UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM S-1


REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933


BLACK CACTUS GLOBAL, INC.

(Exact name of registrant as specified in its charter)


FLORIDA

(State or other jurisdiction of incorporation or organization)


8000

(Primary Standard Industrial Classification Code Number)


46-2500923

(I.R.S. Employer Identification Number)


8275 S. Eastern Avenue, Suite 200

Las Vegas, NV 89123

(702) 724-2643

(Address and telephone number of registrant’s principal

executive offices and principal place of business)


Jocelyn Nicholas

3811 Alden Way

Sarasota, FL 34232

(941) 650-3848

(Name, address and telephone number of agent for service)


Communication Copies to:


Poole & Shaffery, LLP

Claudia J. McDowell, Esq.

25350 Magic Mountain Parkway Suite 250

Santa Clarita, California 91355

(661) 290-2991


From time to time 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. [X]

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) 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. 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. [  ]

 

If delivery of the prospectus is expected to be made pursuant to Rule 424, check the following box. [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth 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.

 

Large accelerated filer   [  ]

Accelerated filer   [  ]

Non-accelerated filer     [  ]

Smaller reporting company  [  ]

 

Emerging growth company  [X]

 

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


Title of Each Class of Securities to be Registered

 

Amount
Registered
(1)

 

Proposed
Maximum
Offering
Price Per
Share (2)

 

Proposed
Maximum
Aggregate
Offering
Price

 

Amount of
Registration
Fee

 

Common Stock, $0.0001 par value per share,
issued as Commitment Shares
(as defined below)

 

 

2,793,296

 

$

0.11

 

$

307,262.56

 

$

38.26

 

Common Stock, $0.0001 par value per share,
issuable upon conversion of the Notes
(as defined below)

 

 

48,400,470

(3)

$

0.11

 

$

5,324,051.70

 

$

662.84

 

Common Stock, $0.0001 par value per share,
issuable upon exercise of the November Warrant
(as defined below)

 

 

7,894,737

(3)

$

0.11

 

$

864,421.07

 

$

108.12

 

Common Stock, $0.0001 par value per share,
issuable upon exercise of the FA Warrant
(as defined below)

 

 

560,717

(3)

$

0.11

 

$

61,678.87

 

$

7.68

 

Common Stock, $0.0001 par value per share,
issuable upon exercise of the April Warrants
(as defined below)

 

 

85,000,000

(3)

$

0.11

 

$

9,350,000

 

$

1,164.08

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

144,649,220

 

$

0.11

 

$

15,911,414.20

 

$

1,980.98

 


(1)

All shares registered pursuant to this registration statement are to be offered by the Selling Security Holder. Pursuant to Rule 416 under the Securities Act of 1933, as amended (the “Securities Act”), this registration statement also covers such indeterminate number of additional shares of the registrant’s Common Stock, $0.0001 par value per share, issued to prevent dilution resulting from stock splits, stock dividends or similar events.

 

 

(2)

Estimated solely for purposes of calculating the amount of the registration fee in accordance with Rule 457(c) under the Securities Act based on the average of the high and low sales prices of the registrant’s Common Stock on the NASDAQ Capital Market on April 19, 2018, which date is within five (5) business days of the filing of this registration statement.

 

 

(3)

Represents shares of the registrant’s Common Stock issuable upon conversion or exercise of notes and warrants to purchase shares of Common Stock, respectively. Such notes and warrants have been issued to the Selling Security Holders named in this registration statement.


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 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said section 8(A), may determine.




The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.


PRELIMINARY PROSPECTUS

SUBJECT TO COMPLETION

DATED APRIL [__], 2018


BLACK CACTUS GLOBAL, INC.


144,649,220 Shares of Common Stock


This prospectus relates to the offer and resale of up to: (i) 2,793,296 shares of our common stock, par value $0.0001 per share (the “Common Stock”) issued to Bellridge Capital, L.P. (“Bellridge”) as a commitment fee (the “Commitment Shares”); (ii) 48,400,470 shares of Common Stock underlying those certain Senior Secured Convertible Promissory Notes (the “Notes”) issuable to Bellridge; (iii) 7,894,737 shares of Common Stock underlying that certain common stock purchase warrant (the “November Warrant”) issued to Bellridge; (iv) 560,717 shares of Common Stock underlying that certain financial advisor warrant to purchase common stock (the “FA Warrant”) issued to Aegis Capital Corp., the exclusive financial advisor to the Company (“Aegis”), as part of Aegis’ financial advisory fee; (v) 28,339,000 shares of Common Stock underlying that certain common stock purchase warrant (the “First April Warrant”) issued to Bellridge; (vi) 28,330,500 shares of Common Stock underlying that certain common stock purchase warrant (the “Second April Warrant”) issued to Bellridge; and (vii) 28,330,500 shares of common stock underlying that certain Common Stock purchase warrant (the “Third April Warrant”; together with the First April Warrant and the second April Warrant, the “April Warrants”) issued to Bellridge.  The Commitment Shares, the Notes, and the November Warrant were issued and/or will be issued to Bellridge pursuant to that that certain Securities Purchase Agreement, dated November 27, 2017, as amended by that certain Amendment to Securities Purchase Agreement, dated April 5, 2018 (collectively, the “November Purchase Agreement”), between the Company and Bellridge.  The FA Warrant was issued to Aegis pursuant to that certain Financial Advisory Agreement, dated November 8, 2017 (the “FA Agreement), between the Company and Aegis.  The April Warrants were issued to Bellridge pursuant to that certain Securities Purchase Agreement, dated April 5, 2018, as amended by that certain Amendment to Securities Purchase Agreement, dated April 13, 2018 (collectively, the “April Purchase Agreement”), between the Company and Bellridge.  The November Warrant, the FA Warrant, and the April Warrants, are collectively referred to herein in the “Warrants”.  Bellridge and Aegis are collectively referred to herein as the “Selling Security Holders” and each a “Selling Security Holder”.


We will not receive any of the proceeds from the sale of the Common Stock by the Selling Security Holders; however, we will receive the proceeds from any warrants exercised (if not on a cashless basis) as described herein.


The Selling Security Holders identified in this prospectus may offer the shares of Common Stock from time to time through public or private transactions at prevailing market prices or at privately negotiated prices. The Selling Security Holders can offer all, some or none of its shares of Common Stock, thus we have no way of determining the number of shares of Common Stock it will hold after this offering. See “Plan of Distribution.”


Our Common Stock is currently quoted on the OTCQB under the symbol “BLGI”. On April 19, 2018, the last reported sale price of our Common Stock on the OTCQB was $0.11.


We are an “emerging growth company” as the term is used in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and, as such, have elected to comply with certain reduced public company reporting requirements for this and future filings.


Investing in our Common Stock involves a high degree of risk. You should review carefully the risks and uncertainties described under the heading “Risk Factors” beginning on page 5 of this prospectus, and under similar headings in any amendments or supplements to this prospectus.


Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.


The date of this prospectus is _______________, 2018




TABLE OF CONTENTS


 

Page

ABOUT THIS PROSPECTUS

1

PROSPECTUS SUMMARY

2

THE OFFERING

3

SUMMARY FINANCIAL DATA

4

RISK FACTORS

5

CAUTIONARY NOTE REGARDING FORWARD LOOKING-STATEMENTS

17

NOVEMBER PRIVATE PLACEMENT

18

APRIL PRIVATE PLACEMENT

20

USE OF PROCEEDS

21

SELLING SECURITY HOLDER

21

MARKET PRICE OF COMMON STOCK AND OTHER STOCKHOLDER MATTERS

22

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

23

BUSINESS

27

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

32

EXECUTIVE COMPENSATION

34

DIRECTOR COMPENSATION

35

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

35

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

37

DESCRIPTION OF SECURITIES

37

PLAN OF DISTRIBUTION

39

SHARES ELIGIBLE FOR FUTURE SALE

40

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

41

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT

41

LEGAL MATTERS

41

EXPERTS

41

WHERE YOU CAN FIND MORE INFORMATION

41

INCORPORATION BY REFERENCE

42

INDEX TO FINANCIAL STATEMENTS

F-1


You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that which is contained in this prospectus. This prospectus may be used only where it is legal to sell these securities. The information in this prospectus may only be accurate on the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of securities.




ABOUT THIS PROSPECTUS


The registration statement of which this prospectus forms a part that we have filed with the Securities and Exchange Commission, or SEC, includes exhibits that provide more detail of the matters discussed in this prospectus. You should read this prospectus and the related exhibits filed with the SEC, together with the additional information described under the headings “Where You Can Find More Information” and “Incorporation by Reference” before making your investment decision.


You should rely only on the information provided in this prospectus or in any prospectus supplement or any free writing prospectuses or amendments thereto. Neither we, nor the Selling Security Holders, have authorized anyone else to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. You should assume that the information in this prospectus is accurate only as of the date hereof. Our business, financial condition, results of operations and prospects may have changed since that date.


Neither we, nor the Selling Security Holders, are offering to sell or seeking offers to purchase these securities in any jurisdiction where the offer or sale is not permitted. Neither we, nor the Selling Security Holders, have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the securities as to distribution of the prospectus outside of the United States.


Information contained in, and that can be accessed through, our web site, www.blackcactusglobal.com, does not constitute part of this prospectus.


This prospectus includes market and industry data that has been obtained from third party sources, including industry publications, as well as industry data prepared by our management on the basis of its knowledge of and experience in the industries in which we operate (including our management’s estimates and assumptions relating to such industries based on that knowledge). Management’s knowledge of such industries has been developed through its experience and participation in these industries. While our management believes the third-party sources referred to in this prospectus are reliable, neither we nor our management have independently verified any of the data from such sources referred to in this prospectus or ascertained the underlying economic assumptions relied upon by such sources. Internally prepared and third-party market forecasts, in particular, are estimates only and may be inaccurate, especially over long periods of time. In addition, the underwriters have not independently verified any of the industry data prepared by management or ascertained the underlying estimates and assumptions relied upon by management. Furthermore, references in this prospectus to any publications, reports, surveys or articles prepared by third parties should not be construed as depicting the complete findings of the entire publication, report, survey or article. The information in any such publication, report, survey or article is not incorporated by reference in this prospectus.


- 1 -



PROSPECTUS SUMMARY


This summary highlights information contained elsewhere in this prospectus; it does not contain all of the information you should consider before investing in our Common Stock. You should read the entire prospectus before making an investment decision. Throughout this prospectus, the terms the “Company”, “Black Cactus Global”, “we,” “us,” “our,” and “our company” refer to Black Cactus Global, Inc., a Florida corporation.


Company Overview


Black Cactus Global, Inc. formerly known as Envoy Group Corp. (the “Company”) is a technology development company with a focus on Blockchain, machine learning, crypto currency, and the Internet of Things.  We specialize in global development and consulting projects in our key development areas of fintech, digital media, financial services, KYC, AML, cyber security, and healthcare.


The Company is developing state-of-the-art Blockchain solutions and applications for Fintech, Healthcare, Media and Supply Chain using smart contracts and machine learning.  The Company’s products and services currently under development include the first fully functional Fiat/Digital Global Financial Trading Platform, a cryptocurrency debit/credit card, know your customer (KYC) identity verification system, as well as versatile Video and Music Blockchain based platform that allows artists and companies get their work out to over 100 online services.


In December 2017, the Company acquired an exclusive software license for the Black Cactus blockchain development software platform and related intellectual property (the “Software”) and the Agreement includes a contract with the CEO of Black Cactus LLC to become a Director and Officer of the Company.  The Company plans to use the Software platform to create a crypto trading exchange to support crypto and fiat currencies, music publishing, distribution, supply chain, medical research and trials.


Company Information


The Company was incorporated in the State of Florida on April 8, 2013. The address of the head office is Suite 200, 8275 South Eastern Avenue, Las Vegas, Nevada 89123. On December 4, 2017, the Company changed its name to “Black Cactus Global, Inc.”.


We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act since we went public in the US in July 2013. We will remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenue exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period. Pursuant to Section 102 of the JOBS Act, we have provided reduced executive compensation disclosure and have omitted a compensation discussion and analysis from this Report. Pursuant to Section 107 of the JOBS Act, we have elected to utilize the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.


Where You Can Find Us


Our executive offices are located at 8275 S. Eastern Avenue, Suite 200, Las Vegas, Nevada 89123, and our telephone number is (702) 724-2643. Our website address is www.blackcactusglobal.com. Information contained on our website does not form part of this prospectus and is intended for informational purposes only.


Recent Developments


Since acquiring the software license from Black Cactus LLC, the Company has been focusing on launching the Software.  Black Cactus Global is a technology development company with a focus on Blockchain, machine learning, crypto currency, and the Internet of Things.  We specialize in global development and consulting projects in our key development areas of fintech, digital media, financial services, KYC, AML, cyber security, and healthcare.


Our mission is to pioneer the application of blockchain and overlapping technologies to protect IP and the security of data and financial transactions.


- 2 -



THE OFFERING


Common Stock to be offered by the Selling Security Holders

  

144,649,220 shares of Common Stock consisting of:


   ●   2,793,296 shares of Common Stock issued as a Commitment Shares;


   ●   48,400,470 shares of Common Stock, issuable upon conversion of the Notes;


   ●   7,894,737 shares of Common Stock, issuable upon exercise of the November Warrant;


   ●   560,717 shares of Common Stock, issuable upon exercise of the FA Warrant; and


   ●   85,000,000 shares of Common Stock, issuable upon exercise of the April Warrants.

  

  

 

Common Stock outstanding before the offering

  

166,043,296 shares of Common Stock.

  

 

  

Common Stock to be outstanding after giving effect to the issuance of 144,649,220 shares of Common Stock

 

307,889,220

 

  

  

Use of Proceeds

 

We will not receive any of the proceeds from any sale of the shares of Common Stock by the Selling Security Holders. We may receive proceeds in the event any of the November Warrants, the FA Warrant, or the April Warrants are exercised.  See “Use of Proceeds.”

 

 

 

Risk Factors

  

The Common Stock offered hereby involves a high degree of risk and should not be purchased by investors who cannot afford the loss of their entire investment. See “Risk Factors” beginning on page 5.

  

  

  

Trading Symbol

  

The Company’s Common Stock is quoted on the OTC Markets QB Market quotation service platform under the symbol “BLGI”.


The number of shares of Common Stock outstanding is based on an aggregate of 166,043,296 shares outstanding as of April 23, 2018, and excludes the Commitment Shares, the shares of Common Stock issuable upon conversion of the Notes, and the shares of Common Stock issuable upon exercise of the November Warrant, the FA Warrant, and the April Warrants.


For a more detailed description of the Commitment Shares, the November Warrants, the FA Warrant, and the November Purchase Agreement, see “November Private Placement”. For a more detailed description of the April Warrants and the April Purchase Agreement, see “April Private Placement”.


