of this Note shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties. |
6. | Assignment. This Note shall be assignable by the Holder with written consent of the Company. |
7. | Waivers. The terms of this Note shall be construed and governed in accordance with the laws of Nevada. |
8. | Amendment or Waiver. Any term of this Note may be amended or waived with the written consent of the Company and Holder. Any amendment or waiver effected in accordance with this section shall be binding upon Holder at the time outstanding, each future Holder of any Note and the Company. |
9. | Notices. Any notice required or permitted under this Note shall be given in writing and shall be deemed effectively given (i) at the time of personal delivery, if delivery is in person; (ii) one (1) business day after transmission by email. Notices shall be delivered (i) if to the Holder, to the address and contact information for Holder set forth in the Company’s books and records, and (ii) if to the Company, to the above stated address or at such other address as any party may designate by giving written notice to the other party. |
10. | Severability. In the event any one or more of the provisions contained in this Note shall, for any reason, be held to be invalid, illegal, or unenforceable in whole or in part or in any respect, or in the event any one or more of the provisions of this Note operate or would prospectively operate to invalidate this Note, such invalidity, illegality, or unenforceability shall not affect any other provision of this Note. In such instance, this Note shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein and the remaining provisions of this Note shall remain operative and in full force and effect and in no way shall be affected, prejudiced or disturbed thereby. |
11. | Delays or Omissions. No delay or omission on the part of the Holder in exercising any right under this Note shall operate as a waiver of such right or of any other right of the Holder, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same or any other right o n any future occasion. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available. |
12. | Headings. The headings in this Note are for convenience of reference only and shall not define or limit any terms or provisions hereof. |
13. | Entire Agreement. This Note constitutes the entire agreement between the parties, and no party shall be liable or bound to any other party in any manner by any warranties, representations, or covenants except as specifically set forth herein or therein. |
[SIGNATURE PAGES IMMEDIATELY FOLLOW]
IN WITNESS WHEREOF, Company has caused this Convertible Promissory Note to be signed in its name as of the date first above written.
BOATIM Inc. | |
Authorised Signatory | |
Agreed and Accepted by the Holder: | |
Authorised Signatory |
EXHIBIT
B
NOTICE OF CONVERSION
The undersigned hereby elects to convert $ ____________ of the principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of BOATIM Inc., a Nevada corporation (the “Borrower”), according to the conditions of the Convertible Promissory Note of the Borrower dated as of June 07, 2021 (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.
Box Checked as to applicable instructions:
☐ | The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal At Custodian system (“DWAC Transfer”). |
Name
of DTC Prime Broker:
Account Number:
☐ | The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto: |
Name: | ||||||
Address: | ||||||
Date of Conversion: | ||||||
Applicable Conversion Price: | $ | |||||
Number of Shares of Common Stock to be Issued Pursuant to Conversion of the Notes: | ||||||
Amount of Principal Balance Due remaining Under the Note after this conversion: | ||||||
STEP WELL ADVISORY LIMITED |
||||||
By: | ||||||
Name: | ||||||
Title: | ||||||
Date: |
Exhibit 10.8
ASSIGNEMENT OF
CONVERTIBLE PROMISSORY NOTE
This General Assignment Agreement (the “Assignment”) of the rights to receive and hold (a) Convertible Promissory Note(s) (the “Note(s)”) is made this December 22nd, 2020, by and between Lawson Capital Partners (Switzerland) AG (the “Assignor”) and AWT Management Services Sdn. Bhd. of Kuala Lumpur, Malaysia (the “Assignee”).
WHEREAS, payments were made by or on behalf of Assignor to Boatim Inc. (the “Borrower”) under a general convertible promissory note funding arrangement and Assignor wishes to assign its claims against Borrower from such payments to Assignee for valuable consideration received.
NOW THEREFORE, the undersigned agree as follows:
AGREEMENT
1. Assignment. Subject to the terms and conditions of this Assignment, on the Closing Date (as defined below) the Assignee will assume from Assignor all rights and obligations under the Note(s) as is/are to be entered into by Assignee for up to $500,000.00 as payments are made to Borrower and assignable claims arise for Assignor from time to time.
2. Assignment Price. The Assignee shall, under this Assignment, pay to Assignee the amount of 75% of the face value of any Note under this Agreement within 12 months of the date of each assignment for the assignment, where the transfer of the Note(s) to Assignee shall occur no later than 5 business days after any relevant payment from Assignor to Borrower has been affected or on such other date as Assignee and Assignor shall agree and confirm in writing (the “Assignment Date”).
3. Dispute Resolution.
a) Binding Arbitration. Any claim or dispute arising out of the terms, provisions or performance of this Agreement shall be resolved only by binding arbitration, which shall result in a final, binding and non-appealable ruling, as set forth below, with the exception of good faith and necessary applications for injunctive relief, which are the only matters that may be submitted to the courts.
The following procedural rules shall apply and shall be strictly adhered to. Written demand for arbitration shall be served on the other party and the proposed arbitrator. The arbitration hearing will be scheduled by the arbitrator immediately, and held within 30 days of demand, or acceptance by the arbitrator of the matter, whichever occurs last, unless otherwise agreed to, in writing, by the parties. Immediately upon acceptance of the matter, the arbitrator shall submit to the parties a briefing schedule. The arbitrator shall limit presentation of evidence and argument to no more than eight hours, and shall have the final ruling served on the parties no more than 48 hours after conclusion of the hearing, unless otherwise agreed to in writing by the parties.
Discovery shall be allowed only as specifically directed by the arbitrator, and in such a manner as to avoid delay of the time periods set forth herein.
b) Attorney Fees. If any action is commenced to enforce or interpret this Agreement, the prevailing Party shall be entitled to recover its reasonable attorneys’ fees and court costs in addition to any other remedy it may obtain or be awarded, as long as he has voluntarily complied with the arbitration provision set forth hereinabove. If such a prevailing party has refused or failed to participate in the above-described arbitration process, by, without limitation, non-compliance with the stated time requirements (except as modified by the parties in writing), initially filing an action in some other forum (except as provided for hereinabove), or otherwise, then he shall not be entitled to attorney’s fees or costs even if he is the prevailing party in any action arising out of the terms of this Agreement. Further, any attempt to file in some other forum may be opposed by the responding party by a motion to compel arbitration, or other relevant motion. In the arbitration proceeding, the “prevailing party” shall mean the party determined by the court to most nearly prevail and not necessarily the party in whose favor a judgment is rendered.
4. Miscellaneous.
a) Governing Law. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Nevada, without giving effect to principles of conflicts of law.
b) Entire Agreement; Enforcement of Rights. This Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter herein and merges all prior discussions between them. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.
c) Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms.
d) Construction. This Agreement is the result of negotiations between and has been reviewed by each of the parties hereto and their respective counsel, if any; accordingly, this Agreement shall be deemed to be the product of all of the parties hereto, and no ambiguity shall be construed in favor of or against any one of the parties hereto.
e) Notices. Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient when delivered personally or sent by fax or 48 hours after being deposited in the mail, as certified or registered mail, with postage prepaid, and addressed to the party to be notified at such party’s address or fax number as set forth below or as subsequently modified by written notice.
f) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.
g) Successors and Assigns. The rights and benefits of this Agreement shall inure to the benefit of, and be enforceable by the Seller’s successors and assigns. The rights and obligations of Purchaser under this Agreement may only be assigned with the prior written consent of the Seller.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
ASSIGNOR: | ASSIGNEE: | |||
By: | By: | |||
Name: | Lawson Capital Partners (Switzerland) AG | Name: | AWT Management Services Sdn. Bhd. | |
ACCEPTED AND AGREED TO FOR BORROWER: | ||||
By: | ||||
Name: | Boatim Inc. |
Exhibit 10.9
EMPLOYMENT AGREEMENT
This employment agreement (the “Agreement”) is entered into between Boatim, Inc. (the “Company”), and Joseph Johnson (“you”). This Agreement is entered into by and between you and the Company on June 22, 2021, effective July 01, 2021.
1. Duties and Scope of Employment.
a. Position. For the term of your employment under this Agreement (your “Employment”), you will be employed on a full-time basis as the Company’s Chief Executive Officer and President of the Board of Directors, reporting to the Company’s Board of Directors (the “Board”) and answering to the major shareholders as the President of the Board, and you will perform the duties and have the responsibilities and authority customarily performed and held by an employee in your position, or as otherwise may be assigned or delegated to you by the Board.
b. Obligations to the Company. During your Employment, you shall devote your full business efforts and time to the Company and shall not assist any person or entity in competing with the Company or in preparing to compete with the Company. Notwithstanding the foregoing, you may serve on corporate boards or committees, civic, charitable or other non-profit boards, committees or organizations, deliver lectures, fulfill speaking engagements, consult, practice law, or teach at educational institutions, in each case without such advance written consent, provided that such activities do not individually or in the aggregate interfere with the performance of your duties under this Agreement. You shall comply with the Company’s policies and rules, as they may be in effect from time to time during your Employment.
c. No Conflicting Obligations. You represent and warrant to the Company that you are under no obligations or commitments, whether contractual or otherwise, that are inconsistent with your obligations under this Agreement. In connection with your Employment, you shall not use or disclose any trade secrets or other proprietary information or intellectual property in which you or any person or entity other than the Company has any right, title or interest and your employment shall not infringe or violate the rights of any other person or entity. You represent and warrant to the Company that you have returned all property and confidential information belonging to any prior employer.
2. Cash and Incentive Compensation.
a. Salary. The Company will pay you an annual base salary of two hundred fifty thousand dollars ($250,000.00) per annum. Such annual base salary shall be payable in accordance with the Company’s standard payroll procedures, which shall be no less than twenty-four (24) payments evenly distributed throughout the year (e.g., two payments each month. The annual base salary specified in this subsection (a), together with any modifications in such annual base salary that the Company may make from time to time, is referred to in this Agreement as “Base Salary.” Your base salary may be reviewed from time to time by the Board or a Compensation Committee of the Board (the “Compensation Committee”) based upon available market data. Your base salary shall be automatically increased each year for inflation at the US Consumer Price Index (CPI) inflation rate. Nothing herein limits the ability of the Company to increase your base salary more than the CPI rate in any given year.
b. Annual Bonus. You will also be eligible to earn an incentive bonus each calendar year or fiscal year of the Company during the term of your Employment under this Agreement, with the target amount of your incentive bonus for each such year equal to 200% of your Base Salary. This target can be issued in the Company’s stock at the market value at the time of the bonus, or a combination of the two, at your discretion. Your incentive bonus opportunity each year will be based upon the achievement of certain objective and/or subjective criteria established by the Board or the Compensation Committee and your eligibility to earn an annual incentive bonus shall be governed by the terms and conditions determined by the Board or the Compensation Committee each calendar year. The Board or the Compensation Committee will determine in its sole and absolute discretion, as applicable, whether you have earned an incentive bonus for each year, including whether the established performance objectives have been met and the amount of the bonus, as soon as practicable after the end of the applicable performance year. Any such determination by the Board or the Compensation Committee will be final and binding. Any incentive bonus earned will be paid to you by the date that is 2½ months after the applicable fiscal year of performance. You are eligible to earn a bonus even if you are no longer employed by the Company on the date when such bonus is paid.
c. Signing Bonus. Upon Your approval of this Agreement, the Company will issue you one million (1,000,000) shares of unrestricted Company stock, which are fully vested, with a service period of six (6) months from the date of this agreement. This agreement shall serve as the date of issuance.
d. Additional Performance Bonus. As Company is currently undergoing major changes within its management in order to enter the North American market, the Company will issue you one million (1,000,000) fully vested shares of stock for each net liquid $1,000,000 in equity raised by the Company during your first six (6) months of your tenure as CEO, with a maximum of five million (5,000,000) shares issued under this section.
3. Vacation/PTO and Employee Benefits. During your Employment, you will be eligible to accrue vacation / paid time off in accordance with the Company’s vacation / paid time off policy, as it may be amended from time to time, and you will be eligible to participate in the employee benefit plans maintained by the Company and generally available to similarly situated employees of the Company, subject in each case to the generally applicable terms and conditions of the plan in question and to the determinations of any person or committee administering such plan.
4. Business Expenses. The Company will reimburse you for your necessary and reasonable business expenses incurred in connection with your duties hereunder upon presentation of an itemized account and appropriate supporting documentation, all in accordance with the Company’s generally applicable policies. For the avoidance of doubt and notwithstanding anything stated in this Agreement to the contrary, to the extent that any reimbursements payable or in-kind benefits provided by the Company to you under this Agreement or otherwise constitute deferred compensation under Code Section 409A, the regulations and other guidance there under, and any state law of similar effect (“Section 409A”), any such payments, reimbursements and/or benefits (i) will be paid no later than December 31st of the year following the year in which the expense was incurred (or, if earlier, the time required by the Company’s generally applicable policies), (ii) will not affect the amount eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, and (iii) will not be subject to liquidation or exchange for another benefit. The Company agrees to obtain and issue a company credit card, at your request, to make the tracking of necessary and reasonable business expenses easier for you. For a definition of reasonable business expenses, Company agrees that all flights taken by you will be in the business class status, depending on availability and scheduling. Company will, at your request, provide corporate housing for frequent trips out of your state of domicile for necessary travel where the cost of lodging exceeds the cost to rent a short-term furnished apartment. For example, the Company maintains a subsidiary in Barcelona, Spain and corporate headquarters in Miami Florida, and will require frequent travel to those locations. Furthermore, Company agrees to provide office space within 25 miles of your place of residence to be used as your daily office, once funds become available for such office space. Such Space should be limited to the size of the office staff, such as a co-working space or private executive office until staff is added within your geographical region.
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5. Termination.
a. Employment at Will. Your employment shall be “at will,” meaning that, following a minimum term of three (3) full calendar months from the Effective Date of this Agreement, either you or the Company shall be entitled to terminate your employment at any time and for any reason, with or without cause or notice. Any contrary representations that may have been made to you shall be superseded by this Agreement. This Agreement constitutes the full and complete agreement between you and the Company on the “at-will” nature of your employment, which may only be changed in an express written agreement signed by you and a duly authorized officer of the Company.
b. Rights Upon Termination. Except as expressly provided in Section 6 below, upon the termination of your Employment, you shall only be entitled to: (i) all earned but unpaid salary, all accrued but unpaid vacation and all other earned but unpaid compensation or wages, (ii) any unreimbursed business expenses incurred by you on or before the termination date and which are reimbursable under the Company’s business expense reimbursement policies, which will be paid to you promptly following your submission of any required receipts and other documentation to the Company in accordance with the Company’s business expense reimbursement policies, provided such receipts and documents are received by the Company within forty-five (45) days after your termination date, and (iii) such other compensation or benefits due to you under any Company-provided plans, policies, and arrangements or as otherwise required by law.
6. Severance.
a. Conditions. Any other provision of this Agreement notwithstanding, subsection (b) below shall not apply unless and until (i) you have executed (and not revoked) a general release of all claims in a form provided by the Company, and such release becomes effective and irrevocable no later than the sixtieth (60th) day following your termination date (such deadline, the “Deadline Date”), and (ii) you have continuously complied with the Confidentiality Agreement (as defined below) and all Company policies.
b. Termination Benefits. If, within the period beginning three (3) months prior to, and ending twelve (12) months following, a Change in Control (as defined below), the Company (or any parent, subsidiary or successor of the Company) terminates your employment without Cause (as defined below), or you terminate your employment with the Company (or any parent, subsidiary or successor of the Company) for Good Reason (as defined below), then you will receive the severance benefits set forth below from the Company.
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i. Base Salary Severance Payment. You will receive a base salary severance payment in an amount equal to three (3) months for each net liquid $1,000,000 equity raised by the Company during your first six (6) months of your tenure as CEO, with a maximum of twelve (12) months of your then current Base Salary as in effect immediately prior to the date of such termination (provided, if you resign as a result of Section 6(d)(vi)(2), the base salary used to calculate the base salary severance payment set forth herein shall be the base salary as in effect immediately prior to the reduction triggering Section 6(d)(vi)(2)). The base salary severance payment shall be paid to you in a single lump-sum within thirty (30) days following the Deadline Date.
ii. Benefits Severance Payment. You will receive a benefits severance payment in an amount equal to a maximum of twelve (12) months’ of the monthly premiums pro-rata with your salary severance as determined under section 6.b.i. above, that would be due for continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) if you were to elect COBRA continuation coverage for you and your eligible dependents (based on the coverage levels in effect immediately prior to your termination or resignation and based on the premium amount that would be due for the first month of COBRA coverage if you were to elect COBRA continuation coverage). The benefits severance payment shall be paid to you in a single lump-sum within thirty (30) days following the Deadline Date and will be made, subject to all applicable taxes and withholding for required deductions, and regardless of whether you elect COBRA continuation coverage.
iii. Equity Awards. You shall vest in 100% of any then outstanding and unvested equity awards subject to time-based vesting that relate to the Company’s common stock that you then hold, whether stock options, stock appreciation rights, shares of restricted stock, restricted stock units, performance shares, performance units or other similar awards (the “Equity Awards”). Such Equity Awards will otherwise remain subject to the terms and conditions of the applicable equity award agreement(s) and/or plan(s) (together, the “Equity Documents”). Notwithstanding anything stated herein or elsewhere to the contrary, if the successor to the Company or any affiliate of such successor does not agree to assume, substitute or otherwise continue any then outstanding Equity Awards at the time of a Change in Control, then 100% of the then-unvested shares subject to the Equity Awards shall fully vest and, if applicable, become exercisable, as of immediately prior to, and contingent upon, the consummation of such Change in Control, regardless of whether your employment with the Company (or any parent, subsidiary or successor of the Company) continues or terminates unless such termination is due to your resignation without Good Reason or by the Company for Cause.
c. Definitions. For purposes of this Agreement, the following terms shall have the meanings set forth below.
i. (i)“Cause” means (1) your willful, deliberate and repeated failure to substantially perform your assigned duties (other than a failure resulting from your Disability (as defined below)), which failure is not cured within thirty (30) days after a written demand for substantial performance is received by you from the Board which identifies the manner in which the Board believes you have not substantially performed your duties; (2) your illegal or intentional gross misconduct in the performance of your duties hereunder that is materially injurious to the Company’s business and/or reputation, which, if capable being cured, is not cured within thirty (30) days after written notice from the Board, which written notice shall state that failure to cure may result in termination for Cause; (3) your unauthorized and knowingly willful use or disclosure of any proprietary information or trade secrets of the Company where such use or disclosure causes material harm to the Company; or (4)your conviction of, or plea of nolo contendere to, a felony or any crime involving fraud, embezzlement or theft which is materially injurious, or reasonably expected to be materially injurious, to the Company’s business or reputation. For purposes of clarity, a termination without “Cause” does not include any termination that occurs as a result of your death or Disability.
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ii. “Change in Control” means the occurrence of any of the following: (1) the consummation of a merger or consolidation of the Company with or into another entity or any other corporate reorganization if the Company’s stockholders immediately prior to such merger, consolidation or reorganization cease to directly or indirectly own immediately after such merger, consolidation or reorganization at least a majority of the combined voting power of the continuing or surviving entity’s securities outstanding immediately after such merger, consolidation or reorganization; (2) the consummation of the sale, transfer or other disposition of all or substantially all of the Company’s assets (other than (x) to a corporation or other entity of which at least a majority of its combined voting power is owned directly or indirectly by the Company, (y) to a corporation or other entity owned directly or indirectly by the shareholders of the Company in substantially the same proportions as their ownership of the Common Stock of the Company or (z) to a continuing or surviving entity described in Section 6(d)(ii)(1) in connection with a merger, consolidation or reorganization which does not result in a Change in Control under Section 6(d)(ii)(1)); (3) a change in the effective control of the Company which occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by members of the Board whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election; or (4) the consummation of any transaction as a result of which any Person (as defined below) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing at least fifty percent (50%) of the total voting power represented by the Company’s then outstanding voting securities, provided, if any Person who is the beneficial owner, directly or indirectly, of securities of the Company representing at least fifty percent (50%) of the total voting power represented by the Company’s then outstanding voting securities acquires additional securities of the Company, such acquisition of additional securities will not be considered to cause a Change in Control pursuant to this Section 6(d)(ii)(4). A transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transactions.
iii. “Code” means the Internal Revenue Code of 1986, as amended.
iv. “Disability” means total and permanent disability as defined in Code Section 22(e)(3).
v. “Exchange Act” means the Securities Exchange Act of 1934, as amended.
vi. “Good Reason” means your resignation due to the occurrence of any of the following conditions which occurs without your written consent, provided that the requirements regarding advance notice and an opportunity to cure set forth below are satisfied: (1) a material adverse change to your authority, duties or responsibilities that, taken as a whole, results in a material diminution in your authority, duties or responsibilities in effect prior to such change; (2) a ten percent (10%) or more reduction in your then-current base salary or a ten percent (10%) or more reduction in your base compensation (including Base Salary and bonus); (3) the Company conditions your continued service with the Company on the relocation of your principal work location to a location that is more than thirty-five (35) miles from your then current principal work location and such relocation results in an increase in your one-way commuting distance from your home by thirty-five (35) miles or more; (4) the failure of the Company to obtain the assumption of this Agreement by any successor to the Company; or (5) any material breach or material violation of a material provision of this Agreement by the Company (or any successor to the Company). In order for you to resign for Good Reason, you must provide written notice to the Company of the existence of the Good Reason condition within ninety (90) days of the initial existence of such Good Reason condition. Upon receipt of such notice, the Company will have thirty (30) days during which it may remedy the Good Reason condition and not be required to provide the severance payments and benefits described herein as a result of such proposed resignation. If the Good Reason condition is not remedied within such thirty (30) day cure period, you may resign based on the Good Reason condition specified in the notice effective no later than ninety (90) days following the expiration of the thirty (30) day cure period.
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vii. “Person” shall have the same meaning as when used in sections 13(d) and 14(d) of the Exchange Act but shall exclude: (1) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or an affiliate of the Company; (2) a corporation or other entity owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the Company’s Common Stock; (3) the Company; and (4) a corporation or other entity of which at least a majority of its combined voting power is owned directly or indirectly by the Company.
d. Code Section 409A. For purposes of Section 409A, each payment that is paid pursuant to this Agreement is hereby designated as a separate payment. Further, (i) no severance or benefits to be paid or provided to you, if any, pursuant to this Agreement that, when considered together with any other severance payments or benefits, are considered deferred compensation under Section 409A, will be paid or otherwise provided until you have had a “separation from service” within the meaning of Section 409A, (ii) no severance or benefits to be paid or provided to you, if any, pursuant to this Agreement that are intended to be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(9)(iii) will be paid or otherwise provided until you have had an “involuntary separation from service” within the meaning of Section 409A, and (iii) in the case of (i) and (ii), any reference in this Agreement to “termination” or “termination of employment” or any similar term shall be construed to mean a “separation from service” within the meaning of Section 409A. The parties intend that all payments and benefits provided or to be provided under this Agreement comply with, or are exempt from, the requirements of Section 409A so that none of the payments or benefits will be subject to the adverse tax penalties imposed under Section 409A, and any ambiguities herein will be interpreted to so comply or be so exempt. You and the Company agree to work together in good faith to consider amendments to this Agreement, and to take such reasonable actions, which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition under Section 409A before payments or benefits are provided to you. Any severance payments or benefits made in connection with your termination under this Agreement and provided on or before the fifteenth (15th) day of the third (3rd) month following the end of your first tax year in which your termination occurs or, if later, the fifteenth (15th) day of the third (3rd) month following the end of the Company’s first tax year in which your termination occurs, shall be exempt from Section 409A to the maximum extent permitted pursuant to Treasury Regulation Section 1.409A-1(b)(4) and any additional payments or benefits provided in connection with your termination under this Agreement shall be exempt from Section 409A to the maximum extent permitted pursuant to Treasury Regulation Section 1.409A-1(b)(9)(iii) (to the extent it is exempt pursuant to such section it will in any event be provided no later than the last day of your second (2nd) taxable year following the taxable year in which your termination occurs). Notwithstanding the foregoing, if any of the payments or benefits provided in connection with your termination do not qualify for any reason to be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(4), Treasury Regulation Section 1.409A-1(b)(9)(iii), or any other applicable exemption and you are, at the time of your termination, a “specified employee,” as defined in Treasury Regulation Section 1.409A-1(i), each such payment or benefit will not be provided until the first regularly scheduled payroll date that occurs on or after the date six (6) months and one (1) day following your termination and, on such date (or, if earlier, another date that occurs as soon as practicable after your death), you will receive all payments and benefits that would have been provided during such period in a single lump sum, if applicable.
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e. Limitation on Payments. In the event that the benefits provided for in this Agreement and/or other payments and benefits otherwise provided to you constitute “parachute payments” within the meaning of Code Section 280G and, but for this Section 6(f), would be subject to the excise tax imposed by Code Section 4999 then, at your election, your severance benefits under this Section 6 and the other payments and benefits otherwise provided to you, will be either delivered in full, or delivered as to such lesser extent which would result in no portion of such severance benefits being subject to excise tax under Code Section 4999, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Code Section 4999, results in the receipt by you on an after-tax basis, of the greatest amount of such payments and benefits, notwithstanding that all or some portion of such payments and benefits may be taxable under Code Section 4999. Unless you and the Company otherwise agree in writing, any determination required under this Section 6(f) will be made in writing by the Company’s outside legal counsel or independent public accountants or other firm selected by the Company (the “Firm”), whose determination will be conclusive and binding upon you and the Company for all purposes. For purposes of making the calculations required by this Section 6(f), the Firm may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Code Sections 280G and 4999. You and the Company will furnish to the Firm such information and documents as the Firm may reasonably request in order to make a determination under this Section. The Company will bear all costs the Firm may reasonably incur in connection with any calculations contemplated by this Section 6(f). Any reduction made pursuant to this Section 6(f) shall be made in accordance with the following order of priority: (i) stock options whose exercise price exceeds the fair market value of the optioned stock (“Underwater Options”) (ii) Full Credit Payments (as defined below) that are payable in cash, (iii) non-cash Full Credit Payments that are taxable, (iv) non-cash Full Credit Payments that are not taxable (v) Partial Credit Payments (as defined below) and (vi) non- cash employee welfare benefits. In each case, reductions shall be made in reverse chronological order such that the payment or benefit owed on the latest date following the occurrence of the event triggering the excise tax will be the first payment or benefit to be reduced (with reductions made pro-rata in the event payments or benefits are owed at the same time). For purposes of this Agreement, a “Full Credit Payment” means a payment, distribution or benefit, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, that if reduced in value by one dollar reduces the amount of the parachute payment (as defined in Code Section 280G) by one dollar, determined as if such payment, distribution or benefit had been paid or distributed on the date of the event triggering the excise tax. For purposes of this Agreement, a “Partial Credit Payment” means any payment, distribution or benefit that is not a Full Credit Payment. In no event shall you have any discretion with respect to the ordering of payment reductions.
f. No Duty to Mitigate. You will not be required to mitigate the amount of any payment contemplated by this Section 6, nor will any earnings that you may receive from any other source reduce any such payment.
7. Confidentiality Agreement. You will, at all times, remain bound by the Proprietary Information, Inventions, Non-Competition and Non-Solicitation Agreement entered into by and between you and the Company (the “Confidentiality Agreement”) at the time of this Agreement.
8. Taxes, Withholding and Required Deductions. All forms of compensation referred to in this Agreement are subject to all applicable taxes, withholding, and any other deductions required by applicable law.
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9. Miscellaneous.
a. Governing Law. The validity, interpretation, construction and performance of this Agreement, and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the state of Florida, without giving effect to principles of conflicts of law. For purposes of litigating any dispute that may arise directly or indirectly from this Agreement, the parties hereby submit and consent to the exclusive jurisdiction of your state of domicile at the time the dispute is presented to court in the form of a complaint for damages, and agree that any such litigation shall be conducted only in the courts of that sate or the federal courts of the United States located in that state and no other courts.
b. Entire Agreement. This Agreement, the Confidentiality Agreement and the Equity Documents set forth the entire agreement and understanding of the parties relating to the subject matter herein and supersede all other prior or contemporaneous discussions, understandings and agreements, whether oral or written, between them relating to the subject matter hereof.
c. Amendments and Waivers. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed by the parties to this Agreement. No delay or failure to require performance of any provision of this Agreement shall constitute a waiver of that provision as to that or any other instance.
d. Successors and Assigns.
i. Company’s Successors. This Agreement shall be binding upon any successor (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets. For all purposes under this Agreement, the term “Company” shall include any successor to the Company’s business or assets that become bound by this Agreement or any affiliate of any such successor that employs you.
ii. Assignment; Your Successors. This Agreement and all of your rights and obligations hereunder are personal to you and may not be transferred or assigned by you at any time. This Agreement and all of your rights hereunder shall inure to the benefit of, and be enforceable by, your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
e. Notices. Any notice, demand or request required or permitted to be given under this Agreement shall be in writing and shall be deemed sufficient when delivered personally or by overnight courier or sent by email, or forty-eight (48) hours after being deposited in the U.S. mail as certified or registered mail with postage prepaid, addressed to the party to be notified at such party’s address at the most recent address set forth in the Company’s books and records. Any termination by the Company for Cause or by you for Good Reason will be communicated by a notice of termination to the other party hereto given in accordance with Section 9(e) of this Agreement. Such notice will indicate the specific termination provision in this Agreement relied upon, will set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and will specify the termination date.
f. Severability. If any provision of this Agreement becomes or is deemed invalid, illegal or unenforceable in any applicable jurisdiction by reason of the scope, extent or duration of its coverage, then such provision shall be deemed amended to the minimum extent necessary to conform to applicable law so as to be valid and enforceable or, if such provision cannot be so amended without materially altering the intention of the parties, then such provision shall be stricken and the remainder of this Agreement shall continue in full force and effect. If any provision of this Agreement is rendered illegal by any present or future statute, law, ordinance or regulation (collectively, the “Law”) then that provision shall be curtailed or limited only to the minimum extent necessary to bring the provision into compliance with the Law. All the other terms and provisions of this Agreement shall continue in full force and effect without impairment or limitation.
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g. Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and all of which together shall constitute one and the same agreement. Execution of a facsimile or scanned copy will have the same force and effect as execution of an original, and a facsimile or scanned signature will be deemed an original and valid signature.
BOATIM, INC. | ||
Name: | WOLFGANG TIPPNER | |
Title: | DIRECTOR & CEO | |
ACCEPTED AND AGREED: | ||
Name: | JOSEPH JOHNSON |
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Exhibit 10.10
EXECUTIVE SERVICES AGREEMENT
THIS EXECUTIVE SERVICES AGREEMENT (the “Agreement”) is made effective as of JULY 1st, 2020 (“Effective Date”) between BOATIM INC. (the “Company”) and PATRICK BURKERT (“Executive”). The Company and Executive are collectively referred to as the “Parties” and each, a “Party”.
1. | Independent Executive. Subject to the terms and conditions of this Agreement, the Company hereby engages the Executive as an independent Executive to perform the services set forth herein, and the Executive hereby accepts such engagement. |
2. | Services and Duties. The Executive will perform CHIEF MARKETING OFFICER services as more fully described in Addendum A (the “Services”) and Executive shall fulfil any other duties reasonably requested by the Company and agreed to by the Executive. |
3. | Term. The term of this Agreement shall commence on the Effective Date, and shall continue in full force and effect indefinitely (the “Term”). The Agreement may be terminated by either party by 3 month prior written notice. |
4. | Compensation. As compensation for the services rendered pursuant to this Agreement, the Company shall pay the Executive compensation as described below. |
a. | Sign-On Bonus. Company shall pay to Executive a sign-on EQUITY BONUS of 500,000 COMMON SHARES in the share capital of the Company, 50,000 shares within 2 weeks of the date of this Agreement, a further 200,000 shares after 6 months, the remainder after 12 months. Shares will be vested and remain restricted for 12 months from the date of issuance. Transfers are subject to this Agreement not being terminated within the restricted period. |
b. | Cash. Executive has or will enter into a separate employment agreement with Company´s subsidiary company BOATIM EUROPE S.L. (the “S.L. Agreement”) which is to stipulate a cash compensation (the “Base Salary”) for the services rendered pursuant to the S.L. Agreement, whereas S.L. shall pay the Executive the sum of ONE HUNDRED FORTY FOUR THOUSAND EURO (€ 144,000.00) incl. all employee labor cost (“brutto”) in accordance with applicable local employment laws, payable in increments of €12,000.00 per month. |
c. | Performance Bonus Shares. With respect to each fiscal year of the Company commencing during the Term, but only after payment of the twelfth increment of Base Salary, Executive shall be eligible to earn an annual share bonus award (the “Annual Bonus”), with a target amount equal to fifty percent (50%) of the Base Salary (the “Target Bonus”), based upon the achievement of performance targets established by the Board (or a committee thereof) in its discretion. The Annual Bonus shall be subject to the terms of any applicable annual bonus plan that may be adopted by the Company. The Annual Bonus, if any, shall be paid at the same time annual bonuses are paid to other senior executives of the Company generally, and shall be subject to Executive being employed by the Company on the date such Annual Bonus is paid. |
5. | Expenses. During the Term, the Executive shall bill the Company and the Company shall reimburse the Executive for all reasonable and pre-approved out-of-pocket expenses which are incurred in connection with the performance of the Services hereunder. Notwithstanding the foregoing, costs for the time spent by Executive in traveling to and from Company facilities and events shall not be reimbursable unless otherwise agreed to in writing by Company. |
6. | Written Reports. The Company may request that project plans, progress reports and a final results report be provided by Executive on a monthly or other periodic basis. A final results report may be due, at Company’s request, at the conclusion of the Agreement and shall be submitted to the Company in a confidential written report at such time. The results report shall be in such form and setting forth such information and data as is reasonably requested by the Company. |
7. | Confidentiality. The Executive acknowledges that during the Term they will have access to and become acquainted with various trade secrets, inventions, innovations, processes, information, records and specifications owned or licensed by the Company and/or used by the Company in connection with the operation of its business including, without limitation, the Company’s business and product processes, methods, customer lists, accounts and procedures. The Executive agrees that they will not disclose any of the aforesaid, directly or indirectly, or use any of the information in any manner, either during the Term or at any time thereafter, except as required in the course of this engagement with the Company. All files, records, documents, blueprints, specifications, information, letters, notes, media lists, original artwork/creative, notebooks, and similar items relating to the business of the Company, whether prepared by the Executive or otherwise coming into their possession, shall remain the exclusive property of the Company. The Executive shall not retain any copies of the foregoing without the Company’s prior written permission. Upon the expiration or earlier termination of this Agreement, or whenever requested by the Company, the Executive shall immediately deliver to the Company all such files, records, documents, specifications, information, and other items in their possession or under their control. |
8. | Conflicts of Interest; Non-hire Provision. The Executive represents that they are free to enter into this Agreement and that this engagement does not violate the terms of any agreement between the Executive and any third party. Further, the Executive, in rendering their Services shall not utilize any invention, discovery, development, improvement, innovation, or trade secret in which they do not have a proprietary interest. During the Term, the Executive shall devote as much of their productive time, energy and abilities to the performance of their duties hereunder as is necessary to perform the required Services in a timely and productive manner. The Executive is expressly free to perform services for other parties while performing Services for the Company. For a period of twelve (12) months following termination, the Executive shall not, directly or indirectly hire, solicit, or encourage leaving the Company’s employment, any employee, consultant, or Executive of the Company or hiring any such employee, consultant, or Executive who has left the Company’s employment or contractual engagement within one year of such employment or engagement. |
9. | Right to Injunction. The parties hereto acknowledge that the Services to be rendered by the Executive under this Agreement and the rights and privileges granted to the Company under the Agreement are of a special, unique, unusual, and extraordinary character which gives them a peculiar value, the loss of which cannot be reasonably or adequately compensated by damages in any action at law, and the breach by the Executive of any of the provisions of this Agreement will cause the Company irreparable injury and damage. The Executive expressly agrees that the Company shall be entitled to injunctive and other equitable relief in the event of, or to prevent, a breach of any provision of this Agreement by the Executive. Resort to such equitable relief, however, shall not be construed to be a waiver of any other rights or remedies that the Company may have for damages or otherwise. The various rights and remedies of the Company under this Agreement or otherwise shall be construed to be cumulative, and no one of them shall be exclusive of any other or of any right or remedy allowed by law. |
10. | Merger. This Agreement shall not be terminated by the merger or consolidation of the Company into or with any other entity. |
11. | Termination. The Company may terminate this Agreement (i) at any time by 30 working days’ written notice to the Executive. In addition, (ii) if the Executive is convicted of any crime or offense, fails or refuses to comply with the written policies or reasonable directive of the Company, is guilty of serious misconduct in connection with performance hereunder, or materially breaches provisions of this Agreement, the Company at any time may terminate the engagement of the Executive immediately and without prior written notice to the Executive. Should the Company terminate this Agreement prior to its set end of term under (ii) above, Executive shall be owed payment of his compensation immediately and in full for the complete originally scheduled term, unless Company terminated this engagement following Executive´s resignation upon his own request. |
12. | Independent Executive. This Agreement shall not render the Executive an employee, partner, agent of, or joint venturer with the Company for any purpose. The Executive is and will remain an independent Executive in his relationship to the Company. The Company shall not be responsible for withholding taxes with respect to the Executive’s compensation hereunder. The Executive shall have no claim against the Company hereunder or otherwise for vacation pay, sick leave, retirement benefits, social security, worker’s compensation, health or disability benefits, unemployment insurance benefits, or employee benefits of any kind. |
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13. | Successors and Assigns. This Agreement shall only apply to Executive personally and none of the provisions of this Agreement shall be binding upon or inure to the benefit of the parties hereto or their respective heirs, if any, successors, or assigns. |
14. | Choice of Law. The laws of the state of FLORIDA shall govern the validity of this Agreement, the construction of its terms and the interpretation of the rights and duties of the parties hereto and any disputes under this agreement are subjected to the exclusive jurisdiction of the courts of the State of FLORIDA, Miami-Dade County. The S.L. Agreement will be governed by the laws of Spain. |
15. | Headings. Section headings are not to be considered a part of this Agreement and are not intended to be a full and accurate description of the contents hereof. |
16. | Waiver. Waiver by one party hereto of breach of any provision of this Agreement by the other shall not operate or be construed as a continuing waiver. |
17. | Assignment. The Executive shall not be able to assign any of his rights under this Agreement, or delegate the performance of any of his Services hereunder, without the prior written consent of the Company. |
18. | Notices. All notices hereunder shall be in writing and shall be sent by registered mail or certified mail, return receipt requested, postage prepaid and with receipt acknowledged, or by hand (to an officer if the party to be served is a corporation), or by facsimile or by e-mail, all charges prepaid, at the respective addresses set forth below. Any party hereto may change its address for purposes of this paragraph by written notice given in the manner provided herein: |
If to the Company: | If to Executive: | |
BOATIM, Inc. 7950 NW 53rd Street, Suite 337 Miami, FL 33166 To: General Counsel, BOATIM, Inc. |
At Executive’s home address as then shown in the Company’s personnel records |
The date of making of personal service or of mailing or transmission via facsimile, or transmission via e-mail, whichever shall be first, shall be deemed the date of service, except that notice of change of address shall be effective only from the date of its receipt.
19. | Modification or Amendment. No amendment, change or modification of this Agreement shall be valid unless in writing signed by the parties hereto. |
20. | Entire Understanding. This document and any exhibit attached constitute the entire understanding and agreement of the parties, and any and all prior agreements, understandings, and representations are hereby terminated and cancelled in their entirety and are of no further force and effect. |
21. | Unenforceability of Provisions. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. |
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22. | Indemnification. Executive hereby indemnifies Company and holds Company harmless against any damages, liability, costs, expenses and fees (including reasonable attorney’s fees and court costs) incurred as a result of or in connection with any claim or proceeding against Company arising out of any breach or claimed breach of this Agreement or of any warranty, representation or covenant by Executive herein, as well as any negligent act or omission by Executive. Executive agrees to pay Company on demand any amounts for which Executive may be responsible under the foregoing indemnity and, without limiting any of Company’s other rights or remedies, Company may deduct the same from any and all monies payable hereunder or any other agreement between Executive and Company if Executive does not so pay Company on demand. |
23. | Representations and Warranties by Company. The Company represents and warrants to Executive that, as of the date of this Agreement: |
a. | Organization and Corporation Power. The Company is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Colorado; and has all required corporate power and authority to own its property and to carry on its business as now being conducted, to enter into this Agreement and to carry out the transactions contemplated hereby. |
b. | Authorization. The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated hereby will not, violate any provision of any charter, articles of incorporation, by-law, mortgage, lien, lease, agreement, contract, instrument, order judgment, or decree to which the Company is a party, or by which it is bound, and will not violate any other restriction of any other kind or character of which Company is subject. The execution of this Agreement by its representative whose signature is set forth at the end hereof has been duly authorized by all necessary corporate action. |
c. | Capitalization. There are sufficient authorized shares of common stock of the Issuing Company to cover the issuance of the Shares pursuant to this Agreement. There are restrictions on the transferability and sale of Shares imposed by or pursuant to federal securities law. |
24. | Representations and Warranties By Executive. The Executive represents and warrants to the Company that, as of the date of this Agreement: |
a. | Executive has the right to enter into this Agreement, to grant the rights granted herein and to perform fully all of the obligations in this Agreement. |
b. | Executive’s entering into this Agreement with the Company and their performance of all of their obligations do not and will not conflict with or result in any breach or default under any other agreement to which they are subject. |
c. | Executive has the required skill, experience and qualifications to perform Services in connection with this Agreement, they shall perform the Services in connection with this Agreement in a professional and workmanlike manner in accordance with generally recognized industry standards for similar services and they shall devote sufficient resources to ensure that the Services in connection with this Agreement are performed in a timely and reliable manner. |
d. | Executive shall perform the services in connection with this Agreement in compliance with all applicable federal, state and local laws and regulations. |
e. | The Company will receive good and valid title to the products resulting from this Agreement, if any, free and clear of all encumbrances and liens of any kind. |
f. | If applicable, the periodic design documents and reports shall be the Executive’s original work (except for material in the public domain or provided by the Company) and, to the best of their knowledge, do not and will not violate or infringe upon the intellectual property right or any other right whatsoever of any person, firm, corporation or other entity. |
g. | Executive fully understands and agrees that Shares potentially being offered by the Issuing Company, might be offered at a price which might be arbitrarily determined without regard to any value of such Shares. |
h. | Executive fully understands that the Issuing Company has a limited net worth. |
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i. | Executive acknowledges receipt of such information as they deem necessary or appropriate as a prudent and knowledgeable investor in evaluating the Shares issued as compensation. |
j. | Executive understands that there exist inherent risks in accepting the Shares as compensation, which risks include, but are not limited to, the lack of liquidity of the Shares, and the Issuing Company’s lack of history. Executive agrees to accept all risks associated with accepting the Shares as compensation. |
k. | Executive understands that the Issuing Company’s business is, by its nature, speculative; that Executive is aware that the financial resources of the Issuing Company are extremely limited and that it is very likely that the Issuing Company will require additional capital, and there is no assurance that such capital will be available if necessary; that Executive is familiar with the high degree of risk that is involved in the Issuing Company’s business, and that Executive is financially able and willing to accept the substantial risk involved in such investment, including the risk of loss of the entire amount invested. |
l. | Executive understands that the Shares have not been registered for sale under federal or state securities laws and that said securities are being issued to Executive pursuant to a claimed exemption from the registration requirements of such laws which is based upon the fact that said securities are not being offered to the public. Executive understands that in order to satisfy such requirement they must be acquiring the Shares with no view to making a public distribution of said securities and the representations and warranties contained in this Section are given with the intention that the Issuing Company may rely thereon for purposes of claiming such exemption; and that they understand that they must bear the economic risk of their investment in the securities for a substantial period of time, because the securities have not been registered under the federal or state securities laws, and cannot be sold unless subsequently registered under such laws, or unless an exemption from such registration is available. |
m. | Executive represents that they are acquiring the securities for their own account and for investment and not with a view to, or for sale in connection with, any distribution thereof in violation of the Securities Act of 1933, as amended. Executive agrees that the Shares will not be offered for sale, sold or otherwise transferred for value and that no transfer thereof will be made by the Executive unless (a) a registration statement with respect thereto has become effective under the Securities Act of 1933, as amended, or (b) there is presented to the Issuing Company an opinion of counsel for Executive reasonably satisfactory to the Issuing Company that such registration is not required. Executive further agrees that the securities will not be offered for sale, sold or otherwise transferred unless, in the opinion of legal counsel for the Issuing Company, such sale or disposition does not and will not violate any provisions of any federal or state securities law or regulation. |
25. | Acknowledgement of Binding Agreement. Executive acknowledges that this is a binding legal agreement and that Executive has read each page of this Agreement prior to its execution and that Executive fully understands its meaning and effect. Executive acknowledges and agrees that Executive has had the opportunity to have this Agreement reviewed by Executive’s attorney or has expressly elected to forego such review, and that by signing this Agreement, Executive intends to be legally bound by all its terms. |
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF the undersigned have executed this Agreement as of the day and year first written above. The parties agree that email/facsimile signatures shall be effective.
BOATIM, Inc. | Executive | |
Authorized Signatory | Name: Patrick Burkert | |
BOATIM, Inc. | ||
Majority Shareholder | ||
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ADDENDUM A
INDEPENDENT EXECUTIVE AGREEMENT
CHIEF MARKETING OFFICER Responsibilities
1. | Define and develop marketing strategies to support the company’s overall projections, roadmap strategies, company’s mission and objectives and to promote revenue, profitability, and growth as an organization. |
2. | Develop and execute a feasible marketing plan for the department and oversee its day-to-day implementation and budgets. |
3. | Plan and organize marketing functions and operations (within product development, branding, communications, content, etc.), and ensure they project the company’s unique voice, branding and objectives. |
4. | Build and manage a highly efficient and motivated team of marketing professionals |
5. | Create a solid network of strategic partnerships within the industry |
6. | Review activity reports and financial statements to determine progress and status in attaining objectives and revise objectives and plans in accordance with current conditions. |
7. | Promote the company through written articles and personal appearances at conferences and on radio and TV and other. |
8. | Represent the company at legislative sessions, committee meetings, and at formal functions. |
9. | Promote the company to local, regional, national, and international constituencies. |
10. | Oversee foreign marketing operations to include evaluating operating and financial performance. |
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Exhibit 10.11
PRODUCTION & BROADCASTING AGREEMENT
By and between: FMW Media Works LLC,”FMW”
And Boatim Inc. (BTIM) (“Client”)
Effective Date: October 26, 2021
RECITALS:
This Production Agreement (this “Agreement”) is made as of Effective Date written above (“Effective Date”), by and among Boatim Inc. (BTIM) (the “Client”), whose principal place of business is 7950 NW 53rd Street, Suite 337 Miami, Florida 33166 and FMW Media Works LLC, having its principal place of business at 425 Broadhollow Road, Suite 217, Melville, NY, 11747 and is made in light of the following recitals which are a material part hereof:
WHEREAS FMW Media Works LLC, is an independent media services company and FMW Media Works LLC, has knowledge and experience to provide television, production, media analysis, procurement as the Client believes can assist it in furthering its media awareness; WHEREAS, Client is retaining FMW Media Works LLC, to create media content and assist in the distribution thereof, and perform certain services as set forth on Schedule A annexed hereto. NOW, THEREFORE, for and in consideration of good and valuable consideration, including, but not limited to the mutual promises set forth herein, the receipt and sufficiency of which is acknowledged by each party hereto, the parties hereby agree as follows:
WITNESSETH: Recitals Govern. The parties desire to enter into this Agreement for purposes of carrying out the above recitals and intentions set forth above and this Agreement shall be construed in light thereof.
Compensation for Services: The Client agrees to pay FMW Media Works LLC, 875,000 Restricted Shares Rule 144 Stock total due upon signing and an additional $7,500 per month, due before each interview, for 12 months. The monthly payments can be paid after monies are raised.
Client’s Initials: | FMW’s Initials: |
Production Services: FMW Media Works LLC, agrees to provide the Services to the Client during the “Term” (as hereinafter defined). FMW Media Works LLC, agrees to provide such information, evaluation, and analysis, in accordance with the Services as will assist in maximizing the effectiveness of the Client’s business model. FMW shall personally provide the Services and the Client understands that the nature of the services to be provided are part-time and that FMW will be engaged in other business activities during the term of this Agreement.
Conflicts: The Client waives any claim of conflict and acknowledges that FMW has owned and continues to work with and provide production services with companies in competitive businesses.
Confidential Information: FMW agrees that any information received by FMW during any furtherance of FMW’s obligations in accordance with this Agreement, which concerns the personal, financial or other affairs of the Client will be treated by FMW in full confidence and will not be revealed to any other persons, firms or organizations. In connection herewith, FMW and the Client have entered into that Confidentiality Agreement in the form attached hereto as Schedule B.
Role of FMW Media Works, LLC: FMW shall produce an informative T.V. show that will discuss the Client and its business. FMW Media Works, LLC will broadcast this show on a well-known network, and keep the show archived for a minimum of 1 year via its website www.newtothestreet.com.
Liability: With regard to the services to be performed by FMW Media Works LLC, pursuant to this Agreement, FMW Media Works LLC, shall not be liable to the Client, or to anyone who may claim any right due to any relationship with the Client, for any acts or omissions in the performance of services on the part of FMW or on the part of the agents or employees of FMW, except when said acts or omissions of FMW Media Works LLC, are due to willful misconduct or gross negligence of FMW Media Works LLC. The Client shall hold FMW Media Works LLC, free and harmless from any obligations, costs, claims, judgments, attorneys’ fees, and attachments arising directly out of the services rendered to the Client pursuant to the terms of this Agreement or in any way connected with the rendering of services, except when the same shall arise due to the willful misconduct or gross negligence of FMW and FMW Media Works LLC, is adjudged to be guilty of willful misconduct or gross negligence by a court of competent jurisdiction.
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Term: The term of this Agreement shall commence as of the Effective Date and shall continue for a period of 12 months from that date unless sooner terminated as provided herein. It is understood that this Agreement shall not automatically renew and no obligations to renew are implied notwithstanding continued efforts to fulfill terms and conditions incomplete as of the termination of this Agreement.
Performance of Services: FMW Media Works LLC, will perform most services in accordance with this Agreement at a location and at times chosen in FMW’s discretion.
Representations and Warranties: Client Representations & Warranties. The Client represents and warrants to FMW Media Works LLC, that: The shares/stocks to be issued are authorized to be issued by the Client; The Client has full right, power, and corporate authority to execute and enter into this Agreement, and to execute all underlying documents and to bind such entity to the terms and obligations hereto and to the underlying documents and to deliver the interests and consideration conveyed thereby, same being authorized by power and authority vested in the party signing on behalf of the Client; FMW Media Works LLC, Representations.
FMW Media Works LLC, represents and warrants to the Client that:
It will acquire the same for investment and not with a view to the sale or other distribution thereof and will not at any time sell, exchange, transfer, or otherwise dispose of the same under circumstances that would constitute a violation of Securities Laws.
Each of the warranties, representations, and covenants contained in this Agreement by any party thereto shall be continuous and shall survive the delivery of FMW’s Services and the termination of this Agreement.
