SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1/A
AMENDMENT NO. 1
Registration Statement Under
THE SECURITIES ACT OF 1933
PIERRE CORP.
(Exact name of registrant as specified in charter)
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Nevada |
| 2080 |
| 467-4046237 |
(State or other jurisdiction |
| (Primary Standard Classi- |
| (IRS Employer |
of incorporation) |
| fication Code Number) |
| I.D. Number) |
Pierre Corp.
750 N. San Vincente, Suite 800 West
West Hollywood, CA 90069
(818) 855-8199
(Address and telephone number of principal executive offices)
750 N. San Vincente, Suite 800 West
West Hollywood, CA 90069
(Address of principal place of business or intended principal place of business)
J. Jacob Isaacs
750 N. San Vincente, Suite 800 West
West Hollywood, CA 90069
(818) 855-8199
(Name, address and telephone number of agent for service)
Copies of all communications, including all communications sent
to the agent for service, should be sent to:
William T. Hart, Esq.
Hart & Hart, LLC
1624 Washington Street
Denver, Colorado 80203
303-839-0061
As soon as practicable after the effective date of this Registration Statement
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: þ
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
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If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ¨ | Accelerated filer ¨ |
Non-accelerated filer ¨ | Smaller reporting company þ |
(Do not check if a smaller reporting company) | Emerging growth company ¨ |
If an emerging growth company, indicate by checkmark if the registrant has not elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ¨
CALCULATION OF REGISTRATION FEE
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Title of each |
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| Proposed |
| Proposed |
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Class of |
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| Maximum |
| Maximum |
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Securities |
| Securities |
| Offering |
| Aggregate |
| Amount of |
to be |
| to be |
| Price Per |
| Offering |
| Registration |
Registered |
| Registered |
| Share (1) |
| Price |
| Fee |
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Common stock (2) |
| 5,000,000 |
| $0.50 |
| $2,500,000 |
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Common stock (3) |
| 136,363 |
| $0.50 |
| 68,182 |
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Total |
| 5,136,363 |
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| $2,568,182 |
| $312 |
(1)
Offering price computed in accordance with Rule 457(o).
(2)
Represents shares to be sold to Tiger Trout Capital, LLC under an Investment Agreement.
(3)
Represents shares to be sold by Tiger Trout Capital, LLC.
Pursuant to Rule 416, this Registration Statement includes such indeterminate number of additional securities as may be required for issuance upon the exercise of the warrants as a result of any adjustment in the number of securities issuable by reason of stock splits or similar capital reorganizations.
The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of l933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
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PROSPECTUS
PIERRE CORP.
Common Stock
This prospectus may be used only in connection with sales of shares of our common stock by Tiger Trout Capital, LLC (TTC). TTC will sell:
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shares of common stock purchased from us pursuant to an Investment Agreement; and
·
136,363 shares which we issued to TTC as a commitment fee pursuant to the Investment Agreement.
In connection with the sale of these shares, TTC will be an underwriter as that term is defined in the Securities Act of 1933.
The number of shares to be sold by TTC in this offering will vary from time-to-time and will depend upon the number of shares purchased from us pursuant to the terms of the Investment Agreement. However, 5,000,000 shares of common stock is the maximum number of shares which we may sell to TTC. See the section of this prospectus captioned Investment Agreement for more information.
Our common stock is quoted on the over-the-counter market under the symbol "PIRE". On January 15, 2020 the closing price for one share of our common stock was $0.55.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
These securities are speculative and involve a high degree of risk. For a description of certain important factors that should be considered by prospective investors, see "Risk Factors" beginning on page 5 of this prospectus.
The date of this prospectus is January ___, 2020
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THIS SUMMARY IS QUALIFIED BY THE MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS.
In March, 2019 we began to develop the following sparkling mineral water beverages:
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water with 5mg of CBD-no flavor
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water with lemon zest flavor and 5mg of CBD
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water with 100mg of caffeine and an energy booster - No CBD
All waters are available in a 355 ml slim can or a 750ml glass bottle.
We have been meeting with distributors and restaurant groups regarding placing our beverages with retailers and in restaurants.
We also plan to own and operate medical and adult marijuana cultivation facilities, manufacturing facilities and dispensaries in California. The first step in our business plan is to acquire licenses to cultivate, manufacture and dispense marijuana.
On March 20, 2019 we entered into a Letter of Intent with an unrelated third party concerning marijuana licenses in Los Angeles County. The Letter of Intent provides that we will pay $850,000 for licenses to cultivate, manufacture, distribute, and deliver marijuana in California that may be awarded to the third party. However we will not acquire any aspects of the licenses that relate to retail delivery or store front retail.
The acquisition of the licenses is subject to a number of conditions, including a requirement that the licenses, which expired in June 2018, be renewed by the government authorities which issued the licenses.
Our executive offices are located at 750 N. San Vicente, Suite 800 West, West Hollywood, CA 90069 and our telephone number is (818) 855-8199.
Securities Offered:
In order to provide a possible source of funding for our operations, we have entered into an Investment Agreement with TTC.
Under the Investment Agreement, TTC has agreed to provide us with up to $2,500,000 of funding during the period ending on November 14, 2022. During this period, we may sell shares of our common stock to TTC and TTC will be obligated to purchase the shares. These shares may be offered for sale from time to time by means of this prospectus by or for the account of TTC.
The maximum amount we can raise at any one time is the lesser of $1,000,000 or 200% of the average trading volume of our common stock during the ten (10) Trading Days immediately preceding the date we submit a request for funding (a Put Notice) to TTC. There is no minimum amount required for a Put Notice. We are under no obligation to sell any shares under the Investment Agreement.
The number of shares to be sold by TTC in this offering will vary from time-to-time and will depend upon the number of shares purchased from us pursuant to the terms of the Investment Agreement. However, 5,000,000 shares of common stock, which represent approximately 17% of our outstanding shares (and approximately 30% of our public float) as of December 16, 2019, are the maximum number of shares which we may sell to TTC and these 5,000,000 shares are the maximum number of shares which may be sold by TTC by means of this prospectus. See the section of this prospectus captioned Investment Agreement for more information.
TTC is also offering 136,363 shares of our common stock that we issued to TTC as a commitment fee pursuant to the Investment Agreement.
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As of January 15, 2020, we had 29,288,163 outstanding shares of common stock. The number of outstanding shares does not give effect to shares which may be issued pursuant to the Investment Agreement or upon the exercise of options or warrants
We will not receive any proceeds from the sale of the shares by TTC. However, we will receive proceeds from any sale of common stock to TTC under the Investment Agreement. We expect to use substantially all the net proceeds for our operations.
Risk Factors:
The purchase of the securities offered by this prospectus involves a high degree of risk. Risk factors include our history of losses and need for additional capital. See the "Risk Factors" section of this prospectus for additional Risk Factors.
Trading Symbol: PIRE
Forward-Looking Statements
This prospectus contains or incorporates by reference "forward-looking statements," as that term is used in federal securities laws, concerning our financial condition, results of operations and business. These statements include, among others:
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statements concerning the benefits that we expect will result from our business activities; and
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statements of our expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts.
You can find many of these statements by looking for words such as "believes," "expects," "anticipates," "estimates" or similar expressions used in this prospectus.
These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause our actual results to be materially different from any future results expressed or implied in those statements. Because the statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied. We caution you not to put undue reliance on these statements, which speak only as of the date of this prospectus. Further, the information contained in this prospectus, or incorporated herein by reference, is a statement of our present intention and is based on present facts and assumptions, and may change at any time.
Investors should be aware that this offering involves certain risks, including those described below, which could adversely affect the value of our common stock. We do not make, nor have we authorized any other person to make, any representation about the future market value of our common stock. In addition to the other information contained in this prospectus, the following factors should be considered carefully in evaluating an investment in our securities.
We have a limited operating history and may never be profitable. Since we have only recently began our new operations and have an unproven business plan, it is difficult for potential investors to evaluate our business. There can be no assurance that we will be profitable or that the securities which may be sold in this offering will have any value. Any forecasts we make concerning operations may prove to be inaccurate. Our prospects must be considered in light of the risks, expenses, and difficulties frequently encountered by companies in the early stage of development. As a result of these risks, challenges, and uncertainties, the value of your investment could be significantly reduced or completely lost.
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We have a history of losses and may continue to incur losses.
For the nine months ended September 30, 2019, we had a net loss of $(281,214) and we had an accumulated deficit of $(684,138) as of September 30, 2019. These losses have had, and likely will continue to have, an adverse effect on our working capital, assets, and stockholders equity. In order to achieve and sustain revenue growth in the future, we must significantly expand our market presence and revenues. We may continue to incur losses in the future and may never generate revenues sufficient to become profitable or to sustain profitability. Continuing losses may impair our ability to raise the additional capital required to continue and expand our operations.
We need capital to implement our business plan. We need capital to fund operations. We do not know what the terms of any future capital raising may be but any future sale of our equity securities will dilute the ownership of existing stockholders and could be at prices substantially below the price of the shares of common stock sold in this offering. Our failure to obtain the capital which we require may result in the slower implementation of our business plan.
We are dependent on our management and the loss of our management would harm our business. Our future success depends largely upon the management experience, skill, and contacts of our sole officer. The loss of the services of our only officer, whether as a result of death, disability or otherwise, may have a material adverse effect upon our business.
We may issue shares of preferred stock that would have a liquidation preference to our common stock. Our articles of incorporation currently authorize the issuance of 5,000,000 shares of preferred stock. Our director has the power to issue these shares without shareholder approval, and such shares can be issued with such rights, preferences, and limitations as may be determined by our director. The rights of the holders of common stock will be subject to, and may be adversely affected by, the rights of any holders of preferred stock that may be issued in the future. Although we presently have no commitments or contracts to issue any shares of preferred stock, authorized and unissued preferred stock could delay, discourage, hinder or preclude an unsolicited acquisition of our company, could make it less likely that shareholders receive a premium for their shares as a result of any such attempt, and could adversely affect the market prices of, and the voting and other rights, of the holders of outstanding shares of our common stock.
The applicability of the "penny stock rules" to broker-dealer sales of our common stock may have a negative effect on the liquidity and market price of our common stock. Trading in our shares is subject to the "penny stock rules" adopted pursuant to Rule 15g-9 of the Securities Exchange Act of 1934, which apply to companies that are not listed on an exchange and whose common stock trades at less than $5.00 per share or which have a tangible net worth of less than $5,000,000, or $2,000,000 if they have been operating for three or more years. The penny stock rules impose additional sales practice requirements on broker-dealers which sell such securities to persons other than established customers and institutional accredited investors. For transactions covered by this rule, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction prior to sale. Consequently, the penny stock rules may affect the ability of broker-dealers to sell shares of common stock and may affect the ability of shareholders to sell their shares in the secondary market, as compliance with such rules may delay and/or preclude certain trading transactions. The rules could also have an adverse effect on the market price of our common stock.
We are an emerging growth company, and the reduced disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors.
We are an emerging growth company, as defined in the JOBS Act. For as long as we are an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding advisory say-on-pay votes on executive compensation and shareholder advisory votes on golden parachute compensation.
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In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year during which we have total annual gross revenues of $1.07 billion or more; (ii) the last date of the fiscal year following the fifth anniversary of the date of the first sale of common stock under this registration statement; (iii) the date on which we have, during the previous three-year period, issued more than $1,000,000,000 in non-convertible debt; and (iv) the date on which we are deemed to be a large accelerated filer under the Exchange Act.
We cannot predict if investors will find our common stock less attractive to the extent we rely on the exemptions available to emerging growth companies. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
There is substantial risk about our ability to continue as a going concern, which may hinder our ability to obtain future financing.
The accompanying consolidated financial statements as of September 30, 2019 have been prepared and presented on a basis assuming we will continue as a going concern. We sustained a loss of $(281,214) during the nine months ended September 30, 2019. Based on our current cash levels as of September 30, 2019, our current rate of cash requirements, we will need to raise additional capital and we will need to generate revenues. There can be no assurance that we can raise capital upon favorable terms, if at all, or that we can earn a profit from our operations.
Our growth will depend on the acceptance of our products and consumer discretionary spending.
The acceptance of our beverage products by consumers is critically important to our success. Shifts in retailer priorities and shifts in user preferences away from our products, our inability to develop effective healthy beverage products that appeal to both retailers and consumers, or changes in our products that eliminate items popular with some consumers could harm our business. Also, our success depends to a significant extent on discretionary user spending, which is influenced by general economic conditions and the availability of discretionary income. Accordingly, we may experience an inability to generate profits during economic downturns or during periods of uncertainty, where users may decide to purchase beverage products that are less expensive or to forego purchasing any type of healthy beverage products.
Competition that we face is varied and strong.
Our products and industry as a whole are subject to competition. There is no guarantee that we can develop or sustain a market position or expand our business. We anticipate that the intensity of competition in the future will increase.
We will rely on independent contract manufacturers of our products, and this dependence could make management of our marketing and distribution efforts inefficient or unprofitable.
We will not own the plants or the equipment required to manufacture and package our beverage products, but instead we will outsource the manufacturing process to independent contract manufacturers (co-packers). We do not anticipate bringing the manufacturing process in-house in the near future. Our ability to attract and maintain effective relationships with contract manufacturers and other third parties for the production and delivery of our beverage products is important to the success of our operations. Contract manufacturers may terminate their arrangements with us at any time, in which case we could experience disruptions in our ability to deliver products to customers. The failure to establish and maintain effective relationships with contract manufacturers could increase our manufacturing costs and reduce profits realized from the sale of our products.
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We will depend on a limited number of suppliers of raw and packaging materials.
We will rely upon a limited number of suppliers for raw and packaging materials used to make and package our products. Our success will depend in part upon our ability to successfully secure such materials from suppliers that are delivered with consistency and at a quality that meets our requirements. The price and availability of these materials are subject to market conditions. Increases in the price of our products due to the increase in the cost of raw materials could have a negative effect on our business.
If we are unable to obtain sufficient quantities of raw and packaging materials, delays or reductions in product shipments could occur which would have a material adverse effect on our business, financial condition, and results of operations. The supply and price of raw materials used to produce our products can be affected by a number of factors beyond our control, such as frosts, droughts, other weather conditions, economic factors affecting growing decisions, various plant diseases and pests, transportation interruption and foreign imposed restrictions. If any of the foregoing were to occur, no assurance can be given that such condition would not have a material adverse effect on our business, financial condition, and results of operations. In addition, our results of operations are dependent upon our ability to accurately forecast our requirements of raw materials. Any failure by us to accurately forecast our demand for raw materials could result in an inability to meet higher than anticipated demand for products or producing excess inventory, either of which may adversely affect our results of operations.
We may fail to comply with applicable government laws and regulations.
We are subject to a variety of federal, state, and local laws and regulations, some of which are rapidly changing or at times conflicting. These laws and regulations apply to many aspects of our business including the manufacture, safety, labeling, transportation, advertising and sale of our products. Violations of these laws or regulations in the manufacture, safety, labeling, transportation and advertising of our products could damage our reputation and/or result in regulatory actions with substantial penalties. In addition, any significant change in such laws or regulations or their interpretation, or the introduction of higher standards or more stringent laws or regulations, could result in increased compliance costs or capital expenditures. For example, changes in recycling and bottle deposit laws or special taxes on our beverages and our ingredients could increase our costs. Regulatory focus on the health, safety and marketing of beverage products is increasing. Federal or state regulations or laws affecting the labeling of our products, are or could become applicable to our products.
Various operating hazards could harm our business.
Our operations are subject to certain hazards and liability risks faced by beverage companies that manufacture and distribute water, tea, energy drink, and dietary supplement products, such as defective products, contaminated products, and damaged products. The occurrence of the foregoing could result in a costly product recall and serious damage to our reputation for product quality, as well as potential lawsuits. Although we plan to carry insurance against certain risks under various general liability and product liability insurance policies, no assurance can be given that our insurance will be adequate to fully cover any incidents of product contamination or injuries resulting from our operations and our products. We cannot assure you that we will be able to continue to maintain insurance with adequate coverage for liabilities or risks arising from our business operations on acceptable terms. Even if the insurance is adequate, insurance premiums could increase significantly which could result in higher costs to us.
Litigation and publicity concerning product quality, health, and other issues could adversely affect our results of operations, business and financial condition.
Our business could be adversely affected by litigation and complaints from customers or government authorities resulting from product defects or product contamination. Adverse publicity about these allegations may negatively affect us, regardless of whether the allegations are true, by discouraging customers from buying our products. We could also incur significant liabilities, if a lawsuit or claim results in a decision against us, or litigation costs, regardless of the result. Further, any litigation may distract our management of cause our management to expend resources and time normally devoted to the operation of our business.
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If we fail to enhance our brand, our ability to expand will be impaired and our financial condition may suffer.
We believe that the development of trade names and brands is critical to achieving widespread awareness of our products, and as a result, is important to attracting new customers. We also believe that the importance of brand recognition will increase as competition in our market increases. Successful promotion of our brand will depend largely on the effectiveness of our marketing efforts and on our ability to provide reliable products at competitive prices. Brand promotion activities may not yield increased revenue, and even if they do, any increased revenue may not offset the expenses we incurred in building our brand. If we fail to successfully promote and maintain our brand, our business could be adversely impacted.
We cannot be certain that the products that we offer will become, or continue to be, appealing and as a result there may not be any demand for these products, which would result in a loss of revenue.
The demand for our products will depend on many factors, including the number of customers we are able to attract and retain over time. The competitive environment in the CBD beverage industry, as well as the beverage industry as a whole, may force us to reduce prices below our desired pricing level or increase promotional spending. Our inability to anticipate changes in user preferences and to meet consumers needs in a timely cost effective manner could result in immediate and longer term declines in the demand for the products we plan to offer.
The federal and state regulatory landscape regarding products containing CBD is uncertain and evolving, and new or changing laws or regulations relating to industrial hemp and industrial hemp-derived products could have a material adverse effect on our business, financial condition and results of operations.
We plan to sell and distribute products containing cannabidiol derived from industrial hemp (CBD), a form of cannabis. Although industrial hemp has been removed from the list of controlled substances under the Controlled Substances Act, some states still classify industrial hemp and its byproducts as a controlled substance under applicable state criminal laws, making the possession, sale, and distribution of any such products illegal under such state laws. Although many states are implementing changes to their criminal laws in response to the 2018 Farm Bill, there can be no assurance that every state will follow suit. As a result, applicable state and local laws or regulations regarding industrial hemp-based CBD and products containing industrial hemp-based CBD could restrict any CBD products we offer in the future or impose additional compliance costs on us. Violations of applicable laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our operations.
FDA regulation regarding the sale or distribution of products containing CBD could make it difficult for us to operate.
The United States Food and Drug Commission (FDA) has the authority to regulate the production and sale of hemp pursuant to the United States Federal Food, Drug, and Cosmetic Act (the FDCA). Shortly after the 2018 Farm Bill became law, the FDA issued a statement that any cannabis product, whether derived from industrial hemp or otherwise, marketed with a disease claim (e.g., a claim of therapeutic benefit or disease prevention) must be approved by the FDA for its intended use through one of the drug approval pathways prior to it being introduced into interstate commerce. The FDA has since indicated that it would issue regulations regarding the addition of food, beverages, and dietary supplements containing CBD, and conducted a public hearing on May 31, 2019 to obtain scientific data and information about the safety, manufacturing, product quality, marketing, labeling, and sale of products containing cannabis or cannabis-derived compounds.
Any regulations the FDA issues relating to the sale of food, beverages, and dietary supplements containing CBD could have a material adverse effect on our business, financial condition and results of operations.
If commercial cultivation of industrial hemp is deemed to be a violation of federal law, we may be subject to federal enforcement actions, which could adversely affect our business and harm our reputation and brand.
The 2018 Farm Bill empowers the United States Department of Agriculture (the USDA) to implement a program to certify state and Indian tribe permitting for the commercial cultivation of industrial hemp. On October 29, 2019, the USDA released the text of its interim final rule for regulations establishing such a program, which include specific requirements about permitting of cultivators, testing of cultivated hemp, and land maintenance,
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among other things (the Interim Rules). Such Interim Rules became effective on November 1, 2019 by their terms; however, the USDA has invited public comment on the Interim Rules in anticipation of final rules to be implemented by the USDA in the future (the Final Rules).
Until commercial cultivators of industrial hemp receive permits for production under applicable state and Indian tribe laws that are implemented pursuant to the Interim Rules, any production of industrial hemp by such persons may be deemed to be in violation of federal law. In addition, any Final Rules implemented by the USDA may be different from the Interim Rules, making industrial hemp more difficult to cultivate and produce in compliance with the Final Rules.
We risk becoming subject to adverse publicity and costly federal enforcement actions in selling and distributing products containing industrial hemp-based CBD in the United States that is not grown in full compliance with the Interim Rules or the Final Rules and applicable state and/or Indian tribe permitting rules. In addition, industrial hemp-based CBD products that we distribute may not fully comply with such Interim Rules or the Final Rules, and state or Indian tribe permitting rules. We may also sustain considerable damage to our reputation and brand should we become party to federal enforcement actions resulting from the sale and distribution of products containing industrial hemp-based CBD that do not fully comply with the Interim Rules or the Final Rules and applicable state and/or Indian tribe permitting rules.
We may have difficulty accessing the service of banks, which may make it difficult to sell our products and services.
Banks remain hesitant to offer banking services to cannabis-related businesses and businesses involved in the cannabis industry continue to encounter difficulty establishing banking relationships. Our inability to maintain our current bank accounts would make it difficult for us to operate and could result in our inability to implement our business plan.
MARKET FOR OUR COMMON STOCK
Our common stock is quoted on the Over-the-Counter Market under the symbol PIRE.
Prior to May 30, 2019 there was no market for our common stock.
The following table summarizes the high and low historical closing prices of our common stock for the periods indicated:
Fiscal Year Ended December 31, 2019
High
Low
Second Quarter
$1.50
$1.50
Third Quarter
$1.50
$1.01
Fourth Quarter
$1.01
$0.74
Holders of our common stock are entitled to receive dividends as may be declared by the Board of Directors. The Board of Directors is not restricted from paying any dividends but is not obligated to declare a dividend. No cash dividends have ever been declared and it is not anticipated that cash dividends will ever be paid.
Our Articles of Incorporation authorize our Board of Directors to issue up to 5,000,000 shares of preferred stock. The provisions in the Articles of Incorporation relating to the preferred stock allow directors to issue preferred stock with multiple votes per share and dividend rights which would have priority over any dividends paid with respect to the holders of common stock. The issuance of preferred stock with these rights may make the removal of management difficult even if the removal would be considered beneficial to shareholders generally and will have the effect of limiting shareholder participation in certain transactions such as mergers or tender offers if these transactions are not favored by our management. As of the date of this prospectus, no preferred shares were outstanding.
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The closing price of our common stock on January 15, 2020 was $0.55 per share.