- 3 -



SUMMARY FINANCIAL DATA


Statement of Operations Data:


 

 

Nine Months Ended January 31,

 

Year Ended April 30

 

 

 

2017

 

2016

 

2017

 

2016

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

 

$

 

$

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Professional fees

 

 

142,683

 

 

 

 

25,069

 

 

28,927

 

General and administrative expenses

 

 

71,267

 

 

48,096

 

 

56,965

 

 

10,443

 

Black Cactus License Fee

 

 

6,600,000

 

 

 

 

 

 

 

Consulting

 

 

1,638,639

 

 

 

 

 

 

 

Product Development and Website Cost

 

 

2,349,123

 

 

 

 

 

 

 

Investor Relations

 

 

78,917

 

 

 

 

 

 

 

Total operating expenses

 

 

10,880,629

 

 

48,096

 

 

81,974

 

 

39,370

 

Other income (expenses):

 

 

 

 

 

 

 

 

 

 

 

 

 

Accretion of discounts on convertible debentures

 

 

(12,161

)

 

 

 

 

 

 

Interest expense

 

 

(4,037

)

 

 

 

 

 

 

Other expense

 

 

 

 

 

 

 

 

 

Total other expenses

 

 

(16,198

)

 

 

 

 

 

 

Net loss

 

 

(10,889,827

)

$

(48,096

)

 

(81,974

)

$

(39,370

)

Net loss per common share

 

$

(0.10

)

$

(0.00

)

$

(0.00

)

$

(0.00

)

Weighted average number of shares outstanding, basic and diluted

 

 

113,200,543

 

 

80,576,000

 

 

80,789,041

 

 

80,000,000

 



Balance Sheet Data:


 

 

January 31, 2018

 

April 30, 2017

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

11,556

 

$

3

 

Prepaid expenses and other assets

 

 

388,192

 

 

 

Total assets

 

 

399,748

 

 

3

 

Total liabilities

 

 

1,094,816

 

 

105,721

 

Additional paid-in capital

 

 

9,627,699

 

 

74,559

 

Accumulated deficit

 

 

(11,099,404

)

 

(202,577

)

Total stockholders’ equity (deficit)

 

$

(695,068

)

$

(105,718

)


- 4 -



RISK FACTORS


An investment our Common Stock is highly speculative and involves a high degree of risk. The risk factors described below summarize some of the material risks inherent in an investment in us. These risk factors are not presented in any particular order of significance. Each prospective investor should carefully consider the following risk factors inherent in and affecting our business and the Offering before making an investment decision. You should also refer to the other information set forth in this prospectus and to the risk factors in our SEC filings.


Risks Related to Our Business and Industry


We are a company with a limited operating history and our future profitability is uncertain. We anticipate future losses and negative cash flow, which may limit or delay our ability to become profitable.


We are a company with a limited operating history and have not generated any revenues to date. We may never generate significant revenues. We have incurred losses since our inception and expect to experience operating losses and negative cash flow for the foreseeable future. As of January 31, 2018, we had a total accumulated deficit of $(11,099,404). Due to certain risks, we anticipate our losses will continue to increase from current levels. Such risks include, but are not limited to, dependence on the growth of use of technology and services, the need to establish the viability of our technologies through testing and through acceptance by the public. To address these risks, we must continue to revise and upgrade our software and seek recognition of our products in the areas of fintech, digital media, financial services, KYC, AML, cyber security and healthcare.  We must also attract, retain, and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so could lead to an inability to meet our financial obligations and therefore result in bankruptcy and the loss of your entire investment in our common shares.


We have a limited operating history.


The Company was incorporated under the laws of the State of Florida on April 8, 2013 and has engaged in limited operations to date. Accordingly, the Company has only a limited operating history with which you can evaluate its business and prospects. An investor in the Company must consider its business and prospects in light of the risks, uncertainties and difficulties frequently encountered by early-stage companies, including limited capital, delays in product development, possible marketing and sales obstacles and delays, inability to gain customer and merchant acceptance or inability to achieve significant distribution of our products and services to customers. The Company cannot be certain that it will successfully address these risks. Its failure to address any of these risks could have a material adverse effect on its business.


Risks related to liquidity and capital resources.


Our independent registered public accounting firm for the fiscal year ended April 30, 2017 has included an explanatory paragraph in their opinion that accompanies our audited financial statements as of and for the year ended April 30, 2017, indicating that our historical losses, working capital deficit and accumulated deficit raises substantial doubt about our ability to continue as a going concern. If we are unable to improve our liquidity position, we may not be able to continue as a going concern. The accompanying financial statements do not include any adjustments that might result if we are unable to continue as a going concern and, therefore, be required to realize our assets and discharge our liabilities other than in the normal course of business which could cause investors to suffer the loss of all or a substantial portion of their investment.


We may incur substantial costs related to product-related liabilities.


We license our software from Black Cactus Holdings, LLC (“Black Cactus Holdings”) as its exclusive licensee.  We sub-license the software to other companies.  This software and software platforms are intended to be used for of fintech, digital media, financial services, KYC, AML, cyber security, and healthcare. We attempt to limit by contract our liability; however, the limitations of liability set forth in the contracts may not be enforceable or may not otherwise protect us from liability for damages. We may also be subject to claims that are not covered by contract. Although we intend to maintain liability insurance coverage, there can be no assurance that such coverage will cover any particular claim that has been brought or that may be brought in the future, that such coverage will prove to be adequate or that such coverage will continue to remain available on acceptable terms, if at all. A successful material claim, or series of claims brought against us, if uninsured or under-insured, could materially harm our business, results of operations and financial condition. Product-related claims, even if not successful, could damage our reputation, cause us to lose existing clients, limit our ability to obtain new clients, divert management’s attention from operations, result in significant revenue loss, create potential liabilities for our clients and us and increase insurance and other operational costs.


- 5 -



We currently have a limited executive management group managing the financial controls of the Company.

 

We have a Chief Executive Officer, Lawrence Cummins, and a Chief Financial Officer, Harpreet Sangha, who are responsible for monitoring and ensuring compliance with our internal control procedures. As a result, our internal controls may be inadequate or ineffective, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public. Investors relying upon the reporting may make an uninformed investment decision.

 

We may encounter numerous difficulties frequently encountered by companies in the early stage of operations.

 

We have a limited operating history upon which an investor can evaluate our current business and future prospects. Any potential investor must consider the risks and difficulties frequently encountered by early-stage companies. Historically, there has been a high failure rate among early-stage companies. Our future performance will depend upon a number of factors, including our ability to:

 

 

generate revenues and implement our business plan and growth strategy;

 

 

 

 

attract and retain marketing and commercial sponsors;

 

 

 

 

aggressively counter and respond to actions by our competitors;

 

 

 

 

maintain adequate control of our expenses;

 

 

 

 

attract, retain and motivate qualified personnel;

 

 

 

 

react to industry preferences and demands;

 

 

 

 

maintain regulatory compliance; and

 

 

 

 

generate sufficient working capital through our operations or through issuance of additional debt or equity financing, and to continue as a going concern.

 

We cannot assure investors that we will successfully address any of these factors, and our failure to do so could have a material adverse effect on our business, financial condition, results of operations and future prospects .

 

The loss of the services of our key management and personnel or the failure to attract additional key personnel could adversely affect our ability to operate our business.

 

A loss of one or more of our current officers or key employees could severely and negatively impact our operations. We have no present intention of obtaining key-man life insurance on any of our executive officers or management. Additionally, competition for highly skilled technical, managerial and other personnel is intense. As our business develops, we might not be able to attract, hire, train, retain and motivate the highly skilled managers and employees we need to be successful. If we fail to attract and retain the necessary technical and managerial personnel, our business will suffer and might fail.

 

Our limited operating history could delay our growth and result in the loss of your investment.

 

We were incorporated in 2013. However, our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their growth stage of development. Such risks include, but are not limited to, dependence on the growth of use of technology and services, complete software platform development and obtaining industry acceptance while responding to competitive developments and attracting, retaining, and motivating qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so could lead to an inability to meet our financial obligations and therefore result in bankruptcy and the loss of your entire investment in our common shares.

 

Our ability to implement and manage growth strategy is uncertain.

 

We plan on expanding the market segments in which we plan to operate.  Implementation of our growth strategy may impose significant strain on our management, operating systems and financial resources.

 

- 6 -



Failure by the Company to manage its growth, or unexpected difficulties encountered during expansion into different markets, could have a materially adverse impact on our results of operations or financial condition. Our ability to continue to operate our business depends upon a number of factors, including (i) generating sufficient funds for operations, (ii) our executive management team and our financial and accounting controls, and (iii) staffing, training and retaining skilled on-site management personnel. Certain of these factors are beyond our control and may be affected by the economy or actions taken by competing companies. Further, there can be no assurance that our market analysis and proprietary business data will continue to support our current marketing plans.

 

We may not be able to retain our key personnel or attract additional personnel, which could affect our ability to further innovate and expand our software platforms and obtain industry and customer acceptance of our software so that we can generate revenue sufficient to continue as a going concern diminishing your return on investment.

 

Our performance is substantially dependent on the services and on the performance of our Management. Black Cactus Global is, and will be, heavily dependent on the skill, acumen and services of our key executives. Our performance also depends on our ability to attract, hire, retain and motivate our officers and key employees. The loss of the services of our executives could result in lost revenue depending on the length of time and effort required to find qualified replacements. We have not entered into long-term employment agreements with any of our key personnel and currently have no “Key Employee” life insurance policies.

 

Our future success may also depend on our ability to identify, attract, hire, train, retain and motivate other highly skilled technical, managerial, marketing and customer service personnel.

 

Competition for such personnel is intense, and there can be no assurance that we will be able to successfully attract, assimilate or retain sufficiently qualified personnel. If we are unable to attract, retain, and train the necessary technical, managerial, marketing and customer service personnel, our expectations of increasing our clientele could be hindered, and the profitability of Black Cactus Global reduced.

 

As the Company intends to be conducting international business transactions, it will be exposed to local business risks in different countries, which could have a material adverse effect on its financial condition or results of operations.

 

The Company intends to promote and sell the software licensed to it internationally by virtue of the global access to its software platform and it expects to have customers located in several countries. The Company’s international operations will be subject to risks inherent in doing business in foreign countries, including, but not necessarily limited to:

 

 

New and different legal and regulatory requirements in local jurisdictions;

 

 

 

 

Potentially adverse tax consequences, including imposition or increase of taxes on transactions or withholding and other taxes on remittances and other payments by subsidiaries;

 

 

 

 

Risk of nationalization of private enterprises by foreign governments;

 

 

 

 

Legal restrictions on doing business in or with certain nations, certain parties and/or certain products; and,

 

 

 

 

Local economic, political and social conditions, including the possibility of hyperinflationary conditions and political instability.

 

The Company may not be successful in developing and implementing policies and strategies to address the foregoing factors in a timely and effective manner in the locations where it will do business. Consequently, the occurrence of one or more of the foregoing factors could have a material adverse effect on its base operations and upon its financial condition and results of operations.

 

Since our products may be available over the Internet in foreign countries and the Company may have customers residing in foreign countries, foreign jurisdictions may require it to qualify to do business in their country. It will be required to comply with certain laws and regulations of each country in which it conducts business, including laws and regulations currently in place or which may be enacted related to Internet services available to the residents of each country from online sites located elsewhere.

 

The Company’s operations in developing markets could expose it to political, economic and regulatory risks that are greater than those it may face in established markets. Further, its international operations may require it to comply with additional United States and international regulations.

 

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For example, it may be required to comply with the Foreign Corrupt Practices Act, or “FCPA,” which prohibits companies or their agents and employees from providing anything of value to a foreign official or agent thereof for the purposes of influencing any act or decision of these individuals in their official capacity to help obtain or retain business, direct business to any person or corporate entity or obtain any unfair advantage. The Company may operate in some nations that have experienced significant levels of governmental corruption. Its employees, agents and contractors, including companies to which it outsources business operations, may take actions in violation of its policies and legal requirements. Such violations, even if prohibited by its policies and procedures, could have an adverse effect on its business and reputation. Any failure by the Company to ensure that its employees and agents comply with the FCPA and applicable laws and regulations in foreign jurisdictions could result in substantial civil and criminal penalties or restrictions on its ability to conduct business in certain foreign jurisdictions, and its results of operations and financial condition could be materially and adversely affected.

 

We may not have the financial resources to litigate should actions arise involving our intellectual property rights or patent applications.

 

We sub-license Black Cactus Holding’s software and platform and Black Cactus Holdings has or will make the appropriate filings to protect its’ intellectual property, future patent rights, and trademarks which relate to our business model. However, patent and intellectual property legal issues for the software and platform we license are complex and currently evolving. We are not certain that Black Cactus Holdings will be able to maintain its future patent rights and intellectual property which may affect our business and plan of operations.  Patent applications are secret until patents are issued in the United States, or published in other countries, therefore, Black Cactus Holdings cannot be sure that it is first to file any patent application for its software. Should any of its patent claims be compromised or if, for example, one of our competitors has filed or obtained a patent before Black Cactus Holding’s claims have been protected, or should a competitor with more resources desire to litigate and force us to defend or prosecute any future patent rights, our ability to develop the market for these products could be compromised, for we do not have the financial resources to litigate actions involving patents and copyrights.

 

We may be subject to litigation that will be costly to defend or pursue and uncertain in its outcome.

 

Our business may bring us into conflict with our licensees, licensors or others with whom we have contractual or other business relationships, or with our competitors or others whose interests differ from ours. If we are unable to resolve those conflicts on terms that are satisfactory to all parties, we may become involved in litigation brought by or against us. That litigation is likely to be expensive and may require a significant amount of management’s time and attention, at the expense of other aspects of our business. The outcome of litigation is always uncertain, and in some cases, could include judgments against us that require us to pay damages, enjoin us from certain activities, or otherwise affect our legal or contractual rights, which could have a significant adverse effect on our business and financial condition.

  

We have no liability insurance, which leaves us vulnerable to future claims we will be unable to satisfy.

 

The development, testing, marketing and sale of the software products in the various financial, healthcare and technology industries entail an inherent risk of product liability claims, and we cannot assure you that substantial product liability claims will not be asserted against us. In the event we are forced to expend significant funds on defending product liability actions, and in the event those funds come from operating capital, we will be required to reduce our business activities, which could lead to significant losses. We cannot assure you that adequate insurance coverage will be available in the future on acceptable terms, if at all, or that, if available, we will be able to maintain any such insurance at sufficient levels of coverage or that any such insurance will provide adequate protection against potential liabilities. Whether or not a product liability insurance policy is obtained or maintained in the future, any product liability claim could harm our business or financial condition.

 

Risks Relating to Our Reliance on Third Parties

 

Because our business involves software, our business tends to be capital intensive.

 

We are likely to require additional capital to maintain operations or expand our business. We have not made any arrangements to obtain any additional financing. Any additional financing may only be available on terms unfavorable to us and disadvantageous to our shareholders .

 

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The protection from future patents is uncertain.

 

We will rely on patents and trade secrets for the protection of Black Cactus Holding’s intellectual property. The issuance of a patent by the Patent Office does not ensure that the patent will be upheld if it is challenged in litigation or that the patent will not be found to infringe upon patents validly issued to others. We could be exposed to substantial litigation expense defending their intellectual property as well as liability to others.