FMW Media Works LLC, is an independent contractor and will not and cannot make any binding obligations on behalf of the Client; If FMW Media Works LLC, comes into possession of non-public information, FMW Media Works LLC, will cease ALL trading activity until such information becomes public or stale. Notwithstanding the aforementioned, it is neither the Client nor FMW’s intention for FMW Media Works LLC, to hold onto the shares/stocks indefinitely.
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Arbitration: Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration in accordance with the rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrator(s) shall be entered in any court having jurisdiction thereof. For that purpose and the resolution of any other claim hereunder, the parties hereto consent to the exclusive jurisdiction and venue of an appropriate court located in the County of Nassau or Suffolk, New York. In the event that litigation results from or arises out of this Agreement or the performance thereof, the parties agree to reimburse the prevailing party’s reasonable attorney’s fees, court costs, and all other expenses, whether or not taxable by the court as costs, in addition to any other relief to which the prevailing party may be a Founder, Managing Partners. In such an event no action will be entertained by said Court or any Court of competent jurisdiction, if the claim is filed more than one year subsequent to the date the cause(s) of action actually accrued, regardless of whether damages were otherwise as of said time calculable.
Notices: All notices, requests, consents, and other communications under this Agreement shall be in writing and shall be mailed by registered or certified mail, postage prepaid, or delivered by facsimile or delivered personally to the address written above or to such other address of which the addressee shall have notified the sender in writing. Notices mailed in accordance with this section shall be deemed given when mailed.
Binding Effect, Assignment, and Succession: All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of his, her or its respective heirs, personal representatives, successors, and assigns, whether so expressed or not. Except for assignment of the options as provided above, no party to this Agreement may, however, assign his rights hereunder or delegate his obligations hereunder to any other person or entity without the express prior written consent of the other parties hereto.
Entire Agreement and Interpretation: This Agreement, including any exhibits and schedules thereto, constitutes and contains the entire agreement between the Client and FMW Media Works LLC, with respect to the provision of FMW’s Services and Compensation and supersedes any prior agreement by the parties, whether written or oral. It may not be changed orally but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension, or discharge is sought. The waiver of a breach of any term or condition of this Agreement must be in writing and signed by the party sought to be charged with such waiver, and such waiver shall not be deemed to constitute the waiver of any other breach of the same or of any other term or condition of this agreement.
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Miscellaneous: The section headings contained in this Agreement are inserted as a matter of convenience and shall not be considered in interpreting or construing this Agreement. This Agreement may be executed concurrently in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. The invalidity or lack of enforce-ability of any provision of this Agreement shall not affect the validity or enforce-ability of the remaining provisions. Time is of the essence in this Agreement and the obligations of the parties hereto.
IN WITNESS WHEREOF, the Client and FMW Media Works LLC, have executed this Agreement as of the day and year first written above.
Client Signature: | FMW Media Works, LLC: | |
Joseph Johnson, CEO | Vince Caruso, Managing Member | |
Boatim Inc (BTIM) | FMW Media Works, LLC |
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SCHEDULE A: Schedule of Services and Deliverables. FMW shall provide the following Strategic Services:
1. | Develop a biography format T.V. show outlining the previous publicly announced milestones of Boatim Inc. (BTIM). The interviews are conducted at the NASDAQ MarketSite in NYC by our NASDAQ anchor. |
2. | Produce 12 HD specialized NASDAQ interviews, of approximately seven to ten (7-10) minutes duration each. These interviews are then shared exclusively on New to the Street T.T. shows syndicated on the business networks listed below. The content interviews are co-owned by Boatim, the television networks, and FMW Media Works/New to the Street. |
3. | Broadcast 12 interviews on FOX Business Network to a minimum of 95.2 million (95,200,000) households. |
4. | .Broadcast 12 interviews on NEWSMAX households. Each interview on NEWSMAX also includes strong social media support from the NEWSMAX including a tweet prior to the Friday preview, that includes your company name and symbol that reaches 900k+ followers. |
5. | Broadcast 12 interviews on Bloomberg 124,000,000 households. |
6. | Broadcast 12 interviews on RNN 30,000,000 households. |
7. | Broadcast 12 interviews on KRON4 2,700,000 households. |
8. | 12 Special Edition NASDAQ Tech Reports-one monthly. Boatim will receive 15 individual Network News Pickups including; ABC, NBC, CBS, etc., during local morning and evening business television news. |
9. | Continue to make visible the show on the Internet for 12 months, being hosted and archived on www.newtothestreet.com. |
10. | 12 months of social media support - will tweet every news release to those who follow New to the Street. |
11. | Website - have interviews and/or links on www.newtothestreet.com or www.exploringtheblock.com |
12. | Press releases for 12 months - one per interview announcing the airing of the segment. |
13. | TV guide listing across networks. |
14. | Produce and Broadcast 480 total-15/30 second commercials, tailored for Boatim Inc., to air across FOX, FOX Business Network, Bloomberg, NEWWSMAX, CNBC, CNN and MSNBC. Commercials will run for 12 months, 20 (15 second spots) 20 (30 second spots) monthly. |
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15. | NYC Subway Digital Billboards-Boatim Inc. commercials to run on Subway Boards 2 times per hour in NYC (minimum 50 per day). |
LOCATIONS: | |||
14th Street-Union Square-N,Q,R,W | 42 Boards | ||
Columbus Circle | 45 Boards | ||
59th Street-4,5,6 | 39 Boards | ||
Fulton Street-4,5 | 18 Boards | ||
Wall Street-4,5 | 4 Boards | ||
72nd Street-2nd Avenue | 8 Boards |
NOTE: Schedule A is the guaranteed minimum number of broadcasts. FOX Business and NEWSMAX are giving us additional airings.
SCHEDULE B: Confidentiality Agreement
This Confidentiality Agreement (hereafter this “Agreement”), made this 26th day of October 2021 by and among Boatim Inc. (BTIM) (the “Client”), whose principal place of business is 7950 NW 53rd Street, Suite 337 Miami, Florida 33166 and FMW Media Works, LLC, 425 Broadhollow Road, Suite 217, Melville, NY, 11747. Given that the client and FMW Media Works LLC, each desire to make certain confidential information concerning the Client, its technology, its investments, its processes, its marketing strategies, its capitalization, and finances, and its business, as well as similar confidential information lawfully possessed by FMW Media Works LLC, (collectively, the “Information”) for purposes, agreed to be legitimate and the Client and FMW Media Works LLC, each agree to hold such information confidential pursuant to the terms of this Agreement, in consideration of the mutual promises and other good and valuable consideration, the receipt and sufficiency of which is acknowledged and with the intent to be legally bound hereby, the Client and FMW Media Works LLC, agree as follows:
The Information includes, but is not limited to, (i) all proprietary information on the Client, (ii) any and all data and information given or made available to FMW Media Works LLC, by the Client, whether written or in machine-readable form, (iii) any and all of the Client’s and FMW’s notes, work papers, investigations, studies, computer printouts, and any other work product including electronic data files, regardless of nature containing any such data and information, (iv) all copies of any of the foregoing, and (v) any information reasonably known, knowable or foresee-ably could or should be confidential by a reasonably prudent person upon a preponderance of the evidence.
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FMW Media Works LLC, and Client each understand that the Information is proprietary to the client and FMW Media Works LLC, and each agrees to hold the Information given by the other strictly confidential, except as used in connection with the services being rendered by the Client. The Client and FMW each agree that the Information shall be used for the purpose of performing the services hereunder. Neither the Client nor FMW Media Works LLC, shall have the right to make copies or hold copies of documents except for reports and notes, which have been generated by them, which reports, and notes shall be retained for their exclusive use and shall remain confidential.
It is understood that this Confidentiality Agreement shall not apply to any information otherwise covered herein (i) which is known to either the Client or FMW Media Works LLC, prior to the date of the Confidentiality Agreement, (ii) which is disclosed to FMW or the Client by a third party who has not directly or indirectly received such Information in violation of an agreement with party from whom it was received, or (iii) which is generally known within the industry.
This Confidentiality Agreement shall be governed by and construed in accordance with the laws of New York and shall be enforceable solely by and be for the sole benefit of FMW Media Works LLC, and Client, their successors and assigns.
In witness whereof, “the Client” and FMW Media Works LLC, have executed this Agreement as of the date above.
Client Signature: | FMW Media Works, LLC: | |
Joseph Johnson, CEO | Vince Caruso, Managing Member | |
Boatim Inc (BTIM) | FMW Media Works, LLC |
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Exhibit 10.12
PLACEMENT AGENT AGREEMENT
This AGREEMENT made and entered into as of 7th January, 2022 (the “Agreement”), by and between Boatim Inc (the “Company”), with principal office at 7950 NW 53rd Street, Suite 337 Miami, FL 33166, and MD Global Partners, LLC (“Advisor”) with principal office at 329 E 63rd Street 3J, New York, NY 10065.
Whereas, the Company strives to be the most trusted digital resource for buyers, sellers, professionals, and enthusiasts in the boating world. Our globally connected online marketplace, social network, and digital tools are professionalizing and standardizing the boating industry.
Whereas, the Advisor is in the business of providing financial advisory and placement agent services to public and private companies; Advisor is a FINRA registered broker-dealer; and
Whereas, the Company desires to engage the Advisor to provide such services in accordance with the terms and conditions hereinafter set forth.
Now, therefore, the Company and Advisor agree as follows:
1. | Engagement. The Company agrees to engage Advisor and Advisor agrees to provide placement agent services to the Company on a non-exclusive basis. |
2. | Term. The term of this Agreement shall commence as of 7th January, 2022. |
3. | Services. Advisor shall render capital markets placement services to the Company and in connection therewith shall: Introduce the Company to the investment community. |
Advisor agrees to make himself available to evaluate all proposals that relate to any financing or any strategic partnership undertaken by the Company.
Anything to the contrary herein notwithstanding, it is agreed that the Advisor’s services will not include any services that constitute the rendering of legal opinions or performance of work that is in the ordinary purview of a certified public accountant.
4. | Compensation: As compensation for its Services, the Company agrees to pay Advisor the placement agent fee as set forth by the provisions in section 5, |
5. | Placement Agent Fee. As compensation for its Services, the Company agrees to pay Advisor for an investment into the Company by a financing source sourced for the Company by the Advisor for which the Company receives funds (including any but not limited to debt, common stock, preferred stock, convertible stock, convertible debentures, subordinated debt with warrants or any other securities convertible into common stock), the Advisor shall receive upon successful closing a placement agent fee, payable in cash, equal to 2%, of the gross amounts raised by the Company on each said closing, |
6. | Fee Tail. None |
7. | Best Efforts Basis. Advisor agrees that he will at all time faithfully and to the best of his experience, ability and talents perform all the duties that may be required of him pursuant to the terms of this Agreement. The Company specifically acknowledges and agrees, however, that the services to be rendered by Advisor shall be conducted on a “best-efforts” basis and Advisor has not, cannot and does not guarantee that his efforts will have any impact on the Company’s business or that any subsequent financial improvement will result from his efforts. |
8. | Costs and Expenses. The Advisor shall be entitled to monthly reimbursement of reasonable and actual out-of-pocket expenses incurred in connection with the services provided under this Agreement. Out-of-pocket expenses shall include, but not be limited to all reasonable travel expenses, computer and research charges, messenger services, facsimile and long-distance telephone calls incurred by Advisor in connection with the services to be provided to the Company. Expenses will be submitted when incurred and payable by wire when receipts and expense reports submitted. Any expenses must be approved by the Company in writing. |
9. | Non-Exclusive Services. The Company understands that the Advisor is currently providing certain advisory and financial consulting services to other individuals and entities and agrees that Advisor is not prevented or barred from rendering services of the same nature or a similar nature to any other individual or entity. |
10. | Advisor Not an Agent or Employee. Advisor’s obligations under this Agreement consist solely of the services described herein. In no event, shall Advisor be considered to be acting as an employee or agent of the Company or otherwise representing or binding the Company. For the purposes of this Agreement, Advisor is an independent contractor. All final decisions with respect to acts of the Company or its affiliates, whether or not made pursuant to or in reliance on information or advice furnished by Advisor hereunder, shall be those of the Company or such affiliates and Advisor shall, under no circumstances, be liable for any expenses incurred or losses suffered by the Company as a consequence of such actions. Advisor agrees that all of his work product relating to the services to be rendered pursuant to this agreement shall become the exclusive property of the Company. |
11. | Representations and Warranties of the Company. The Company represents and warrants to Advisor, each such representation and warranty being deemed to be material, that: |
The Company will cooperate fully and timely with Advisor to enable Advisor to perform his obligations under the Agreement;
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The execution and performance of this agreement by the Company has been duly authorized by the Board of Directors of the Company in accordance with applicable law.
The performance by the Company of this Agreement will not violate any applicable court decree, law or regulation nor will it violate any provision of the organizational documents of the Company or any contractual obligation by which the Company may be bound;
Because the Advisor will rely upon information being supplied to him by the Company, all such information shall be true, accurate, complete and not misleading, in all material respects;
The Company will act diligently and promptly in reviewing materials submitted to it by Advisor to enhance timely distribution of such materials and will inform Advisor of any inaccuracies contained therein prior to dissemination.
The Company is current in its reporting requirements to the applicable foreign regulations, and the Company operates its business legally
The Company agrees it has bound its subsidiaries, if any, to honor and not to circumvent or violate this Agreement.
12. | Representations and Warranties of Advisor. Advisor hereby represents and warrants to the Company as follows: Advisor has full power and authority to enter into this Agreement, to enter into a consulting relationship with the Company and to otherwise perform this Agreement in the time and manner contemplated. |
13. | Liability of Advisor. In furnishing the Company with management advice and other services as herein provided, Advisor shall not be liable to the Company or its creditors for errors of judgment or for anything except malfeasance or gross negligence in the performance of his duties. |
It is further understood and agreed that Advisor may rely upon information furnished to him reasonably believed to be accurate and reliable and that, except as herein provided, Advisor shall not be accountable for any loss suffered by the Company by reason of the Company’s action or non-action on the basis of any advice, recommendation or approval of Advisor. The parties further acknowledge that Advisor undertakes no responsibility for the accuracy of any statements to be made by management contained in press releases or other communications, including, but not limited to, filings with the Securities and Exchange Commission and FINRA
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14. | Mutual Indemnification. |
(a) Both parties agree to indemnify and hold harmless the other from and against any and all losses, claims, damages, liabilities and expenses (including, without limitation attorneys’ fees and costs incurred in the investigation, defense and settlement of the matter) suffered or incurred by either party which arises out of this Agreement or otherwise out of the performance by either party of their obligations hereunder, unless, such losses, claims, damages, liabilities or expenses are found by a final determination of a court of competent jurisdiction to have arisen out of gross negligence or malfeasance of the either party hereunder (pending any such final determination, the indemnification and reimbursement provision of this Agreement shall apply. If for any reason the foregoing indemnification is unavailable to either party, or insufficient to hold him harmless, then the parties shall contribute to the amount paid or payable as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect not only the relative benefits received by the Company on the one hand and the Advisor on the other hand, but also the relative fault of the Company and the Advisor, as well as any other relevant equitable considerations. The reimbursement, indemnity and contribution obligations of both parties under this paragraph shall be in addition to any liability which the either party may otherwise have and shall be binding and inure to the benefit of any respective successors, assigns, heirs and personal representatives of the Company and the Advisor.
(b) The Company agrees to indemnify, defend and hold harmless the Advisor against any and all losses, claims, damages, expenses and liabilities to which the Advisor may become subject, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, resulting from the use of written information furnished to the Advisor by the Company, regarding the Company, for use in the preparation of the Registration Statement.
The provisions of this Section 14 shall survive the termination and expiration of this Agreement.
15. | Confidentiality. Until such time as the same may become publicly known, Advisor agrees that any information provided him by the Company, of a confidential nature will not be revealed or disclosed to any person or entities, except in the performance of this Agreement. Advisor will, where he deems necessary, require confidentiality agreements from any associated persons where he reasonably believes they will come in contact with confidential material. |
16. | Applicable Law. This Agreement shall be governed by the laws of the State of New York without giving effect to the principles of conflicts of law. |
17. | Other Agreements. This Agreement supersedes all prior understandings and agreements between the parties. It may not be amended orally, but only by a writing signed by the parties hereto. |
18. | Disbursement Information. All funds received from placements arranged will be promptly transmitted to the escrow account maintained by either Donnell Suares Esq. or as mutually agreed between the Advisor and the Company (the “Escrow Agent”). At the Closing, the funds received in respect of the placement closed on will be forwarded to the Company, against delivery of the appropriate number of shares of Common Stock, Warrants or Debenture (Convertible or Non-Convertible), net of (i) a Placement Agent commission payable in cash in an amount equal to eight percent (8%) of the gross proceeds (ii) any reasonable, documented out-of-pocket costs and expenses paid or to be paid by the Placement Agent including, but not limited to, printing, filing, background examinations of the Company’s officers, directors, controlling persons and key employees, mailing, travel, lodging, plus legal expenses except that the Company shall not be responsible for any expenses of the Placement excess of $1000 without the Company’s prior written approval. |
18. | Non-Waiver. No delay or failure by either party in exercising any right under this Agreement, and no partial or single exercise of that right shall constitute a waiver of that or any other right. |
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Please confirm that the foregoing correctly sets forth our agreement by signing and returning to MD Global Partners a copy of this Agreement.
MD Global Partners | ||
/s/ Owen May | ||
Name: | Owen May | |
Title: | CEO | |
Date: | 1/7/22 | |
Address for Notice: | ||
329
E 63rd Street Suite 3J New York, New York 10065 | ||
Accepted and Agreed to as of the date written above: | ||
Boatim Inc | ||
Name: | Joseph Kent Johnson | |
Title: | Chairman | |
Date: | 1/7/22 | |
Address for Notice: | ||
7950 NW 53rd Street Suite 337 | ||
Miami, FL 33166 |
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Exhibit 10.13
EXECUTIVE SERVICES AGREEMENT
THIS EXECUTIVE SERVICES AGREEMENT (the “Agreement”) is made effective as of June 1, 2020 (“Effective Date”) between BOATIM, Inc. (the “Company”) and WOLFGANG TIPPNER (“Executive”). The Company and Executive are collectively referred to as the “Parties” and each, a “Party”.
1. | Independent Executive. Subject to the terms and conditions of this Agreement, the Company hereby engages the Executive as an independent Executive to perform the services set forth herein, and the Executive hereby accepts such engagement. |
2. | Services and Duties. The Executive will perform CHIEF EXECUTIVE OFFICER services as more fully described in Addendum A (the “Services”) and Executive shall fulfil any other duties reasonably requested by the Company and agreed to by the Executive. |
3. | Term. The term of this Agreement shall commence on the Effective Date, and shall continue in full force and effect indefinitely (the “Term”). The Agreement may be terminated by either Party by a 3 month prior written notice. |
4. | Compensation. As compensation for the services rendered pursuant to this Agreement, the Company shall pay the Executive cash compensation as described below. |
a. | Sign-On Bonus. Executive had been providing services to the Company from April 24, 2019. For services rendered up to the Effective Date Company shall pay to Executive a sign-on BONUS of US $24,000.00, within 6 months from the date of this agreement. |
b. | Cash. As compensation for the services rendered pursuant to this Agreement, the Company shall pay the Executive the sum of NINETY SIX THOUSAND US DOLLARS (US $96,000.00) payable as follows: |
i. | US $8,000.00 per month, for CEO Services. |
ii. | Executive shall submit a monthly invoice to accounting@boatim.com within five business days of the end of the month, payable Net 10 days from date of invoice receipt. The Parties have determined that no VAT applies – should VAT apply or should applicable laws change, the Parties will consider the above amount to be the net amount and VAT shall be charged and paid additionally thereon. |
5. | Expenses. During the Term, the Executive shall bill the Company and the Company shall reimburse the Executive for all reasonable and pre-approved out-of-pocket expenses which are incurred in connection with the performance of the Services hereunder. Notwithstanding the foregoing, costs for the time spent by Executive in traveling to and from Company facilities and events shall not be reimbursable unless otherwise agreed to in writing by Company. |
6. | Written Reports. The Company may request that project plans, progress reports and a final results report be provided by Executive on a monthly or other periodic basis. A final results report may be due, at Company’s request, at the conclusion of the Agreement and shall be submitted to the Company in a confidential written report at such time. The results report shall be in such form and setting forth such information and data as is reasonably requested by the Company. |
7. | Confidentiality. The Executive acknowledges that during the Term they will have access to and become acquainted with various trade secrets, inventions, innovations, processes, information, records and specifications owned or licensed by the Company and/or used by the Company in connection with the operation of its business including, without limitation, the Company’s business and product processes, methods, customer lists, accounts and procedures. The Executive agrees that they will not disclose any of the aforesaid, directly or indirectly, or use any of the information in any manner, either during the Term or at any time thereafter, except as required in the course of this engagement with the Company. All files, records, documents, blueprints, specifications, information, letters, notes, media lists, original artwork/creative, notebooks, and similar items relating to the business of the Company, whether prepared by the Executive or otherwise coming into their possession, shall remain the exclusive property of the Company. The Executive shall not retain any copies of the foregoing without the Company’s prior written permission. Upon the expiration or earlier termination of this Agreement, or whenever requested by the Company, the Executive shall immediately deliver to the Company all such files, records, documents, specifications, information, and other items in their possession or under their control. |
8. | Conflicts of Interest; Non-hire Provision. The Executive represents that they are free to enter into this Agreement and that this engagement does not violate the terms of any agreement between the Executive and any third party. Further, the Executive, in rendering their Services shall not utilize any invention, discovery, development, improvement, innovation, or trade secret in which they do not have a proprietary interest. During the Term, the Executive shall devote as much of their productive time, energy and abilities to the performance of their duties hereunder as is necessary to perform the required Services in a timely and productive manner. The Executive is expressly free to perform services for other parties while performing Services for the Company. For a period of twelve (12) months following termination, the Executive shall not, directly or indirectly hire, solicit, or encourage leaving the Company’s employment, any employee, consultant, or Executive of the Company or hiring any such employee, consultant, or Executive who has left the Company’s employment or contractual engagement within one year of such employment or engagement. |
9. | Right to Injunction. The parties hereto acknowledge that the Services to be rendered by the Executive under this Agreement and the rights and privileges granted to the Company under the Agreement are of a special, unique, unusual, and extraordinary character which gives them a peculiar value, the loss of which cannot be reasonably or adequately compensated by damages in any action at law, and the breach by the Executive of any of the provisions of this Agreement will cause the Company irreparable injury and damage. The Executive expressly agrees that the Company shall be entitled to injunctive and other equitable relief in the event of, or to prevent, a breach of any provision of this Agreement by the Executive. Resort to such equitable relief, however, shall not be construed to be a waiver of any other rights or remedies that the Company may have for damages or otherwise. The various rights and remedies of the Company under this Agreement or otherwise shall be construed to be cumulative, and no one of them shall be exclusive of any other or of any right or remedy allowed by law. |
10. | Merger. This Agreement shall not be terminated by the merger or consolidation of the Company into or with any other entity. |
11. | Termination. Either Party may terminate this Agreement (i) at any time by 3 months written notice to the other Party. In addition, the Company may terminate this Agreement (ii) if the Executive is convicted of any crime or offense, fails or refuses to comply with the written policies or reasonable directive of the Company, is guilty of serious misconduct in connection with performance hereunder, or materially breaches provisions of this Agreement, the Company at any time may terminate the engagement of the Executive immediately and without prior written notice to the Executive. Should the Company terminate this Agreement under (ii) above, Executive shall be owed payment of his compensation immediately and in full for the 3 months termination period, unless Company terminated this engagement following Executive´s resignation upon his own request. |
12. | Independent Executive. This Agreement shall not render the Executive an employee, partner, agent of, or joint venturer with the Company for any purpose. The Executive is and will remain an independent Executive in his relationship to the Company. The Company shall not be responsible for withholding taxes with respect to the Executive’s compensation hereunder. The Executive shall have no claim against the Company hereunder or otherwise for vacation pay, sick leave, retirement benefits, social security, worker’s compensation, health or disability benefits, unemployment insurance benefits, or employee benefits of any kind. |
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13. | Successors and Assigns. This Agreement shall only apply to Executive personally and none of the provisions of this Agreement shall be binding upon or inure to the benefit of the parties hereto or their respective heirs, if any, successors, or assigns. |
14. | Choice of Law. The laws of the state of FLORIDA shall govern the validity of this Agreement, the construction of its terms and the interpretation of the rights and duties of the parties hereto and any disputes under this agreement are subjected to the exclusive jurisdiction of the courts of the State of FLORIDA, Miami-Dade County. |
15. | Headings. Section headings are not to be considered a part of this Agreement and are not intended to be a full and accurate description of the contents hereof. |
16. | Waiver. Waiver by one party hereto of breach of any provision of this Agreement by the other shall not operate or be construed as a continuing waiver. |
17. | Assignment. The Executive shall not be able to assign any of his rights under this Agreement, or delegate the performance of any of his Services hereunder, without the prior written consent of the Company. |
18. | Notices. All notices hereunder shall be in writing and shall be sent by registered mail or certified mail, return receipt requested, postage prepaid and with receipt acknowledged, or by hand (to an officer if the party to be served is a corporation), or by facsimile or by e-mail, all charges prepaid, at the respective addresses set forth below. Any party hereto may change its address for purposes of this paragraph by written notice given in the manner provided herein: |
If to the Company: | If to Executive: | |
BOATIM,
Inc. |
At Executive’s home address as then shown in the Company’s personnel records |
The date of making of personal service or of mailing or transmission via facsimile, or transmission via e-mail, whichever shall be first, shall be deemed the date of service, except that notice of change of address shall be effective only from the date of its receipt.
19. | Modification or Amendment. No amendment, change or modification of this Agreement shall be valid unless in writing signed by the parties hereto. |
20. | Entire Understanding. This document and any exhibit attached constitute the entire understanding and agreement of the parties, and any and all prior agreements, understandings, and representations are hereby terminated and cancelled in their entirety and are of no further force and effect. |
21. | Unenforceability of Provisions. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. |
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22. | Indemnification. Executive hereby indemnifies Company and holds Company harmless against any damages, liability, costs, expenses and fees (including reasonable attorney’s fees and court costs) incurred as a result of or in connection with any claim or proceeding against Company arising out of any breach or claimed breach of this Agreement or of any warranty, representation or covenant by Executive herein, as well as any negligent act or omission by Executive. Executive agrees to pay Company on demand any amounts for which Executive may be responsible under the foregoing indemnity and, without limiting any of Company’s other rights or remedies, Company may deduct the same from any and all monies payable hereunder or any other agreement between Executive and Company if Executive does not so pay Company on demand. |
23. | Representations and Warranties by Company. The Company represents and warrants to Executive that, as of the date of this Agreement: |
a. | Organization and Corporation Power. The Company is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Colorado; and has all required corporate power and authority to own its property and to carry on its business as now being conducted, to enter into this Agreement and to carry out the transactions contemplated hereby. |
b. | Authorization. The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated hereby will not, violate any provision of any charter, articles of incorporation, by-law, mortgage, lien, lease, agreement, contract, instrument, order judgment, or decree to which the Company is a party, or by which it is bound, and will not violate any other restriction of any other kind or character of which Company is subject. The execution of this Agreement by its representative whose signature is set forth at the end hereof has been duly authorized by all necessary corporate action. |
c. | Capitalization. There are sufficient authorized shares of common stock of the Issuing Company to cover the issuance of the Shares pursuant to this Agreement. There are restrictions on the transferability and sale of Shares imposed by or pursuant to federal securities law. |
24. | Representations and Warranties By Executive. The Executive represents and warrants to the Company that, as of the date of this Agreement: |
a. | Executive has the right to enter into this Agreement, to grant the rights granted herein and to perform fully all of the obligations in this Agreement. |
b. | Executive’s entering into this Agreement with the Company and their performance of all of their obligations do not and will not conflict with or result in any breach or default under any other agreement to which they are subject. |
c. | Executive has the required skill, experience and qualifications to perform Services in connection with this Agreement, they shall perform the Services in connection with this Agreement in a professional and workmanlike manner in accordance with generally recognized industry standards for similar services and they shall devote sufficient resources to ensure that the Services in connection with this Agreement are performed in a timely and reliable manner. |
d. | Executive shall perform the services in connection with this Agreement in compliance with all applicable federal, state and local laws and regulations. |
e. | The Company will receive good and valid title to the products resulting from this Agreement, if any, free and clear of all encumbrances and liens of any kind. |
f. | If applicable, the periodic design documents and reports shall be the Executive’s original work (except for material in the public domain or provided by the Company) and, to the best of their knowledge, do not and will not violate or infringe upon the intellectual property right or any other right whatsoever of any person, firm, corporation or other entity. |
g. | Executive fully understands and agrees that Shares potentially being offered by the Issuing Company, might be offered at a price which might be arbitrarily determined without regard to any value of such Shares. |
h. | Executive fully understands that the Issuing Company has a limited net worth. |
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i. | Executive acknowledges receipt of such information as they deem necessary or appropriate as a prudent and knowledgeable investor in evaluating the Shares issued as compensation. |
j. | Executive understands that there exist inherent risks in accepting the Shares as compensation, which risks include, but are not limited to, the lack of liquidity of the Shares, and the Issuing Company’s lack of history. Executive agrees to accept all risks associated with accepting the Shares as compensation. |
k. | Executive understands that the Issuing Company’s business is, by its nature, speculative; that Executive is aware that the financial resources of the Issuing Company are extremely limited and that it is very likely that the Issuing Company will require additional capital, and there is no assurance that such capital will be available if necessary; that Executive is familiar with the high degree of risk that is involved in the Issuing Company’s business, and that Executive is financially able and willing to accept the substantial risk involved in such investment, including the risk of loss of the entire amount invested. |
l. | Executive understands that the Shares have not been registered for sale under federal or state securities laws and that said securities are being issued to Executive pursuant to a claimed exemption from the registration requirements of such laws which is based upon the fact that said securities are not being offered to the public. Executive understands that in order to satisfy such requirement they must be acquiring the Shares with no view to making a public distribution of said securities and the representations and warranties contained in this Section are given with the intention that the Issuing Company may rely thereon for purposes of claiming such exemption; and that they understand that they must bear the economic risk of their investment in the securities for a substantial period of time, because the securities have not been registered under the federal or state securities laws, and cannot be sold unless subsequently registered under such laws, or unless an exemption from such registration is available. |
m. | Executive represents that they are acquiring the securities for their own account and for investment and not with a view to, or for sale in connection with, any distribution thereof in violation of the Securities Act of 1933, as amended. Executive agrees that the Shares will not be offered for sale, sold or otherwise transferred for value and that no transfer thereof will be made by the Executive unless (a) a registration statement with respect thereto has become effective under the Securities Act of 1933, as amended, or (b) there is presented to the Issuing Company an opinion of counsel for Executive reasonably satisfactory to the Issuing Company that such registration is not required. Executive further agrees that the securities will not be offered for sale, sold or otherwise transferred unless, in the opinion of legal counsel for the Issuing Company, such sale or disposition does not and will not violate any provisions of any federal or state securities law or regulation. |
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25. | Acknowledgement of Binding Agreement. Executive acknowledges that this is a binding legal agreement and that Executive has read each page of this Agreement prior to its execution and that Executive fully understands its meaning and effect. Executive acknowledges and agrees that Executive has had the opportunity to have this Agreement reviewed by Executive’s attorney or has expressly elected to forego such review, and that by signing this Agreement, Executive intends to be legally bound by all its terms. |
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF the undersigned have executed this Agreement as of the day and year first written above. The parties agree that email/facsimile signatures shall be effective.
BOATIM, Inc. | Executive | ||
Veng Kun LUN, Director & COO | Name: | Wolfgang Tippner | |
BOATIM, Inc. | |||
Majority Shareholder |
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ADDENDUM A
INDEPENDENT EXECUTIVE AGREEMENT
CHIEF EXECUTIVE OFFICER Responsibilities
1. | Develop a strategic plan to advance the company’s mission and objectives and to promote revenue, profitability, and growth as an organization. |
2. | Oversee company operations to insure service efficiency, quality, and cost-effective management of resources. |
3. | Plan, develop, and implement strategies for generating resources and/or revenues for the company. |
4. | Identify acquisition and merger opportunities and direct implementation activities. |
5. | Approve company operational procedures, policies, and standards. |
6. | Review activity reports and financial statements to determine progress and status in attaining objectives and revise objectives and plans in accordance with current conditions. |
7. | Evaluate performance of executives for compliance with established policies and objectives of the company and contributions in attaining objectives. |
8. | Promote the company through written articles and personal appearances at conferences and on radio and TV. |
9. | Represent the company at legislative sessions, committee meetings, and at formal functions. |
10. | Promote the company to local, regional, national, and international constituencies. |
11. | Build a fundraising network using personal contacts, direct mail, special events, and foundation support. |
12. | Present company report at Annual Stockholder and Board of Director meetings. |
13. | Direct company planning and policy-making committees. |
14. | Oversee foreign operations to include evaluating operating and financial performance. |
15. | Report to Board of Directors and any other committees in place from time to time. |
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Exhibit 10.14
EXECUTIVE SERVICES AGREEMENT
THIS EXECUTIVE SERVICES AGREEMENT (the “Agreement”) is made effective as of January 1, 2021 (“Effective Date”) between BOATIM INC. (the “Company”) and BENJAMIN LAURENCE SALTER (“Executive”). The Company and Executive are collectively referred to as the “Parties” and each, a “Party”.
1. | Independent Executive. Subject to the terms and conditions of this Agreement, the Company hereby engages the Executive as an independent Executive to perform the services set forth herein, and the Executive hereby accepts such engagement. |
2. | Services and Duties. The Executive will perform CHIEF FINANCIAL OFFICER services as more fully described in Addendum A (the “Services”) and Executive shall fulfil any other duties reasonably requested by the Company and agreed to by the Executive. |
3. | Term. The term of this Agreement shall commence on the Effective Date, and shall continue in full force and effect indefinitely (the “Term”). The Agreement may be terminated by either party by 3 months’ prior written notice. |
4. | Compensation. As compensation for the services rendered pursuant to this Agreement, the Company shall pay the Executive compensation as described below. |
a. | Sign-On Bonus. Company shall make available to Executive a sign-on bonus EQUITY OPTION (the “Options”) of 500,000 COMMON SHARES in the share capital of the Company at a strike price of $0.10 per share. The Options must be executed within 15 months from the date of the Agreement. They can be executed no earlier as follows: 50,000 shares within 2 weeks of the date of this Agreement, a further 200,000 shares after 6 months, the remainder after 12 months. The Company will make cash payments to Executive accordingly of $5,000, $20,000 and $25,000 after 2 weeks, 6 months and 12 months. Shares will be vested and remain restricted for 12 months from the date of issuance. Options and transfers are subject to this Agreement not being terminated within the restricted period. |
b. | Cash. Executive shall earn a cash compensation (the “Base Salary”) for the services rendered pursuant to this Agreement of ONE HUNDRED FIFTY THOUSAND SWISSFRANCS (CHF 150,000.00) in accordance with applicable local employment laws, payable in increments of CHF 12,500.00 per month. Executive´s Base Salary shall be increased to ONE HUNDRED EIGHTY THOUSAND SWISSFRANCS (CHF 180,000.00) payable in increments of CHF 15,000.00 per month from April 01, 2021 on. |
c. | Performance Bonus Shares. With respect to each fiscal year of the Company during the Term, but only after payment of the twelfth increment of Base Salary, Executive shall be eligible to earn an annual share bonus award (the “Annual Bonus”), with a target amount equal to fifty percent (50%) of the Base Salary (the “Target Bonus”), based upon the achievement of performance targets established by the Board (or a committee thereof) in its discretion. The Annual Bonus shall be subject to the terms of any applicable annual bonus plan that may be adopted by the Company. The Annual Bonus, if any, shall be paid at the same time annual bonuses are paid to other senior executives of the Company generally, and shall be subject to Executive being employed by the Company on the date such Annual Bonus is paid. |
5. | Expenses. During the Term, the Executive shall bill the Company and the Company shall reimburse the Executive for all reasonable and pre-approved out-of-pocket expenses which are incurred in connection with the performance of the Services hereunder, including inter alia reasonable home-office expenses and travel cost to and from company, shareholder, and other advisers’s premises and events. |
6. | Written Reports. The Company may request that project plans, progress reports and a final results report be provided by Executive on a monthly or other periodic basis. A final results report may be due, at Company’s request, at the conclusion of the Agreement and shall be submitted to the Company in a confidential written report at such time. The results report shall be in such form and setting forth such information and data as is reasonably requested by the Company. |
7. | Confidentiality. The Executive acknowledges that during the Term they will have access to and become acquainted with various trade secrets, inventions, innovations, processes, information, records and specifications owned or licensed by the Company and/or used by the Company in connection with the operation of its business including, without limitation, the Company’s business and product processes, methods, customer lists, accounts and procedures. The Executive agrees that they will not disclose any of the aforesaid, directly or indirectly, or use any of the information in any manner, either during the Term or at any time thereafter, except as required in the course of this engagement with the Company. All files, records, documents, blueprints, specifications, information, letters, notes, media lists, original artwork/creative, notebooks, and similar items relating to the business of the Company, whether prepared by the Executive or otherwise coming into their possession, shall remain the exclusive property of the Company. The Executive shall not retain any copies of the foregoing without the Company’s prior written permission. Upon the expiration or earlier termination of this Agreement, or whenever requested by the Company, the Executive shall within seven days and upon specific request of the Company deliver to the Company all such files, records, documents, specifications, information, and other items in their possession or under their control, or confirm their deletion. |
8. | Conflicts of Interest; Non-hire Provision. The Executive represents that they are free to enter into this Agreement and that this engagement does not violate the terms of any agreement between the Executive and any third party. Further, the Executive, in rendering their Services shall not utilize any invention, discovery, development, improvement, innovation, or trade secret in which they do not have a proprietary interest. During the Term, the Executive shall devote as much of their productive time, energy and abilities to the performance of their duties hereunder as is necessary to perform the required Services in a timely and productive manner. The Executive is expressly free to perform services for other parties while performing Services for the Company. For a period of twelve (12) months following termination, the Executive shall not, directly or indirectly hire, solicit, or encourage leaving the Company’s employment, any employee, consultant, or Executive of the Company, provided however, nothing shall prohibit Executive from placing general hiring advertisements in media of general circulation if such advertisements are not directed primarily toward Company employees or hiring as a result of such advertisements. |
9. | Right to Injunction. The parties hereto acknowledge that the Services to be rendered by the Executive under this Agreement and the rights and privileges granted to the Company under the Agreement are of a special, unique, unusual, and extraordinary character which may give them a peculiar value, the loss of which cannot be reasonably or adequately compensated by damages in any action at law, and the breach by the Executive of any of the provisions of this Agreement may cause the Company irreparable injury and damage. The Executive expressly agrees that the Company shall be entitled to seek injunctive and other equitable relief in the event of, or to prevent, a breach of any provision of this Agreement by the Executive. Resort to such equitable relief, however, shall not be construed to be a waiver of any other rights or remedies that the Company may have for damages or otherwise. The various rights and remedies of the Company under this Agreement or otherwise shall be construed to be cumulative, and no one of them shall be exclusive of any other or of any right or remedy allowed by law. |
10. | Merger. This Agreement shall not be terminated by the merger or consolidation of the Company into or with any other entity. |
11. | Termination. The Company may terminate this Agreement (i) at any time by 3 calendar months’ written notice to the Executive. In addition, (ii) if the Executive is convicted of any crime or offense, fails or refuses to comply with the written policies or reasonable directive of the Company, is guilty of serious misconduct in connection with performance hereunder, or materially breaches provisions of this Agreement, the Company at any time may terminate the engagement of the Executive immediately and without prior written notice to the Executive. Should the Company terminate this Agreement prior to its set end of term under (ii) above, Executive shall be owed payment of his compensation immediately and in full for the complete originally scheduled term, unless Company terminated this engagement following Executive´s resignation upon his own request. |
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12. | Independent Executive. This Agreement shall not render the Executive an employee, partner, agent of, or joint venturer with the Company for any purpose. The Executive is and will remain an independent Executive in his relationship to the Company. The Company shall not be responsible for withholding taxes with respect to the Executive’s compensation hereunder. The Executive shall have no claim against the Company hereunder or otherwise for vacation pay, sick leave, retirement benefits, social security, worker’s compensation, health or disability benefits, unemployment insurance benefits, or employee benefits of any kind. |
13. | Successors and Assigns. This Agreement shall only apply to Executive personally and none of the provisions of this Agreement shall be binding upon or inure to the benefit of the parties hereto or their respective heirs, if any, successors, or assigns. |
14. | Choice of Law. The laws of the state of FLORIDA shall govern the validity of this Agreement, the construction of its terms and the interpretation of the rights and duties of the parties hereto and any disputes under this agreement are subjected to the exclusive jurisdiction of the courts of the State of FLORIDA, Miami-Dade County. |
15. | Headings. Section headings are not to be considered a part of this Agreement and are not intended to be a full and accurate description of the contents hereof. |
16. | Waiver. Waiver by one party hereto of breach of any provision of this Agreement by the other shall not operate or be construed as a continuing waiver. |
17. | Assignment. The Executive shall not be able to assign any of his rights under this Agreement, or delegate the performance of any of his Services hereunder, without the prior written consent of the Company. |
18. | Notices. All notices hereunder shall be in writing and shall be sent by registered mail or certified mail, return receipt requested, postage prepaid and with receipt acknowledged, or by hand (to an officer if the party to be served is a corporation), or by e-mail, all charges prepaid, at the respective addresses set forth below. Any party hereto may change its address for purposes of this paragraph by written notice given in the manner provided herein: |
If to the Company: | If to Executive: | |
BOATIM, Inc. 7950 NW 53rd Street, Suite 337 Miami, FL 33166 Attn: General Counsel, BOATIM, Inc. |
At Executive’s home address as then shown in the Company’s personnel records |
The date of making of personal service or of mailing or transmission via facsimile, or transmission via e- mail, whichever shall be first, shall be deemed the date of service, except that notice of change of address shall be effective only from the date of its receipt.
19. | Modification or Amendment. No amendment, change or modification of this Agreement shall be valid unless in writing signed by the parties hereto. |
20. | Entire Understanding. This document and any exhibit attached constitute the entire understanding and agreement of the parties, and any and all prior agreements, understandings, and representations are hereby terminated and cancelled in their entirety and are of no further force and effect. |
21. | Unenforceability of Provisions. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. |
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22. | EXECUTIVE D&O. Executive shall be indemnified by the Company against damages, liability, costs, expenses and fees (including reasonable attorney’s fees and court costs) incurred as a result of or in connection with any third-party claim or proceeding against Executive arising out of his serving as an officer of the Company and/or performing services under this Agreement, to the maximum extent permitted by applicable law. The Executive shall be entitled to prompt advancement of all expenses in accordance with the provisions of this section. The Company shall, to the maximum extent permitted by law, indemnify and hold Executive harmless for any acts or decisions made in good faith while performing services for the Company. In addition, the Company shall maintain, for the benefit of the Executive liability insurance to the extent available on commercially reasonable terms. |
23. | Representations and Warranties by Company. The Company represents and warrants to Executive that, as of the date of this Agreement: |
a. | Organization and Corporation Power. The Company is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Nevada; and has all required corporate power and authority to own its property and to carry on its business as now being conducted, to enter into this Agreement and to carry out the transactions contemplated hereby. |
b. | Authorization. The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated hereby will not, violate any provision of any charter, articles of incorporation, by-law, mortgage, lien, lease, agreement, contract, instrument, order judgment, or decree to which the Company is a party, or by which it is bound, and will not violate any other restriction of any other kind or character of which Company is subject. The execution of this Agreement by its representative whose signature is set forth at the end hereof has been duly authorized by all necessary corporate action. |
c. | Capitalization. There are sufficient authorized shares of common stock of the Company to cover the issuance of the Shares pursuant to this Agreement. There are restrictions on the transferability and sale of Shares imposed by or pursuant to federal securities law. |
d. | Compliance. The Company has raised capital from investors prior to the date of this Agreement. All investments received by the Company have been done so in compliance with applicable Securities laws and regulations, and Company has performed and documented its compliance with applicable Anti-Money Laundering and Know-your-Client provisions. |
24. | Undertakings by the Company. The Company undertakes to Executive that as soon as possible following the date of this Agreement, and continuing on an ongoing basis thereafter, it shall: |
a. | Procure Directors & Officers insurance coverage, including the Executive as a named person, with company coverage of a minimum of $2 million, and maintain ongoing constant coverage. |
b. | Maintain validly appointed SEC legal counsel for the benefit of the Company and the Board of Directors. |
25. | Representations and Warranties by Majority Shareholder. The Majority Shareholder represents and warrants to Executive that, as of the date of this Agreement, it is not aware of any breaches of the Representations and Warranties made by the Company. |
26. | Representations and Warranties By Executive. The Executive represents and warrants to the Company that, as of the Effective Date of this Agreement: |
a. | Executive has the right to enter into this Agreement, to grant the rights granted herein and to perform fully all of the obligations in this Agreement. |
b. | Executive’s entering into this Agreement with the Company and their performance of all of their obligations do not and will not conflict with or result in any breach or default under any other agreement to which they are subject. |
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c. | Executive has the required skill, experience and qualifications to perform Services in connection with this Agreement, they shall perform the Services in connection with this Agreement in a professional and workmanlike manner in accordance with generally recognized industry standards for similar services and they shall devote sufficient resources to ensure that the Services in connection with this Agreement are performed in a timely and reliable manner. |
d. | Executive shall perform the services in connection with this Agreement in compliance with all applicable federal, state and local laws and regulations. |
e. | The Company will receive good and valid title to the products resulting from this Agreement, if any, free and clear of all encumbrances and liens of any kind. |
f. | Executive fully understands and agrees that Shares potentially being offered by the Company, might be offered at a price which might be arbitrarily determined without regard to any value of such Shares. Executive fully understands that the Company has a limited net worth. |
g. | Executive acknowledges receipt of such information as they deem necessary or appropriate as a prudent and knowledgeable investor in evaluating the Shares issued as compensation. |
h. | Executive understands that there exist inherent risks in accepting the Shares as compensation, which risks include, but are not limited to, the lack of liquidity of the Shares, and the Company’s lack of history. Executive agrees to accept all risks associated with accepting the Shares as compensation. |
i. | Executive understands that the Company’s business is, by its nature, speculative; that Executive is aware that the financial resources of the Company are extremely limited and that it is very likely that the Company will require additional capital, and there is no assurance that such capital will be available if necessary; that Executive is familiar with the high degree of risk that is involved in the Company’s business. |
j. | Executive understands that the Shares have not been registered for sale under federal or state securities laws and that said securities are being issued to Executive pursuant to a claimed exemption from the registration requirements of such laws which is based upon the fact that said securities are not being offered to the public. Executive understands that in order to satisfy such requirement they must be acquiring the Shares with no view to making a public distribution of said securities and the representations and warranties contained in this Section are given with the intention that the Company may rely thereon for purposes of claiming such exemption; and that they understand that they must bear the economic risk of their investment in the securities for a substantial period of time, because the securities have not been registered under the federal or state securities laws, and cannot be sold unless subsequently registered under such laws, or unless an exemption from such registration is available. |
k. | Executive represents that they are acquiring the securities for their own account and for investment and not with a view to, or for sale in connection with, any distribution thereof in violation of the Securities Act of 1933, as amended. Executive agrees that the Shares will not be offered for sale, sold or otherwise transferred for value and that no transfer thereof will be made by the Executive unless (a) a registration statement with respect thereto has become effective under the Securities Act of 1933, as amended, or (b) there is presented to the Company an opinion of counsel for Executive reasonably satisfactory to the Company that such registration is not required. Executive further agrees that the securities will not be offered for sale, sold or otherwise transferred unless, in the opinion of legal counsel for the Company, such sale or disposition does not and will not violate any provisions of any federal or state securities law or regulation. |
27. | Acknowledgement of Binding Agreement. Executive acknowledges that this is a binding legal agreement and that Executive has read each page of this Agreement prior to its execution and that Executive fully understands its meaning and effect. Executive acknowledges and agrees that Executive has had the opportunity to have this Agreement reviewed by Executive’s attorney or has expressly elected to forego such review, and that by signing this Agreement, Executive intends to be legally bound by all its terms. |
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IN WITNESS WHEREOF the undersigned have executed this Agreement as of the day and year written below. The parties agree that email/facsimile signatures shall be effective.
BOATIM, Inc. | Executive | |||
Wolfgang TIPPNER Director & CEO |
Name: | Benjamin Laurence Salter | ||
Date: | 14th December, 2020 | Date: | ||
BOATIM, INC | ||||
Majority Shareholder | ||||
Date: | 14th December, 2020 |
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ADDENDUM A
INDEPENDENT EXECUTIVE AGREEMENT
CHIEF FINANCIAL OFFICER Responsibilities
1. | Develop a strategic plan to advance the company’s mission and objectives and to promote revenue, profitability, and growth as an organization. |
2. | Oversee company operations to ensure service efficiency, quality, and cost-effective management of resources. |
3. | Plan, develop, and implement strategies for generating resources and/or revenues for the company. |
4. | Identify investors, acquisition and merger opportunities, and direct implementation activities. |
5. | Design and implement company operational procedures, policies, and standards. |
6. | Build, lead, and develop the internal financial reporting systems |
7. | Manage liquidity, and contribute to fundraising and investor relations activities. |
8. | Oversee relevant operational topics in the HR and legal areas. |
9. | Establish the strategic financial plan for the company, and analytical processes that drive performance.1 |
10. | Review activity reports and financial statements to determine progress and status in attaining objectives and revise objectives and plans in accordance with current conditions. |
11. | Oversee financial accounting and reporting, external audit, tax, and Board reporting. |
12. | Evaluate performance of executives for compliance with established policies and objectives of the company and contributions in attaining objectives. |
13. | Represent the company periodically through written articles, interviews, and personal appearances. |
14. | Represent the company to relevant constituencies in corporate finance, banking relationships, investor relations, and M&A. |
15. | Set up and maintain an adequate system of internal controls, financial systems, governance, and risk management. |
16. | Present company report at Annual Stockholder and Board of Director meetings. |
17. | Oversee foreign operations to include evaluating operating and financial performance. |
18. | Report to major Shareholders, Board of Directors and any other committees in place from time to time. |
1 | Including development of commercialisation models and analysis of economic viability of potential future target markets like boat charter, shared economy business models and new markets digitizing currently offline industry practices, ie financing, insurance, warranties etc. |
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Exhibit 10.15
NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT (this “Agreement”), dated as of December 20, 2021, (the “Execution Date”), is entered into by and between BOATIM, INC., a Nevada corporation (the “Company”), and MEDITHORITY, LLC, a Nevada limited liability company (the “Buyer”). Each capitalized term used herein shall have the meaning ascribed thereto in Section 10 below, or as otherwise defined herein.
WHEREAS, the Company and the Buyer are executing and delivering this Agreement in reliance upon an exemption from securities registration afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”); and
WHEREAS, the Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement (i) a secured convertible promissory note of the Company, in the form attached hereto as Exhibit A, in an aggregate funded amount of $217,500 as set forth on the Issuance Schedule attached hereto (such note, together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof, a “Note”), convertible into shares (the “Conversion Shares”) of common stock, $0.001 par value per share, of the Company (the “Common Stock”) pursuant to the terms of the Note; and (ii) warrants to acquire shares (the “Warrant Shares”) of Common Stock in the form attached hereto as Exhibit B (the “Warrant”), in such amounts set forth on the Issuance Schedule; and
WHEREAS, as inducement to enter into this Agreement, and for the funding of the Note, the Company desires to issue to the Buyer shares of Common Stock (the “Commitment Shares”) as set forth herein.