As of January 15, 2020 we had 29,288,163 outstanding shares of common stock which were owned by 52 shareholders of record.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
The following discussion and analysis by our management of our financial condition and results of operations should be read in conjunction with financial statements and the related notes included elsewhere in this prospectus.
Results of Operations
Year Ended December 31, 2018
Operating expenses for the years ended December 31, 2018 and 2017 were $198,901 and $64,039, respectively, and were comprised of principally legal and accounting costs and management fees. Operating expenses during the year ended December 31, 2018 increased due to increased activity within the company. This was largely due to the company beginning a new business plan and moving into the process of attaining public status.
Three and Nine Months Ended September 30, 2019
During the three and nine months ended September 30, 2019 General and Administrative Expenses increased from the comparable periods in 2018 due to the change in our business plan which resulted in increased legal and consulting fees as well as increased travel costs. Increases in other expense are the result of cost associated with our new note payable arrangements included amortization of discounts, derivative liability expense and interest.
Liquidity and Capital Resources
Our sources and (uses) of cash for the years ended December 31, 2018 and 2017 were:
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| 2018 | 2017 | |||
Cash (used in) operations | (172,927) | (35,059) | |||
Sale of common stock | 186,700 | -- | |||
Proceeds from notes payable, related party | 20,012 | 22,200 | |||
Proceeds from notes payable, unrelated parties | 20,000 | 12,000 | |||
Repayments on notes payable, related party | (52,500) | (812) |
Our sources and (uses) of cash for the nine months ended September 30, 2019 and 2018 were:
| 2019 |
| 2018 |
| ||||
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|
|
|
| ||||
Cash used in operations |
| $ | (179,055) |
|
| $ | (115,598) |
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Sale of common stock |
| $ | - |
|
| $ | 186,700 |
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Proceeds from notes payable, related party |
| $ | - |
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| $ | 20,012 |
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Payment on notes payable, related party |
| $ | - |
|
| $ | (52,500) |
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Proceeds from convertible notes |
| $ | 100,000 |
|
| $ | - |
|
Proceeds from notes payable, unrelated party |
| $ | 82,900 |
|
| $ | 20,000 |
|
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Going Concern
The financial statements included as part of this prospectus have been prepared on a going concern basis, which assumes that our company will be able to meet our obligations and continue our operations for our next fiscal year. Realization values may be substantially different from carrying values as shown and the financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should we be unable to continue as a going concern. At September 30, 2019, we have not yet achieved profitable operations and expect to incur further losses in the development of our business, all of which raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate future profitable operations and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that we will be able to obtain additional funds by equity financing and/or related party advances, however there is no assurance of additional funding being available.
Due to our continuing losses from business operations, the independent auditors report dated March 29, 2019, included a going concern opinion relating to the fact that our continuation is dependent upon obtaining additional working capital either through revenues or through outside financing.
There are no assurances that we will be able to obtain further funds required for our continued operations. We are pursuing various financing alternatives to meet our immediate and long-term financial requirements. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will be forced to scale down or perhaps even cease the operation of our business
We are currently in the development stage and have not earned any revenues.
We do not anticipate receiving cash flows from operations in the near future to satisfy our ongoing capital requirements. We are seeking financing in the form of equity capital in order to provide the necessary working capital. Our ability to meet our obligations and continue to operate as a going concern is highly dependent on our ability to obtain additional financing. We cannot predict whether this additional financing will be in the form of equity or debt, or be in another form. We may not be able to obtain the necessary additional capital on a timely basis, on acceptable terms, or at all. In any of these events, we may be unable to implement our current plans which circumstances would have a material adverse effect on our business, prospects, financial conditions and results of operations.
Our estimated capital requirements for the twelve months ending December 31, 2020 are:
|
|
|
Description
Amount
Inventory
$ 250,000
Marketing
500,000
Payment of loans
200,000
Operating expenses
250,000
$1,200,000
Critical Accounting Policies
See Note 2 to the December 31, 2018 financial statements included as part of this prospectus for a discussion of our Significant Accounting Policies.
BUSINESS
Unless otherwise indicated or the context otherwise requires, all references in this Form 10-Q to we, us, our, our company, Pierre or the Company refer to Pierre Corp.
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We were incorporated in Nevada on January 21, 2011. Following our incorporation, we attempted to become involved in a number of business ventures, all of which were unsuccessful and which we have abandoned.
Non-Alcoholic Beverages
Industry Overview
In March, 2019 we began to develop a line of sparkling, non-alcoholic, mineral water beverages.
Non-alcoholic beverages are among the most widely distributed food products in the world and are being sold through more than 400,000 retailers in the United States, our core market. The United States has more than 2,600 beverage companies and 500 bottlers of beverage products. Collectively they account for more than $100 billion in annual sales. It is estimated that globally more than $300 billion worth of non-alcoholic beverages are sold annually. The beverage market is controlled by two giants, The Coca-Cola Company (Coke) and PepsiCo, combining for over 70% of the non-alcoholic beverage market. The demand for better-for you and functional drinks are two of the fastest growing beverage categories.
As of November 15, 2019, 33 states and the District of Columbia allow their citizens to use Medical Marijuana. Additionally, 10 states and the District of Columbia have legalized cannabis for recreational use by adults. As cannabis steps out of the black market, new industries, such as CBD-infused beverages, are developing.
CBD is an abbreviated term for cannabidiol. It has become increasingly popular for relieving pain, promoting relaxation, and lifting mood without the psychoactive properties that come with THC (Tetrahydrocannabinol), the other major cannabinoid.
After years of prohibition, a large body of clinical research data on cannabinoids and their potential therapeutic effects has been published. Clinical trials have been conducted on a range of disorders, from general analgesia and inflammation, to major cardiovascular, oncological and neurodengerative disorders. Recent studies suggest that CBDs properties may be useful in combating a variety of health conditions such as epilepsy, schizophrenia, multiple sclerosis, migraines, arthritis, and even side effects of cancer. This body of clinical trials is publicly available via the National Institutes of Health website.
A recent World Health Organization report, published in November 2017, revealed that CBD does not have potential for abuse or addiction and is completely safe for useit has none of the psychoactive effects of THC.
CBD-infused beverages are being marketed to new audiences who want to consume cannabis in different formats and many brands are positioning themselves in the health and wellness category. CBD beverages, which include tea, soda, cider, margaritas and wine, have a variety of benefits, including the following:
?
Beverages are seen as the healthier way to consume CBD, especially compared to smoking.
?
They are becoming more easily available in restaurants, bars, supermarkets, and online sites.
?
Dosage is controlled and, much like alcohol, consumers will be able to determine how much CBD content they want.
Demand for CBD-infused beverages will be fueled by three key trends;
·
The decline of globally is evidence of changing consumer tastes. Sales are expected to fall further as more people exchange alcohol for cannabis products.
·
Sustainable packaging, transparency around ingredients, more convenient ready-to-drink solutions, and personalized strains are driving the pace of product innovation.
·
Growing knowledge and increasing brand/celebrity endorsements are creating an established CBD industry in mainstream culture.
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CBD is derived from hemp. Hemp is a staple crop cultivated throughout North America and around the globe for thousands of years. It is an extremely versatile plant, growing in almost any climate, and producing foods, clothing, oils, and medicines.
Hemp is the term used to describe the food and fiber variety of the cannabis plant, and marijuana is used to describe the drug variety of the cannabis plant. In order to be considered hemp, the plant must contain less than 0.3% THC the primary psychoactive component in cannabis. Under this threshold, cannabis is defined as hemp. Above this threshold, cannabis is considered marijuana.
On December 12, 2018, Congress passed the 2018 Farm Bill, which was signed into law by President Trump the following week.
The 2018 Farm Bill:
·
defines hemp as the plant with a concentration of not more than 0.3 percent THC by dry weight. This definition is consistent with the definition of industrial hemp in the 2014 bill, which created a limited agricultural pilot program regarding research into industrial hemp.
·
removes hemp from the Controlled Substances Act, allowing the legal cultivation, possession, sale and distribution of the hemp plant.
·
delegates to states and Indian tribes the broad authority to regulate and limit the production and sale of hemp and hemp products within their borders. States and Indian tribes cannot, however, limit the transportation or shipment of hemp and hemp products through their respective jurisdictions.
With the passage of the 2018 U.S. Farm Bill, cannabis and beverage companies alike are launching CBD-infused beverage products in the U.S. market. The hemp-derived CBD market is expected to reach sales of $22 billion by 2022, outpacing cannabis sales, and surging from $591 million in 2018.
Our Products
We have recently developed the following sparkling mineral water beverages:
·
water with 5mg of CBD-no flavor
·
water with lemon zest flavor and 5mg of CBD
·
water with 100mg of caffeine and an energy booster - No CBD
All waters are available in a 355 ml slim can or a 750ml glass bottle.
We have been meeting with distributors and restaurant groups regarding placing our beverages with retailers and in restaurants.
We plan to begin the distribution of our products in March, 2020.
Production
We will outsource the manufacturing and warehousing of our products to independent contract manufacturers (co-packers). We will purchase our raw materials from suppliers which deliver to a third-party co-packer. Once manufactured, we will store finished product in a warehouse adjacent to a co-packer or in a third party warehouses. Other than minimum case volume requirements per production run, we do not expect to have annual minimum production commitments with a co-packer. Co-packers typically may terminate their arrangements with companies such as ours at any time, in which case disruptions in a companys ability to deliver products to our customers may result. As of December 16, 2019, we did not have any agreements with any co-packers.
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Raw Materials
Substantially all the raw materials used in the preparation, bottling, canning, and packaging of our products will be purchased by us or by our contract manufacturer in accordance with our specifications. Most of the ingredients used in our products are off-the shelf and readily available. No ingredient has a lead time greater than four weeks.
New Product Development
Our product philosophy to be based on developing products in those segments of the market that offer the greatest chance of success such as health, wellness and natural refreshment and rehydration, and we will continue to seek out underserved market niches. We believe we can respond to changing market conditions with new and innovative products. We are committed to developing products that are distinct, meet a quantifiable need, are proprietary, project a quality and healthy image, and can be sold through customary distribution channels.
Intellectual Property
We own the following intellectual property: - (List any trademarks here)-Currently we own the formulas developed and Pierre Brand
Seasonality
Our sales are expected to be seasonal and experience quarterly fluctuations because of many factors. Historically, the industry experiences an increase in revenues during the warm weather months of April through September.
Competition
Competition in the CBD infused beverage industry includes numerous companies that are highly fragmented in terms of geographic market coverage, distribution channels and product categories. We believe that competition is principally based upon price, quality, efficacy of products, branding, marketing and customer service. Large beverage companies, which have broader product lines, significantly greater financial resources and possess extensive manufacturing, distribution and marketing capabilities are beginning to enter the CBD infused beverage market. The entry of larger competitors could have a material adverse effect on our results of operations and financial conditions.
Government Regulation
The Agriculture Improvement Act of 2018, known as the "2018 Farm Bill", provides much of the legal framework for hemp-based CBD. The 2018 Farm Bill permanently removed hemp from the purview of the Controlled Substances Act, and accordingly, the Drug Enforcement Administration (the DEA) no longer has any claim to interfere with the interstate commerce of hemp products. Some of the immediate impact from this legislation includes the ability for farmers to access crop insurance and U.S. Department of Agriculture programs for certification and competitive grants. While the DEA is now officially not involved in hemp regulation, the FDA retains its authority to regulate ingestible and topical products, including those that contain hemp and hemp extracts such as CBD.
A range of federal regulations govern our operations, including the Dietary Supplement Health and Education Act of 1994 (the DSHEA). Under DSHEA, supplements are effectively regulated by the FDA for Good Manufacturing Practices under 21 CFR Part 111. DSHEA defines a dietary supplement as a product intended to supplement the diet that contains one or more of the following: (a) a vitamin; (b) a mineral; (c) an herb or other botanical; (d) an amino acid; (e) a dietary substance for use by man to supplement the diet by increasing the total dietary intake; or (f) a concentrate, metabolite, constituent, extract, or combination of any ingredient described in section (a) through (e). Accordingly, the law permits a wide range of dietary ingredients in dietary supplements, including CBD. CBD also falls under section (e) as it is a dietary substance for use by humans to supplement the diet by increasing the total dietary intake
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Marijuana Cultivation/Manufacturing Facilities and Dispensaries
We also plan to own and operate medical and adult marijuana cultivation facilities, manufacturing facilities and dispensaries in California. The first step in our business plan is to acquire licenses to cultivate, manufacture and dispense marijuana.
We previously had agreements with an unrelated third party to acquire marijuana cultivation and manufacturing licenses which the third party may be awarded by the state of California.
On February 22, 2019 we terminated our agreements relating to the acquisition of these licenses.
On March 20, 2019 we entered into a Letter of Intent with an unrelated third party concerning marijuana licenses in Los Angeles County. The Letter of Intent provides that we will pay $850,000 for licenses to cultivate, manufacture, distribute, and deliver marijuana in California that may be awarded to the third party. However we will not acquire any aspects of the licenses that relate to retail delivery or store front retail.
The acquisition of the licenses is subject to a number of conditions, including a requirement that the licenses, which expired in June 2018, be renewed by the government authorities which issued the licenses.
If the licenses are acquired, we plan to joint venture with a third party (not yet identified) to construct a cultivation, manufacturing and distribution facility in Los Angeles and sell marijuana throughout California.
If the third party is not awarded any licenses we may attempt to acquire licenses from other persons who have either applied for or been granted marijuana licenses in California.
We do not intend to acquire a license associated with a facility or dispensary which is in operation.
We may also apply for marijuana cultivation, manufacturing or dispensary licenses in our own name.
Other Information
As of January 15, 2020, we had one employee.
Our offices are located at 750 N. San Vicente, Suite 800 West, West Hollywood, CA 90069.
MANAGEMENT
Name
Age
Position
J. Jacob Isaacs
36
Chief Executive, Financial and Accounting Officer and a Director
Mr. Isaacs has served as our officer and director since August 2017. Mr. Isaacs served as the Chief Executive Officer, President, Chief Financial Officer and Secretary/Treasurer of Cumberland Hills, Ltd. since its inception in January 2010 until its subsequent merger in 2013. Since 2013 Mr. Isaacs has operated his own private consulting firm advising small companies on the process of going public. He is also active in restructuring corporations and arranging debt consolidations.
Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until their successors are elected or appointed. Our officers are appointed by our board of directors and serve at the discretion of the board.
We believe Mr. Isaacs is qualified to act as a director based upon his knowledge of business practices and, in particular, the regulations relating to public companies.
Mr. Isaacs is not independent as that term is defined in Section 803 of the NYSE MKT Company Guide.
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We do not have a financial expert as that term is defined by the Securities and Exchange Commission.
Our Board of Directors does not have standing audit, nominating or compensation committees, committees performing similar functions, or charters for such committees. Instead, the functions that might be delegated to such committees are carried out by our Directors, to the extent required. Our Directors believe that the cost of associated with such committees, has not been justified under our current circumstances. During the years ended December 31, 2018 and 2017 we did not compensate any person for serving as a director.
None of our executive officers served as a member of the compensation committee or as a director of another entity one of whose executive officers served on our compensation committee or as one of our directors.
We have not adopted a code of ethics that applies to our officers since as of the date of this prospectus we had only one officer.
Executive Compensation
|
|
|
|
Salary
Total
Name and principal position
Year
($)
($)
J. Jacobs Isaacs (1)
2019
121,500
121,500
CEO, CFO and CAO
2018
36,000
36,000
2017
24,000
24,000
Robert Sawatsky, (2)
2017
--
--
Former President, CEO and CFO
(1)
Mr. Isaacs was initially appointed as a director and officer on August 16, 2016 and resigned on November 24, 2017. Mr. Isaacs was reappointed as an officer and directors on January 11, 2018.
(2)
In 2017 Mr. Isaacs was paid $0 and his compensation of $24,000 was accrued in full. In 2018, Mr. Isaacs was paid $15,600 and compensation of $20,400 was accrued.
(3)
Mr. Sawatsky was appointed as a director and officer on March 9, 2016 and resigned on August 16, 2017.
There have never been any grants of stock options to our officers or directors.
The following shows the amounts we expect to pay to our officer during the twelve months ended December 31, 2020 and the amount of time this person expects to devote to our business
Projected
Percent of time to be devoted
Name
Compensation
to the Companys Business
J. Jacob Isaacs
$24,000
80%
Transactions with Related Parties
See Note 3 to the December 31, 2018 financial statements included as part of report.
PRINCIPAL SHAREHOLDERS
The following table shows the ownership, as January 15, 2020, of those persons owning beneficially 5% or more of our common stock and the number and percentage of outstanding shares owned by each of our directors and officers and by all officers and directors as a group. Each owner has sole voting and investment power over their shares of common stock.
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Percent of
Name
Shares Owned
Outstanding Shares
J. Jacob Isaacs
15,750,000
55.6%
All officers and directors
as a group (one person)
15,750,000
55.6%
On January 2, 2020, we entered into an Investment Agreement with Tiger Trout Capital, LLC (TTC) in order to establish a possible source of funding for our operations.
Under the Investment Agreement TTC has agreed to provide us with up to $2,500,000 of funding during the period ending on November 14, 2022.
From time to time during the period ending November 14, 2022, we may, in our sole discretion, deliver a Put Notice to TTC. The Put Notice will specify the number of shares of common stock which we intend to sell to TTC on a closing date.
The closing of the purchase by TTC of the shares specified in the Put Notice will occur seven Trading Days following the date TTC receives the Put Notice. On the closing date we will sell to TTC the shares specified in the Put Notice, and TTC will pay us an amount equal to the Purchase Price multiplied by the number of shares specified in the Put Notice.
The maximum amount that we will be entitled to sell to TTC with respect to any applicable Put Notice will be the lesser of $1,000,000 or 200% of the average of the daily trading volume of our common stock for the ten consecutive Trading Days immediately prior to the delivery of a Put Notice. We may not submit a Put Notice until ten Trading Days after the delivery of a prior Put Notice.
The number of shares to be sold by TTC in this offering will vary from time-to-time and will depend upon the number of shares purchased from us pursuant to the terms of the Investment Agreement. However, 5,000,000 shares of common stock is the maximum number of shares which we may sell to TTC and 5,000,000 shares is the maximum number of shares which TTC may sell by means of this prospectus.
For purposes of the foregoing:
Purchase Price means 90% of the lowest price at which our common stock trades during the five consecutive Trading Days including and immediately following the delivery of a Put Notice.
Trading Day means any day on which the Principal Market for our common stock is open for trading.
Principal Market means the OTC Markets Group or whichever is the principal market on which our common stock is traded.
The price of our common stock on the Principal Market will be as reported by (i) Bloomberg Financial L.P. or (ii) One Stream.
Using the formula contained in the Investment Agreement, if we had delivered a Put Notice on December 31, 2019 we would not be able to sell any shares of our common stock since our common stock did not trade during the ten Trading Days prior to December 31, 2019.
The number of shares to be sold by TTC in this offering will vary from time-to-time and will depend upon the number of shares purchased from us pursuant to the terms of the Investment Agreement.
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We are under no obligation to sell any shares under the equity line of credit and we may terminate the Investment Agreement upon written notice to TTC.
We will not receive any proceeds from the sale of the shares by TTC. TTC may resell the shares it acquires by means of this prospectus from time to time in the public market. We are paying the costs of registering the shares offered by TTC. TTC will pay all other costs of the sale of the shares which it may purchase from us. During the past three years neither TTC nor its controlling persons had any relationship with us, or our officers or directors.
The shares of common stock owned, or which may be acquired by TTC, may be offered and sold by means of this prospectus from time to time as market conditions permit in the over-the-counter market, or otherwise, at prices and terms then prevailing or at prices related to the then-current market price, or in negotiated transactions. These shares may be sold by one or more of the following methods, without limitation:
·
a block trade in which a broker or dealer so engaged will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
·
purchases by a broker or dealer as principal and resale by such broker or dealer for its account pursuant to this prospectus;
·
ordinary brokerage transactions and transactions in which the broker solicits purchasers; and
·
face-to-face transactions between sellers and purchasers without a broker/dealer.
In competing sales, brokers or dealers engaged by TTC may arrange for other brokers or dealers to participate. These brokers or dealers may receive commissions or discounts from TTC in amounts to be negotiated.
TTC is an underwriter and any broker/dealers who act in connection with the sale of the shares by means of this prospectus may be deemed to be underwriters within the meaning of the Securities Acts of 1933, and any commissions received by them and profit on any resale of the shares as principal might be deemed to be underwriting discounts and commissions under the Securities Act. We haves agreed to indemnify TTC against certain liabilities, including liabilities under the Securities Act as underwriters or otherwise.
We have advised TTC that it and any securities broker/dealers or others who may be deemed to be statutory underwriters will be subject to the prospectus delivery requirements under the Securities Act of 1933. We have also advised TTC that, in the event of a distribution of its shares, TTC any affiliated purchasers, and any broker/dealer or other person who participates in such distribution, may be subject to Rule 102 of Regulation M under the Securities Exchange Act of 1934 until their participation in that distribution is completed. Rule 102 makes it unlawful for any person who is participating in a distribution to bid for or purchase stock of the same class as is the subject of the distribution. A distribution is defined in Regulation M as an offering of securities that is distinguished from ordinary trading transactions by the magnitude of the offering and the presence of special selling efforts and selling methods. We have also advised TTC that Regulation M prohibits any stabilizing bid or stabilizing purchase for the purpose of pegging, fixing or stabilizing the price of the common stock in connection with this offering.
We granted registration rights to TTC to enable it to sell the common stock it may acquire under the Investment Agreement. Notwithstanding these registration rights, we have no obligation:
·
to assist or cooperate with TTC in the offering or disposition of their shares; or
·
to obtain a commitment from an underwriter relative to the sale of any the shares.
TTC is entitled to customary indemnification from us for any losses or liabilities it suffers based upon material misstatements or omissions from the registration statement or this prospectus, except as they relate to information TTC supplied to us for inclusion in the registration statement and prospectus.
We will prepare and file amendments and supplements to this prospectus as may be necessary in order to keep this prospectus effective as long as TTC holds shares of our common stock or until these shares can be sold
19
under an appropriate exemption from registration. We have agreed to bear the expenses of registering the shares, but not the expenses associated with selling the shares, such as broker discounts and commissions.
As the date of this prospectus TTC owned 136,363 shares of our common stock which we issued to TTC as a commitment fee for providing us with the Investment Agreement. These shares may be sold by TTC by means of this prospectus. During the course of this offering, TTC may acquire up to 5,000,000 additional shares of our common stock. It is not known how many shares of our common stock TTC will own after this offering. TTC is controlled by Alan S. Masley.
TTCs obligations under the Investment Agreement are not transferable.
Common Stock
We are authorized to issue 200,000,000 shares of common stock. Holders of our common stock are each entitled to cast one vote for each share held of record on all matters presented to the shareholders. Cumulative voting is not allowed; hence, the holders of a majority of our outstanding common shares can elect all directors.