 

Our proposed products may become technologically obsolete.

 

The software market for Blockchain applications is characterized by extensive research and development activities as this field continues to grow and expand.  New developments are expected to continue at a rapid pace and there can be no assurance that new discoveries will not render our products, processes and devices uneconomical or obsolete. The likelihood of success for our products must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the development of new software applications and products and their level of acceptance by various industries.   

 

We may encounter liabilities involving customers and third parties.

 

The licensing of software products and applications can result in claims for damages if a product causes harm or fails to perform as promised. Although we have not been subject to any such claim, no assurance can be given that such claims will not be made in the future or that we can obtain any insurance coverage. If we were subject to an uncovered claim, our assets could be greatly reduced.

 

We depend on our collaborators to help us develop and test the proprietary software which we have the exclusive license to develop, and our ability to develop and commercialize that software and related applications may be impaired or delayed if collaborations are unsuccessful.

 

Our strategy for the development, testing and commercialization of the proprietary software platform and applications may require that we enter into collaborations with consultants, corporate partners, licensors, licensees and others. We are dependent upon the subsequent success of these other parties in performing their respective responsibilities and the continued cooperation of our partners. Our collaborators may not cooperate with us or perform their obligations under our agreements with them. We cannot control the amount and timing of our collaborators’ resources that will be devoted to our research and development activities related to our collaborative agreements with them. Our collaborators may choose to pursue existing or alternative technologies in preference to those being developed in collaboration with us.

 

Under agreements with collaborators, we may rely significantly on such collaborators to, among other things, design prototypes for and value the intellectual property, and market for us any commercial products that result from our collaborations.

 

The development and commercialization of the proprietary software platform and applications will be delayed if collaborators fail to conduct these activities in a timely manner, or at all. In addition, our collaborators could terminate their agreements with us and we may not receive any development or milestone payments. If we do not achieve milestones set forth in the agreements, or if our collaborators breach or terminate their collaborative agreements with us, our business may be materially harmed.

 

We intend to continue strategic business acquisitions and other combinations, which are subject to inherent risks.

 

In order to expand our solutions, services, and grow our market and client base, we may continue to seek and complete strategic business acquisitions and other combinations that we believe are complementary to our business. Acquisitions have inherent risks which may have a material adverse effect on our business, financial condition, operating results or prospects, including, but not limited to: 1) failure to successfully integrate the business and financial operations, services, intellectual property, solutions or personnel of an acquired business and to maintain uniform standard controls, policies and procedures; 2) diversion of management’s attention from other business concerns; 3) entry into markets in which we have little or no direct prior experience; 4) failure to achieve projected synergies and performance targets; 5) loss of clients or key personnel; 6) incurrence of debt or assumption of known and unknown liabilities; 7) write-off of software development costs, goodwill, client lists and amortization of expenses related to intangible assets; 8) dilutive issuances of equity securities; and, 9) accounting deficiencies that could arise in connection with, or as a result of, the acquisition of an acquired company, including issues related to internal control over financial reporting and the time and cost associated with remedying such deficiencies. If we fail to successfully integrate acquired businesses or fail to implement our business strategies with respect to these acquisitions, we may not be able to achieve projected results or support the amount of consideration paid for such acquired businesses.

 

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Volatility and disruption resulting from global economic conditions could negatively affect our business, results of operations and financial condition.

 

Although certain indices and economic data have shown signs of stabilization in the United States and certain global markets, there can be no assurance that these improvements will be broad-based or sustainable, nor is it clear how, if at all, they will affect the markets relevant to us. As a result, our operating results may be impacted by the health of the global economy. Volatility and disruption in global capital and credit markets may lead to slowdowns or declines in client spending which could adversely affect our business and financial performance. Our business and financial performance, including new business bookings and collection of our accounts receivable, may be adversely affected by current and future economic conditions (including a reduction in the availability of credit, higher energy costs, rising interest rates, financial market volatility and lower than expected economic growth) that cause a slowdown or decline in client spending. Reduced purchases by our clients or changes in payment terms could adversely affect our revenue growth and cause a decrease in our cash flow from operations. Bankruptcies or similar events affecting clients may cause us to incur bad debt expense at levels higher than historically experienced. Further, volatility and disruption in global financial markets may also limit our ability to access the capital markets at a time when we would like, or need, to raise capital, which could have an impact on our ability to react to changing economic and business conditions. Accordingly, if global financial and economic volatility continues or worsens, our business, results of operations and financial condition could be materially and adversely affected. 

 

If we are unable to manage our growth in the new markets in which we offer solutions or services, our business and financial results could suffer.

 

Our future financial results will depend in part on our ability to profitably manage our business in the new markets that we enter. Difficulties in managing future growth in new markets could have a significant negative impact on our business, financial condition and results of operations.


The further development and acceptance of bitcoins and other digital currencies and the protocols governing the issuance of transactions in bitcoins and other digital currencies, which represent a new and rapidly changing industry, are subject to a variety of factors that are difficult to evaluate.


The use of digital currencies to, among other things, buy and sell goods and services, is part of a new and rapidly evolving industry that employs digital assets based upon a computer-generated mathematical and/or cryptographic protocol. The growth of this industry is subject to a high degree of uncertainty. The factors affecting the further development of this industry, include, but are not limited to:


 

continued worldwide growth in the adoption and use of digital currencies;

 

 

 

 

government and quasi-government regulation of bitcoins and other digital assets and their use, or restrictions on or regulation of access to and operation of digital asset systems;

 

 

 

 

changes in consumer demographics and public tastes and preferences;

 

 

 

 

the availability and popularity of other forms or methods of buying and selling goods and services, including new means of using fiat currencies;

 

 

 

 

general economic conditions and the regulatory environment relating to digital assets; and

 

 

 

 

negative consumer perception of cryptocurrencies.


Management of our Company is within the control of the Board of Directors and the officers. You should not purchase our Common Stock unless you are willing to entrust management of our Company to these individuals.

 

All decisions with respect to the management of the Company will be made by our Board of Directors and our officers, who beneficially own 50.10% of our Common Stock, as calculated in accordance with Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended. Holders of the Common Stock who purchase in this offering will not obtain majority control of the Company. Therefore, management will retain the power to elect a majority of the board of directors who shall, in turn, have the power to appoint the officers of the Company and to determine, in accordance with their fiduciary duties and the business judgment rule, the direction, objectives and policies of the Company including, without limitation, the purchase of businesses or assets; the sale of all or a substantial portion of the assets of the Company; the merger or consolidation of the Company with another corporation; raising additional capital through financing and/or equity sources; the retention of cash reserves for future product development, expansion of our business and/or acquisitions; the filing of registration statements with the Securities and Exchange Commission for offerings of our capital stock; and transactions which may cause or prevent a change in control of the Company or its winding up and dissolution.


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Accordingly, no investor should purchase the Common Stock we are offering unless such investor is willing to entrust all aspects of the management of the Company to such individuals.

 

Our reliance on the activities of our non-employee consultants whose activities are not wholly within our control, may lead to delays in development of our proposed products.

 

We rely extensively upon and have relationships with consultants. These consultants are not our employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to us. We have limited control over the activities of these consultants and, except as otherwise required by our collaboration and consulting agreements to the extent they exist, can expect only limited amounts of their time to be dedicated to our activities.


Risks Related to Cryptocurrency


The further development and acceptance of blockchain networks, which are part of a new and rapidly changing industry, are subject to a variety of factors that are difficult to evaluate. The slowing or stopping of the development or acceptance of blockchain networks and blockchain assets would have a material adverse effect on successful development


The growth of the blockchain industry, in general, as well as the blockchain networks on which the Company will rely upon in its business operations are subject to a high degree of uncertainty. A decline in the popularity or acceptance of cryptocurrencies such as Bitcoin or Ethereum would adversely affect the Company’s results of operations, the development, launch and/or operations of the Company. Factors that affect the development of the cryptocurrency industry and blockchain networks, include, but are not limited to:


 

worldwide growth in the adoption and use of Bitcoin, Ethereum, and other blockchain technologies;

 

 

 

 

government and quasi-government regulation of Bitcoin, Ethereum, and other blockchain assets and their use, or restrictions on or regulation of access to, and operation of blockchain networks or similar systems;

 

 

 

 

the maintenance and development of the open-source software protocol of the Bitcoin or Ethereum networks;

 

 

 

 

changes in consumer demographics and public tastes and preferences;

 

 

 

 

the availability and popularity of other forms or methods of buying and selling goods and services; and

 

 

 

 

general economic conditions and the regulatory environment relating to cryptocurrencies.


Blockchain networks are based on software protocols that govern peer-to-peer interactions between computers connected to these networks. The suitability of the networks for the Company’s business, depends upon a variety of factors, including, but not limited to:


 

the effectiveness of the informal groups of (often uncompensated) developers contributing to the protocols that underlie the networks;

 

 

 

 

the effectiveness of the network validators (sometimes called “miners”) and the network’s consensus mechanisms to effectively secure the networks against confirmation of invalid transactions;

 

 

 

 

disputes among the developers or validators of the networks;

 

 

 

 

changes in the consensus or validation schemes that underlie the networks, including, without limitation, shifts between so-called “proof of work” and “proof of stake” schemes;

 

 

 

 

the failure of cybersecurity controls or security breaches of the networks;

 

 

 

 

the existence of other competing and operational versions of the networks, including, without limitation, so-called “forked” networks;

 

 

 

 

the existence of undiscovered technical flaws in the networks;

 

 

 

 

the development of new or existing hardware, software tools, or mechanisms that could negatively impact the functionality of the systems;


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the price of blockchain assets associated with the networks;

 

 

 

 

intellectual property rights-based claims or other claims against the networks’ participants; and

 

 

 

 

the maturity of the computer software programming languages used in connection with the networks.


Unfavorable developments or characteristics of any of the above circumstances could adversely affect the Company’s business, the development, launch and/or operations of the Company.


The regulatory regime governing blockchain technologies, cryptocurrencies, tokens, and token offerings is uncertain. Developments in regulations in the United States or in other jurisdictions may alter the nature of the Company’s business or restrict the use of blockchain assets or the operation of a blockchain network upon which the Company and its business will rely in a manner that adversely affects the Company’s business, the development and/or operation of the Company .


As blockchain networks and blockchain assets have grown in popularity and in market size, federal and state agencies have begun to take an interest in, and, in some cases, regulate their use and operation. In the case of virtual currencies, US state regulators like the New York Department of Financial Services, have created new regulatory frameworks. Other states, such as Texas, have published guidance as to how their existing regulatory frameworks apply to virtual currencies. Other states have amended their state’s statutes to apply existing licensing regimes to virtual currencies. Treatment of virtual currencies continues to evolve under US federal law as well. Both the US Department of the Treasury and the CFTC, for example, have published guidance on the treatment of virtual currencies like Bitcoin. Further, the IRS released guidance on virtual currencies classifying Bitcoin and Ether as property for the purposes of US federal income taxes. Both US federal and state agencies have instituted enforcement actions against those violating their interpretation of existing laws.


The regulation of non-currency use of blockchain assets is of particular relevance to the Company’s business and the software upon which it will rely.  Neither the SEC nor the CFTC has formally asserted regulatory authority over any particular blockchain network. The CFTC has publicly taken the position that certain blockchain assets are commodities, but the SEC has not officially taken the position all blockchain assets are securities; rather, it is a facts and circumstances test. To the extent that a US government or quasi-governmental agency exerts regulatory authority over a blockchain network, including one upon which the Company’s business relies, or a blockchain asset, the Company’s business and the functionality of the Company may be adversely affected.


On July 25, 2017, the SEC issued an investigative report cautioning market participants that offers and sales of digital assets by “virtual” organizations are subject to the requirements of the US federal securities laws. The report, entitled “Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”: The DAO” (the “DAO Report”), found that tokens offered and sold by a “virtual” organization known as “The DAO” were securities and were therefore subject to the US federal securities laws. The DAO Report confirmed that issuers of distributed ledger or blockchain technology-based securities must register offers and sales of such securities unless a valid exemption applies.


Certain non-US regulators have also released statements or issued some form of guidance regarding their position on “initial coin offerings” and token sales. The Company’s business, the development, launch and/or operations of the Company could be adversely affected by regulations that restrict the use of cryptocurrencies or digital assets.


Developments in foreign regulations and laws may alter the nature of the Company’s business or restrict the operation of a blockchain network upon which the Company relies, including the use of blockchain assets, in a manner that adversely affects our business.


Blockchain networks currently face an uncertain regulatory landscape in not only the United States, but also in many foreign jurisdictions, which have issued guidelines or regulatory communications regarding cryptocurrencies, digital assets and “initial coin offerings” and are still working on ways to regulate this industry. Various foreign jurisdictions may, in the near future, adopt laws, regulations, or directives that affect the Ethereum network and its users, particularly Ether exchanges and service providers that fall within such jurisdictions’ regulatory scope. Such laws, regulations, or directives may conflict with those of the United States, or may directly and negatively impact the Company’s business, the development, launch and/or operations of the Company. The effect of any future regulatory change is impossible to predict, but such change could be substantial and adverse to the Company’s business, the development, launch and/or operations of the Company and the development of the Company. Developments in US commercial and corporate laws may alter the nature of the Company’s business or the development or operation of the software in a manner that adversely affects the Company’s business.


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Risks of unfavorable regulatory action in one or more jurisdictions.

 

Blockchain technologies and cryptocurrencies have been the subject of scrutiny by various regulatory bodies around the world. The Company could be impacted by one or more regulatory inquiries or actions, including but not limited to restrictions on the use of blockchain technology, which could impede or limit the development of our anticipated blockchain technology solutions.


Competitive risks and alternative platforms.

 

Blockchain industry is highly competitive and should intensify in the future. There are many platforms that enable the use of blockchain technologies in the payments ecosystem. Additional competitors are likely to enter the industry in the future. There is also competition from the traditional payment networks, all of which could potentially negatively impact the Company.

 

We may not be able to develop new products or enhance the capabilities related to blockchain technology that is being developed by the Company to keep pace with our industry’s rapidly changing technology and customer requirements.

 

The industry for blockchain technology is characterized by rapid technological changes, new product introductions, enhancements, and evolving industry standards. Our business prospects depend on our ability to develop new products and applications for our technology in new markets that develop as a result of technological and scientific advances, while improving performance and cost-effectiveness. New technologies, techniques or products could emerge that might offer better combinations of price and performance than the blockchain technology solutions that are being developed by the Company. It is important that we anticipate changes in technology and market demand. If we do not successfully innovate and introduce new technology into our anticipated technology solutions or effectively manage the transitions of our technology to new product offerings, our business, financial condition and results of operations could be harmed.

 

Risks associated with unauthorized access.

 

Third parties that gains access to a user’s login credentials or private keys may be able to transfer the user’s value. To minimize this risk, the users should guard against unauthorized access to their electronic devices.

 

Risks that our anticipated blockchain technology solutions, as developed, will not meet the expectations of its target audience.

 

Our anticipated blockchain technology solutions are presently under development and may undergo significant changes before beta and/or final release. Any expectations regarding the form and functionality of our anticipated blockchain technology solutions may not be met upon release, for any number of reasons including change in the design and implementation plans and execution.