NOW THEREFORE, in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the Buyer hereby agree as follows:
1. | PURCHASE AND SALE OF SECURITIES. |
(a) | Closing. On the Closing Date (as defined below), the Company shall sell and issue to the Buyer and the Buyer shall purchase and fund a Note in such principal amount, and for such funding price, set forth on the Issuance Schedule under “December Closing” (the “Closing”), which such funding amount shall be $217,500 for the Closing (the “Company Funding Amount”) delivered in two tranches, one-half at Closing and the other half at the time that the Company’s 2021 10-K is filed. |
(b) | Closing Date. Subject to the satisfaction (or written waiver) of the conditions set forth in Section 7 and Section 8 below, the date of the issuance and sale of the Note constituting the Closing pursuant to this Agreement (the “Closing Date”) shall be the Execution Date. |
(c) | Form of Payment. On the Closing Date, the Buyer shall deliver the Company Funding Amount by wire transfer of immediately available funds, in accordance with the Company’s written wiring instructions. |
(d) | Warrants. On the Closing Date, the Company shall deliver Warrants to the Buyer constituting 100% warrant coverage in such amounts as set forth on the Issuance Schedule. |
(e) | Commitment Shares. The Company shall be required to deliver the Commitment Shares to the Buyer, and the Buyer shall be entitled to receive such shares, in an aggregate amount of shares valued at $275,000, as set forth below in this Section and as set forth on the Issuance Schedule: |
(i) | Closing Delivery. At the closing, the Company shall deliver 2,750,000 Commitment Shares to the Buyer (the “Initial Commitment Shares”). |
(ii) | True-up Delivery. On the date that is the earlier of (A) the initial date of the “effectiveness” of an effective registration statement on Form S-1 covering the resale of the Registrable Securities, or (B) the date as of which the Buyer may sell all of the Registrable Securities without restriction pursuant to Rule 144 promulgated under the Securities Act without any restrictions (including any restrictions under Rule 144(c) or Rule 144(i)) (such earlier date, the “True-up Date”), in the event that the aggregate market value of the Initial Commitment Shares is less than $275,000, with such calculation based on the closing price of the Common Stock on the True-up Date (“Initial Commitment Shares Value”), the Company must deliver to the Buyer, and the Buyer shall be entitled to receive, a balance amount of Commitment Shares equal to the difference of $275,000 minus the Initial Commitment Shares Value (the “True-up Shares”). The price per share of the True-up Shares for purposes of determining the amount of shares to be issued shall be equal to the closing price of the Common Stock on the True- up Date. The Company shall immediately deliver within 24 hours after the True-up Date written notice to the Buyer regarding its calculation of True- up Shares and an acknowledgement that the Company will comply with the terms of this Section (e)(ii). The Company shall deliver the True-up Shares to the Buyer within 48 hours after the True-up Date. Failure to timely deliver the True-up Shares shall be an Event of Default under the Note. |
2. | REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and warrants to the Company that: |
(a) | Investment Purpose. As of the Execution Date, the Buyer is purchasing the Securities for its own account for investment only and not with a view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the Securities Act; provided, however, that by making the foregoing representation and warranty, the Buyer does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of all or any portion of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act. |
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(b) | Reliance on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities. |
(c) | Information. The Buyer and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by the Buyer or its advisors. The Buyer and its advisors, if any, have been afforded the opportunity to ask questions of the Company. Notwithstanding the foregoing, the Company has not disclosed to the Buyer any material non- public information and will not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer. Neither such inquiries nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall modify, amend or affect Buyer’s right to rely on the Company’s representations and warranties contained in Section 3 below. |
(d) | Authorization; Enforcement; Organization. This Agreement has been duly and validly authorized by the Buyer. This Agreement has been duly executed and delivered on behalf of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms. The Buyer is a limited liability company organized under the laws of the State of Nevada. |
(e) | Accredited Investor Status. The Buyer is (i) an “accredited investor” as that term is defined in Rule 501 of the General Rules and Regulations under the Securities Act by reason of Rule 501(a)(3) (an “Accredited Investor”), (ii) experienced in making investments of the kind described in this Agreement and the related documents, (iii) able, by reason of the business and financial experience of its officers (if an entity) and professional advisors (who are not affiliated with or compensated in any way by the Company or any of its Affiliates or selling agents), to protect its own interests in connection with the transactions described in this Agreement, and the related documents, and (iv) able to afford the entire loss of its investment in the Securities. |
(f) | General Solicitation. The Buyer is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement. |
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3. | REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to the Buyer that as of the Execution Date and as of each Closing Date (or as of such other time expressly specified below): |
(a) | Corporate Governance Compliance: |
(i) | Issuance of Commitment Shares, Note and Conversion Shares and Warrant and Warrant Shares. The Note has been duly authorized and is being validly issued to the Buyer. The Conversion Shares have been duly authorized and fully reserved for issuance and, upon conversion of the Note in accordance with its terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock. The Conversion Shares shall not be subject to pre-emptive rights or other similar rights of stockholders of the Company (except to the extent already waived) and will not impose personal liability upon the holder thereof, other than restrictions on transfer provided for in the Transaction Documents and under the Securities Act. The Warrant has been duly authorized and is being validly issued to the Buyer. The Warrant Shares have been duly authorized and fully reserved for issuance and, upon exercise of the Warrant in accordance with its terms, will be validly issued, fully paid and non- assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock. The Warrant Shares shall not be subject to pre-emptive rights or other similar rights of stockholders of the Company (except to the extent already waived) and will not impose personal liability upon the holder thereof, other than restrictions on transfer provided for in the Transaction Documents and under the Securities Act. The Commitment Shares have been duly authorized and upon delivery to the Buyer shall be validly issued, fully paid and non-assessable, and free from all taxes, Liens, claims and encumbrances with respect to the issue thereof, with the Buyer being entitled to all rights accorded to a holder of Common Stock. The Commitment Shares shall not be subject to pre-emptive rights or other similar rights of stockholders of the Company (except to the extent already waived) and will not impose personal liability upon the holder thereof, other than restrictions on transfer provided for in the Transaction Documents and under the Securities Act. |
(ii) | Organization and Qualification. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Nevada, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. Each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. Each of the Company and the Subsidiaries is not in violation or default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in a Material Adverse Effect and no proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification. |
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(iii) | Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement and the other Transaction Documents. The execution and delivery of this Agreement and the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action, and no further consent or authorization of the Company or its Board of Directors or stockholders is required. Each of this Agreement and the other Transaction Documents has been duly executed and delivered by the Company and constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application. |
(iv) | Capitalization. As of the Execution Date, the authorized capital stock of the Company is as set forth in the SEC Documents (as defined below). Except as set forth on Schedule 3(a)(iv), the Company has not issued any capital stock since its most recently filed SEC Document, other than pursuant to the exercise of employee stock options under the Company’s stock option plans, the issuance of shares of Common Stock to employees pursuant to the Company’s employee stock purchase plans and pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed SEC Document. Except as disclosed in the SEC Documents, no shares are reserved for issuance pursuant to the Company’s stock option plans, no shares are reserved for issuance pursuant to the terms of any Common Stock Equivalents (other than the Note and the Warrant) exercisable for, or convertible into or exchangeable for shares of Common Stock and sufficient shares are reserved for issuance upon conversion of the Note and upon exercise of the Warrant (as required by the Note, the Warrant and Transfer Agent Instruction Letter). All of such outstanding shares of capital stock are, or upon issuance will be, duly authorized, validly issued, fully paid and non-assessable. No shares of capital stock of the Company are subject to preemptive rights or any other similar rights of the stockholders of the Company or any liens or encumbrances imposed through the actions or failure to act of the Company. Except as disclosed in the SEC Documents, as of the Execution Date, (i) there are no outstanding options, warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings, claims or other commitments or rights of any character whatsoever relating to, or securities or rights convertible into or exchangeable for any shares of capital stock of the Company or any of its Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries, (ii) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of its or their securities under the Securities Act and (iii) there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) that will be triggered by the issuance of the Securities. The Company has filed in its SEC Documents true and correct copies of the Company’s Certificate of Incorporation as in effect on the Execution Date, the Company’s bylaws, as in effect on the Execution Date, and the terms of all securities convertible into or exercisable for Common Stock of the Company and the material rights of the holders thereof in respect thereto. The Company shall provide the Buyer a certification of this representation signed by the Company’s Chief Executive Officer on behalf of the Company as of the Closing Date. |
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(v) | No Conflicts. The execution, delivery and performance of this Agreement and the other Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance of the Conversion Shares and the Warrant Shares) will not (a) result in a violation of the Company’s or any Subsidiary’s certificate or articles of incorporation, by-laws or other organizational or charter documents, (b) conflict with, or constitute a material default (or an event that with notice or lapse of time or both would become a material default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, instrument or any “lock-up” or similar provision of any underwriting or similar agreement to which the Company or any Subsidiary is a party, or (c) result in a violation of any federal, state or local law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or any Subsidiary or by which any property or asset of the Company or any Subsidiary is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect), nor is the Company otherwise in violation of, conflict with or in default under any of the foregoing. The business of the Company is not being conducted in violation of any law, ordinance or regulation of any governmental entity, except for possible violations that either singly or in the aggregate do not and will not have a Material Adverse Effect. The Company is not required under federal, state or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to issue the Conversion Shares or the Warrant Shares or to execute, deliver or perform any of its obligations under this Agreement or the other Transaction Documents (other than any SEC, FINRA or state securities filings that may be required to be made by the Company subsequent to Closing). |
(b) | SEC and Offering Compliance: |
(i) | SEC Documents. By December 31, 2021, the Company shall file all reports, schedules, forms, statements and other documents, via “Super 8-K” or otherwise, required to be filed by the Company under the Securities Act and the Exchange Act for the Company to be deemed fully “fully reporting” and “current” and in compliance with the periodic and current reporting requirements of Section 13 or 15(d) of the Exchange Act, and in compliance with the Rule 144(c)(1) under the Securities Act (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Documents”). The SEC Documents will comply in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and other federal laws, rules and regulations applicable to such SEC Documents, and none of the SEC Documents when filed will contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. |
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(ii) | Financial Statements. The financial statements of the Company included in its OTC Filings and Disclosures (the “Financial Statements”) comply as to form and substance in all material respects with applicable accounting requirements and the published rules and regulations of the OTC Pink Market as well as other applicable rules and regulations with respect thereto. Such Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except (a) as may be otherwise indicated in such Financial Statements or the notes thereto or (b) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments). The Company maintains a system of internal accounting controls appropriate for its size. There is no transaction, arrangement, or other relationship between the Company and an unconsolidated or other off balance sheet entity that is not disclosed by the Company in its Financial Statements or otherwise that would be reasonably likely to have a Material Adverse Effect. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf has provided the Buyer or its agents or counsel with any information that it believes constitutes or might constitute material, non-public information. The Company understands and confirms that the Buyer will rely on the foregoing representation in effecting transactions in securities of the Company. |
(iii) | Acknowledgment Regarding Buyer’s Purchase of Securities. The Company acknowledges and agrees that the Buyer is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby and that the Buyer is neither (i) an officer or director of the Company or any of its Subsidiaries, nor (ii) an “affiliate” (as defined in Rule 144) of the Company or any of its Subsidiaries. The Company further acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company or any of its Subsidiaries (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated hereby and thereby, and any advice given by a Buyer or any of its representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to the Buyer’s purchase of the Securities. The Company further represents to the Buyer that the Company’s decision to enter into the Transaction Documents has been based solely on the independent evaluation by the Company and its representatives. |
(iv) | No Integrated Offering. Neither the Company, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the Securities Act of the issuance of the Securities to the Buyer. The issuance of the Securities to the Buyer will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any stockholder approval provisions applicable to the Company or its securities. |
(v) | No Brokers. Except as set forth on Schedule 3(b)(v), no broker is entitled to a commission payable by the Company in connection with the transactions contemplated by this transaction and the Company has taken no action which would give rise to any claim by any person for brokerage commissions, transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby. Any all fees due to any brokers shall be paid and satisfied by the Company at the Closing except as otherwise provided in Section 1(c) of this Agreement. |
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(vi) | Disclosure. All information relating to or concerning the Company or any of its Subsidiaries set forth in this Agreement and provided to the Buyer pursuant in connection with the transactions contemplated hereby is true and correct in all material respects and the Company has not omitted to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they were made, not misleading. No event or circumstance has occurred or exists with respect to the Company or any of its Subsidiaries or its or their business, properties, prospects, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed (assuming for this purpose that the Company’s reports filed under the Exchange Act are being incorporated into an effective registration statement filed by the Company under the Securities Act). |
(vii) | Shell Company Status. The Company is not currently an issuer identified in Rule 144(i)(1)(i) under the Securities Act, and, if it was at any time previously been such an issuer, then the Company is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, has filed all reports and other materials required to be filed by Section 13 or 15(d) of the Exchange Act, as applicable during the preceding 12 months, and, as of a date at least one year prior to the Execution Date, has filed current “Form 10 information” with the SEC (as defined in Rule 144(i)(3) of the Securities Act) reflecting its status as an entity that is no longer an issuer described in Rule 144(i)(1)(i) of the Securities Act. |
(viii) | No Disqualification Events. With respect to Securities to be offered and sold hereunder in reliance on Rule 506 under the Securities Act (“Regulation D Securities”), none of the Company, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the Company participating in the offering hereunder, any beneficial owner of 20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the Securities Act) connected with the Company in any capacity at the time of sale (each, an “Issuer Covered Person” and, together, “Issuer Covered Persons”) is subject to any of the “bad actor” disqualifying events described in Rule 506(d)(1)(i)(viii) under the Securities Act (each, a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event. The Company has complied, to the extent applicable, with its disclosure obligations under Rule 506(e), and has furnished to the Buyers a copy of any disclosures provided thereunder. |
(ix) | Other Covered Persons. The Company is not aware of any Person (other than any Issuer Covered Person) that has been or will be paid (directly or indirectly) remuneration for solicitation of buyers or potential purchasers in connection with the sale of any Regulation D Securities. |
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(x) | No General Solicitation; Placement Agent. Neither the Company, nor any of its Subsidiaries or Affiliates, nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Securities. Neither the Company nor any of its Subsidiaries has engaged any placement agent in connection with the sale of the Securities. In the event that a broker-dealer or other agent or advisory is engaged by the Company subsequent to the initial Closing, the Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, or brokers’ commissions (other than for persons engaged by any Buyer or its investment advisor) relating to or arising out of the transactions contemplated hereby in connection with the sale of the Securities. The Company shall pay, and hold the Buyer harmless against, any liability, loss or expense (including, without limitation, attorney’s fees and out-of-pocket expenses) arising in connection with any such claim. |
(xi) | Investment Company Status. The Company is not, and upon consummation of the sale of the Securities will not be, an “investment company,” a company controlled by an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended. |
(xii) | Transfer Taxes. On the Closing Date, all stock transfer or other taxes (other than income or similar taxes) which are required to be paid in connection with the sale and transfer of the Securities to be sold to the Buyer hereunder will be, or will have been, fully paid or provided for by the Company, and all laws imposing such taxes will be or will have been complied with. |
(xiii) | Compliance with Rule 15c2-11. On the Closing Date, and at all times that any of the Securities remain outstanding, the Company shall maintain as publicly available all information required by paragraph (b) of Rule 15c2-11 of the Exchange Act (as effective on September 26, 2021), as amended, such that brokers or dealers attempting to publish any quotation for the Common Stock or, directly or indirectly, to submit any such quotation for publication, shall be able to comply with Rule 15c2-11(a). |
(c) | Operations Related: |
(i) | Absence of Certain Changes. No event has occurred that would have a Material Adverse Effect on the Company or any Subsidiary that has not been disclosed in the SEC Documents, OTC Filings and Disclosures. Without limiting the generality of the foregoing, except as disclosed in the SEC Documents, OTC Filings and Disclosures, neither the Company nor any of its Subsidiaries has taken any of the actions set forth on Schedule 3(c)(i). |
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(ii) | Absence of Litigation. Except as disclosed in the SEC Documents, there are no actions, suits, investigations, inquiries or proceedings pending or, to the Knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties, nor has the Company received any written or oral notice of any such action, suit, proceeding, inquiry or investigation, which would have a Material Adverse Effect or would require disclosure under the Securities Act or the Exchange Act. No judgment, order, writ, injunction or decree or award has been issued by or, to the Knowledge of the Company, requested of any court, arbitrator or governmental agency which would have a Material Adverse Effect. Except as disclosed in the SEC Documents, OTC Filings and Disclosures or as set forth on Schedule 3(c)(ii) there has not been, and to the Knowledge of the Company, there is not pending or contemplated, any investigation by the SEC involving the Company, any Subsidiary or any current or former director or officer of the Company or any Subsidiary. |
(iii) | Patents, Copyrights, etc. The Company and the Subsidiaries own or possess adequate rights or licenses to use all material trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted (“Intellectual Property”). None of the Company’s nor any Subsidiary’s Intellectual Property rights have expired or terminated, or, by the terms and conditions thereof, could expire or terminate within two years from the Execution Date. The Company does not have any Knowledge of any infringement by the Company and/or any Subsidiary of any material trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other similar rights of others, or of any such development of similar or identical trade secrets or technical information by others, and there is no claim, action or proceeding being made or brought against, or to the Company’s Knowledge, being threatened against, the Company and/or any Subsidiary regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other infringement, which could reasonably be expected to have a Material Adverse Effect. |
(iv) | Tax Status. The Company and each of its Subsidiaries has made or filed all federal and material state and foreign income and all other material tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. The Company has not executed a waiver with respect to the statute of limitations relating to the assessment or collection of any foreign, federal, state or local tax. None of the Company’s tax returns is presently being audited by any taxing authority. |
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(v) | Certain Transactions. Except as set forth in the SEC Documents, OTC Filings and Disclosures, none of the officers or directors of the Company or any Subsidiary, and to the Knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the Knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, in each case in excess of the lesser of (i) $120,000 or (ii) one percent of the average of the Company’s total assets at year end for the last two completed fiscal years, other than for (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company or any Subsidiary and (iii) other employee benefits, including stock option agreements under any stock option plan of the Company. |
(vi) | Permits; Compliance. The Company and each of its Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and operate its properties and to carry on its business as it is now being conducted (collectively, the “Company Permits”), and there is no action pending or, to the Knowledge of the Company, threatened regarding suspension or cancellation of any of the Company Permits. Neither the Company nor any of its Subsidiaries is in conflict with, or in default or violation of, any of the Company Permits, except for any such conflicts, defaults or violations which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries has received any notification with respect to possible conflicts, defaults or violations of applicable laws, except for notices relating to possible conflicts, defaults or violations, which conflicts, defaults or violations would not have a Material Adverse Effect. |
(vii) | Environmental Matters. The Company is in compliance with all applicable Environmental Laws in all respects except where the failure to comply does not have and could not reasonably be expected to have a Material Adverse Effect. For purposes of the foregoing: “Environmental Laws” means, collectively, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Superfund Amendments and Reauthorization Act of 1986, the Resource Conservation and Recovery Act, the Toxic Substances Control Act, as amended, the Clean Air Act, as amended, the Clean Water Act, as amended, any other “Superfund” or “Superlien” law or any other applicable federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning, the environment or any Hazardous Material. |
(viii) | Title to Property. Except as disclosed in the SEC Documents, OTC Filings and Disclosures, the Company and each Subsidiary has good and marketable title in fee simple to all real property owned by it and good and marketable title in all personal property owned by it that is material to the business of the Company and each Subsidiary, in each case free and clear of all Liens and, except for Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company or any Subsidiary and Liens for the payment of federal, state or other taxes, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company or any Subsidiary is held under valid, subsisting and enforceable leases with which the Company is in compliance with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company or any Subsidiary. |
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(ix) | Internal Accounting Controls. Except as disclosed in the SEC Documents the Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient, in the judgment of the Company’s board of directors, to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company is in compliance with all provisions of the Sarbanes-Oxley Act of 2002, as amended, which are applicable to it. |
(x) | Foreign Corrupt Practices. Neither the Company, nor any of its Subsidiaries, nor any director, officer, agent, employee or other person acting on behalf of the Company or any Subsidiary has, in the course of his actions for, or on behalf of, the Company, used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee. |
(xi) | Solvency. The Company (after giving effect to the transactions contemplated by this Agreement) is solvent (i.e., its assets have a fair market value in excess of the amount required to pay its probable liabilities on its existing debts as they become absolute and matured) and currently the Company has no information that would lead it to reasonably conclude that the Company would not, after giving effect to the transaction contemplated by this Agreement, have the ability to, nor does it intend to take any action that would impair its ability to, pay its debts from time to time incurred in connection therewith as such debts mature. Except as disclosed in the SEC Documents, OTC Filings and Disclosures or on Schedule 3(c)(xi), the Company did not receive a qualified opinion from its auditors with respect to its most recent fiscal year end and, after giving effect to the transactions contemplated by this Agreement, does not anticipate or know of any basis upon which its auditors might issue a qualified opinion in respect of its current fiscal year. For the avoidance of doubt any qualification of the auditors’ opinion relating to the Company’s ability to continue as a “going concern” shall not, by itself, be a violation of this Section 3(c)(xi). |
(xii) | Insurance. The Company and each Subsidiary is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and each Subsidiary is engaged. Neither the Company, nor any Subsidiary has been refused any insurance coverage sought or applied for, and the Company has no reason to believe that it or any Subsidiary will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not materially and adversely affect the condition, financial or otherwise, or the earnings, business or operations of the Company, taken as a whole. |
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(xiii) | No Undisclosed Events, Liabilities, Developments or Circumstances. Except as set forth in the SEC Documents, OTC Filings and Disclosures, the Company and its Subsidiaries have no liabilities or obligations of any nature (whether accrued, absolute, contingent, unasserted or otherwise and whether due or to become due) other than those liabilities or obligations that are disclosed in the Financial Statements or which do not exceed, individually in excess of $50,000 and in the aggregate in excess of $200,000. The reserves, if any, established by the Company or the lack of reserves, if applicable, are reasonable based upon facts and circumstances known by the Company on the Execution Date and there are no loss contingencies that are required to be accrued by the Statement of Financial Accounting Standard No. 5 of the Financial Accounting Standards Board which are not provided for in the Financial Statements. |
(xiv) | Management. During the past five year period, no current or former officer or director or, to the Knowledge of the Company, stockholder of the Company or any of its Subsidiaries has been the subject of any matter that would require disclosure under Paragraph (f) of Rule 401 of Regulation S-K that has not been publicly disclosed. |
(xv) | Assets; Title. Except as disclosed on Schedule 3(c)(xv), each of the Company and its Subsidiaries has good and valid title to, or a valid leasehold interest in, as applicable, all of its properties and assets, free and clear of all Liens except (i) any Lien for taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent, (iii) any Lien created by operation of law, such as materialmen’s liens, mechanics’ liens and other similar liens, arising in the ordinary course of business with respect to a liability that is not yet due or delinquent or that are being contested in good faith by appropriate proceedings, and (iv) such as have been disposed of in the ordinary course of business. To the Company’s Knowledge, all tangible personal property owned by the Company and its Subsidiaries has been maintained in good operating condition and repair, except (x) for ordinary wear and tear, and (y) where such failure would not have a Material Adverse Effect. To the Company’s Knowledge, all assets leased by the Company or any of its Subsidiaries are in the condition required by the terms of the lease applicable thereto during the term of such lease and upon the expiration thereof. To the Company’s Knowledge, the Company and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects. Any real property and facilities held under lease by the Company or any of its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries. |
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(xvi) | Subsidiary Rights. The Company or one of its Subsidiaries has the unrestricted right to vote, and to receive dividends and distributions on, all equity securities of its Subsidiaries as owned by the Company or such Subsidiary. |
(xvii) | Books and Records. To the Company’s Knowledge, the books of account, ledgers, order books, records and documents of the Company and its Subsidiaries accurately and completely reflect all information relating to the respective businesses of the Company and its Subsidiaries, the nature, acquisition, maintenance, location and collection of each of their respective assets, and the nature of all transactions giving rise to material obligations or accounts receivable of the Company or its Subsidiaries, as the case may be, except where the failure to so reflect such information would not have a Material Adverse Effect. To the Company’s Knowledge, the minute books of the Company and its Subsidiaries contain accurate records in all material respects of all meetings and accurately reflect all other actions taken by the stockholders, boards of directors and all committees of the boards of directors, and other governing Persons of the Company and its Subsidiaries, respectively. |
(xviii) | Money Laundering. The Company and its Subsidiaries are in compliance with, and have not previously violated, the USA PATRIOT ACT of 2001 and all other applicable U.S. and non-U.S. anti-money laundering laws and regulations, including, but not limited to, the laws, regulations and Executive Orders and sanctions programs administered by the U.S. Office of Foreign Assets Control, including, but not limited, to (i) Executive Order 13224 of September 23, 2001 entitled, “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism” (66 Fed. Reg. 49079 (2001)); and (ii) any regulations contained in 31 CFR, Subtitle B, Chapter V. |
(d) | General |
(i) | Acknowledgment of Dilution. The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance of the Conversion Shares upon conversion of the Note. The Company further acknowledges that its obligation to issue Conversion Shares upon conversion of the Note is absolute and unconditional regardless of the dilutive effect that such issuances may have on the ownership interests of other stockholders of the Company. The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance of the Warrant Shares upon exercise of the Warrant. The Company further acknowledges that its obligation to issue Warrant Shares upon exercise of the Warrant is absolute and unconditional regardless of the dilutive effect that such issuances may have on the ownership interests of other stockholders of the Company. The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance of the Commitment Shares upon execution of this Agreement. The Company further acknowledges that its obligation to issue Commitment Shares upon execution of this Agreement is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other stockholders of the Company. |
(ii) | Breach of Representations and Warranties by the Company. If the Company breaches any of the representations or warranties set forth in this Section 3, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an Event of Default under the Note. |
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(iii) | Absence of Schedules. In the event that at the Closing Date, the Company does not deliver and attach hereto any disclosure schedule contemplated by this Agreement, the Company hereby acknowledges and agrees that (i) each such undelivered disclosure schedule shall be deemed to read as follows: “Nothing to Disclose”, and (ii) the Buyer has not otherwise waived delivery of such disclosure schedule. |
4. | GENERAL COVENANTS. |
(a) | Best Efforts. The parties shall use their commercially reasonable best efforts to satisfy timely each of the conditions described in Section 7 and 8 of this Agreement. |
(b) | Use of Proceeds. The Company shall use the proceeds from the sale of the Notes first as set forth on Schedule 4(b), and thereafter for other general corporate purposes and shall not, directly or indirectly, use such proceeds for any loan to or investment in any other corporation, partnership, enterprise or other person. |
(c) | Financial Information. The Company agrees to send or make available the following reports to the Buyer until the Buyer transfers, assigns, or sells all of the Securities: (i) within ten (10) days after the filing with the SEC, a copy of its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K; (ii) within five (5) days after upload or filing, any filings made in the SEC Documents, OTC Filings and Disclosures; (iii) within one (1) day after release, copies of all press releases issued by the Company or any of its Subsidiaries relating to the transactions contemplated hereby; and (iv) contemporaneously with the making available or giving to the stockholders of the Company, copies of any notices or other information the Company makes available or gives to such stockholders. For the avoidance of doubt, filing the documents required in (i) above via EDGAR or releasing any documents set forth in (ii) above via a recognized wire service shall satisfy the delivery requirements of this Section 4(c). |
(d) | Listing. The Company shall work in good faith to secure the listing of the Conversion Shares, the Commitment Shares, and the Warrant Shares upon each national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and, so long as the Buyer owns any of the Securities, shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all Conversion Shares, Commitment Shares, and all Warrant Shares from time to time issuable upon exercise of the Note and the Warrant, respectively. The Company will obtain and, so long as the Buyer owns any of the Securities, maintain the listing and trading of its Common Stock on the Trading Market and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Financial Industry Regulatory Authority (“FINRA”) and such exchanges, as applicable. |
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(e) | Corporate Existence. So long as the Buyer beneficially owns any of the Securities, the Company shall maintain its corporate existence and shall not sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or sale of all or substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s obligations hereunder and under the agreements and instruments entered into in connection herewith and (ii) is a publicly traded corporation whose Common Stock is listed or quoted for trading on the Trading Market. |
(f) | No Integration. The Company shall not make any offers or sales of any security (other than the Securities) under circumstances that would require registration of the Securities being offered or sold hereunder under the Securities Act or cause the offering of the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision applicable to the Company or its securities. |
(g) | Failure to Comply with the Exchange Act. So long as the Buyer beneficially owns any of the Securities, the Company shall comply with the reporting requirements of the Exchange Act; and the Company be subject to the periodic reporting and other reporting requirements of the Exchange Act. |
(h) | Breach of Covenants. If the Company breaches any of the covenants set forth in this Section 4, then in addition to any other remedies available to the Buyer pursuant to this Agreement, each such breach will be considered an “Event of Default” under the Note. |
(i) | Reservation of Shares. The Company covenants that while the Note and/or Warrant remain outstanding, the Company will reserve from its authorized and unissued Common Stock, five times (500%) of the number of shares of Common Stock, free from pre-emptive rights, that would be issuable upon full, unconditioned conversion of the Note and exercise of the Warrant calculated on the basis of the conversion price and exercise price, respectively, in effect as the Closing Date, which such reserved amounts shall be increased by the Company from time to time in accordance with its obligations under such Securities. In addition to all other rights in this Agreement and the Note, in the event that on any date (the “Reserve Depletion Date”) the Company does not have available enough authorized shares of Common Stock to satisfy any conversion request regarding the Note, or exercise of the Warrant, the Company shall repay all outstanding amounts owed under the Note in full within sixty (60) days of the Reserve Depletion Date. |
(j) | Indemnification. Each party hereto (an “Indemnifying Party”) agrees to indemnify and hold harmless the other party along with its officers, directors, employees, and authorized agents, and each Person or entity, if any, who controls such party within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act or the rules and regulations thereunder (an “Indemnified Party”) from and against any Damages, joint or several, and any action in respect thereof to which the Indemnified Party becomes subject to, resulting from, arising out of or relating to any misrepresentation, breach of warranty or nonfulfillment of or failure to perform any covenant or agreement on the part of the Indemnifying Party contained in this Agreement. |
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(k) | Certain Expenses and Fees. The Company shall pay all stamp taxes and other taxes and duties levied in connection with the delivery of the Note to the Buyer. In addition, the Buyer shall be entitled to withhold $2,500 for the Buyer’s transaction expenses from the amounts delivered at Closing. |
5. | SPECIAL COVENANTS |
(a) | Piggyback Registration Rights. The Company shall include on any registration and/or offering statement filed with the SEC, including without limitation on any offering statement on Form 1-A, all Conversion Shares, all Warrant Shares, and all Commitment Shares for resale by the Buyer. In addition to all other remedies at law or in equity or otherwise under this Agreement or other Transaction Documents, failure to do so will result in liquidated damages of $20,000.00 pursuant to this Section 5(a), being immediately due and payable to the Buyer at its election in the form of cash payment. |
(b) | Variable Rate Transactions. The Company covenants and agrees that it will not, without the prior written consent of the Buyer, enter into any equity line of credit agreement with any other party or enter into any transaction resulting in, or with, any Variable Security Holders, excluding the Buyer, without the Buyer’s prior written consent, which consent may be granted or withheld in the Buyer’s sole and absolute discretion unless the proceeds of such transaction are used first and primarily to repay the Note in full; provided that such arrangements evidenced by written agreements that exist as of the Execution Date shall not be subject to the provisions of this Section 5(b). “Variable Security Holder” means any holder of any securities of the Company that (A) have or may have conversion rights of any kind, contingent, conditional or otherwise, in which the number of shares that may be issued pursuant to such conversion right varies with the market price of the Common Stock, and/or (B) are or may become convertible into Common Stock (including without limitation convertible debt, warrants or convertible preferred stock), with a conversion price that varies with the market price of the Common Stock, even if such security only becomes convertible following an event of default, the passage of time, or another trigger event or condition. |
(c) | Regulation A Offering Participation. |
(i) | During the twelve (12) months immediately following the Closing, with respect to any Regulation A offering conducted by the Company on Form 1-A, or successor/similar form, filed by the Company with the SEC (a “Reg A+ Offering”), the Company agrees to, and hereby does, irrevocably grant to the Buyer the option to purchase up to $1,000,000.00 worth of the securities offered by the Company in the Reg A+ Offering at the applicable prices thereunder (such grant, the “Participation Right”). The Buyer shall hold the Participation Right from the date that the SEC declares the subject Reg A+ Offering statement “qualified” (the “Qualification Date”) until the date that is the earlier of (i) 180 days after the Qualification Date or (ii) the date that the Buyer has purchased aggregate of $1,000,000 of securities from such offering statement. |
(ii) | Within 30 days after the Closing, the Company shall successfully file an offering statement to conduct a Reg A+ Offering with the SEC. |
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(iii) | The Company shall use its best efforts take all necessary action to cause the offering statement referenced in Section 5(c)(ii) above to be declared “qualified” by the SEC within 30 days after the Closing. |
(d) | Participation Rights. During the twelve (12) months immediately following the Closing, with respect to each and any securities offering conducted by the Company, the Company agrees to, and hereby does, irrevocably grant to the Buyer the option to purchase up to $1,000,000 worth of the securities offered in such offering at the applicable offering prices thereunder. |
(e) | Repayment from Proceeds. While any portion of the Note is outstanding, if the Company receives cash proceeds from any source or series of related or unrelated sources, including but not limited to, from payments from customers, the issuance of equity or debt, the conversion of outstanding warrants of the Company, the issuance of securities pursuant to an equity line of credit of the Company or the sale of assets, the Company shall, within one (1) business day of the Company’s receipt of such proceeds, inform the Buyer of such receipt, following which the Buyer shall have the right in its sole discretion to require the Company to immediately apply all or any portion of such proceeds to repay all or any portion of the outstanding amounts owed under the Note. In the event that such proceeds are received by the Holder (as defined in the Note) prior to the Maturity Date (as defined in the Note), the required prepayment shall be subject to all prepayment terms in the Note. |
(f) | Right of First Refusal. During the twelve (12) months immediately following the Closing, in the event that the Company receives a Bona Fide Offer (defined below) of capital or financing from any third party consisting of any securities offering, including but not limited to any debt or equity securities, then the Company must, and irrevocably agrees to, first offer such opportunity to the Buyer to provide such capital or financing to the Company on the same or similar terms as each respective third party’s terms, and the Buyer may in its sole discretion determine whether the Buyer will provide such capital or financing. Upon receipt of the third party offer, the Company shall promptly provide notice thereof to the Buyer (the “Offer Notice”) and provide copies of the pending transaction documents. Should the Buyer be unwilling or unable to provide such capital or financing to the Company within two (2) Trading Days from the Buyer’s receipt of the Offer Notice from the Company, then the Company may obtain such capital or financing from the respective third party upon the exact same terms and conditions offered by the Company to the Buyer, which transaction must be completed within seven (7) Trading Days after the date of the Offer Notice. If the Company does not receive the capital or financing from the respective third party within seven (7) Trading Days after the date of the respective Offer Notice, then the Company must again offer the capital or financing opportunity to the Buyer as described above, and the process detailed above shall be repeated. A “Bona Fide Offer” is one in which the purchaser is irrevocably and contractually bound to purchase the subject securities from the Company, subject to the Buyer’s right of first refusal. |
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(g) | Compliance with Rule 15c2-11. The Company take all actions to maintain as publicly available all information required by paragraph (b) of Rule 15c2-11 of the Exchange Act (as effective on September 26, 2021), as amended, such that brokers or dealers attempting to publish any quotation for the Common Stock or, directly or indirectly, to submit any such quotation for publication, shall be able to comply with Rule 15c2-11(a). |
(h) | Prohibition on Certain Transactions. The Buyer covenants and agrees that neither it, nor any affiliate acting on its behalf or pursuant to any understanding with it will execute any “short sales” of the Common Stock as defined in Rule 200 of Regulation SHO under the Exchange Act. |
(i) | Security Agreement. On the Execution Date, the Company shall execute and deliver the Security Agreement to the Buyer. |
(j) | Registration Rights. |
(i) | Mandatory Registration. The Company shall, by the first anniversary of the Execution Date, file with the SEC an initial registration statement on Form S-1 covering the resale of the maximum number of Registrable Securities as shall be permitted to be included thereon (in such amounts as to the specific Registrable Securities included therein as mutually identified by the Buyer, the Company and their respective legal counsel) in accordance with applicable SEC rules, regulations and interpretations so as to permit the resale of such Registrable Securities by the Buyer, including but not limited to under Rule 415 under the Securities Act at then prevailing market prices (and not fixed prices), as mutually determined by both the Company and the Buyer in consultation with their respective legal counsel (the “Initial Registration Statement”). The Initial Registration Statement shall register only the Registrable Securities. The Company shall use its best efforts to have the Initial Registration Statement and any amendment thereto declared effective by the SEC at the earliest possible date. The Initial Registration Statement shall, in any event, be declared effective within four hundred (400) calendar days after the Execution Date. Rule 424 Prospectus. In addition to the Initial Registration Statement, the Company shall, as required by applicable securities regulations, from time to time file with the SEC, pursuant to Rule 424 promulgated under the Securities Act, such prospectuses and prospectus supplements to be used in connection with sales of the Registrable Securities under each Registration Statement. The Buyer and its counsel shall have a reasonable opportunity to review and comment upon such prospectuses prior to its filing with the SEC, and the Company shall give due consideration to all such comments. The Buyer and its counsel shall use their reasonable best efforts to comment upon any prospectus within three (3) business days from the date the Buyer receives the final pre-filing version of such prospectus. |
(ii) | Sufficient Number of Shares Registered. In the event the number of shares available under the Initial Registration Statement is insufficient to cover all of the Registrable Securities, the Company shall amend the Initial Registration Statement or file a new registration statement (a “New Registration Statement”), so as to cover the resale of all of such Registrable Securities as soon as practicable, but in any event not later than ten (10) business days after the necessity therefor arises and the Company’s financial statements as filed with the SEC are current as would be required by such New Registration Statement, subject to any limits that may be imposed by the SEC pursuant to Rule 415 under the Securities Act. The Company shall use its reasonable best efforts to cause such amendment and/or New Registration Statement to become effective as soon as practicable following the filing thereof. |
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(iii) | Effectiveness. The Buyer and its counsel shall have a reasonable opportunity to review and comment upon any registration statement and any amendment or supplement to such registration statement and any related prospectus regarding the Registrable Securities prior to its filing with the SEC, and the Company shall give due consideration to all reasonable comments. The Company shall use best efforts to keep all registration statements covering Registrable Securities effective, including but not limited to pursuant to Rule 415 promulgated under the Securities Act and available for use by the Buyer for the resale of all of the Registrable Securities covered thereby at all times until the earlier of (i) the date as of which the Buyer may sell all of the Registrable Securities without restriction pursuant to Rule 144 promulgated under the Securities Act without any restrictions (including any restrictions under Rule 144(c) or Rule 144(i)) and (ii) the date on which the Buyer shall have sold all the Registrable Securities. Each registration statement (including any amendments or supplements thereto and prospectuses contained therein) filed by the Company shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading. The Company shall take all actions necessary prior to the filing of the Initial Registration Statement to cause itself to be fully reporting and “current” for purposes of being a public company subject to Section 13 or 15(d) of the Exchange Act of 1934, which requires the company to file periodic reports with the SEC. |
(iv) | Offering. If the staff of the SEC (the “Staff”) or the SEC seeks to characterize any offering pursuant to a registration statement filed pursuant to this Agreement as constituting an offering of securities that does not permit such registration statement to become or remain effective and be used for resales by the Buyer under Rule 415 at then-prevailing market prices (and not fixed prices) by comment letter or otherwise, or if after the filing of the Initial Registration Statement with the SEC, the Company is otherwise required by the Staff or the SEC to reduce the number of Registrable Securities included in such Initial Registration Statement, then the Company shall reduce the number of Registrable Securities to be included in such Initial Registration Statement (in such amounts of specific Registrable Securities as the Buyer, the Company and their respective legal counsel shall mutually agree to be removed therefrom) until such time as the Staff and the SEC shall so permit such registration statement to become effective and be used as aforesaid. In the event of any reduction in Registrable Securities pursuant to this paragraph, the Company shall file one or more New Registration Statements in accordance with subsection 5(k)(iii) above until such time as all Registrable Securities have been included in Registration Statements that have been declared effective and the prospectus contained therein is available for use by the Buyer. Notwithstanding any provision herein to the contrary, the Company’s obligations to register Registrable Securities shall be qualified as necessary to comport with any requirement of the SEC or the Staff as addressed in this Section 5(k)(v). |
(k) | Breach of Covenants. If the Company breaches any of the covenants set forth in this Section 5, then in addition to any other remedies available to the Buyer pursuant to this Agreement, each such breach will be considered an “Event of Default” under the Note. |
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6. | TRANSFER AGENT INSTRUCTIONS. Prior to registration of the Conversion Shares and the Warrant Shares under the Securities Act or the date on which the Conversion Shares or the Warrant Shares may be sold pursuant to Rule 144 without any restriction as to the number of Securities as of a particular date that can then be immediately sold, all such certificates shall bear the restrictive legend specified in the Note or Warrants as applicable. The Company warrants that: (i) no stop transfer instructions will be given by the Company to its Transfer Agent and that the Securities shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Note; (ii) it will not direct its Transfer Agent not to transfer or delay, impair, and/or hinder its Transfer Agent in transferring (or issuing) (electronically or in certificated form) any certificate for Conversion Shares or Warrant Shares to be issued to the Buyer upon conversion/exercise of or otherwise pursuant to the Note or the Warrant, respectively, as and when required by the Note, the Warrant or this Agreement; and (iii) it will not fail to remove (or direct its Transfer Agent not to remove or impairs, delays, and/or hinders its Transfer Agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Conversion Shares or any Warrant Shares as contemplated by the terms of this Agreement, the Note and the Warrant, as applicable. Nothing in this Section shall affect in any way the Buyer’s obligations and agreement to comply with all applicable prospectus delivery requirements, if any, upon re-sale of the Securities. If the Buyer provides the Company (which shall be at the cost of the Company), with (i) an opinion of counsel in form, substance and scope customary for opinions in comparable transactions, to the effect that a public sale or transfer of any Securities may be made without registration under the Securities Act and such sale or transfer is effected or (ii) the Buyer provides reasonable assurances that the Securities can be sold pursuant to Rule 144, the Company shall permit the transfer, and, in the case of the Conversion Shares, the Commitment Shares, and the Warrant Shares, promptly instruct its Transfer Agent to issue one or more certificates, free from restrictive legend, in such name and in such denominations as specified by the Buyer or, in the sole discretion of the Buyer, the Company shall take all action necessary to ensure that such Common Stock is transferred electronically as DWAC (as defined in the Note) shares. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer, by vitiating the intent and purpose of the transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section may be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section, that the Buyer shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate transfer, without the necessity of showing economic loss and without any bond or other security being required. |
7. | CONDITIONS PRECEDENT TO THE COMPANY’S OBLIGATIONS TO SELL. The obligation of the Company hereunder to issue and sell any Note, Warrant, and Commitment Shares to the Buyer at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions thereto, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion: |
(a) | The Buyer shall have executed this Agreement and delivered the same to the Company. |
(b) | The Buyer shall have delivered the Company Funding Amount in accordance with Section 1 above. |
(c) | The representations and warranties of the Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), and the Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to the Closing Date. |
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(d) | No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self- regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement. |
8. | CONDITIONS PRECEDENT TO THE BUYER’S OBLIGATION TO PURCHASE. The obligation of the Buyer hereunder to purchase any Note and fund such Note at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions, provided that these conditions are for the Buyer’s sole benefit and may be waived by the Buyer at any time in its sole discretion: |
(a) | The Company shall have executed this Agreement and delivered the same to the Buyer on the Closing Date. |
(b) | The Company shall have delivered to the Buyer the duly executed Note and the Commitment Shares in accordance with Section 1 above on the Closing Date. |
(c) | The Company shall have delivered to the Buyer the duly executed Warrant on the Closing Date. |
(d) | The Company shall have delivered to the Buyer the duly executed Transfer Agent Instruction Letter on the Closing Date. |
(e) | The Company shall have delivered a copy of its Directors’ resolutions relating to the transactions contemplated hereby, the form of which is attached hereto as Exhibit D, on the Closing Date. |
(f) | The Company shall have delivered to the Buyer the duly executed Security Agreement in the form attached hereto as Exhibit E. |
(g) | No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self- regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement, as of the Closing Date. |
(h) | No event shall have occurred which could reasonably be expected to have a Material Adverse Effect on the Company including but not limited to a change in the Exchange Act reporting status of the Company or the failure of the Company to be timely in its Exchange Act reporting obligations, as of the Closing Date. |
(i) | The Company shall have delivered to the Buyer a copy of its certificate of good standing with the State of Nevada dated within five (5) days of the Closing. |
(j) | The Company shall have delivered a legal opinion to the Buyer regarding the enforceability of the Transaction Documents in form and substance acceptable to the Buyer. |
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(k) | The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Execution Date and the Closing Date as though made at such time (except for representations and warranties that speak as of a specific date, which shall be true and correct in all material respects as of such specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date. The Buyer shall have received a certificate or certificates, executed by the chief executive officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Buyer, in the form prescribed by the Buyer. |
9. | GOVERNING LAW; MISCELLANEOUS. |
(a) | Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of Clark County, Nevada, or in the federal courts located in Nevada. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. |
(b) | JURY TRIAL WAIVER. THE COMPANY AND THE BUYER HEREBY WAIVE A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER IN RESPECT OF ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THE TRANSACTION DOCUMENTS. |
(c) | Counterparts; Signatures by Electronic Mail. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. This Agreement, once executed by a party, may be delivered to the other party hereto by electronic mail transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement. |
(d) | Headings. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement. |
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(e) | Severability. In the event that any provision of this Agreement or of any of the Transaction Documents is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof. |
(f) | Entire Agreement; Amendments. This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the Buyer. |
(g) | Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (a) personally served, (b) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (c) delivered by reputable air courier service with charges prepaid, or (d) transmitted by hand delivery, or e-mail as a PDF (with read receipt), addressed as set forth below or to such other address as such party shall have specified most recently by written notice given in accordance herewith. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (i) upon hand delivery or delivery by e-mail (with read receipt) at the address designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (ii) on the second business day following the date of mailing by express courier service or on the fifth business day after deposited in the mail, in each case, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. |
If to the Company, to:
BOATIM, INC.
7950 NW 53rd Street Suite 337
Miami, FL 33166
Attn: Joseph Johnson, CEO
E-mail: joseph@boatim.com
If to the Buyer, to:
MEDITHORITY, LLC
2880 BICENTENNIAL PARKWAY STE 100, #152
HENDERSON, NV 89044
Attn: Christopher Lewis, Manager
E-mail: blewis@lewislawonline.com
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Either party hereto may from time to time change its address or e-mail for notices under this Section 9(g) by giving at least ten (10) days’ prior written notice of such changed address to the other party hereto.
(h) | Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, subject to Section 2(e), the Buyer may assign its rights hereunder to any person that purchases Securities in a private transaction from the Buyer or to any of its “affiliates,” as that term is defined under the Exchange Act, without the consent of the Company. |
(i) | Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person. |
(j) | Survival. The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the Closings hereunder as well as the termination/satisfaction of the Note for the longest period allowable under applicable law. The Company agrees to indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a result of or related to any breach by the Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred. |
(k) | Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. |
(l) | No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. |
(m) | Remedies. |
(i) | The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing economic loss and without any bond or other security being required. |
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(ii) | In addition to any other remedy provided herein or in any document executed in connection herewith, the Company shall pay the Buyer for all costs, fees and expenses in connection with any arbitration, litigation, contest, dispute, suit or any other action to enforce any rights of the Buyer against the Company in connection herewith, including, but not limited to, costs and expenses and attorneys’ fees, and costs and time charges of counsel to the Buyer. |
(n) | Publicity. The Company and the Buyer shall have the right to review a reasonable period of time before issuance of any press releases, SEC, Trading Market, or FINRA filings, or any other public statements with respect to the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior approval of the Buyer, to make any press release or SEC, Trading Market or FINRA filings with respect to such transactions as is required by applicable law and regulations (although the Buyer shall be consulted by the Company in connection with any such press release prior to its release and shall be provided with a copy thereof). |
10. | DEFINED TERMS. As used in this Agreement, the following terms shall have the following meanings specified or indicated (such meanings to be equally applicable to both the singular and plural forms of the terms defined): |
“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person, and the term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of such Person, whether through ownership of voting securities, by contract or otherwise.
“Common Stock Equivalents” means any securities of the Company or the Subsidiaries that would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
“Damages” shall mean any loss, claim, damage, liability, cost and expense (including, without limitation, reasonable attorneys’ fees and disbursements and costs and expenses of expert witnesses and investigation).
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Hazardous Material” means and includes any hazardous, toxic or dangerous waste, substance or material, the generation, handling, storage, disposal, treatment or emission of which is subject to any Environmental Law.
“Knowledge” including the phrase “to the Company’s Knowledge” shall mean the actual knowledge after reasonable investigation of the Company’s officers and directors.
“Lien” means a lien, charge, pledge, security interest, encumbrance, right of first refusal, pre- emptive right or any other restriction.
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“Material Adverse Effect” means any effect on the business, operations, properties, or financial condition of the Company and/or the Subsidiaries that is material and adverse to the Company and/or the Subsidiaries and/or any condition, circumstance, or situation that prohibits or otherwise materially interferes with the ability of the Company and/or the Subsidiaries to enter into and/or perform its obligations under any Transaction Document.
“OTC Filings and Disclosures” shall mean the Company’s documents uploaded as of the Execution Date onto the Company’s “Filings and Disclosures” page on the OTCMarkets.com website.
“Person” means an individual, a corporation, a partnership, an association, a trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.
“Registrable Securities” means all of the Commitment Shares, Conversion Shares and Warrant Shares, and any and all shares of capital stock issued or issuable as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise, without regard to any limitation on issuances under any of the Transaction Documents.
“Securities” means, collectively, the Note, the Conversion Shares, the Warrant, the Warrant Shares, the Commitment Shares, and any other securities of the Company issued in connection with or in exchange for any of the foregoing.
“Security Agreement” means that certain Security Agreement between the parties as attached hereto as Exhibit E.
“Subsidiary” or “Subsidiaries” means any Person the Company wholly-owns or controls, or in which the Company, directly or indirectly, owns a majority of the voting stock or similar voting interest, in each case that would be disclosable pursuant to Item 601(b)(21) of Regulation S-K promulgated under the Securities Act.
“Trading Day” shall mean a day on which the NASDAQ stock market shall be open for business.
“Trading Market” means the OTC-PINK market of the OTC-Markets.
“Transaction Documents” shall mean this Agreement, the Note, the Warrant, the Security Agreement, the Transfer Agent Instruction Letter and all schedules and exhibits hereto and thereto.
“Transfer Agent” shall mean the current transfer agent of the Company, and any successor transfer agent of the Company.