Holders of our common stock are entitled to receive such dividends as may be declared by our Board of Directors out of funds legally available and, in the event of liquidation, to share pro rata in any distribution of our assets after payment of liabilities. Our Board of Directors is not obligated to declare a dividend. It is not anticipated that dividends will be paid in the foreseeable future.
Holders of our common stock do not have preemptive rights to subscribe to additional shares if issued. There are no conversion, redemption, sinking fund or similar provisions regarding the common stock. All outstanding shares of common stock are fully paid and non-assessable.
Preferred Stock
We are authorized to issue 5,000,000 shares of preferred stock. Shares of preferred stock may be issued from time to time in one or more series as may be determined by our Board of Directors. The voting powers and preferences, the relative rights of each such series and the qualifications, limitations and restrictions of each series will be established by the Board of Directors. Our directors may issue preferred stock with multiple votes per share and dividend rights which would have priority over any dividends paid with respect to the holders of our common stock. The issuance of preferred stock with these rights may make the removal of management difficult even if the removal would be considered beneficial to shareholders generally, and will have the effect of limiting shareholder participation in transactions such as mergers or tender offers if these transactions are not favored by our management. As of the date of this prospectus, we had not issued any shares of preferred stock.
Transfer Agent
Empire Stock Transfer
1859 Whitney Mesa Dr.
Henderson, NV 89014
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We are not involved in any legal proceedings and we do not know of any legal proceedings which are threatened or contemplated.
Our Bylaws authorize indemnification of a director, officer, employee or agent against expenses incurred by him in connection with any action, suit, or proceeding to which he is named a party by reason of his having acted or served in such capacity, except for liabilities arising from his own misconduct or negligence in performance of his duty. In addition, even a director, officer, employee, or agent found liable for misconduct or negligence in the performance of his duty may obtain such indemnification if, in view of all the circumstances in the case, a court of competent jurisdiction determines such person is fairly and reasonably entitled to indemnification. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers, or controlling persons pursuant to these provisions, we have been informed that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is therefore unenforceable.
We have filed with the Securities and Exchange Commission a Registration Statement on Form S-1 (together with all amendments and exhibits) under the Securities Act of 1933, as amended, with respect to the securities offered by this prospectus. This prospectus does not contain all of the information in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Securities and Exchange Commission. For further information, reference is made to the Registration Statement which may be read and copied at the Commissions Public Reference Room.
We are subject to the requirements of the Securities Exchange Act of l934 and are required to file reports and other information with the Securities and Exchange Commission. Copies of any such reports and other information (which includes our financial statements) filed by us can be read and copied at the Commission's Public Reference Room.
The public may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The Public Reference Room is located at 100 F. Street, N.E., Washington, D.C. 20549.
Our Registration Statement and all reports and other information we file with the Securities and Exchange Commission are available at www.sec.gov, the website of the Securities and Exchange Commission.
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FINANCIAL STATEMENTS
DECEMBER 31, 2018
|
|
F-1 | Report of Independent Registered Public Accounting Firm |
F-2 | Balance Sheets as of December 31, 2018 and 2017; |
F-3 | Statements of Operations for the years ended December 31, 2018 and 2017 |
F-4 | Statement of Stockholders Equity (Deficit) for the years ended December 31, 2018 and 2017; |
F-5 | Statements of Cash Flows for years ended December 31, 2018 and 2017; |
F-6 | Notes to Financial Statements |
22
Report of Independent Registered Public Accounting Firm
Board of Directors and Shareholders
Pierre Corp.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Pierre Corp. as of December 31, 2018 and 2017, and the related statements of operations, stockholders deficit, and cash flows for each of the two years in the period ended December 31, 2018, 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 Pierre Corp. as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the entitys management. Our responsibility is to express an opinion on these 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 Pierre Corp. 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. Pierre Corp. 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 entitys 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.
As discussed in Note 2 to the financial statements, the Companys absence of significant revenues, recurring losses from operations, and its need for additional financing in order to fund its projected loss in 2019 raise substantial doubt about its ability to continue as a going concern. The 2018 financial statements do not include any adjustments that might result from the outcome of this uncertainty.
LBB & Associates Ltd., LLP
We have served as Pierre Corp.'s auditor since 2013.
Houston, Texas
March 29, 2019
F-1
PIERRE CORP.
BALANCE SHEET
|
|
|
| December 31, | December 31, |
| 2018 | 2017 |
ASSETS |
|
|
Current assets: |
|
|
Cash | $ 1,285 | $ - |
Prepaid assets | 5,700 | - |
Total currents assets | 6,985 | - |
|
|
|
Property and equipment, net | - | 1,184 |
|
|
|
Total assets | $ 6,985 | $ 1,184 |
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
|
|
Current liabilities: |
|
|
Accounts payable | $ 15,028 | $ 4,879 |
Accounts payable - related party | 164,841 | 144,500 |
Notes payable | 244,000 | 224,000 |
Notes payable - related party | 6,000 | 38,488 |
Total current liabilities | 429,869 | 411,867 |
|
|
|
Total liabilities | 429,869 | 411,867 |
|
|
|
Commitments |
|
|
|
|
|
STOCKHOLDERS' DEFICIT |
|
|
|
|
|
Preferred stock, $0.001 par value, 5,000,000 shares authorized, |
|
|
none issued and outstanding |
|
|
Common stock, $0.001 par value, 200,000,000 shares authorized, |
|
|
29,051,800 shares outstanding at December 31, 2018 and |
|
|
28,305,000 shares at December 31,2017 | 29,052 | 28,305 |
Additional paid in capital | 189,048 | 3,095 |
Accumulated deficit | (640,984) | (442,083) |
Total stockholders' deficit | (422,884) | (410,683) |
|
|
|
Total liabilities and stockholders' deficit | $ 6,985 | $ 1,184 |
The accompanying notes are an integral part of these financial statements.
F-2
PIERRE CORP.
STATEMENT OF OPERATIONS
For the years ended December 31, 2018 and 2017
|
|
|
| Year ended | Year ended |
| December 31, 2018 | December 31, 2017 |
Operating expenses: |
|
|
Depreciation | $1,184 | $1,544 |
General and administration | 197,717 | 62,495 |
Total operating expenses | 198,901 | 64,039 |
|
|
|
Net loss | ($198,901) | ($64,039) |
|
|
|
Net loss per share: |
|
|
Basic and diluted | ($0.01) | $0.00 |
|
|
|
Weighted average shares |
|
|
outstanding: |
|
|
Basic and diluted | 29,051,800 | 28,305,000 |
The accompanying notes are an integral part of these financial statements.
F-3
PIERRE CORP.
STATEMENT OF CASH FLOWS
For the years ended December 31, 2018 and 2017
|
|
|
| Year ended | Year ended |
| December 31, 2018 | December 31, 2017 |
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
Net loss | $ (198,901) | $ (64,039) |
Adjustment to reconcile net loss to |
|
|
cash used in operating activities: |
|
|
Depreciation expense | 1,184 | 1,544 |
Net change in: |
|
|
Prepaid deposits | (5,700) | - |
Accounts payable | 10,149 | 3,436 |
Accounts payable - related party | 20,341 | 24,000 |
|
|
|
CASH FLOWS USED IN OPERATING ACTIVITIES | (172,927) | (35,059) |
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
Proceed from sale of common stock | 186,700 | - |
Proceeds from notes payable, related party | 20,012 | 22,200 |
Proceeds from notes payable, unrelated parties | 20,000 | 12,000 |
Repayments on notes payable, related party | (52,500) | (812) |
|
|
|
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | 174,212 | 33,388 |
|
|
|
NET CHANGE IN CASH | 1,285 | (1,671) |
Cash, beginning of period | - | 1,671 |
|
|
|
Cash, end of period | $ 1,285 | $ - |
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION |
|
|
Cash paid on interest expenses | $ - | $ - |
|
|
|
Cash paid for income taxes | $ - | $ - |
The accompanying notes are an integral part of these financial statements.
F-4
PIERRE CORP.
STATEMENT OF STOCKHOLDERS' DEFICIT
For the years ended December 31, 2018 and 2017
|
|
|
|
|
|
|
|
| Preferred Stock | Common Stock |
|
|
| ||
| Shares | Amount | Shares | Amount | Additional paid-in capital | Deficit accumulated during the exploration | Total |
|
|
|
|
|
|
|
|
Balance, December 31, 2016 | - | $ - | 28,305,000 | $ 28,305 | $ 3,095 | $ (378,044) | $ (346,644) |
|
|
|
|
|
|
|
|
Net loss | - | - | - | - | - | (64,039) | (64,039) |
|
|
|
|
|
|
|
|
Balance, December 31, 2017 | - | - | 28,305,000 | 28,305 | 3,095 | (442,083) | (410,683) |
|
|
|
|
|
|
|
|
Sale of common stock | - | - | 746,800 | 747 | 185,953 | - | 186,700 |
|
|
|
|
|
|
|
|
Net loss | - | - | - | - | - | (198,901) | (198,901) |
|
|
|
|
|
|
|
|
Balance, December 31, 2018 | - | $ - | 29,051,800 | $ 29,052 | $ 189,048 | $ (640,984) | $ (422,884) |
The accompanying notes are an integral part of these financial statements.
F-5
PIERRE CORP.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2018
Note 1.
Basis of Presentation
General
Pierre Corp. (the Company) was incorporated in Nevada on January 21, 2011. Since its incorporation, the Company has have attempted to become involved in a number of business ventures, all of which were unsuccessful and which it has abandoned.
In February 2018, the Company decided to become involved in the marijuana industry.
The Company now plans to own and operate medical and adult marijuana cultivation facilities, manufacturing facilities and dispensaries in California. The first step in the Companys business plan is to acquire licenses to cultivate, manufacture and sell marijuana.
The Company will attempt to acquire licenses from persons who have either applied for or been granted marijuana licenses in California.
The Company does not intend to acquire a license associated with a facility or dispensary which is in operation.
The Company may also apply for a marijuana cultivation, manufacturing or dispensary license in its own name.
The Companys activities are subject to significant risks and uncertainties including the failure to secure the funding needed to properly execute the Companys business plan.
We do not anticipate receiving cash flow from operations in the near future to satisfy our ongoing capital requirements. We are seeking financing in the form of equity capital in order to provide the necessary working capital. Our ability to meet our obligations and continue to operate as a going concern is highly dependent on our ability to obtain additional financing. We cannot predict whether this additional financing will be in the form of equity or debt or be in another form. We may not be able to obtain the necessary additional capital on a timely basis, on acceptable terms, or at all. In any of these events, we may be unable to implement our current plans which circumstances would have a material adverse effect on our business, prospects, financial conditions and results of operations.
On August 7, 2018 the Company entered into agreements with LGM, Org and Lean Green Machine, Inc. (collectively LGM) to acquire licenses LGM may be awarded by the state of California in Long Beach and the City of Commerce. These agreements were terminated in February 2019.
On March 12, 2019 Pierre Corp entered into a Letter of Intent to acquire licenses in Lynwood, California where Pierre Corp would pay $850,000 to the vender to purchase the right to cultivate marijuana in that local. At this time the agreement is not legally binding until the definitive agreement is signed at a later date. The Seller must deliver to Pierre Corp in this agreement the updated and renewed licenses.
On October 15, 2018 a shareholder owning a majority of the Companys outstanding shares of common stock amended the Companys Articles of Incorporation to:
·
change the name of the Company from Wadena Corp. to Pierre Corp.
·
reverse split the Companys outstanding shares of common stock on a 5-for-1 basis.
The Companys activities are subject to significant risks and uncertainties including failure to secure additional funding to properly execute the Companys business plan.
F-6
Note 2. Summary of Significant Accounting Policies
The financial statements have, in management's opinion, been properly prepared within the framework of the significant accounting policies summarized below:
Going Concern
These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At December 31, 2018, the Company had not yet achieved profitable operations, has accumulated losses of $640,984, since its inception, has working capital deficit of $422,884, and expects to incur further losses in the development of its business, all of which raise substantial doubt about the Company's ability to continue as a going concern. The Company's ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by equity financing and/or related party advances; however, there is no assurance of additional funding being available.
Income Taxes
The Company uses the assets and liability method of accounting for income taxes. Under the assets and liability method deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. 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.
Basic and Diluted Loss Per Share
Basic loss per share is computed using the weighted average number of shares outstanding during the period. Diluted loss per share has not been provided as it would be anti-dilutive.
Use of Estimates
In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original purchase maturity of three months or less to be cash equivalents.
Property and Equipment
Property and equipment is carried at cost less accumulated depreciation. Depreciation is provided principally on the straight-line method over the useful lives as follows:
Furniture and fixtures
7 years
Equipment
5 years
F-7
Fair Value of Financial Instruments
The carrying value of cash, accounts payable and accrued liabilities and related party loan approximate their fair value because of the short maturity of these instruments. Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective accounting standards will have a material effect on the accompanying financial statements.
Note 3. Related Party Transactions
The related party advances are due to the former director and President of the Company for funds advanced. The advances are unsecured, non-interest bearing and have no specific terms for repayment. As of December 31, 2018, the advances had been repaid in full.
During the year ended December 31, 2018, the Company repaid a note payable, net of receipts, in the amount of $32,488 to the President of the Company. As of December 31, 2018, the note payable totaled $6,000. The advances are unsecured, non-interest bearing and have no specific terms for repayment.
Effective March 1, 2012, the Company agreed to pay the President of the Company $4,000 per month for management services if funds are available or to accrue such amount if funds are not available. Effective July 1, 2016, the Company agreed to pay the President of the Company $2,000 per month for management services if funds are available or to accrue such amount if funds are not available. Effective October 1, 2018, the Company agreed to pay the President of the Company $6,000 per month for management services if funds are available or to accrue such amount if funds are not available. Accounts payable related party are the fees earned but not yet paid of $164,841 and $144,500 at December 31, 2018 and December 31, 2017, respectively.
|
|
|
| |||
| Year ended December 31, 2018 | Year ended December 31, 2017 | ||||
|
|
| ||||
Management fees | $ 36,000 | $ 24,000 |
Note 4. Property and Equipment, net
Cost and accumulated depreciation of property and equipment as of December 31, 2018 and December 31, 2017 are as follows:
|
|
|
| December 31, 2018 | December 31, 2017 |
|
|
|
Computers | $ 3,443 | $ 3,443 |
|
|
|
Furniture and fixtures | 6,000 | 6,000 |
Total | 9,443 | 9,443 |
Less: Accumulated depreciation | (9,443) | (8,259) |
Property and equipment, net | $ - | $ 1,184 |
Depreciation expense charged to operations was $1,184 and $1,544 for the years ended December 31, 2018 and 2017, respectively.
F-8
Note 5.
Notes Payable
During the year ended December 31, 2018, the Company received a loan for $20,000 from an individual. The loans in addition to the loans previously entered into by the Company, are unsecured, non-interest bearing and have no specific terms for repayment. As of December 31, 2018, the loans totaled $244,000.
Note 6.
Income Taxes
The cumulative tax effect at the expected rate of 21% of significant items comprising our net deferred tax amount is as follows:
|
|
|
| December 31, 2018 | December 31, 2017 |
|
|
|
Deferred tax asset attributable to: |
|
|
Net operating loss | $ 134,600 | $ 92,800 |
Valuation allowance | (134,600) | (92,800) |
Net | $ - | $ - |
A reconciliation of income tax provision to the provision that would be recognized under the statutory rates is as follows:
|
|
|
| December 31, 2018 | December 31, 2017 |
|
|
|
Benefit attributable to operating loss | $ 41,800 | $ 150,000 |
Impact of change in tax rate | - | (57,200) |
Valuation allowance | (41,800) | (92,800) |
Net provision | $ - | $ - |
The amount taken into income as deferred tax assets must reflect that portion of the income tax loss carry forwards that is more likely-than-not to be realized from future operations. The Company has chosen to provide an allowance of 100% against all available income tax loss carry forwards, regardless of their time of expiry.
As of December 31, 2017, the Company saw a decrease in deferred tax assets from income tax loss carry forwards. The significant decline in the carry forwards was due the passage of the Tax Cuts and Jobs Act on December 20, 2017 that reduced effective tax rates for future periods to 21% from 34%. The decline in value of the income tax loss carry forwards has no impact on our statement of operations.
No provision for income taxes has been provided in these financial statements due to the net loss. At December 31, 2018, the Company has net operating loss carry forwards, which expire commencing in 2031, totaling approximately $641,000, the benefit of which has not been recorded in the financial statements.
Note 7.
Equity Transactions
Between May and August, 2018, third party investors purchased 746,800 shares of the Companys common stock at a price of $0.25 per share for gross proceeds of $186,700. The Company relied upon the exemption provided by Section 4(a)(2) of the Securities Act of 1933 in connection with the sale of the common stock described above.
On October 15, 2018, the Companys Board of Directors declared a five-for-one reverse stock split of the Companys common stock. The record date for the stock split was October 15, 2018. Shareholders of record as of the close of business on the record date received one share of common stock of the Company for every five shares that they owned on such date. The earnings per share calculations and share data for all periods presented have been recast to reflect the impact of the stock split on outstanding shares.
F-9
Note 8.
Subsequent Events
On August 7, 2018 the Company entered into agreements with LGM, Org and Lean Green Machine, Inc. (collectively LGM) to acquire licenses LGM may be awarded by the state of California in Long Beach and the City of Commerce. These agreements were terminated in February, 2019.
On March 12, 2019 Pierre Corp entered into a Letter of Intent to acquire licenses in Lynwood, California where Pierre Corp would pay $850,000 to the vender to purchase the right to cultivate marijuana in that local. At this time the agreement is not legally binding until the definitive agreement is signed at a later date. The Seller must deliver to Pierre Corp in this agreement the updated and renewed licenses.
On January 17, 2019, Rodney Throgmorton loaned the Company $20,000.
F-10
FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
|
|
F-12 | Balance Sheets as of September 30, 2019 and 2018; |
F-13 | Statements of Operations for the three and nine months ended September 30, 2019 and 2018 |
F-14 | Statement of Stockholders Equity (Deficit) for the nine months ended September 30, 2019 and 2018; |
F-15 | Statements of Cash Flows for nine months ended September 30, 2019 and 2018; |
F-16 | Notes to Financial Statements |
F-11
Pierre Corp. | |||||
Balance Sheets | |||||
(Unaudited) | |||||
|
|
|
|
|
|
|
|
| September 30, 2019 |
| December 31, |
|
|
|
|
|
|
ASSETS |
|
|
| ||
Current assets: |
|
|
|
|
|
Cash |
|
| $ 5,130 |
| $ 1,285 |
Prepaid assets |
|
| 6,869 |
| 5,700 |
Total current assets |
|
| 1,999 |
| 6,985 |
Total assets |
|
| $ 11,999 |
| $ 6,985 |
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
| ||
Current liabilities: |
|
|
|
| |
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
| $ 13,615 |
| $ 15,028 |
Accounts payable - related party |
|
| 189,374 |
| 164,841 |
Notes payable |
|
| 326,900 |
| 244,000 |
Notes payable - related party |
|
| 6,000 |
| 6,000 |
Convertible notes, net of unamortized discount of $52,621 and $0, respectively |
| 62,379 |
| - | |
Derivative liability |
|
| 97,869 |
| - |
|
|
|
|
|
|
Total current liabilities |
|
| 696,137 |
| 429,869 |
Total liabilities |
|
| 696,137 |
| 429,869 |
|
|
|
|
|
|
STOCKHOLDERS' DEFICIT |
|
|
| ||
Preferred stock, $0.001 par value, 500,000,000 shares authorized, |
|
|
|
|
|
none issued and outstanding |
|
| - |
| - |
Common stock, $0.001 par value, 200,000,000 shares authorized, |
|
|
|
|
|
29,076,800 and 29,051,800 shares issued and outstanding at |
|
|
|
|
|
September 30, 2019 and December 31, 2018, respectively |
|
| 29,077 |
| 29,052 |
Additional paid in capital |
|
| 208,983 |
| 189,048 |
Accumulated deficit |
|
| (922,198) |
| (640,984) |
Total stockholders' deficit |
|
| (684,138) |
| (422,884) |
Total liabilities and stockholders' deficit |
|
| $ 11,999 |
| $ 6,985 |
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited financial statements. |
|
|
|
|
|
|
|
|
|
|
F-12
Pierre Corp. | ||||
Statements of Operations | ||||
(Unaudited) | ||||
|
|
|
|
|
| For the Three | For the Three | For the Nine | For the Nine |
| Months Ended | Months Ended | Months Ended | Months Ended |
| September 30, 2019 | September 30, 2018 | September 30, 2019 | September 30, 2018 |
Operating expenses: |
|
|
|
|
Depreciation | $ - | $ 386 | $ - | $ 1,158 |
General and administration | 70,502 | 49,236 | 197,813 | 119,669 |
|
|
|
|
|
Total operating expenses | (70,502) | (49,622) | (197,813) | (120,827) |
|
|
|
|
|
Amortization of debt discount | (37,358) | - | (45,995) | - |
Interest expense | (2,354) | - | (3,193) | - |
Change in fair value of derivative liability | (25,720) | - | (34,213) | - |
Total other expense | (65,432) | - | (83,401) | - |
|
|
|
|
|
Net loss | $ (135,934) | $ (49,622) | $ (281,214) | $ (120,827) |
|
|
|
|
|
Net loss per common share: |
|
|
|
|
Basic and diluted | $ (0.00) | $ (0.00) | $ (0.01) | $ (0.00) |
|
|
|
|
|
Weighted average common shares outstanding: |
|
|
|
|
Basic and diluted | 29,076,800 | 29,051,935 | 29,066,230 | 28,622,218 |
|
|
|
|
|
The accompanying notes are an integral part of these unaudited financial statements. |
|
|
|
|
|
|
F-13
Pierre Corp. | |||||
Statements of Changes in Stockholders Deficit | |||||
For the nine months ended September 30, 2019 and 2018 | |||||
(Unaudited) | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| Common Stock | Additional paid-in | Accumulated |
| |
| Shares | Amount | capital | Deficit | Total |
|
|
|
|
|
|
Balance, December 31, 2018 | 29,051,800 | $ 29,052 | $ 189,048 | $ (640,984) | $ (422,884) |
Net loss | - | - | - | (47,655) | (47,655) |
Balance, March 31, 2019 | 29,051,800 | 29,052 | 189,048 | (688,639) | (470,539) |
Common shares issued with convertible note | 25,000 | 25 | 6,225 | - | 6,250 |
Net loss | - | - | - | (97,625) | (97,625) |
Balance, June 30, 2019 | 29,076,800 | 29,077 | 195,273 | (786,264) | (561,914) |
Common shares to be issued with convertible note | - | - | 13,710 | - | 13,710 |
Net loss | - | - |
| (135,934) | (135,934) |
Balance, September 30, 2019 | 29,076,800 | $ 29,077 | $ 208,983 | $ (922,198) | $ (684,138) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2017 | 28,305,000 | $ 28,305 | $ 3,095 | $ (442,083) | $ (410,683) |
Net loss | - | - | - | (19,345) | (19,345) |
Balance, March 31, 2018 | 28,305,000 | 28,305 | 3,095 | (461,428) | (430,028) |
Sale of common stock | 600,000 | 600 | 149,400 | - | 150,000 |
Net loss | - | - | - | (51,860) | (51,860) |
Balance, June 30, 2018 | 28,905,000 | 28,905 | 152,495 | (513,288) | (331,888) |
Sale of common stock | 146,800 | 147 | 36,553 | - | 36,700 |
Net loss | - | - | - | (49,622) | (49,622) |
Balance, September 30, 2018 | 29,051,800 | $ 29,052 | $ 189,048 | $ (562,910) | $ (344,810) |
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited financial statements. | |||||
|
|
|
|
F-14
Pierre Corp. |
| ||
Statements of Cash Flows |
| ||
(Unaudited) |
| ||
| For the Nine Months Ended | For the Nine Months Ended |
|
| September 30, 2019 | September 30, 2018 |
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
Net loss | $ (281,214) | $ (120,827) |
|
Adjustment to reconcile net loss to |
|
|
|
cash used in operating activities: |
|
|
|
Depreciation expense | - | 1,158 |
|
Amortization of debt discount | 45,995 | - |
|
Loss on change in derivative liability | 34,213 | - |
|
Net change in: |
|
|
|
Prepaid assets | (1,169) | (5,700) |
|
Accounts payable | (1,413) | 1,430 |
|
Accounts payable - related party | 24,533 | 8,341 |
|
|
|
|
|
CASH FLOWS USED IN OPERATING ACTIVITIES | (179,055) | (115,598) |
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
Sale of common stock | - | 186,700 |
|
Proceeds from convertible notes | 100,000 | - |
|
Proceeds from notes payable, related party | - | 20,012 |
|
Payments from notes payable, related party | - | (52,500) |
|
Proceeds from notes payable, unrelated party | 82,900 | 20,000 |
|
|
|
|
|
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | 182,900 | 174,212 |
|
|
|
|
|
NET CHANGE IN CASH | 3,845 | 58,614 |
|
Cash, beginning of period | 1,285 | - |
|
Cash, end of period | $ 5,130 | $ 58,614 |
|
SUPPLEMENTAL CASH FLOW INFORMATION |
|
|
|
|
|
|
|
Cash paid on interest expenses | $ - | $ - |
|
Cash paid for income taxes | $ - | $ - |
|
NON-CASH TRANSACTIONS |
|
|
|
Common stock issued with convertible notes | $ 19,960 | $ - |
|
Debt discount created by derivative liability | $ 63,656 | $ - |
|
|
|
|
|
The accompanying notes are an integral part of these unaudited financial statements. |
F-15
Pierre Corp.