 

Risks of theft and hacking.

 

Hackers or other groups or organizations may attempt to interfere with the blockchain technology or the availability of our anticipated blockchain technology solutions in any number of ways, including without limitation denial of service attacks, Sybil attacks, spoofing, smurfing, malware attacks, or consensus-based attacks. The Company expects to spend significant resources to consistently penetrate test and monitor its technology to prevent any such threats.

 

Risk of security weaknesses in the core infrastructure and software.

 

Some parts of the core software may be based on open-source software. There is a risk that the development team, or other third parties may intentionally or unintentionally introduce weaknesses or bugs into the core infrastructure elements of our anticipated blockchain technology solutions interfering with the use of or causing the loss to the Company.

 

Risk of weaknesses or exploitable breakthroughs in the field of cryptography.

 

Advances in cryptography, or technical advances such as the development of quantum computers, could present risks to cryptocurrencies and network, which could result in theft or loss.

 


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We may require additional capital to fully utilize its business plan on a going forward basis as the Company develops and deploys its anticipated blockchain technology solutions and related ecosystem.

 

While the Company expects that funding of the project will be from future financings, including the Notes, the Company has yet to approximate its capital needs and might require additional capital to fully utilize its business plan on a go forward basis as the Company develops and deploys the ecosystem, cost of development of the ecosystem, value-added solutions as well as deployment and distribution costs. There is no assurance that the Company will be able to obtain any such additional capital in sufficient amounts or on acceptable terms when needed.


If regulatory changes or interpretations require the regulation of digital currencies under the Securities Act of 1933, as amended (the “Securities Act”) and Investment Company Act of 1940, as amended (the Investment Company Act”) by the SEC, we may be required to register and comply with such regulations. To the extent that we decide to continue operations, the required registrations and regulatory compliance steps may result in extraordinary, non-recurring expenses to us. We may also decide to cease certain operations. Any disruption of our operations in response to the changed regulatory circumstances may be at a time that is disadvantageous to investors.

 

Current and future legislation and SEC rulemaking and other regulatory developments, including interpretations released by a regulatory authority, may impact the manner in which cryptocurrencies are treated for classification and clearing purposes. In particular, digital currencies may not be excluded from the definition of “security” by SEC rulemaking or interpretation. As of the date of this prospectus, we are not aware of any rules or interpretations that have been proposed to regulate bitcoins as securities. We cannot be certain as to how future regulatory developments will impact the treatment of bitcoins under the law. Such additional registrations may result in extraordinary, non-recurring expenses, thereby materially and adversely impacting an investment in us. If we determine not to comply with such additional regulatory and registration requirements, we may seek to cease certain of our operations. Any such action may adversely affect an investment in us.


To the extent that cryptocurrencies are deemed by the SEC to fall within the definition of a security, we may be required to register and comply with additional regulation under the Investment Company Act, including additional periodic reporting and disclosure standards and requirements and the registration of our Company as an investment company. Additionally, one or more states may conclude cryptocurrencies are a security under state securities laws which would require registration under state laws including merit review laws which would adversely impact us since we would likely not comply. Such additional registrations may result in extraordinary, non-recurring expenses of our Company, thereby materially and adversely impacting an investment in our Company. If we determine not to comply with such additional regulatory and registration requirements, we may seek to cease all or certain parts of our operations. Any such action may adversely affect an investment in us.

 

Risks Related to Common Stock

 

The large number of shares eligible for immediate and future sales may depress the price of our stock.

 

As of the date of this prospectus we have 166,043,296 shares of Common Stock outstanding. Approximately 30,000,000 shares are “free trading” and may serve to overhang the market and depress the price of our Common Stock.

 

There is currently a limited public market for our Common Stock. Failure to develop or maintain a trading market could negatively affect its value and make it difficult or impossible for you to sell your shares.

 

Our Common Stock trades on the OTCQB Market under the symbol “BLGI”. There has been a limited public market for our Common Stock and an active public market for our Common Stock may not develop. Failure to develop or maintain an active trading market could make it difficult for you to sell your shares or recover any part of your investment in us. Even if a market for our Common Stock does develop, the market price of our Common Stock may be highly volatile. In addition to the uncertainties relating to future operating performance and the profitability of operations, factors such as variations in interim financial results or various, as yet unpredictable, factors, many of which are beyond our control, may have a negative effect on the market price of our Common Stock.

 

“Penny Stock” rules may make buying or selling our Common Stock difficult. Limitations upon Broker-Dealers Effecting Transactions in “Penny Stocks”

 

Trading in our Common Stock is subject to material limitations as a consequence of regulations which limit the activities of broker-dealers effecting transactions in “penny stocks.” Pursuant to Rule 3a51-1 under the Exchange Act, our Common Stock is a “penny stock” because it (i) is not listed on any national securities exchange or The NASDAQ Stock Market™, (ii) has a market price of less than $5.00 per share, and (iii) its issuer (the Company) has net tangible assets less than $2,000,000 (if the issuer has been in business for at least three (3) years) or $5,000,000 (if the issuer has been in business for less than three (3) years).


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Rule 15g-9 promulgated under the Exchange Act imposes limitations upon trading activities on “penny stocks”, which makes selling our Common Stock more difficult compared to selling securities which are not “penny stocks.” Rule 15a-9 restricts the solicitation of sales of “penny stocks” by broker-dealers unless the broker first (i) obtains from the purchaser information concerning his financial situation, investment experience and investment objectives, (ii) reasonably determines that the purchaser has sufficient knowledge and experience in financial matters that the person is capable of evaluating the risks of investing in “penny stocks”, and (iii) delivers and receives back from the purchaser a manually signed written statement acknowledging the purchaser’s investment experience and financial sophistication.

 

Rules 15g-2 through 15g-6 promulgated under the Exchange Act require broker-dealers who engage in transactions in “penny stocks” first to provide their customers with a series of disclosures and documents, including (i) a standardized risk disclosure document identifying the risks inherent in investing in “penny stocks”, (ii) all compensation received by the broker-dealer in connection with the transaction, (iii) current quotation prices and other relevant market data, and (iv) monthly account statements reflecting the fair market value of the securities.

 

There can be no assurance that any broker-dealer which initiates quotations for the Common Stock will continue to do so, and the loss of any such broker-dealer likely would have a material adverse effect on the market price of our Common Stock.

 

FINRA sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.

 

In addition to the “penny stock” rules described below, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our Common Stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

 

Because our Common Stock is deemed a low-priced “penny stock,” it will be cumbersome for brokers and dealers to trade in our Common Stock, making the market for our Common Stock less liquid and negatively affect the price of our stock.

 

We will be subject to certain provisions of the Securities Exchange Act of 1934 (the “Exchange Act”), commonly referred to as the “penny stock” rules as defined in Rule 3a51-1. A penny stock is generally defined to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Since our stock is deemed to be a penny stock, trading is subject to additional sales practice requirements of broker-dealers. These require a broker-dealer to:

 

 

Deliver to the customer, and obtain a written receipt for, a disclosure document;

 

 

 

 

Disclose certain price information about the stock;

 

 

 

 

Disclose the amount of compensation received by the broker-dealer or any associated person of the broker-dealer;

 

 

 

 

Send monthly statements to customers with market and price information about the penny stock; and

 

 

 

 

In some circumstances, approve the purchaser’s account under certain standards and deliver written statements to the customer with information specified in the rules.

 

Consequently, penny stock rules and FINRA rules may restrict the ability or willingness of broker-dealers to trade and/or maintain a market in our Common Stock. Also, prospective investors may not want to get involved with the additional administrative requirements, which may have a material adverse effect on the trading of our shares.

 

We have paid no dividends.

 

We never have paid any dividends on our Common Stock and we do not intend to pay any dividends in the foreseeable future.

 


- 15 -



We are an “emerging growth company” under the JOBS Act of 2012 and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our Common Stock less attractive to investors.

 

We are an “emerging growth company”, as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), and 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 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 a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our Common Stock less attractive because we may rely on these exemptions. 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.

 

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. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to take advantage of the extended transition period for complying with new or revised accounting standards.

 

We will remain an “emerging growth company” for up to five years, although we will lose that status sooner if our revenues exceed $1 billion, if we issue more than $1 billion in non-convertible debt in a three-year period, or if the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of any June 30.

 

Our status as an “emerging growth company” under the JOBS Act of 2012 may make it more difficult to raise capital as and when we need it.

 

Because of the exemptions from various reporting requirements provided to us as an “emerging growth company” and because we will have an extended transition period for complying with new or revised financial accounting standards, we may be less attractive to investors and it may be difficult for us to raise additional capital as and when we need it. Investors may be unable to compare our business with other companies in our industry if they believe that our financial accounting is not as transparent as other companies in our industry. If we are unable to raise additional capital as and when we need it, our financial condition and results of operations may be materially and adversely affected.

 

Future issuances of common shares may be adversely affected by the SPA.

 

The market price of our Common Stock could decline as a result of issuances and sales by us, including pursuant to the Securities Purchase Agreement (the “SPA”), or sales by our existing shareholders, of Common Stock, or the perception that these issuances and sales could occur. Sales by our shareholders might also make it more difficult for us to issue and sell Common Stock at a time and price that we deem appropriate. It is likely that the sale of shares by Bellridge may depress the market price of our Common Stock.

 

We have the right to issue shares of preferred stock. If we were to issue preferred stock, it is likely to have rights, preferences and privileges that may adversely affect the Common Stock.

 

We are authorized to issue 10,000,000 shares of preferred stock, with such rights, preferences and privileges as may be determined from time-to-time by our board of directors. We currently have designated 10,000 shares of Series A Preferred Stock, none of which are issued and outstanding.  Our board of directors is empowered, without shareholder approval, to issue preferred stock in one or more series, and to fix for any series the dividend rights, dissolution or liquidation preferences, redemption prices, conversion rights, voting rights, and other rights, preferences and privileges for the preferred stock. The issuance of shares of preferred stock, depending on the rights, preferences and privileges attributable to the preferred stock, could adversely reduce the voting rights and powers of the Common Stock and the portion of the Company’s assets allocated for distribution to Common Stock holders in a liquidation event, and could also result in dilution in the book value per share of the Common Stock we are offering. The preferred stock could also be utilized, under certain circumstances, as a method for raising additional capital or discouraging, delaying or preventing a change in control of the Company, to the detriment of the investors in the Common Stock offered hereby. We cannot assure you that the Company will not, under certain circumstances, issue shares of its preferred stock.

 

- 16 -



Conversions of the Notes may cause dilution to existing shareholders and depress the market price of our Common Stock.

 

Bellridge has committed to purchase or has purchased $1,500,000 of the Notes. From time to time, Bellridge may convert Notes into shares of our Common Stock at prices below the market price quoted on the OTCQB Market pursuant to the terms of the Notes. As a result, our existing shareholders could experience immediate dilution upon the conversion of Notes by Bellridge. The issuance and sale of the shares upon conversion of the Notes may also have an adverse effect on the market price of the common shares. Bellridge may resell some, if not all, of the shares that we issue to it on conversion of the Notes and such sales could cause the market price of our Common Stock to decline significantly. To the extent of any such decline, any subsequent conversions could require us to issue a greater number of shares to Bellridge in exchange for each dollar amount of Bellridge Note converted. Under these circumstances, the existing shareholders of our company will experience greater dilution. The effect of this dilution may, in turn, cause the price of our Common Stock to decrease further, both because of the downward pressure on the stock price that would be caused by a large number of sales of our shares into the public market by Bellridge, and because our existing stockholders may disagree with a decision to sell shares to Bellridge at a time when our stock price is low, and may in response decide to sell additional shares, further decreasing our stock price.


We are registering an aggregate of 144,649,220 shares of Common Stock for resale including 48,400,470 shares of Common Stock issuable upon the conversion of the Notes (including, without limitation, the anti-dilution clauses contained in the Notes), 7,894,737 shares of Common Stock issuable upon the exercise of the November Warrant (including, without limitation, the anti-dilution clauses contained in the November Warrant), 2,792,267 Commitment Shares issued to Bellridge, 560,717 shares of Common stock issuable upon the exercise of the FA Warrants, and 85,000,000 shares of Common Stock issuable upon the exercise of the April Warrants. The sale of such shares could depress the market price for our Common Stock.


We are registering the resale of an aggregate of 144,649,220 shares of Common Stock under the Registration Statement of which this prospectus forms a part including, 2,793,296 shares of Common Stock issued to Bellridge as a commitment fee, 48,400,470 shares of Common Stock issuable upon the conversion of the Notes, 7,894,737 shares of Common Stock issuable upon the exercise of the November Warrant, 560,717 shares of Common Stock issuable upon the exercise of the FA Warrant, and 85,000,000 shares of Common Stock issuable upon the exercise of the April Warrants. The sale of these shares into the public market by the Selling Security Holders could depress the market price for our Common Stock.


Limitations on director and officer liability and indemnification of our officers and directors by us may discourage stockholders from bringing suit against a director.

 

Black Cactus Global’s Articles of Incorporation and Bylaws provide, with certain exceptions as permitted by governing state law, that a director or officer shall not be personally liable to us or our stockholders for breach of fiduciary duty as a director, except for acts or omissions which involve intentional misconduct, fraud or knowing violation of law, or unlawful payments of dividends. These provisions may discourage stockholders from bringing suit against a director for breach of fiduciary duty and may reduce the likelihood of derivative litigation brought by stockholders on our behalf against a director. In addition, the Company’s Articles of Incorporation and Bylaws may provide for mandatory indemnification of directors and officers to the fullest extent permitted by governing state law.


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS


This prospectus, including the sections entitled “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business”, contains forward-looking statements that include information relating to future events, future financial performance, strategies, expectations, our competitive environment, regulation and availability of resources. These forward-looking statements include, without limitation, statements regarding: proposed new products or services; our statements concerning litigation or other matters; statements concerning projections, predictions, expectations, estimates or forecasts for our business, financial and operating results and future economic performance; statements of management’s goals and objectives; trends affecting our financial condition, results of operations or future prospects; our financing plans or growth strategies; and other similar expressions concerning matters that are not historical facts. Words such as “may”, “will”, “should”, “could”, “would”, “predicts”, “potential”, “continue”, “expects”, “anticipates”, “future”, “intends”, “plans”, “believes” and “estimates,” and similar expressions, as well as similar statements in the future tense, identify forward-looking statements.


Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by which, that performance or those results will be achieved. Forward-looking statements are based on information available at the time they are made and/or management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from what is expressed in or suggested by the forward-looking statements.


- 17 -



Forward-looking statements speak only as of the date they are made. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.