“Transfer Agent Instruction Letter” means the letter from the Company to the Transfer Agent in the form of Exhibit C attached hereto.
** signature page follows **
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IN WITNESS WHEREFORE, the Buyer and the Company have caused their respective signature page to this Note Purchase Agreement to be duly executed as of the Execution Date.
COMPANY: | ||
BOATI.M, INC. | ||
By: | ||
BUYER: | ||
MEDlTHORITY, LLC | ||
By: | ||
Title: | Manager |
** Signature Page to Note Purchase Agreement **
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ISSUANCE SCHEDULE
DECEMBER CLOSING
(1) | (2) | (3) | (4) | (5) |
Buyer | Face Value of Note | Warrant Shares | Number of Commitment Shares | Funding Amount |
Medithority, LLC | $275,000* | 1,100,000 | 2,750,000** | $217,500*** |
* | The Face Value of the Note includes an original issuance discount of 10%. |
** | The value of Commitment Shares issued under this Agreement shall equal 100% of the original face value of the Note with 2,750,000 shares issued on the Closing Date, at $0.10 per share and the balance of shares issued on the True-up Date. |
*** | The Buyer has the right to withhold $2,500 from the funding amount for payment of its transaction costs, and a 10% prepaid interest withheld at closing. |
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DISCLOSURE SCHEDULES
Schedule 3(b)(v)
The Company has not engaged a broker for this transaction.
Schedule 3(c)(i)
Except as disclosed in the SEC Documents, OTC Filings and Disclosures, neither the Company nor any of its Subsidiaries has:
(1) declared, set aside or paid any dividend or other distribution with respect to any shares of capital stock of the Company or any of its Subsidiaries or any direct or indirect redemption, purchase or other acquisition of any such shares;
(2) sold, assigned, pledged, encumbered, transferred or otherwise disposed of any tangible asset of the Company or any of its Subsidiaries (other than sales or the licensing of its products to customers in the ordinary course of business consistent with past practice), or sold, assigned, pledged, encumbered, transferred or otherwise disposed of any Intellectual Property (as defined below), other than licensing of products of the Company or its Subsidiaries in the ordinary course of business and on a non-exclusive basis;
(3) entered into any licensing or other agreement with regard to the acquisition or disposition of any Intellectual Property other than licenses in the ordinary course of business consistent with past practice or any amendment or consent with respect to any licensing agreement filed or required to be filed with respect to any governmental authority;
(4) made capital expenditures, individually or in the aggregate, in excess of $100,000;
(5) incurred any obligation or liability (whether absolute, accrued, contingent or otherwise, and whether due or to become due) on the Company’s behalf or any of its Subsidiaries, in excess of $100,000 individually, other than obligations under customer contracts, current obligations and liabilities, in each case incurred in the ordinary course of business and consistent with past practice;
(6) had any Lien on any property of the Company or any of its Subsidiaries except as disclosed in the SEC Documents, OTC Filings and Disclosures;
(7) made any payment, discharge, satisfaction or settlement of any suit, action, claim, arbitration, proceeding or obligation of the Company or any of its Subsidiaries, except in the ordinary course of business and consistent with past practice;
(8) effected any split, combination or reclassification of any equity securities;
(9) sustained any material loss, destruction or damage to any property of the Company or any Subsidiary, whether or not insured;
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(10) effected any acceleration or prepayment of any indebtedness for borrowed money or the refunding of any such indebtedness;
(11) experienced any labor trouble involving the Company or any Subsidiary or any material change in their personnel or the terms and conditions of employment;
(12) made any waiver of any valuable right, whether by contract or otherwise;
(13) made any loan or extension of credit to any officer or employee of the Company;
(14) made any change in the independent public accountants of the Company or its Subsidiaries or any material change in the accounting methods or accounting practices followed by the Company or its Subsidiaries, as applicable, or any material change in depreciation or amortization policies or rates;
(15) experienced any resignation or termination of any officer, key employee or group of employees of the Company or any of its Subsidiaries;
(16) effected any change in any compensation arrangement or agreement with any employee, officer, director or stockholder that would result in the aggregate compensation to such Person in such year to exceed $100,000;
(17) effected any material increase in the compensation of employees of the Company or its Subsidiaries (including any increase pursuant to any written bonus, pension, profit sharing or other benefit or compensation plan, policy or arrangement or commitment), or any increase in any such compensation or bonus payable to any officer, stockholder, director, consultant or agent of the Company or any of its Subsidiaries having an annual salary or remuneration in excess of $100,000;
(18) made any revaluation of any of their respective assets, including, without limitation, writing down the value of capitalized inventory or writing off notes or accounts receivable or any sale of assets other than in the ordinary course of business;
(19) made any acquisition or disposition of any material assets (or any contract or arrangement therefor), or any other material transaction by the Company or any Subsidiary otherwise than for fair value in the ordinary course of business;
(20) written-down the value of any asset of the Company or its Subsidiaries or written-off as uncollectible of any accounts or notes receivable or any portion thereof except in the ordinary course of business and in a magnitude consistent with historical practice;
(21) cancelled any debts or claims or any material amendment, termination or waiver of any rights of the Company or its Subsidiaries; or
(22) entered into any agreement, whether in writing or otherwise, to take any of the actions specified in the foregoing items (1) through (21).
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SCHEDULE 4(b)
Use of Proceeds
(1) Expenses incurred in connection with completing initial Reg A+ Offering, and
(2) General working capital.
(3) Proceeds shall not be used to pay past debts to related parties, shareholders, or affiliates other than employee salaries and those necessary and proper expenses as determined by the Company’s CEO and at his sole discretion.
(4) Current CEO shall remain in his position and have sole discretion as to the use of funds; any change in CEO or removal of authority from current CEO shall be prohibited and result in a default.
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Exhibit 10.16
NEITHER THE ISSUANCE NOR SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES FILED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
Principal Amount: $275,000 | Issue Date: December 20, 2021 |
SECURED CONVERTIBLE PROMISSORY NOTE
FOR VALUE RECEIVED, as of December 20, 2021 (the “Issue Date”), BOATIM, INC., a Nevada corporation (hereinafter called the “Borrower” or “Company”), hereby promises to pay to the order of Medithority, LLC, a Nevada limited liability company, or its registered assigns (the “Holder”), the principal sum of $275,000, payable upon the earlier of maturity or upon acceleration or upon prepayment of this Note as set forth herein. The term “Note” and all references thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented. This Note shall have a one-time interest charge at the rate of ten percent (10%) on the principal amount of this Note. The maturity date of this Note shall be the date that is twelve (12) months after the Issue Date (the “Maturity Date”), and is the date upon which the principal amount, as well as any accrued and unpaid interest and other fees, shall be due and payable. This Note may be prepaid in whole or in part as explicitly set forth herein. All payments due hereunder (to the extent not converted into common stock of the Company, $0.001 par value per share (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date. As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of Miami, Florida are authorized or required by law or executive order to remain closed. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Note Purchase Agreement dated December 20, 2021, pursuant to which this Note was originally issued (as amended and/or restated from time to time, the “Purchase Agreement”).
The cash consideration delivered to the Borrower at the closing of this Note is $217,500 as this Note is being issued with a $27,500 Original Issue Discount with $27,500 as a one-time interest charge at the rate of ten percent (10%) on the principal amount withheld as well as $2,500.00 being withheld to offset transaction and legal costs of the Holder.
This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.
The Company hereby affirms all of its obligations to the Holder under all of the Transaction Documents and agrees and affirms as follows: (i) that as of the Issue Date, the Company has performed, satisfied and complied in all material respects with all the covenants, agreements and conditions under each of the Transaction Documents to be performed, satisfied or complied with by the Company; (ii) that the Company shall continue to perform each and every covenant, agreement and condition set forth in each of the Transaction Documents and this Note, and continue to be bound by each and all of the terms and provisions thereof and hereof; (iii) that as of the Issue Date, no default or Event of Default has occurred or is continuing under the Purchase Agreement, the Note or any other Transaction Documents, and no event has occurred that, with the passage of time, the giving of notice, or both, would constitute a default or an Event of Default under the Purchase Agreement, the Note or any other Transaction Documents; and (iv) that as of the Issue Date, no event, fact, or other set of circumstances has occurred which could reasonably be expected to have, cause, or result in a Material Adverse Effect.
EXHIBIT A: SECURED CONVERTIBLE PROMISSORY NOTE
The Company hereby acknowledges, represents, warrants and confirms to the Holder that: (i) each of the Transaction Documents executed by the Company are valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms; and (ii) no oral representations, statements, or inducements have been made by Holder, or any agent or representative of Holder, with respect to this Note, the Purchase Agreement, and all other Transaction Documents.
This Note shall be a first senior secured obligation of the Borrower, with priority over all existing and future Indebtedness (as defined below) of the Borrower as provided for herein. The obligations of the Borrower under this Note are secured pursuant to the terms of the security agreement of even date herewith by and between the Borrower and the Holder, and such security interest includes but is not limited to all of the assets of the Borrower. So long as the Borrower shall have any obligation under this Note, the Borrower shall not (directly or indirectly through any subsidiary or affiliate) incur or suffer to exist or guarantee any Indebtedness that is senior to or pari passu with (in priority of payment and performance) the Borrower’s obligations hereunder. For purposes of this paragraph, the term “Borrower” shall include any subsidiary of the Borrower in addition to the Borrower. As used herein, the term “Indebtedness” means (a) all indebtedness of the Borrower for borrowed money or for the deferred purchase price of property or services, including any type of letters of credit, but not including deferred purchase price obligations in place as of the Issue Date and as disclosed in the OTC Filings and Disclosures or the SEC Documents or obligations to trade creditors incurred in the ordinary course of business, (b) all obligations of the Borrower evidenced by notes, bonds, debentures or other similar instruments, (c) purchase money indebtedness hereafter incurred by the Borrower to finance the purchase of fixed or capital assets, including all capital lease obligations of the Borrower which do not exceed the purchase price of the assets funded, (d) all guarantee obligations of the Borrower in respect of obligations of the kind referred to in clauses (a) through (c) above that the Borrower would not be permitted to incur or enter into, and (e) all obligations of the kind referred to in clauses (a) through (d) above that the Borrower is not permitted to incur or enter into that are secured and/or unsecured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured and/or unsecured by) any lien or encumbrance on property (including accounts and contract rights) owned by the Borrower, whether or not the Borrower has assumed or become liable for the payment of such obligation.
The following additional terms shall also apply to this Note:
ARTICLE I
CONVERSION RIGHTS
1.1 Conversion Right. The Holder shall have the right at any time, and from time to time, on or after the Issue Date to convert all or any part of the outstanding and unpaid principal, interest, fees, or any other obligation owed pursuant to this Note into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the Conversion Price (as defined below) selected by the Holder for any particular conversion, determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of this Note or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the Conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso. The number of shares of Common Stock to be issued upon each Conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) (the numerator) by the applicable Conversion Price then in effect on the date specified in the notice of conversion (the denominator), in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., Miami, Florida time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any Conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such Conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, provided however, that the Borrower shall have the right to pay any or all interest in cash plus (3) at the Holder’s option, fees on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.
EXHIBIT A: SECURED CONVERTIBLE PROMISSORY NOTE
2
1.2 Conversion Price. Subject to the adjustments described herein, this Note shall be convertible into shares of Common Stock at any time, and from time to time, in any portion at either of the Reg A+ Conversion Price, the Fixed Conversion Price, or the Default Conversion Price, in the sole discretion of the Holder. “Conversion Price” means the then applicable Fixed Conversion Price, Reg A+ Conversion Price, Default Conversion Price or other conversion price as determined in accordance with this Note as selected by the Holder in connection with any particular Conversion. The Conversion Price shall be automatically adjusted equitably for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, as well as combinations, recapitalization, reclassifications, extraordinary distributions and similar events:
(a) Reg A+ Conversion Price. Pursuant to Section 5 of the Purchase Agreement, the Borrower is obligated to qualify in any Reg A+ Offering the shares of Common Stock underlying this Note (which this Note is convertible into, i.e. the Conversion Shares). At any time, and from time to time, the Holder may utilize the Reg A+ Conversion Price for conversions of this Note into Common Stock. The Reg A+ Conversion Price shall be equal to the applicable “qualified” price per share that the Common Stock is being offered and issued by the Borrower in the Reg A+ Offering on its own behalf at that time (the “Reg A+ Conversion Price”).
(b) Fixed Conversion Price. At any time, and from time to time, the Holder may utilize the Fixed Conversion Price for conversions of this Note into Common Stock. The Fixed Conversion Price shall be a rate per share equal $0.13 per share (the “Fixed Conversion Price”). “Trading Day” shall mean any day on which the Common Stock is tradable for any period on the OTCBB, OTCQB or on the principal securities exchange or other securities market on which the Common Stock is then being quoted or traded.
(c) Default Conversion Price: Notwithstanding anything herein to the contrary, upon delivery by the Holder to the Borrower of a Default Notice (as defined herein) setting forth the Event of Default under the Note, at the sole option of the Holder the Default Conversion Price (as defined below) can be used by the Holder as the Conversion Price, at any time, and from time to time, thereafter while the Note remains outstanding. The “Default Conversion Price” shall mean $0.01 per share.
EXHIBIT A: SECURED CONVERTIBLE PROMISSORY NOTE
3
(d) Additional Conversion Considerations. To the extent the Conversion Price of the Borrower’s Common Stock closes below the par value per share, the Borrower will take all steps necessary to solicit the consent of the stockholders to reduce the par value of the Common Stock to the lowest value possible under law. The Borrower agrees to honor all conversions submitted pending this adjustment. If the shares of the Borrower’s Common Stock have not been delivered within three (3) business days to the Holder, the Notice of Conversion may be rescinded by the Holder. If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Borrower and the Holder for which the calculation of the Trading Price is required in order to determine the Conversion Price of such Notes. If at any time the Conversion Price as determined hereunder for any conversion would be less than the par value of the Common Stock, then at the sole discretion of the Holder, the Conversion Price hereunder may equal such par value for such conversion and the Conversion Amount for such conversion may be increased to include Additional Principal, where “Additional Principal” means such additional amount to be added to the Conversion Amount to the extent necessary to cause the number of conversion shares issuable upon such conversion to equal the same number of conversion shares as would have been issued had the Conversion Price not been adjusted by the Holder to the par value price.
(e) Pro Rata Conversion; Disputes. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in connection with a conversion of this Note, the Borrower shall issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with this Note.
1.3 Authorized Shares. The Borrower covenants that during the period the Conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all times to have authorized and reserved five times (500%) the number of shares that is actually issuable upon full conversion of the Note (based on the Conversion Price of the Note in effect from time to time) (the “Reserved Amount”). The Reserved Amount shall be increased from time to time in accordance with the Borrower’s obligations pursuant to Section 4(i) of the Purchase Agreement. The Borrower represents that upon issuance, such shares of Common Stock will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which this Note shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Note. The Borrower (i) represents that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note. Notwithstanding the foregoing, in no event shall the Reserved Amount be lower than the initial Reserved Amount, regardless of any prior conversions.
Borrower’s failure to maintain or to replenish the Reserved Amount within three (3) business days of a request of the Holder, shall be an Event of Default under this Note.
1.4 Method of Conversion.
(a) Mechanics of Conversion. Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time from time to time on or after the Issue Date, by (i) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., Miami, Florida time) and (ii) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower.
EXHIBIT A: SECURED CONVERTIBLE PROMISSORY NOTE
4
(b) Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such records of the Holder shall, prima facie, be controlling and determinative in the absence of manifest error. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.
(c) Payment of Taxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.
(d) Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates (or electronic shares via DWAC transfer, at the option of Holder) for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and the Purchase Agreement.
(e) Obligation of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is received by the Borrower before 6:00 p.m., Miami, Florida time, on such date.
(f) Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions contained in Section 1.1 and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal At Custodian (“DWAC”) system.
EXHIBIT A: SECURED CONVERTIBLE PROMISSORY NOTE
5
(g) Failure to Deliver Common Stock Prior to Delivery Deadline. Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline (other than a failure due to the circumstances described in Section 1.3 above, which failure shall be governed by such Section) the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock until the Borrower issues and delivers a certificate to the Holder or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon such Holder’s conversion of any Conversion Amount (under Holder’s and Borrower’s expectation that any damages will tack back to the Issue Date). Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly, the parties acknowledge that the liquidated damages provision contained in this Section 1.4(g) are justified.
(h) Rescindment of a Notice of Conversion. If (i) the Borrower fails to respond to Holder within one (1) business day from the Conversion Date confirming the details of Notice of Conversion, (ii) the Borrower fails to provide any of the shares of the Borrower’s Common Stock requested in the Notice of Conversion within three (3) business days from the date of receipt of the Note of Conversion, (iii) the Holder is unable to procure a legal opinion required to have the shares of the Borrower’s Common Stock issued unrestricted and/or deposited to sell for any reason related to the Borrower’s standing, (iv) the Holder is unable to deposit the shares of the Borrower’s Common Stock requested in the Notice of Conversion for any reason related to the Borrower’s standing, (v) at any time after a missed Deadline, at the Holder’s sole discretion, or (vi) if OTC Markets Group, Inc. changes the Borrower’s designation to ‘Limited Information’ (Yield), ‘No Information’ (Stop Sign), ‘Caveat Emptor’ (Skull & Crossbones), ‘OTC’, ‘Other OTC’ or ‘Grey Market’ (Exclamation Mark Sign) or other trading restriction on the day of or any day after the Conversion Date, the Holder maintains the option and sole discretion to rescind the Notice of Conversion with a “Notice of Rescindment.”
1.5 Concerning the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the Securities Act of 1933, as amended 1933 Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the 1933 Act (or a successor rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an “accredited investor” (as defined in Rule 501(a) of the 1933 Act). Except as otherwise provided in the Purchase Agreement (and subject to the removal provisions set forth below), until such time as the shares of Common Stock issuable upon conversion of this Note have been registered under the 1933 Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:
“NEITHER THE ISSUANCE OR SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”
EXHIBIT A: SECURED CONVERTIBLE PROMISSORY NOTE
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The legend set forth above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration under the 1933 Act, which opinion shall be reasonably accepted by the Company so that the sale or transfer is effected or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold. In the event that the Company does not accept the opinion of counsel provided by the Holder with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline, and the does not provide a suitable replacement opinion to the Holder within two (2) business days, it will be considered an Event of Default pursuant to Section 3.2 of the Note.
1.6 Effect of Certain Events.
(a) Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either: (i) be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III) or (ii) be treated pursuant to Section 1.6(b) hereof. “Person” shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.
(b) Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, thirty (30) days prior written notice (but in any event at least fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(d). The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.
EXHIBIT A: SECURED CONVERTIBLE PROMISSORY NOTE
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(c) Adjustment Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.
(d) Adjustment Due to Dilutive Issuance. If, at any time when this Note is issued and outstanding, the Borrower issues or sells, or in accordance with this Section 1.6(d) hereof is deemed to have issued or sold, except for shares of Common Stock issued directly to vendors or suppliers of the Borrower in satisfaction of amounts owed to such vendors or suppliers (provided, however, that such vendors or suppliers shall not have an arrangement to transfer, sell or assign such shares of Common Stock prior to the issuance of such shares), any shares of Common Stock for no consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith) less than the Conversion Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (a “Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Conversion Price will be reduced to the amount of the consideration per share received by the Borrower in such Dilutive Issuance, subject to the Holder’s rights under Section 1.2 to select its Conversion Price.
The Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or grants any warrants, rights or options (not including employee stock option plans), whether or not immediately exercisable, to subscribe for or to purchase Common Stock or other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”) and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon the exercise of such Options” is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or granting of all such Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the exercise of all such Options, plus, in the case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion of Convertible Securities, if applicable). No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon exercise of such Options.
Additionally, the Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or sells any Convertible Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options), and the price per share for which Common Stock is issuable upon such conversion or exchange is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For the purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon such conversion or exchange” is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or sale of all such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.
EXHIBIT A: SECURED CONVERTIBLE PROMISSORY NOTE
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(e) Purchase Rights. If, at any time when any Notes are issued and outstanding, the Borrower issues any Convertible Securities or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.
(f) Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the events described in this Section 1.6, or under Section 1.2 (regarding stock splits, combinations, etc.), the Borrower, at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Borrower shall, upon the written request at any time of the Holder, furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of the Note.
1.7 Trading Market Limitations. Unless permitted by the applicable rules and regulations of the principal securities market on which the Common Stock is then quoted, listed or traded, in no event shall the Borrower issue upon conversion of or otherwise pursuant to this Note more than the maximum number of shares of Common Stock that the Borrower can issue pursuant to any rule of the principal United States securities market on which the Common Stock is then traded (the “Maximum Share Amount”), subject to equitable adjustment from time to time for stock splits, stock dividends, combinations, capital reorganizations and similar events relating to the Common Stock occurring after the Issue Date. Once the Maximum Share Amount has been issued, if the Borrower fails to eliminate any prohibitions under applicable law or the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Borrower or any of its securities on the Borrower’s ability to issue shares of Common Stock in excess of the Maximum Share Amount, in lieu of any further right to convert this Note, this will be considered an Event of Default under Section 3.2 of the Note.
1.8 Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received certificates or transmission of such shares pursuant to Section 1.4(f) for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, if this Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted. In all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion default payments pursuant to Section 1.3 to the extent required thereby for such Conversion default and any subsequent Conversion default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section 1.2) for the Borrower’s failure to convert this Note.
EXHIBIT A: SECURED CONVERTIBLE PROMISSORY NOTE
9
1.9 Prepayment. Notwithstanding anything to the contrary contained in this Note, the Borrower may prepay the amounts outstanding hereunder with the consent of the Holder pursuant to the following terms and conditions:
(a) At any time during the period beginning on the Issue Date and ending on the date which is day immediately prior to the Maturity Date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full by making a payment to the Holder of an amount in cash equal to 125%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note.
(b) Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional Prepayment Date”), the Borrower shall make payment of the applicable prepayment amount to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower delivers an Optional Prepayment Notice and fails to pay the applicable prepayment amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.
ARTICLE II
CERTAIN COVENANTS
2.1 Distributions on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect of its capital stock except for distributions pursuant to any shareholders’ rights plan which is approved by a majority of the Borrower’s disinterested directors.
2.2 Restriction on Stock Repurchases. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Borrower or any warrants, rights or options to purchase or acquire any such shares.
2.3 Borrowings. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation of any person, firm, partnership, joint venture or corporation, except by the endorsement of negotiable instruments for deposit or collection, or suffer to exist any liability for borrowed money, except (a) borrowings in existence or committed on the Issue Date and of which the Borrower has informed Holder in writing prior to the Issue Date, (b) indebtedness to trade creditors financial institutions or other lenders incurred in the ordinary course of business or (c) borrowings, the proceeds of which shall be used to repay this Note.
2.4 Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.
EXHIBIT A: SECURED CONVERTIBLE PROMISSORY NOTE
10
2.5 Advances and Loans. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, lend money, give credit or make advances to any person, firm, joint venture or corporation, including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances (a) in existence or committed on the Issue Date and which the Borrower has informed Holder in writing prior to the Issue Date, (b) made in the ordinary course of business or (c) not in excess of $15,000.
2.6 Section 3(a)(9) or 3(a)(10) Transaction. So long as this Note is outstanding, the Borrower shall not enter into any transaction or arrangement structured in accordance with, based upon, or related or pursuant to, in whole or in part, either Section 3(a)(9) of the 1933 Act (a “3(a)(9) Transaction”) or Section 3(a)(10) of the 1933 Act (a “3(a)(10) Transaction”). In the event that the Borrower does enter into, or makes any issuance of Common Stock related to a 3(a)(9) Transaction or a 3(a)(10) Transaction while this Note is outstanding, a liquidated damages charge of 25% of the outstanding principal balance of this Note, but not less than Fifteen Thousand Dollars ($15,000), will be assessed and will become immediately due and payable to the Holder at its election in the form of cash payment or addition to the balance of this Note.
2.7 Preservation of Existence, etc. The Borrower shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence, rights and privileges, and become or remain, and cause each of its Subsidiaries (other than dormant Subsidiaries that have no or minimum assets) to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary.
2.8 Non-circumvention. The Borrower hereby covenants and agrees that the Borrower will not, by amendment of its Certificate or Articles of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will at all times in good faith carry out all the provisions of this Note and take all action as may be required to protect the rights of the Holder.
2.9 Repayment from Proceeds. While any portion of this Note is outstanding, if the Borrower receives cash proceeds from any source or series of related or unrelated sources, including but not limited to, from payments from customers, the issuance of equity or debt, the conversion of outstanding warrants of the Borrower, the issuance of securities pursuant to an equity line of credit of the Borrower or the sale of assets, the Borrower shall, within one (1) business day of Borrower’s receipt of such proceeds, inform the Holder of such receipt, following which the Holder shall have the right in its sole discretion to require the Borrower to immediately apply all or any portion of such proceeds to repay all or any portion of the outstanding amounts owed under this Note. Failure of the Borrower to comply with this provision shall constitute an Event of Default. In the event that such proceeds are received by the Holder prior to the Maturity Date, the required prepayment shall be subject to the terms of Section 1.9 herein.
2.10 Piggyback Registration Rights. The Company shall include on any registration statement or offering statement filed with the SEC, all Conversion Shares, all Warrant Shares, and all Commitment Shares. In addition to all other remedies at law or in equity or otherwise in connection with any breaches under this Note or the other Transaction Documents, failure to do so in compliance with this Section 2.10 will result in liquidated damages of $20,000, being immediately due and payable to the Holder at its election in the form of cash payment.
2.11 Reg A+ Offering. Within 30 days after the Issue Date, the Company shall file an offering statement to conduct its initial Reg A+ Offering with the SEC. The failure to complete such filing shall constitute an Event of Default under Section 3.3 below. The Company shall use best efforts to have such offering statement “qualified” within 30 days after the Issue Date.
EXHIBIT A: SECURED CONVERTIBLE PROMISSORY NOTE
11
ARTICLE III
EVENTS OF DEFAULT
The occurrence of any of the following shall each constitute an “Event of Default” with no right to notice or the right to cure except as specifically stated:
3.1 Failure to Pay Principal or Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at the Maturity Date, upon acceleration or otherwise.
3.2 Conversion and the Shares. The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the Conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an “Event of Default” of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within forty- eight (48) hours of a demand from the Holder.
3.3 Breach of Covenants. The Borrower breaches any covenant or other term or condition contained in this Note, or in any of the Transaction Documents including but not limited to the Purchase Agreement.
3.4 Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement), shall be false or misleading in any material respect when made.
3.5 Receiver or Trustee. The Company or any subsidiary of the Company shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.
3.6 Judgments. Any money judgment, writ or similar process shall be entered against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more than $50,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.
3.7 Bankruptcy; Liquidation. (i) Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Company or any subsidiary of the Company or the Borrower admits in writing its inability to pay its debts generally as they mature, or have filed against it an involuntary petition for bankruptcy; or (ii) any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business occurs.
EXHIBIT A: SECURED CONVERTIBLE PROMISSORY NOTE
12
3.8 Delisting of Common Stock; Failure to Uplist. (i) The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTCBB, OTCQB, OTC Pink or an equivalent replacement exchange, the Nasdaq Capital Market, the New York Stock Exchange, or the NYSE American, or (ii) the Borrower shall fail to successfully uplist the Common Stock to the Nasdaq Capital Market or New York Stock Exchange within 90 days of the Issue Date.
3.9 Failure to Comply with the Exchange Act. The Borrower shall fail to timely comply with the reporting requirements of the 1934 Act (including but not limited to becoming delinquent in its filings); and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act; and/or the Borrower shall not have publicly available all information required by paragraph (b) of Rule 15c2-11 of the Exchange Act (as effective on September 26, 2021), as amended, such that brokers or dealers attempting to publish any quotation for the Common Stock or, directly or indirectly, to submit any such quotation for publication, shall be able to comply with Rule 15c2-11(a).
3.10 DTC. If the Company is currently in the process of applying for “DWAC/FAST” electronic transfer, once in place, if the Company (i) loses its ability to deliver shares via “DWAC/FAST” electronic transfer, or (ii) loses its stats as “DTC Eligible.”
3.11 Cessation of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.
3.12 Maintenance of Assets. The failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future) or any disposition or conveyance of any material asset of the Borrower.
3.13 Financial Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.
3.14 Reverse Splits. The Borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to the Holder.
3.15 Rights of Participation. The failure of the Borrower to fully satisfy its obligations to the Holder under Section 5(c) and/or Section 5(d) of the Purchase Agreement.
3.16 Replacement of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Transfer Agent Instruction Letter in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.
3.17 Cessation of Trading. Any cessation of trading of the Common Stock on at least one of the OTCBB, OTCQB, OTC Pink or an equivalent replacement exchange, the Nasdaq Capital Market, the New York Stock Exchange, or the NYSE American, and such cessation of trading shall continue for a period of five consecutive (5) Trading Days.
EXHIBIT A: SECURED CONVERTIBLE PROMISSORY NOTE
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3.18 Cross-Default. Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Borrower of any material covenant or other term or condition contained in any of the Other Agreements, other than any such breach or default which is cured by agreement of the parties, after the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. “Other Agreements” means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes. Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower to the Holder.
3.19 Bid Price. The Borrower shall lose the “bid” price for its Common Stock ($0.01 on the “Ask” with zero market makers on the “Bid” per Level 2) and/or a market (including the OTCBB, OTCQB or an equivalent replacement exchange).
3.20 OTC Markets Designation. If the OTC-Markets changes the Borrower’s designation to ‘No Information’ (Stop Sign), ‘Caveat Emptor’ (Skull and Crossbones), or ‘OTC’, ‘Other OTC’ or ‘Grey Market’ (Exclamation Mark Sign).
3.21 Inside Information. Any attempt by the Borrower or its officers, directors, and/or affiliates to transmit, convey, disclose, or any actual transmittal, conveyance, or disclosure by the Borrower or its officers, directors, and/or affiliates of, material non-public information concerning the Borrower, to the Holder or its successors and assigns, which is not immediately cured by Borrower’s filing of a Form 8-K pursuant to Regulation FD on that same date.
3.22 Unavailability of Rule 144. If, at any time on or after the date which is six (6) months after the Issue Date, the Holder is unable to (i) obtain a standard “144 legal opinion letter” from an attorney reasonably acceptable to the Holder, the Holder’s brokerage firm (and respective clearing firm), and the Borrower’s transfer agent in order to facilitate the Holder’s conversion of any portion of the Note into free trading shares of the Borrower’s Common Stock pursuant to Rule 144, and (ii) thereupon deposit such shares into the Holder’s brokerage account.
Upon the occurrence of any Event of Default specified in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14, 3.13, 3.16. 3.17, 3.18, 3.19, 3.20, 3.21, and/or 3.22 exercisable through the delivery of written notice to the Borrower by such Holders (the “Default Notice”), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to (i) 150% times the sum of (x) the then outstanding principal amount of this Note plus (y) accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment (the “Mandatory Prepayment Date”), on the amounts referred to in clauses (x) and/or (y) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment plus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default Sum”) or (ii) at the option of the Holder, the “parity value” of the Default Sum to be prepaid, where parity value means (a) the highest number of shares of Common Stock issuable upon conversion of or otherwise pursuant to such Default Sum in accordance with Article I, treating the Trading Day immediately preceding the Mandatory Prepayment Date as the “Conversion Date” for purposes of determining the lowest applicable Conversion Price, unless the Event of Default arises as a result of a breach in respect of a specific Conversion Date (in which case such Conversion Date shall be the Conversion Date), multiplied by (b) the highest Closing Price (defined below) for the Common Stock during the period beginning on the date of first occurrence of the Event of Default and ending one day prior to the Mandatory Prepayment Date (the “Default Amount”) and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity. “Closing Price” means, for any security as of any date, the closing bid price as reported on the OTCBB, OTCQB or applicable trading market or exchange as reported by a reliable reporting service designated by the Holder or, if the OTCBB is not the principal trading market for such security, the closing bid price of such security on the principal securities exchange or trading market where such security is quoted, listed or traded.
EXHIBIT A: SECURED CONVERTIBLE PROMISSORY NOTE
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The Holder shall have the right at any time, to require the Borrower to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect, subject to the terms of this Note. This requirement by the Borrower shall automatically apply upon the occurrence of an Event of Default without the need for any party to give any notice or take any other action.
If the Holder shall commence an action or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney, then if the Holder prevails in such action, the Holder shall be reimbursed by the Borrower for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
ARTICLE IV
MISCELLANEOUS
4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
4.2 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, or electronic transmission by e-mail (with read-receipt required) addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by electronic transmission by e-mail (with read-receipt required), at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:
If to the Borrower, to:
Boatim, Inc.
7950 NW 53rd Street Suite 337
Miami, FL 33166
Attn: Joseph Johnson, CEO
E-mail: joseph@boatim.com
If to the Holder:
Medithority, LLC
2880 BICENTENNIAL PARKWAY STE 100, #152
HENDERSON, NV 89044
Attn: Christopher Lewis, Manager
E-mail: blewis@lewislawonline.com
EXHIBIT A: SECURED CONVERTIBLE PROMISSORY NOTE
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4.3 Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder.
4.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Neither the Borrower nor the Holder shall assign this Note or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, the Holder may assign its rights hereunder to any “accredited investor” (as defined in Rule 501(a) of the 1933 Act) in a private transaction from the Holder or to any of its “affiliates”, as that term is defined under the 1934 Act, without the consent of the Borrower. Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bonafide margin account or other lending arrangement. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.
4.5 Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof reasonable costs of collection, including reasonable attorneys’ fees.
4.6 Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of Nevada without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts of Clark County, Nevada, or in the federal courts located in Nevada. The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Note or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
4.7 Certain Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding principal amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note. The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.
4.8 Purchase Agreement and Security Agreement. By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement and the Security Agreement.
EXHIBIT A: SECURED CONVERTIBLE PROMISSORY NOTE
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4.9 Notice of Corporate Events. Except as otherwise provided in this Note, the Holder of this Note shall have no rights as a Holder of Common Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders). In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Borrower or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9 including, but not limited to, name changes, recapitalizations, etc. as soon as possible under law.
4.10 Usury. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable provision shall automatically be revised to equal the maximum rate of interest or other amount deemed interest permitted under applicable law. The Borrower covenants (to the extent that it may lawfully do so) that it will not seek to claim or take advantage of any usury law that would prohibit or forgive the Borrower from paying all or a portion of the principal or interest on this Note.
4.11 Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required. No provision of this Note shall alter or impair the obligation of the Borrower, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
4.12 Severability. In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.
4.13 Dispute Resolution. In the case of a dispute as to the determination of the Conversion Price, Conversion Amount, any prepayment amount or Default Amount, Default Sum, Closing Date or Maturity Date, the closing bid price, or fair market value (as the case may be) or the arithmetic calculation of the Conversion Price or the applicable prepayment amount(s) (as the case may be), the Borrower or the Holder shall submit the disputed determinations or arithmetic calculations via electronic transmission by e-mail (with read-receipt required) (i) within two (2) Trading Days after receipt of the applicable notice giving rise to such dispute to the Borrower or the Holder or (ii) if no notice gave rise to such dispute, at any time after the Holder learned of the circumstances giving rise to such dispute. If the Holder and the Borrower are unable to agree upon such determination or calculation within two (2) business days of such disputed determination or arithmetic calculation (as the case may be) being submitted to the Borrower or the Holder, then the Borrower shall, within two (2) business days, submit via electronic transmission by e-mail (with read-receipt required) (a) the disputed determination of the Conversion Price, the closing bid price, the or fair market value (as the case may be) to an independent, reputable investment bank selected by the Borrower and approved by the Holder or (b) the disputed arithmetic calculation of the Conversion Price, Conversion Amount, any prepayment amount or Default Amount, Default Sum to an independent, outside accountant selected by the Holder that is reasonably acceptable to the Borrower. The Borrower shall cause at its expense the investment bank or the accountant to perform the determinations or calculations and notify the Borrower and the Holder of the results no later than ten (10) business days from the time it receives such disputed determinations or calculations. Such investment bank’s or accountant’s determination or calculation shall be binding upon all parties absent demonstrable error.
EXHIBIT A: SECURED CONVERTIBLE PROMISSORY NOTE
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4.14 Terms of Future Financings. So long as this Note is outstanding, upon any issuance by the Borrower or any of its subsidiaries of any security with any term more favorable to the holder of such security or with a term (including without limitation any Conversion Price) in favor of the holder of such security that was not similarly provided to the Holder in this Note (other than a future financing with the Holder), then the Borrower shall notify the Holder of such additional or more favorable term and such term, at Holder’s option, shall become a part of the Transaction Documents with the Holder. The types of terms contained in another security that may be more favorable to the holder of such security include, but are not limited to, terms addressing conversion discounts, prepayment rate, conversion lookback periods, interest rates, original issue discounts, stock sale price, private placement price per share, and warrant coverage.
*** signature page follows ***
EXHIBIT A: SECURED CONVERTIBLE PROMISSORY NOTE
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IN WITNESS WHEREFORE, Borrower has caused this Note to be signed in its name by its duly authorized officer as of of Issue Date.
COMPANY: | ||
Name: | Joseph Johnson | |
Title: | CEO |
Acknowledged and Acepted | ||
HOLDER: | ||
Medithority, LLC | ||
Title: | Manager |
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Exhibit 10.17
NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT (this “Agreement”), dated as of December 22, 2021, (the “Execution Date”), is entered into by and between BOATIM, INC., a Nevada corporation (the “Company”), and QUICK CAPITAL, LLC, a Wyoming limited liability company (the “Buyer”). Each capitalized term used herein shall have the meaning ascribed thereto in Section 10 below, or as otherwise defined herein.
WHEREAS, the Company and the Buyer are executing and delivering this Agreement in reliance upon an exemption from securities registration afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”); and
WHEREAS, the Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement (i) a secured convertible promissory note of the Company, in the form attached hereto as Exhibit A, in an aggregate funded amount of $143,166 as set forth on the Issuance Schedule attached hereto (such note, together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof, a “Note”), convertible into shares (the “Conversion Shares”) of common stock, $0.001 par value per share, of the Company (the “Common Stock”) pursuant to the terms of the Note; and (ii) warrants to acquire shares (the “Warrant Shares”) of Common Stock in the form attached hereto as Exhibit B (the “Warrant”), in such amounts set forth on the Issuance Schedule; and
WHEREAS, as inducement to enter into this Agreement, and for the funding of the Note, the Company desires to issue to the Buyer shares of Common Stock (the “Commitment Shares”) as set forth herein.