Notes to the Financial Statements
September 30, 2019
(Unaudited)
Note 1.
Basis of Presentation
The accompanying unaudited interim financial statements of Pierre Corp. (Pierre or the Company) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (SEC), and should be read in conjunction with the audited financial statements and notes thereto contained in the Companys Annual Report filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for our interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially duplicate the disclosure contained in the audited financial statements for fiscal 2018, as reported in the Form 10-K of the Company, have been omitted.
Significant Accounting Policies
Fair Value of Financial Instruments
The carrying value of short-term instruments, including cash, accounts payable and accrued expenses, and short-term notes approximate fair value due to the relatively short period to maturity for these instruments. The notes payable approximate fair value since the related rates of interest approximate current market rates
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company utilizes a three-level valuation hierarchy for disclosures of fair value measurements, defined as follows:
Level 1:
inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets
Level 2:
inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liabilities, either directly or indirectly, for substantially the full term of the financial instruments.
Level 3:
inputs to the valuation methodology are unobservable and significant to the fair value
F-16
Fair Value Measurements
The Companys assets and liabilities recorded at fair value have been categorized based upon a fair value hierarchy.
The following table presents information about the Companys liabilities measured at fair value on a recurring basis and the Companys estimated level within the fair value hierarchy of those assets and liabilities as of September 30, 2019 and December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value measured at September 30, 2019 | ||||||||||||
|
| Total carrying value at September 30, 2019 |
| Quoted prices in active markets (Level 1) |
| Significant other observable inputs (Level 2) |
| Significant Unobservable inputs (Level 3) | ||||
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities |
| $ | 97,869 |
| $ | - |
| $ | - |
| $ | 97,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value measured at December 31, 2018 | ||||||||||||
|
| Total carrying value at December 31, 2018 |
| Quoted prices in active markets (Level 1) |
| Significant other observable inputs (Level 2) |
| Significant Unobservable inputs (Level 3) | ||||
|
|
|
|
| ||||||||
|
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|
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Liabilities: |
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|
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|
|
|
Derivative liabilities |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
There were no transfers between Level 1, 2 or 3 during the period.
The table below presents the change in the fair value of the derivative liability during the nine months ended September 30, 2019:
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|
|
|
|
Fair value as of December 31, 2018
$ -
Fair value on the date of issuance recorded as a debt discount
63,656
Fair value on the date of issuance recorded as a loss on derivatives
29,653
Gain on change in fair value of derivatives
4,560
Fair value as of September 30, 2019
$ 97,869
Convertible debt
The Company records a beneficial conversion feature related to the issuance of convertible debts that have conversion features at fixed or adjustable rates. The beneficial conversion feature for the convertible instruments is recognized and measured by allocating a portion of the proceeds as an increase in additional paid-in capital and as a reduction to the carrying amount of the convertible instrument equal to the intrinsic value of the conversion features. The beneficial conversion feature will be accreted by recording additional noncash interest expense over the expected life of the convertible notes.
F-17
Beneficial Conversion Features
If the conversion feature of conventional convertible debt provides for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (BCF). A BCF is recorded by the Company as a debt discount pursuant to ASC Topic 470-20 Debt with Conversion and Other Options. In those circumstances, the convertible debt is recorded net of the discount related to the
BCF and the Company amortizes the discount to interest expense over the life of the debt using the effective interest method.
Derivative Financial Instruments
Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments and measurement of their fair value for accounting purposes. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt under ASC 470, the Company will continue its evaluation process of these instruments as derivative financial instruments under ASC 815. The Company applies the guidance in ASC 815-40-35-12 to determine the order in which each convertible instrument would be evaluated for derivative classification.
Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02). Under ASU No. 2016-2, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU No. 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. For public companies, The Company adopted this standard on January 1, 2019 using the modified retrospective method. The new standard provides a number of optional practical expedients in transition. The Company elected the package of practical expedients, which permitted the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs; and all of the new standards available transition practical expedients.
The new standard also provides practical expedients for a companys ongoing accounting. The Company elected the short-term lease recognition exemption for its leases. For those leases with a lease term of 12 months or less, the Company will not recognize ROU assets or lease liabilities. The Company also made an accounting policy election to combine lease and non-lease components of operating leases for all asset classes. The adoption of this new standard did not impact the Company.
F-18
In June 2018, the FASB issued ASU No. 2018-07, Compensation Stock Compensation (Topic 718) - Improvements to Nonemployee Share-Based Payment Accounting, which aligns the accounting for share-based payment awards issued to employees and nonemployees. Under ASU No. 2018-07, the existing employee guidance will apply to nonemployee share-based transactions (as long as the transaction is not effectively a form of financing), with the exception of specific guidance related to the attribution of compensation cost. The cost of nonemployee awards will continue to be recorded as if the grantor had paid cash for the goods or services. In addition, the contractual term will be able to be used in lieu of an expected term in the option-pricing model for nonemployee awards. The Company adopted the provisions of the guidance on January 1, 2019 with no material impact on the Companys consolidated financial statements and disclosures.
The Company does not believe that any other recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying financial statements.
Note 2.
Going Concern
These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At September 30, 2019 the Company had not yet achieved profitable operations and expects to incur further losses in the development of its business, all of which raise substantial doubt about the Companys ability to continue as a going concern. The Companys ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by equity financing and/or related party advances, however there is no assurance of additional funding being available.
Note 3. Related Party Transactions
The related party advances are due to the former director and President of the Company for funds advanced. The advances are unsecured, non-interest bearing and have no specific terms for repayment. As of September 30, 2019, the advances totaled $6,000.
Effective March 1, 2012, the Company agreed to pay the President of the Company $4,000 per month for management services if funds are available or to accrue such amount if funds are not available. Effective July 1, 2016, the Company agreed to pay the President of the Company $2,000 per month for management services if funds are available or to accrue such amount if funds are not available. Effective October 1, 2018, the Company agreed to pay the President of the Company $6,000 per month for management services if funds are available or to accrue such amount if funds are not available. Effective April 30, 2019, the Company agreed to pay the President of the Company $11,500 per month for management services if funds are available or to accrue such amount if funds are not available. The agreement is verbal and can be cancelled at any time. Accounts payable related party are the fees earned but not yet paid of $189,877 and $164,841 at September 30, 2019 and December 31, 2018, respectively.
F-19
Fees earned during the period are as follows:
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| |
|
| Nine months ended September 30, 2019 | Nine months ended September 30, 2018 | |||
|
|
|
|
Management fees
$ 87,000
$ 18,000
Robert Sawatsky, who was previously the President and CEO of the Company provided consulting services to the Company related to public company reporting with no expected compensation for the period ending June 30, 2019. During the nine months ended September 30, 2019 Mr. Sawatsky advanced $3,000 to the Company. The advance is unsecured, non-interest bearing and has no specific terms for repayment.
Note 4. Notes Payable
During the nine-month period ended September 30, 2019, the Company received advances of $82,900. The advances are unsecured, non-interest bearing and have no specific terms for repayment. As of September 30, 2019 and December 31, 2018 the advances totaled $326,900 and $244,000, respectively.
Note 5. Convertible Notes Payable
On April 25, 2019, the Company borrowed $30,000 from an unrelated third party. The loan had an original issuance discount of $2,500 plus an additional $2,500 to pay for transaction fees of the lender, which will be amortized over the life of the note. In addition the Company was required to pay transaction fees of the lender of $2,500 which is included in accounts payable. The loan bears interest at a rate of 9% and is due and payable on October 25, 2019 and is currently past due. The Company may prepay the loan by paying the lender the outstanding loan principal and accrued interest plus premiums ranging from 5% to 25% and accrued interest. The unpaid principal is convertible into shares of the Companys common stock at the conversion price. The conversion price is 50% of the lowest trading price of the Companys common stock during the 20 consecutive trading days immediately prior to the date of conversion. Due to the variable conversion feature the note conversion feature was bifurcated from the note and recorded as a derivative liability. The day one derivative liability was $28,112 which was recorded as a discount on the note payable and a day one loss on the derivative liability of $9,362. In addition, the note holder was issued 25,000 shares of common stock with a relative fair value of $6,250 which was recorded as a debt discount and will be amortized over the life of the note.
On June 4, 2019, the Company borrowed $55,000 from an unrelated third party. The loan had an original issuance discount of $5,000 which will be amortized over the life of the note. The loan bears interest at a rate of 10% and is due and payable on March 4, 2020. At any time on or before December 1, 2019 the Company may prepay the loan by paying the lender the outstanding loan principal and accrued interest plus premiums ranging from 20% to 40%. After December 1, 2019, the Company may not repay the loan without the consent of the lender. At any time after December 1, 2019, the unpaid principal is convertible into shares of the Companys common stock at the conversion price. The conversion price is 65% of the lowest trading price of the Companys common stock during the 20 consecutive trading days immediately prior to the date of conversion. Due to the variable conversion feature the note conversion feature was
F-20
bifurcated from the note and recorded as a derivative liability. The day one derivative liability was $33,615 which was recorded as a discount on the note payable.
On September 9, 2019, the Company borrowed $30,000 from an unrelated third party. The loan had an original issuance discount of $2,500 plus an additional $2,500 to pay for transaction fees of the lender, which will be amortized over the life of the note. The loan bears interest at a rate of 9% and is due and payable on March 9, 2020. The Company may prepay the loan by paying the lender the outstanding loan principal and accrued interest plus premiums ranging from 5% to 25% and accrued interest. The unpaid principal is convertible into shares of the Companys common stock at the conversion price. The conversion price is 50% of the lowest trading price of the Companys common stock during the 20 consecutive trading days immediately prior to the date of conversion. Due to the variable conversion feature the note conversion feature was bifurcated from the note and recorded as a derivative liability. The day one derivative liability was $31,581 which was recorded as a day one loss on the derivative liability. In addition, the note holder will be issued 25,000 shares of common stock with a relative fair value of $13,710 which was recorded as a debt discount and will be amortized over the life of the note.
As of September 30, 2019, the total derivative liability on the above notes was adjusted to a fair value of $97,869. During the nine months ended September 30, 2019, $45,995 of the discount was amortized leaving an unamortized balance of $52,621. The fair value of the conversion option was estimated using the Black-Scholes option pricing model and the following assumptions during the period: fair value of stock $0.25 - $1.10, volatility of 55% - 59% based on a comparable company peer group, expected term of 0.32 1.00 years, risk-free rate of 1.7% - 2.3% and a dividend yield of 0%.
Note 6.
Capital Stock
During the nine months ended September 30, 2019 the Company issued 25,000 shares of its restricted common stock to the third party that provided the Company with the $30,000 loan described in Note 5. An additional 25,000 shares were committed for issuance as of September 30, 2019 associated with the September 9, 2019 convertible note payable. The shares were issued subsequent to period end.
F-21
TABLE OF CONTENTS
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| Page |
PROSPECTUS SUMMARY | 4 |
RISK FACTORS | 5 |
MARKET FOR OUR COMMON STOCK | 7 |
MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION | 8 |
BUSINESS | 12 |
MANAGEMENT | 18 |
PRINCIPAL SHAREHOLDERS | 24 |
INVESTMENT AGREEMENT | 24 |
DESCRIPTION OF SECURITIES | 26 |
LEGAL PROCEEDINGS | 27 |
INDEMNIFICATION | 27 |
AVAILABLE INFORMATION | 28 |
FINANCIAL STATEMENTS | F-1 |
No dealer, salesperson or other person has been authorized to give any information or to make any representation not contained in this prospectus, and if given or made, such information or representations must not be relied upon as having been authorized by Pierre Corp. This prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any of the securities offered in any jurisdiction to any person to whom it is unlawful to make an offer by means of this prospectus.
PART II
Information Not Required in Prospectus
Item 13. Other Expenses of Issuance and Distribution.
The following table shows the costs and expenses payable by the Company in connection with this registration statement.
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| |||||
| SEC Filing Fee | $ | 312 |
| ||||
| Blue Sky Fees and Expenses |
| 1,000 |
| ||||
| Legal Fes and Expenses |
| 30,000 |
| ||||
| Accounting Fees and Expenses |
| 5,000 |
| ||||
| Miscellaneous Expenses |
| 3,688 |
| ||||
| T TOTAL | $ | 40,000 |
|
All expenses other than the SEC filing fee are estimated.
Item 14. Indemnification of Officers and Directors
The Nevada Revised Statutes provides that the Company may indemnify any and all of its officers, directors, employees or agents or former officers, directors, employees or agents, against expenses actually and necessarily incurred by them, in connection with the defense of any legal proceeding or threatened legal proceeding, except as to matters in which such persons shall be determined to not have acted in good faith and in the Companys best interest.
Item 15. Recent Sales of Unregistered Securities.
Between May and August, 2018 the Company sold 746,800 shares of its common stock to a group of private investors for $186,700 in cash.
On April 25, 2019, the Company borrowed $25,000 from an unrelated third party. The unpaid principal (originally $27,500 after an original issue discount of $2,500) is convertible into shares of the Companys common stock at the conversion price. The conversion price is 50% of the lowest trading price of the Companys common stock during the 20 consecutive trading days immediately prior to the date of conversion
On June 4, 2019, the Company borrowed $50,000 from an unrelated third party. The unpaid principal (originally $55,000 after an original issue discount of $5,000) is convertible into shares of the Companys common stock at the conversion price. The conversion price is 65% of the lowest trading price of the Companys common stock during the 20 consecutive trading days immediately prior to the date of conversion.
On September 9, 2019, the Company borrowed $25,000 from an unrelated third party. The unpaid principal (originally $27,500 after an original issue discount of $2,500) is convertible into shares of the Companys common stock at the conversion price. The conversion price is 50% of the lowest trading price of the Companys common stock during the 20 consecutive trading days immediately prior to the date of conversion. As additional consideration for the loan, the note holder was issued 25,000 shares of common stock.
On November 14, 2019, the Company borrowed $65,000 from an unrelated third party. The unpaid principal (originally $85,000 after an original issue discount of $20,000) is convertible into shares of the Companys common stock at the conversion price. The conversion price is 50% of the lowest trading price of the Companys common stock during the 20 consecutive trading days immediately prior to the date of conversion.
In December 2019 the Company issued Tiger Trout Capital, LLC 136,363 shares of common stock as a commitment fee for providing the Company with the Investment Agreement filed as Exhibit 10.5 to this Registration Statement.
The Company relied upon the exemption provided by Section 4(a)(2) of the Securities Act of 1933 with respect to the issuance of the securities described above. The persons who acquired these securities were sophisticated investors and were provided full information regarding the Company. There was no general solicitation in connection with the offer or sale of these securities. The persons who acquired these securities acquired them for their own accounts. The certificates representing these securities bear a restricted legend providing that they cannot be sold except pursuant to an effective registration statement or an exemption from registration.
Item 16. Exhibits and Financial Statement Schedules
The following exhibits are filed with this Registration Statement:
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Exhibit |
| Description |
| Articles of Incorporation (1) | |
3.3 |
| Amendments to Articles of Incorporation Bylaws (2) |
| ||
| ||
10.2 |
| |
| ||
10.4 |
| |
10.5 |
| Investment Agreement with Tiger Trout Capital, LLC (3) |
| ||
|
(1)
Incorporated by reference to Exhibit 3.1 filed with the Companys registration statement on Form S-1 (File #333-207047).
(2)
Incorporated by reference to Exhibit 3.2 filed with the Companys registration statement on Form S-1 (File #333-207047).
(3)
Incorporated by reference to Exhibit 10.1 filed with the Companys 8-K report on January 6, 2020.
Item 17.
Undertakings
The undersigned registrant hereby undertakes:
(1)
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i)
To include any prospectus required by Section l0 (a)(3) of the Securities Act:
(ii)
To reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate
offering price set forth in the Calculation of Registration Fee table in the effective registration statement; and
(iii)
To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
(2)
That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3)
To remove from registration by means of a post-effective amendment any of the securities that remain unsold at the termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act of l933 (the Act) may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
(4)
That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:
(i)
If the registrant is relying on Rule 430B:
(A)
Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
(B)
Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or
(ii)
If the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after
effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(6)
That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:
The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i)
Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii)
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii)
The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv)
Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
SIGNATURES
Pursuant to the requirements of the Securities Act of l933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of West Hollywood, CA on the 30th day of January 2020.
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| PIERRE CORP. | |
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| By: | /s/ J. Jacob Isaacs |
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| J. Jacob Isaacs, Principal Executive, |
|
| Financial and Accounting Officer |
In accordance with the requirements of the Securities Act of l933, this registration statement has been signed by the following persons in the capacities and on the dates indicated:
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/s/ J. Jacob Isaacs |
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J. Jacobs Isaacs |
| Principal Executive, Financial and Accounting Officer and a Director |
| January 30, 2020 |
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BARBARA K. CEGAVSKE
Secretary of State
102 North Carson St.
Carson City, Nevada 89701-4201
(775) 884-5706
Website: nvsos.gov
Filed in the Office of Document Number
Barbara Cegavske 20150102673-272
Secretary of State Filing Date and Time
State of Nevada 3/04/2015 7:42 am
Entity Number
E0034092011-6
CERTIFICATE OF AMENDMENT
Certificate of Amendment to the Articles of Incorporation
For Nevada Profit Corporations
(Pursuant to NRS 78.385 After Issuance of Stock)
1.
Name of Corporation:
WADENA CORP.
2.
The articles have been amended as follows (provide article numbers, if available):
ARTICLE 3. Authorized Stock:
The total number of shares the Corporation is authorized to issue is 205,000,000, consisting of 200,000,000 shares of common stock $.001 par value, and 5,000,000 shares of preferred stock $.001 par value, of which the rights, preferences, series and designations shall be determined by the Board of Directors.
Currently we have 3,145,000 shares issued and outstanding. Upon the effectiveness of this amendment, each holder of shares of record shall be entitled to, without surrender of their certificate(s) representing such shares, to receive a new certificate or certificates representing an additional Forty Four (44) shares of Common Stock, $.001 par value, for every One (1) share of issued and outstanding common stock held by each holder of shares. The Corporation will then have a total of 141,525,000 shares issued and outstanding.
3.
The vote by which the stockholders holding shares in the corporation entitling them to exercise at least a majority of the voting power, or such greater proportion of the voting power as may be required n the case of a vote by classes or series, or as may be required by the provisions of the Articles of Incorporation have voted in favor of the amendment is 55%
4.
Effective date and time of filing (optional): Date: _____________ Time: ___________
5.
Signatures (required):
/s/ Rodney McLellan
Signature of Officer
BARBARA K. CEGAVSKE
Secretary of State
102 North Carson St.
Carson City, Nevada 89701-4201
(775) 884-5706
Website: nvsos.gov
Filed in the Office of Document Number
Barbara Cegavske 20180453583-29
Secretary of State Filing Date and Time
State of Nevada 10/17/2018 4:13 pm
Entity Number
E0034092011-6
CERTIFICATE OF AMENDMENT
Certificate of Amendment to the Articles of Incorporation
For Nevada Profit Corporations
(Pursuant to NRS 78.385 After Issuance of Stock)
1.
Name of Corporation:
WADENA CORP.
2.
The articles have been amended as follows (provide article numbers, if available):
Article One will be amended to read:
The name of the Company will be changed to Pierre Corp.
The following sentence will be added to the end of Article Four:
Effective on the date this Certificate of Amendment is filed with the Nevada Secretary of State, the outstanding shares of this Corporations common stock will be reverse split on a 5-for-1 basis.
3.
The vote by which the stockholders holding shares in the corporation entitling them to exercise at least a majority of the voting power, or such greater proportion of the voting power as may be required n the case of a vote by classes or series, or as may be required by the provisions of the Articles of Incorporation have voted in favor of the amendment is 78,750,000
4.
Effective date and time of filing (optional): Date: _____________ Time: ___________
5.
Signatures (required):
/s/ Joe Isaacs
Signature of Officer
HART & HART, LLC
ATTORNEYS AT LAW
1624 Washington Street
Denver, CO 80203
William T. Hart, P.C.