NOVEMBER PRIVATE PLACEMENT


November Purchase Agreement


On November 27, 2017, the Company entered into a Securities Purchase Agreement (the “Original November Purchase Agreement”), with Bellridge Capital, L.P. (“Bellridge”) pursuant to which the Company agreed to sell to Bellridge an aggregate of $1,500,000 principal amount of Senior Secured Convertible Promissory Notes (the “Notes”) and a Common Stock purchase warrant (the “November Warrant”) to purchase up to 48,400,470 shares of the Company’s Common Stock, $0.0001 par value per share (the “Common Stock”).  On April 5, 2018, the Company entered into an Amendment to Securities Purchase Agreement (the “Amendment”; and together with the “Original November Purchase Agreement”, the “November Purchase Agreement”), with Bellridge, whereby the schedule of tranche funding was amended.  On November 27, 2017, the Company closed the first tranche under the November Purchase Agreement and issued a Note in the principal amount of $500,000 to Bellridge, as well as the November Warrant.  On December 20, 2017, the Company received the second tranche under the November Purchase Agreement and issued a Note in the principal amount of $300,000 to Bellridge.  The Note was issued in April, 2018 with an effective date of December 20, 2017 which is when we received the funds.


Bellridge is obligated to purchase from the Company a Note for the third tranche in the principal amount of $200,000 and a Note for the fourth tranche in the principal amount of $500,000 as follows: within five (5) after the Company receives the first set of comments from the U.S. Securities and Exchange Commission, so long as the comments are reasonable in the sole discretion of Bellridge;  and within five (5) days after the Effectiveness Date (as defined in the November Registration Rights Agreement (as defined below)), respectively.


Bellridge is not required to purchase the third tranche and fourth tranches Notes in the event that: (i) the Company, any of its subsidiaries, or any of the officers or directors of the Company or its subsidiaries commit fraud; (ii) the Company or any of its subsidiaries breach any convents in any of the transaction documents related to the November Purchase Agreement and Notes; (ii) there is an Event of Default (as defined in the Notes) on any closing date with respect to any tranche; and (iv) there is any event of default under any other transaction documents related to the November Purchase Agreement or Notes.


Commitment Shares


As consideration for Bellridge entering into the November Purchase Agreement and agreeing to purchase the Notes and the November Warrant, the Company issued to Bellridge 2,793,296 shares of Common Stock as commitment shares (the “Commitment Shares”).


Notes

 

The Notes are senior secured obligations of the Company. The Notes rank senior to the Company’s existing and future indebtedness and are secured by all assets of the Company and its subsidiaries, pursuant to a Security Agreement (as defined below) and the IP Security Agreement (as defined below).  Unless earlier converted or redeemed, the Notes will mature one (1) year from their issuance. The Notes bear interest at a rate of 5% per annum, which twelve (12) months’ interest amount is guaranteed.  


At any time after issuance of the Notes, so long as there is no event of default under the Notes, the Company may deliver to Bellridge a notice of prepayment with respect to any portion of the principal amount of the Notes, any accrued and unpaid (including, without limitation, guaranteed interest on any outstanding principal), and any other amounts due under the Notes).  If the Company exercises its right to prepay the Notes, the Company will pay to Bellridge an amount in cash equal to the sum of the then outstanding principal amount of the Notes and guaranteed interest as follows: (i) within ninety (90) days of initial issuance date of such Note, a 115% premium; (ii) from the ninety-first (91 st ) day after initial issuance date of such Note through the one hundred eightieth (180 th ) after the initial issuance date of such Note, a 110% premium; and (iii) from the one hundred eighty-first first (181 st ) day after initial issuance date of such Note through the day prior to the maturity date of such Note, a 125% premium.  Bellridge may continue to convert such Note from the date of notice of prepay is given until the date of the prepayment.


- 18 -



The Notes are convertible at any time, in whole or in part, at the option of Bellridge into shares of Common Stock at a conversion price (the “Fixed Conversion Price) equal to the lesser of (i) ten cents ($0.10), and (ii) seventy percent (70%) of the lowest traded price in the twenty (20) consecutive Trading Days (as defined in the Notes) on the Trading Market (as defined in the Notes) prior to the Conversion Date (as defined in the Notes).  The Fixed Conversion Price which is subject to adjustment for full anti-dilution protection, stock dividends, stock splits, combinations or similar events.


In the event of an Event of Default (as defined in the Notes) under the Notes, one hundred thirty-five percent (135%) of the outstanding principal amount of the Notes, plus accrued but unpaid interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration shall become, at Bellridge’s election, immediately due and payable at its option, in cash or in shares of Common Stock (subject to the Equity Conditions (as defined in the Notes)), at an alternate conversion price of  sixty percent (60%) of the lowest traded price in the twenty (20) consecutive Trading Days (as defined in the Notes) prior to the Conversion Date (as defined in the Notes).  Additionally, the interest rate of the Notes shall then accrue at an additional interest rate equal to the lesser of two percent (2%) per month (twenty-four percent (24%) per annum) or the maximum rate permitted under applicable law.


Bellridge has no right to convert the Notes to the extent that such conversion would result in Bellridge being the beneficial owner in excess of 4.99% (or, upon election of Bellridge, 9.99%), which beneficial ownership limitation may be increased or decreased up to 9.99% upon notice to the Company, provided that any increase in such limitation will not be effective until sixty-one (61) days following notice to the Company.


So long as the Notes are outstanding or Bellridge holds any shares of Common Stock issued upon conversion of the Notes, the Company is prohibited from entering into any Variable Rate Transactions (as defined in the Notes).  So long as the Notes are outstanding, the Company is prohibited from entering into any Exchange Transaction (as defined in the Notes).


November Warrant

 

The November Warrant entitles Bellridge to purchase up to 7,894,737 shares of Common Stock.  The November Warrant is exercisable beginning on May 27, 2018, through the fourth (4 th ) anniversary of such initial exercisability date. The November Warrant has an initial exercise price equal to the Fixed Conversion Price of the Notes (the “November Exercise Price”).   The November Exercise Price is subject to adjustment for full anti-dilution protection, stock dividends, stock splits, combinations or similar events.


Bellridge has no right to exercise the November Warrant to the extent that such exercise would result in Bellridge being the beneficial owner in excess of 4.99% (or, upon election of Bellridge, 9.99%), which beneficial ownership limitation may be increased or decreased up to 9.99% upon notice to the Company, provided that any increase in such limitation will not be effective until sixty-one (61) days following notice to the Company.


So long as the November Warrant is outstanding or Bellridge holds any shares of Common Stock issued upon exercise of the November Warrant, the Company is prohibited from entering into any Variable Rate Transactions (as defined in the November Warrant).  So long as the November Warrant is outstanding, the Company is prohibited from entering into any Exchange Transaction (as defined in the November Warrant).


FA Warrant


The FA Warrant was issued to Aegis Capital Corp. (“Aegis”), the exclusive financial advisor to the Company, pursuant to that certain Financial Advisory Agreement, dated November 8, 2017 (the “FA Agreement), between the Company and Aegis, as partial compensation of Aegis’ advisory fees.  The FA Agreement contains certain terms related to Aegis’ engagement as the Company’s exclusive financial advisor for a period of thee (3) months after November 8, 2017, including, without limitation, Aegis’ advisory fees. The FA Warrant entitles Aegis to purchase up to 560,717 shares of Common Stock.  The FA Warrant is exercisable beginning on the date of its issuance through the sixty (60)-month anniversary of such initial exercisability date. The FA Warrant has an initial exercise price of $0.10 (the “FA Exercise Price”).   The FA Exercise Price is subject to adjustment for full anti-dilution protection, stock dividends, stock splits, combinations or similar events.  Aegis may exercise the FA Warrant on a cashless basis at any time, regardless of whether the shares of Common Stock underlying the FA Warrant are registered on this prospectus.


Aegis has no right to exercise the FA Warrant to the extent that such exercise would result in Aegis being the beneficial owner in excess of 9.99%.


Aegis has certain piggy-back registration rights to demand that the Company register on this prospectus the shares of Common Stock underlying the FA Warrant.  Aegis may also assign some or all of the FA Warrant or the shares of Common stock underlying the FA Warrant to its permitted assigns.


- 19 -



November Registration Rights Agreement

 

In connection with the sale of the Notes and November Warrant, the Company entered into a Registration Rights Agreement, dated November 27, 2017, as amended by that certain Amendment to Registration Rights Agreement, dated April 13, 2018 (collectively, the “November Registration Rights Agreement”), with Bellridge, pursuant to which the Company agreed to register the shares of Common Stock underlying the Notes and the November Warrant on a Form S-1 registration statement (the “November Registration Statement”) to be filed with the Securities and Exchange Commission within thirty (30) days after the date of the initial closing under the Purchase Agreement (the “November Filing Date”) and to cause the November Registration Statement to be declared effective under the Securities Act of 1933, as amended (the “Securities Act”) within one hundred twenty (120) days following the November Filing Date (the “November Effectiveness Date”).  If certain of its obligations under the November Registration Rights Agreement are not met, the Company is required to pay partial liquidated damages to Bellridge.  The Company did not file the November Registration Statement by the November Filing Date and it will not be declared effective by the November Effectiveness Date.


Security Documents

 

In connection with the sale of the Notes and November Warrant, the Company entered into a security agreement, dated November 27, 2017 (the “Security Agreement”), between the Company and Bellridge.  Pursuant to the Security Agreement, Bellridge was granted a security interest in all assets of the Company to secure the payment and performance of all obligations of the Company under the Notes, November Warrant, November Purchase Agreement, November Registration Rights Agreement, Security Agreement, IP Security Agreement (as defined below), and the Subsidiary Guarantee (as defined below).  


In addition, in connection with the Security Agreement, the Company entered into an Intellectual Property Security Agreement, dated November 27, 2017 (the “IP Security Agreement”), with Bellridge.  Pursuant to the IP Security Agreement, Bellridge was granted a security interest in all intellectual property of the Company to secure the payment and performance of all obligations of the Company under the Notes, November Warrant, November Purchase Agreement, November Registration Rights Agreement, Security Agreement, the IP Security Agreement, and the Subsidiary Guarantee (as defined below).  Further, the Company entered into a Subsidiary Guarantee, dated November 27, 2017 (the “Subsidiary Guarantee”), pursuant to which it agreed that any current or future subsidiaries must guarantee and act as surety for payment of the Notes and other obligations of the Company under the November Warrant, November Purchase Agreement, November Registration Rights Agreement, Security Agreement, IP Security Agreement, and the Subsidiary Guarantee.


APRIL PRIVATE PLACEMENT


April Purchase Agreement


The Company entered into a Securities Purchase Agreement, dated April 5, 2018, as amended by that certain Amendment to Securities Purchase Agreement, dated April 13, 2018 (collectively, the “April Purchase Agreement”), with Bellridge Capital, L.P. (“Bellridge”) pursuant to which the Company sold to Bellridge for $0.003 three (3) common stock purchase warrants to purchase up to 85,000,000 shares of Common Stock as follows: (i) 28,339,000 shares of Common Stock underlying that certain common stock purchase warrant (the “First April Warrant”); (ii) 28,330,500 shares of common stock underlying that certain common stock purchase warrant (the “Second April Warrant”); and (iii) 28,330,500 shares of common stock underlying that certain Common Stock purchase warrant (the “Third April Warrant”; together with the First April Warrant and the second April Warrant, the “April Warrants”).


The April Warrants are exercisable beginning on the date of their issuance through the sixty (60)-month anniversary of such initial exercisability date. The April Warrants have an initial exercise price of $0.10 (the “April Exercise Price”).   The April Exercise Price is subject to adjustment for full anti-dilution protection, stock dividends, stock splits, combinations or similar events.


Bellridge has no right to exercise any of the April Warrants to the extent that such exercise would result in Bellridge being the beneficial owner in excess of 9.99%.


April Registration Rights Agreement

 

In connection with the sale of the April Warrants, the Company entered into a Registration Rights Agreement, dated April 13, 2018, effective as of April 5, 2018, with Bellridge, pursuant to which the Company agreed to register the shares of Common Stock underlying the April Warrants on a Form S-1 registration statement (the “April Registration Statement”) to be filed with the Securities and Exchange Commission on or prior to April 16, 2018 (the “April Filing Date”) and to cause the April Registration Statement to be declared effective under the Securities Act within one hundred twenty (120) days following the April Filing Date.  If certain of its obligations under the April Registration Rights Agreement are not met, the Company is required to pay partial liquidated damages to Bellridge.

 

- 20 -



USE OF PROCEEDS

 

The Selling Security Holders will receive all of the proceeds from the sale of shares of Common Stock under this prospectus. We will not receive any proceeds from these sales. To the extent we receive proceeds from the exercise of the November Warrant, the FA Warrant, and the April Warrants (collectively, the “Warrants”) held by the Selling Security Holders, we will use those proceeds for working capital, retirement of debt, officer salaries, product development and testing.  We have agreed to bear the certain expenses relating to the registration of the shares of Common Stock being register herein for each of the Selling Security Holders.


See “Plan of Distribution” elsewhere in this prospectus for more information.


SELLING SECURITY HOLDERS


This prospectus covers the offering of up to 144,649,220 shares of Common Stock being offered by the Selling Security Holders, which includes the Commitment Shares and shares of Common Stock acquirable upon the conversion or exercise of the Notes and Warrants (as defined below) held by the Selling Security Holders as described herein.  We are registering the shares of Common Stock in order to permit the Selling Security Holders to offer their shares of Common Stock for resale from time to time.


The table below lists the Selling Security Holders and other information regarding the “beneficial ownership” of the shares of Common Stock by the Selling Security Holders. In accordance with Rule 13d-3 of the Exchange Act, “beneficial ownership” includes any shares of Common Stock as to which the Selling Security Holders have sole or shared voting power or investment power and any shares of Common Stock the Selling Security Holders have the right to acquire within sixty (60) days (including shares of Common Stock issuable pursuant to the Notes currently convertible, or convertible within sixty (60) days), and upon exercise of the Warrants currently exercisable or exercisable within sixty (60) days.


The second column indicates the number of shares of Common Stock beneficially owned by the Selling Security Holders, based on its ownership as of April 13, 2018. The second column also assumes exercise of all the Notes and Warrants held by the Selling Security Holders on April 13, 2018, without regard to any limitations on conversion or exercise described in this prospectus or in such Notes and Warrants, respectively


The third column lists the shares of Common Stock being offered by this prospectus by the Selling Security Holders. Such aggregate amount of Common Stock does not take into account any applicable limitations on conversion or exercise of the Notes and Warrants, respectively.