NOW THEREFORE, in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the Buyer hereby agree as follows:
1. | PURCHASE AND SALE OF SECURITIES. |
(a) | Closing. On the Closing Date (as defined below), the Company shall sell and issue to the Buyer and the Buyer shall purchase and fund a Note in such principal amount, and for such funding price, set forth on the Issuance Schedule under “December Closing” (the “Closing”), which such funding amount shall be $143,166 for the Closing (the “Company Funding Amount”). |
(b) | Closing Date. Subject to the satisfaction (or written waiver) of the conditions set forth in Section 7 and Section 8 below, the date of the issuance and sale of the Note constituting the Closing pursuant to this Agreement (the “Closing Date”) shall be the Execution Date. |
(c) | Form of Payment. On the Closing Date, the Buyer shall deliver the Company Funding Amount by wire transfer of immediately available funds, in accordance with the Company’s written wiring instructions. |
(d) | Warrants. On the Closing Date, the Company shall deliver Warrants to the Buyer constituting 50% warrant coverage in such amounts as set forth on the Issuance Schedule. |
(e) | Commitment Shares. The Company shall be required to deliver the Commitment Shares to the Buyer, and the Buyer shall be entitled to receive such shares, in an aggregate amount of shares valued at $83,333, as set forth below in this Section and as set forth on the Issuance Schedule: |
(i) | Closing Delivery. At the closing, the Company shall deliver 456,621 Commitment Shares to the Buyer (the “Initial Commitment Shares”). |
(ii) | True-up Delivery. On the date that is the earlier of (A) the initial date of the “effectiveness” of an effective registration statement on Form S-1 covering the resale of the Registrable Securities, or (B) the date as of which the Buyer may sell all of the Registrable Securities without restriction pursuant to Rule 144 promulgated under the Securities Act without any restrictions (including any restrictions under Rule 144(c) or Rule 144(i)) (such earlier date, the “True-up Date”), in the event that the aggregate market value of the Initial Commitment Shares is less than $83,333, with such calculation based on the closing price of the Common Stock on the True-up Date (“Initial Commitment Shares Value”), the Company must deliver to the Buyer, and the Buyer shall be entitled to receive, a balance amount of Commitment Shares equal to the difference of $83,333 minus the Initial Commitment Shares Value (the “True-up Shares”). The price per share of the True-up Shares for purposes of determining the amount of shares to be issued shall be equal to the closing price of the Common Stock on the True- up Date. The Company shall immediately deliver within 24 hours after the True-up Date written notice to the Buyer regarding its calculation of True- up Shares and an acknowledgement that the Company will comply with the terms of this Section (e)(ii). The Company shall deliver the True-up Shares to the Buyer within 48 hours after the True-up Date. Failure to timely deliver the True-up Shares shall be an Event of Default under the Note. |
2. | REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and warrants to the Company that: |
(a) | Investment Purpose. As of the Execution Date, the Buyer is purchasing the Securities for its own account for investment only and not with a view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the Securities Act; provided, however, that by making the foregoing representation and warranty, the Buyer does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of all or any portion of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act. |
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(b) | Reliance on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities. |
(c) | Information. The Buyer and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by the Buyer or its advisors. The Buyer and its advisors, if any, have been afforded the opportunity to ask questions of the Company. Notwithstanding the foregoing, the Company has not disclosed to the Buyer any material non- public information and will not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer. Neither such inquiries nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall modify, amend or affect Buyer’s right to rely on the Company’s representations and warranties contained in Section 3 below. |
(d) | Authorization; Enforcement; Organization. This Agreement has been duly and validly authorized by the Buyer. This Agreement has been duly executed and delivered on behalf of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms. The Buyer is a limited liability company organized under the laws of the State of Wyoming. |
(e) | Accredited Investor Status. The Buyer is (i) an “accredited investor” as that term is defined in Rule 501 of the General Rules and Regulations under the Securities Act by reason of Rule 501(a)(3) (an “Accredited Investor”), (ii) experienced in making investments of the kind described in this Agreement and the related documents, (iii) able, by reason of the business and financial experience of its officers (if an entity) and professional advisors (who are not affiliated with or compensated in any way by the Company or any of its Affiliates or selling agents), to protect its own interests in connection with the transactions described in this Agreement, and the related documents, and (iv) able to afford the entire loss of its investment in the Securities. |
(f) | General Solicitation. The Buyer is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement. |
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3. | REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to the Buyer that as of the Execution Date and as of each Closing Date (or as of such other time expressly specified below): |
(a) | Corporate Governance Compliance: |
(i) | Issuance of Commitment Shares, Note and Conversion Shares and Warrant and Warrant Shares. The Note has been duly authorized and is being validly issued to the Buyer. The Conversion Shares have been duly authorized and fully reserved for issuance and, upon conversion of the Note in accordance with its terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock. The Conversion Shares shall not be subject to pre-emptive rights or other similar rights of stockholders of the Company (except to the extent already waived) and will not impose personal liability upon the holder thereof, other than restrictions on transfer provided for in the Transaction Documents and under the Securities Act. The Warrant has been duly authorized and is being validly issued to the Buyer. The Warrant Shares have been duly authorized and fully reserved for issuance and, upon exercise of the Warrant in accordance with its terms, will be validly issued, fully paid and non- assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock. The Warrant Shares shall not be subject to pre-emptive rights or other similar rights of stockholders of the Company (except to the extent already waived) and will not impose personal liability upon the holder thereof, other than restrictions on transfer provided for in the Transaction Documents and under the Securities Act. The Commitment Shares have been duly authorized and upon delivery to the Buyer shall be validly issued, fully paid and non-assessable, and free from all taxes, Liens, claims and encumbrances with respect to the issue thereof, with the Buyer being entitled to all rights accorded to a holder of Common Stock. The Commitment Shares shall not be subject to pre-emptive rights or other similar rights of stockholders of the Company (except to the extent already waived) and will not impose personal liability upon the holder thereof, other than restrictions on transfer provided for in the Transaction Documents and under the Securities Act. |
(ii) | Organization and Qualification. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Nevada, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. Each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. Each of the Company and the Subsidiaries is not in violation or default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in a Material Adverse Effect and no proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification. |
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(iii) | Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement and the other Transaction Documents. The execution and delivery of this Agreement and the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action, and no further consent or authorization of the Company or its Board of Directors or stockholders is required. Each of this Agreement and the other Transaction Documents has been duly executed and delivered by the Company and constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application. |
(iv) | Capitalization. As of the Execution Date, the authorized capital stock of the Company is as set forth in the SEC Documents (as defined below). Except as set forth on Schedule 3(a)(iv), the Company has not issued any capital stock since its most recently filed SEC Document, other than pursuant to the exercise of employee stock options under the Company’s stock option plans, the issuance of shares of Common Stock to employees pursuant to the Company’s employee stock purchase plans and pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed SEC Document. Except as disclosed in the SEC Documents, no shares are reserved for issuance pursuant to the Company’s stock option plans, no shares are reserved for issuance pursuant to the terms of any Common Stock Equivalents (other than the Note and the Warrant) exercisable for, or convertible into or exchangeable for shares of Common Stock and sufficient shares are reserved for issuance upon conversion of the Note and upon exercise of the Warrant (as required by the Note, the Warrant and Transfer Agent Instruction Letter). All of such outstanding shares of capital stock are, or upon issuance will be, duly authorized, validly issued, fully paid and non-assessable. No shares of capital stock of the Company are subject to preemptive rights or any other similar rights of the stockholders of the Company or any liens or encumbrances imposed through the actions or failure to act of the Company. Except as disclosed in the SEC Documents, as of the Execution Date, (i) there are no outstanding options, warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings, claims or other commitments or rights of any character whatsoever relating to, or securities or rights convertible into or exchangeable for any shares of capital stock of the Company or any of its Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries, (ii) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of its or their securities under the Securities Act and (iii) there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) that will be triggered by the issuance of the Securities. The Company has filed in its SEC Documents true and correct copies of the Company’s Certificate of Incorporation as in effect on the Execution Date, the Company’s bylaws, as in effect on the Execution Date, and the terms of all securities convertible into or exercisable for Common Stock of the Company and the material rights of the holders thereof in respect thereto. The Company shall provide the Buyer a certification of this representation signed by the Company’s Chief Executive Officer on behalf of the Company as of the Closing Date. |
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(v) | No Conflicts. The execution, delivery and performance of this Agreement and the other Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance of the Conversion Shares and the Warrant Shares) will not (a) result in a violation of the Company’s or any Subsidiary’s certificate or articles of incorporation, by-laws or other organizational or charter documents, (b) conflict with, or constitute a material default (or an event that with notice or lapse of time or both would become a material default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, instrument or any “lock-up” or similar provision of any underwriting or similar agreement to which the Company or any Subsidiary is a party, or (c) result in a violation of any federal, state or local law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or any Subsidiary or by which any property or asset of the Company or any Subsidiary is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect), nor is the Company otherwise in violation of, conflict with or in default under any of the foregoing. The business of the Company is not being conducted in violation of any law, ordinance or regulation of any governmental entity, except for possible violations that either singly or in the aggregate do not and will not have a Material Adverse Effect. The Company is not required under federal, state or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to issue the Conversion Shares or the Warrant Shares or to execute, deliver or perform any of its obligations under this Agreement or the other Transaction Documents (other than any SEC, FINRA or state securities filings that may be required to be made by the Company subsequent to Closing). |
(b) | SEC and Offering Compliance: |
(i) | SEC Documents. By December 31, 2021, the Company shall file all reports, schedules, forms, statements and other documents, via “Super 8-K” or otherwise, required to be filed by the Company under the Securities Act and the Exchange Act for the Company to be deemed fully “fully reporting” and “current” and in compliance with the periodic and current reporting requirements of Section 13 or 15(d) of the Exchange Act, and in compliance with the Rule 144(c)(1) under the Securities Act (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Documents”). The SEC Documents will comply in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and other federal laws, rules and regulations applicable to such SEC Documents, and none of the SEC Documents when filed will contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. |
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(ii) | Financial Statements. The financial statements of the Company included in its OTC Filings and Disclosures (the “Financial Statements”) comply as to form and substance in all material respects with applicable accounting requirements and the published rules and regulations of the OTC Pink Market as well as other applicable rules and regulations with respect thereto. Such Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except (a) as may be otherwise indicated in such Financial Statements or the notes thereto or (b) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments). The Company maintains a system of internal accounting controls appropriate for its size. There is no transaction, arrangement, or other relationship between the Company and an unconsolidated or other off balance sheet entity that is not disclosed by the Company in its Financial Statements or otherwise that would be reasonably likely to have a Material Adverse Effect. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf has provided the Buyer or its agents or counsel with any information that it believes constitutes or might constitute material, non-public information. The Company understands and confirms that the Buyer will rely on the foregoing representation in effecting transactions in securities of the Company. |
(iii) | Acknowledgment Regarding Buyer’s Purchase of Securities. The Company acknowledges and agrees that the Buyer is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby and that the Buyer is neither (i) an officer or director of the Company or any of its Subsidiaries, nor (ii) an “affiliate” (as defined in Rule 144) of the Company or any of its Subsidiaries. The Company further acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company or any of its Subsidiaries (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated hereby and thereby, and any advice given by a Buyer or any of its representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to the Buyer’s purchase of the Securities. The Company further represents to the Buyer that the Company’s decision to enter into the Transaction Documents has been based solely on the independent evaluation by the Company and its representatives. |
(iv) | No Integrated Offering. Neither the Company, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the Securities Act of the issuance of the Securities to the Buyer. The issuance of the Securities to the Buyer will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any stockholder approval provisions applicable to the Company or its securities. |
(v) | No Brokers. Except as set forth on Schedule 3(b)(v), no broker is entitled to a commission payable by the Company in connection with the transactions contemplated by this transaction and the Company has taken no action which would give rise to any claim by any person for brokerage commissions, transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby. Any all fees due to any brokers shall be paid and satisfied by the Company at the Closing except as otherwise provided in Section 1(c) of this Agreement. |
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(vi) | Disclosure. All information relating to or concerning the Company or any of its Subsidiaries set forth in this Agreement and provided to the Buyer pursuant in connection with the transactions contemplated hereby is true and correct in all material respects and the Company has not omitted to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they were made, not misleading. No event or circumstance has occurred or exists with respect to the Company or any of its Subsidiaries or its or their business, properties, prospects, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed (assuming for this purpose that the Company’s reports filed under the Exchange Act are being incorporated into an effective registration statement filed by the Company under the Securities Act). |
(vii) | Shell Company Status. The Company is not currently an issuer identified in Rule 144(i)(1)(i) under the Securities Act, and, if it was at any time previously been such an issuer, then the Company is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, has filed all reports and other materials required to be filed by Section 13 or 15(d) of the Exchange Act, as applicable during the preceding 12 months, and, as of a date at least one year prior to the Execution Date, has filed current “Form 10 information” with the SEC (as defined in Rule 144(i)(3) of the Securities Act) reflecting its status as an entity that is no longer an issuer described in Rule 144(i)(1)(i) of the Securities Act. |
(viii) | No Disqualification Events. With respect to Securities to be offered and sold hereunder in reliance on Rule 506 under the Securities Act (“Regulation D Securities”), none of the Company, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the Company participating in the offering hereunder, any beneficial owner of 20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the Securities Act) connected with the Company in any capacity at the time of sale (each, an “Issuer Covered Person” and, together, “Issuer Covered Persons”) is subject to any of the “bad actor” disqualifying events described in Rule 506(d)(1)(i)(viii) under the Securities Act (each, a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event. The Company has complied, to the extent applicable, with its disclosure obligations under Rule 506(e), and has furnished to the Buyers a copy of any disclosures provided thereunder. |
(ix) | Other Covered Persons. The Company is not aware of any Person (other than any Issuer Covered Person) that has been or will be paid (directly or indirectly) remuneration for solicitation of buyers or potential purchasers in connection with the sale of any Regulation D Securities. |
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(x) | No General Solicitation; Placement Agent. Neither the Company, nor any of its Subsidiaries or Affiliates, nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Securities. Neither the Company nor any of its Subsidiaries has engaged any placement agent in connection with the sale of the Securities. In the event that a broker-dealer or other agent or advisory is engaged by the Company subsequent to the initial Closing, the Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, or brokers’ commissions (other than for persons engaged by any Buyer or its investment advisor) relating to or arising out of the transactions contemplated hereby in connection with the sale of the Securities. The Company shall pay, and hold the Buyer harmless against, any liability, loss or expense (including, without limitation, attorney’s fees and out-of-pocket expenses) arising in connection with any such claim. |
(xi) | Investment Company Status. The Company is not, and upon consummation of the sale of the Securities will not be, an “investment company,” a company controlled by an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended. |
(xii) | Transfer Taxes. On the Closing Date, all stock transfer or other taxes (other than income or similar taxes) which are required to be paid in connection with the sale and transfer of the Securities to be sold to the Buyer hereunder will be, or will have been, fully paid or provided for by the Company, and all laws imposing such taxes will be or will have been complied with. |
(xiii) | Compliance with Rule 15c2-11. On the Closing Date, and at all times that any of the Securities remain outstanding, the Company shall maintain as publicly available all information required by paragraph (b) of Rule 15c2-11 of the Exchange Act (as effective on September 26, 2021), as amended, such that brokers or dealers attempting to publish any quotation for the Common Stock or, directly or indirectly, to submit any such quotation for publication, shall be able to comply with Rule 15c2-11(a). |
(c) | Operations Related: |
(i) | Absence of Certain Changes. No event has occurred that would have a Material Adverse Effect on the Company or any Subsidiary that has not been disclosed in the SEC Documents, OTC Filings and Disclosures. Without limiting the generality of the foregoing, except as disclosed in the SEC Documents, OTC Filings and Disclosures, neither the Company nor any of its Subsidiaries has taken any of the actions set forth on Schedule 3(c)(i). |
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(ii) | Absence of Litigation. Except as disclosed in the SEC Documents, there are no actions, suits, investigations, inquiries or proceedings pending or, to the Knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties, nor has the Company received any written or oral notice of any such action, suit, proceeding, inquiry or investigation, which would have a Material Adverse Effect or would require disclosure under the Securities Act or the Exchange Act. No judgment, order, writ, injunction or decree or award has been issued by or, to the Knowledge of the Company, requested of any court, arbitrator or governmental agency which would have a Material Adverse Effect. Except as disclosed in the SEC Documents, OTC Filings and Disclosures or as set forth on Schedule 3(c)(ii) there has not been, and to the Knowledge of the Company, there is not pending or contemplated, any investigation by the SEC involving the Company, any Subsidiary or any current or former director or officer of the Company or any Subsidiary. |
(iii) | Patents, Copyrights, etc. The Company and the Subsidiaries own or possess adequate rights or licenses to use all material trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted (“Intellectual Property”). None of the Company’s nor any Subsidiary’s Intellectual Property rights have expired or terminated, or, by the terms and conditions thereof, could expire or terminate within two years from the Execution Date. The Company does not have any Knowledge of any infringement by the Company and/or any Subsidiary of any material trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other similar rights of others, or of any such development of similar or identical trade secrets or technical information by others, and there is no claim, action or proceeding being made or brought against, or to the Company’s Knowledge, being threatened against, the Company and/or any Subsidiary regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other infringement, which could reasonably be expected to have a Material Adverse Effect. |
(iv) | Tax Status. The Company and each of its Subsidiaries has made or filed all federal and material state and foreign income and all other material tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. The Company has not executed a waiver with respect to the statute of limitations relating to the assessment or collection of any foreign, federal, state or local tax. None of the Company’s tax returns is presently being audited by any taxing authority. |
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(v) | Certain Transactions. Except as set forth in the SEC Documents, OTC Filings and Disclosures, none of the officers or directors of the Company or any Subsidiary, and to the Knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the Knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, in each case in excess of the lesser of (i) $120,000 or (ii) one percent of the average of the Company’s total assets at year end for the last two completed fiscal years, other than for (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company or any Subsidiary and (iii) other employee benefits, including stock option agreements under any stock option plan of the Company. |
(vi) | Permits; Compliance. The Company and each of its Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and operate its properties and to carry on its business as it is now being conducted (collectively, the “Company Permits”), and there is no action pending or, to the Knowledge of the Company, threatened regarding suspension or cancellation of any of the Company Permits. Neither the Company nor any of its Subsidiaries is in conflict with, or in default or violation of, any of the Company Permits, except for any such conflicts, defaults or violations which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries has received any notification with respect to possible conflicts, defaults or violations of applicable laws, except for notices relating to possible conflicts, defaults or violations, which conflicts, defaults or violations would not have a Material Adverse Effect. |
(vii) | Environmental Matters. The Company is in compliance with all applicable Environmental Laws in all respects except where the failure to comply does not have and could not reasonably be expected to have a Material Adverse Effect. For purposes of the foregoing: “Environmental Laws” means, collectively, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Superfund Amendments and Reauthorization Act of 1986, the Resource Conservation and Recovery Act, the Toxic Substances Control Act, as amended, the Clean Air Act, as amended, the Clean Water Act, as amended, any other “Superfund” or “Superlien” law or any other applicable federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning, the environment or any Hazardous Material. |
(viii) | Title to Property. Except as disclosed in the SEC Documents, OTC Filings and Disclosures, the Company and each Subsidiary has good and marketable title in fee simple to all real property owned by it and good and marketable title in all personal property owned by it that is material to the business of the Company and each Subsidiary, in each case free and clear of all Liens and, except for Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company or any Subsidiary and Liens for the payment of federal, state or other taxes, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company or any Subsidiary is held under valid, subsisting and enforceable leases with which the Company is in compliance with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company or any Subsidiary. |
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(ix) | Internal Accounting Controls. Except as disclosed in the SEC Documents the Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient, in the judgment of the Company’s board of directors, to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company is in compliance with all provisions of the Sarbanes-Oxley Act of 2002, as amended, which are applicable to it. |
(x) | Foreign Corrupt Practices. Neither the Company, nor any of its Subsidiaries, nor any director, officer, agent, employee or other person acting on behalf of the Company or any Subsidiary has, in the course of his actions for, or on behalf of, the Company, used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee. |
(xi) | Solvency. The Company (after giving effect to the transactions contemplated by this Agreement) is solvent (i.e., its assets have a fair market value in excess of the amount required to pay its probable liabilities on its existing debts as they become absolute and matured) and currently the Company has no information that would lead it to reasonably conclude that the Company would not, after giving effect to the transaction contemplated by this Agreement, have the ability to, nor does it intend to take any action that would impair its ability to, pay its debts from time to time incurred in connection therewith as such debts mature. Except as disclosed in the SEC Documents, OTC Filings and Disclosures or on Schedule 3(c)(xi), the Company did not receive a qualified opinion from its auditors with respect to its most recent fiscal year end and, after giving effect to the transactions contemplated by this Agreement, does not anticipate or know of any basis upon which its auditors might issue a qualified opinion in respect of its current fiscal year. For the avoidance of doubt any qualification of the auditors’ opinion relating to the Company’s ability to continue as a “going concern” shall not, by itself, be a violation of this Section 3(c)(xi). |
(xii) | Insurance. The Company and each Subsidiary is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and each Subsidiary is engaged. Neither the Company, nor any Subsidiary has been refused any insurance coverage sought or applied for, and the Company has no reason to believe that it or any Subsidiary will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not materially and adversely affect the condition, financial or otherwise, or the earnings, business or operations of the Company, taken as a whole. |
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(xiii) | No Undisclosed Events, Liabilities, Developments or Circumstances. Except as set forth in the SEC Documents, OTC Filings and Disclosures, the Company and its Subsidiaries have no liabilities or obligations of any nature (whether accrued, absolute, contingent, unasserted or otherwise and whether due or to become due) other than those liabilities or obligations that are disclosed in the Financial Statements or which do not exceed, individually in excess of $50,000 and in the aggregate in excess of $200,000. The reserves, if any, established by the Company or the lack of reserves, if applicable, are reasonable based upon facts and circumstances known by the Company on the Execution Date and there are no loss contingencies that are required to be accrued by the Statement of Financial Accounting Standard No. 5 of the Financial Accounting Standards Board which are not provided for in the Financial Statements. |
(xiv) | Management. During the past five year period, no current or former officer or director or, to the Knowledge of the Company, stockholder of the Company or any of its Subsidiaries has been the subject of any matter that would require disclosure under Paragraph (f) of Rule 401 of Regulation S-K that has not been publicly disclosed. |
(xv) | Assets; Title. Except as disclosed on Schedule 3(c)(xv), each of the Company and its Subsidiaries has good and valid title to, or a valid leasehold interest in, as applicable, all of its properties and assets, free and clear of all Liens except (i) any Lien for taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent, (iii) any Lien created by operation of law, such as materialmen’s liens, mechanics’ liens and other similar liens, arising in the ordinary course of business with respect to a liability that is not yet due or delinquent or that are being contested in good faith by appropriate proceedings, and (iv) such as have been disposed of in the ordinary course of business. To the Company’s Knowledge, all tangible personal property owned by the Company and its Subsidiaries has been maintained in good operating condition and repair, except (x) for ordinary wear and tear, and (y) where such failure would not have a Material Adverse Effect. To the Company’s Knowledge, all assets leased by the Company or any of its Subsidiaries are in the condition required by the terms of the lease applicable thereto during the term of such lease and upon the expiration thereof. To the Company’s Knowledge, the Company and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects. Any real property and facilities held under lease by the Company or any of its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries. |
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(xvi) | Subsidiary Rights. The Company or one of its Subsidiaries has the unrestricted right to vote, and to receive dividends and distributions on, all equity securities of its Subsidiaries as owned by the Company or such Subsidiary. |
(xvii) | Books and Records. To the Company’s Knowledge, the books of account, ledgers, order books, records and documents of the Company and its Subsidiaries accurately and completely reflect all information relating to the respective businesses of the Company and its Subsidiaries, the nature, acquisition, maintenance, location and collection of each of their respective assets, and the nature of all transactions giving rise to material obligations or accounts receivable of the Company or its Subsidiaries, as the case may be, except where the failure to so reflect such information would not have a Material Adverse Effect. To the Company’s Knowledge, the minute books of the Company and its Subsidiaries contain accurate records in all material respects of all meetings and accurately reflect all other actions taken by the stockholders, boards of directors and all committees of the boards of directors, and other governing Persons of the Company and its Subsidiaries, respectively. |
(xviii) | Money Laundering. The Company and its Subsidiaries are in compliance with, and have not previously violated, the USA PATRIOT ACT of 2001 and all other applicable U.S. and non-U.S. anti-money laundering laws and regulations, including, but not limited to, the laws, regulations and Executive Orders and sanctions programs administered by the U.S. Office of Foreign Assets Control, including, but not limited, to (i) Executive Order 13224 of September 23, 2001 entitled, “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism” (66 Fed. Reg. 49079 (2001)); and (ii) any regulations contained in 31 CFR, Subtitle B, Chapter V. |
(d) | General |
(i) | Acknowledgment of Dilution. The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance of the Conversion Shares upon conversion of the Note. The Company further acknowledges that its obligation to issue Conversion Shares upon conversion of the Note is absolute and unconditional regardless of the dilutive effect that such issuances may have on the ownership interests of other stockholders of the Company. The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance of the Warrant Shares upon exercise of the Warrant. The Company further acknowledges that its obligation to issue Warrant Shares upon exercise of the Warrant is absolute and unconditional regardless of the dilutive effect that such issuances may have on the ownership interests of other stockholders of the Company. The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance of the Commitment Shares upon execution of this Agreement. The Company further acknowledges that its obligation to issue Commitment Shares upon execution of this Agreement is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other stockholders of the Company. |
(ii) | Breach of Representations and Warranties by the Company. If the Company breaches any of the representations or warranties set forth in this Section 3, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an Event of Default under the Note. |
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(iii) | Absence of Schedules. In the event that at the Closing Date, the Company does not deliver and attach hereto any disclosure schedule contemplated by this Agreement, the Company hereby acknowledges and agrees that (i) each such undelivered disclosure schedule shall be deemed to read as follows: “Nothing to Disclose”, and (ii) the Buyer has not otherwise waived delivery of such disclosure schedule. |
4. | GENERAL COVENANTS. |
(a) | Best Efforts. The parties shall use their commercially reasonable best efforts to satisfy timely each of the conditions described in Section 7 and 8 of this Agreement. |
(b) | Use of Proceeds. The Company shall use the proceeds from the sale of the Notes first as set forth on Schedule 4(b), and thereafter for other general corporate purposes and shall not, directly or indirectly, use such proceeds for any loan to or investment in any other corporation, partnership, enterprise or other person. |
(c) | Financial Information. The Company agrees to send or make available the following reports to the Buyer until the Buyer transfers, assigns, or sells all of the Securities: (i) within ten (10) days after the filing with the SEC, a copy of its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K; (ii) within five (5) days after upload or filing, any filings made in the SEC Documents, OTC Filings and Disclosures; (iii) within one (1) day after release, copies of all press releases issued by the Company or any of its Subsidiaries relating to the transactions contemplated hereby; and (iv) contemporaneously with the making available or giving to the stockholders of the Company, copies of any notices or other information the Company makes available or gives to such stockholders. For the avoidance of doubt, filing the documents required in (i) above via EDGAR or releasing any documents set forth in (ii) above via a recognized wire service shall satisfy the delivery requirements of this Section 4(c). |
(d) | Listing. The Company shall work in good faith to secure the listing of the Conversion Shares, the Commitment Shares, and the Warrant Shares upon each national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and, so long as the Buyer owns any of the Securities, shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all Conversion Shares, Commitment Shares, and all Warrant Shares from time to time issuable upon exercise of the Note and the Warrant, respectively. The Company will obtain and, so long as the Buyer owns any of the Securities, maintain the listing and trading of its Common Stock on the Trading Market and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Financial Industry Regulatory Authority (“FINRA”) and such exchanges, as applicable. |
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(e) | Corporate Existence. So long as the Buyer beneficially owns any of the Securities, the Company shall maintain its corporate existence and shall not sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or sale of all or substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s obligations hereunder and under the agreements and instruments entered into in connection herewith and (ii) is a publicly traded corporation whose Common Stock is listed or quoted for trading on the Trading Market. |
(f) | No Integration. The Company shall not make any offers or sales of any security (other than the Securities) under circumstances that would require registration of the Securities being offered or sold hereunder under the Securities Act or cause the offering of the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision applicable to the Company or its securities. |
(g) | Failure to Comply with the Exchange Act. So long as the Buyer beneficially owns any of the Securities, the Company shall comply with the reporting requirements of the Exchange Act; and the Company be subject to the periodic reporting and other reporting requirements of the Exchange Act. |
(h) | Breach of Covenants. If the Company breaches any of the covenants set forth in this Section 4, then in addition to any other remedies available to the Buyer pursuant to this Agreement, each such breach will be considered an “Event of Default” under the Note. |
(i) | Reservation of Shares. The Company covenants that while the Note and/or Warrant remain outstanding, the Company will reserve from its authorized and unissued Common Stock, five times (500%) of the number of shares of Common Stock, free from pre-emptive rights, that would be issuable upon full, unconditioned conversion of the Note and exercise of the Warrant calculated on the basis of the conversion price and exercise price, respectively, in effect as the Closing Date, which such reserved amounts shall be increased by the Company from time to time in accordance with its obligations under such Securities. In addition to all other rights in this Agreement and the Note, in the event that on any date (the “Reserve Depletion Date”) the Company does not have available enough authorized shares of Common Stock to satisfy any conversion request regarding the Note, or exercise of the Warrant, the Company shall repay all outstanding amounts owed under the Note in full within sixty (60) days of the Reserve Depletion Date. |
(j) | Indemnification. Each party hereto (an “Indemnifying Party”) agrees to indemnify and hold harmless the other party along with its officers, directors, employees, and authorized agents, and each Person or entity, if any, who controls such party within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act or the rules and regulations thereunder (an “Indemnified Party”) from and against any Damages, joint or several, and any action in respect thereof to which the Indemnified Party becomes subject to, resulting from, arising out of or relating to any misrepresentation, breach of warranty or nonfulfillment of or failure to perform any covenant or agreement on the part of the Indemnifying Party contained in this Agreement. |
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(k) | Certain Expenses and Fees. The Company shall pay all stamp taxes and other taxes and duties levied in connection with the delivery of the Note to the Buyer. In addition, the Buyer shall be entitled to withhold $3,500 for the Buyer’s transaction expenses from the amounts delivered at Closing. |
5. | SPECIAL COVENANTS |
(a) | Piggyback Registration Rights. The Company shall include on any registration and/or offering statement filed with the SEC, including without limitation on any offering statement on Form 1-A, all Conversion Shares, all Warrant Shares, and all Commitment Shares for resale by the Buyer. In addition to all other remedies at law or in equity or otherwise under this Agreement or other Transaction Documents, failure to do so will result in liquidated damages of $20,000.00 pursuant to this Section 5(a), being immediately due and payable to the Buyer at its election in the form of cash payment. |
(b) | Variable Rate Transactions. The Company covenants and agrees that it will not, without the prior written consent of the Buyer, enter into any equity line of credit agreement with any other party or enter into any transaction resulting in, or with, any Variable Security Holders, excluding the Buyer, without the Buyer’s prior written consent, which consent may be granted or withheld in the Buyer’s sole and absolute discretion unless the proceeds of such transaction are used first and primarily to repay the Note in full; provided that such arrangements evidenced by written agreements that exist as of the Execution Date shall not be subject to the provisions of this Section 5(b). “Variable Security Holder” means any holder of any securities of the Company that (A) have or may have conversion rights of any kind, contingent, conditional or otherwise, in which the number of shares that may be issued pursuant to such conversion right varies with the market price of the Common Stock, and/or (B) are or may become convertible into Common Stock (including without limitation convertible debt, warrants or convertible preferred stock), with a conversion price that varies with the market price of the Common Stock, even if such security only becomes convertible following an event of default, the passage of time, or another trigger event or condition. |
(c) | Regulation A Offering Participation. |
(i) | During the twelve (12) months immediately following the Closing, with respect to any Regulation A offering conducted by the Company on Form 1-A, or successor/similar form, filed by the Company with the SEC (a “Reg A+ Offering”), the Company agrees to, and hereby does, irrevocably grant to the Buyer the option to purchase up to $1,000,000.00 worth of the securities offered by the Company in the Reg A+ Offering at the applicable prices thereunder (such grant, the “Participation Right”). The Buyer shall hold the Participation Right from the date that the SEC declares the subject Reg A+ Offering statement “qualified” (the “Qualification Date”) until the date that is the earlier of (i) 180 days after the Qualification Date or (ii) the date that the Buyer has purchased aggregate of $1,000,000 of securities from such offering statement. |
(ii) | Within 30 days after the Closing, the Company shall successfully file an offering statement to conduct a Reg A+ Offering with the SEC. |
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(iii) | The Company shall use its best efforts take all necessary action to cause the offering statement referenced in Section 5(c)(ii) above to be declared “qualified” by the SEC within 30 days after the Closing. |
(d) | Participation Rights. During the twelve (12) months immediately following the Closing, with respect to each and any securities offering conducted by the Company, the Company agrees to, and hereby does, irrevocably grant to the Buyer the option to purchase up to $1,000,000 worth of the securities offered in such offering at the applicable offering prices thereunder. |
(e) | Repayment from Proceeds. While any portion of the Note is outstanding, if the Company receives cash proceeds from any source or series of related or unrelated sources, including but not limited to, from payments from customers, the issuance of equity or debt, the conversion of outstanding warrants of the Company, the issuance of securities pursuant to an equity line of credit of the Company or the sale of assets, the Company shall, within one (1) business day of the Company’s receipt of such proceeds, inform the Buyer of such receipt, following which the Buyer shall have the right in its sole discretion to require the Company to immediately apply all or any portion of such proceeds to repay all or any portion of the outstanding amounts owed under the Note. In the event that such proceeds are received by the Holder (as defined in the Note) prior to the Maturity Date (as defined in the Note), the required prepayment shall be subject to all prepayment terms in the Note. |
(f) | Right of First Refusal. During the twelve (12) months immediately following the Closing, in the event that the Company receives a Bona Fide Offer (defined below) of capital or financing from any third party consisting of any securities offering, including but not limited to any debt or equity securities, then the Company must, and irrevocably agrees to, first offer such opportunity to the Buyer to provide such capital or financing to the Company on the same or similar terms as each respective third party’s terms, and the Buyer may in its sole discretion determine whether the Buyer will provide such capital or financing. Upon receipt of the third party offer, the Company shall promptly provide notice thereof to the Buyer (the “Offer Notice”) and provide copies of the pending transaction documents. Should the Buyer be unwilling or unable to provide such capital or financing to the Company within two (2) Trading Days from the Buyer’s receipt of the Offer Notice from the Company, then the Company may obtain such capital or financing from the respective third party upon the exact same terms and conditions offered by the Company to the Buyer, which transaction must be completed within seven (7) Trading Days after the date of the Offer Notice. If the Company does not receive the capital or financing from the respective third party within seven (7) Trading Days after the date of the respective Offer Notice, then the Company must again offer the capital or financing opportunity to the Buyer as described above, and the process detailed above shall be repeated. A “Bona Fide Offer” is one in which the purchaser is irrevocably and contractually bound to purchase the subject securities from the Company, subject to the Buyer’s right of first refusal. |
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(g) | Compliance with Rule 15c2-11. The Company take all actions to maintain as publicly available all information required by paragraph (b) of Rule 15c2-11 of the Exchange Act (as effective on September 26, 2021), as amended, such that brokers or dealers attempting to publish any quotation for the Common Stock or, directly or indirectly, to submit any such quotation for publication, shall be able to comply with Rule 15c2-11(a). |
(h) | Prohibition on Certain Transactions. The Buyer covenants and agrees that neither it, nor any affiliate acting on its behalf or pursuant to any understanding with it will execute any “short sales” of the Common Stock as defined in Rule 200 of Regulation SHO under the Exchange Act. |
(i) | Security Agreement. On the Execution Date, the Company shall execute and deliver the Security Agreement to the Buyer. |
(j) | Registration Rights. |
(i) | Mandatory Registration. The Company shall, by the first anniversary of the Execution Date, file with the SEC an initial registration statement on Form S-1 covering the resale of the maximum number of Registrable Securities as shall be permitted to be included thereon (in such amounts as to the specific Registrable Securities included therein as mutually identified by the Buyer, the Company and their respective legal counsel) in accordance with applicable SEC rules, regulations and interpretations so as to permit the resale of such Registrable Securities by the Buyer, including but not limited to under Rule 415 under the Securities Act at then prevailing market prices (and not fixed prices), as mutually determined by both the Company and the Buyer in consultation with their respective legal counsel (the “Initial Registration Statement”). The Initial Registration Statement shall register only the Registrable Securities. The Company shall use its best efforts to have the Initial Registration Statement and any amendment thereto declared effective by the SEC at the earliest possible date. The Initial Registration Statement shall, in any event, be declared effective within four hundred (400) calendar days after the Execution Date. Rule 424 Prospectus. In addition to the Initial Registration Statement, the Company shall, as required by applicable securities regulations, from time to time file with the SEC, pursuant to Rule 424 promulgated under the Securities Act, such prospectuses and prospectus supplements to be used in connection with sales of the Registrable Securities under each Registration Statement. The Buyer and its counsel shall have a reasonable opportunity to review and comment upon such prospectuses prior to its filing with the SEC, and the Company shall give due consideration to all such comments. The Buyer and its counsel shall use their reasonable best efforts to comment upon any prospectus within three (3) business days from the date the Buyer receives the final pre-filing version of such prospectus. |
(ii) | Sufficient Number of Shares Registered. In the event the number of shares available under the Initial Registration Statement is insufficient to cover all of the Registrable Securities, the Company shall amend the Initial Registration Statement or file a new registration statement (a “New Registration Statement”), so as to cover the resale of all of such Registrable Securities as soon as practicable, but in any event not later than ten (10) business days after the necessity therefor arises and the Company’s financial statements as filed with the SEC are current as would be required by such New Registration Statement, subject to any limits that may be imposed by the SEC pursuant to Rule 415 under the Securities Act. The Company shall use its reasonable best efforts to cause such amendment and/or New Registration Statement to become effective as soon as practicable following the filing thereof. |
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(iii) | Effectiveness. The Buyer and its counsel shall have a reasonable opportunity to review and comment upon any registration statement and any amendment or supplement to such registration statement and any related prospectus regarding the Registrable Securities prior to its filing with the SEC, and the Company shall give due consideration to all reasonable comments. The Company shall use best efforts to keep all registration statements covering Registrable Securities effective, including but not limited to pursuant to Rule 415 promulgated under the Securities Act and available for use by the Buyer for the resale of all of the Registrable Securities covered thereby at all times until the earlier of (i) the date as of which the Buyer may sell all of the Registrable Securities without restriction pursuant to Rule 144 promulgated under the Securities Act without any restrictions (including any restrictions under Rule 144(c) or Rule 144(i)) and (ii) the date on which the Buyer shall have sold all the Registrable Securities. Each registration statement (including any amendments or supplements thereto and prospectuses contained therein) filed by the Company shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading. The Company shall take all actions necessary prior to the filing of the Initial Registration Statement to cause itself to be fully reporting and “current” for purposes of being a public company subject to Section 13 or 15(d) of the Exchange Act of 1934, which requires the company to file periodic reports with the SEC. |
(iv) | Offering. If the staff of the SEC (the “Staff”) or the SEC seeks to characterize any offering pursuant to a registration statement filed pursuant to this Agreement as constituting an offering of securities that does not permit such registration statement to become or remain effective and be used for resales by the Buyer under Rule 415 at then-prevailing market prices (and not fixed prices) by comment letter or otherwise, or if after the filing of the Initial Registration Statement with the SEC, the Company is otherwise required by the Staff or the SEC to reduce the number of Registrable Securities included in such Initial Registration Statement, then the Company shall reduce the number of Registrable Securities to be included in such Initial Registration Statement (in such amounts of specific Registrable Securities as the Buyer, the Company and their respective legal counsel shall mutually agree to be removed therefrom) until such time as the Staff and the SEC shall so permit such registration statement to become effective and be used as aforesaid. In the event of any reduction in Registrable Securities pursuant to this paragraph, the Company shall file one or more New Registration Statements in accordance with subsection 5(k)(iii) above until such time as all Registrable Securities have been included in Registration Statements that have been declared effective and the prospectus contained therein is available for use by the Buyer. Notwithstanding any provision herein to the contrary, the Company’s obligations to register Registrable Securities shall be qualified as necessary to comport with any requirement of the SEC or the Staff as addressed in this Section 5(k)(v). |
(k) | Breach of Covenants. If the Company breaches any of the covenants set forth in this Section 5, then in addition to any other remedies available to the Buyer pursuant to this Agreement, each such breach will be considered an “Event of Default” under the Note. |
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6. | TRANSFER AGENT INSTRUCTIONS. Prior to registration of the Conversion Shares and the Warrant Shares under the Securities Act or the date on which the Conversion Shares or the Warrant Shares may be sold pursuant to Rule 144 without any restriction as to the number of Securities as of a particular date that can then be immediately sold, all such certificates shall bear the restrictive legend specified in the Note or Warrants as applicable. The Company warrants that: (i) no stop transfer instructions will be given by the Company to its Transfer Agent and that the Securities shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Note; (ii) it will not direct its Transfer Agent not to transfer or delay, impair, and/or hinder its Transfer Agent in transferring (or issuing) (electronically or in certificated form) any certificate for Conversion Shares or Warrant Shares to be issued to the Buyer upon conversion/exercise of or otherwise pursuant to the Note or the Warrant, respectively, as and when required by the Note, the Warrant or this Agreement; and (iii) it will not fail to remove (or direct its Transfer Agent not to remove or impairs, delays, and/or hinders its Transfer Agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Conversion Shares or any Warrant Shares as contemplated by the terms of this Agreement, the Note and the Warrant, as applicable. Nothing in this Section shall affect in any way the Buyer’s obligations and agreement to comply with all applicable prospectus delivery requirements, if any, upon re-sale of the Securities. If the Buyer provides the Company (which shall be at the cost of the Company), with (i) an opinion of counsel in form, substance and scope customary for opinions in comparable transactions, to the effect that a public sale or transfer of any Securities may be made without registration under the Securities Act and such sale or transfer is effected or (ii) the Buyer provides reasonable assurances that the Securities can be sold pursuant to Rule 144, the Company shall permit the transfer, and, in the case of the Conversion Shares, the Commitment Shares, and the Warrant Shares, promptly instruct its Transfer Agent to issue one or more certificates, free from restrictive legend, in such name and in such denominations as specified by the Buyer or, in the sole discretion of the Buyer, the Company shall take all action necessary to ensure that such Common Stock is transferred electronically as DWAC (as defined in the Note) shares. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer, by vitiating the intent and purpose of the transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section may be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section, that the Buyer shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate transfer, without the necessity of showing economic loss and without any bond or other security being required. |
7. | CONDITIONS PRECEDENT TO THE COMPANY’S OBLIGATIONS TO SELL. The obligation of the Company hereunder to issue and sell any Note, Warrant, and Commitment Shares to the Buyer at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions thereto, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion: |
(a) | The Buyer shall have executed this Agreement and delivered the same to the Company. |
(b) | The Buyer shall have delivered the Company Funding Amount in accordance with Section 1 above. |
(c) | The representations and warranties of the Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), and the Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to the Closing Date. |
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(d) | No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self- regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement. |
8. | CONDITIONS PRECEDENT TO THE BUYER’S OBLIGATION TO PURCHASE. The obligation of the Buyer hereunder to purchase any Note and fund such Note at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions, provided that these conditions are for the Buyer’s sole benefit and may be waived by the Buyer at any time in its sole discretion: |
(a) | The Company shall have executed this Agreement and delivered the same to the Buyer on the Closing Date. |
(b) | The Company shall have delivered to the Buyer the duly executed Note and the Commitment Shares in accordance with Section 1 above on the Closing Date. |
(c) | The Company shall have delivered to the Buyer the duly executed Warrant on the Closing Date. |
(d) | The Company shall have delivered to the Buyer the duly executed Transfer Agent Instruction Letter on the Closing Date. |
(e) | The Company shall have delivered a copy of its Directors’ resolutions relating to the transactions contemplated hereby, the form of which is attached hereto as Exhibit D, on the Closing Date. |
(f) | The Company shall have delivered to the Buyer the duly executed Security Agreement in the form attached hereto as Exhibit E. |
(g) | No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self- regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement, as of the Closing Date. |
(h) | No event shall have occurred which could reasonably be expected to have a Material Adverse Effect on the Company including but not limited to a change in the Exchange Act reporting status of the Company or the failure of the Company to be timely in its Exchange Act reporting obligations, as of the Closing Date. |
(i) | The Company shall have delivered to the Buyer a copy of its certificate of good standing with the State of Nevada dated within five (5) days of the Closing. |
(j) | The Company shall have delivered a legal opinion to the Buyer regarding the enforceability of the Transaction Documents in form and substance acceptable to the Buyer. |
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(k) | The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Execution Date and the Closing Date as though made at such time (except for representations and warranties that speak as of a specific date, which shall be true and correct in all material respects as of such specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date. The Buyer shall have received a certificate or certificates, executed by the chief executive officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Buyer, in the form prescribed by the Buyer. |
9. | GOVERNING LAW; MISCELLANEOUS. |
(a) | Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Wyoming without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of Miami, Florida, or in the federal courts located in the Southern District of Florida. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. |
(b) | JURY TRIAL WAIVER. THE COMPANY AND THE BUYER HEREBY WAIVE A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER IN RESPECT OF ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THE TRANSACTION DOCUMENTS. |
(c) | Counterparts; Signatures by Electronic Mail. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. This Agreement, once executed by a party, may be delivered to the other party hereto by electronic mail transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement. |
(d) | Headings. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement. |
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(e) | Severability. In the event that any provision of this Agreement or of any of the Transaction Documents is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof. |
(f) | Entire Agreement; Amendments. This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the Buyer. |
(g) | Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (a) personally served, (b) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (c) delivered by reputable air courier service with charges prepaid, or (d) transmitted by hand delivery, or e-mail as a PDF (with read receipt), addressed as set forth below or to such other address as such party shall have specified most recently by written notice given in accordance herewith. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (i) upon hand delivery or delivery by e-mail (with read receipt) at the address designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (ii) on the second business day following the date of mailing by express courier service or on the fifth business day after deposited in the mail, in each case, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. |
If to the Company, to:
BOATIM, INC.
7950 NW 53rd Street Suite 337
Miami, FL 33166
Attn: Joseph Johnson, CEO
E-mail: JOSEPH@BOATIM.COM
If to the Buyer, to:
QUICK CAPITAL, LLC
66 West Flagler Street, 900-#2292
Miami, FL 33130
Attn: Eilon D. Natan, Manager
E-mail: eilon@quick-cap.com
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Either party hereto may from time to time change its address or e-mail for notices under this Section 9(g) by giving at least ten (10) days’ prior written notice of such changed address to the other party hereto.
(h) | Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, subject to Section 2(e), the Buyer may assign its rights hereunder to any person that purchases Securities in a private transaction from the Buyer or to any of its “affiliates,” as that term is defined under the Exchange Act, without the consent of the Company. |
(i) | Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person. |
(j) | Survival. The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the Closings hereunder as well as the termination/satisfaction of the Note for the longest period allowable under applicable law. The Company agrees to indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a result of or related to any breach by the Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred. |
(k) | Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. |
(l) | No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. |
(m) | Remedies. |
(i) | The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing economic loss and without any bond or other security being required. |
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(ii) | In addition to any other remedy provided herein or in any document executed in connection herewith, the Company shall pay the Buyer for all costs, fees and expenses in connection with any arbitration, litigation, contest, dispute, suit or any other action to enforce any rights of the Buyer against the Company in connection herewith, including, but not limited to, costs and expenses and attorneys’ fees, and costs and time charges of counsel to the Buyer. |
(n) | Publicity. The Company and the Buyer shall have the right to review a reasonable period of time before issuance of any press releases, SEC, Trading Market, or FINRA filings, or any other public statements with respect to the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior approval of the Buyer, to make any press release or SEC, Trading Market or FINRA filings with respect to such transactions as is required by applicable law and regulations (although the Buyer shall be consulted by the Company in connection with any such press release prior to its release and shall be provided with a copy thereof). |
10. | DEFINED TERMS. As used in this Agreement, the following terms shall have the following meanings specified or indicated (such meanings to be equally applicable to both the singular and plural forms of the terms defined): |
“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person, and the term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of such Person, whether through ownership of voting securities, by contract or otherwise.
“Common Stock Equivalents” means any securities of the Company or the Subsidiaries that would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
“Damages” shall mean any loss, claim, damage, liability, cost and expense (including, without limitation, reasonable attorneys’ fees and disbursements and costs and expenses of expert witnesses and investigation).
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Hazardous Material” means and includes any hazardous, toxic or dangerous waste, substance or material, the generation, handling, storage, disposal, treatment or emission of which is subject to any Environmental Law.
“Knowledge” including the phrase “to the Company’s Knowledge” shall mean the actual knowledge after reasonable investigation of the Company’s officers and directors.
“Lien” means a lien, charge, pledge, security interest, encumbrance, right of first refusal, pre- emptive right or any other restriction.
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“Material Adverse Effect” means any effect on the business, operations, properties, or financial condition of the Company and/or the Subsidiaries that is material and adverse to the Company and/or the Subsidiaries and/or any condition, circumstance, or situation that prohibits or otherwise materially interferes with the ability of the Company and/or the Subsidiaries to enter into and/or perform its obligations under any Transaction Document.
“OTC Filings and Disclosures” shall mean the Company’s documents uploaded as of the Execution Date onto the Company’s “Filings and Disclosures” page on the OTCMarkets.com website.
“Person” means an individual, a corporation, a partnership, an association, a trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.
“Registrable Securities” means all of the Commitment Shares, Conversion Shares and Warrant Shares, and any and all shares of capital stock issued or issuable as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise, without regard to any limitation on issuances under any of the Transaction Documents.
“Securities” means, collectively, the Note, the Conversion Shares, the Warrant, the Warrant Shares, the Commitment Shares, and any other securities of the Company issued in connection with or in exchange for any of the foregoing.
“Security Agreement” means that certain Security Agreement between the parties as attached hereto as Exhibit E.
“Subsidiary” or “Subsidiaries” means any Person the Company wholly-owns or controls, or in which the Company, directly or indirectly, owns a majority of the voting stock or similar voting interest, in each case that would be disclosable pursuant to Item 601(b)(21) of Regulation S-K promulgated under the Securities Act.
“Trading Day” shall mean a day on which the NASDAQ stock market shall be open for business.
“Trading Market” means the OTC-PINK market of the OTC-Markets.
“Transaction Documents” shall mean this Agreement, the Note, the Warrant, the Security Agreement, the Transfer Agent Instruction Letter and all schedules and exhibits hereto and thereto.
“Transfer Agent” shall mean the current transfer agent of the Company, and any successor transfer agent of the Company.
“Transfer Agent Instruction Letter” means the letter from the Company to the Transfer Agent in the form of Exhibit C attached hereto.
** signature page follows **
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IN WITNESS WHEREOF, the Buyer and the Company have caused their respective signature page to this Note Purchase Agreement to be duly executed as of the Execution Date.
COMPANY: | ||
BOATIM, INC. | ||
By: | ||
Name: | Joseph Johnson | |
Title: | CEO | |
BUYER: | ||
QUICK CAPITAL, LLC | ||
By: | ||
Name: | Eilon D. Natan | |
Title: | Manager |
** Signature Page to Note Purchase Agreement **
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ISSUANCE SCHEDULE
DECEMBER CLOSING
(1) | (2) | (3) | (4) | (5) |
Buyer | Face Value of Note | Warrant Shares | Number of Commitment Shares | Funding Amount |
Quick Capital,, LLC | $166,666* | 277,778 | 456,621** | $143,166*** |
* | The Face Value of the Note includes an original issuance discount of 10%. |
** | The value of Commitment Shares issued under this Agreement shall equal 50% of the original face value of the Note with 456,621 shares issued on the Closing Date, and the balance of shares issued on the True-up Date. |
*** | The Buyer has the right to withhold $3,500 from the funding amount for payment of its transaction costs, and a 2% commission shall be delivered to the Company’s broker at the closing on the Company’s behalf. |
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DISCLOSURE SCHEDULES
Schedule 3(b)(v)
The Company’s broker is entitled to a payment of $3,333 for its services in connection with the transaction contemplated by this Agreement.
Schedule 3(c)(i)
Except as disclosed in the SEC Documents, OTC Filings and Disclosures, neither the Company nor any of its Subsidiaries has:
(1) declared, set aside or paid any dividend or other distribution with respect to any shares of capital stock of the Company or any of its Subsidiaries or any direct or indirect redemption, purchase or other acquisition of any such shares;
(2) sold, assigned, pledged, encumbered, transferred or otherwise disposed of any tangible asset of the Company or any of its Subsidiaries (other than sales or the licensing of its products to customers in the ordinary course of business consistent with past practice), or sold, assigned, pledged, encumbered, transferred or otherwise disposed of any Intellectual Property (as defined below), other than licensing of products of the Company or its Subsidiaries in the ordinary course of business and on a non-exclusive basis;
(3) entered into any licensing or other agreement with regard to the acquisition or disposition of any Intellectual Property other than licenses in the ordinary course of business consistent with past practice or any amendment or consent with respect to any licensing agreement filed or required to be filed with respect to any governmental authority;
(4) made capital expenditures, individually or in the aggregate, in excess of $100,000;
(5) incurred any obligation or liability (whether absolute, accrued, contingent or otherwise, and whether due or to become due) on the Company’s behalf or any of its Subsidiaries, in excess of $100,000 individually, other than obligations under customer contracts, current obligations and liabilities, in each case incurred in the ordinary course of business and consistent with past practice;
(6) had any Lien on any property of the Company or any of its Subsidiaries except as disclosed in the SEC Documents, OTC Filings and Disclosures;
(7) made any payment, discharge, satisfaction or settlement of any suit, action, claim, arbitration, proceeding or obligation of the Company or any of its Subsidiaries, except in the ordinary course of business and consistent with past practice;
(8) effected any split, combination or reclassification of any equity securities;
(9) sustained any material loss, destruction or damage to any property of the Company or any Subsidiary, whether or not insured;
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(10) effected any acceleration or prepayment of any indebtedness for borrowed money or the refunding of any such indebtedness;
(11) experienced any labor trouble involving the Company or any Subsidiary or any material change in their personnel or the terms and conditions of employment;
(12) made any waiver of any valuable right, whether by contract or otherwise;
(13) made any loan or extension of credit to any officer or employee of the Company;
(14) made any change in the independent public accountants of the Company or its Subsidiaries or any material change in the accounting methods or accounting practices followed by the Company or its Subsidiaries, as applicable, or any material change in depreciation or amortization policies or rates;
(15) experienced any resignation or termination of any officer, key employee or group of employees of the Company or any of its Subsidiaries;
(16) effected any change in any compensation arrangement or agreement with any employee, officer, director or stockholder that would result in the aggregate compensation to such Person in such year to exceed $100,000;
(17) effected any material increase in the compensation of employees of the Company or its Subsidiaries (including any increase pursuant to any written bonus, pension, profit sharing or other benefit or compensation plan, policy or arrangement or commitment), or any increase in any such compensation or bonus payable to any officer, stockholder, director, consultant or agent of the Company or any of its Subsidiaries having an annual salary or remuneration in excess of $100,000;
(18) made any revaluation of any of their respective assets, including, without limitation, writing down the value of capitalized inventory or writing off notes or accounts receivable or any sale of assets other than in the ordinary course of business;
(19) made any acquisition or disposition of any material assets (or any contract or arrangement therefor), or any other material transaction by the Company or any Subsidiary otherwise than for fair value in the ordinary course of business;
(20) written-down the value of any asset of the Company or its Subsidiaries or written-off as uncollectible of any accounts or notes receivable or any portion thereof except in the ordinary course of business and in a magnitude consistent with historical practice;
(21) cancelled any debts or claims or any material amendment, termination or waiver of any rights of the Company or its Subsidiaries; or
(22) entered into any agreement, whether in writing or otherwise, to take any of the actions specified in the foregoing items (1) through (21).
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SCHEDULE 4(b)
Use of Proceeds
(1) | Expenses incurred in connection with completing initial Reg A+ Offering, and |
(2) | General working capital. |
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Exhibit 10.18
NEITHER THE ISSUANCE NOR SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES FILED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
Principal Amount: $166,666 | Issue Date: December 22, 2021 |
SECURED CONVERTIBLE PROMISSORY NOTE
FOR VALUE RECEIVED, as of December 22, 2021 (the “Issue Date”), BOATIM, INC., a Nevada corporation (hereinafter called the “Borrower” or “Company”), hereby promises to pay to the order of Quick Capital, LLC, a Wyoming limited liability company, or its registered assigns (the “Holder”), the principal sum of $166,666, payable upon the earlier of maturity or upon acceleration or upon prepayment of this Note as set forth herein. The term “Note” and all references thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented. This Note shall have a one-time interest charge at the rate of five percent (5%) on the principal amount of this Note. The maturity date of this Note shall be the date that is eight (8) months after the Issue Date (the “Maturity Date”), and is the date upon which the principal amount, as well as any accrued and unpaid interest and other fees, shall be due and payable. This Note may be prepaid in whole or in part as explicitly set forth herein. All payments due hereunder (to the extent not converted into common stock of the Company, $0.001 par value per share (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date. As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of Miami, Florida are authorized or required by law or executive order to remain closed. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Note Purchase Agreement dated December 22, 2021, pursuant to which this Note was originally issued (as amended and/or restated from time to time, the “Purchase Agreement”).
The cash consideration delivered to the Borrower at the closing of this Note is $143,166 as this Note is being issued with a ten percent (10%) original issuance discount, with a 2% commission being issued to the Company’s broker on the Company’s behalf at closing, and with $3,500.00 being withheld to offset transaction and legal costs of the Holder.
This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.
The Company hereby affirms all of its obligations to the Holder under all of the Transaction Documents and agrees and affirms as follows: (i) that as of the Issue Date, the Company has performed, satisfied and complied in all material respects with all the covenants, agreements and conditions under each of the Transaction Documents to be performed, satisfied or complied with by the Company; (ii) that the Company shall continue to perform each and every covenant, agreement and condition set forth in each of the Transaction Documents and this Note, and continue to be bound by each and all of the terms and provisions thereof and hereof; (iii) that as of the Issue Date, no default or Event of Default has occurred or is continuing under the Purchase Agreement, the Note or any other Transaction Documents, and no event has occurred that, with the passage of time, the giving of notice, or both, would constitute a default or an Event of Default under the Purchase Agreement, the Note or any other Transaction Documents; and (iv) that as of the Issue Date, no event, fact, or other set of circumstances has occurred which could reasonably be expected to have, cause, or result in a Material Adverse Effect.
The Company hereby acknowledges, represents, warrants and confirms to the Holder that: (i) each of the Transaction Documents executed by the Company are valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms; and (ii) no oral representations, statements, or inducements have been made by Holder, or any agent or representative of Holder, with respect to this Note, the Purchase Agreement, and all other Transaction Documents.
This Note shall be a first senior secured obligation of the Borrower, with priority over all existing and future Indebtedness (as defined below) of the Borrower as provided for herein. The obligations of the Borrower under this Note are secured pursuant to the terms of the security agreement of even date herewith by and between the Borrower and the Holder, and such security interest includes but is not limited to all of the assets of the Borrower. So long as the Borrower shall have any obligation under this Note, the Borrower shall not (directly or indirectly through any subsidiary or affiliate) incur or suffer to exist or guarantee any Indebtedness that is senior to or pari passu with (in priority of payment and performance) the Borrower’s obligations hereunder. For purposes of this paragraph, the term “Borrower” shall include any subsidiary of the Borrower in addition to the Borrower. As used herein, the term “Indebtedness” means (a) all indebtedness of the Borrower for borrowed money or for the deferred purchase price of property or services, including any type of letters of credit, but not including deferred purchase price obligations in place as of the Issue Date and as disclosed in the OTC Filings and Disclosures or the SEC Documents or obligations to trade creditors incurred in the ordinary course of business, (b) all obligations of the Borrower evidenced by notes, bonds, debentures or other similar instruments, (c) purchase money indebtedness hereafter incurred by the Borrower to finance the purchase of fixed or capital assets, including all capital lease obligations of the Borrower which do not exceed the purchase price of the assets funded, (d) all guarantee obligations of the Borrower in respect of obligations of the kind referred to in clauses (a) through (c) above that the Borrower would not be permitted to incur or enter into, and (e) all obligations of the kind referred to in clauses (a) through (d) above that the Borrower is not permitted to incur or enter into that are secured and/or unsecured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured and/or unsecured by) any lien or encumbrance on property (including accounts and contract rights) owned by the Borrower, whether or not the Borrower has assumed or become liable for the payment of such obligation.
The following additional terms shall also apply to this Note:
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ARTICLE I
CONVERSION RIGHTS
1.1 Conversion Right. The Holder shall have the right at any time, and from time to time, on or after the Issue Date to convert all or any part of the outstanding and unpaid principal, interest, fees, or any other obligation owed pursuant to this Note into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the Conversion Price (as defined below) selected by the Holder for any particular conversion, determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of this Note or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the Conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso. The number of shares of Common Stock to be issued upon each Conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) (the numerator) by the applicable Conversion Price then in effect on the date specified in the notice of conversion (the denominator), in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., Miami, Florida time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any Conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such Conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, provided however, that the Borrower shall have the right to pay any or all interest in cash plus (3) at the Holder’s option, fees on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.
1.2 Conversion Price. Subject to the adjustments described herein, this Note shall be convertible into shares of Common Stock at any time, and from time to time, in any portion at either of the Reg A+ Conversion Price, the Fixed Conversion Price, or the Default Conversion Price, in the sole discretion of the Holder. “Conversion Price” means the then applicable Fixed Conversion Price, Reg A+ Conversion Price, Default Conversion Price or other conversion price as determined in accordance with this Note as selected by the Holder in connection with any particular Conversion. The Conversion Price shall be automatically adjusted equitably for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, as well as combinations, recapitalization, reclassifications, extraordinary distributions and similar events:
(a) Reg A+ Conversion Price. Pursuant to Section 5 of the Purchase Agreement, the Borrower is obligated to qualify in any Reg A+ Offering the shares of Common Stock underlying this Note (which this Note is convertible into, i.e. the Conversion Shares). At any time, and from time to time, the Holder may utilize the Reg A+ Conversion Price for conversions of this Note into Common Stock. The Reg A+ Conversion Price shall be equal to the applicable “qualified” price per share that the Common Stock is being offered and issued by the Borrower in the Reg A+ Offering on its own behalf at that time (the “Reg A+ Conversion Price”).
(b) Fixed Conversion Price. At any time, and from time to time, the Holder may utilize the Fixed Conversion Price for conversions of this Note into Common Stock. The Fixed Conversion Price shall be a rate per share equal $0.15 per share (the “Fixed Conversion Price”). “Trading Day” shall mean any day on which the Common Stock is tradable for any period on the OTCBB, OTCQB or on the principal securities exchange or other securities market on which the Common Stock is then being quoted or traded.
(c) Default Conversion Price: Notwithstanding anything herein to the contrary, upon delivery by the Holder to the Borrower of a Default Notice (as defined herein) setting forth the Event of Default under the Note, at the sole option of the Holder the Default Conversion Price (as defined below) can be used by the Holder as the Conversion Price, at any time, and from time to time, thereafter while the Note remains outstanding. The “Default Conversion Price” shall mean $0.01 per share.
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(d) Additional Conversion Considerations. To the extent the Conversion Price of the Borrower’s Common Stock closes below the par value per share, the Borrower will take all steps necessary to solicit the consent of the stockholders to reduce the par value of the Common Stock to the lowest value possible under law. The Borrower agrees to honor all conversions submitted pending this adjustment. If the shares of the Borrower’s Common Stock have not been delivered within three (3) business days to the Holder, the Notice of Conversion may be rescinded by the Holder. If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Borrower and the Holder for which the calculation of the Trading Price is required in order to determine the Conversion Price of such Notes. If at any time the Conversion Price as determined hereunder for any conversion would be less than the par value of the Common Stock, then at the sole discretion of the Holder, the Conversion Price hereunder may equal such par value for such conversion and the Conversion Amount for such conversion may be increased to include Additional Principal, where “Additional Principal” means such additional amount to be added to the Conversion Amount to the extent necessary to cause the number of conversion shares issuable upon such conversion to equal the same number of conversion shares as would have been issued had the Conversion Price not been adjusted by the Holder to the par value price.