________
harttrinen@aol.com
Will Hart
(303) 839-0061
Fax: (303) 839-5414
January 22, 2020
Pierre Corp.
750 N. San Vincente, Suite 800 West
West Hollywood, CA 90069
This letter will constitute an opinion upon the legality of the sale by Tiger Trout Capital, LLC of:
·
up to 5,000,000 shares of common stock of Pierre Corp. (the Company) which may be purchased by TTC pursuant to the terms of an Investment Agreement with the Company; and
·
136,363 shares of common stock owned by TTC
all as referred to in the Registration Statement on Form S-1 filed by the Company with the Securities and Exchange Commission.
We have examined the Articles of Incorporation, the Bylaws, and the minutes of the Board of Directors of the Company, and the applicable laws of Nevada, all reported judicial decisions interpreting the same, and a copy of the Registration Statement. In our opinion:
·
any shares sold by TTC in accordance with the terms of the Investment Agreement will be legally issued and will represent fully paid and non-assessable shares of the Companys common stock; and
·
the 136,363 shares owned by TTC have been legally issued and represent fully paid and non-assessable shares of the Companys common stock.
Very Truly Yours,
HART & HART, LLC
/s/ William T. Hart
By
William T. Hart
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 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: $27,500.00
Issue Date: April 25, 2019
PROMISSORY NOTE
FOR VALUE RECEIVED, Pierre Corporation., a Nevada corporation (hereinafter called the Borrower), hereby promises to pay to the order of Green Coast Capital International SA, a Panama Corporation, or registered assigns (the Holder) the principal sum of up to $27,500.00 (the Principal Amount), together with interest at the rate of nine percent (9%) per annum, at maturity or upon acceleration or otherwise, as set forth herein (the Note). The consideration to the Borrower for this Note is up to $25,000.00 (the Consideration) in United States currency, due to the prorated original issuance discount of up to $2,500.00 (the OID). The Holder shall pay $25,000.00 of the Consideration) within a reasonable amount of time of the full execution of the transactional documents related to this Note. At the closing of the First Tranche, the outstanding principal amount under this Note shall be $30,000.00, consisting of the Consideration plus the prorated portion of the OID (as defined herein) and a $2,500.00 credit for the Holders transactional expenses. The Holder may pay such additional amounts of the Consideration and at such dates as the Holder and Borrower mutually agree upon. The maturity date shall be six (6) months from the effective date of each payment (the Maturity Date), and is the date upon which the principal sum, as well as any accrued and unpaid interest and other fees for each tranche, shall be due and payable. This Note may not be repaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal or interest on this Note, which is not paid by the Maturity Date, shall bear interest at the rate of the lesser of (i) eighteen percent (18%) per annum or (ii) the maximum amount allowed by law, from the due date thereof until the same is paid (Default Interest). Interest shall commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed. All payments due hereunder (to the extent not converted into the Borrowers common stock (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
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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 New York, New York are authorized or required by law or executive order to remain closed.
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 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 on or after the Issue Date, to convert all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of 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 (the Conversion Price) 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 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 the Notes 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) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, 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., New York, New York 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 Holders option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at the Holders option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holders
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option, any amounts owed to the Holder pursuant to Sections 1.3(g) hereof.
1.2
Conversion Price.
(a)
Calculation of Conversion Price. The Conversion Price shall be the Variable Conversion Price (as defined herein) (subject to adjustment as further described herein). The "Variable Conversion Price" shall mean 50% discount to the lowest trade in the 20 days prior to the conversion. Trading Price means, for any security as of any date, the lowest traded price on the Over-the-Counter Pink Marketplace, OTCQB, or applicable trading market (the Principal Market) as reported by a reliable reporting service (Reporting Service) designated by the Holder (i.e. www.Nasdaq.com) or, if the Principal Market is not the principal trading market for such security, on the principal securities exchange or trading market where such security is listed or traded or, if the lowest intraday trading price of such security is not available in any of the foregoing manners, the lowest intraday price of any market makers for such security that are quoted on the OTC Markets. If the Conversion Price on the date in which the Holder actually receives the Conversion Shares (each a Share Delivery Date) is less than the Conversion Price in the respective Notice of Conversion, then the Conversion Price in the respective Notice of Conversion shall be retroactively adjusted downward to equal the Conversion Price on the Share Delivery Date. 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 holders of a majority in interest of the Notes being converted for which the calculation of the Trading Price is required in order to determine the Conversion Price of such Notes. Trading Day shall mean any day on which the Common Stock is tradable for any period on the Principal Market, or on the principal securities exchange or other securities market on which the Common Stock is then being traded. All expenses incurred by Holder for the issuance and clearing of the Common Stock into which this Note is convertible into shall immediately and automatically be added to the balance of the Note at such time as the expenses are incurred by Holder.
Each time, while this Note is outstanding, the Borrower enters into a Section 3(a)(9) Transaction (as defined herein) (including but not limited to the issuance of new promissory notes or of a replacement promissory note), or Section 3(a)(10) Transaction (as defined herein), in which any third party has the right to convert monies owed to that third party (or receive shares pursuant to a settlement or otherwise) at a discount to market greater than the Conversion Price in effect at that time (prior to all other applicable adjustments in the Note), then the Conversion Price shall be adjusted at the option of the Holder to such greater discount percentage (prior to all applicable adjustments in this Note) until this Note is no longer outstanding. Each time, while this Note is outstanding, the Borrower enters into a Section 3(a)(9) Transaction (including but not limited to the issuance of new promissory notes or of a replacement promissory note), or Section 3(a)(10) Transaction, in which any third party has a look back period greater than the look back period in effect under the Note at that time, then the Holders look back period shall be adjusted at the option of the Holder to such greater number of days until this Note is no longer outstanding. The Borrower shall give written notice to the Holder, with the adjusted Conversion Price and/or adjusted look back period (each adjustment that is applicable due to the triggering event), within one (1) business day of an event that requires any adjustment described in the two immediately preceding sentences, and the Holder shall have the sole discretion in determining whether to utilize the adjusted term pursuant to this
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section. So long as this Note is outstanding, if any security of the Borrower contains any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the Holder in this Note, then the Borrower shall notify the Holder of such additional or more favorable term and such term, at Holders option, shall become a part of the transaction documents with the Holder.
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 (at the option of the Holder) to include Additional Principal (without a reduction in the amount owed under the Note), 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.
If, at any time when the Note is issued and outstanding, the Borrower issues or sells, or is deemed to have issued or sold, any shares of Common Stock for a consideration per share 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 the Holder shall have the right, in Holders sole discretion, to utilize the price per share of the Dilutive Issuance as the Conversion Price.
(b)
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. The Borrower is required at all times to have authorized and reserved three times the number of shares that is actually issuable upon full conversion of the Note (based on the Conversion Price of the Note as if the Note convertible at that time, even if an Event of Default has not occurred under the Note) (the Reserved Amount). The Reserved Amount shall be increased from time to time in accordance with the Borrowers obligations hereunder. The Borrower represents that upon issuance, such shares 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 the Notes 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 Notes. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and 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.
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If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.2 of the Note.
1.3
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 on or after the Issue Date, by submitting to the Borrower (A) 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., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower.
(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 Borrower shall, prima facie, be controlling and determinative in the absence of manifest error. Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid principal amount of this Note. 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 Holders 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 for the Common Stock issuable upon such conversion within two (2) 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.
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(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 Borrowers 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., New York, New York 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 Holders Prime Broker with DTC through its Deposit Withdrawal Agent Commission (DWAC) system.
(g)
Failure to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holders 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, the Borrower shall pay to the Holder $3,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock. 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 1.3(g) are justified.
1.4
Concerning the Shares. The shares of Common Stock issuable upon
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conversion of this Note may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the 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 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. Except as otherwise provided (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 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 AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE 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 Act, which opinion shall be accepted by the Borrower 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 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 Borrower 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, it will be considered an Event of Default pursuant to Section 3.2 of the Note.
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1.5
[Intentionally Omitted].
1.6
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 Holders allocated portion of the Reserved Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holders 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 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 the 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 1.3) for the Borrowers failure to convert this Note.
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 Holders 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 Borrowers 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 Holders 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
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
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pursuant to an equity line of credit of the Borrower or the sale of assets, the Borrower shall, within one (1) business day of Borrowers 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.
ARTICLE III. EVENTS OF DEFAULT
If any of the following events of default (each, an Event of Default) shall occur:
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 maturity, upon acceleration or otherwise.
3.2
Conversion and the Shares. The Borrower fails to reserve a sufficient amount of shares of common stock as required under the terms of this Note (including Section 1.3 of this Note), 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) 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) 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 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 two (2) 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 Borrowers transfer agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within five (5) business days, either in cash or as an addition to the balance of the Note, and such choice of payment method is at the discretion of the Borrower.
3.3
Breach of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents and such
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breach continues for a period of three (3) days after written notice thereof to the Borrower from the Holder or after five (5) days after the Borrower should have been aware of the breach.
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, shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note.
3.5
Receiver or Trustee. The Borrower or any subsidiary of the Borrower 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 $100,000, and shall remain unvacated, unbonded or unstayed for a period of ten (10) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.
3.7
Bankruptcy. 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 Borrower or any subsidiary of the Borrower.
3.8
Delisting of Common Stock. The Borrower shall fail to maintain the listing or quotation of the Common Stock on the Principal Market or an equivalent replacement exchange, the Nasdaq Global Market, the Nasdaq Capital Market, the New York Stock Exchange, or the NYSE American.
3.9
Failure to Comply with the Exchange Act. The Borrower shall fail to comply with the reporting requirements of the Exchange 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.
3.10
Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.
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 Borrowers 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
Financial Statement Restatement. The Borrower replaces its auditor, or any 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
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statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note.
3.13
Reverse Splits. The Borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to the Holder.
3.14
Replacement of Transfer Agent. In the event that the Borrower replaces its transfer agent, and the Borrower fails to provide prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions (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 that reserves the greater of (i) total amount of shares previously held in reserve for the Note with the Borrowers immediately preceding transfer agent and (ii) the Reserved Amount.
3.15
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 covenant or other term or condition contained in any of the other financial instrument, including but not limited to all convertible promissory notes, currently issued, or hereafter issued, by the Borrower, to the Holder or any third party (the Other Agreements), 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, in which event the Holder shall be entitled to apply all rights and remedies of the Holder under the terms of this Note by reason of a default under said Other Agreement or hereunder.
3.16
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 Borrowers filing of a Form 8-K pursuant to Regulation FD on that same date.
3.17
No bid. At any time while this Note is outstanding, the lowest Trading Price on the Principal Market or other applicable principal trading market for the Common Stock is equal to or less than $0.0001.
3.18
Prohibition on Debt and Variable Securities. So long as the Note is outstanding, the Borrower shall not, without written consent of the Investor, issue any Variable Security (as defined herein), unless (i) the Borrower is permitted to pay off the Note in cash at the time of the issuance of the respective Variable Security and (ii) the Borrower pays off the Note, pursuant to the terms of the Note, in cash at the time of the issuance of the respective Variable Security. A Variable Security shall mean any security issued by the Borrower that (i) has 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; (ii) is or may become convertible into common stock (including without limitation convertible debt, warrants or convertible preferred stock), with a conversion or exercise price that varies with the market price of the common stock, even if such security only
11
becomes convertible or exercisable following an event of default, the passage of time, or another trigger event or condition; or (iii) was issued or may be issued in the future in exchange for or in connection with any contract, security, or instrument, whether convertible or not, where the number of shares of common stock issued or to be issued is based upon or related in any way to the market price of the common stock, including, but not limited to, common stock issued in connection with a Section 3(a)(9) exchange, a Section 3(a)(10) settlement, or any other similar settlement or exchange, provided, however, that a Variable Security shall not include a security with conversion rights subject to a floor price per share of 50% or greater than the closing price of the Common Stock on the issuance date of the security (such floor price shall not be subject to further lower adjustment for any reason).
3.19
Failure to Repay Upon Qualified Offering. The Borrower fails to repay the Note, in its entirety, pursuant to the terms of the Note, with funds received from its next completed offering of $1,000,000.00 or more (consummated on or after the Issue Date).
UPON THE OCCURRENCE OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, 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: (Y) THE DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon the occurrence of any Event of Default specified in Sections 3.1, 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 and/or 3.19, 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 140% (plus an additional 5% per each additional Event of Default that occurs hereunder) multiplied by the then outstanding entire balance of the Note (including principal and accrued and unpaid interest) plus Default Interest, if any, plus any amounts owed to the Holder pursuant to Sections 1.3(g) hereof (collectively, in the aggregate of all of the above, the Default Sum), 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. Each time an Event of Default occurs while this Note is outstanding, an additional discount of five percent (5%) shall be factored into the Conversion Price.
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 issuance in tranches due to the beneficial ownership limitations contained in this Note. Upon the occurrence of any Event of Default, the Conversion Price shall be the lesser of the (i) Variable Conversion Price and (ii) 60% multiplied by the lowest Trading Price during the twenty-five (25) Trading Day period ending, in Holders sole discretion on each conversion, on either (i) the last complete Trading Day prior to the Conversion Date or (ii) the Conversion Date (subject to adjustment as provided in this Note).
12
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, telegram, facsimile, or electronic mail 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, upon electronic mail delivery, or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, 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:
Pierre Corporation.
750 N. San Vicente Suite 800 West
West Hollywood, CA 90069
e-mail: jisaacs60@gmail.com
If to the Holder:
Green Coast Capital International SA
Plaza 2000, 10th Floor, 50th St.
Panama City, Republic of Panama 00646
e-mail: accounting@greencoast-capital.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. The term Note and all reference 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.
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
13
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 bona fide 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 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 and/or federal courts of Washoe County, 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. The Borrower and Holder waive trial by jury. 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 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.
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 plus Default Interest on such 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
14
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
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.
4.9
Repayment. Notwithstanding anything to the contrary contained in this Note, the Borrower may repay any amount outstanding under each tranche of this Note, during the 30 calendar day period after the funding date, by making a payment to the Holder of an amount in cash equal to 105% multiplied the amount that the Borrower is repaying. Notwithstanding anything to the contrary contained in this Note, the Borrower may repay any amount outstanding under each tranche of this Note, during the 31st through 60th calendar day period after the funding date of the respective tranche, by making a payment to the Holder of an amount in cash equal to 110% multiplied the amount that the Borrower is repaying. Notwithstanding anything to the contrary contained in this Note, the Borrower may repay any amount outstanding under each tranche of this Note, during the 61st through 90th calendar day period after the funding date of the respective tranche, by making a payment to the Holder of an amount in cash equal to 115% multiplied the amount that the Borrower is repaying. Notwithstanding anything to the contrary contained in this Note, the Borrower may repay any amount outstanding under each tranche of this Note, on or after the 91st calendar day after the funding date of the respective tranche, by making a payment to the Holder of an amount in cash equal to 125% multiplied the amount that the Borrower is repaying. In order to repay this Note, the Borrower shall provide notice to the Holder ten (10) business days prior to such respective repayment date, and the Holder must receive such repayment within twelve (12) business days of the Holders receipt of the respective repayment notice, but not sooner than ten (10) business days from the date of notice (the Repayment Period). The Holder may convert the Note in whole or in part at any time during the Repayment Period, subject to the terms and conditions of this Note. Any repayment hereunder shall be applied to the tranches funded under this Note in reverse chronological order (applied first to the most recently funded tranches under this Note).
4.10
Section 3(a)(10) Transactions. If at any time while this Note is outstanding, the Borrower enters into a transaction structured in accordance with, based upon, or related or pursuant to, in whole or in part, Section 3(a)(10) of the Securities Act (a 3(a)(10) Transaction), then a liquidated damages charge of 100% of the outstanding principal balance of this Note at that time, will be assessed and will become immediately due and payable to the Holder, either in the form of cash payment, an addition to the balance of the Note, or a
15
combination of both forms of payment, as determined by the Holder.
4.11
Reverse Split Penalty. If at any time while this Note is outstanding, the Borrower effectuates a reverse split with respect to the Common Stock, then a liquidated damages charge of 30% of the outstanding principal balance of this Note at that time, will be assessed and will become immediately due and payable to the Holder, either in the form of cash payment, an addition to the balance of the Note, or a combination of both forms of payment, as determined by the Holder.
4.12
Restriction on Section 3(a)(9) Transactions. So long as this Note is outstanding, the Borrower shall not enter into any 3(a)(9) Transaction with any party other than the Holder, without prior written consent of the Holder. In the event that the Borrower does enter into, or makes any issuance of Common Stock related to a 3(a)(9) Transaction while this Note is outstanding, a liquidated damages charge of 25% of the outstanding principal balance of this Note, but not less than $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.
4.13
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 in favor of the holder of such security that was not similarly provided to the Holder in this Note, then the Borrower shall notify the Holder of such additional or more favorable term and such term, at Holders 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 look back periods, interest rates, original issue discounts, stock sale price, private placement price per share, and warrant coverage.
4.14
Usury. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Borrower covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Borrower from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and the Borrower (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.
4.15
Right of First Refusal. If at any time during the 24 months after the Issue Date, the Borrower has a bona fide offer of an equity line of credit from any third party, that the Borrower intends to act upon, then the Borrower must first offer such opportunity to the
16
Holder to provide such capital or financing to the Borrower on the same or similar terms as each respective third partys terms, and the Holder may in its sole discretion determine whether the Holder will provide all or a portion of such capital or financing. Except as otherwise provided in this Note, should the Holder be unwilling or unable to provide such capital or financing to the Borrower within 10 trading days from Holders receipt of written notice of the offer (the Offer Notice) from the Borrower, then the Borrower may obtain such capital or financing from that respective third party upon the exact same terms and conditions offered by the Borrower to the Holder, which transaction must be completed within 15 days after the date of the Offer Notice. Borrower shall, within two (2) business days of the respective closing, utilize 50% of all proceeds received by Borrower by each respective third party that provides capital or financing to the Borrower, to repay this Note. If the Borrower does not receive the capital or financing from the respective third party within 15 days after the date of the respective Offer Notice, then the Borrower must again offer the capital or financing opportunity to the Holder as described above, and the process detailed above shall be repeated. The Offer Notice must be sent via electronic mail to accounting@greencoast-capital.com. The Borrower must offer the Holder the right of first refusal to participate in up to 25% of any offering from the Borrower for 24 months after the Issue Date.
4.16
Piggyback Registration Rights. n/a
[signature page to follow]
17
IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this April 25, 2019.
Pierre Corporation.
By:___/s/ Joseph Isaacs
Name: Joseph Isaacs
Title: Chief Executive Officer
18
EXHIBIT A -- 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 Pierre Corporation., a Nevada corporation (the Borrower) according to the conditions of the promissory note of the Borrower dated as of April 25, 2019 (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 Agent Commission 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 Holders calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:
Green Coast Capital International SA
Plaza 2000, 10th Floor 50th St.
Panama City, Rep of Panama 00646
e-mail: accounting@greencoast-capital.com
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:
__________________
Green Coast Capital International SA
By:_____________________________
Name: __________________________
Title: ___________________________
Date____________________________
19
Note: June 4, 2019
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION 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.
THIS NOTE DOES NOT REQUIRE PHYSICAL SURRENDER OF THE NOTE IN THE EVENT OF A PARTIAL REDEMPTION OR CONVERSION. AS A RESULT, FOLLOWING ANY REDEMPTION OR CONVERSION OF ANY PORTION OF THIS NOTE, THE OUTSTANDING PRINCIPAL SUM REPRESENTED BY THIS NOTE MAY BE LESS THAN THE PRINCIPAL SUM AND ACCRUED INTEREST SET FORTH BELOW.
10% CONVERTIBLE PROMISSORY NOTE
OF
PIERRE CORPORATION
Issuance Date: June 4, 2019
Total Face Value of Note: $55,000
THIS NOTE is a duly authorized Convertible Promissory Note of Pierre Corporation, a corporation duly organized and existing under the laws of the State of Nevada (the Company), designated as the Company's 10% Convertible Promissory Note due March 4, 2020 (Maturity Date) in the face amount of $55,000 (the Note).
FOR VALUE RECEIVED, the Company hereby promises to pay to the order of Tangiers Global, LLC or its registered assigns or successors-in-interest (the Holder) the Principal Sum of $55,000 (the Principal Sum) and to pay guaranteed interest on the principal balance hereof at an amount equivalent to 10% of the Principal Sum, to the extent such Principal Sum and guaranteed interest and any other interest, fees, liquidated damages and/or items due to Holder herein have not been repaid or converted into the Companys Common Stock (the Common Stock), in accordance with the terms hereof. The sum of $50,000 shall be remitted and delivered to the Company, and $5,000 shall be retained by the Holder through an original issue discount (the OID) for due diligence and legal bills related to this transaction. The OID is set at 10% of any consideration paid. The Company covenants that within 30 months of the Effective Date of the Note, it shall utilize approximately $50,000 of the proceeds in the manner set forth on Schedule 1, attached hereto (the Use of Proceeds), and shall
2
promptly provide evidence thereof to Holder, in sufficient detail as reasonably requested by Holder.
In addition to the guaranteed interest referenced above, and upon the occurrence of an Event of Default (as defined in Section 3.00(a)), additional interest will accrue from the date of the Event of Default at the rate equal to the lower of 20% per annum or the highest rate permitted by law (the Default Rate).
This Note will become effective only upon the execution by both parties, including the execution of Exhibits B, C, D, E, Schedule 1 (collectively, the Exhibits), and the Irrevocable Transfer Agent Instructions (the Date of Execution) and delivery of the initial payment of consideration by the Holder (the Effective Date). The Company acknowledges and agrees the Exhibits are material provisions of this Note.
For purposes hereof the following terms shall have the meanings ascribed to them below:
Business Day shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the City of New York are authorized or required by law or executive order to remain closed.
Conversion Price shall be equal to 65% of the lowest trading price of the Companys Common Stock during the 20 consecutive Trading Days prior to the date on which Holder elects to convert all or part of the Note. For the purpose of calculating the Variable Conversion Price only, any time after 4:00 pm Eastern Time (the closing time of the Principal Market) shall be considered to be the beginning of the next Business Day. If the Company is placed on chilled status with the DTC, the discount shall be increased by 10%, i.e., from 35% to 45%, until such chill is remedied. If the Company is not DWAC eligible through their transfer agent and DTCs FAST system, the Variable Conversion Price discount will be increased by 5%, i.e., from 35% to 40%. In the case of both, the Variable Conversion Price discount shall be a cumulative increase of 15%, i.e., from 35% to 50%. Any default of this Note not remedied within the applicable cure period will result in a permanent additional 10% increase, i.e., from 35% to 45%, in the Variable Conversion Price discount in addition to any and all other Conversion Price discounts, as provided above.