This prospectus covers the resale of (i) the Commitment Shares, (ii) all of the shares of Common Stock issued and issuable upon conversion of the Notes, (iii) any additional shares of Common Stock issued and issuable in connection with the Notes (in each case without giving effect to any limitations on exercise set forth in the Notes), (iv) any securities issued or then issuable upon any full anti-dilution protection, stock split, dividend or other distribution, recapitalization or similar event with respect to the Notes, (v) all of the shares of Common Stock issued and issuable upon exercise of the November Warrant, (vi) any additional shares of Common Stock issued and issuable in connection with the November Warrant (in each case without giving effect to any limitations on exercise set forth in the November Warrant), (vii) any securities issued or then issuable upon any full-anti-dilution protection, stock split, dividend or other distribution, recapitalization or similar event with respect to the November Warrant, (viii) all of the shares of Common Stock issued and issuable upon exercise of the FA Warrant, (ix) any additional shares of Common Stock issued and issuable in connection with the FA Warrant (in each case without giving effect to any limitations on exercise set forth in the FA Warrant), (x) any securities issued or then issuable upon any full-anti-dilution protection, stock split, dividend or other distribution, recapitalization or similar event with respect to the FA Warrant, (xi) all of the shares of Common Stock issued and issuable upon exercise of the April Warrants, (xii) any additional shares of Common Stock issued and issuable in connection with the April Warrants (in each case without giving effect to any limitations on exercise set forth in the April Warrants), and (xiii) any securities issued or then issuable upon any full-anti-dilution protection, stock split, dividend or other distribution, recapitalization or similar event with respect to the April Warrants


Because the conversion price and exercise price of the Notes and Warrants may be adjusted, respectively, the number of shares of Common Stock that will actually be issued upon conversion and exercise of the Notes and Warrants, respectively, may be more or less than the number of shares of Common Stock being offered by this prospectus. The Selling Security Holders can offer all, some or none of its shares of Common Stock, thus we have no way of determining the number of shares of Common Stock it will hold after this offering. Therefore, the fourth and fifth columns assume that the Selling Security Holders will sell all shares of Common Stock covered by this prospectus. See “Plan of Distribution.”


Each of the Selling Security Holders identified below has confirmed to us that it is not a broker-dealer or an affiliate of a broker-dealer within the meaning of United States federal securities laws.


- 21 -



 

 

Number of
Shares of
Common Stock
Owned Prior to
Offering(1)

 

Maximum
Number of
Shares of
Common Stock
to be Sold
Pursuant to this
Prospectus(2)

 

Number of
Shares of
Common Stock
Owned After
Offering

 

Percentage
Beneficially
Owned After
Offering(2)

 

Bellridge Capital, L.P. (1)

 

2,793,296

 

144,088,503

 

 

 

Aegis Capital Corp. (2)

 

 

560,717

 

 

 

TOTAL

 

2,793,296

 

144,649,220

 

 

 

__________

 

(1)

Bellridge Capital LP is a limited partnership organized under the laws of Delaware and is controlled by Robert Klimov. Its address is Bellridge Capital, LP 5149 W. Woodmill Drive, Suite 20 Wilmington, Delaware 19808.

 

 

 

 

(2)

Aegis Capital Corp. is a New York corporation and is controlled by Robert Eide. Its address is Aegis Capital Corp., 810 7 th Ave., New York, NY 10019.

 

Material Relationships with Selling Security Holders  


The Selling Security Holders have not at any time during the past three (3) years acted as one of our employees, officers or directors or had a material relationship with us except with respect to transactions described above in “November Private Placement” and “April Private Placement”.


MARKET PRICE OF COMMON STOCK AND OTHER STOCKHOLDER MATTERS


Our Common Stock is currently quoted on the OTCQB Market, which is sponsored by OTC Markets Group, Inc. The OTCQB Market is a network of security dealers who buy and sell stock. The dealers are connected by a computer network that provides information on current “bids” and “asks,” as well as volume information. Our shares are quoted on the OTCQB Markets under the symbol “BLGI.”


The following table sets forth the range of high and low bid quotations for our Common Stock for each of the periods indicated as reported by the OTCQB. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.


Trading Market


 

 

Closing Price

 

 

 

High

 

Low

 

Year Ended April 30, 2016

 

 

 

 

 

 

 

First Quarter

 

$

0.13

 

$

0.06

 

Second Quarter

 

$

0.83

 

$

0.03

 

Third Quarter

 

$

0.70

 

$

0.01

 

Fourth Quarter

 

$

0.60

 

$

0.03

 

 

 

 

 

 

 

 

 

Year Ended April 30, 2017

 

 

 

 

 

 

 

First Quarter

 

$

0.83

 

$

0.03

 

Second Quarter

 

$

0.32

 

$

0.08

 

Third Quarter

 

$

0.66

 

$

0.09

 

Fourth Quarter*

 

$

0.40

 

$

0.06

 

__________

 

 

 

 

 

 

 

* Through April 20, 2018

 

 

 

 

 

 

 


The high and low bid price for shares of our Common Stock on April 20, 2018, was $0.12 and $0.105, respectively, based upon bids that represent prices quoted by broker-dealers on the OTCQB.


- 22 -



Approximate Number of Equity Security Holders

 

As of April 20, 2018, there were approximately 33 stockholders of record. Because shares of our Common Stock are held by depositaries, brokers and other nominees, the number of beneficial holders of our shares is substantially larger than the number of stockholders of record.

 

Dividends

 

Holders of our Common Stock are entitled to receive dividends if, as and when declared by the Board of Directors out of funds legally available therefore. We have never declared or paid any dividends on our Common Stock. We intend to retain any future earnings for use in the operation and expansion of our business. Consequently, we do not anticipate paying any cash dividends on our Common Stock to our stockholders for the foreseeable future.

 

Penny Stock

 

Our stock is considered a penny stock. The SEC has adopted rules that regulate broker-dealer practices in transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.

   

The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with: (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.

 

These disclosure requirements may have the effect of reducing the trading activity for our Common Stock. Therefore, stockholders may have difficulty selling our securities.


MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATION


Overview


We intend for this discussion to provide information that will assist in understanding our financial statements, the changes in certain key items in those financial statements, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our financial statements. This discussion should be read in conjunction with our financial statements and accompanying notes for the fiscal years ended April 30, 2017 and 2016.


General Overview of Our Business


Overview


We intend for this discussion to provide information that will assist in understanding our financial statements, the changes in certain key items in those financial statements, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our financial statements.


- 23 -



Business Overview


The Company is a Florida corporation incorporated on April 8, 2013 and was originally formed to be in the business of providing adult daycare facilities for senior citizens.  Since then, we have entered into licensing agreements for Blockchain software and that is the focus of our business. The Company’s fiscal year end is April 30.  To date, the Company has an exclusive license to a proprietary Blockchain software application and platform and we are engaged in subleasing that software as well as acquiring other businesses which utilize Blockchain software.


Plan of Operation


The Company plans to continue to sublicense the Blockchain software for which the Company has an exclusive license to other companies to generate revenue for the Company.  As part of its strategy, the Company plans to continue to expand the Black Cactus Holding software platform for the discovery and delivery of digital content and applications.  The Company plans to invest in additional research and development to continue to develop new and innovative Blockchain services and technologies.  We do not have sufficient capital to fund our proposed operations.  The Company has raised $800,000 from the sale of its Notes to Bellridge and anticipates selling an additional $700,000 in Notes to Bellridge to help fund its operations.


Use of estimates


Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Significant estimates were made for the fair value of Common Stock issued for services and for the BitReturn domain and brand, in estimating the useful life used for depreciation and amortization of our long-lived assets, and the valuation of deferred income tax assets. Actual results and outcomes may differ from management’s estimates and assumptions.


Revenue recognition


The Company recognizes revenue from its technology licensing and commercialization activities in accordance with paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned.


The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the services have been rendered to the customer and accepted by the customer as completed pursuant to Company’s Licensing Agreements, (iii) collectability is reasonably assured. The Company has yet to realize any revenues from its licensing agreements.


Recently Issued Accounting Pronouncements


The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations. Pursuant to Jumpstart Our Business Startups Act of 2012, as an “emerging growth company,” we are permitted to take advantage of an extended transition period for complying with new or revised accounting standards until such time as the standards are applicable to private companies. We have chosen to take advantage of this extended transition period. Accordingly, our financial statements may not be comparable to those of companies that comply with public company effective dates.


Results of Operations


Our results of operations for the nine months ended January 31, 2018 and January 31, 2017 are summarized below:


 

 

For the Nine
Months Ended
January 31, 2018

 

For the Nine
Months Ended
January 31, 2017

 

Revenue

 

 

 

 

 

Cost of Revenue

 

 

 

 

 

Net Loss (Income) and Comprehensive (Loss) Income

 

$

(10,896,827

)

$

(48,096

)

Net Loss (Income) per Common Share, Basic and Diluted

 

 

(0.10

)

 

(0.00

)

Weighted Average Number of Common Shares Outstanding, Basic and Diluted

 

 

113,200,543

 

 

80,576,000

 


- 24 -



We had net (loss) income of $(7,734,866) and $(28,851) for the three months ended January 31, 2018 and 2017, respectively.


We did not generate any revenues from our operations for the three months or the nine months ended January 31, 2018 or 2017. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including the financial risks associated with the limited capital resources currently available to us for the implementation of our business strategies.


During the three months ended January 31, 2018 and 2017, we had operating expenses of $(7,718,668) and $(28,851), respectively. The increase in operating expenses is primarily a result of the license fee of $6,600,000 resulting from our issuance of 60,000,000 shares of our Common Stock to Black Cactus Holdings, consulting fees of $937,691, investor relations fees of $78,917, professional fees of $52,525 and higher general and administrative fees of $49,075. These costs do not meet the criteria for capitalization, and therefore have been treated as an operating expense.


During the nine months ended January 31, 2018 and 2017, we had operating expenses of $(10,880,629) and $(48,096), respectively.  The increase in operating expenses is primarily a result of the cost of the license fee to Black Cactus Holdings of $6,600,000, professional fees of $142,683, product and website development costs of $2,349,123, general and administrative expenses of $71,267 as well as consulting fees of $1,638,639.  During the same period ended January 31, 2017, we incurred $48,096 in general and administrative expenses and had none of the other expenses referred to for the nine months ended January 31, 2018.


Since inception, the majority of our time has been spent refining our business plan and preparing for a primary financial offering.

 

Net Loss


Net Loss was $7,734,866 and $10,896,827 for the three and six-month periods ended January 31, 2018 compared to $28,851 and $48,096 for the same periods in 2017. This increase was primarily due to costs incurred in the acquiring the Black Cactus Holdings license, the costs of the BitReturn acquisition as well as increases in consulting fees and professional fees as a result of the Black Cactus Holdings and BitReturn transactions.


Year Ended April 30, 2017 compared to year ended April 30, 2016


 

 

For the Years Ended

April 30,

 

 

 

2017

 

2016

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

General and administrative

 

$

56,905

 

$

10,443

 

Professional fees

 

 

25,069

 

 

28,927

 

 

 

 

 

 

 

 

 

NET LOSS AND COMPREHENSIVE LOSS

 

$

(81,974

)

$

(39,370

)

 

 

 

 

 

 

 

 

NET LOSS PER COMMON SHARE, BASIC AND DILUTED

 

$

(0.00

)

$

(0.00

)

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED

 

 

80,789,041

 

 

80,000,000

 


Results of Operations


We have incurred expenses of $81,974 and $39,370 in our operations for the years ended April 30, 2017 and 2016, respectively.


We did not generate any revenues from our operations for the years ended April 30, 2017 or 2016. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including the financial risks associated with the limited capital resources currently available to us for the implementation of our business strategies.


- 25 -



Management’s Plan of Operation


We do not have adequate funds to satisfy our working capital requirements for the next twelve months.  We have borrowed a total of $800,000 from Bellridge to fund our planned plan of operations utilizing the software license agreement we have with Black Cactus Holdings.  Pursuant to the terms of our agreements with Bellridge, we are filing this registration statement with the SEC to register the shares of Common Stock to be issued under those agreements.  We will not receive the third tranche of $200,000 until we receive our first set of comments from the SEC.  The fourth and final tranche of $500,000 will be received once the registration statement is declared effective by the SEC. We cannot estimate when we will receive the SEC comments or when our registration statement will be declared effective by the SEC (so long as the comments are reasonable in the sole discretion of Bellridge). Under certain conditions, Bellridge may not have to purchase the third and fourth Notes.  These conditions include any acts constituting default under any of the Notes or the agreements entered into at the time of the first purchase of the Note issued on November 27, 2017.  Until such time as we receive the final $800,000 of funding from Bellridge, in the interim, we may not be able to completely implement and commence our proposed plan of operations.


Liquidity and Capital Resources


The following table summarizes total current assets, liabilities and working capital at April 30, 2017 compared to April 30, 2016.


 

 

April 30, 2017

 

April 30, 2016

 

Current Assets

 

$

3

 

$

0

 

Current Liabilities

 

$

71,939

 

$

74,103

 

Working Capital (Deficit)

 

$

(71,936

)

$

(74,103

)


At April 30, 2017, we had working capital deficit of $71,936 as compared to working capital deficit of $74,103 at April 30, 2016, a decrease in working capital deficit of $2,167.


The following table summarizes total current assets, liabilities and working capital at January 31, 2018 (unaudited) compared to April 30, 2017.


 

 

January 31, 2017
(unaudited)

 

April 30, 2017

 

Current Assets

 

$

399,748

 

$

3

 

Current Liabilities

 

$

1,094,816

 

$

71,939

 

Working Capital (Deficit)

 

$

(695,068

)

$

(71,936

)


At January 31, 2018, we had a working capital deficit of ($695,068) as compared to working capital deficit of ($71,936) at April 30, 2017, an increase in working capital deficit of $623,132.


As of January 31, 2018, we had not generated any revenues from our business operations.


As of January 31, 2018, and 2017, we had cash and cash equivalents of $11,556 and $102, respectively. Our cash was not sufficient to meet our current obligations and the expenses associated with being a company that is fully reporting with the SEC. We believe we will require additional financing in the form of share issuance proceeds, debt financing or advances from our directors.


Our business expansion will require significant capital resources that may be funded through the issuance of Common Stock or of notes payable or other debt arrangements that may affect our debt structure. Despite our current financial status, we believe that we may be able to issue notes payable or debt instruments in order to start executing our business plan. However, there can be no assurance that we will be able to raise money in this fashion and have not entered into any agreements that would obligate a third party to provide us with capital.


During the nine months ended January 31, 2018 and 2017, we had operating expenses of $10,880,629 and $48,096, respectively. Historically, we have relied on loans to fund general and administrative operating expenses. As of January 31, 2018, we had a working capital deficiency of $695,068.


As of January 31, 2018, the Company had no external sources of liquidity such as arrangements with credit institutions or off-balance sheet arrangements that will have or are reasonably likely to have a current or future effect on our financial condition or immediate access to capital.  Subsequently, we entered into the Bellridge transaction which has provided us with some of our capital requirements.


- 26 -



Our independent auditor has expressed doubt about our ability to continue as a going concern and believes that our ability is dependent on our ability to implement our business plan, raise capital and generate revenues. See Note 2 of our financial statements.


Off-Balance Sheet Arrangements


The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect or change on the Company’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with the Company is a party, under which the Company has (i) any obligation arising under a guarantee contract, derivative instrument or variable interest; or (ii) a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.


BUSINESS


Overview


Black Cactus Global is a global technology development and consulting company working with Black Cactus Holdings to develop state-of-the-art Blockchain solutions and applications for Fintech, Healthcare, Media and Supply Chain using smart contracts and machine learning. The Company intends to be a global company with its main office located in Las Vegas, NV with offices opening in London, Chicago, Melbourne this year, and with a soon-to-be opened technology hub in India.