(e) Pro Rata Conversion; Disputes. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in connection with a conversion of this Note, the Borrower shall issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with this Note.
1.3 Authorized Shares. The Borrower covenants that during the period the Conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all times to have authorized and reserved five times (500%) the number of shares that is actually issuable upon full conversion of the Note (based on the Conversion Price of the Note in effect from time to time) (the “Reserved Amount”). The Reserved Amount shall be increased from time to time in accordance with the Borrower’s obligations pursuant to Section 4(i) of the Purchase Agreement. The Borrower represents that upon issuance, such shares of Common Stock will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which this Note shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Note. The Borrower (i) represents that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note. Notwithstanding the foregoing, in no event shall the Reserved Amount be lower than the initial Reserved Amount, regardless of any prior conversions.
Borrower’s failure to maintain or to replenish the Reserved Amount within three (3) business days of a request of the Holder, shall be an Event of Default under this Note.
1.4 Method of Conversion.
(a) Mechanics of Conversion. Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time from time to time on or after the Issue Date, by (i) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., Miami, Florida time) and (ii) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower.
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(b) Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such records of the Holder shall, prima facie, be controlling and determinative in the absence of manifest error. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.
(c) Payment of Taxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.
(d) Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates (or electronic shares via DWAC transfer, at the option of Holder) for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and the Purchase Agreement.
(e) Obligation of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is received by the Borrower before 6:00 p.m., Miami, Florida time, on such date.
(f) Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions contained in Section 1.1 and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal At Custodian (“DWAC”) system.
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(g) Failure to Deliver Common Stock Prior to Delivery Deadline. Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline (other than a failure due to the circumstances described in Section 1.3 above, which failure shall be governed by such Section) the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock until the Borrower issues and delivers a certificate to the Holder or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon such Holder’s conversion of any Conversion Amount (under Holder’s and Borrower’s expectation that any damages will tack back to the Issue Date). Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly, the parties acknowledge that the liquidated damages provision contained in this Section 1.4(g) are justified.
(h) Rescindment of a Notice of Conversion. If (i) the Borrower fails to respond to Holder within one (1) business day from the Conversion Date confirming the details of Notice of Conversion, (ii) the Borrower fails to provide any of the shares of the Borrower’s Common Stock requested in the Notice of Conversion within three (3) business days from the date of receipt of the Note of Conversion, (iii) the Holder is unable to procure a legal opinion required to have the shares of the Borrower’s Common Stock issued unrestricted and/or deposited to sell for any reason related to the Borrower’s standing, (iv) the Holder is unable to deposit the shares of the Borrower’s Common Stock requested in the Notice of Conversion for any reason related to the Borrower’s standing, (v) at any time after a missed Deadline, at the Holder’s sole discretion, or (vi) if OTC Markets Group, Inc. changes the Borrower’s designation to ‘Limited Information’ (Yield), ‘No Information’ (Stop Sign), ‘Caveat Emptor’ (Skull & Crossbones), ‘OTC’, ‘Other OTC’ or ‘Grey Market’ (Exclamation Mark Sign) or other trading restriction on the day of or any day after the Conversion Date, the Holder maintains the option and sole discretion to rescind the Notice of Conversion with a “Notice of Rescindment.”
1.5 Concerning the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the Securities Act of 1933, as amended 1933 Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the 1933 Act (or a successor rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an “accredited investor” (as defined in Rule 501(a) of the 1933 Act). Except as otherwise provided in the Purchase Agreement (and subject to the removal provisions set forth below), until such time as the shares of Common Stock issuable upon conversion of this Note have been registered under the 1933 Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:
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“NEITHER THE ISSUANCE OR SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”
The legend set forth above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration under the 1933 Act, which opinion shall be reasonably accepted by the Company so that the sale or transfer is effected or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold. In the event that the Company does not accept the opinion of counsel provided by the Holder with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline, and the does not provide a suitable replacement opinion to the Holder within two (2) business days, it will be considered an Event of Default pursuant to Section 3.2 of the Note.
1.6 Effect of Certain Events.
(a) Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either: (i) be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III) or (ii) be treated pursuant to Section 1.6(b) hereof. “Person” shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.
(b) Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, thirty (30) days prior written notice (but in any event at least fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(d). The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.
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(c) Adjustment Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.
(d) Adjustment Due to Dilutive Issuance. If, at any time when this Note is issued and outstanding, the Borrower issues or sells, or in accordance with this Section 1.6(d) hereof is deemed to have issued or sold, except for shares of Common Stock issued directly to vendors or suppliers of the Borrower in satisfaction of amounts owed to such vendors or suppliers (provided, however, that such vendors or suppliers shall not have an arrangement to transfer, sell or assign such shares of Common Stock prior to the issuance of such shares), any shares of Common Stock for no consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith) less than the Conversion Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (a “Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Conversion Price will be reduced to the amount of the consideration per share received by the Borrower in such Dilutive Issuance, subject to the Holder’s rights under Section 1.2 to select its Conversion Price.
The Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or grants any warrants, rights or options (not including employee stock option plans), whether or not immediately exercisable, to subscribe for or to purchase Common Stock or other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”) and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon the exercise of such Options” is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or granting of all such Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the exercise of all such Options, plus, in the case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion of Convertible Securities, if applicable). No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon exercise of such Options.
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Additionally, the Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or sells any Convertible Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options), and the price per share for which Common Stock is issuable upon such conversion or exchange is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For the purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon such conversion or exchange” is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or sale of all such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.
(e) Purchase Rights. If, at any time when any Notes are issued and outstanding, the Borrower issues any Convertible Securities or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.
(f) Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the events described in this Section 1.6, or under Section 1.2 (regarding stock splits, combinations, etc.), the Borrower, at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Borrower shall, upon the written request at any time of the Holder, furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of the Note.
1.7 Trading Market Limitations. Unless permitted by the applicable rules and regulations of the principal securities market on which the Common Stock is then quoted, listed or traded, in no event shall the Borrower issue upon conversion of or otherwise pursuant to this Note more than the maximum number of shares of Common Stock that the Borrower can issue pursuant to any rule of the principal United States securities market on which the Common Stock is then traded (the “Maximum Share Amount”), subject to equitable adjustment from time to time for stock splits, stock dividends, combinations, capital reorganizations and similar events relating to the Common Stock occurring after the Issue Date. Once the Maximum Share Amount has been issued, if the Borrower fails to eliminate any prohibitions under applicable law or the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Borrower or any of its securities on the Borrower’s ability to issue shares of Common Stock in excess of the Maximum Share Amount, in lieu of any further right to convert this Note, this will be considered an Event of Default under Section 3.2 of the Note.
1.8 Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received certificates or transmission of such shares pursuant to Section 1.4(f) for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, if this Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted. In all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion default payments pursuant to Section 1.3 to the extent required thereby for such Conversion default and any subsequent Conversion default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section 1.2) for the Borrower’s failure to convert this Note.
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1.9 Prepayment. Notwithstanding anything to the contrary contained in this Note, the Borrower may prepay the amounts outstanding hereunder with the consent of the Holder pursuant to the following terms and conditions:
(a) At any time during the period beginning on the Issue Date and ending on the date which is day immediately prior to the Maturity Date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full by making a payment to the Holder of an amount in cash equal to 125%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note.
(b) Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional Prepayment Date”), the Borrower shall make payment of the applicable prepayment amount to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower delivers an Optional Prepayment Notice and fails to pay the applicable prepayment amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.
ARTICLE II
CERTAIN COVENANTS
2.1 Distributions on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect of its capital stock except for distributions pursuant to any shareholders’ rights plan which is approved by a majority of the Borrower’s disinterested directors.
2.2 Restriction on Stock Repurchases. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Borrower or any warrants, rights or options to purchase or acquire any such shares.
2.3 Borrowings. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation of any person, firm, partnership, joint venture or corporation, except by the endorsement of negotiable instruments for deposit or collection, or suffer to exist any liability for borrowed money, except (a) borrowings in existence or committed on the Issue Date and of which the Borrower has informed Holder in writing prior to the Issue Date, (b) indebtedness to trade creditors financial institutions or other lenders incurred in the ordinary course of business or (c) borrowings, the proceeds of which shall be used to repay this Note.
2.4 Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.
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2.5 Advances and Loans. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, lend money, give credit or make advances to any person, firm, joint venture or corporation, including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances (a) in existence or committed on the Issue Date and which the Borrower has informed Holder in writing prior to the Issue Date, (b) made in the ordinary course of business or (c) not in excess of $15,000.
2.6 Section 3(a)(9) or 3(a)(10) Transaction. So long as this Note is outstanding, the Borrower shall not enter into any transaction or arrangement structured in accordance with, based upon, or related or pursuant to, in whole or in part, either Section 3(a)(9) of the 1933 Act (a “3(a)(9) Transaction”) or Section 3(a)(10) of the 1933 Act (a “3(a)(10) Transaction”). In the event that the Borrower does enter into, or makes any issuance of Common Stock related to a 3(a)(9) Transaction or a 3(a)(10) Transaction while this Note is outstanding, a liquidated damages charge of 25% of the outstanding principal balance of this Note, but not less than Fifteen Thousand Dollars ($15,000), will be assessed and will become immediately due and payable to the Holder at its election in the form of cash payment or addition to the balance of this Note.
2.7 Preservation of Existence, etc. The Borrower shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence, rights and privileges, and become or remain, and cause each of its Subsidiaries (other than dormant Subsidiaries that have no or minimum assets) to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary.
2.8 Non-circumvention. The Borrower hereby covenants and agrees that the Borrower will not, by amendment of its Certificate or Articles of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will at all times in good faith carry out all the provisions of this Note and take all action as may be required to protect the rights of the Holder.
2.9 Repayment from Proceeds. While any portion of this Note is outstanding, if the Borrower receives cash proceeds from any source or series of related or unrelated sources, including but not limited to, from payments from customers, the issuance of equity or debt, the conversion of outstanding warrants of the Borrower, the issuance of securities pursuant to an equity line of credit of the Borrower or the sale of assets, the Borrower shall, within one (1) business day of Borrower’s receipt of such proceeds, inform the Holder of such receipt, following which the Holder shall have the right in its sole discretion to require the Borrower to immediately apply all or any portion of such proceeds to repay all or any portion of the outstanding amounts owed under this Note. Failure of the Borrower to comply with this provision shall constitute an Event of Default. In the event that such proceeds are received by the Holder prior to the Maturity Date, the required prepayment shall be subject to the terms of Section 1.9 herein.
2.10 Piggyback Registration Rights. The Company shall include on any registration statement or offering statement filed with the SEC, all Conversion Shares, all Warrant Shares, and all Commitment Shares. In addition to all other remedies at law or in equity or otherwise in connection with any breaches under this Note or the other Transaction Documents, failure to do so in compliance with this Section 2.10 will result in liquidated damages of $20,000, being immediately due and payable to the Holder at its election in the form of cash payment.
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2.11 Reg A+ Offering. Within 30 days after the Issue Date, the Company shall file an offering statement to conduct its initial Reg A+ Offering with the SEC. The failure to complete such filing shall constitute an Event of Default under Section 3.3 below. The Company shall use best efforts to have such offering statement “qualified” within 30 days after the Issue Date.
ARTICLE III
EVENTS OF DEFAULT
The occurrence of any of the following shall each constitute an “Event of Default” with no right to notice or the right to cure except as specifically stated:
3.1 Failure to Pay Principal or Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at the Maturity Date, upon acceleration or otherwise.
3.2 Conversion and the Shares. The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the Conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an “Event of Default” of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within forty- eight (48) hours of a demand from the Holder.
3.3 Breach of Covenants. The Borrower breaches any covenant or other term or condition contained in this Note, or in any of the Transaction Documents including but not limited to the Purchase Agreement.
3.4 Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement), shall be false or misleading in any material respect when made.
3.5 Receiver or Trustee. The Company or any subsidiary of the Company shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.
3.6 Judgments. Any money judgment, writ or similar process shall be entered against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more than $50,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.
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3.7 Bankruptcy; Liquidation. (i) Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Company or any subsidiary of the Company or the Borrower admits in writing its inability to pay its debts generally as they mature, or have filed against it an involuntary petition for bankruptcy; or (ii) any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business occurs.
3.8 Delisting of Common Stock; Failure to Uplist. (i) The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTCBB, OTCQB, OTC Pink or an equivalent replacement exchange, the Nasdaq Capital Market, the New York Stock Exchange, or the NYSE American, or (ii) the Borrower shall fail to successfully uplist the Common Stock to the Nasdaq Capital Market or New York Stock Exchange within 90 days of the Issue Date.
3.9 Failure to Comply with the Exchange Act. The Borrower shall fail to timely comply with the reporting requirements of the 1934 Act (including but not limited to becoming delinquent in its filings); and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act; and/or the Borrower shall not have publicly available all information required by paragraph (b) of Rule 15c2-11 of the Exchange Act (as effective on September 26, 2021), as amended, such that brokers or dealers attempting to publish any quotation for the Common Stock or, directly or indirectly, to submit any such quotation for publication, shall be able to comply with Rule 15c2-11(a).
3.10 DTC. The Company is currently in the process of applying for “DWAC/FAST” electronic transfer. Once in place, if the Company (i) loses its ability to deliver shares via “DWAC/FAST” electronic transfer, or (ii) loses its stats as “DTC Eligible.”
3.11 Cessation of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.
3.12 Maintenance of Assets. The failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future) or any disposition or conveyance of any material asset of the Borrower.
3.13 Financial Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.
3.14 Reverse Splits. The Borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to the Holder.
3.15 Rights of Participation. The failure of the Borrower to fully satisfy its obligations to the Holder under Section 5(c) and/or Section 5(d) of the Purchase Agreement.
3.16 Replacement of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Transfer Agent Instruction Letter in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.
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3.17 Cessation of Trading. Any cessation of trading of the Common Stock on at least one of the OTCBB, OTCQB, OTC Pink or an equivalent replacement exchange, the Nasdaq Capital Market, the New York Stock Exchange, or the NYSE American, and such cessation of trading shall continue for a period of five consecutive (5) Trading Days.
3.18 Cross-Default. Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Borrower of any material covenant or other term or condition contained in any of the Other Agreements, other than any such breach or default which is cured by agreement of the parties, after the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. “Other Agreements” means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes. Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower to the Holder.
3.19 Bid Price. The Borrower shall lose the “bid” price for its Common Stock ($0.01 on the “Ask” with zero market makers on the “Bid” per Level 2) and/or a market (including the OTCBB, OTCQB or an equivalent replacement exchange).
3.20 OTC Markets Designation. If the OTC-Markets changes the Borrower’s designation to ‘No Information’ (Stop Sign), ‘Caveat Emptor’ (Skull and Crossbones), or ‘OTC’, ‘Other OTC’ or ‘Grey Market’ (Exclamation Mark Sign).
3.21 Inside Information. Any attempt by the Borrower or its officers, directors, and/or affiliates to transmit, convey, disclose, or any actual transmittal, conveyance, or disclosure by the Borrower or its officers, directors, and/or affiliates of, material non-public information concerning the Borrower, to the Holder or its successors and assigns, which is not immediately cured by Borrower’s filing of a Form 8-K pursuant to Regulation FD on that same date.
3.22 Unavailability of Rule 144. If, at any time on or after the date which is six (6) months after the Issue Date, the Holder is unable to (i) obtain a standard “144 legal opinion letter” from an attorney reasonably acceptable to the Holder, the Holder’s brokerage firm (and respective clearing firm), and the Borrower’s transfer agent in order to facilitate the Holder’s conversion of any portion of the Note into free trading shares of the Borrower’s Common Stock pursuant to Rule 144, and (ii) thereupon deposit such shares into the Holder’s brokerage account.
Upon the occurrence of any Event of Default specified in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14, 3.15, 3.16. 3.17, 3.18, 3.19, 3.20, 3.21, and/or 3.22 exercisable through the delivery of written notice to the Borrower by such Holders (the “Default Notice”), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to (i) 150% times the sum of (x) the then outstanding principal amount of this Note plus (y) accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment (the “Mandatory Prepayment Date”), on the amounts referred to in clauses (x) and/or (y) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment plus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default Sum”) or (ii) at the option of the Holder, the “parity value” of the Default Sum to be prepaid, where parity value means (a) the highest number of shares of Common Stock issuable upon conversion of or otherwise pursuant to such Default Sum in accordance with Article I, treating the Trading Day immediately preceding the Mandatory Prepayment Date as the “Conversion Date” for purposes of determining the lowest applicable Conversion Price, unless the Event of Default arises as a result of a breach in respect of a specific Conversion Date (in which case such Conversion Date shall be the Conversion Date), multiplied by (b) the highest Closing Price (defined below) for the Common Stock during the period beginning on the date of first occurrence of the Event of Default and ending one day prior to the Mandatory Prepayment Date (the “Default Amount”) and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity. “Closing Price” means, for any security as of any date, the closing bid price as reported on the OTCBB, OTCQB or applicable trading market or exchange as reported by a reliable reporting service designated by the Holder or, if the OTCBB is not the principal trading market for such security, the closing bid price of such security on the principal securities exchange or trading market where such security is quoted, listed or traded.
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The Holder shall have the right at any time, to require the Borrower to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect, subject to the terms of this Note. This requirement by the Borrower shall automatically apply upon the occurrence of an Event of Default without the need for any party to give any notice or take any other action.
If the Holder shall commence an action or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney, then if the Holder prevails in such action, the Holder shall be reimbursed by the Borrower for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
ARTICLE IV
MISCELLANEOUS
4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
4.2 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, or electronic transmission by e-mail (with read-receipt required) addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by electronic transmission by e-mail (with read-receipt required), at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:
If to the Borrower, to:
Boatim, Inc.
7950 NW 53rd Street Suite 337
Miami, FL 33166
Attn: Joseph Johnson, CEO
E-mail: joseph@boatim.com
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If to the Holder:
Quick Capital, LLC
66 West Flagler Street, 900-#2292
Miami, FL 33130
Attn: Eilon D. Natan, Manager
E-mail: eilon@quick-cap.com
4.3 Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder.
4.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Neither the Borrower nor the Holder shall assign this Note or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, the Holder may assign its rights hereunder to any “accredited investor” (as defined in Rule 501(a) of the 1933 Act) in a private transaction from the Holder or to any of its “affiliates”, as that term is defined under the 1934 Act, without the consent of the Borrower. Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bonafide margin account or other lending arrangement. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.
4.5 Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof reasonable costs of collection, including reasonable attorneys’ fees.
4.6 Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of Nevada without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts of Miami, Florida, or in the federal courts located in the Southern District of Florida. The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Note or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
4.7 Certain Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding principal amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note. The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.
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4.8 Purchase Agreement and Security Agreement. By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement and the Security Agreement.
4.9 Notice of Corporate Events. Except as otherwise provided in this Note, the Holder of this Note shall have no rights as a Holder of Common Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders). In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Borrower or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9 including, but not limited to, name changes, recapitalizations, etc. as soon as possible under law.
4.10 Usury. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable provision shall automatically be revised to equal the maximum rate of interest or other amount deemed interest permitted under applicable law. The Borrower covenants (to the extent that it may lawfully do so) that it will not seek to claim or take advantage of any usury law that would prohibit or forgive the Borrower from paying all or a portion of the principal or interest on this Note.
4.11 Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required. No provision of this Note shall alter or impair the obligation of the Borrower, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
4.12 Severability. In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.
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4.13 Dispute Resolution. In the case of a dispute as to the determination of the Conversion Price, Conversion Amount, any prepayment amount or Default Amount, Default Sum, Closing Date or Maturity Date, the closing bid price, or fair market value (as the case may be) or the arithmetic calculation of the Conversion Price or the applicable prepayment amount(s) (as the case may be), the Borrower or the Holder shall submit the disputed determinations or arithmetic calculations via electronic transmission by e-mail (with read-receipt required) (i) within two (2) Trading Days after receipt of the applicable notice giving rise to such dispute to the Borrower or the Holder or (ii) if no notice gave rise to such dispute, at any time after the Holder learned of the circumstances giving rise to such dispute. If the Holder and the Borrower are unable to agree upon such determination or calculation within two (2) business days of such disputed determination or arithmetic calculation (as the case may be) being submitted to the Borrower or the Holder, then the Borrower shall, within two (2) business days, submit via electronic transmission by e-mail (with read-receipt required) (a) the disputed determination of the Conversion Price, the closing bid price, the or fair market value (as the case may be) to an independent, reputable investment bank selected by the Borrower and approved by the Holder or (b) the disputed arithmetic calculation of the Conversion Price, Conversion Amount, any prepayment amount or Default Amount, Default Sum to an independent, outside accountant selected by the Holder that is reasonably acceptable to the Borrower. The Borrower shall cause at its expense the investment bank or the accountant to perform the determinations or calculations and notify the Borrower and the Holder of the results no later than ten (10) business days from the time it receives such disputed determinations or calculations. Such investment bank’s or accountant’s determination or calculation shall be binding upon all parties absent demonstrable error.
4.14 Terms of Future Financings. So long as this Note is outstanding, upon any issuance by the Borrower or any of its subsidiaries of any security with any term more favorable to the holder of such security or with a term (including without limitation any Conversion Price) in favor of the holder of such security that was not similarly provided to the Holder in this Note (other than a future financing with the Holder), then the Borrower shall notify the Holder of such additional or more favorable term and such term, at Holder’s option, shall become a part of the Transaction Documents with the Holder. The types of terms contained in another security that may be more favorable to the holder of such security include, but are not limited to, terms addressing conversion discounts, prepayment rate, conversion lookback periods, interest rates, original issue discounts, stock sale price, private placement price per share, and warrant coverage.
*** signature page follows ***
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IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer as of the Issue Date.
COMPANY: | ||
Boatim, Inc. | ||
By: | ||
Name: | Joseph Johnson | |
Title: | CEO |
Acknowledged and Accepted by: | ||
HOLDER: | ||
Quick Capital, LLC | ||
By: | ||
Name: | Eilon D. Natan | |
Title: | Manager |
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Exhibit 10.19
AMENDED AND RESTATED NOTE PURCHASE AGREEMENT
THIS AMENDED AND RESTATED NOTE PURCHASE AGREEMENT (this “Agreement”), originally executed on January 7, 2022, (the “Execution Date”), and amended and restated on February [__], 2022 (the “Restatement Date”), is entered into by and between BOATIM, INC., a Nevada corporation (the “Company”), and QUICK CAPITAL, LLC, a Wyoming limited liability company (the “Buyer”). Each capitalized term used herein shall have the meaning ascribed thereto in Section 10 below, or as otherwise defined herein.
WHEREAS, the Company and the Buyer are executing and delivering this Agreement in reliance upon an exemption from securities registration afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”); and
WHEREAS, the Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement (i) a secured convertible promissory note of the Company, in the form attached hereto as Exhibit A, as amended and restated, in an aggregate funded amount of $143,166 as set forth on the Issuance Schedule attached hereto (such note, together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof, a “Note”), convertible into shares (the “Conversion Shares”) of common stock, $0.001 par value per share, of the Company (the “Common Stock”) pursuant to the terms of the Note; and (ii) warrants to acquire shares (the “Warrant Shares”) of Common Stock, as amended, in the form attached hereto as Exhibit B (the “Warrant”), in such amounts set forth on the Issuance Schedule; and
WHEREAS, as inducement to enter into this Agreement, and for the funding of the Note, the Company desires to issue to the Buyer shares of Common Stock (the “Commitment Shares”) as set forth herein.
NOW THEREFORE, in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the Buyer hereby agree as follows:
1. | PURCHASE AND SALE OF SECURITIES. |
(a) | Closing. On the Execution Date, the Company sold and issued to the Buyer and the Buyer purchased and funded a Note in such principal amount, and for such funding price, set forth on the Issuance Schedule under “January Closing” (the “Closing”), which such funding amount was $143,166 for the Closing (the “Company Funding Amount”). |
(b) | Closing Date. Subject to the satisfaction (or written waiver) of the conditions set forth in Section 7 and Section 8 below, the date of the issuance and sale of the Note constituting the Closing pursuant to this Agreement (the “Closing Date”) shall be the Execution Date, subject to the amendment and restatement of the Note on the Restatement Date. |
(c) | Form of Payment. On the Closing Date, the Buyer shall deliver the Company Funding Amount by wire transfer of immediately available funds, in accordance with the Company’s written wiring instructions. |
(d) | Warrants. On the Restatement Date, the Company shall deliver 724,058 Warrants to the Buyer in the amount of warrant coverage in such amounts as set forth on the Issuance Schedule. |
(e) | Commitment Shares. The Company shall be required to deliver the Commitment Shares to the Buyer, and the Buyer shall be entitled to receive such shares, in an aggregate amount of 1,810,145 shares, as set forth below in this Section and as set forth on the Issuance Schedule: |
(i) | Closing Delivery. At the closing, the Company shall deliver 1,810,145 Commitment Shares to the Buyer (the “Initial Commitment Shares”). |
(ii) | True-up Delivery. On the date that is the earlier of (A) the initial date of the “effectiveness” of an effective registration statement on Form S-1 covering the resale of the Registrable Securities, or (B) the date as of which the Buyer may sell all of the Registrable Securities without restriction pursuant to Rule 144 promulgated under the Securities Act without any restrictions (including any restrictions under Rule 144(c) or Rule 144(i)) (such earlier date, the “True-up Date”), in the event that the aggregate market value of the Initial Commitment Shares is less than $81,540, with such calculation based on the closing price of the Common Stock on the True-up Date (“Initial Commitment Shares Value”), the Company must deliver to the Buyer, and the Buyer shall be entitled to receive, a balance amount of Commitment Shares equal to the difference of $81,540 minus the Initial Commitment Shares Value (the “True-up Shares”). The price per share of the True-up Shares for purposes of determining the amount of shares to be issued shall be equal to the closing price of the Common Stock on the True-up Date. The Company shall immediately deliver within 24 hours after the True-up Date written notice to the Buyer regarding its calculation of True-up Shares and an acknowledgement that the Company will comply with the terms of this Section (e)(ii). The Company shall deliver the True-up Shares to the Buyer within 48 hours after the True-up Date. Failure to timely deliver the True-up Shares shall be an Event of Default under the Note. |
2. | REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and warrants to the Company that: |
(a) | Investment Purpose. As of the Execution Date, the Buyer is purchasing the Securities for its own account for investment only and not with a view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the Securities Act; provided, however, that by making the foregoing representation and warranty, the Buyer does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of all or any portion of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act. |
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(b) | Reliance on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities. |
(c) | Information. The Buyer and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by the Buyer or its advisors. The Buyer and its advisors, if any, have been afforded the opportunity to ask questions of the Company. Notwithstanding the foregoing, the Company has not disclosed to the Buyer any material non-public information and will not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer. Neither such inquiries nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall modify, amend or affect Buyer’s right to rely on the Company’s representations and warranties contained in Section 3 below. |
(d) | Authorization; Enforcement; Organization. This Agreement has been duly and validly authorized by the Buyer. This Agreement has been duly executed and delivered on behalf of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms. The Buyer is a limited liability company organized under the laws of the State of Wyoming. |
(e) | Accredited Investor Status. The Buyer is (i) an “accredited investor” as that term is defined in Rule 501 of the General Rules and Regulations under the Securities Act by reason of Rule 501(a)(3) (an “Accredited Investor”), (ii) experienced in making investments of the kind described in this Agreement and the related documents, (iii) able, by reason of the business and financial experience of its officers (if an entity) and professional advisors (who are not affiliated with or compensated in any way by the Company or any of its Affiliates or selling agents), to protect its own interests in connection with the transactions described in this Agreement, and the related documents, and (iv) able to afford the entire loss of its investment in the Securities. |
(f) | General Solicitation. The Buyer is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement. |
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3. | REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to the Buyer that as of the Execution Date, Restatement Date and as of any Closing Date (or as of such other time expressly specified below): |
(a) | Corporate Governance Compliance: |
(i) | Issuance of Commitment Shares, Note and Conversion Shares and Warrant and Warrant Shares. The Note has been duly authorized and is being validly issued to the Buyer. The Conversion Shares have been duly authorized and fully reserved for issuance and, upon conversion of the Note in accordance with its terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock. The Conversion Shares shall not be subject to pre-emptive rights or other similar rights of stockholders of the Company (except to the extent already waived) and will not impose personal liability upon the holder thereof, other than restrictions on transfer provided for in the Transaction Documents and under the Securities Act. The Warrant has been duly authorized and is being validly issued to the Buyer. The Warrant Shares have been duly authorized and fully reserved for issuance and, upon exercise of the Warrant in accordance with its terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock. The Warrant Shares shall not be subject to pre-emptive rights or other similar rights of stockholders of the Company (except to the extent already waived) and will not impose personal liability upon the holder thereof, other than restrictions on transfer provided for in the Transaction Documents and under the Securities Act. The Commitment Shares have been duly authorized and upon delivery to the Buyer shall be validly issued, fully paid and non-assessable, and free from all taxes, Liens, claims and encumbrances with respect to the issue thereof, with the Buyer being entitled to all rights accorded to a holder of Common Stock. The Commitment Shares shall not be subject to pre-emptive rights or other similar rights of stockholders of the Company (except to the extent already waived) and will not impose personal liability upon the holder thereof, other than restrictions on transfer provided for in the Transaction Documents and under the Securities Act. |
(ii) | Organization and Qualification. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Nevada, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. Each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. Each of the Company and the Subsidiaries is not in violation or default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in a Material Adverse Effect and no proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification. |
(iii) | Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement and the other Transaction Documents. The execution and delivery of this Agreement and the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action, and no further consent or authorization of the Company or its Board of Directors or stockholders is required. Each of this Agreement and the other Transaction Documents has been duly executed and delivered by the Company and constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application. |
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(iv) | Capitalization. As of the Execution Date, the authorized capital stock of the Company is as set forth in the SEC Documents (as defined below). Except as set forth on Schedule 3(a)(iv), the Company has not issued any capital stock since its most recently filed SEC Document, other than pursuant to the exercise of employee stock options under the Company’s stock option plans, the issuance of shares of Common Stock to employees pursuant to the Company’s employee stock purchase plans and pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed SEC Document. Except as disclosed in the SEC Documents, no shares are reserved for issuance pursuant to the Company’s stock option plans, no shares are reserved for issuance pursuant to the terms of any Common Stock Equivalents (other than the Note and the Warrant) exercisable for, or convertible into or exchangeable for shares of Common Stock and sufficient shares are reserved for issuance upon conversion of the Note and upon exercise of the Warrant (as required by the Note, the Warrant and Transfer Agent Instruction Letter). All of such outstanding shares of capital stock are, or upon issuance will be, duly authorized, validly issued, fully paid and non-assessable. No shares of capital stock of the Company are subject to preemptive rights or any other similar rights of the stockholders of the Company or any liens or encumbrances imposed through the actions or failure to act of the Company. Except as disclosed in the SEC Documents, as of the Execution Date, (i) there are no outstanding options, warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings, claims or other commitments or rights of any character whatsoever relating to, or securities or rights convertible into or exchangeable for any shares of capital stock of the Company or any of its Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries, (ii) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of its or their securities under the Securities Act and (iii) there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) that will be triggered by the issuance of the Securities. The Company has filed in its SEC Documents true and correct copies of the Company’s Certificate of Incorporation as in effect on the Execution Date, the Company’s bylaws, as in effect on the Execution Date, and the terms of all securities convertible into or exercisable for Common Stock of the Company and the material rights of the holders thereof in respect thereto. The Company shall provide the Buyer a certification of this representation signed by the Company’s Chief Executive Officer on behalf of the Company as of the Closing Date. |
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(v) | No Conflicts. The execution, delivery and performance of this Agreement and the other Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance of the Conversion Shares and the Warrant Shares) will not (a) result in a violation of the Company’s or any Subsidiary’s certificate or articles of incorporation, by-laws or other organizational or charter documents, (b) conflict with, or constitute a material default (or an event that with notice or lapse of time or both would become a material default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, instrument or any “lock-up” or similar provision of any underwriting or similar agreement to which the Company or any Subsidiary is a party, or (c) result in a violation of any federal, state or local law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or any Subsidiary or by which any property or asset of the Company or any Subsidiary is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect), nor is the Company otherwise in violation of, conflict with or in default under any of the foregoing. The business of the Company is not being conducted in violation of any law, ordinance or regulation of any governmental entity, except for possible violations that either singly or in the aggregate do not and will not have a Material Adverse Effect. The Company is not required under federal, state or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to issue the Conversion Shares or the Warrant Shares or to execute, deliver or perform any of its obligations under this Agreement or the other Transaction Documents (other than any SEC, FINRA or state securities filings that may be required to be made by the Company subsequent to Closing). |
(b) | SEC and Offering Compliance: |
(i) | SEC Documents. By February 28, 2022, the Company shall file all reports, schedules, forms, statements and other documents, via “Super 8-K” or otherwise, required to be filed by the Company under the Securities Act and the Exchange Act for the Company to be deemed fully “fully reporting” and “current” and in compliance with the periodic and current reporting requirements of Section 13 or 15(d) of the Exchange Act, and in compliance with the Rule 144(c)(1) under the Securities Act (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Documents”). The SEC Documents will comply in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and other federal laws, rules and regulations applicable to such SEC Documents, and none of the SEC Documents when filed will contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. |
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(ii) | Financial Statements. The financial statements of the Company included in its OTC Filings and Disclosures (the “Financial Statements”) comply as to form and substance in all material respects with applicable accounting requirements and the published rules and regulations of the OTC Pink Market as well as other applicable rules and regulations with respect thereto. Such Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except (a) as may be otherwise indicated in such Financial Statements or the notes thereto or (b) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments). The Company maintains a system of internal accounting controls appropriate for its size. There is no transaction, arrangement, or other relationship between the Company and an unconsolidated or other off balance sheet entity that is not disclosed by the Company in its Financial Statements or otherwise that would be reasonably likely to have a Material Adverse Effect. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf has provided the Buyer or its agents or counsel with any information that it believes constitutes or might constitute material, non-public information. The Company understands and confirms that the Buyer will rely on the foregoing representation in effecting transactions in securities of the Company. |
(iii) | Acknowledgment Regarding Buyer’s Purchase of Securities. The Company acknowledges and agrees that the Buyer is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby and that the Buyer is neither (i) an officer or director of the Company or any of its Subsidiaries, nor (ii) an “affiliate” (as defined in Rule 144) of the Company or any of its Subsidiaries. The Company further acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company or any of its Subsidiaries (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated hereby and thereby, and any advice given by a Buyer or any of its representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to the Buyer’s purchase of the Securities. The Company further represents to the Buyer that the Company’s decision to enter into the Transaction Documents has been based solely on the independent evaluation by the Company and its representatives. |
(iv) | No Integrated Offering. Neither the Company, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the Securities Act of the issuance of the Securities to the Buyer. The issuance of the Securities to the Buyer will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any stockholder approval provisions applicable to the Company or its securities. |
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(v) | No Brokers. Except as set forth on Schedule 3(b)(v), no broker is entitled to a commission payable by the Company in connection with the transactions contemplated by this transaction and the Company has taken no action which would give rise to any claim by any person for brokerage commissions, transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby. Any all fees due to any brokers shall be paid and satisfied by the Company at the Closing except as otherwise provided in Section 1(c) of this Agreement. |
(vi) | Disclosure. All information relating to or concerning the Company or any of its Subsidiaries set forth in this Agreement and provided to the Buyer pursuant in connection with the transactions contemplated hereby is true and correct in all material respects and the Company has not omitted to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they were made, not misleading. No event or circumstance has occurred or exists with respect to the Company or any of its Subsidiaries or its or their business, properties, prospects, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed (assuming for this purpose that the Company’s reports filed under the Exchange Act are being incorporated into an effective registration statement filed by the Company under the Securities Act). |
(vii) | Shell Company Status. The Company is not currently an issuer identified in Rule 144(i)(1)(i) under the Securities Act, and, if it was at any time previously been such an issuer, then the Company is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, has filed all reports and other materials required to be filed by Section 13 or 15(d) of the Exchange Act, as applicable during the preceding 12 months, and, as of a date at least one year prior to the Execution Date, has filed current “Form 10 information” with the SEC (as defined in Rule 144(i)(3) of the Securities Act) reflecting its status as an entity that is no longer an issuer described in Rule 144(i)(1)(i) of the Securities Act. |
(viii) | No Disqualification Events. With respect to Securities to be offered and sold hereunder in reliance on Rule 506 under the Securities Act (“Regulation D Securities”), none of the Company, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the Company participating in the offering hereunder, any beneficial owner of 20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the Securities Act) connected with the Company in any capacity at the time of sale (each, an “Issuer Covered Person” and, together, “Issuer Covered Persons”) is subject to any of the “bad actor” disqualifying events described in Rule 506(d)(1)(i)(viii) under the Securities Act (each, a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event. The Company has complied, to the extent applicable, with its disclosure obligations under Rule 506(e), and has furnished to the Buyers a copy of any disclosures provided thereunder. |
(ix) | Other Covered Persons. The Company is not aware of any Person (other than any Issuer Covered Person) that has been or will be paid (directly or indirectly) remuneration for solicitation of buyers or potential purchasers in connection with the sale of any Regulation D Securities. |
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(x) | No General Solicitation; Placement Agent. Neither the Company, nor any of its Subsidiaries or Affiliates, nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Securities. Neither the Company nor any of its Subsidiaries has engaged any placement agent in connection with the sale of the Securities. In the event that a broker-dealer or other agent or advisory is engaged by the Company subsequent to the initial Closing, the Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, or brokers’ commissions (other than for persons engaged by any Buyer or its investment advisor) relating to or arising out of the transactions contemplated hereby in connection with the sale of the Securities. The Company shall pay, and hold the Buyer harmless against, any liability, loss or expense (including, without limitation, attorney’s fees and out-of-pocket expenses) arising in connection with any such claim. |
(xi) | Investment Company Status. The Company is not, and upon consummation of the sale of the Securities will not be, an “investment company,” a company controlled by an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended. |
(xii) | Transfer Taxes. On the Closing Date, all stock transfer or other taxes (other than income or similar taxes) which are required to be paid in connection with the sale and transfer of the Securities to be sold to the Buyer hereunder will be, or will have been, fully paid or provided for by the Company, and all laws imposing such taxes will be or will have been complied with. |
(xiii) | Compliance with Rule 15c2-11. On the Closing Date, and at all times that any of the Securities remain outstanding, the Company shall maintain as publicly available all information required by paragraph (b) of Rule 15c2-11 of the Exchange Act (as effective on September 26, 2021), as amended, such that brokers or dealers attempting to publish any quotation for the Common Stock or, directly or indirectly, to submit any such quotation for publication, shall be able to comply with Rule 15c2-11(a). |
(c) | Operations Related: |
(i) | Absence of Certain Changes. No event has occurred that would have a Material Adverse Effect on the Company or any Subsidiary that has not been disclosed in the SEC Documents, OTC Filings and Disclosures. Without limiting the generality of the foregoing, except as disclosed in the SEC Documents, OTC Filings and Disclosures, neither the Company nor any of its Subsidiaries has taken any of the actions set forth on Schedule 3(c)(i). |
(ii) | Absence of Litigation. Except as disclosed in the SEC Documents, there are no actions, suits, investigations, inquiries or proceedings pending or, to the Knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties, nor has the Company received any written or oral notice of any such action, suit, proceeding, inquiry or investigation, which would have a Material Adverse Effect or would require disclosure under the Securities Act or the Exchange Act. No judgment, order, writ, injunction or decree or award has been issued by or, to the Knowledge of the Company, requested of any court, arbitrator or governmental agency which would have a Material Adverse Effect. Except as disclosed in the SEC Documents, OTC Filings and Disclosures or as set forth on Schedule 3(c)(ii) there has not been, and to the Knowledge of the Company, there is not pending or contemplated, any investigation by the SEC involving the Company, any Subsidiary or any current or former director or officer of the Company or any Subsidiary. |
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(iii) | Patents, Copyrights, etc. The Company and the Subsidiaries own or possess adequate rights or licenses to use all material trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted (“Intellectual Property”). None of the Company’s nor any Subsidiary’s Intellectual Property rights have expired or terminated, or, by the terms and conditions thereof, could expire or terminate within two years from the Execution Date. The Company does not have any Knowledge of any infringement by the Company and/or any Subsidiary of any material trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other similar rights of others, or of any such development of similar or identical trade secrets or technical information by others, and there is no claim, action or proceeding being made or brought against, or to the Company’s Knowledge, being threatened against, the Company and/or any Subsidiary regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other infringement, which could reasonably be expected to have a Material Adverse Effect. |
(iv) | Tax Status. The Company and each of its Subsidiaries has made or filed all federal and material state and foreign income and all other material tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. The Company has not executed a waiver with respect to the statute of limitations relating to the assessment or collection of any foreign, federal, state or local tax. None of the Company’s tax returns is presently being audited by any taxing authority. |
(v) | Certain Transactions. Except as set forth in the SEC Documents, OTC Filings and Disclosures, none of the officers or directors of the Company or any Subsidiary, and to the Knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the Knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, in each case in excess of the lesser of (i) $120,000 or (ii) one percent of the average of the Company’s total assets at year end for the last two completed fiscal years, other than for (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company or any Subsidiary and (iii) other employee benefits, including stock option agreements under any stock option plan of the Company. |
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(vi) | Permits; Compliance. The Company and each of its Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and operate its properties and to carry on its business as it is now being conducted (collectively, the “Company Permits”), and there is no action pending or, to the Knowledge of the Company, threatened regarding suspension or cancellation of any of the Company Permits. Neither the Company nor any of its Subsidiaries is in conflict with, or in default or violation of, any of the Company Permits, except for any such conflicts, defaults or violations which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries has received any notification with respect to possible conflicts, defaults or violations of applicable laws, except for notices relating to possible conflicts, defaults or violations, which conflicts, defaults or violations would not have a Material Adverse Effect. |
(vii) | Environmental Matters. The Company is in compliance with all applicable Environmental Laws in all respects except where the failure to comply does not have and could not reasonably be expected to have a Material Adverse Effect. For purposes of the foregoing: “Environmental Laws” means, collectively, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Superfund Amendments and Reauthorization Act of 1986, the Resource Conservation and Recovery Act, the Toxic Substances Control Act, as amended, the Clean Air Act, as amended, the Clean Water Act, as amended, any other “Superfund” or “Superlien” law or any other applicable federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning, the environment or any Hazardous Material. |
(viii) | Title to Property. Except as disclosed in the SEC Documents, OTC Filings and Disclosures, the Company and each Subsidiary has good and marketable title in fee simple to all real property owned by it and good and marketable title in all personal property owned by it that is material to the business of the Company and each Subsidiary, in each case free and clear of all Liens and, except for Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company or any Subsidiary and Liens for the payment of federal, state or other taxes, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company or any Subsidiary is held under valid, subsisting and enforceable leases with which the Company is in compliance with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company or any Subsidiary. |
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(ix) | Internal Accounting Controls. Except as disclosed in the SEC Documents the Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient, in the judgment of the Company’s board of directors, to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company is in compliance with all provisions of the Sarbanes-Oxley Act of 2002, as amended, which are applicable to it. |
(x) | Foreign Corrupt Practices. Neither the Company, nor any of its Subsidiaries, nor any director, officer, agent, employee or other person acting on behalf of the Company or any Subsidiary has, in the course of his actions for, or on behalf of, the Company, used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee. |
(xi) | Solvency. The Company (after giving effect to the transactions contemplated by this Agreement) is solvent (i.e., its assets have a fair market value in excess of the amount required to pay its probable liabilities on its existing debts as they become absolute and matured) and currently the Company has no information that would lead it to reasonably conclude that the Company would not, after giving effect to the transaction contemplated by this Agreement, have the ability to, nor does it intend to take any action that would impair its ability to, pay its debts from time to time incurred in connection therewith as such debts mature. Except as disclosed in the SEC Documents, OTC Filings and Disclosures or on Schedule 3(c)(xi), the Company did not receive a qualified opinion from its auditors with respect to its most recent fiscal year end and, after giving effect to the transactions contemplated by this Agreement, does not anticipate or know of any basis upon which its auditors might issue a qualified opinion in respect of its current fiscal year. For the avoidance of doubt any qualification of the auditors’ opinion relating to the Company’s ability to continue as a “going concern” shall not, by itself, be a violation of this Section 3(c)(xi). |
(xii) | Insurance. The Company and each Subsidiary is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and each Subsidiary is engaged. Neither the Company, nor any Subsidiary has been refused any insurance coverage sought or applied for, and the Company has no reason to believe that it or any Subsidiary will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not materially and adversely affect the condition, financial or otherwise, or the earnings, business or operations of the Company, taken as a whole. |
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(xiii) | No Undisclosed Events, Liabilities, Developments or Circumstances. Except as set forth in the SEC Documents, OTC Filings and Disclosures, the Company and its Subsidiaries have no liabilities or obligations of any nature (whether accrued, absolute, contingent, unasserted or otherwise and whether due or to become due) other than those liabilities or obligations that are disclosed in the Financial Statements or which do not exceed, individually in excess of $50,000 and in the aggregate in excess of $200,000. The reserves, if any, established by the Company or the lack of reserves, if applicable, are reasonable based upon facts and circumstances known by the Company on the Execution Date and there are no loss contingencies that are required to be accrued by the Statement of Financial Accounting Standard No. 5 of the Financial Accounting Standards Board which are not provided for in the Financial Statements. |
(xiv) | Management. During the past five year period, no current or former officer or director or, to the Knowledge of the Company, stockholder of the Company or any of its Subsidiaries has been the subject of any matter that would require disclosure under Paragraph (f) of Rule 401 of Regulation S-K that has not been publicly disclosed. |
(xv) | Assets; Title. Except as disclosed on Schedule 3(c)(xv), each of the Company and its Subsidiaries has good and valid title to, or a valid leasehold interest in, as applicable, all of its properties and assets, free and clear of all Liens except (i) any Lien for taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent, (iii) any Lien created by operation of law, such as materialmen’s liens, mechanics’ liens and other similar liens, arising in the ordinary course of business with respect to a liability that is not yet due or delinquent or that are being contested in good faith by appropriate proceedings, and (iv) such as have been disposed of in the ordinary course of business. To the Company’s Knowledge, all tangible personal property owned by the Company and its Subsidiaries has been maintained in good operating condition and repair, except (x) for ordinary wear and tear, and (y) where such failure would not have a Material Adverse Effect. To the Company’s Knowledge, all assets leased by the Company or any of its Subsidiaries are in the condition required by the terms of the lease applicable thereto during the term of such lease and upon the expiration thereof. To the Company’s Knowledge, the Company and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects. Any real property and facilities held under lease by the Company or any of its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries. |
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(xvi) | Subsidiary Rights. The Company or one of its Subsidiaries has the unrestricted right to vote, and to receive dividends and distributions on, all equity securities of its Subsidiaries as owned by the Company or such Subsidiary. |
(xvii) | Books and Records. To the Company’s Knowledge, the books of account, ledgers, order books, records and documents of the Company and its Subsidiaries accurately and completely reflect all information relating to the respective businesses of the Company and its Subsidiaries, the nature, acquisition, maintenance, location and collection of each of their respective assets, and the nature of all transactions giving rise to material obligations or accounts receivable of the Company or its Subsidiaries, as the case may be, except where the failure to so reflect such information would not have a Material Adverse Effect. To the Company’s Knowledge, the minute books of the Company and its Subsidiaries contain accurate records in all material respects of all meetings and accurately reflect all other actions taken by the stockholders, boards of directors and all committees of the boards of directors, and other governing Persons of the Company and its Subsidiaries, respectively. |
(xviii) | Money Laundering. The Company and its Subsidiaries are in compliance with, and have not previously violated, the USA PATRIOT ACT of 2001 and all other applicable U.S. and non-U.S. anti-money laundering laws and regulations, including, but not limited to, the laws, regulations and Executive Orders and sanctions programs administered by the U.S. Office of Foreign Assets Control, including, but not limited, to (i) Executive Order 13224 of September 23, 2001 entitled, “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism” (66 Fed. Reg. 49079 (2001)); and (ii) any regulations contained in 31 CFR, Subtitle B, Chapter V. |
(d) | General |
(i) | Acknowledgment of Dilution. The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance of the Conversion Shares upon conversion of the Note. The Company further acknowledges that its obligation to issue Conversion Shares upon conversion of the Note is absolute and unconditional regardless of the dilutive effect that such issuances may have on the ownership interests of other stockholders of the Company. The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance of the Warrant Shares upon exercise of the Warrant. The Company further acknowledges that its obligation to issue Warrant Shares upon exercise of the Warrant is absolute and unconditional regardless of the dilutive effect that such issuances may have on the ownership interests of other stockholders of the Company. The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance of the Commitment Shares upon execution of this Agreement. The Company further acknowledges that its obligation to issue Commitment Shares upon execution of this Agreement is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other stockholders of the Company. |
(ii) | Breach of Representations and Warranties by the Company. If the Company breaches any of the representations or warranties set forth in this Section 3, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an Event of Default under the Note. |
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(iii) | Absence of Schedules. In the event that at the Closing Date, the Company does not deliver and attach hereto any disclosure schedule contemplated by this Agreement, the Company hereby acknowledges and agrees that (i) each such undelivered disclosure schedule shall be deemed to read as follows: “Nothing to Disclose”, and (ii) the Buyer has not otherwise waived delivery of such disclosure schedule. |
4. | GENERAL COVENANTS. |
(a) | Best Efforts. The parties shall use their commercially reasonable best efforts to satisfy timely each of the conditions described in Section 7 and 8 of this Agreement. |
(b) | Use of Proceeds. The Company shall use the proceeds from the sale of the Notes first as set forth on Schedule 4(b), and thereafter for other general corporate purposes and shall not, directly or indirectly, use such proceeds for any loan to or investment in any other corporation, partnership, enterprise or other person. |
(c) | Financial Information. The Company agrees to send or make available the following reports to the Buyer until the Buyer transfers, assigns, or sells all of the Securities: (i) within ten (10) days after the filing with the SEC, a copy of its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K; (ii) within five (5) days after upload or filing, any filings made in the SEC Documents, OTC Filings and Disclosures; (iii) within one (1) day after release, copies of all press releases issued by the Company or any of its Subsidiaries relating to the transactions contemplated hereby; and (iv) contemporaneously with the making available or giving to the stockholders of the Company, copies of any notices or other information the Company makes available or gives to such stockholders. For the avoidance of doubt, filing the documents required in (i) above via EDGAR or releasing any documents set forth in (ii) above via a recognized wire service shall satisfy the delivery requirements of this Section 4(c). |