Principal Amount shall refer to the sum of (i) the original principal amount of this Note (including the original issue discount, prorated if the Note has not been funded in full), (ii) all guaranteed and other accrued but unpaid interest hereunder, (iii) any fees due hereunder, (iv) liquidated damages, and (v) any default payments owing under the Note, in each case previously paid or added to the Principal Amount.
Principal Market shall refer to the primary exchange or trading platform on which the Companys common stock is traded or quoted.
Trading Day shall mean a day on which there is trading or quoting for any security on the Principal Market.
Underlying Shares means the shares of Common Stock into which the Note is convertible (including interest, fees, liquidated damages and/or principal payments in common stock as set forth herein) in accordance with the terms hereof.
3
The following terms and conditions shall apply to this Note:
Section 1.00
Repayment.
(a)
The Company may pay this Note, in whole or in part, in cash or in other good funds, according to the following schedule:
Days Since Effective Date | Payment Amount |
0-60 days | 120% of Principal Amount so paid |
61-120 days | 130% of Principal Amount so paid |
121-180 days | 140% of Principal Amount so paid |
(b)
After 180 days from the Effective Date, the Company may not pay this Note, in whole or in part, in cash or in other good funds, without prior written consent from Holder, which consent may be withheld, delayed, denied, or conditioned in Holders sole and absolute discretion. Whenever any amount expressed to be due by the terms of this Note is due on any day that is not a Business Day, the same shall instead be due on the next succeeding day that is a Business Day. Upon the occurrence of an Event of Default, the Company may not pay the Note, in whole or in part, in cash or in other good funds without written consent of the Holder, which consent may be withheld, delayed, denied, or conditioned in Holders sole and absolute discretion. Further, the Company shall provide the Holder with two weeks prior written notice of the Companys determination to pay any or all of its obligations hereunder. During such two-week period, the Holder may exercise any or all of its conversion rights hereunder. In the event that the Holder does not exercise its conversion rights in respect of any or all of such noticed, prospective payment, the Company shall tender the full amount set forth in such notice (less any amount in respect of which the Holder has exercised its conversion rights) to the Holder within 2 Business Days following the Holders exercise (or notification to the Company of non-exercise) of the Holders conversion rights in respect of the amount set forth in such notice. Any such payment by the Company in connection with this provision shall be deemed to have been made on the date that the Holder first receives the above-referenced notice.
Section 2.00
Conversion.
(a)
Conversion Right. Subject to the terms hereof and restrictions and limitations contained herein, the Holder shall have the right, at the Holder's sole option, at any time and from time to time to convert in whole or in part the outstanding and unpaid Principal Amount under this Note into shares of Common Stock at the Conversion Price (defined below), but not to exceed the Restricted Ownership Percentage, as defined in Section 2.00(f). The date of any conversion notice (Conversion Notice) hereunder shall be referred to herein as the Conversion Date.
(b)
Stock Certificates or DWAC. The Company will deliver to the Holder, or Holders authorized designee, no later than 2 Trading Days after the Conversion Date, a certificate or certificates (which certificate(s) shall be free of restrictive legends and trading restrictions if the shares of Common Stock underlying the portion of the Note being converted
4
are eligible under a resale exemption pursuant to Rule 144(b)(1)(ii) and Rule 144(d)(1)(ii) of the Securities Act of 1933, as amended) representing the number of shares of Common Stock being acquired upon the conversion of this Note. In lieu of delivering physical certificates representing the shares of Common Stock issuable upon conversion of this Note, provided the Company's transfer agent is participating in Depository Trust Companys (DTC) Fast Automated Securities Transfer (FAST) program, the Company shall instead use commercially reasonable efforts to cause its transfer agent to electronically transmit such shares issuable upon conversion to the Holder (or its designee), by crediting the account of the Holders (or such designees) broker with DTC through its Deposits and Withdrawal at Custodian (DWAC) program (provided that the same time periods herein as for stock certificates shall apply).
(c)
Charges and Expenses. Issuance of Common Stock to Holder, or any of its assignees, upon the conversion of this Note shall be made without charge to the Holder for any issuance fee, transfer tax, legal opinion and related charges, postage/mailing charge or any other expense with respect to the issuance of such Common Stock. Company shall pay all transfer agent fees incurred from the issuance of the Common Stock to Holder, as well as any and all other fees and charges required by the transfer agent as a condition to effectuate such issuance. Any such fees or charges, as noted in this Section that are paid by the Holder (whether from the Companys delays, outright refusal to pay, or otherwise), will be automatically added to the Principal Sum of the Note and tack back to the Effective Date for purposes of Rule 144.
(d)
Delivery Timeline. If the Company fails to deliver to the Holder such certificate or certificates (or shares through the DWAC program) pursuant to this Section (free of any restrictions on transfer or legends, if eligible) prior to 3 Trading Days after the Conversion Date, the Company shall pay to the Holder as liquidated damages an amount equal to $2,000 per day, until such certificate or certificates are delivered. The Company acknowledges that it would be extremely difficult or impracticable to determine the Holders actual damages and costs resulting from a failure to deliver the Common Stock and the inclusion herein of any such additional amounts are the agreed upon liquidated damages representing a reasonable estimate of those damages and costs. Such liquidated damages will be automatically added to the Principal Sum of the Note and tack back to the Effective Date for purposes of Rule 144.
(e)
Reservation of Underlying Securities. The Company covenants that it will at all times reserve and keep available for Holder, out of its authorized and unissued Common Stock solely for the purpose of issuance upon conversion of this Note, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holder, initially 10,000,000, but at no time less than five times the number of shares of Common Stock as shall be issuable (taking into account the adjustments under this Section 2.00, but without regard to any ownership limitations contained herein) upon the conversion of this Note (consisting of the Principal Amount), to Common Stock (the Required Reserve). The Company covenants that all shares of Common Stock that shall be issuable will, upon issue, be duly authorized, validly issued, fully-paid, non-assessable and freely-tradable (if eligible). If the amount of shares on reserve in Holders name at the Companys transfer agent for this Note shall drop below the Required Reserve, the Company will, within 2 Trading Days of notification from Holder, instruct the transfer agent to increase the number of shares so that the Required Reserve is met. In the event that the Company does not instruct the transfer agent to increase the number of shares so that the Required Reserve is met, the Holder will be allowed, if applicable, to provide this instruction as per the terms of the Irrevocable Transfer Agent Instructions attached to this Note.
5
The Company agrees that the maintenance of the Required Reserve is a material term of this Note and any breach of this Section 2.00(e) will result in a default of the Note.
(f)
Conversion Limitation. The Holder will not submit a conversion to the Company that would result in the Holder beneficially owning more than 9.99% of the then total outstanding shares of the Company (Restricted Ownership Percentage).
(g)
Conversion Delays. If the Company fails to deliver shares in accordance with the timeframe stated in Section 2.00(d), the Holder, at any time prior to selling all of those shares, may rescind any portion, in whole or in part, of that particular conversion attributable to the unsold shares. The rescinded conversion amount will be returned to the Principal Sum with the rescinded conversion shares returned to the Company, under the expectation that any returned conversion amounts will tack back to the Effective Date.
(h)
Shorting and Hedging. Holder may not engage in any shorting or hedging transaction(s) in the Common Stock of the Company prior to conversion.
(i)
Conversion Right Unconditional. If the Holder shall provide a Conversion Notice as provided herein, the Company's obligations to deliver Common Stock shall be absolute and unconditional, irrespective of any claim of setoff, counterclaim, recoupment, or alleged breach by the Holder of any obligation to the Company.
Section 3.00
Defaults and Remedies.
(a)
Events of Default. An Event of Default is: (i) a default in payment of any amount due hereunder; (ii) a default in the timely issuance of underlying shares upon and in accordance with terms of Section 2.00, which default continues for 2 Trading Days after the Company has failed to issue shares or deliver stock certificates within the 3rd Trading Day following the Conversion Date; (iii) if the Company does not issue the press release or file the Current Report on Form 8-K, in each case in accordance with the provisions and the deadlines referenced Section 5.00(j); (iv) failure by the Company for 3 days after notice has been received by the Company to comply with any material provision of this Note; (iv) any representation or warranty of the Company in this Note that is found to have been incorrect in any material respect when made, including, without limitation, the Exhibits; (vi) failure of the Company to remain compliant with DTC, thus incurring a chilled status with DTC; (vii) any default of any mortgage, indenture or instrument which may be issued, or by which there may be secured or evidenced any indebtedness, for money borrowed by the Company or for money borrowed the repayment of which is guaranteed by the Company, whether such indebtedness or guarantee now exists or shall be created hereafter; (viii) if the Company is subject to any Bankruptcy Event; (ix) any failure of the Company to satisfy its filing obligations under Securities Exchange Act of 1934, as amended (the 1934 Act) and the rules and guidelines issued by OTC Markets News Service, OTCMarkets.com and their affiliates; (x) failure of the Company to remain in good standing under the laws of its state of domicile; (xi) any failure of the Company to provide the Holder with information related to its corporate structure including, but not limited to, the number of authorized and outstanding shares, public float, etc. within 1 Trading Day of request by Holder; (xii) failure by the Company to maintain the Required Reserve in accordance with the terms of Section 2.00(f); (xiii) failure of Companys Common Stock to maintain a closing bid price in its Principal Market for more than 3 consecutive Trading Days; (xiv) any delisting from a Principal Market for any reason; (xv) failure by Company to pay any of its transfer agent fees
6
in excess of $2,000 or to maintain a transfer agent of record; (xvi) failure by Company to notify Holder of a change in transfer agent within 24 hours of such change; (xvii) any trading suspension imposed by the United States Securities and Exchange Commission (the SEC) under Sections 12(j) or 12(k) of the 1934 Act; (xviii) failure by the Company to meet all requirements necessary to satisfy the availability of Rule 144 to the Holder or its assigns, including but not limited to the timely fulfillment of its filing requirements as a fully-reporting issuer registered with the SEC, requirements for XBRL filings, and requirements for disclosure of financial statements on its website; (xix) failure of the Company to abide by the Use of Proceeds or failure of the Company to inform the Holder of a change in the Use of Proceeds; or (xx) failure of the Company to abide by the terms of the right of first refusal contained in Section 5.00(l).
(b)
Remedies. If an Event of Default occurs, the outstanding Principal Amount of this Note owing in respect thereof through the date of acceleration, shall become, at the Holder's election, immediately due and payable in cash at the Mandatory Default Amount. The Mandatory Default Amount means 40% of the outstanding Principal Amount of this Note will be automatically added to the Principal Sum of the Note and tack back to the Effective Date for purposes of Rule 144. Commencing 5 days after the occurrence of any Event of Default that results in the eventual acceleration of this Note, this Note shall accrue additional interest, in addition to the Notes guaranteed interest, at a rate equal to the lesser of 20% per annum or the maximum rate permitted under applicable law. Finally, after the occurrence of an Event of Default that results in the eventual acceleration of this Note, an additional 10% increase to the Conversion Price discount will go into effect. In connection with such acceleration described herein, the Holder need not provide, and the Issuer hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by the Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the note until such time, if any, as the Holder receives full payment pursuant to this Section 3.00(b). No such rescission or annulment shall affect any subsequent event of default or impair any right consequent thereon. Nothing herein shall limit the Holder's right to pursue any other remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Companys failure to timely deliver certificates representing shares of Common Stock upon conversion of the Note as required pursuant to the terms hereof.
Section 4.00
Representations and Warranties of Holder.
Holder hereby represents and warrants to the Company that:
(a)
Holder is an accredited investor, as such term is defined in Regulation D of the Securities Act of 1933, as amended (the 1933 Act), and will acquire this Note and the Underlying Shares (collectively, the Securities) for its own account and not with a view to a sale or distribution thereof as that term is used in Section 2(a)(11) of the 1933 Act, in a manner which would require registration under the 1933 Act or any state securities laws. Holder has such knowledge and experience in financial and business matters that such Holder is capable of evaluating the merits and risks of the Securities. Holder can bear the economic risk of the Securities, has knowledge and experience in financial business matters and is capable of bearing and managing the risk of investment in the Securities. Holder recognizes that the Securities have
7
not been registered under the 1933 Act, nor under the securities laws of any state and, therefore, cannot be resold unless the resale of the Securities is registered under the 1933 Act or unless an exemption from registration is available. Holder has carefully considered and has, to the extent Holder believes such discussion necessary, discussed with its professional, legal, tax and financial advisors, the suitability of an investment in the Securities for its particular tax and financial situation and its advisers, if such advisors were deemed necessary, and has determined that the Securities are a suitable investment for it. Holder has not been offered the Securities by any form of general solicitation or advertising, including, but not limited to, advertisements, articles, notices or other communications published in any newspaper, magazine, or other similar media or television or radio broadcast or any seminar or meeting where, to Holders knowledge, those individuals that have attended have been invited by any such or similar means of general solicitation or advertising. Holder has had an opportunity to ask questions of and receive satisfactory answers from the Company, or any person or persons acting on behalf of the Company, concerning the terms and conditions of the Securities and the Company, and all such questions have been answered to the full satisfaction of Holder. The Company has not supplied Holder any information regarding the Securities or an investment in the Securities other than as contained in this Agreement, and Holder is relying on its own investigation and evaluation of the Company and the Securities and not on any other information.
(b)
The Holder is a limited liability company duly organized, validly existing and in good standing under the laws of the state of its incorporation and has all requisite corporate power and authority to carry on its business as now conducted. The Holder is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its business or properties.
(c)
All limited liability company action has been taken on the part of the Holder, its officers, directors, managers and members necessary for the authorization, execution and delivery of this Note. The Holder has taken all limited liability company action required to make all of the obligations of the Holder reflected in the provisions of this Note, valid and enforceable obligations.
(d)
Each certificate or instrument representing Securities will be endorsed with the following legend (or a substantially similar legend), unless or until registered under the 1933 Act or exempt from registration:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES WHICH IS REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
8
Section 5.00
General.
(a)
Payment of Expenses. The Company agrees to pay all reasonable charges and expenses, including attorneys' fees and expenses, which may be incurred by the Holder in successfully enforcing this Note and/or collecting any amount due under this Note.
(b)
Assignment, Etc. The Holder may assign or transfer this Note to any transferee at its sole discretion. This Note shall be binding upon the Company and its successors and shall inure to the benefit of the Holder and its successors and permitted assigns.
(c)
Amendments. This Note may not be modified or amended, or any of the provisions of this Note waived, except by written agreement of the Company and the Holder.
(d)
Funding Window. The Company agrees that it will not enter into a convertible debt financing transaction, including 3(a)(9) and 3(a)(10) transactions, with any party other than the Holder for a period of 60 Trading Days following the Effective Date. The Company agrees that this is a material term of this Note and any breach of this will result in a default of the Note.
(e)
Piggyback Registration Rights. The Company shall include on the next registration statement that the Company files with the SEC (or on the subsequent registration statement if such registration statement is withdrawn) all shares issuable upon conversion of this Note. Failure to do so will result in liquidated damages of 30% of the outstanding Principal Sum of this Note, but not less than $20,000, being immediately due and payable to the Holder at its election in the form of a cash payment or an addition to the Principal Sum of this Note.
(f)
Terms of Future Financings. So long as this Note is outstanding, upon any issuance by the Company or any of its subsidiaries of any convertible debt security (whether such debt begins with a convertible feature or such feature is added at a later date) with any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the Holder in this Note, then the Company shall notify the Holder of such additional or more favorable term and such term, at the Holder's option, shall become a part of this Note and its supporting documentation.. The types of terms contained in the other security that may be more favorable to the holder of such security include, but are not limited to, terms addressing conversion discounts, terms addressing maturity, conversion look back periods, interest rates, original issue discount percentages and warrant coverage.
(g)
Governing Law; Jurisdiction.
(i)
Governing Law. This Note will be governed by, and construed and interpreted in accordance with, the laws of the Commonwealth of Puerto Rico without regard to any conflicts of laws or provisions thereof that would otherwise require the application of the law of any other jurisdiction.
(ii)
Jurisdiction and Venue. Any dispute, claim, suit, action or other legal proceeding arising out of or relating to this Note or the rights and obligations of each of the parties shall be brought only in the San Juan, Puerto Rico or in the federal courts of the United States of America located in San Juan, Puerto Rico.
9
(iii)
No Jury Trial. The Company hereto knowingly and voluntarily waives any and all rights it may have to a trial by jury with respect to any litigation based on, or arising out of, under, or in connection with, this Note.
(iv)
Delivery of Process by the Holder to the Company. In the event of an action or proceeding by the Holder against the Company, and only by the Holder against the Company, service of copies of summons and/or complaint and/or any other process that may be served in any such action or proceeding may be made by the Holder via U.S. Mail, overnight delivery service such as FedEx or UPS, email, fax, or process server, or by mailing or otherwise delivering a copy of such process to the Company at its last known attorney as set forth in its most recent SEC filing.
(v)
Notices. Any notice required or permitted hereunder (including Conversion Notices) must be in writing and either personally served, sent by facsimile or email transmission, or sent by overnight courier. Notices will be deemed effectively delivered at the time of transmission if by facsimile or email, and if by overnight courier the business day after such notice is deposited with the courier service for delivery.
(h)
No Bad Actor. No officer or director of the Company would be disqualified under Rule 506(d) of the Securities Act of 1933, as amended, on the basis of being a bad actor as that term is established in the September 13, 2013 Small Entity Compliance Guide published by the SEC.
(i)
Usury. If it shall be found that any interest or other amount deemed interest due hereunder violates any applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it will not seek to claim or take advantage of any law that would prohibit or forgive the Company from paying all or a portion of the principal, fees, liquidated damages or interest on this Note.
(j)
Securities Laws Disclosure; Publicity. The Company shall (a) by 9:30 a.m. Eastern Time on the Trading Day immediately following the Date of Execution, issue a press release disclosing the material terms of the transactions contemplated hereby, and (b) file a Current Report on Form 8-K, including a copy of this Note as an exhibit thereto, with the SEC within the time required by the 1934 Act. From and after the filing of such press release, the Company represents to the Holder that it shall have publicly disclosed all material, non-public information delivered to the Holder by the Company, or any of its officers, directors, employees, or agents in connection with the transactions contemplated by this Note. The Company and the Holder shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither the Company nor the Holder shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, with respect to any press release of the Holder, or without the prior consent of the Holder, with respect to any press release of the Company, none of which consents shall be unreasonably withheld, delayed, denied, or conditioned except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication. Notwithstanding the foregoing, the Company shall not publicly disclose the name of the Holder, or include the name of the Holder in any filing with the SEC or any regulatory agency or Principal Market, without the prior written consent of the Holder, except to the extent such disclosure is required by law or Principal Market regulations, in
10
which case the Company shall provide the Holder with prior notice of such disclosure permitted hereunder.
The Company agrees that this is a material term of this Note and any breach of this Section 5.00(j) will result in a default of the Note.
(k)
Attempted Below-par Issuance. In the event that the Holder delivers a Conversion Notice to the Company and, if as of such date, (i) the Conversion Price would be less than par value of the Companys Common Stock and (ii) within three business days of the delivery of the Conversion Notice, the Company shall not have reduced its par value such that all of the requested conversion transaction may then be accomplished, then the Company and the Holder shall utilize the following conversion protocol for Par Value Adjustment. The Holder shall transmit to the Company: (X) a preliminary Conversion Notice for the full number of shares of Common Stock that would be issued at the Conversion Price without regard to any below-par value conversion issues; followed by (Y) a par value Conversion Notice for the number of shares of Common Stock with the Conversion Price increased from the preliminary Conversion Price to a Conversion Price at par value; and, finally, (Z) a liquidated damages Conversion Notice for that number of shares of Common Stock that represents the difference between the preliminary Conversion Notice full number of shares and the par value Conversion Notice limited number of shares. The Conversion Price of such liquidated damages Common Shares would be the par value of the Common Stock. Accordingly, through this protocol, the Company would issue, in two transactions, an amount of shares of its Common Stock equivalent to the full number of shares of Common Stock that would have been issued in accordance with the preliminary Conversion Notice without regard to any below-par value conversion issues. In the event that the Holder is precluded from exercising any or all of its conversion rights hereunder as a result of a proposed below par conversion, the Company agrees that, in lieu of actual damages for such failure, liquidated damages may be assessed and recovered by the Holder without being required to present any evidence of the amount or character of actual damages sustained by reason thereof. The amount of such liquidated damages shall be an amount equivalent to the trading price utilized in the preliminary Conversion Notice multiplied by the number of shares calculated on the liquidated damages Conversion Notice. Such amount shall be assessed and become immediately due and payable to the Holder (at its election) in the form of a (i) cash payment, (ii) an addition to the Principal Sum of this Note, or (iii) the immediate issuance of that number of shares of Common Stock as calculated on the liquidated damages Conversion Notice. Such liquidated damages are intended to represent estimated actual damages and are not intended to be a penalty, but, by virtue of their genesis and subject to the election of the Holder (as set forth in the immediately preceding sentence), will be automatically added to the Principal Sum of the Note and tack back to the Effective Date for purposes of Rule 144, as the Companys failure to maintain the par value of its Common Stock at an amount that would not result in a below par conversion failure is equivalent to a default as of the Issuance Date of the Note.
(l)
Right of First Refusal. From and after the date of this Note and at all times hereafter while the Note is outstanding, the Parties agree that, in the event that the Company receives any written or oral proposal (the Proposal) containing one or more offers to provide additional capital or equity or debt financing (the Financing Amount), the Company agrees that it shall provide a copy of all documents received relating to the Proposal together with a complete and accurate description of the Proposal to the Holder and all amendments, revisions,
11
and supplements thereto (the Proposal Documents) no later than 3 business days from the receipt of the Proposal Documents. Following receipt of the Proposal Documents from the Company, the Holder shall have the right (the Right of First Refusal), but not the obligation, for a period of 5 business days thereafter (the Exercise Period), to invest, at similar or better terms to the Company, an amount equal to or greater than the Financing Amount, upon written notice to the Company that the Holder is exercising the Right of First Refusal provided hereby. In furtherance of the Right of First Refusal, the Company agrees that it will cooperate and assist the Holder in conducting a due diligence investigation of the Company and its corporate and financial affairs and promptly provide the Holder with information and documents that the Holder may reasonably request so as to allow the Holder to make an informed investment decision. However, the Company and the Holder agree that the Holder shall have no more than 5 business days from and after the expiration of the Exercise Period to exercise its Right of First Refusal hereunder. This Right of First Refusal shall extend to all purchases of debt held by, or assigned to or from, current stockholders, vendors, or creditors, all transactions under Sections 3(a)(9) and/or 3(a)(10) or the Securities Act of 1933, as amended, and all equity line-of-credit transactions. In the event that the Company 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, without giving Right of First Refusal to the Holder, a liquidated damages charge of 25% of the outstanding principal balance of this Note, but not less than $25,000, 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. Such liquidated damages will be automatically added to the Principal Sum of the Note and tack back to the Effective Date for purposes of Rule 144.
[Signature Page to Follow.]