The Company’s anticipated products and services to be licensed from Black Cactus Holdings include the first fully functional Fiat/Digital Global Financial Trading Platform, a cryptocurrency debit/credit card, know your customer (KYC) identity verification system, as well as versatile Video and Music Blockchain based platform that will allow artists and companies to distribute their works to over 100 online services.


Black Cactus Global believes that over time, Blockchain and Blockchain related technologies will completely transform the global economy.

 

The Company plans to develop creative, intelligent Blockchain solutions to support transactions of value, with speed, efficiency and benefit for its clients and its users.


Corporate History


Black Cactus Global was incorporated in the State of Florida on April 8, 2013. The address of the head office is Suite 200, 8275 South Eastern Avenue, Las Vegas, Nevada 89123. When we were originally incorporated, our business plan was to open adult day care centers in Sarasota, Florida.  We were unable to raise the capital necessary for such a center and had to abandon that proposed business operations and have revised our business plan accordingly.


On June 18, 2017, the Company entered into a Definitive Acquisition Agreement (the “BitReturn Agreement”) with Bitreturn.ca (“BitReturn”), an unrelated third party.  Pursuant to the BitReturn Agreement, we were to acquire the BitReturn domain and brand in exchange for 10,000,000 shares of our Common Stock, in restricted form and the payment of total consideration of $350,000 once certain milestones were reached.  As part of the BitReturn Agreement, the Company purchased computer equipment totaling $364,590 for use by BitReturn.  The equipment was pledged as security for the loan incurred by the Company to pay for the equipment.  Due to a failure of the Company to repay the loan in full by September 30, 2017, the lender took possession of the equipment.  To date, the BitReturn transaction has not developed into the operations that the Company had anticipated, and the Company does not anticipate that it will receive any return on its investment in BitReturn.  


On October 17, 2017, the Company entered into an Exclusive Software License Agreement (License Agreement”) with Black Cactus Holdings, a Delaware limited liability company, an unrelated third party (“Black Cactus Holdings”). Pursuant to the terms of the License Agreement, the Company was granted an exclusive software license for the Black Cactus blockchain development software platform and related intellectual property (the “Software”). The Company and Black Cactus Holdings plan to use the platform to build a crypto trading exchange to support crypto and fiat currencies, music publishing, distribution, supply chain, medical research and trials. The term of the Agreement will remain in effect in perpetuity.


- 27 -



As consideration for the use of the Software, in November 2017, the Company issued Black Cactus Holdings 60,000,000 shares of the Company’s Common Stock. In addition, the Company agreed to pay Black Cactus Holdings a royalty in the amount of five percent (5%) (the “Royalty”) of the net revenue received from the sublicense of the Software and any revenues generated from the use of the Software including other intellectual property that the Company licensed from Black Cactus Holdings pursuant to the terms of the Agreement (the “Sublicensed Materials”) for the term of the Agreement, less (i) applicable sales and use taxes (but in no event to include income or franchise taxes), (ii) any export duties, shipping, freight and handling charges paid by Licensee and reimbursed by customers, (iii) any trade and quantity discounts actually taken, and (iv) any credits for sales previously recorded but cancelled or refunded to a customer (“Net Revenues”).  The Company agreed to pay Black Cactus Holdings the Royalty due on a quarterly basis for each fiscal quarter of the Company during the term of the Agreement commencing six months after the Company releases a “go live” version of the Software that utilizes the Sublicensed Material (the “Go Live Date”).  The quarterly Royalty payment will be due on or before the sixtieth (60th) day after the last day of the fiscal quarter for which the Royalty payment is calculated.


In addition, the Company agreed to increase the size of its Board to five, with Black Cactus Holdings having the right to appoint two members to the Board and the Company changed its name to Black Cactus Global, Inc.  Additionally, the Company agreed to appoint the manager of Black Cactus Holdings, Lawrence Cummins, as its President and CEO.


On December 4, 2017, the Company entered into a software sub-license agreement (the “Sub-Lease Agreement”) with Milestone Group PLC (“Milestone”), an unrelated third party. Under the terms of the Sub-Lease Agreement, the Company granted Milestone a sublicense to the Software.  As consideration for the sublicense, Milestone will issue 29.5% of its issued capital to the Company and pay the Company a royalty fee of ten percent (10%) of the first 500,000 British Pounds in gross revenues received from the sublicense and thereafter, five percent (5%) of gross revenues generated by the sublicense.


On December 20, 2017, the Company entered into a Share Purchase Agreement (the “WOW Agreement”) with World on Wireless (UK) Limited (“WOW”), an unrelated third party.  Under the terms of the WOW Agreement, the Company will purchase all the issued ordinary shares of WOW from its shareholders, thereby acquiring all the intellectual property, research and development, contracts, accounts receivable and licenses owned by WOW.  In exchange, the Company will issue 3,200,000 shares of its Common Stock to the WOW shareholders.  The WOW Agreement has not closed and the acquisition will not be complete until the Company receives the source code and software to WOW’s intellectual property for all of WOW’s programs, platforms and products and these assets have been independently verified. Although the Company has issued these 3,200,000 shares, the shares have not been delivered and the transaction has not closed.  Additionally, if the shares issued to the WOW shareholders do not have an aggregate value of US$2 million by January 15, 2019, the WOW shareholders are entitled to have additional shares issued to them so that they hold shares equal to $2 million as of that date.


Business Strategy


Black Cactus Global in the business of designing, marketing and employing powerful Blockchain applications through its license with Black Cactus Holdings. The Company is planning a multi-phase rollout of advanced and market ready Blockchain applications as they become available.


The Company is committed to offering the highest quality of applications and platforms that convey the value of Black Cactus Holdings’ products and services.  Black Cactus Global is committed to bringing the most secure and finest user experience to its customers through its innovative Blockchain-technology designs.


The Company’s business strategy leverages its license agreement with Black Cactus Holdings unique and innovative design team which has pioneered, tested and perfected sophisticated Blockchain-based platforms for over six years. Our Company believes that it will eventually have the ability to design and develop its own platforms, dedicated application software and advanced machine learning algorithms that provide customers products and solutions with innovative design, superior ease-of-use and seamless integration into existing and popular websites and ecommerce spaces.


We believe that many of our current competitors may still be in the development phase, with no viable product ready for the marketplace.  We believe that Black Cactus Holding’s market ready products have been thoroughly tested and provide a high degree of complexity that will give the Company an enormous advantage over its competitors and greatly enhances our ability to attract and retain customers. We believe that Black Cactus Holding’s software and software platform are at the leading edge of a new technology that may be how the world’s economy will operate in the future.


- 28 -



As part of its strategy, the Company continues to expand its platform for the discovery and delivery of digital content and applications through the support of a community of engineers and students that will be the driving engine for new digital content, platforms and software products. The Company believes that ongoing investment in research and development is critical to the development of innovative Blockchain services and technologies. Our goal is to educate, innovate and invest in the new technological solutions for the future.


Services and Products


Currently, the Company has licensed several live Blockchain applications that will serve both to generate future revenue as well as position the Company as a leader in the Blockchain space.


 

Trading Platform - Trading is what the world has been waiting for. The platform creates and expands the intersection of the new crypto economy with the existing global economy. The platform fully integrates the new economic world of Digital Currencies with existing global economy of Financial Markets and Fiat Currencies by allowing the user to trade using either fiat or digital currency. The groundbreaking platform offers a comprehensive, simple and secure interface that is desktop and mobile device ready allowing access to Multiple currencies, multiple exchanges and applications are all available on the Trading Platform. The powerful trading platform will be marketed worldwide to consumers and business from small to large.

 

 

 

 

Debit/Credit Card – available in hard plastic or digital for mobile devices, Black Cactus Global is creating what it believes to be the first Crypto Debit/Credit card which will allow holders of crypto currency worldwide the ability to utilize the spending power of their Digital Currencies. The Company believes that the card, once it is created, will be accepted by ATMS globally and function as any typical credit card used at retail outlets.

 

 

 

 

Music and Video platform – these two powerful platforms create an entirely sustainable and ethical ecosystem for music or video works by artists, companies and distributors. The music or video product is first encoded and then transcoded into the Blockchain and then by using Smart Contracts the digital content autonomously maintains proper terms of usage, copyrights and revenue distribution. The content is instantly published to over 100 downloading services worldwide including Google Play, iTunes, Spotify, etc.

 

 

 

 

Know your customer (KYC) – Anti Money Laundering (AML) products. Black Cactus Global believes that it has sophisticated Blockchain solutions that offer rapid identity verification that more than meets stringent compliance issues for Banking, Anti-terrorist and FINTRACs mandate. Our product will ensure secure and valid online digital monetary and P2P transactions of value.

 

 

 

 

Blockchain Platform – Black Cactus Global has a powerful and adaptable Blockchain platform that can quickly be scaled to any use. After years of testing, new applications can be developed at low cost for solutions across a wide range of business verticals. Currently Black Cactus Global is moving forward in the Fintech, Agriculture, Smart City, Supply Chain and Medical sectors with efficient new Blockchain solutions that will bring in massive revenue for the Company.


Future Products and Services


 

Digital Banking – Currently, Black Cactus Global is actively seeking entities that have a valid banking license to create the world’s first fully digital service bank for Fiat and Cryptocurrencies. Black Cactus Global hopes to brand itself as the dominant force in this new market.

 

 

 

 

Consulting – At present, some officers of Black Cactus Global have been invited to advisory positions for a number of clients and business. Presently, we are expanding our capacity in this role to include government agencies and venture capital institutions. Black Cactus Global is a founding member of the Blockchain for Impact community platform, formed by the Blockchain Commission for Sustainable Development (BCSD). The BCSD was established to develop a framework for which the United Nations system, including its funds, programs and specialized agencies—along with Member States, Intergovernmental Organizations, the private sector and civil society—can utilize blockchain-based technologies to develop local, national and global solutions to the most pressing issues of our day.

 

 

 

 

Black Cactus Institute – currently Black Cactus Global has agreements with educational institutes in the US, Australia and in India. Here we plan for students to be taught the fundamentals of Blockchain and detailed coding techniques that will allow us to expand our technical team. We plan to educate, innovate, incubate and invest in the future technologies, applications and platforms created by students of the Academy.


- 29 -



 

The Company entered into an agreement to acquire World on Wireless (UK) Ltd (“WOW”) in December 2017.  This acquisition, if it closes, will give us expanded services and clients that include mobile wallets, merchant payments, and a number of consumer credit products that generate over USD$1 million annually of contractual revenue. Black Cactus Global has plans to expand some of these services as well as integrate them to our larger corporate goal of becoming the leader in digital transaction services.


Overview of the Industry


Blockchains may appear very complicated, but are quite simply, secure, permanent online digital ledgers that can record and preserve transactions by keeping the data safe by distributing the data in a non-centralized location. They are used to maintain a continuously growing list of records, called blocks, which over time are built into a series of time-stamped records, or a chain of blocks.


Blockchains are not held within one computer or data location but are stored across many computers or networks and the stored blocks cannot be retroactively altered. Thus, Blockchains are suitable for the recording of events, tracking physical items, preserving accounting or medical records, transaction processing and many other record management activities. Early in 2017, the Harvard Business Review suggested that Blockchain is truly a “foundational technology” and thus “has the potential to create new foundations for our economic and social systems.”


Recently, investment community has begun to realize the incredible value of far reaching power of Blockchain technology. Goldman Sachs has stated the technology “has the potential to redefine transactions” and can change “everything”. Banks and businesses are viewing Blockchains’ cost saving uses, and developers are seeing the Blockchain as a new backbone of the internet, an ‘Internet 3.0’.


The original terminology and the first application of Blockchain technology was developed for the digital currency, Bitcoin. Bitcoin, was not the first digital currency, but by employing the underlying Blockchain technology, Bitcoin gained rapid use as a safe and verifiable peer to peer electronic cash system and its meteoric rise has made it a mainstay of conversation for investors, media, and technologists alike.


In February 2011, the value of a Bitcoin reached parity with the U.S. dollar and by the end of 2017, Bitcoin has become the world’s top performing currency for 2nd straight year. At present, the Bitcoin price is approximately US$11,000 and is accepted by hundreds of thousands of business across the globe. Since Bitcoin supply is limited and cannot be created out of thin air, it appears that the price of Bitcoins will continue to rise.   


The Blockchain technology behind Bitcoin has also given birth to over 1,200 other cryptocurrencies and assets that are available for online trading. And while the market for Bitcoin is worth over $265 billion itself, the rest of these cryptocurrencies are worth more in the aggregate.   


All the top cryptocurrencies experienced incredible gains in 2016 and 2017, with the combined valuation of the top five crypto coins now over US $500 Billion which rivals some of America’s largest corporations. The Cryptocurrencies, Ethereum and Ripple, make up a large portion of the valuation of other popular digital currencies.


Ethereum, launched in 2015, is the largest coin by market capitalization aside from Bitcoin. However, it is also quite different. While Bitcoin is designed to be a payments protocol first, Ethereum enables developers to build and deploy decentralized applications, while also enabling smart contracts. The tokens used to power the network are called Ether, but they can also be traded online. At time of writing, Ethereum’s market capitalization is $99.8 billion.


Ripple (XRP) is the native currency of the Ripple Protocol – a broader catch-all for an open-source, global exchange. It is already being used by banks such as Santander, Bank of America, Merrill Lynch, UBS, and RBC. It solves a different problem than Bitcoin, allowing for settling payments between different currencies and even different payment systems. Today, Ripple’s native coin (XRP) has a market cap of $121.6 billion.


Whatever the currency, the aim of digital currencies is to provide a way to provide a way to exchange tokens or crypto-coins online without having to rely on centralized intermediaries, such as banks.


Advantages of using Crypto-currency


The generation and Blockchain methodology behind the digital currency provide a safeguard against counterfeit.  Each coin or portion is tracked by a digital ledger. They provide a decentralized banking service that is open to all. Digital currencies can be exchanged worldwide for goods and services; there is no need for an application or potential rejection for users like credit cards, nor middle third-party fees, intermediary currency exchange rates and immediate settlement.


- 30 -



Cryptocurrencies seem to have found the middle ground between gold and fiat as a medium of exchange. They combine the qualities of a unit that has a limited and visible supply with high trust but have the convenience of being digital, widely accepted and instantly mobile.


Acceptance of digital currencies worldwide would ensure open access to billions of individuals in the world with access to mobile phones and the internet, but who don’t have access to traditional banks, credit cards or exchange systems.


Competition


There are several Blockchain private companies including BitFury, Bitpay, Blockchain, Blockstack, Blockstream, Chain, Consenys, and Digital Asset.

 

Companies that participate in Blockchain technology in the public market include:


HIVE Blockchain is a Canadian publicly traded company. HIVE concentrates on mining of cryptocurrencies. BTL Group is another Canadian listed company which focuses on Interbit, its blockchain development platform, which is designed to build out applications. Currently, HIVE appears to be in mainly a testing phase of its platform having invited several companies for six-month trials tests prior to commercially launching its product.


Riot Blockchain is traded on NASDAQ. Riot presently mines Bitcoin as well making investments in Coinsquare – a Canadian digital currency exchange, Tesspay – a group planning to develop blockchain-based escrow services and Verady – a provider in cryptocurrency accounting and audit technology.