(d) | Listing. The Company shall work in good faith to secure the listing of the Conversion Shares, the Commitment Shares, and the Warrant Shares upon each national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and, so long as the Buyer owns any of the Securities, shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all Conversion Shares, Commitment Shares, and all Warrant Shares from time to time issuable upon exercise of the Note and the Warrant, respectively. The Company will obtain and, so long as the Buyer owns any of the Securities, maintain the listing and trading of its Common Stock on the Trading Market and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Financial Industry Regulatory Authority (“FINRA”) and such exchanges, as applicable. |
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(e) | Corporate Existence. So long as the Buyer beneficially owns any of the Securities, the Company shall maintain its corporate existence and shall not sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or sale of all or substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s obligations hereunder and under the agreements and instruments entered into in connection herewith and (ii) is a publicly traded corporation whose Common Stock is listed or quoted for trading on the Trading Market. |
(f) | No Integration. The Company shall not make any offers or sales of any security (other than the Securities) under circumstances that would require registration of the Securities being offered or sold hereunder under the Securities Act or cause the offering of the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision applicable to the Company or its securities. |
(g) | Failure to Comply with the Exchange Act. So long as the Buyer beneficially owns any of the Securities, the Company shall comply with the reporting requirements of the Exchange Act; and the Company be subject to the periodic reporting and other reporting requirements of the Exchange Act. |
(h) | Breach of Covenants. If the Company breaches any of the covenants set forth in this Section 4, then in addition to any other remedies available to the Buyer pursuant to this Agreement, each such breach will be considered an “Event of Default” under the Note. |
(i) | Reservation of Shares. The Company covenants that while the Note and/or Warrant remain outstanding, the Company will reserve from its authorized and unissued Common Stock, five times (500%) of the number of shares of Common Stock, free from pre-emptive rights, that would be issuable upon full, unconditioned conversion of the Note and exercise of the Warrant calculated on the basis of the conversion price and exercise price, respectively, in effect as the Closing Date, which such reserved amounts shall be increased by the Company from time to time in accordance with its obligations under such Securities. In addition to all other rights in this Agreement and the Note, in the event that on any date (the “Reserve Depletion Date”) the Company does not have available enough authorized shares of Common Stock to satisfy any conversion request regarding the Note, or exercise of the Warrant, the Company shall repay all outstanding amounts owed under the Note in full within sixty (60) days of the Reserve Depletion Date. |
(j) | Indemnification. Each party hereto (an “Indemnifying Party”) agrees to indemnify and hold harmless the other party along with its officers, directors, employees, and authorized agents, and each Person or entity, if any, who controls such party within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act or the rules and regulations thereunder (an “Indemnified Party”) from and against any Damages, joint or several, and any action in respect thereof to which the Indemnified Party becomes subject to, resulting from, arising out of or relating to any misrepresentation, breach of warranty or nonfulfillment of or failure to perform any covenant or agreement on the part of the Indemnifying Party contained in this Agreement. |
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(k) | Certain Expenses and Fees. The Company shall pay all stamp taxes and other taxes and duties levied in connection with the delivery of the Note to the Buyer. In addition, the Buyer shall be entitled to withhold $3,500 for the Buyer’s transaction expenses from the amounts delivered at Closing. |
5. | SPECIAL COVENANTS |
(a) | Piggyback Registration Rights. The Company shall include on any registration and/or offering statement filed with the SEC, including without limitation on any offering statement on Form 1-A, all Conversion Shares, all Warrant Shares, and all Commitment Shares for resale by the Buyer. In addition to all other remedies at law or in equity or otherwise under this Agreement or other Transaction Documents, failure to do so will result in liquidated damages of $20,000.00 pursuant to this Section 5(a), being immediately due and payable to the Buyer at its election in the form of cash payment. |
(b) | Variable Rate Transactions. The Company covenants and agrees that it will not, without the prior written consent of the Buyer, enter into any equity line of credit agreement with any other party or enter into any transaction resulting in, or with, any Variable Security Holders, excluding the Buyer, without the Buyer’s prior written consent, which consent may be granted or withheld in the Buyer’s sole and absolute discretion unless the proceeds of such transaction are used first and primarily to repay the Note in full; provided that such arrangements evidenced by written agreements that exist as of the Execution Date shall not be subject to the provisions of this Section 5(b). “Variable Security Holder” means any holder of any securities of the Company that (A) have or may have conversion rights of any kind, contingent, conditional or otherwise, in which the number of shares that may be issued pursuant to such conversion right varies with the market price of the Common Stock, and/or (B) are or may become convertible into Common Stock (including without limitation convertible debt, warrants or convertible preferred stock), with a conversion price that varies with the market price of the Common Stock, even if such security only becomes convertible following an event of default, the passage of time, or another trigger event or condition. |
(c) | Regulation A Offering Participation. |
(i) | During the twelve (12) months immediately following the Closing, with respect to any Regulation A offering conducted by the Company on Form 1-A, or successor/similar form, filed by the Company with the SEC (a “Reg A+ Offering”), the Company agrees to, and hereby does, irrevocably grant to the Buyer the option to purchase up to $1,000,000.00 worth of the securities offered by the Company in the Reg A+ Offering at the applicable prices thereunder (such grant, the “Participation Right”). The Buyer shall hold the Participation Right from the date that the SEC declares the subject Reg A+ Offering statement “qualified” (the “Qualification Date”) until the date that is the earlier of (i) 180 days after the Qualification Date or (ii) the date that the Buyer has purchased aggregate of $1,000,000 of securities from such offering statement. |
(ii) | Within 30 days after the Closing, the Company shall successfully file an offering statement to conduct a Reg A+ Offering with the SEC. |
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(iii) | The Company shall use its best efforts take all necessary action to cause the offering statement referenced in Section 5(c)(ii) above to be declared “qualified” by the SEC within 30 days after the Closing. |
(d) | Participation Rights. During the twelve (12) months immediately following the Closing, with respect to each and any securities offering conducted by the Company, the Company agrees to, and hereby does, irrevocably grant to the Buyer the option to purchase up to $1,000,000 worth of the securities offered in such offering at the applicable offering prices thereunder. |
(e) | Repayment from Proceeds. While any portion of the Note is outstanding, if the Company receives cash proceeds from any source or series of related or unrelated sources, including but not limited to, from payments from customers, the issuance of equity or debt, the conversion of outstanding warrants of the Company, the issuance of securities pursuant to an equity line of credit of the Company or the sale of assets, the Company shall, within one (1) business day of the Company’s receipt of such proceeds, inform the Buyer of such receipt, following which the Buyer shall have the right in its sole discretion to require the Company to immediately apply all or any portion of such proceeds to repay all or any portion of the outstanding amounts owed under the Note. In the event that such proceeds are received by the Holder (as defined in the Note) prior to the Maturity Date (as defined in the Note), the required prepayment shall be subject to all prepayment terms in the Note. |
(f) | Right of First Refusal. During the twelve (12) months immediately following the Closing, in the event that the Company receives a Bona Fide Offer (defined below) of capital or financing from any third party consisting of any securities offering, including but not limited to any debt or equity securities, then the Company must, and irrevocably agrees to, first offer such opportunity to the Buyer to provide such capital or financing to the Company on the same or similar terms as each respective third party’s terms, and the Buyer may in its sole discretion determine whether the Buyer will provide such capital or financing. Upon receipt of the third party offer, the Company shall promptly provide notice thereof to the Buyer (the “Offer Notice”) and provide copies of the pending transaction documents. Should the Buyer be unwilling or unable to provide such capital or financing to the Company within two (2) Trading Days from the Buyer’s receipt of the Offer Notice from the Company, then the Company may obtain such capital or financing from the respective third party upon the exact same terms and conditions offered by the Company to the Buyer, which transaction must be completed within seven (7) Trading Days after the date of the Offer Notice. If the Company does not receive the capital or financing from the respective third party within seven (7) Trading Days after the date of the respective Offer Notice, then the Company must again offer the capital or financing opportunity to the Buyer as described above, and the process detailed above shall be repeated. A “Bona Fide Offer” is one in which the purchaser is irrevocably and contractually bound to purchase the subject securities from the Company, subject to the Buyer’s right of first refusal. |
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(g) | Compliance with Rule 15c2-11. The Company take all actions to maintain as publicly available all information required by paragraph (b) of Rule 15c2-11 of the Exchange Act (as effective on September 26, 2021), as amended, such that brokers or dealers attempting to publish any quotation for the Common Stock or, directly or indirectly, to submit any such quotation for publication, shall be able to comply with Rule 15c2-11(a). |
(h) | Prohibition on Certain Transactions. The Buyer covenants and agrees that neither it, nor any affiliate acting on its behalf or pursuant to any understanding with it will execute any “short sales” of the Common Stock as defined in Rule 200 of Regulation SHO under the Exchange Act. |
(i) | Security Agreement. On the Execution Date, the Company shall execute and deliver the Security Agreement to the Buyer. |
(j) | Registration Rights. |
(i) | Mandatory Registration. The Company shall, by the first anniversary of the Execution Date, file with the SEC an initial registration statement on Form S-1 covering the resale of the maximum number of Registrable Securities as shall be permitted to be included thereon (in such amounts as to the specific Registrable Securities included therein as mutually identified by the Buyer, the Company and their respective legal counsel) in accordance with applicable SEC rules, regulations and interpretations so as to permit the resale of such Registrable Securities by the Buyer, including but not limited to under Rule 415 under the Securities Act at then prevailing market prices (and not fixed prices), as mutually determined by both the Company and the Buyer in consultation with their respective legal counsel (the “Initial Registration Statement”). The Initial Registration Statement shall register only the Registrable Securities. The Company shall use its best efforts to have the Initial Registration Statement and any amendment thereto declared effective by the SEC at the earliest possible date. The Initial Registration Statement shall, in any event, be declared effective within four hundred (400) calendar days after the Execution Date. Rule 424 Prospectus. In addition to the Initial Registration Statement, the Company shall, as required by applicable securities regulations, from time to time file with the SEC, pursuant to Rule 424 promulgated under the Securities Act, such prospectuses and prospectus supplements to be used in connection with sales of the Registrable Securities under each Registration Statement. The Buyer and its counsel shall have a reasonable opportunity to review and comment upon such prospectuses prior to its filing with the SEC, and the Company shall give due consideration to all such comments. The Buyer and its counsel shall use their reasonable best efforts to comment upon any prospectus within three (3) business days from the date the Buyer receives the final pre-filing version of such prospectus. |
(ii) | Sufficient Number of Shares Registered. In the event the number of shares available under the Initial Registration Statement is insufficient to cover all of the Registrable Securities, the Company shall amend the Initial Registration Statement or file a new registration statement (a “New Registration Statement”), so as to cover the resale of all of such Registrable Securities as soon as practicable, but in any event not later than ten (10) business days after the necessity therefor arises and the Company’s financial statements as filed with the SEC are current as would be required by such New Registration Statement, subject to any limits that may be imposed by the SEC pursuant to Rule 415 under the Securities Act. The Company shall use its reasonable best efforts to cause such amendment and/or New Registration Statement to become effective as soon as practicable following the filing thereof. |
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(iii) | Effectiveness. The Buyer and its counsel shall have a reasonable opportunity to review and comment upon any registration statement and any amendment or supplement to such registration statement and any related prospectus regarding the Registrable Securities prior to its filing with the SEC, and the Company shall give due consideration to all reasonable comments. The Company shall use best efforts to keep all registration statements covering Registrable Securities effective, including but not limited to pursuant to Rule 415 promulgated under the Securities Act and available for use by the Buyer for the resale of all of the Registrable Securities covered thereby at all times until the earlier of (i) the date as of which the Buyer may sell all of the Registrable Securities without restriction pursuant to Rule 144 promulgated under the Securities Act without any restrictions (including any restrictions under Rule 144(c) or Rule 144(i)) and (ii) the date on which the Buyer shall have sold all the Registrable Securities. Each registration statement (including any amendments or supplements thereto and prospectuses contained therein) filed by the Company shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading. The Company shall take all actions necessary prior to the filing of the Initial Registration Statement to cause itself to be fully reporting and “current” for purposes of being a public company subject to Section 13 or 15(d) of the Exchange Act of 1934, which requires the company to file periodic reports with the SEC. |
(iv) | Offering. If the staff of the SEC (the “Staff”) or the SEC seeks to characterize any offering pursuant to a registration statement filed pursuant to this Agreement as constituting an offering of securities that does not permit such registration statement to become or remain effective and be used for resales by the Buyer under Rule 415 at then-prevailing market prices (and not fixed prices) by comment letter or otherwise, or if after the filing of the Initial Registration Statement with the SEC, the Company is otherwise required by the Staff or the SEC to reduce the number of Registrable Securities included in such Initial Registration Statement, then the Company shall reduce the number of Registrable Securities to be included in such Initial Registration Statement (in such amounts of specific Registrable Securities as the Buyer, the Company and their respective legal counsel shall mutually agree to be removed therefrom) until such time as the Staff and the SEC shall so permit such registration statement to become effective and be used as aforesaid. In the event of any reduction in Registrable Securities pursuant to this paragraph, the Company shall file one or more New Registration Statements in accordance with subsection 5(k)(iii) above until such time as all Registrable Securities have been included in Registration Statements that have been declared effective and the prospectus contained therein is available for use by the Buyer. Notwithstanding any provision herein to the contrary, the Company’s obligations to register Registrable Securities shall be qualified as necessary to comport with any requirement of the SEC or the Staff as addressed in this Section 5(k)(v). |
(k) | Breach of Covenants. If the Company breaches any of the covenants set forth in this Section 5, then in addition to any other remedies available to the Buyer pursuant to this Agreement, each such breach will be considered an “Event of Default” under the Note. |
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6. | Transfer Agent Instructions. Prior to registration of the Conversion Shares and the Warrant Shares under the Securities Act or the date on which the Conversion Shares or the Warrant Shares may be sold pursuant to Rule 144 without any restriction as to the number of Securities as of a particular date that can then be immediately sold, all such certificates shall bear the restrictive legend specified in the Note or Warrants as applicable. The Company warrants that: (i) no stop transfer instructions will be given by the Company to its Transfer Agent and that the Securities shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Note; (ii) it will not direct its Transfer Agent not to transfer or delay, impair, and/or hinder its Transfer Agent in transferring (or issuing) (electronically or in certificated form) any certificate for Conversion Shares or Warrant Shares to be issued to the Buyer upon conversion/exercise of or otherwise pursuant to the Note or the Warrant, respectively, as and when required by the Note, the Warrant or this Agreement; and (iii) it will not fail to remove (or direct its Transfer Agent not to remove or impairs, delays, and/or hinders its Transfer Agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Conversion Shares or any Warrant Shares as contemplated by the terms of this Agreement, the Note and the Warrant, as applicable. Nothing in this Section shall affect in any way the Buyer’s obligations and agreement to comply with all applicable prospectus delivery requirements, if any, upon re-sale of the Securities. If the Buyer provides the Company (which shall be at the cost of the Company), with (i) an opinion of counsel in form, substance and scope customary for opinions in comparable transactions, to the effect that a public sale or transfer of any Securities may be made without registration under the Securities Act and such sale or transfer is effected or (ii) the Buyer provides reasonable assurances that the Securities can be sold pursuant to Rule 144, the Company shall permit the transfer, and, in the case of the Conversion Shares, the Commitment Shares, and the Warrant Shares, promptly instruct its Transfer Agent to issue one or more certificates, free from restrictive legend, in such name and in such denominations as specified by the Buyer or, in the sole discretion of the Buyer, the Company shall take all action necessary to ensure that such Common Stock is transferred electronically as DWAC (as defined in the Note) shares. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer, by vitiating the intent and purpose of the transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section may be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section, that the Buyer shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate transfer, without the necessity of showing economic loss and without any bond or other security being required. |
7. | CONDITIONS PRECEDENT TO THE COMPANY’S OBLIGATIONS TO SELL. The obligation of the Company hereunder to issue and sell any Note, Warrant, and Commitment Shares to the Buyer at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions thereto, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion: |
(a) | The Buyer shall have executed this Agreement and delivered the same to the Company. |
(b) | The Buyer shall have delivered the Company Funding Amount in accordance with Section 1 above. |
(c) | The representations and warranties of the Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), and the Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to the Closing Date. |
(d) | No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement. |
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8. | CONDITIONS PRECEDENT TO THE BUYER’S OBLIGATION TO PURCHASE. The obligation of the Buyer hereunder to purchase any Note and fund such Note at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions, provided that these conditions are for the Buyer’s sole benefit and may be waived by the Buyer at any time in its sole discretion: |
(a) | The Company shall have executed this Agreement and delivered the same to the Buyer on the Closing Date. |
(b) | The Company shall have delivered to the Buyer the duly executed Note and the Commitment Shares in accordance with Section 1 above on the Closing Date or Restatement Date, as applicable. |
(c) | The Company shall have delivered to the Buyer the duly executed Warrant on the Closing Date. |
(d) | The Company shall have delivered to the Buyer the duly executed Transfer Agent Instruction Letter on the Closing Date. |
(e) | The Company shall have delivered a copy of its Directors’ resolutions relating to the transactions contemplated hereby, the form of which is attached hereto as Exhibit D, on the Closing Date. |
(f) | The Company shall have delivered to the Buyer the duly executed Security Agreement in the form attached hereto as Exhibit E. |
(g) | No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement, as of the Closing Date. |
(h) | No event shall have occurred which could reasonably be expected to have a Material Adverse Effect on the Company including but not limited to a change in the Exchange Act reporting status of the Company or the failure of the Company to be timely in its Exchange Act reporting obligations, as of the Closing Date. |
(i) | The Company shall have delivered to the Buyer a copy of its certificate of good standing with the State of Nevada dated within five (5) days of the Closing. |
(j) | The Company shall have delivered a legal opinion to the Buyer regarding the enforceability of the Transaction Documents in form and substance acceptable to the Buyer. |
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(k) | The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Execution Date and the Closing Date as though made at such time (except for representations and warranties that speak as of a specific date, which shall be true and correct in all material respects as of such specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date. The Buyer shall have received a certificate or certificates, executed by the chief executive officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Buyer, in the form prescribed by the Buyer. |
9. | GOVERNING LAW; MISCELLANEOUS. |
(a) | Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Wyoming without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of Miami, Florida, or in the federal courts located in the Southern District of Florida. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. |
(b) | JURY TRIAL WAIVER. THE COMPANY AND THE BUYER HEREBY WAIVE A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER IN RESPECT OF ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THE TRANSACTION DOCUMENTS. |
(c) | Counterparts; Signatures by Electronic Mail. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. This Agreement, once executed by a party, may be delivered to the other party hereto by electronic mail transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement. |
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(d) | Headings. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement. |
(e) | Severability. In the event that any provision of this Agreement or of any of the Transaction Documents is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof. |
(f) | Entire Agreement; Amendments. This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the Buyer. |
(g) | Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (a) personally served, (b) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (c) delivered by reputable air courier service with charges prepaid, or (d) transmitted by hand delivery, or e-mail as a PDF (with read receipt), addressed as set forth below or to such other address as such party shall have specified most recently by written notice given in accordance herewith. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (i) upon hand delivery or delivery by e-mail (with read receipt) at the address designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (ii) on the second business day following the date of mailing by express courier service or on the fifth business day after deposited in the mail, in each case, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. |
If to the Company, to:
BOATIM, INC.
7950 NW 53rd Street Suite 337
Miami, FL 33166
Attn: Joseph Johnson, CEO
E-mail: [___________________]
If to the Buyer, to:
QUICK CAPITAL, LLC
66 West Flagler Street, 900-#2292
Miami, FL 33130
Attn: Eilon D. Natan, Manager
E-mail: eilon@quick-cap.com
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Either party hereto may from time to time change its address or e-mail for notices under this Section 9(g) by giving at least ten (10) days’ prior written notice of such changed address to the other party hereto.
(h) | Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, subject to Section 2(e), the Buyer may assign its rights hereunder to any person that purchases Securities in a private transaction from the Buyer or to any of its “affiliates,” as that term is defined under the Exchange Act, without the consent of the Company. |
(i) | Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person. |
(j) | Survival. The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the Closings hereunder as well as the termination/satisfaction of the Note for the longest period allowable under applicable law. The Company agrees to indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a result of or related to any breach by the Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred. |
(k) | Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. |
(l) | No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. |
(m) | Remedies. |
(i) | The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing economic loss and without any bond or other security being required. |
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(ii) | In addition to any other remedy provided herein or in any document executed in connection herewith, the Company shall pay the Buyer for all costs, fees and expenses in connection with any arbitration, litigation, contest, dispute, suit or any other action to enforce any rights of the Buyer against the Company in connection herewith, including, but not limited to, costs and expenses and attorneys’ fees, and costs and time charges of counsel to the Buyer. |
(n) | Publicity. The Company and the Buyer shall have the right to review a reasonable period of time before issuance of any press releases, SEC, Trading Market, or FINRA filings, or any other public statements with respect to the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior approval of the Buyer, to make any press release or SEC, Trading Market or FINRA filings with respect to such transactions as is required by applicable law and regulations (although the Buyer shall be consulted by the Company in connection with any such press release prior to its release and shall be provided with a copy thereof). |
10. | DEFINED TERMS. As used in this Agreement, the following terms shall have the following meanings specified or indicated (such meanings to be equally applicable to both the singular and plural forms of the terms defined): |
“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person, and the term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of such Person, whether through ownership of voting securities, by contract or otherwise.
“Common Stock Equivalents” means any securities of the Company or the Subsidiaries that would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
“Damages” shall mean any loss, claim, damage, liability, cost and expense (including, without limitation, reasonable attorneys’ fees and disbursements and costs and expenses of expert witnesses and investigation).
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Hazardous Material” means and includes any hazardous, toxic or dangerous waste, substance or material, the generation, handling, storage, disposal, treatment or emission of which is subject to any Environmental Law.
“Knowledge” including the phrase “to the Company’s Knowledge” shall mean the actual knowledge after reasonable investigation of the Company’s officers and directors.
“Lien” means a lien, charge, pledge, security interest, encumbrance, right of first refusal, pre-emptive right or any other restriction.
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“Material Adverse Effect” means any effect on the business, operations, properties, or financial condition of the Company and/or the Subsidiaries that is material and adverse to the Company and/or the Subsidiaries and/or any condition, circumstance, or situation that prohibits or otherwise materially interferes with the ability of the Company and/or the Subsidiaries to enter into and/or perform its obligations under any Transaction Document.
“OTC Filings and Disclosures” shall mean the Company’s documents uploaded as of the Execution Date onto the Company’s “Filings and Disclosures” page on the OTCMarkets.com website.
“Person” means an individual, a corporation, a partnership, an association, a trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.
“Registrable Securities” means all of the Commitment Shares, Conversion Shares and Warrant Shares, and any and all shares of capital stock issued or issuable as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise, without regard to any limitation on issuances under any of the Transaction Documents.
“Securities” means, collectively, the Note, the Conversion Shares, the Warrant, the Warrant Shares, the Commitment Shares, and any other securities of the Company issued in connection with or in exchange for any of the foregoing.
“Security Agreement” means that certain Security Agreement between the parties as attached hereto as Exhibit E.
“Subsidiary” or “Subsidiaries” means any Person the Company wholly-owns or controls, or in which the Company, directly or indirectly, owns a majority of the voting stock or similar voting interest, in each case that would be disclosable pursuant to Item 601(b)(21) of Regulation S-K promulgated under the Securities Act.
“Trading Day” shall mean a day on which the NASDAQ stock market shall be open for business.
“Trading Market” means the OTC-PINK market of the OTC-Markets.
“Transaction Documents” shall mean this Agreement, the Note, the Warrant, the Security Agreement, the Transfer Agent Instruction Letter and all schedules and exhibits hereto and thereto.
“Transfer Agent” shall mean the current transfer agent of the Company, and any successor transfer agent of the Company.
“Transfer Agent Instruction Letter” means the letter from the Company to the Transfer Agent in the form of Exhibit C attached hereto.
** signature page follows **
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IN WITNESS WHEREOF, the Buyer and the Company have caused their respective signature page to this Amended and Restated Note Purchase Agreement to be duly executed as of the Restatement Date.
COMPANY: | ||
BOATIM, INC. | ||
By: | ||
Name: | Joseph Johnson | |
Title: | CEO | |
BUYER: | ||
QUICK CAPITAL, LLC | ||
By: | ||
Name: | Eilon D. Natan | |
Title: | Manager |
** Signature Page to Amended and Restated Note Purchase Agreement **
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ISSUANCE SCHEDULE
FEBRUARY CLOSING
(1) | (2) | (3) | (4) | (5) |
Buyer |
Face Value of Note |
Warrant Shares | Number of Commitment Shares |
Funding Amount |
Quick Capital, LLC | $163,077* | 724,058 | 1,810,145** |
$143,166*** |
* | The Face Value of the Note includes an original issuance discount of $18.101.45. |
** | An aggregate of 1,810,145 Commitment Shares are being issued on or before the Restatement Date, and the balance of shares issued on the True-up Date. |
*** | The Buyer has the right to withhold from the funding its transaction costs, and any commissions due to the Company’s broker. |
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DISCLOSURE SCHEDULES
Schedule 3(b)(v)
The Company’s broker is entitled to a payment of $3,333 for its services in connection with the transaction contemplated by this Agreement.
Schedule 3(c)(i)
Except as disclosed in the SEC Documents, OTC Filings and Disclosures, neither the Company nor any of its Subsidiaries has:
(1) declared, set aside or paid any dividend or other distribution with respect to any shares of capital stock of the Company or any of its Subsidiaries or any direct or indirect redemption, purchase or other acquisition of any such shares;
(2) sold, assigned, pledged, encumbered, transferred or otherwise disposed of any tangible asset of the Company or any of its Subsidiaries (other than sales or the licensing of its products to customers in the ordinary course of business consistent with past practice), or sold, assigned, pledged, encumbered, transferred or otherwise disposed of any Intellectual Property (as defined below), other than licensing of products of the Company or its Subsidiaries in the ordinary course of business and on a non-exclusive basis;
(3) entered into any licensing or other agreement with regard to the acquisition or disposition of any Intellectual Property other than licenses in the ordinary course of business consistent with past practice or any amendment or consent with respect to any licensing agreement filed or required to be filed with respect to any governmental authority;
(4) made capital expenditures, individually or in the aggregate, in excess of $100,000;
(5) incurred any obligation or liability (whether absolute, accrued, contingent or otherwise, and whether due or to become due) on the Company’s behalf or any of its Subsidiaries, in excess of $100,000 individually, other than obligations under customer contracts, current obligations and liabilities, in each case incurred in the ordinary course of business and consistent with past practice;
(6) had any Lien on any property of the Company or any of its Subsidiaries except as disclosed in the SEC Documents, OTC Filings and Disclosures;
(7) made any payment, discharge, satisfaction or settlement of any suit, action, claim, arbitration, proceeding or obligation of the Company or any of its Subsidiaries, except in the ordinary course of business and consistent with past practice;
(8) effected any split, combination or reclassification of any equity securities;
(9) sustained any material loss, destruction or damage to any property of the Company or any Subsidiary, whether or not insured;
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(10) effected any acceleration or prepayment of any indebtedness for borrowed money or the refunding of any such indebtedness;
(11) experienced any labor trouble involving the Company or any Subsidiary or any material change in their personnel or the terms and conditions of employment;
(12) made any waiver of any valuable right, whether by contract or otherwise;
(13) made any loan or extension of credit to any officer or employee of the Company;
(14) made any change in the independent public accountants of the Company or its Subsidiaries or any material change in the accounting methods or accounting practices followed by the Company or its Subsidiaries, as applicable, or any material change in depreciation or amortization policies or rates;
(15) experienced any resignation or termination of any officer, key employee or group of employees of the Company or any of its Subsidiaries;
(16) effected any change in any compensation arrangement or agreement with any employee, officer, director or stockholder that would result in the aggregate compensation to such Person in such year to exceed $100,000;
(17) effected any material increase in the compensation of employees of the Company or its Subsidiaries (including any increase pursuant to any written bonus, pension, profit sharing or other benefit or compensation plan, policy or arrangement or commitment), or any increase in any such compensation or bonus payable to any officer, stockholder, director, consultant or agent of the Company or any of its Subsidiaries having an annual salary or remuneration in excess of $100,000;
(18) made any revaluation of any of their respective assets, including, without limitation, writing down the value of capitalized inventory or writing off notes or accounts receivable or any sale of assets other than in the ordinary course of business;
(19) made any acquisition or disposition of any material assets (or any contract or arrangement therefor), or any other material transaction by the Company or any Subsidiary otherwise than for fair value in the ordinary course of business;
(20) written-down the value of any asset of the Company or its Subsidiaries or written-off as uncollectible of any accounts or notes receivable or any portion thereof except in the ordinary course of business and in a magnitude consistent with historical practice;
(21) cancelled any debts or claims or any material amendment, termination or waiver of any rights of the Company or its Subsidiaries; or
(22) entered into any agreement, whether in writing or otherwise, to take any of the actions specified in the foregoing items (1) through (21).
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SCHEDULE 4(b)
Use of Proceeds
(1) | Expenses incurred in connection with completing initial Reg A+ Offering, and |
(2) | General working capital. |
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EXHIBITS
A - NOTE
B - WARRANT
C - TRANSFER AGENT INSTRUCTIONS
D - BOARD RESOLUTIONS
E - SECURITY AGREEMENT
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Exhibit 10.20
NEITHER THE ISSUANCE NOR SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES FILED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
Principal Amount: $163,077 | Issue Date: January 7, 2022 |
AMENDED AND RESTATED SECURED CONVERTIBLE PROMISSORY NOTE
FOR VALUE RECEIVED, as of January 7, 2021 (the “Issue Date”), BOATIM, INC., a Nevada corporation (hereinafter called the “Borrower” or “Company”), hereby promises to pay to the order of Quick Capital, LLC, a Wyoming limited liability company, or its registered assigns (the “Holder”), the principal sum of $163,077, payable upon the earlier of maturity or upon acceleration or upon prepayment of this Note as set forth herein. The term “Note” and all references thereto, as used throughout this instrument, shall mean this instrument as originally executed on the Issue Date, as amended and restated on February [___], 2022 (the “Restatement Date”), or if later amended or supplemented, then as so amended or supplemented. This Note shall have a one-time interest charge of $18,101.45. The maturity date of this Note shall be the date that is eight (8) months after the Issue Date (the “Maturity Date”), and is the date upon which the principal amount, as well as any accrued and unpaid interest and other fees, shall be due and payable. This Note may be prepaid in whole or in part as explicitly set forth herein. All payments due hereunder (to the extent not converted into common stock of the Company, $0.001 par value per share (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date. As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of Miami, Florida are authorized or required by law or executive order to remain closed. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Note Purchase Agreement dated February [__], 2022, pursuant to which this Note was originally issued (as amended and/or restated from time to time, the “Purchase Agreement”).
The cash consideration delivered to the Borrower at the closing of this Note is $143,166 as this Note is being issued with an $18,101.45 original issuance discount, and with the balance of the principal amount being withheld to offset transaction and legal costs of the Holder.
This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.
The Company hereby affirms all of its obligations to the Holder under all of the Transaction Documents and agrees and affirms as follows: (i) that as of the Issue Date, the Company has performed, satisfied and complied in all material respects with all the covenants, agreements and conditions under each of the Transaction Documents to be performed, satisfied or complied with by the Company; (ii) that the Company shall continue to perform each and every covenant, agreement and condition set forth in each of the Transaction Documents and this Note, and continue to be bound by each and all of the terms and provisions thereof and hereof; (iii) that as of the Issue Date, no default or Event of Default has occurred or is continuing under the Purchase Agreement, the Note or any other Transaction Documents, and no event has occurred that, with the passage of time, the giving of notice, or both, would constitute a default or an Event of Default under the Purchase Agreement, the Note or any other Transaction Documents; and (iv) that as of the Issue Date, no event, fact, or other set of circumstances has occurred which could reasonably be expected to have, cause, or result in a Material Adverse Effect.
The Company hereby acknowledges, represents, warrants and confirms to the Holder that: (i) each of the Transaction Documents executed by the Company are valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms; and (ii) no oral representations, statements, or inducements have been made by Holder, or any agent or representative of Holder, with respect to this Note, the Purchase Agreement, and all other Transaction Documents.
This Note shall be a first senior secured obligation of the Borrower, with priority over all existing and future Indebtedness (as defined below) of the Borrower as provided for herein. The obligations of the Borrower under this Note are secured pursuant to the terms of the security agreement of even date herewith by and between the Borrower and the Holder, and such security interest includes but is not limited to all of the assets of the Borrower. So long as the Borrower shall have any obligation under this Note, the Borrower shall not (directly or indirectly through any subsidiary or affiliate) incur or suffer to exist or guarantee any Indebtedness that is senior to or pari passu with (in priority of payment and performance) the Borrower’s obligations hereunder. For purposes of this paragraph, the term “Borrower” shall include any subsidiary of the Borrower in addition to the Borrower. As used herein, the term “Indebtedness” means (a) all indebtedness of the Borrower for borrowed money or for the deferred purchase price of property or services, including any type of letters of credit, but not including deferred purchase price obligations in place as of the Issue Date and as disclosed in the OTC Filings and Disclosures or the SEC Documents or obligations to trade creditors incurred in the ordinary course of business, (b) all obligations of the Borrower evidenced by notes, bonds, debentures or other similar instruments, (c) purchase money indebtedness hereafter incurred by the Borrower to finance the purchase of fixed or capital assets, including all capital lease obligations of the Borrower which do not exceed the purchase price of the assets funded, (d) all guarantee obligations of the Borrower in respect of obligations of the kind referred to in clauses (a) through (c) above that the Borrower would not be permitted to incur or enter into, and (e) all obligations of the kind referred to in clauses (a) through (d) above that the Borrower is not permitted to incur or enter into that are secured and/or unsecured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured and/or unsecured by) any lien or encumbrance on property (including accounts and contract rights) owned by the Borrower, whether or not the Borrower has assumed or become liable for the payment of such obligation.
The following additional terms shall also apply to this Note:
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ARTICLE
I
CONVERSION RIGHTS
1.1 Conversion Right. The Holder shall have the right at any time, and from time to time, on or after the Issue Date to convert all or any part of the outstanding and unpaid principal, interest, fees, or any other obligation owed pursuant to this Note into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the Conversion Price (as defined below) selected by the Holder for any particular conversion, determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of this Note or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the Conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso. The number of shares of Common Stock to be issued upon each Conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) (the numerator) by the applicable Conversion Price then in effect on the date specified in the notice of conversion (the denominator), in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., Miami, Florida time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any Conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such Conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, provided however, that the Borrower shall have the right to pay any or all interest in cash plus (3) at the Holder’s option, fees on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.
1.2 Conversion Price. Subject to the adjustments described herein, this Note shall be convertible into shares of Common Stock at any time, and from time to time, in any portion at either of the Reg A+ Conversion Price, the Fixed Conversion Price, or the Default Conversion Price, in the sole discretion of the Holder. “Conversion Price” means the then applicable Fixed Conversion Price, Reg A+ Conversion Price, Default Conversion Price or other conversion price as determined in accordance with this Note as selected by the Holder in connection with any particular Conversion. The Conversion Price shall be automatically adjusted equitably for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, as well as combinations, recapitalization, reclassifications, extraordinary distributions and similar events:
(a) Reg A+ Conversion Price. Pursuant to Section 5 of the Purchase Agreement, the Borrower is obligated to qualify in any Reg A+ Offering the shares of Common Stock underlying this Note (which this Note is convertible into, i.e. the Conversion Shares). At any time, and from time to time, the Holder may utilize the Reg A+ Conversion Price for conversions of this Note into Common Stock. The Reg A+ Conversion Price shall be equal to the applicable “qualified” price per share that the Common Stock is being offered and issued by the Borrower in the Reg A+ Offering on its own behalf at that time (the “Reg A+ Conversion Price”).
(b) Fixed Conversion Price. At any time, and from time to time, the Holder may utilize the Fixed Conversion Price for conversions of this Note into Common Stock. The Fixed Conversion Price shall be a rate per share equal $0.13 per share (the “Fixed Conversion Price”). “Trading Day” shall mean any day on which the Common Stock is tradable for any period on the OTCBB, OTCQB or on the principal securities exchange or other securities market on which the Common Stock is then being quoted or traded.
(c) Default Conversion Price: Notwithstanding anything herein to the contrary, upon delivery by the Holder to the Borrower of a Default Notice (as defined herein) setting forth the Event of Default under the Note, at the sole option of the Holder the Default Conversion Price (as defined below) can be used by the Holder as the Conversion Price, at any time, and from time to time, thereafter while the Note remains outstanding. The “Default Conversion Price” shall mean $0.01 per share.
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(d) Additional Conversion Considerations. To the extent the Conversion Price of the Borrower’s Common Stock closes below the par value per share, the Borrower will take all steps necessary to solicit the consent of the stockholders to reduce the par value of the Common Stock to the lowest value possible under law. The Borrower agrees to honor all conversions submitted pending this adjustment. If the shares of the Borrower’s Common Stock have not been delivered within three (3) business days to the Holder, the Notice of Conversion may be rescinded by the Holder. If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Borrower and the Holder for which the calculation of the Trading Price is required in order to determine the Conversion Price of such Notes. If at any time the Conversion Price as determined hereunder for any conversion would be less than the par value of the Common Stock, then at the sole discretion of the Holder, the Conversion Price hereunder may equal such par value for such conversion and the Conversion Amount for such conversion may be increased to include Additional Principal, where “Additional Principal” means such additional amount to be added to the Conversion Amount to the extent necessary to cause the number of conversion shares issuable upon such conversion to equal the same number of conversion shares as would have been issued had the Conversion Price not been adjusted by the Holder to the par value price.
(e) Pro Rata Conversion; Disputes. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in connection with a conversion of this Note, the Borrower shall issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with this Note.
1.3 Authorized Shares. The Borrower covenants that during the period the Conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all times to have authorized and reserved five times (500%) the number of shares that is actually issuable upon full conversion of the Note (based on the Conversion Price of the Note in effect from time to time) (the “Reserved Amount”). The Reserved Amount shall be increased from time to time in accordance with the Borrower’s obligations pursuant to Section 4(i) of the Purchase Agreement. The Borrower represents that upon issuance, such shares of Common Stock will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which this Note shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Note. The Borrower (i) represents that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note. Notwithstanding the foregoing, in no event shall the Reserved Amount be lower than the initial Reserved Amount, regardless of any prior conversions.
Borrower’s failure to maintain or to replenish the Reserved Amount within three (3) business days of a request of the Holder, shall be an Event of Default under this Note.
1.4 Method of Conversion.
(a) Mechanics of Conversion. Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time from time to time on or after the Issue Date, by (i) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., Miami, Florida time) and (ii) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower.
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(b) Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such records of the Holder shall, prima facie, be controlling and determinative in the absence of manifest error. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.
(c) Payment of Taxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.
(d) Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates (or electronic shares via DWAC transfer, at the option of Holder) for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and the Purchase Agreement.
(e) Obligation of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is received by the Borrower before 6:00 p.m., Miami, Florida time, on such date.
(f) Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions contained in Section 1.1 and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal At Custodian (“DWAC”) system.
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(g) Failure to Deliver Common Stock Prior to Delivery Deadline. Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline (other than a failure due to the circumstances described in Section 1.3 above, which failure shall be governed by such Section) the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock until the Borrower issues and delivers a certificate to the Holder or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon such Holder’s conversion of any Conversion Amount (under Holder’s and Borrower’s expectation that any damages will tack back to the Issue Date). Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly, the parties acknowledge that the liquidated damages provision contained in this Section 1.4(g) are justified.
(h) Rescindment of a Notice of Conversion. If (i) the Borrower fails to respond to Holder within one (1) business day from the Conversion Date confirming the details of Notice of Conversion, (ii) the Borrower fails to provide any of the shares of the Borrower’s Common Stock requested in the Notice of Conversion within three (3) business days from the date of receipt of the Note of Conversion, (iii) the Holder is unable to procure a legal opinion required to have the shares of the Borrower’s Common Stock issued unrestricted and/or deposited to sell for any reason related to the Borrower’s standing, (iv) the Holder is unable to deposit the shares of the Borrower’s Common Stock requested in the Notice of Conversion for any reason related to the Borrower’s standing, (v) at any time after a missed Deadline, at the Holder’s sole discretion, or (vi) if OTC Markets Group, Inc. changes the Borrower’s designation to ‘Limited Information’ (Yield), ‘No Information’ (Stop Sign), ‘Caveat Emptor’ (Skull & Crossbones), ‘OTC’, ‘Other OTC’ or ‘Grey Market’ (Exclamation Mark Sign) or other trading restriction on the day of or any day after the Conversion Date, the Holder maintains the option and sole discretion to rescind the Notice of Conversion with a “Notice of Rescindment.”
1.5 Concerning the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the Securities Act of 1933, as amended 1933 Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the 1933 Act (or a successor rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an “accredited investor” (as defined in Rule 501(a) of the 1933 Act). Except as otherwise provided in the Purchase Agreement (and subject to the removal provisions set forth below), until such time as the shares of Common Stock issuable upon conversion of this Note have been registered under the 1933 Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:
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“NEITHER THE ISSUANCE OR SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”
The legend set forth above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration under the 1933 Act, which opinion shall be reasonably accepted by the Company so that the sale or transfer is effected or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold. In the event that the Company does not accept the opinion of counsel provided by the Holder with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline, and the does not provide a suitable replacement opinion to the Holder within two (2) business days, it will be considered an Event of Default pursuant to Section 3.2 of the Note.
1.6 Effect of Certain Events.
(a) Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either: (i) be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III) or (ii) be treated pursuant to Section 1.6(b) hereof. “Person” shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.
(b) Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, thirty (30) days prior written notice (but in any event at least fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(d). The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.
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(c) Adjustment Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.
(d) Adjustment Due to Dilutive Issuance. If, at any time when this Note is issued and outstanding, the Borrower issues or sells, or in accordance with this Section 1.6(d) hereof is deemed to have issued or sold, except for shares of Common Stock issued directly to vendors or suppliers of the Borrower in satisfaction of amounts owed to such vendors or suppliers (provided, however, that such vendors or suppliers shall not have an arrangement to transfer, sell or assign such shares of Common Stock prior to the issuance of such shares), any shares of Common Stock for no consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith) less than the Conversion Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (a “Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Conversion Price will be reduced to the amount of the consideration per share received by the Borrower in such Dilutive Issuance, subject to the Holder’s rights under Section 1.2 to select its Conversion Price.
The Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or grants any warrants, rights or options (not including employee stock option plans), whether or not immediately exercisable, to subscribe for or to purchase Common Stock or other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”) and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon the exercise of such Options” is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or granting of all such Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the exercise of all such Options, plus, in the case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion of Convertible Securities, if applicable). No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon exercise of such Options.
Additionally, the Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or sells any Convertible Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options), and the price per share for which Common Stock is issuable upon such conversion or exchange is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For the purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon such conversion or exchange” is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or sale of all such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.
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(e) Purchase Rights. If, at any time when any Notes are issued and outstanding, the Borrower issues any Convertible Securities or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.
(f) Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the events described in this Section 1.6, or under Section 1.2 (regarding stock splits, combinations, etc.), the Borrower, at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Borrower shall, upon the written request at any time of the Holder, furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of the Note.
1.7 Trading Market Limitations. Unless permitted by the applicable rules and regulations of the principal securities market on which the Common Stock is then quoted, listed or traded, in no event shall the Borrower issue upon conversion of or otherwise pursuant to this Note more than the maximum number of shares of Common Stock that the Borrower can issue pursuant to any rule of the principal United States securities market on which the Common Stock is then traded (the “Maximum Share Amount”), subject to equitable adjustment from time to time for stock splits, stock dividends, combinations, capital reorganizations and similar events relating to the Common Stock occurring after the Issue Date. Once the Maximum Share Amount has been issued, if the Borrower fails to eliminate any prohibitions under applicable law or the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Borrower or any of its securities on the Borrower’s ability to issue shares of Common Stock in excess of the Maximum Share Amount, in lieu of any further right to convert this Note, this will be considered an Event of Default under Section 3.2 of the Note.
1.8 Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received certificates or transmission of such shares pursuant to Section 1.4(f) for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, if this Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted. In all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion default payments pursuant to Section 1.3 to the extent required thereby for such Conversion default and any subsequent Conversion default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section 1.2) for the Borrower’s failure to convert this Note.
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1.9 Prepayment. Notwithstanding anything to the contrary contained in this Note, the Borrower may prepay the amounts outstanding hereunder with the consent of the Holder pursuant to the following terms and conditions:
(a) At any time during the period beginning on the Issue Date and ending on the date which is day immediately prior to the Maturity Date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full by making a payment to the Holder of an amount in cash equal to 125%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note.
(b) Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional Prepayment Date”), the Borrower shall make payment of the applicable prepayment amount to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower delivers an Optional Prepayment Notice and fails to pay the applicable prepayment amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.
ARTICLE
II
CERTAIN COVENANTS
2.1 Distributions on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect of its capital stock except for distributions pursuant to any shareholders’ rights plan which is approved by a majority of the Borrower’s disinterested directors.
2.2 Restriction on Stock Repurchases. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Borrower or any warrants, rights or options to purchase or acquire any such shares.
2.3 Borrowings. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation of any person, firm, partnership, joint venture or corporation, except by the endorsement of negotiable instruments for deposit or collection, or suffer to exist any liability for borrowed money, except (a) borrowings in existence or committed on the Issue Date and of which the Borrower has informed Holder in writing prior to the Issue Date, (b) indebtedness to trade creditors financial institutions or other lenders incurred in the ordinary course of business or (c) borrowings, the proceeds of which shall be used to repay this Note.
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2.4 Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.
2.5 Advances and Loans. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, lend money, give credit or make advances to any person, firm, joint venture or corporation, including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances (a) in existence or committed on the Issue Date and which the Borrower has informed Holder in writing prior to the Issue Date, (b) made in the ordinary course of business or (c) not in excess of $15,000.
2.6 Section 3(a)(9) or 3(a)(10) Transaction. So long as this Note is outstanding, the Borrower shall not enter into any transaction or arrangement structured in accordance with, based upon, or related or pursuant to, in whole or in part, either Section 3(a)(9) of the 1933 Act (a “3(a)(9) Transaction”) or Section 3(a)(10) of the 1933 Act (a “3(a)(10) Transaction”). In the event that the Borrower does enter into, or makes any issuance of Common Stock related to a 3(a)(9) Transaction or a 3(a)(10) Transaction while this Note is outstanding, a liquidated damages charge of 25% of the outstanding principal balance of this Note, but not less than Fifteen Thousand Dollars ($15,000), will be assessed and will become immediately due and payable to the Holder at its election in the form of cash payment or addition to the balance of this Note.
2.7 Preservation of Existence, etc. The Borrower shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence, rights and privileges, and become or remain, and cause each of its Subsidiaries (other than dormant Subsidiaries that have no or minimum assets) to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary.
2.8 Non-circumvention. The Borrower hereby covenants and agrees that the Borrower will not, by amendment of its Certificate or Articles of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will at all times in good faith carry out all the provisions of this Note and take all action as may be required to protect the rights of the Holder.
2.9 Repayment from Proceeds. While any portion of this Note is outstanding, if the Borrower receives cash proceeds from any source or series of related or unrelated sources, including but not limited to, from payments from customers, the issuance of equity or debt, the conversion of outstanding warrants of the Borrower, the issuance of securities pursuant to an equity line of credit of the Borrower or the sale of assets, the Borrower shall, within one (1) business day of Borrower’s receipt of such proceeds, inform the Holder of such receipt, following which the Holder shall have the right in its sole discretion to require the Borrower to immediately apply all or any portion of such proceeds to repay all or any portion of the outstanding amounts owed under this Note. Failure of the Borrower to comply with this provision shall constitute an Event of Default. In the event that such proceeds are received by the Holder prior to the Maturity Date, the required prepayment shall be subject to the terms of Section 1.9 herein.
2.10 Piggyback Registration Rights. The Company shall include on any registration statement or offering statement filed with the SEC, all Conversion Shares, all Warrant Shares, and all Commitment Shares. In addition to all other remedies at law or in equity or otherwise in connection with any breaches under this Note or the other Transaction Documents, failure to do so in compliance with this Section 2.10 will result in liquidated damages of $20,000, being immediately due and payable to the Holder at its election in the form of cash payment.
2.11 Reg A+ Offering. Within 30 days after the Issue Date, the Company shall file an offering statement to conduct its initial Reg A+ Offering with the SEC. The failure to complete such filing shall constitute an Event of Default under Section 3.3 below. The Company shall use best efforts to have such offering statement “qualified” within 30 days after the Issue Date.
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ARTICLE
III
EVENTS OF DEFAULT
The occurrence of any of the following shall each constitute an “Event of Default” with no right to notice or the right to cure except as specifically stated:
3.1 Failure to Pay Principal or Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at the Maturity Date, upon acceleration or otherwise.
3.2 Conversion and the Shares. The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the Conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an “Event of Default” of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within forty-eight (48) hours of a demand from the Holder.
3.3 Breach of Covenants. The Borrower breaches any covenant or other term or condition contained in this Note, or in any of the Transaction Documents including but not limited to the Purchase Agreement.
3.4 Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement), shall be false or misleading in any material respect when made.
3.5 Receiver or Trustee. The Company or any subsidiary of the Company shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.
3.6
Judgments. Any money judgment, writ or similar process shall be entered or filed against the Borrower or any
subsidiary of the Borrower or any of its property or other assets for more than $50,000, and shall remain unvacated, unbonded or unstayed
for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.
3.7 Bankruptcy; Liquidation. (i) Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Company or any subsidiary of the Company or the Borrower admits in writing its inability to pay its debts generally as they mature, or have filed against it an involuntary petition for bankruptcy; or (ii) any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business occurs.
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3.8 Delisting of Common Stock; Failure to Uplist. (i) The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTCBB, OTCQB, OTC Pink or an equivalent replacement exchange, the Nasdaq Capital Market, the New York Stock Exchange, or the NYSE American, or (ii) the Borrower shall fail to successfully uplist the Common Stock to the Nasdaq Capital Market or New York Stock Exchange within 90 days of the Issue Date.
3.9 Failure to Comply with the Exchange Act. The Borrower shall fail to timely comply with the reporting requirements of the 1934 Act (including but not limited to becoming delinquent in its filings); and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act; and/or the Borrower shall not have publicly available all information required by paragraph (b) of Rule 15c2-11 of the Exchange Act (as effective on September 26, 2022), as amended, such that brokers or dealers attempting to publish any quotation for the Common Stock or, directly or indirectly, to submit any such quotation for publication, shall be able to comply with Rule 15c2-11(a).
3.10 DTC . The Company is currently in the process of applying for “DWAC/FAST” electronic transfer. Once in place, if the Company (i) loses its ability to deliver shares via “DWAC/FAST” electronic transfer, or (ii) loses its stats as “DTC Eligible.”
3.11 Cessation of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.
3.12 Maintenance of Assets. The failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future) or any disposition or conveyance of any material asset of the Borrower.
3.13 Financial Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.
3.14 Reverse Splits. The Borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to the Holder.
3.15 Rights of Participation. The failure of the Borrower to fully satisfy its obligations to the Holder under Section 5(c) and/or Section 5(d) of the Purchase Agreement.
3.16 Replacement of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Transfer Agent Instruction Letter in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.
3.17 Cessation of Trading. Any cessation of trading of the Common Stock on at least one of the OTCBB, OTCQB, OTC Pink or an equivalent replacement exchange, the Nasdaq Capital Market, the New York Stock Exchange, or the NYSE American, and such cessation of trading shall continue for a period of five consecutive (5) Trading Days.