12
IN WITNESS WHEREOF, the Company has caused this Convertible Promissory Note to be duly executed on the day and in the year first above written.
PIERRE CORPORATION
By: /s/ Joseph J. Isaacs_______________
Name:
Joseph J. Isaacs
Title:
CEO
Email:
joe@pierrec
Address:
750 N. San Vicente Suite 800 West, West Hollywood, CA 90069
This Convertible Promissory Note of June 4, 2019 is accepted this 3rd day of June, 2019 by
TANGIERS GLOBAL, LLC
By:
/s/ Michael Sobeck____________
Name: Michael Sobeck
Title: Managing Member
EXHIBIT A
FORM OF CONVERSION NOTICE
(To be executed by the Holder in order to convert all or part of that certain $55,000 Convertible Promissory Note identified as the Note)
DATE:
__________________________
FROM:
Tangiers Global, LLC
Re:
$55,000 Convertible Promissory Note (this Note) originally issued by Pierre Corporation, a Nevada corporation, to Tangiers Global, LLC on June 4, 2019.
The undersigned, on behalf of Tangiers Global, LLC, hereby elects to convert $_______________________ of the aggregate outstanding Principal Amount (as defined in the Note) indicated below of this Note into shares of Common Stock, $0.001 par value per share, of Pierre Corporation (the Company), according to the conditions hereof, as of the date written below. If shares are to be issued in the name of a person other than undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the holder for any conversion, except for such transfer taxes, if any. The undersigned represents as of the date hereof that, after giving effect to the conversion of this Note pursuant to this Conversion Notice, the undersigned will not exceed the Restricted Ownership Percentage contained in this Note.
Conversion information: |
|
| Date to Effect Conversion |
| Aggregate Principal Sum of Note Being Converted |
| Aggregate Interest/Fees of Principal Amount Being Converted |
| Remaining Principal Balance |
| Number of Shares of Common Stock to be Issued |
| Applicable Conversion Price |
| Signature |
| Name |
| Address |
EXHIBIT B
WRITTEN CONSENT OF THE BOARD OF DIRECTORS OF
PIERRE CORPORATION
The undersigned, being directors of Pierre Corporation, a Nevada corporation (the Company), acting pursuant to the Bylaws of the Corporation, do hereby consent to, approve and adopt the following preamble and resolutions:
Convertible Note with Tangiers Global, LLC
The board of directors of the Company has reviewed and authorized the following documents relating to the issuance of a Convertible Promissory Note in the amount of $55,000 with Tangiers Global, LLC.
The documents agreed to and dated June 4, 2019 are as follows:
10% Convertible Promissory Note of Pierre Corporation
Irrevocable Transfer Agent Instructions
Certificate of Corporate Secretary
Disbursement Instructions
Schedule 1 Use of Proceeds
The board of directors further agree to authorize and approve the issuance of shares to the Holder at Conversion prices that are below the Companys then current par value.
IN WITNESS WHEREOF, the undersign member(s) of the board of the Company executed this unanimous written consent as of June 4, 2019.
/s/ Joseph J. Isaacs______________________
By: Joseph J. Isaacs
Its: CEO
EXHIBIT C
NOTARIZED CERTIFICATE OF CORPORATE SECRETARY OF
PIERRE CORPORATION
(Two Pages)
The undersigned, Joseph J. Isaacs_______________ is the duly elected Corporate Secretary of Pierre Corporation, a Nevada corporation (the Company).
I hereby warrant and represent that I have undertaken a complete and thorough review of the Companys corporate and financial books and records, including, but not limited to, the Companys records relating to the following:
(A)
The issuance of that certain convertible promissory note dated June 4, 2019 (the Note Issuance Date) issued to Tangiers Global, LLC (the Holder) in the stated original principal amount of $55,000 (the Note);
(B)
The Companys Board of Directors duly approved the issuance of the Note to the Holder;
(C)
The Company has not received and does not contemplate receiving any new consideration from any persons in connection with any later conversion of the Note and the issuance of the Companys Common Stock upon any said conversion;
(D)
To my best knowledge and after completing the aforementioned review of the Companys stockholder and corporate records, I am able to certify that the Holder (and the persons affiliated with the Holder) are not officers, directors, or directly or indirectly, ten percent (10.00%) or more stockholders of the Company and none of said persons has had any such status in the one hundred (100) days immediately preceding the date of this Certificate;
(E)
The Companys Board of Directors have approved duly adopted resolutions approving the Irrevocable Instructions to the Companys Stock Transfer Agent dated June 4, 2019;
(F)
Mark the appropriate selection:
___ The Company represents that it is not a shell company, as that term is defined in Section 12b-2 of the Securities Exchange Act of 1934, as amended, and has never been a shell company, as so defined; or
_X_ The Company represents that (i) it was a shell company, as that term is defined in Section 12b-2 of the Securities Exchange Act of 1934, as amended,
(ii) since March 2018, it has no longer been a shell company, as so defined, and (iii) on May 2018, it provided Form 10-type information in a filing with the United States Securities and Exchange Commission.
(G)
I understand the constraints imposed under Rule 144 on those persons who are or may be deemed to be affiliates, as that term is defined in Rule 144(a)(1) of the Securities Act of 1933, as amended.
(H)
I understand that all of the representations set forth in this Certificate will be relied upon by counsel to Tangiers Global, LLC in connection with the preparation of a legal opinion.
I hereby affix my signature to this Notarized Certificate and hereby confirm the accuracy of the statements made herein.
Signed:
/s/ Joseph J. Isaacs_____________
Date:
June 3, 2019___________
Name:
Joseph J. Isaacs_______________
Title: CEO___________________
SUBSCRIBED AND SWORN TO BEFORE ME ON THIS 3rd DAY OF JUNE, 2019.
Commission Expires: Permanent_________
/s/ Sau Ki Cheung________________
Notary Public
Witnessed as to Execution
Only No Advice Sought or Given
SAU KI CHEUNG
Notary Public
Unit 2077 1163 Pinetree Way
Coquitlam, BC V3B 8A9
My Commission is Permanent
EXHIBIT D
TO:
Tangiers Global, LLC
FROM:
Pierre Corporation
DATE:
June 4, 2019
RE:
Disbursement of Funds
Pursuant to that certain Convertible Promissory Note between the parties listed above and dated June 4, 2019, a disbursement of funds will take place in the amount and manner described below:
Please disburse to: |
|
Amount to disburse: | $50,000 |
Form of distribution | Wire |
Name | Pierre Corporation |
Company Address | |
Wire Instructions: | Bank: ABA Routing Number: Account Number: SWIFT Code: Account Name: Phone: |
TOTAL: $50,000
For: Pierre Corporation
By: ____/s/ Joseph J. Isaacs______________
Dated: June 4, 2019
Name:
Joseph J. Isaacs
Its:
CEO
EXHIBIT E
COMPANY CAPITALIZATION TABLE AS OF JUNE 4, 2019
COMMON STOCK AND COMMON STOCK EQUIVALENTS
ISSUED, OUTSTANDING AND RESERVED
DESCRIPTION | AMOUNT |
Authorized Common Stock | 200,000,000 |
Authorized Capital Stock | 200,000,000 |
Authorized Common Stock | 200,000,000 |
Issued Common Stock | 29,051,800 |
Outstanding Common Stock | 29,051,800 |
Treasury Stock | 0 |
*Authorized, but unissued | 0 |
|
|
Authorized Preferred Stock | 5,000,000 |
Issued Preferred Stock | 0 |
|
|
Reserved for Equity Incentive Plans | 0 |
Reserved for Convertible Debt | 0 |
Reserved for Options and Warrants | 0 |
Reserved for Other Purposes | 0 |
|
|
TOTAL COMMON STOCK AND COMMON STOCK EQUIVALENTS OUTSTANDING | 29,051,800 |
* This number includes all shares reserved for Convertible Debt
Note: If not applicable, enter n/a or zero in Column 2.
CURRENT DEBT AND LIABILITIES TABLE
CONVERTIBLE PROMISSORY NOTE BALANCES AND PROMISSORY NOTE BALANCES
DESCRIPTION | ISSUANCE DATE | AMOUNT |
Convertible Promissory Note |
|
|
|
|
|
|
|
|
None |
|
|
|
|
|
|
|
|
Promissory Note |
|
|
|
|
|
|
|
|
None |
|
|
|
|
|
|
|
|
Other Debt and Liabilities |
|
|
|
|
|
|
|
|
None |
|
|
|
|
|
|
|
|
Note: If not applicable, enter n/a or zero in Column 2.
To my best knowledge and after completing the aforementioned review of the Companys stockholder and corporate records, I am able to certify the accuracy of the statements made herein.
PIERRE CORPORATION
By:
/s/ Joseph J. Isaacs
Dated: June 4, 2019
Name:
Joseph J. Isaacs
Title:
CEO
SCHEDULE 1
USE OF PROCEEDS
Pursuant to that certain Convertible Promissory Note between the parties listed above and dated June 4, 2019, the Company covenants that it will within, month(s) of the Effective Date of the Note, it shall use approximately $50,000 of the proceeds in the manner set forth below (the Use of Proceeds):
|
Working capital |
Legal fees |
Inventory |
PIERRE CORPORATION
By:/s/ Joseph J. Isaacs
Dated: June 4, 2019
Name:
Joseph J. Isaacs
Title: Ceo
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 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: $27,500.00 Issue Date: November 9, 2019
PROMISSORY NOTE
FOR VALUE RECEIVED, Pierre Corporation., a Nevada corporation (hereinafter called the Borrower), hereby promises to pay to the order of Green Coast Capital International SA, a Panama Corporation, or registered assigns (the Holder) the principal sum of up to $27,500.00 (the Principal Amount), together with interest at the rate of nine percent (9%) per annum, at maturity or upon acceleration or otherwise, as set forth herein (the Note). The consideration to the Borrower for this Note is up to $25,000.00 (the Consideration) in United States currency, due to the prorated original issuance discount of up to $2,500.00 (the OID). The Holder shall pay $25,000.00 of the Consideration ) within a reasonable amount of time of the full execution of the transactional documents related to this Note. At the closing of the First Tranche, the outstanding principal amount under this Note shall be $30,000.00, consisting of the Consideration plus the prorated portion of the OID (as defined herein) and a
$2,500.00 credit for the Holders transactional expenses. The Holder may pay such additional amounts of the Consideration and at such dates as the Holder and Borrower mutually agree upon. The maturity date shall be six (6) months from the effective date of each payment (the Maturity Date), and is the date upon which the principal sum, as well as any accrued and unpaid interest and other fees for each tranche, shall be due and payable. This Note may not be repaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal or interest on this Note, which is not paid by the Maturity Date, shall bear interest at the rate of the lesser of (i) eighteen percent (18%) per annum or (ii) the maximum amount allowed by law, from the due date thereof until the same is paid (Default Interest). Interest shall commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed. All payments due hereunder (to the extent not converted into the Borrowers common stock (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
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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 New York, New York are authorized or required by law or executive order to remain closed.
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 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 on or after the Issue Date, to convert all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of 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 (the Conversion Price) 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 the Notes 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) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, 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., New York, New York time on such conversion date (the Conversion Date). The term Conversion Amount means, with respect to any conversion of
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this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at the Holders option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at the Holders option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holders option, any amounts owed to the Holder pursuant to Sections
1.3(g) hereof.
1.2
Conversion Price.
(a) Calculation of Conversion Price. The Conversion Price shall be the Variable Conversion Price (as defined herein) (subject to adjustment as further described herein). The "Variable Conversion Price" shall mean 50% discount to the lowest trade in the 20 days prior to the conversion . Trading Price means, for any security as of any date, the lowest traded price price on the Over-the-Counter Pink Marketplace, OTCQB, or applicable trading market (the Principal Market) as reported by a reliable reporting service (Reporting Service) designated by the Holder (i.e. www.Nasdaq.com) or, if the Principal Market is not the principal trading market for such security, on the principal securities exchange or trading market where such security is listed or traded or, if the lowest intraday trading price of such security is not available in any of the foregoing manners, the lowest intraday price of any market makers for such security that are quoted on the OTC Markets. If the Conversion Price on the date in which the Holder actually receives the Conversion Shares (each a Share Delivery Date) is less than the Conversion Price in the respective Notice of Conversion, then the Conversion Price in the respective Notice of Conversion shall be retroactively adjusted downward to equal the Conversion Price on the Share Delivery Date. 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 holders of a majority in interest of the Notes being converted for which the calculation of the Trading Price is required in order to determine the Conversion Price of such Notes. Trading Day shall mean any day on which the Common Stock is tradable for any period on the Principal Market, or on the principal securities exchange or other securities market on which the Common Stock is then being traded. All expenses incurred by Holder for the issuance and clearing of the Common Stock into which this Note is convertible into shall immediately and automatically be added to the balance of the Note at such time as the expenses are incurred by Holder.
Each time, while this Note is outstanding, the Borrower enters into a Section 3(a)(9) Transaction (as defined herein) (including but not limited to the issuance of new promissory notes or of a replacement promissory note), or Section 3(a)(10) Transaction (as defined herein), in which any 3rd party has the right to convert monies owed to that 3rd party (or receive shares pursuant to a settlement or otherwise) at a discount to market greater than the Conversion Price in effect at that time (prior to all other applicable adjustments in the Note), then the Conversion Price shall be adjusted at the option of the Holder to such greater discount percentage (prior to all applicable adjustments in this Note) until this Note is no longer outstanding. Each time, while this Note is outstanding, the Borrower enters into a Section 3(a)(9) Transaction (including but not limited to the issuance of new promissory notes or of a replacement promissory note), or Section 3(a)(10) Transaction, in which any 3rd party has a look back period greater than the look
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back period in effect under the Note at that time, then the Holders look back period shall be adjusted at the option of the Holder to such greater number of days until this Note is no longer outstanding. The Borrower shall give written notice to the Holder, with the adjusted Conversion Price and/or adjusted look back period (each adjustment that is applicable due to the triggering event), within one (1) business day of an event that requires any adjustment described in the two immediately preceding sentences, and the Holder shall have the sole discretion in determining whether to utilize the adjusted term pursuant to this section. So long as this Note is outstanding, if any security of the Borrower contains any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the Holder in this Note, then the Borrower shall notify the Holder of such additional or more favorable term and such term, at Holders option, shall become a part of the transaction documents with the Holder.
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 (at the option of the Holder) to include Additional Principal (without a reduction in the amount owed under the Note), 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.
If, at any time when the Note is issued and outstanding, the Borrower issues or sells, or is deemed to have issued or sold, any shares of Common Stock for a consideration per share 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 the Holder shall have the right, in Holders sole discretion, to utilize the price per share of the Dilutive Issuance as the Conversion Price.
(b) 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. The Borrower is required at all times to have authorized and reserved three times the number of shares that is actually issuable upon full conversion of the Note (based on the Conversion Price of the Note as if the Note convertible at that time, even if an Event of Default has not occurred under the Note) (the Reserved Amount). The Reserved Amount shall be increased from time to time in accordance with the Borrowers obligations hereunder. The Borrower represents that upon issuance, such shares 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 the Notes 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 Notes.
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The Borrower (i) acknowledges that issuable upon conversion of this Note, and 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.
If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.2 of the Note.
1.3
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 on or after the Issue Date, by submitting to the Borrower (A) 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., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower.
(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 Borrower shall, prima facie, be controlling and determinative in the absence of manifest error. Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid principal amount of this Note. 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 Holders 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
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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 for the Common Stock issuable upon such conversion within two (2) 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.
(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 Borrowers 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., New York, New York 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 Holders Prime Broker with DTC through its Deposit Withdrawal Agent Commission (DWAC) system.
(g) Failure to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holders 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, the Borrower shall pay to the Holder $3,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock. 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
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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 1.3(g) are justified.
1.4 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 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 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. Except as otherwise provided (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 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 AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE 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
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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 Act, which opinion shall be accepted by the Borrower 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 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 Borrower 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, it will be considered an Event of Default pursuant to Section 3.2 of the Note.
1.5
[Intentionally Omitted].
1.6 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 Holders allocated portion of the Reserved Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holders 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 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 the 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 1.3) for the Borrowers failure to convert this Note.
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 Holders 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
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capital stock except for distributions pursuant to any shareholders rights plan which is approved by a majority of the Borrowers 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 Holders 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 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 Borrowers 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.
ARTICLE III. EVENTS OF DEFAULT
If any of the following events of default (each, an Event of Default) shall occur:
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 maturity, upon acceleration or otherwise.
3.2 Conversion and the Shares. The Borrower fails to reserve a sufficient amount of shares of common stock as required under the terms of this Note (including Section 1.3 of this Note), 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) 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) 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 shares of Common Stock
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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 two (2) 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 Borrowers transfer agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within five (5) business days, either in cash or as an addition to the balance of the Note, and such choice of payment method is at the discretion of the Borrower.
3.3 Breach of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents and such breach continues for a period of three (3) days after written notice thereof to the Borrower from the Holder or after five (5) days after the Borrower should have been aware of the breach.
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, shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note.
3.5 Receiver or Trustee. The Borrower or any subsidiary of the Borrower 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 $100,000, and shall remain unvacated, unbonded or unstayed for a period of ten (10) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.
3.7 Bankruptcy. 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 Borrower or any subsidiary of the Borrower.
3.8 Delisting of Common Stock. The Borrower shall fail to maintain the listing or quotation of the Common Stock on the Principal Market or an equivalent replacement exchange, the Nasdaq Global Market, the Nasdaq Capital Market, the New York
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Stock Exchange, or the NYSE American.
3.9
Failure to Comply with the Exchange Act.
The
Borrower shall fail to comply with the reporting requirements of the Exchange 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.
3.10 Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.
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 Borrowers 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 Financial Statement Restatement. The Borrower replaces its auditor, or any 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.
3.13
Reverse Splits. The Borrower effectuates a reverse split of its
Common Stock without twenty (20) days prior written notice to the Holder.
3.14 Replacement of Transfer Agent. In the event that the Borrower replaces its transfer agent, and the Borrower fails to provide prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions (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 that reserves the greater of (i) total amount of shares previously held in reserve for the Note with the Borrowers immediately preceding transfer agent and (ii) the Reserved Amount.
3.15 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 covenant or other term or condition contained in any of the other financial instrument, including but not limited to all convertible promissory notes, currently issued, or hereafter issued, by the Borrower, to the Holder or any 3rd party (the Other Agreements), 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, in which event the Holder shall be entitled to apply all rights and remedies of the Holder under the terms of this Note by reason of a default under said Other Agreement or hereunder.
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3.16 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 Borrowers filing of a Form 8-K pursuant to Regulation FD
on that same date.
3.17 No bid. At any time while this Note is outstanding, the lowest Trading Price on the Principal Market or other applicable principal trading market for the Common Stock is equal to or less than $0.0001.
3.18 Prohibition on Debt and Variable Securities. So long as the Note is outstanding, the Borrower shall not, without written consent of the Investor, issue any Variable Security (as defined herein), unless (i) the Borrower is permitted to pay off the Note in cash at the time of the issuance of the respective Variable Security and (ii) the Borrower pays off the Note, pursuant to the terms of the Note, in cash at the time of the issuance of the respective Variable Security. A Variable Security shall mean any security issued by the Borrower that (i) has 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; (ii) is or may become convertible into common stock (including without limitation convertible debt, warrants or convertible preferred stock), with a conversion or exercise price that varies with the market price of the common stock, even if such security only becomes convertible or exercisable following an event of default, the passage of time, or another trigger event or condition; or (iii) was issued or may be issued in the future in exchange for or in connection with any contract, security, or instrument, whether convertible or not, where the number of shares of common stock issued or to be issued is based upon or related in any way to the market price of the common stock, including, but not limited to, common stock issued in connection with a Section 3(a)(9) exchange, a Section 3(a)(10) settlement, or any other similar settlement or exchange, provided, however, that a Variable Security shall not include a security with conversion rights subject to a floor price per share of 50% or greater than the closing price of the Common Stock on the issuance date of the security (such floor price shall not be subject to further lower adjustment for any reason).
3.19 Failure to Repay Upon Qualified Offering. The Borrower fails to repay the Note, in its entirety, pursuant to the terms of the Note, with funds received from its next completed offering of $1,000,000.00 or more (consummated on or after the Issue Date).
UPON THE OCCURRENCE OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, 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: (Y) THE DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon the occurrence of any Event of Default specified in Sections 3.1, 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 and/or 3.19, 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
12
equal to 140% (plus an additional 5% per each additional Event of Default that occurs hereunder) multiplied by the then outstanding entire balance of the Note (including principal and accrued and unpaid interest) plus Default Interest, if any, plus any amounts owed to the Holder pursuant to Sections 1.3(g) hereof (collectively, in the aggregate of all of the above, the Default Sum), 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. Each time an Event of Default occurs while this Note is outstanding, an additional discount of five percent (5%) shall be factored into the Conversion Price.
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 issuance in tranches due to the beneficial ownership limitations contained in this Note. Upon the occurrence of any Event of Default, the Conversion Price shall be the lesser of the (i) Variable Conversion Price and (ii) 60% multiplied by the lowest Trading Price during the twenty-five (25) Trading Day period ending, in Holders sole discretion on each conversion, on either (i) the last complete Trading Day prior to the Conversion Date or (ii) the Conversion Date (subject to adjustment as provided in this Note).
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, telegram, facsimile, or electronic mail 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, upon electronic mail delivery, or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, 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
13
mailing, whichever shall first occur. The addresses for such communications shall be:
If to the Borrower, to:
Pierre Corporation.
750 N. San Vicente Suite 800 West
West Hollywood, CA 90069 e-mail: jisaacs60@gmail.com
If to the Holder:
Green Coast Capital International SA Plaza 2000, 10th Floor, 50th St
Panama City, Republic of
Panama 00646
e-mail: accounting@greencoast-capital.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. The term Note and all reference 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.
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 bona fide 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 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 and/or federal courts of Washoe County, Nevada. The parties to this Note hereby irrevocably waive any objection to
14
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 Borrower and Holder waive trial by jury. 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 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.
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 plus Default Interest on such 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 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.
4.9 Repayment. Notwithstanding anything to the contrary contained in this Note, the Borrower may repay any amount outstanding under each tranche of this Note, during the 30 calendar day period after the funding date, by making a payment to the Holder of an amount in cash equal to 105% multiplied the amount that the Borrower is repaying.
15
Notwithstanding anything to the contrary contained in this Note, the Borrower may repay any amount outstanding under each tranche of this Note, during the 31st through 60th calendar day period after the funding date of the respective tranche, by making a payment to the Holder of an amount in cash equal to 110% multiplied the amount that the Borrower is repaying. Notwithstanding anything to the contrary contained in this Note, the Borrower may repay any amount outstanding under each tranche of this Note, during the 61st through 90th calendar day period after the funding date of the respective tranche, by making a payment to the Holder of an amount in cash equal to 115% multiplied the amount that the Borrower is repaying. Notwithstanding anything to the contrary contained in this Note, the Borrower may repay any amount outstanding under each tranche of this Note, on or after the 91st calendar day after the funding date of the respective tranche, by making a payment to the Holder of an amount in cash equal to 125% multiplied the amount that the Borrower is repaying. In order to repay this Note, the Borrower shall provide notice to the Holder ten (10) business days prior to such respective repayment date, and the Holder must receive such repayment within twelve (12) business days of the Holders receipt of the respective repayment notice, but not sooner than ten (10) business days from the date of notice (the Repayment Period). The Holder may convert the Note in whole or in part at any time during the Repayment Period, subject to the terms and conditions of this Note. Any repayment hereunder shall be applied to the tranches funded under this Note in reverse chronological order (applied first to the most recently funded tranches under this Note).
4.10 Section 3(a)(10) Transactions. If at any time while this Note is outstanding, the Borrower enters into a transaction structured in accordance with, based upon, or related or pursuant to, in whole or in part, Section 3(a)(10) of the Securities Act (a 3(a)(10) Transaction), then a liquidated damages charge of 100% of the outstanding principal balance of this Note at that time, will be assessed and will become immediately due and payable to the Holder, either in the form of cash payment, an addition to the balance of the Note, or a combination of both forms of payment, as determined by the Holder.
4.11 Reverse Split Penalty. If at any time while this Note is outstanding, the Borrower effectuates a reverse split with respect to the Common Stock, then a liquidated damages charge of 30% of the outstanding principal balance of this Note at that time, will be assessed and will become immediately due and payable to the Holder, either in the form of cash payment, an addition to the balance of the Note, or a combination of both forms of payment, as determined by the Holder.
4.12 Restriction on Section 3(a)(9) Transactions. So long as this Note is outstanding, the Borrower shall not enter into any 3(a)(9) Transaction with any party other than the Holder, without prior written consent of the Holder. In the event that the Borrower does enter into, or makes any issuance of Common Stock related to a 3(a)(9) Transaction while this Note is outstanding, a liquidated damages charge of 25% of the outstanding principal balance of this Note, but not less than $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.
4.13 Terms of Future Financings. So long as this Note is
16
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 in favor of the holder of such security that was not similarly provided to the Holder in this Note, then the Borrower shall notify the Holder of such additional or more favorable term and such term, at Holders 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 look back periods, interest rates, original issue discounts, stock sale price, private placement price per share, and warrant coverage.
4.14 Usury. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Borrower covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Borrower from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and the Borrower (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.
4.15 Right of First Refusal. If at any time during the 24 months after the Issue Date, the Borrower has a bona fide offer of an equity line of credit from any 3rd party, that the Borrower intends to act upon, then the Borrower must first offer such opportunity to the Holder to provide such capital or financing to the Borrower on the same or similar terms as each respective 3rd partys terms, and the Holder may in its sole discretion determine whether the Holder will provide all or a portion of such capital or financing. Except as otherwise provided in this Note, should the Holder be unwilling or unable to provide such capital or financing to the Borrower within 10 trading days from Holders receipt of written notice of the offer (the Offer Notice) from the Borrower, then the Borrower may obtain such capital or financing from that respective 3rd party upon the exact same terms and conditions offered by the Borrower to the Holder, which transaction must be completed within 15 days after the date of the Offer Notice. Borrower shall, within two (2) business days of the respective closing, utilize 50% of all proceeds received by Borrower by each respective 3rd party that provides capital or financing to the Borrower, to repay this Note. If the Borrower does not receive the capital or financing from the respective 3rd party within 15 days after the date of the respective Offer Notice, then the Borrower must again offer the capital or financing opportunity to the Holder as described above, and the process detailed above shall be repeated. The Offer Notice must be sent via electronic mail to accounting@greencoast-capital.com. The Borrower must offer the Holder the right of first refusal to participate in up to 25% of any offering from the Borrower for 24 months after the Issue Date.
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4.16
Piggyback Registration Rights. n/a
[signature page to follow]
18
IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this September 9, 2019.
Pierre Corporation.
By: /s/ Joseph Isaacs
Name: Joseph Isaacs
Title: Chief Executive Officer
19
EXHIBIT A -- 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 Pierre Corporation., a Nevada corporation (the Borrower) according to the conditions of the promissory note of the Borrower dated as of September 9, 2019 (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 Agent Commission 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 | |
Holders calculation attached hereto) in the name(s) specified immediately below or, if | ||
additional space is necessary, on an attachment hereto: | ||
Green Coast Capital International SA Plaza 2000, 10th Floor 50th st | ||
Panama City, Rep of Panama | ||
00646 | ||
e-mail: accounting@greencoast-capital.com | ||
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:
Green Coast Capital International SA
By:_ Name: Title: Date:
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 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: $85,000.00
Issue Date: November 14, 2019
Purchase Price: $65,000.00
PROMISSORY NOTE
FOR VALUE RECEIVED, Pierre Corporation., a Nevada corporation (hereinafter called the Borrower), hereby promises to pay to the order of Green Coast Capital International SA, a Panama Corporation, or registered assigns (the Holder) the principal sum of up to $85,000.00 (the Principal Amount), together with interest at the rate of nine percent (9%) per annum, at maturity or upon acceleration or otherwise, as set forth herein (the Note). The consideration to the Borrower for this Note is up to $65,000.00 (the Consideration) in United States currency, due to the prorated original issuance discount of up to $20,000.00 (the OID). The Holder shall pay $65,000.00 of the Consideration) within a reasonable amount of time of the full execution of the transactional documents related to this Note. The maturity date shall be six (6) months from the effective date of each payment (the Maturity Date), and is the date upon which the principal sum, as well as any accrued and unpaid interest and other fees for each tranche, shall be due and payable. This Note may not be repaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal or interest on this Note, which is not paid by the Maturity Date, shall bear interest at the rate of the lesser of (i) eighteen percent (18%) per annum or (ii) the maximum amount allowed by law, from the due date thereof until the same is paid (Default Interest). Interest shall commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed. All payments due hereunder (to the extent not converted into the Borrowers common stock (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
1
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 New York, New York are authorized or required by law or executive order to remain closed.
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 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 on or after the Issue Date, to convert all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of 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 (the Conversion Price) 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 the Notes 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) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, 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., New York, New York 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 Holders option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at the Holders option, Default Interest, if any, on the
2
amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holders option, any amounts owed to the Holder pursuant to Sections 1.3(g) hereof.
1.2
Conversion Price.
(a)
Calculation of Conversion Price. The Conversion Price shall be the Variable Conversion Price (as defined herein) (subject to adjustment as further described herein). The "Variable Conversion Price" shall mean 50% discount to the lowest trade in the 20 days prior to the conversion. Trading Price means, for any security as of any date, the lowest traded price on the Over-the-Counter Pink Marketplace, OTCQB, or applicable trading market (the Principal Market) as reported by a reliable reporting service (Reporting Service) designated by the Holder (i.e. www.Nasdaq.com) or, if the Principal Market is not the principal trading market for such security, on the principal securities exchange or trading market where such security is listed or traded or, if the lowest intraday trading price of such security is not available in any of the foregoing manners, the lowest intraday price of any market makers for such security that are quoted on the OTC Markets. If the Conversion Price on the date in which the Holder actually receives the Conversion Shares (each a Share Delivery Date) is less than the Conversion Price in the respective Notice of Conversion, then the Conversion Price in the respective Notice of Conversion shall be retroactively adjusted downward to equal the Conversion Price on the Share Delivery Date. 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 holders of a majority in interest of the Notes being converted for which the calculation of the Trading Price is required in order to determine the Conversion Price of such Notes. Trading Day shall mean any day on which the Common Stock is tradable for any period on the Principal Market, or on the principal securities exchange or other securities market on which the Common Stock is then being traded. All expenses incurred by Holder for the issuance and clearing of the Common Stock into which this Note is convertible into shall immediately and automatically be added to the balance of the Note at such time as the expenses are incurred by Holder.
Each time, while this Note is outstanding, the Borrower enters into a Section 3(a)(9) Transaction (as defined herein) (including but not limited to the issuance of new promissory notes or of a replacement promissory note), or Section 3(a)(10) Transaction (as defined herein), in which any third party has the right to convert monies owed to that third party (or receive shares pursuant to a settlement or otherwise) at a discount to market greater than the Conversion Price in effect at that time (prior to all other applicable adjustments in the Note), then the Conversion Price shall be adjusted at the option of the Holder to such greater discount percentage (prior to all applicable adjustments in this Note) until this Note is no longer outstanding. Each time, while this Note is outstanding, the Borrower enters into a Section 3(a)(9) Transaction (including but not limited to the issuance of new promissory notes or of a replacement promissory note), or Section 3(a)(10) Transaction, in which any third party has a look back period greater than the look back period in effect under the Note at that time, then the Holders look back period shall be adjusted at the option of the Holder to such greater number of days until this Note is no longer outstanding. The Borrower shall give written notice to the Holder, with the adjusted Conversion Price and/or adjusted look back period (each adjustment
3
that is applicable due to the triggering event), within one (1) business day of an event that requires any adjustment described in the two immediately preceding sentences, and the Holder shall have the sole discretion in determining whether to utilize the adjusted term pursuant to this section. So long as this Note is outstanding, if any security of the Borrower contains any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the Holder in this Note, then the Borrower shall notify the Holder of such additional or more favorable term and such term, at Holders option, shall become a part of the transaction documents with the Holder.
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 (at the option of the Holder) to include Additional Principal (without a reduction in the amount owed under the Note), 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.
If, at any time when the Note is issued and outstanding, the Borrower issues or sells, or is deemed to have issued or sold, any shares of Common Stock for a consideration per share 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 the Holder shall have the right, in Holders sole discretion, to utilize the price per share of the Dilutive Issuance as the Conversion Price.
(b)
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. The Borrower is required at all times to have authorized and reserved three times the number of shares that is actually issuable upon full conversion of the Note (based on the Conversion Price of the Note as if the Note convertible at that time, even if an Event of Default has not occurred under the Note) (the Reserved Amount). The Reserved Amount shall be increased from time to time in accordance with the Borrowers obligations hereunder. The Borrower represents that upon issuance, such shares 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 the Notes 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 Notes. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and 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.
4
If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.2 of the Note.
1.3
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 on or after the Issue Date, by submitting to the Borrower (A) 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., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower.
(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 Borrower shall, prima facie, be controlling and determinative in the absence of manifest error. Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid principal amount of this Note. 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 Holders 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 for the Common Stock issuable upon such conversion
5
within two (2) 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.
(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 Borrowers 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., New York, New York 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 Holders Prime Broker with DTC through its Deposit Withdrawal Agent Commission (DWAC) system.
(g)
Failure to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holders 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, the Borrower shall pay to the Holder $3,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock. 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,
6
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 1.3(g) are justified.
1.4
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 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 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. Except as otherwise provided (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 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 AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE 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 Act, which opinion shall be accepted by the Borrower so that the sale or transfer is effected or (ii) in the case of the Common Stock
7
issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the 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 Borrower 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, it will be considered an Event of Default pursuant to Section 3.2 of the Note.
1.5
[Intentionally Omitted].
1.6
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 Holders allocated portion of the Reserved Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holders 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 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 the 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 1.3) for the Borrowers failure to convert this Note.
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 Holders written consent 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 Borrowers 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 Holders written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other
8
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
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 Borrowers 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.
ARTICLE III. EVENTS OF DEFAULT
If any of the following events of default (each, an Event of Default) shall occur:
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 maturity, upon acceleration or otherwise.
3.2
Conversion and the Shares. The Borrower fails to reserve a sufficient amount of shares of common stock as required under the terms of this Note (including Section 1.3 of this Note), 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) 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) 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 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 two (2) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Borrower to remain current in its
9
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 Borrowers transfer agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within five (5) business days, either in cash or as an addition to the balance of the Note, and such choice of payment method is at the discretion of the Borrower.
3.3
Breach of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents and such breach continues for a period of three (3) days after written notice thereof to the Borrower from the Holder or after five (5) days after the Borrower should have been aware of the breach.
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, shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note.
3.5
Receiver or Trustee. The Borrower or any subsidiary of the Borrower 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 $100,000, and shall remain unvacated, unbonded or unstayed for a period of ten (10) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.
3.7
Bankruptcy. 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 Borrower or any subsidiary of the Borrower.
3.8
Delisting of Common Stock. The Borrower shall fail to maintain the listing or quotation of the Common Stock on the Principal Market or an equivalent replacement exchange, the Nasdaq Global Market, the Nasdaq Capital Market, the New York Stock Exchange, or the NYSE American.
3.9
Failure to Comply with the Exchange Act. The Borrower shall fail to comply with the reporting requirements of the Exchange 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.
3.10
Liquidation. Any dissolution, liquidation, or winding up of
10
Borrower or any substantial portion of its business.
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 Borrowers 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
Financial Statement Restatement. The Borrower replaces its auditor, or any 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.
3.13
Reverse Splits. The Borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to the Holder.
3.14
Replacement of Transfer Agent. In the event that the Borrower replaces its transfer agent, and the Borrower fails to provide prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions (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 that reserves the greater of (i) total amount of shares previously held in reserve for the Note with the Borrowers immediately preceding transfer agent and (ii) the Reserved Amount.
3.15
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 covenant or other term or condition contained in any of the other financial instrument, including but not limited to all convertible promissory notes, currently issued, or hereafter issued, by the Borrower, to the Holder or any third party (the Other Agreements), 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, in which event the Holder shall be entitled to apply all rights and remedies of the Holder under the terms of this Note by reason of a default under said Other Agreement or hereunder.
3.16
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 Borrowers filing of a Form 8-K pursuant to Regulation FD on that same date.
3.17
No bid. At any time while this Note is outstanding, the lowest Trading Price on the Principal Market or other applicable principal trading market for the Common Stock is equal to or less than $0.0001.
11
3.18
Prohibition on Debt and Variable Securities. So long as the Note is outstanding, the Borrower shall not, without written consent of the Investor, issue any Variable Security (as defined herein), unless (i) the Borrower is permitted to pay off the Note in cash at the time of the issuance of the respective Variable Security and (ii) the Borrower pays off the Note, pursuant to the terms of the Note, in cash at the time of the issuance of the respective Variable Security. A Variable Security shall mean any security issued by the Borrower that (i) has 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; (ii) is or may become convertible into common stock (including without limitation convertible debt, warrants or convertible preferred stock), with a conversion or exercise price that varies with the market price of the common stock, even if such security only becomes convertible or exercisable following an event of default, the passage of time, or another trigger event or condition; or (iii) was issued or may be issued in the future in exchange for or in connection with any contract, security, or instrument, whether convertible or not, where the number of shares of common stock issued or to be issued is based upon or related in any way to the market price of the common stock, including, but not limited to, common stock issued in connection with a Section 3(a)(9) exchange, a Section 3(a)(10) settlement, or any other similar settlement or exchange, provided, however, that a Variable Security shall not include a security with conversion rights subject to a floor price per share of 50% or greater than the closing price of the Common Stock on the issuance date of the security (such floor price shall not be subject to further lower adjustment for any reason).
3.19
Failure to Repay Upon Qualified Offering. The Borrower fails to repay the Note, in its entirety, pursuant to the terms of the Note, with funds received from its next completed offering of $1,000,000.00 or more (consummated on or after the Issue Date).
UPON THE OCCURRENCE OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, 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: (Y) THE DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon the occurrence of any Event of Default specified in Sections 3.1, 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 and/or 3.19, 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 140% (plus an additional 5% per each additional Event of Default that occurs hereunder) multiplied by the then outstanding entire balance of the Note (including principal and accrued and unpaid interest) plus Default Interest, if any, plus any amounts owed to the Holder pursuant to Sections 1.3(g) hereof (collectively, in the aggregate of all of the above, the Default Sum), 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. Each time an Event of Default occurs while this Note is outstanding, an additional discount of five percent (5%) shall be factored into the Conversion Price.
12
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 issuance in tranches due to the beneficial ownership limitations contained in this Note. Upon the occurrence of any Event of Default, the Conversion Price shall be the lesser of the (i) Variable Conversion Price and (ii) 60% multiplied by the lowest Trading Price during the twenty-five (25) Trading Day period ending, in Holders sole discretion on each conversion, on either (i) the last complete Trading Day prior to the Conversion Date or (ii) the Conversion Date (subject to adjustment as provided in this Note).
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, telegram, facsimile, or electronic mail 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, upon electronic mail delivery, or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, 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:
Pierre Corporation.
750 N. San Vicente Suite 800 West
West Hollywood, CA 90069
e-mail: jisaacs60@gmail.com
13
If to the Holder:
Green Coast Capital International SA
Plaza 2000, 10th Floor, 50th St.
Panama City, Republic of Panama 00646
e-mail: accounting@greencoast-capital.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. The term Note and all reference 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.
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 bona fide 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 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 and/or federal courts of Washoe County, 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. The Borrower and Holder waive trial by jury. 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
14
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.
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 plus Default Interest on such 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
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.
4.9
Repayment. Notwithstanding anything to the contrary contained in this Note, the Borrower may repay any amount outstanding under each tranche of this Note, during the 30 calendar day period after the funding date, by making a payment to the Holder of an amount in cash equal to 105% multiplied the amount that the Borrower is repaying. Notwithstanding anything to the contrary contained in this Note, the Borrower may repay any amount outstanding under each tranche of this Note, during the 31st through 60th calendar day period after the funding date of the respective tranche, by making a payment to the Holder of an amount in cash equal to 110% multiplied the amount that the Borrower is repaying. Notwithstanding anything to the contrary contained in this Note, the Borrower may repay any amount outstanding under each tranche of this Note, during the 61st through 90th calendar day period after the funding date of the respective tranche, by making a payment to the Holder of an amount in cash equal to 115% multiplied the amount that the Borrower is repaying. Notwithstanding anything to the contrary contained in this Note, the Borrower may repay any amount outstanding under each tranche of this Note, on or after the 91st calendar day after the funding date of the respective tranche, by making a payment to the Holder of an amount in cash
15
equal to 125% multiplied the amount that the Borrower is repaying. In order to repay this Note, the Borrower shall provide notice to the Holder ten (10) business days prior to such respective repayment date, and the Holder must receive such repayment within twelve (12) business days of the Holders receipt of the respective repayment notice, but not sooner than ten (10) business days from the date of notice (the Repayment Period). The Holder may convert the Note in whole or in part at any time during the Repayment Period, subject to the terms and conditions of this Note. Any repayment hereunder shall be applied to the tranches funded under this Note in reverse chronological order (applied first to the most recently funded tranches under this Note).
4.10
Section 3(a)(10) Transactions. If at any time while this Note is outstanding, the Borrower enters into a transaction structured in accordance with, based upon, or related or pursuant to, in whole or in part, Section 3(a)(10) of the Securities Act (a 3(a)(10) Transaction), then a liquidated damages charge of 100% of the outstanding principal balance of this Note at that time, will be assessed and will become immediately due and payable to the Holder, either in the form of cash payment, an addition to the balance of the Note, or a combination of both forms of payment, as determined by the Holder.
4.11
Reverse Split Penalty. If at any time while this Note is outstanding, the Borrower effectuates a reverse split with respect to the Common Stock, then a liquidated damages charge of 30% of the outstanding principal balance of this Note at that time, will be assessed and will become immediately due and payable to the Holder, either in the form of cash payment, an addition to the balance of the Note, or a combination of both forms of payment, as determined by the Holder.
4.12
Restriction on Section 3(a)(9) Transactions. So long as this Note is outstanding, the Borrower shall not enter into any 3(a)(9) Transaction with any party other than the Holder, without prior written consent of the Holder. In the event that the Borrower does enter into, or makes any issuance of Common Stock related to a 3(a)(9) Transaction while this Note is outstanding, a liquidated damages charge of 25% of the outstanding principal balance of this Note, but not less than $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.
4.13
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 in favor of the holder of such security that was not similarly provided to the Holder in this Note, then the Borrower shall notify the Holder of such additional or more favorable term and such term, at Holders 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 look back periods, interest rates, original issue discounts, stock sale price, private placement price per share, and warrant coverage.
4.14
Usury. If it shall be found that any interest or other amount deemed
16
interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Borrower covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Borrower from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and the Borrower (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.
4.15
Right of First Refusal. If at any time during the 24 months after the Issue Date, the Borrower has a bona fide offer of an equity line of credit from any third party, that the Borrower intends to act upon, then the Borrower must first offer such opportunity to the Holder to provide such capital or financing to the Borrower on the same or similar terms as each respective third partys terms, and the Holder may in its sole discretion determine whether the Holder will provide all or a portion of such capital or financing. Except as otherwise provided in this Note, should the Holder be unwilling or unable to provide such capital or financing to the Borrower within 10 trading days from Holders receipt of written notice of the offer (the Offer Notice) from the Borrower, then the Borrower may obtain such capital or financing from that respective third party upon the exact same terms and conditions offered by the Borrower to the Holder, which transaction must be completed within 15 days after the date of the Offer Notice. Borrower shall, within two (2) business days of the respective closing, utilize 50% of all proceeds received by Borrower by each respective third party that provides capital or financing to the Borrower, to repay this Note. If the Borrower does not receive the capital or financing from the respective third party within 15 days after the date of the respective Offer Notice, then the Borrower must again offer the capital or financing opportunity to the Holder as described above, and the process detailed above shall be repeated. The Offer Notice must be sent via electronic mail to accounting@greencoast-capital.com. The Borrower must offer the Holder the right of first refusal to participate in up to 25% of any offering from the Borrower for 24 months after the Issue Date.
4.16
Piggyback Registration Rights. n/a
[signature page to follow]
17
IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this November 14, 2019.
Pierre Corporation.
By: /s/ Joseph Isaacs
Name: Joseph Isaacs
Title: Chief Executive Officer
18
EXHIBIT A -- 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 Pierre Corporation., a Nevada corporation (the Borrower) according to the conditions of the promissory note of the Borrower dated as of November 14, 2019 (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 Agent Commission 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 Holders calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:
Green Coast Capital International SA
Plaza 2000, 10th Floor 50th St.
Panama City, Rep of Panama 00646
e-mail: accounting@greencoast-capital.com
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:
__________________
Green Coast Capital International SA
By:_____________________________
Name: __________________________
Title: ___________________________
Date____________________________
19
CONSENT OF ATTORNEYS
Reference is made to the Registration Statement of Pierre Corp. on Form S-1 whereby a selling shareholder proposes to sell up to 5,136,363 shares of the Companys common stock. Reference is also made to Exhibit 5 included in the Registration Statement relating to the validity of the securities proposed to be issued and sold.
We hereby consent to the use of our opinion concerning the validity of the securities proposed to be issued and sold.
|
|
Very truly yours,
HART & HART, LLC
/s/ William T. Hart
William T. Hart
Denver, Colorado
January 22, 2020
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