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3.18 Cross-Default. Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Borrower of any material covenant or other term or condition contained in any of the Other Agreements, other than any such breach or default which is cured by agreement of the parties, after the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. “Other Agreements” means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes. Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower to the Holder.
3.19 Bid Price. The Borrower shall lose the “bid” price for its Common Stock ($0.01 on the “Ask” with zero market makers on the “Bid” per Level 2) and/or a market (including the OTCBB, OTCQB or an equivalent replacement exchange).
3.20 OTC Markets Designation. If the OTC-Markets changes the Borrower’s designation to ‘No Information’ (Stop Sign), ‘Caveat Emptor’ (Skull and Crossbones), or ‘OTC’, ‘Other OTC’ or ‘Grey Market’ (Exclamation Mark Sign).
3.21 Inside Information. Any attempt by the Borrower or its officers, directors, and/or affiliates to transmit, convey, disclose, or any actual transmittal, conveyance, or disclosure by the Borrower or its officers, directors, and/or affiliates of, material non-public information concerning the Borrower, to the Holder or its successors and assigns, which is not immediately cured by Borrower’s filing of a Form 8-K pursuant to Regulation FD on that same date.
3.22 Unavailability of Rule 144. If, at any time on or after the date which is six (6) months after the Issue Date, the Holder is unable to (i) obtain a standard “144 legal opinion letter” from an attorney reasonably acceptable to the Holder, the Holder’s brokerage firm (and respective clearing firm), and the Borrower’s transfer agent in order to facilitate the Holder’s conversion of any portion of the Note into free trading shares of the Borrower’s Common Stock pursuant to Rule 144, and (ii) thereupon deposit such shares into the Holder’s brokerage account.
Upon the occurrence of any Event of Default specified in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14, 3.15, 3.16. 3.17, 3.18, 3.19, 3.20, 3.21, and/or 3.22 exercisable through the delivery of written notice to the Borrower by such Holders (the “Default Notice”), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to (i) 150% times the sum of (x) the then outstanding principal amount of this Note plus (y) accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment (the “Mandatory Prepayment Date”), on the amounts referred to in clauses (x) and/or (y) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment plus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default Sum”) or (ii) at the option of the Holder, the “parity value” of the Default Sum to be prepaid, where parity value means (a) the highest number of shares of Common Stock issuable upon conversion of or otherwise pursuant to such Default Sum in accordance with Article I, treating the Trading Day immediately preceding the Mandatory Prepayment Date as the “Conversion Date” for purposes of determining the lowest applicable Conversion Price, unless the Event of Default arises as a result of a breach in respect of a specific Conversion Date (in which case such Conversion Date shall be the Conversion Date), multiplied by (b) the highest Closing Price (defined below) for the Common Stock during the period beginning on the date of first occurrence of the Event of Default and ending one day prior to the Mandatory Prepayment Date (the “Default Amount”) and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity. “Closing Price” means, for any security as of any date, the closing bid price as reported on the OTCBB, OTCQB or applicable trading market or exchange as reported by a reliable reporting service designated by the Holder or, if the OTCBB is not the principal trading market for such security, the closing bid price of such security on the principal securities exchange or trading market where such security is quoted, listed or traded.
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The Holder shall have the right at any time, to require the Borrower to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect, subject to the terms of this Note. This requirement by the Borrower shall automatically apply upon the occurrence of an Event of Default without the need for any party to give any notice or take any other action.
If the Holder shall commence an action or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney, then if the Holder prevails in such action, the Holder shall be reimbursed by the Borrower for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
ARTICLE
IV
MISCELLANEOUS
4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
4.2 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, or electronic transmission by e-mail (with read-receipt required) addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by electronic transmission by e-mail (with read-receipt required), at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:
If to the Borrower, to:
Boatim, Inc.
7950 NW 53rd Street Suite 337
Miami, FL 33166
Attn: Joseph Johnson, CEO
E-mail: [__________________]
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If to the Holder:
Quick Capital, LLC
66 West Flagler Street, 900-#2292
Miami, FL 33130
Attn: Eilon D. Natan, Manager
E-mail: eilon@quick-cap.com
4.3 Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder.
4.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Neither the Borrower nor the Holder shall assign this Note or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, the Holder may assign its rights hereunder to any “accredited investor” (as defined in Rule 501(a) of the 1933 Act) in a private transaction from the Holder or to any of its “affiliates”, as that term is defined under the 1934 Act, without the consent of the Borrower. Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bonafide margin account or other lending arrangement. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.
4.5 Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof reasonable costs of collection, including reasonable attorneys’ fees.
4.6 Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of Wyoming without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts of Miami, Florida, or in the federal courts located in the Southern District of Florida. The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Note or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
4.7 Certain Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding principal amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note. The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.
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4.8 Purchase Agreement and Security Agreement. By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement and the Security Agreement.
4.9 Notice of Corporate Events. Except as otherwise provided in this Note, the Holder of this Note shall have no rights as a Holder of Common Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders). In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Borrower or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9 including, but not limited to, name changes, recapitalizations, etc. as soon as possible under law.
4.10 Usury. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable provision shall automatically be revised to equal the maximum rate of interest or other amount deemed interest permitted under applicable law. The Borrower covenants (to the extent that it may lawfully do so) that it will not seek to claim or take advantage of any usury law that would prohibit or forgive the Borrower from paying all or a portion of the principal or interest on this Note.
4.11 Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required. No provision of this Note shall alter or impair the obligation of the Borrower, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
4.12 Severability. In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.
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4.13 Dispute Resolution. In the case of a dispute as to the determination of the Conversion Price, Conversion Amount, any prepayment amount or Default Amount, Default Sum, Closing Date or Maturity Date, the closing bid price, or fair market value (as the case may be) or the arithmetic calculation of the Conversion Price or the applicable prepayment amount(s) (as the case may be), the Borrower or the Holder shall submit the disputed determinations or arithmetic calculations via electronic transmission by e-mail (with read-receipt required) (i) within two (2) Trading Days after receipt of the applicable notice giving rise to such dispute to the Borrower or the Holder or (ii) if no notice gave rise to such dispute, at any time after the Holder learned of the circumstances giving rise to such dispute. If the Holder and the Borrower are unable to agree upon such determination or calculation within two (2) business days of such disputed determination or arithmetic calculation (as the case may be) being submitted to the Borrower or the Holder, then the Borrower shall, within two (2) business days, submit via electronic transmission by e-mail (with read-receipt required) (a) the disputed determination of the Conversion Price, the closing bid price, the or fair market value (as the case may be) to an independent, reputable investment bank selected by the Borrower and approved by the Holder or (b) the disputed arithmetic calculation of the Conversion Price, Conversion Amount, any prepayment amount or Default Amount, Default Sum to an independent, outside accountant selected by the Holder that is reasonably acceptable to the Borrower. The Borrower shall cause at its expense the investment bank or the accountant to perform the determinations or calculations and notify the Borrower and the Holder of the results no later than ten (10) business days from the time it receives such disputed determinations or calculations. Such investment bank’s or accountant’s determination or calculation shall be binding upon all parties absent demonstrable error.
4.14 Terms of Future Financings. So long as this Note is outstanding, upon any issuance by the Borrower or any of its subsidiaries of any security with any term more favorable to the holder of such security or with a term (including without limitation any Conversion Price) in favor of the holder of such security that was not similarly provided to the Holder in this Note (other than a future financing with the Holder), then the Borrower shall notify the Holder of such additional or more favorable term and such term, at Holder’s option, shall become a part of the Transaction Documents with the Holder. The types of terms contained in another security that may be more favorable to the holder of such security include, but are not limited to, terms addressing conversion discounts, prepayment rate, conversion lookback periods, interest rates, original issue discounts, stock sale price, private placement price per share, and warrant coverage.
*** signature page follows ***
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IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer as of the Restatement Date.
COMPANY: | ||
Boatim, Inc. | ||
By: | ||
Name: | Joseph Johnson | |
Title: | CEO |
Acknowledged and Accepted by: | ||
HOLDER: | ||
Quick Capital, LLC | ||
By: | ||
Name: | Eilon D. Natan | |
Title: | Manager |
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EXHIBIT A
NOTICE OF CONVERSION
The undersigned hereby elects to convert $_________________ principal amount of the Note (defined below) together with $________________ of accrued and unpaid interest thereto, totaling $_____________ into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of Boatim, Inc., a Nevada corporation (the “Borrower”), according to the conditions of the convertible note of the Borrower dated as of _____________ ____, 2022 (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.
Box Checked as to applicable instructions:
[ ] | The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal At Custodian system (“DWAC Transfer”). | |
Name of DTC Prime Broker: | ||
Account Number: | ||
[ ] | The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto: | |
Name: [NAME] | ||
Address: [ADDRESS] |
Date of Conversion: | |||
Applicable Conversion Price: $ | |||
Number of Shares of Common Stock to be Issued | |||
Pursuant to Conversion of the Notes: | |||
Amount of Principal Balance Due remaining | |||
Under the Note after this conversion: | |||
Accrued and unpaid interest remaining: |
[HOLDER] | |||
By: | |||
Name: [NAME] | |||
Title: [TITLE] | |||
Date: [DATE] |
A-1
Exhibit 10.21
NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
BOATIM INC
Warrant Shares: 1,750,000 | Initial Exercise Date: January 20, 2022 |
THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, ONE EYED JACK ENTERPRISES LLC or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise Date”) and on or prior to 5:00 p.m. (New York City time) on January 20, 2023 (the “Termination Date”) but not thereafter, to subscribe for and purchase from BOATIM Incorporated, a Nevada corporation (the “Company”), up to 1,750,000 shares (as subject to adjustment hereunder, the “Warrant Shares”) of Common Stock. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).
Section 1. Definitions. In addition to the terms defined elsewhere in this Warrant, the following terms have the meanings indicated in this Section 1:
“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person as such terms are used in and construed under Rule 405 under the Securities Act.
“Board of Directors” means the board of directors of the Company.
“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.
“Commission” means the United States Securities and Exchange Commission.
“Common Stock” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.
“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Trading Day” means a day on which the principal Trading Market is open for trading.
“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, OTCQB or OTCQX (or any successors to any of the foregoing).
“Transfer Agent” means Globex Transfer, LLC, the current transfer agent of the Company, with a mailing address of 780 Deltona Blvd., Suite 202, Deltona, Florida 32725, and any successor transfer agent of the Company.
Section 2. Exercise.
a) Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed facsimile copy or PDF copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form annexed hereto (the “Notice of Exercise”). Within the two (2) Trading Days following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within two (2) Business Days of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
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b) Exercise Price. The exercise price per share of Common Stock under this Warrant shall be $0.001, subject to adjustment hereunder (the “Exercise Price”).
c) Cashless Exercise. This Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = | the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise; |
(B) = | the Exercise Price of this Warrant, as adjusted hereunder; and |
(X) = | the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise. |
If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the characteristics of the Warrants being exercised, and the holding period of the Warrant Shares being issued may tack on to the holding period of this Warrant. The Company agrees not to take any position contrary to this Section 2(c).
“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
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d) Mechanics of Exercise.
i. Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by Holder or (B) the Warrant Shares are eligible for resale by the Holder without volume or manner-of- sale limitations pursuant to Rule 144 (assuming cashless exercise of the Warrants), and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is two (2) Trading Days after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within two (2) Trading Days. The Company agrees to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Exercise.
ii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.
iii. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.
iv. Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that, in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.
v. Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
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e) Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within one Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.
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Section 3. Certain Adjustments.
a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
b) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction.
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c) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
d) Notice to Holder.
i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly deliver to the Holder by facsimile or email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by facsimile or email to the Holder at its last facsimile number or email address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice.
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Section 4. Transfer of Warrant.
a) Transferability. Subject to compliance with any applicable securities laws and the conditions set forth in Section 4(d) hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date on which the Holder delivers an assignment form to the Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.
b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
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c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
d) Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions or current public information requirements pursuant to Rule 144, the Company may require, as a condition of allowing such transfer, that the Holder provide to the Company an opinion of counsel selected by the Holder and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Warrant under the Securities Act.
e) Representation by the Holder. The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.
Section 5. Miscellaneous.
a) No Rights as Stockholder Until Exercise; No Settlement in Cash. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3. Without limiting any rights of a Holder to receive Warrant Shares on a “cashless exercise” pursuant to Section 2(c), in no event shall the Company be required to net cash settle an exercise of this Warrant.
b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
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c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day.
d) Authorized Shares.
The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.
Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
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e) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of Nevada, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Warrant (whether brought against a party hereto or their respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in Las Vegas, Nevada. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in Las Vegas, Nevada for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Warrant and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If either party shall commence an action, suit or proceeding to enforce any provisions of this Warrant, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for their reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.
f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.
g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
h) Notices. Any and all notices or other communications or deliveries to be provided by the Holders hereunder including, without limitation, any Notice of Exercise, shall be in writing and delivered personally, by facsimile or e-mail, or sent by a nationally recognized overnight courier service, addressed to the Company, at 7950 NW 53rd St., Ste., 337 Miami, Florida, 33166, Attention: Joseph Johnson, CEO, email address: joseph@boatim.com, or such other facsimile number, email address or address as the Company may specify for such purposes by notice to the Holders. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile or e-mail, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number, e-mail address or address of such Holder appearing on the books of the Company. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or via e-mail at the e- mail address set forth in this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or via e-mail at the e- mail address set forth in this Section on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.
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i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
j) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
k) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.
l) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.
m) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
n) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
BOATIM INCORPORATED | ||
By: | /s/ Joseph Johnson | |
Name: | Joseph Johnson | |
Title: | CEO |
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NOTICE OF EXERCISE
TO: | BOATIM INC. |
(1) The undersigned hereby elects to purchase __________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
[ ] if permitted, the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).
(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
The Warrant Shares shall be delivered to the following DWAC Account Number:
(4) Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.
[SIGNATURE OF HOLDER]
Name of Investing Entity: | |
Signature of Authorized Signatory of Investing Entity: | |
Name of Authorized Signatory: | |
Title of Authorized Signatory: | |
Date: |
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EXHIBIT B
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to
Name: | ||
(Please Print) | ||
Address: | ||
(Please Print) | ||
Phone Number: | ||
Email Address: | ||
Dated: _____________________, _____________ | ||
Holder’s Signature: | ||
Holder’s Address: |
B-1
Exhibit 10.22
NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
BOATIM INC
Warrant Shares: 1,750,000 | Initial Exercise Date: January 20, 2022 |
THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, QUOTEBRAND LIMITED or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise Date”) and on or prior to 5:00 p.m. (New York City time) on January 20, 2023 (the “Termination Date”) but not thereafter, to subscribe for and purchase from BOATIM Incorporated, a Nevada corporation (the “Company”), up to 1,750,000 shares (as subject to adjustment hereunder, the “Warrant Shares”) of Common Stock. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).
Section 1. Definitions. In addition to the terms defined elsewhere in this Warrant, the following terms have the meanings indicated in this Section 1:
“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person as such terms are used in and construed under Rule 405 under the Securities Act.
“Board of Directors” means the board of directors of the Company.
“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.
“Commission” means the United States Securities and Exchange Commission.
“Common Stock” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.
“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Trading Day” means a day on which the principal Trading Market is open for trading.
“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, OTCQB or OTCQX (or any successors to any of the foregoing).
“Transfer Agent” means Globex Transfer, LLC, the current transfer agent of the Company, with a mailing address of 780 Deltona Blvd., Suite 202, Deltona, Florida 32725, and any successor transfer agent of the Company.
Section 2. Exercise.
a) Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed facsimile copy or PDF copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form annexed hereto (the “Notice of Exercise”). Within the two (2) Trading Days following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within two (2) Business Days of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
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b) Exercise Price. The exercise price per share of Common Stock under this Warrant shall be $0.001, subject to adjustment hereunder (the “Exercise Price”).
c) Cashless Exercise. This Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = | the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise; |
(B) = | the Exercise Price of this Warrant, as adjusted hereunder; and |
(X) = | the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise. |
If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the characteristics of the Warrants being exercised, and the holding period of the Warrant Shares being issued may tack on to the holding period of this Warrant. The Company agrees not to take any position contrary to this Section 2(c).
“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
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d) Mechanics of Exercise.
i. Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by Holder or (B) the Warrant Shares are eligible for resale by the Holder without volume or manner-of- sale limitations pursuant to Rule 144 (assuming cashless exercise of the Warrants), and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is two (2) Trading Days after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within two (2) Trading Days. The Company agrees to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Exercise.
ii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.
iii. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.
iv. Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that, in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.
v. Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
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e) Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within one Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.
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Section 3. Certain Adjustments.
a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
b) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction.
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c) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
d) Notice to Holder.
i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly deliver to the Holder by facsimile or email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by facsimile or email to the Holder at its last facsimile number or email address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice.
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Section 4. Transfer of Warrant.
a) Transferability. Subject to compliance with any applicable securities laws and the conditions set forth in Section 4(d) hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date on which the Holder delivers an assignment form to the Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.
b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
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c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
d) Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions or current public information requirements pursuant to Rule 144, the Company may require, as a condition of allowing such transfer, that the Holder provide to the Company an opinion of counsel selected by the Holder and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Warrant under the Securities Act.
e) Representation by the Holder. The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.
Section 5. Miscellaneous.
a) No Rights as Stockholder Until Exercise; No Settlement in Cash. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3. Without limiting any rights of a Holder to receive Warrant Shares on a “cashless exercise” pursuant to Section 2(c), in no event shall the Company be required to net cash settle an exercise of this Warrant.
b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
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c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day.
d) Authorized Shares.
The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.
Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
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e) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of Nevada, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Warrant (whether brought against a party hereto or their respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in Las Vegas, Nevada. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in Las Vegas, Nevada for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Warrant and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If either party shall commence an action, suit or proceeding to enforce any provisions of this Warrant, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for their reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.
f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.
g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
h) Notices. Any and all notices or other communications or deliveries to be provided by the Holders hereunder including, without limitation, any Notice of Exercise, shall be in writing and delivered personally, by facsimile or e-mail, or sent by a nationally recognized overnight courier service, addressed to the Company, at 7950 NW 53rd St., Ste., 337 Miami, Florida, 33166, Attention: Joseph Johnson, CEO, email address: joseph@boatim.com, or such other facsimile number, email address or address as the Company may specify for such purposes by notice to the Holders. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile or e-mail, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number, e-mail address or address of such Holder appearing on the books of the Company. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or via e-mail at the e- mail address set forth in this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or via e-mail at the e- mail address set forth in this Section on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.
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i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
j) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
k) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.
l) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.
m) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
n) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
BOATIM INCORPORATED | ||
By: | /s/ Joseph Johnson | |
Name: | Joseph Johnson | |
Title: | CEO |
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NOTICE OF EXERCISE
TO: | BOATIM INC. |
(1) The undersigned hereby elects to purchase __________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
[ ] if permitted, the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).
(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
The Warrant Shares shall be delivered to the following DWAC Account Number:
(4) Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.
[SIGNATURE OF HOLDER]
Name of Investing Entity: | |
Signature of Authorized Signatory of Investing Entity: | |
Name of Authorized Signatory: | |
Title of Authorized Signatory: | |
Date: |
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EXHIBIT B
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to
Name: | ||
(Please Print) | ||
Address: | ||
(Please Print) | ||
Phone Number: | ||
Email Address: | ||
Dated: _____________________, _____________ | ||
Holder’s Signature: | ||
Holder’s Address: |
B-1
Exhibit 10.23
NEITHER THIS SECURITY NOR THE SECURITIES AS TO WHICH THIS SECURITY MAY BE EXERCISED HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
AMENDED AND RESTATED COMMON STOCK PURCHASE WARRANT
BOATIM, INC.
Warrant Shares: 724,058
Date of Issuance: January 7, 2022 (the “Issuance Date”)
THIS AMENDED AND RESTATED COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received (in connection with the funding of that certain amended and restated secured convertible promissory issued on January 7, 2022, as amended on February 1, 2022 (the “Restatement Date”), in the original principal amount of $163,077 issued by the Company (as defined below) to the Lender (as defined below) (the “Note”), Quick Capital, LLC, a Wyoming limited liability company (the “Lender” and including any permitted and registered assigns, the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time during the Exercise Period, to purchase from BOATIM, INC., a Nevada corporation (the “Company”), up to 724,058 shares of Common Stock (as defined below) (the “Warrant Shares”) at the Exercise Price per share then in effect. The number of Warrant Shares for which this Warrant may be exercised is subject to adjustment in accordance with the terms hereof. This Warrant was issued by the Company as of the Issuance Date and amended on the Restatement Date pursuant to the amended and restated note purchase agreement dated February1, 2022, between the Company and the Lender (the “Purchase Agreement”).
Capitalized terms used in this Warrant shall have the meanings set forth in the Purchase Agreement unless otherwise defined in the body of this Warrant or in Section 12 below. For purposes of this Warrant, the term “Exercise Price” shall mean) $0.25 per share subject to adjustment as provided herein (including but not limited to cashless exercise), and the term “Exercise Period” shall mean the period commencing on the Issuance Date and ending on 5:00 p.m. eastern standard time on the five-year anniversary of such date.
1. EXERCISE OF WARRANT.
(a) Mechanics of Exercise. Subject to the terms and conditions hereof, the rights represented by this Warrant may be exercised in whole or in part at any time or times during the Exercise Period by delivery of a written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. On or before the second Trading Day (the “Warrant Share Delivery Date”) following the date on which the Company shall have received the Exercise Notice, which Exercise Notice must be received by the Company prior to 11 a.m., Miami, Florida time to count as received on such date, and upon receipt by the Company of payment to the Company of an amount equal to the applicable Exercise Price multiplied by the number of Warrant Shares as to which all or a portion of this Warrant is being exercised (the “Aggregate Exercise Price” and together with the Exercise Notice, the “Exercise Delivery Documents”) in cash or by wire transfer of immediately available funds (or by cashless exercise if permitted under the terms of this Warrant, in which case there shall be no Aggregate Exercise Price provided), the Company shall (or direct its transfer agent to) issue and dispatch by overnight courier to the address as specified in the Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise. Upon delivery of the Exercise Delivery Documents, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the certificates evidencing such Warrant Shares. If this Warrant is submitted in connection with any exercise and the number of Warrant Shares represented by this Warrant is greater than the number of Warrant Shares being acquired upon an exercise, then the Company shall as soon as practicable and in no event later than three business days after any exercise and at its own expense, issue a new Warrant (in accordance with Section 6) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised.
If the Company fails to cause its transfer agent to transmit to the Holder the respective shares of Common Stock by the respective Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise in Holder’s sole discretion, and such failure shall be deemed an “Event of Default” under the Note. Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Warrant is not delivered by the Warrant Share Delivery Date the Company shall pay to the Holder $3,000 per day, for each day beyond the Warrant Share Delivery Date that the Company fails to deliver such Common Stock (unless such failure results from war, acts of terrorism, an epidemic, or natural disaster). Such amount shall be paid to Holder in cash by the fifth day of the month following the month in which it has accrued. The Company agrees that the right to exercise the Warrant is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such exercise right are difficult if not impossible to qualify. Accordingly, the parties acknowledge that the liquidated damages provision contained in this Section 1(a) are justified.
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If, at any time during the Exercise Period, there is no effective registration statement of the Company covering the Holder’s immediate resale of the Warrant Shares without any limitations, then the Holder may elect to receive Warrant Shares pursuant to a cashless exercise, in lieu of a cash exercise, equal to the value of this Warrant determined in the manner described below (or of any portion thereof remaining unexercised) by surrender of this Warrant and a Notice of Exercise, in which event the Company shall issue to Holder a number of shares of Common Stock computed using the following formula:
X = Y (A-B)
A
Where | X = | the number of Shares to be issued to Holder. | |
Y = | the number of Warrant Shares that the Holder elects to purchase under this Warrant (at the date of such calculation). | ||
A = | the Market Price (at the date of such calculation). | ||
B = | Exercise Price (as adjusted to the date of such calculation). |
(b) No Fractional Shares. No fractional shares shall be issued upon the exercise of this Warrant as a consequence of any adjustment pursuant hereto. All Warrant Shares (including fractions) issuable upon exercise of this Warrant may be aggregated for purposes of determining whether the exercise would result in the issuance of any fractional share. If, after aggregation, the exercise would result in the issuance of a fractional share, the Company shall, in lieu of issuance of any fractional share, pay to the Holder otherwise entitled to such fraction a sum in cash equal to the product resulting from multiplying the then-current fair market value of a Warrant Share by such fraction.
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(c) Holder’s Exercise Limitations. The Company shall not affect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, to the extent that after giving effect to issuance of Warrant Shares upon exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates (as such term is defined under the Exchange Act), and any other persons acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation, as defined below. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, non-exercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or non-converted portion of any other securities of the Company (including without limitation any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this paragraph (d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this paragraph applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination.
For purposes of this Section 1(c), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the SEC, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or its transfer agent setting forth the number of shares of Common Stock outstanding. Upon the request of a Holder, the Company shall within two Trading Days confirm to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The limitations contained in this paragraph shall apply to a successor Holder of this Warrant.
2. ADJUSTMENTS. The Exercise Price and the number of Warrant Shares shall be adjusted from time to time as follows:
(a) Distribution of Assets. If the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including without limitation any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case:
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(i) any Exercise Price in effect immediately prior to the close of business on the record date fixed for the determination of holders of shares of Common Stock entitled to receive the Distribution shall be reduced, effective as of the close of business on such record date, to a price determined by multiplying such Exercise Price by a fraction (i) the numerator of which shall be the Closing Sale Price of the shares of Common Stock on the Trading Day immediately preceding such record date minus the value of the Distribution (as determined in good faith by the Company’s Board of Directors) applicable to one share of Common Stock, and (ii) the denominator of which shall be the Closing Sale Price of the shares of Common Stock on the Trading Day immediately preceding such record date; and
(ii) the number of Warrant Shares shall be increased to a number of shares equal to the number of shares of Common Stock obtainable immediately prior to the close of business on the record date fixed for the determination of holders of shares of Common Stock entitled to receive the Distribution multiplied by the reciprocal of the fraction set forth in the immediately preceding clause (i); provided, however, that in the event that the Distribution is of shares of common stock of a company (other than the Company) whose common stock is traded on a national securities exchange or a national automated quotation system (“Other Shares of Common Stock”), then the Holder may elect to receive a warrant to purchase Other Shares of Common Stock in lieu of an increase in the number of Warrant Shares, the terms of which shall be identical to those of this Warrant, except that such warrant shall be exercisable into the number of shares of Other Shares of Common Stock that would have been payable to the Holder pursuant to the Distribution had the Holder exercised this Warrant immediately prior to such record date and with an aggregate exercise price equal to the product of the amount by which the exercise price of this Warrant was decreased with respect to the Distribution pursuant to the terms of the immediately preceding clause (i) and the number of Warrant Shares calculated in accordance with the first part of this clause (ii).
(b) Stock Splits. If the Company, at any time while this Warrant is outstanding: (i) subdivides outstanding shares of Common Stock into a larger number of shares, or (ii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 2(b) shall become effective immediately after the effective date in the case of a subdivision or combination.
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(c) Anti-Dilution; Adjustments to Exercise Price. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or securities entitling any person or entity to acquire shares of Common Stock (upon conversion, exercise or otherwise) (including but not limited to under the Note), at an effective price per share less than the then Exercise Price (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share which is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance), then the Exercise Price shall be reduced at the option of the Holder and only reduced to equal the Base Share Price. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. The Company shall notify the Holder in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 2(c), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice the “Dilutive Issuance Notice”). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 2(c), upon the occurrence of any Dilutive Issuance, the Holder is entitled to receive such adjustment. Without duplication of any adjustment otherwise provided for in Section 2 of this Warrant, the number of Common Stock issuable upon conversion of the Warrant shall, after the Issuance Date, be subject to general anti-dilution adjustment such that upon any issuances of Common Stock by the Company (not in connection with this Warrant), the number of Warrant Shares issuable under this Warrant shall be adjusted on such date by adding thereto the number of shares of Common Stock which would maintain the Holder’s ownership percentage (if this Warrant was exercised) of the outstanding Common Stock of the Company on a fully diluted basis as that percentage on the Issuance Date.
3. FUNDAMENTAL TRANSACTIONS. If, at any time while this Warrant is outstanding, (i) the Company effects any merger of the Company with or into another entity and the Company is not the surviving entity (such surviving entity, the “Successor Entity”), (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or by another individual or entity, and approved by the Company) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares of Common Stock for other securities, cash or property and the holders of at least 50% of the Common Stock accept such offer, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (other than as a result of a subdivision or combination of shares of Common Stock) (in any such case, a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive the number of shares of Common Stock of the Successor Entity or of the Company and any additional consideration (the “Alternate Consideration”) receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event (disregarding any limitation on exercise contained herein solely for the purpose of such determination). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any Successor Entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder’s right to exercise such warrant into Alternate Consideration.
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4. NON-CIRCUMVENTION. The Company covenants and agrees that it will not, by amendment of its certificate of incorporation, bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon the exercise of this Warrant, and (iii) shall, for so long as this Warrant is outstanding, have authorized and reserved, free from preemptive rights, three times the number of shares of Common Stock issuable under the Warrant, or as otherwise required under the Purchase Agreement, to provide for the exercise of the rights represented by this Warrant (without regard to any limitations on exercise).
5. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise specifically provided herein, this Warrant, in and of itself, shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.
6. REISSUANCE.
(a) Lost, Stolen or Mutilated Warrant. If this Warrant is lost, stolen, mutilated or destroyed, the Company will, on such terms as to indemnity or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as this Warrant so lost, stolen, mutilated or destroyed.
(b) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant shall be of like tenor with this Warrant, and shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date.
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7. TRANSFER.
(a) Notice of Transfer. The Holder agrees to give written notice to the Company before transferring this Warrant or transferring any Warrant Shares of such Holder’s intention to do so, describing briefly the manner of any proposed transfer. Promptly upon receiving such written notice, the Company shall present copies thereof to the Company’s counsel. If the proposed transfer may be effected without registration or qualification (under any federal or state securities laws), the Company, as promptly as practicable, shall notify the Holder thereof, whereupon the Holder shall be entitled to transfer this Warrant or to dispose of Warrant Shares received upon the previous exercise of this Warrant, all in accordance with the terms of the notice delivered by the Holder to the Company; provided, however, that an appropriate legend may be endorsed on this Warrant or the certificates for such Warrant Shares respecting restrictions upon transfer thereof necessary or advisable in the opinion of counsel and satisfactory to the Company to prevent further transfers which would be in violation of Section 5 of the Securities Act and applicable state securities laws; and provided further that the prospective transferee or purchaser shall execute the Assignment of Warrant attached hereto as Exhibit B and such other documents and make such representations, warranties, and agreements as may be required solely to comply with the exemptions relied upon by the Company for the transfer or disposition of the Warrant or Warrant Shares.
(b) If the proposed transfer or disposition of this Warrant or such Warrant Shares described in the written notice given pursuant to this Section 7 may not be effected without registration or qualification of this Warrant or such Warrant Shares, the Holder will limit its activities in respect to such transfer or disposition as are permitted by law.
(c) Any transferee of all or a portion of this Warrant shall succeed to the rights and benefits of the initial Holder of this Warrant under the Purchase Agreement (registration rights, expenses, and indemnity).
8. NOTICES. Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with the notice provisions contained in the Purchase Agreement. The Company shall provide the Holder with prompt written notice (i) immediately upon any adjustment of the Exercise Price, setting forth in reasonable detail, the calculation of such adjustment and (ii) at least 20 days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) with respect to any grants, issuances or sales of any stock or other securities directly or indirectly convertible into or exercisable or exchangeable for shares of Common Stock or other property, pro rata to the holders of shares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder.
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9. AMENDMENT AND WAIVER. The terms of this Warrant may be amended or waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the Holder.
10. GOVERNING LAW; DISPUTE RESOLUTION. This Warrant shall be governed by and construed in accordance with the laws of the State of Wyoming without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Warrant shall be brought only in the state courts of Miami, Florida, or in the federal courts located in the Southern District of Florida. The parties to this Warrant hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Warrant or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Warrant or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Warrant and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
11. ACCEPTANCE. Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.
12. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall have the following meanings:
(a) “Closing Sale Price” means, for any security as of any date, (i) the last closing trade price for such security on the Trading Market, as reported by the Trading Market, or, if the Trading Market begins to operate on an extended hours basis and does not designate the closing trade price, then the last trade price of such security prior to 4:00 p.m., Miami, Florida time, as reported by the Trading Market, or (ii) if the foregoing does not apply, the last trade price of such security in the over-the-counter market for such security as reported by the Trading Market, or (iii) if no last trade price is reported for such security by the Trading Market, the average of the bid and ask prices of any market makers for such security as reported by the Trading Market. If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.
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(b) “Common Stock” means the Company’s common stock, par value $0.001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.
(c) “Common Stock Equivalents” means any securities of the Company that would entitle the holder thereof to acquire at any time Common Stock, including without limitation any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
(d) “Market Price” means the highest traded price of the Common Stock during the thirty (30) Trading Days prior to the date of the respective Exercise Notice.
(e) “OTC Markets” means OTCQX, OTCQB, OTC Pink, the OTC Bulletin Board.
(f) “Trading Day” means (i) any day on which the Common Stock is listed or quoted and traded on its Trading Market, (ii) if the Common Stock is not then listed or quoted and traded on any national securities exchange, then a day on which trading occurs on any over-the-counter markets, or (iii) if trading does not occur on the over-the-counter markets, any business day.
(g) “Trading Market” means the OTC Markets or any equivalent principal securities exchange or other securities market on which the Common Stock is being traded or quoted.
** signature page follows **
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IN WITNESS WHEREOF, the Company has caused this Amended and Restated Warrant to be duly executed as of the Issuance Date set forth above.
BOATIM, INC. | ||
By: | ||
Name: | Joseph Johnson | |
Title: | CEO | |
Agreed & Accepted: | ||
Quick Capital, LLC | ||
By: | ||
Name: | Eilon D. Natan | |
Title: | Managing Partner |
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EXHIBIT A
EXERCISE NOTICE
(To be executed by the registered holder to exercise this Amended and Restated Common Stock Purchase Warrant)
The Undersigned holder hereby exercises the right to purchase _________________ of the shares of Common Stock (“Warrant Shares”) of BOATIM, INC., a Nevada corporation (the “Company”), evidenced by the attached copy of the Amended and Restated Common Stock Purchase Warrant (the ”Warrant”). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.
1. | Form of Exercise Price. The Holder intends that payment of the Exercise Price shall be made as (check one): |
☐ | a cash exercise with respect to _________________ Warrant Shares; or |
☐ | by cashless exercise pursuant to the Warrant. |
2. | Payment of Exercise Price. If cash exercise is selected above, the holder shall pay the applicable Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of the Warrant. |
3. | Delivery of Warrant Shares. The Company shall deliver to the holder __________________ Warrant Shares in accordance with the terms of the Warrant. |
Date: | |||
(Print Name of Registered Holder) | |||
By: | |||
Name: | |||
Title: |
A-1
EXHIBIT B
ASSIGNMENT OF WARRANT
(To be signed only upon authorized transfer of the Warrant)
For Value Received, the undersigned hereby sells, assigns, and transfers unto ____________________ the right to purchase _______________ shares of common stock of BOATIM, INC., to which the within Common Stock Purchase Warrant relates and appoints ____________________, as attorney-in-fact, to transfer said right on the books of BOATIM, INC. with full power of substitution and re-substitution in the premises. By accepting such transfer, the transferee has agreed to be bound in all respects by the terms and conditions of the within Warrant.
Date: | |||
(Signature) * | |||
(Name) | |||
(Address) | |||
(Social Security or Tax Identification No.) |
* | The signature on this Assignment of Warrant must correspond to the name as written upon the face of the Amended and Restated Common Stock Purchase Warrant in every particular without alteration or enlargement or any change whatsoever. When signing on behalf of a corporation, partnership, trust or other entity, please indicate your position(s) and title(s) with such entity. |
B-1
Exhibit 10.24
NEITHER THIS SECURITY NOR THE SECURITIES AS TO WHICH THIS SECURITY MAY BE EXERCISED HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
BOATIM, INC.
Warrant Shares: 1,100,000
Date of Issuance: December 20, 2021 (the “Issuance Date”)
THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received (in connection with the funding of that certain secured convertible promissory note dated December 20, 2021, in the original principal amount of $275,000 issued by the Company (as defined below) to the Lender (as defined below) (the “Note”), Medithority, LLC, a Nevada limited liability company (the “Lender” and including any permitted and registered assigns, the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time during the Exercise Period, to purchase from BOATIM, INC., a Nevada corporation (the “Company”), up to 1,100,000 shares of Common Stock (as defined below) (the “Warrant Shares”) at the Exercise Price per share then in effect. The number of Warrant Shares for which this Warrant may be exercised is subject to adjustment in accordance with the terms hereof. This Warrant is issued by the Company as of the Issuance Date pursuant to the note purchase agreement dated December 20, 2021, between the Company and the Lender (the “Purchase Agreement”).
Capitalized terms used in this Warrant shall have the meanings set forth in the Purchase Agreement unless otherwise defined in the body of this Warrant or in Section 12 below. For purposes of this Warrant, the term “Exercise Price” shall mean) $0.25 per share subject to adjustment as provided herein (including but not limited to cashless exercise), and the term “Exercise Period” shall mean the period commencing on the Issuance Date and ending on 5:00 p.m. eastern standard time on the five-year anniversary of such date.
EXHIBIT B: STOCK PURCHASE WARRANT
1. EXERCISE OF WARRANT.
(a) Mechanics of Exercise. Subject to the terms and conditions hereof, the rights represented by this Warrant may be exercised in whole or in part at any time or times during the Exercise Period by delivery of a written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. On or before the second Trading Day (the “Warrant Share Delivery Date”) following the date on which the Company shall have received the Exercise Notice, which Exercise Notice must be received by the Company prior to 11 a.m., Miami, Florida time to count as received on such date, and upon receipt by the Company of payment to the Company of an amount equal to the applicable Exercise Price multiplied by the number of Warrant Shares as to which all or a portion of this Warrant is being exercised (the “Aggregate Exercise Price” and together with the Exercise Notice, the “Exercise Delivery Documents”) in cash or by wire transfer of immediately available funds (or by cashless exercise if permitted under the terms of this Warrant, in which case there shall be no Aggregate Exercise Price provided), the Company shall (or direct its transfer agent to) issue and dispatch by overnight courier to the address as specified in the Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise. Upon delivery of the Exercise Delivery Documents, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the certificates evidencing such Warrant Shares. If this Warrant is submitted in connection with any exercise and the number of Warrant Shares represented by this Warrant is greater than the number of Warrant Shares being acquired upon an exercise, then the Company shall as soon as practicable and in no event later than three business days after any exercise and at its own expense, issue a new Warrant (in accordance with Section 6) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised.
If the Company fails to cause its transfer agent to transmit to the Holder the respective shares of Common Stock by the respective Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise in Holder’s sole discretion, and such failure shall be deemed an “Event of Default” under the Note. Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Warrant is not delivered by the Warrant Share Delivery Date the Company shall pay to the Holder $3,000 per day, for each day beyond the Warrant Share Delivery Date that the Company fails to deliver such Common Stock (unless such failure results from war, acts of terrorism, an epidemic, or natural disaster). Such amount shall be paid to Holder in cash by the fifth day of the month following the month in which it has accrued. The Company agrees that the right to exercise the Warrant is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such exercise right are difficult if not impossible to qualify. Accordingly, the parties acknowledge that the liquidated damages provision contained in this Section 1(a) are justified.
EXHIBIT B: STOCK PURCHASE WARRANT
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If, at any time during the Exercise Period, there is no effective registration statement of the Company covering the Holder’s immediate resale of the Warrant Shares without any limitations, then the Holder may elect to receive Warrant Shares pursuant to a cashless exercise, in lieu of a cash exercise, equal to the value of this Warrant determined in the manner described below (or of any portion thereof remaining unexercised) by surrender of this Warrant and a Notice of Exercise, in which event the Company shall issue to Holder a number of shares of Common Stock computed using the following formula:
X = Y (A-B)
A
Where | X = | the number of Shares to be issued to Holder. | |
Y = | the number of Warrant Shares that the Holder elects to purchase under this Warrant (at the date of such calculation). | ||
A = | the Market Price (at the date of such calculation). | ||
B = | Exercise Price (as adjusted to the date of such calculation). |
(b) No Fractional Shares. No fractional shares shall be issued upon the exercise of this Warrant as a consequence of any adjustment pursuant hereto. All Warrant Shares (including fractions) issuable upon exercise of this Warrant may be aggregated for purposes of determining whether the exercise would result in the issuance of any fractional share. If, after aggregation, the exercise would result in the issuance of a fractional share, the Company shall, in lieu of issuance of any fractional share, pay to the Holder otherwise entitled to such fraction a sum in cash equal to the product resulting from multiplying the then-current fair market value of a Warrant Share by such fraction.
EXHIBIT B: STOCK PURCHASE WARRANT
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(c) Holder’s Exercise Limitations. The Company shall not affect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, to the extent that after giving effect to issuance of Warrant Shares upon exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates (as such term is defined under the Exchange Act), and any other persons acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation, as defined below. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, non-exercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or non-converted portion of any other securities of the Company (including without limitation any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this paragraph (d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this paragraph applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination.
For purposes of this Section 1(c), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the SEC, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or its transfer agent setting forth the number of shares of Common Stock outstanding. Upon the request of a Holder, the Company shall within two Trading Days confirm to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The limitations contained in this paragraph shall apply to a successor Holder of this Warrant.
2. ADJUSTMENTS. The Exercise Price and the number of Warrant Shares shall be adjusted from time to time as follows:
(a) Distribution of Assets. If the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including without limitation any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case:
EXHIBIT B: STOCK PURCHASE WARRANT
4
(i) any Exercise Price in effect immediately prior to the close of business on the record date fixed for the determination of holders of shares of Common Stock entitled to receive the Distribution shall be reduced, effective as of the close of business on such record date, to a price determined by multiplying such Exercise Price by a fraction (i) the numerator of which shall be the Closing Sale Price of the shares of Common Stock on the Trading Day immediately preceding such record date minus the value of the Distribution (as determined in good faith by the Company’s Board of Directors) applicable to one share of Common Stock, and (ii) the denominator of which shall be the Closing Sale Price of the shares of Common Stock on the Trading Day immediately preceding such record date; and
(ii) the number of Warrant Shares shall be increased to a number of shares equal to the number of shares of Common Stock obtainable immediately prior to the close of business on the record date fixed for the determination of holders of shares of Common Stock entitled to receive the Distribution multiplied by the reciprocal of the fraction set forth in the immediately preceding clause (i); provided, however, that in the event that the Distribution is of shares of common stock of a company (other than the Company) whose common stock is traded on a national securities exchange or a national automated quotation system (“Other Shares of Common Stock”), then the Holder may elect to receive a warrant to purchase Other Shares of Common Stock in lieu of an increase in the number of Warrant Shares, the terms of which shall be identical to those of this Warrant, except that such warrant shall be exercisable into the number of shares of Other Shares of Common Stock that would have been payable to the Holder pursuant to the Distribution had the Holder exercised this Warrant immediately prior to such record date and with an aggregate exercise price equal to the product of the amount by which the exercise price of this Warrant was decreased with respect to the Distribution pursuant to the terms of the immediately preceding clause (i) and the number of Warrant Shares calculated in accordance with the first part of this clause (ii).
(b) Stock Splits. If the Company, at any time while this Warrant is outstanding: (i) subdivides outstanding shares of Common Stock into a larger number of shares, or (ii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 2(b) shall become effective immediately after the effective date in the case of a subdivision or combination.
EXHIBIT B: STOCK PURCHASE WARRANT
5
(c) Anti-Dilution; Adjustments to Exercise Price. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or securities entitling any person or entity to acquire shares of Common Stock (upon conversion, exercise or otherwise) (including but not limited to under the Note), at an effective price per share less than the then Exercise Price (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share which is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance), then the Exercise Price shall be reduced at the option of the Holder and only reduced to equal the Base Share Price. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. The Company shall notify the Holder in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 2(c), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice the “Dilutive Issuance Notice”). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 2(c), upon the occurrence of any Dilutive Issuance, the Holder is entitled to receive such adjustment. Without duplication of any adjustment otherwise provided for in Section 2 of this Warrant, the number of Common Stock issuable upon conversion of the Warrant shall, after the Issuance Date, be subject to general anti-dilution adjustment such that upon any issuances of Common Stock by the Company (not in connection with this Warrant), the number of Warrant Shares issuable under this Warrant shall be adjusted on such date by adding thereto the number of shares of Common Stock which would maintain the Holder’s ownership percentage (if this Warrant was exercised) of the outstanding Common Stock of the Company on a fully diluted basis as that percentage on the Issuance Date.
3. FUNDAMENTAL TRANSACTIONS. If, at any time while this Warrant is outstanding, (i) the Company effects any merger of the Company with or into another entity and the Company is not the surviving entity (such surviving entity, the “Successor Entity”), (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or by another individual or entity, and approved by the Company) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares of Common Stock for other securities, cash or property and the holders of at least 50% of the Common Stock accept such offer, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (other than as a result of a subdivision or combination of shares of Common Stock) (in any such case, a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive the number of shares of Common Stock of the Successor Entity or of the Company and any additional consideration (the “Alternate Consideration”) receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event (disregarding any limitation on exercise contained herein solely for the purpose of such determination). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any Successor Entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder’s right to exercise such warrant into Alternate Consideration.
EXHIBIT B: STOCK PURCHASE WARRANT
6
4. NON-CIRCUMVENTION. The Company covenants and agrees that it will not, by amendment of its certificate of incorporation, bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon the exercise of this Warrant, and (iii) shall, for so long as this Warrant is outstanding, have authorized and reserved, free from preemptive rights, three times the number of shares of Common Stock issuable under the Warrant, or as otherwise required under the Purchase Agreement, to provide for the exercise of the rights represented by this Warrant (without regard to any limitations on exercise).
5. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise specifically provided herein, this Warrant, in and of itself, shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.
EXHIBIT B: STOCK PURCHASE WARRANT
7
6. REISSUANCE.
(a) Lost, Stolen or Mutilated Warrant. If this Warrant is lost, stolen, mutilated or destroyed, the Company will, on such terms as to indemnity or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as this Warrant so lost, stolen, mutilated or destroyed.
(b) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant shall be of like tenor with this Warrant, and shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date.
7. TRANSFER.
(a) Notice of Transfer. The Holder agrees to give written notice to the Company before transferring this Warrant or transferring any Warrant Shares of such Holder’s intention to do so, describing briefly the manner of any proposed transfer. Promptly upon receiving such written notice, the Company shall present copies thereof to the Company’s counsel. If the proposed transfer may be effected without registration or qualification (under any federal or state securities laws), the Company, as promptly as practicable, shall notify the Holder thereof, whereupon the Holder shall be entitled to transfer this Warrant or to dispose of Warrant Shares received upon the previous exercise of this Warrant, all in accordance with the terms of the notice delivered by the Holder to the Company; provided, however, that an appropriate legend may be endorsed on this Warrant or the certificates for such Warrant Shares respecting restrictions upon transfer thereof necessary or advisable in the opinion of counsel and satisfactory to the Company to prevent further transfers which would be in violation of Section 5 of the Securities Act and applicable state securities laws; and provided further that the prospective transferee or purchaser shall execute the Assignment of Warrant attached hereto as Exhibit B and such other documents and make such representations, warranties, and agreements as may be required solely to comply with the exemptions relied upon by the Company for the transfer or disposition of the Warrant or Warrant Shares.
(b) If the proposed transfer or disposition of this Warrant or such Warrant Shares described in the written notice given pursuant to this Section 7 may not be effected without registration or qualification of this Warrant or such Warrant Shares, the Holder will limit its activities in respect to such transfer or disposition as are permitted by law.
(c) Any transferee of all or a portion of this Warrant shall succeed to the rights and benefits of the initial Holder of this Warrant under the Purchase Agreement (registration rights, expenses, and indemnity).
EXHIBIT B: STOCK PURCHASE WARRANT
8
8. NOTICES. Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with the notice provisions contained in the Purchase Agreement. The Company shall provide the Holder with prompt written notice (i) immediately upon any adjustment of the Exercise Price, setting forth in reasonable detail, the calculation of such adjustment and (ii) at least 20 days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) with respect to any grants, issuances or sales of any stock or other securities directly or indirectly convertible into or exercisable or exchangeable for shares of Common Stock or other property, pro rata to the holders of shares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder.
9. AMENDMENT AND WAIVER. The terms of this Warrant may be amended or waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the Holder.
10. GOVERNING LAW; DISPUTE RESOLUTION. This Warrant shall be governed by and construed in accordance with the laws of the State of Nevada without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Warrant shall be brought only in the state courts of Clark County, Nevada, or in the federal courts located in Nevada. The parties to this Warrant hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Warrant or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Warrant or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Warrant and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
EXHIBIT B: STOCK PURCHASE WARRANT
9
11. ACCEPTANCE. Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.
12. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall have the following meanings:
(a) “Closing Sale Price” means, for any security as of any date, (i) the last closing trade price for such security on the Trading Market, as reported by the Trading Market, or, if the Trading Market begins to operate on an extended hours basis and does not designate the closing trade price, then the last trade price of such security prior to 4:00 p.m., Miami, Florida time, as reported by the Trading Market, or (ii) if the foregoing does not apply, the last trade price of such security in the over-the-counter market for such security as reported by the Trading Market, or (iii) if no last trade price is reported for such security by the Trading Market, the average of the bid and ask prices of any market makers for such security as reported by the Trading Market. If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.
(b) “Common Stock” means the Company’s common stock, par value $0.001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.
(c) “Common Stock Equivalents” means any securities of the Company that would entitle the holder thereof to acquire at any time Common Stock, including without limitation any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
(d) “Market Price” means the highest traded price of the Common Stock during the thirty (30) Trading Days prior to the date of the respective Exercise Notice.
(e) “OTC Markets” means OTCQX, OTCQB, OTC Pink, the OTC Bulletin Board.
(f) “Trading Day” means (i) any day on which the Common Stock is listed or quoted and traded on its Trading Market, (ii) if the Common Stock is not then listed or quoted and traded on any national securities exchange, then a day on which trading occurs on any over-the-counter markets, or (iii) if trading does not occur on the over-the-counter markets, any business day.
(g) “Trading Market” means the OTC Markets or any equivalent principal securities exchange or other securities market on which the Common Stock is being traded or quoted.
** signature page follows **
EXHIBIT B: STOCK PURCHASE WARRANT
10
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the Issuance Date set forth above.
BOATIM, INC. | ||
By: | ||
Name: | Joseph Johnson | |
Title: | CEO | |
Agreed & Accepted: | ||
MEDITHORITY, LLC | ||
By: | ||
Name: | Christopher Lewis | |
Title: | Managing Partner |
EXHIBIT B: STOCK PURCHASE WARRANT
11
Exhibit 11.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the inclusion in this Registration Statement on Form 1-A of our report dated January 3, 2022 with respect to the audited consolidated financial statements of Boatim, Inc. for the years ended August 31, 2021 and 2020. Our report contains an explanatory paragraph regarding the Company’s ability to continue as a going concern.
We also consent to the references to us under the heading “Experts” in such Registration Statement.
/s/ MaloneBailey, LLP
www.malonebailey.com
Houston, Texas
February 8, 2022
Exhibit 12.1
Exhibit 21.1
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