DigitalX is an Australian listed company. DigitalX offers Blockchain advisory and consulting services to approximately eight clients that are in development of various Blockchain Applications. MGT Capital is publicly traded in the US and has two security related products, a Privacy Phone and the Sentinel Program, which pro-actively defends against hacking. MGT Capital is also involved in the mining of Cryptocurrency.


Marketing


Our marketing strategy rests on the belief that our products and services represent a value-added and cost saving approach for its clientele and their customers.


The Company intends an aggressive strategic marketing campaign in 2018 that will attract clients to our current live Fintech and Media platforms as well as our many services.


The market for Blockchain technology is highly competitive, and we expect competition to increase in the future. We face competition from other providers of Blockchain technology, including competitors who utilize similar software and technology.  Many of our competitors have longer operating histories, greater brand recognition and greater financial, marketing and other resources. We expect that competition will continue to increase as a result of the increase in transactions utilizing cryptocurrencies and increased acceptance of cryptocurrencies by consumers and business worldwide.


Employees


We do not have any employees. However, we have retained approximately 3 individuals as independent contractors that are involved in business development and administrative functions.


Reports to Security Holders


The public may read and copy any materials the Company files with the SEC in the SEC’s Public Reference Section, Room 1580, 100 F Street N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Section by calling the SEC at 1-800-SEC-0330. Additionally, the SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, which can be found at http://www.sec.gov.


- 31 -



Properties


Our corporate headquarters is located at 8275 S. Eastern Avenue, Suite 200, Las Vegas, NV 89123.  We currently require only limited office space for the administration of our business. This space is currently provided to us free of charge at the office of Mr. Sangha, an officer and director of the company. Management believes this facility is appropriate for our current needs and could be expanded at reasonable cost if our business required us to do so.


Private Placement and Acquisitions


In November 2017, the Company issued 60,000,000 shares of Common Stock pursuant to the terms the License Agreement with Black Cactus Holdings to acquire an exclusive software license for the Black Cactus blockchain development software platform and related intellectual property (the “Software”) and the Agreement includes a service contract with the CEO of Black Cactus Holdings to join the Company as a director and officer. The term of the Agreement will remain in effect in perpetuity. In addition, the Company agreed to pay Black Cactus Holdings a royalty in the amount of 5% of the net revenue received from the sublicense of the Software and any revenues generated from the use of the Software including other intellectual property that the Company licensed from Black Cactus Holdings pursuant to the terms of the Agreement.


For a more detailed description of the Company’s private placements consummated in November 2017 and April 2018, see “November Private Placement” and “April Private Placement”, respectively.


Legal Proceedings


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


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


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


DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS


Directors and Executive Officers


The following table contains information with respect to our directors and executive officers. To the best of our knowledge, none of our directors or executive officers have an arrangement or understanding with any other person pursuant to which he or she was selected as a director or officer. There are no family relationships between any of our directors or executive officers. Directors serve one-year terms. Our executive officers are appointed by and serve at the pleasure of the board of directors.


Name

Current Age

Position

Harpreet Sangha

53

Chairman of the Board of Directors, Chief Financial Officer

Lawrence Commins

55

Director, Chief Development Officer

Dr. Ravindranath Kancherla

63

Director

Dr. Pruthvinath Kancherla

34

Director

Dr. Ramesh Para

45

Director, CEO


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Business Experience


Harpreet Sangha


Mr. Sangha has been a founder, CEO and board member of several public companies and brings 31 years of entrepreneurial, operational and capital market experience to Black Cactus Global, Inc. In 1986, he started his career as Investment Advisor and gained his affinity for raising capital for numerous startups and early stage public companies. Mr. Sangha departed this position in March 2006 to apply his unique ability of bringing capital to early stage projects and founded Douglas Lake Minerals. In the role of CEO, his leadership in Douglas Lake overcame rigorous operational challenges in the African environment and brought the value of the company to $240 million. He has also served as CEO, Secretary, and director of Sharprock Resources Inc. (OTCBB: SHRK) where he raised capital to explore a preproduction gold project in the Chukotka Region of Russia. He joined Rango Energy, Inc. in 2012 as Chairman of the Board and Chief Executive Officer. Mr. Sangha has established many valuable contacts and relationships with institutional clients worldwide.


Lawrence P. Cummins


On December 8, 2017, Lawrence P. Cummins was appointed CEO of Black Cactus Global, Inc. fka Envoy Group Corp. (the “Company”). Mr. Cummins is also a member of the Board of Directors.  On April 10, 2018, Mr. Cummins resigned as CEO but remains Chief Development Officer and a member of the Board of Directors.  Mr. Cummins is the CEO of Black Cactus Global Pty. Ltd., an Australian corporation (Black Cactus – Australia”), and managing member of Black Cactus Global, LLC, a Delaware limited liability company (“Black Cactus US”) which recently entered into a software licensing agreement with the Company.  Mr. Cummins has worked at Black Cactus – Australia for the past four years.  Prior to that, he was managing director of Charteris, Mackie, Baillie and Cummins (USA) from 1999-2015.  Mr. Cummins is still managing director of Charteris, Mackie in the United Kingdom.  Charteris Mackie is a global consulting firm specializing in Blockchain and Blockchain business strategy. Mr. Cummins has a Bachelor of Arts in Economics from Northwestern University and a Bachelor of Arts in Mathematics from the University of Oxford, University College.


Dr. Ravindranath Kancherla


On December 11, 2017, Dr. Ravindranath Kancherla was appointed Director of the Company.  Dr. Kancherla is a distinguished and internationally recognized Gastrointestinal Endosurgeon and a Fellow of both the Royal College of Surgeons of Edinburgh and Glasgow. Dr. Kancherla is the founder of Global Hospitals Group, India’s first multi-organ transplant center. Dr. Kancherla is currently its chairman and has served in that position since 2006.  Dr. Kancherla became a Fellow of the Royal College of Surgeons of Edinburgh in 1985 as well as the Royal College of Surgeons, Glasgow in 1985.  Dr. Kancherla received his Master of Science from Madras University in 1984 and was granted his Bachelor of Medicine / Bachelor of Surgery in 1980 from Sri Venkateswara Medical College, in Tirupati, AP, India.


Dr. Pruthvinath Kancherla


Dr. Pruthvinath Kancherla is the director of Global Hospitals Group, a multi super specialty tertiary care multi organ transplant facility having facilities in four major metro cities of India. Dr. Kancherla is a medical doctor who also has a Masters in Hospital Administration. Dr. Kancherla joined the Board of Global Hospitals as a full-time director in 2011 and has been closely involved in its growth. In 2015, Dr. Kancherla became a part-time director of Global Hospitals so that he might focus on fintech and cyber security areas. Dr. Kancherla has extensive investment experience at home and abroad. Dr. Kancherla’s hands on experience both in India and UK, more particularly in technology areas, is expected to bring immense value to the Company.


Dr. Ramesh Para


On February 1, 2018, Dr.Ramesh Para was appointed a member of the Board of Directors and on April 10, 2018, he was appointed CEO of the Company.  Dr. Ramesh Para has been a Director of Sysveda UK Limited since December 2011. As part of his duties at Sysveda, Dr. Para is responsible for the support of an in-house back office system, incident investigation and for defining functionalities for one of Sysveda’s client. He coordinates the offshore development team of 350 employees during development, planning user acceptance testing and system code review for the same client. Dr. Para has a track record of managing profitable companies of various sizes and looking after Information Technology for over 17 years and his expertise in IT management and development will assist the Company in its proposed operations. Dr. Para has a PhD in Management Information Systems, a Master’s in Business Administration and a Bachelor’s of Technology in Computer Science.


- 33 -



Family Relationships


Dr. Ravindranath Kancherla and Dr. Pruthvinath Kancerla are father and son.  There are no other family relationships between any of our directors or executive officers.


Involvement in Certain Legal Proceedings


There have been no events under any bankruptcy act, any criminal proceedings and any judgments, injunctions, orders or decrees material to the evaluation of the ability and integrity of any director, executive officer, promoter or control person of the Company during the past five years.


The Board of Directors acts as the Audit Committee and the Board of Directors has no separate committees. The Company has no qualified financial expert at this time because it has not been able to hire a qualified candidate. The Company intends to continue to search for a qualified individual for hire.


Code of Ethics


We have adopted a Code of Ethics which covers the Chief Executive Officer and Chief Financial Officer, which is administered and monitored by the Board of Directors as a whole.


EXECUTIVE COMPENSATION


Executive Officer Compensation


Summary Compensation Table


The table below summarizes all compensation awarded to, earned by, or paid to each named executive officer for our last two completed fiscal years for all services rendered to us.


2018 SUMMARY COMPENSATION TABLE

Name and

principal position

 

Year

 

Salary

($)

 

Bonus

($)

 

Stock Awards

($)

 

Option

Awards

($)

 

Non-Equity

Incentive Plan

Compensation

($)

 

Nonqualified

Deferred

Compensation

Earnings ($)

 

All Other

Compensation

($)

 

Total

($)

Harpreet Sangha,

 

2018

2017

 

0

0

 

0

0

 

0

0

 

0

0

 

0

0

 

0

0

 

0

0

 

0

0

CEO & CFO

 

2016

 

0

 

0

 

0

 

0

 

0

 

0

 

0

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dr. Ramesh Para

 

2018

 

0

 

0

 

0

 

0

 

0

 

0

 

0

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lawrence Cummins,

 

2018

2017

 

0

0

 

0

0

 

0

0

 

0

0

 

0

0

 

0

0

 

0

0

 

0

0

Chief Development Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


We do not have employment agreements with any of our executive officers. We also do not have pension, health, annuity, insurance, stock options, profit sharing, or similar benefit plans. However, we may adopt plans in the future.


Outstanding Equity Awards at the End of the Fiscal Year


We do not have any equity compensation plans and therefore no equity awards are outstanding as of December 31, 2017 and none have been issued during 2018.


Director Compensation


None of the members of the Board of Directors of the Company were compensated for services in such capacity.


- 34 -



Bonuses and Deferred Compensation


We do not have any bonus, deferred compensation or retirement plan. All decisions regarding compensation are determined by our Board of Directors.


Options and Stock Appreciation Rights


We have no outstanding options or stock appreciate rights.


Payment of Post-Termination Compensation


We do not have change-in-control agreements with our director or executive officer, and we are not obligated to pay severance or other enhanced benefits to our executive officer upon termination of his employment.


Employment Agreements


Currently, the Company has no employment agreements.


Board of Directors


Our directors hold office until the next annual meeting of shareholders and until their successors have been duly elected and qualified. Our officers are elected by and serves at the discretion of the Board of Directors.


Indemnification of Directors and Executive Officers and Limitation of Liability


Florida law generally permits us to indemnify our directors, officers, employees and agents. We, as a corporation organized in Florida, may indemnify our directors, officers, employees and agents in accordance with Florida Law. Our Certificate of Incorporation, as amended, does not contain any specific language enhancing or limiting the general Florida statutory provisions.


Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy and is, therefore, unenforceable.


DIRECTOR COMPENSATION


Our directors do not receive any compensation for their services as directors of the Company.


SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.


As of April 20, 2018, our authorized capitalization was 490,000,000 shares of Common Stock $0.0001 par value per share and 10,000,000 shares of preferred stock, par value $0.0001.  10,000 shares of our preferred stock are designated as Series A Preferred Stock. As of the same date, there were 166,043,296 shares of our Common Stock outstanding, all of which were fully paid, non-assessable and entitled to vote. Each share of our Common Stock entitles its holder to one vote on each matter submitted to the stockholders. There are no shares of Series A Preferred Stock issued and outstanding and no shares of preferred stock issued and outstanding.


The following table sets forth, as of April 20, 2018, the number of shares of our Common Stock owned by (i) each person who is known by us to own of record or beneficially five percent (5%) or more of our outstanding shares, (ii) each of our directors, (iii) each of our executive officers and (iv) all of our directors and executive officers as a group. Unless otherwise indicated, each of the persons listed below has sole voting and investment power with respect to the shares of our Common Stock beneficially owned.


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NAME OF OWNER

 

NUMBER OF

COMMON SHARES
OWNED (2)(3)

 

PERCENTAGE OF
COMMON STOCK (1)

 

 

 

 

 

 

 

Harpreet Sangha
c/o Black Cactus Global, Inc.
8275 S. Eastern Avenue Ste. 200
Las Vegas, NV 89123

 

 

23,200,000

 

 

13.97

%

 

 

 

 

 

 

 

 

Lawrence Cummins
c/o Black Cactus Global, Inc.
8275 S. Eastern Avenue Ste. 200
Las Vegas, NV 89123

 

 

60,000,000

 

 

36.13

%

 

 

 

 

 

 

 

 

Dr. Kancherla Ravindranath
c/o Black Cactus Global, Inc.
8275 S. Eastern Avenue, Ste. 200
Las Vegas, NV 89123

 

 

 

 

 

 

 

 

 

 

 

 

 

Andres Nil-Thore Forsberg
c/o Black Cactus Global, Inc.
8275 S. Eastern Avenue Ste. 200
Las Vegas, NV 89123

 

 

 

 

 

 

 

 

 

 

 

 

 

Dr. Pruthvinath Kancherla
c/o Black Cactus Global, Inc.
8275 S. Eastern Avenue Ste. 200
Las Vegas, NV 89123

 

 

 

 

 

 

 

 

 

 

 

 

 

Dr. Ramesh Para
c/o Black Cactus Global, Inc.
8275 S. Eastern Avenue Ste 200
Las Vegas, NV 89123

 

 

 

 

 

 

 

 

 

 

 

 

 

CEDE & Co.
PO Box 20
Bowling Green Station
New York, NY 10014

 

 

29,986,500

 

 

18.06

 

 

 

 

 

 

 

 

 

All Directors and Officers as a Group

 

 

83,200,000

 

 

50.10

%

All 5% Shareholders as a Group

 

 

113,186,500

 

 

69.17

%

All Directors, Officers and 5% Shareholders as a Group

 

 

113,186,500

 

 

69.17

%

__________

 

(1)

Based on 166,043,296 shares of Common Stock outstanding as of April 20, 2018.

 

(2)

Beneficial ownership is determined in accordance with Rule 13d-3(a) of the Exchange Act and generally includes voting or investment power with respect to securities.

 

(3)

The percentages in the table have been calculated on the basis of treating as outstanding for a particular person, all shares of our Common Stock outstanding on that date and all shares of our Common Stock issuable to that holder in the event of exercise of outstanding options, warrants, rights or conversion privileges owned by that person at that date which are exercisable within 60 days of that date. Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our Common Stock owned by them, except to the extent that power may be shared with a spouse.


Changes in Control


We are not aware of any arrangements that may result in changes in control” as that term is defined by the provisions of Item 403(c) of Regulation S-K.


- 36 -



CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE


As of April 20, 2018, the Company was indebted to Harpreet Sangha, an officer and director, in the amount of $321,217 for advances of working capital and expenses paid on behalf of the Company. The amount is unsecured, non-interest bearing and due on demand.


On June 22, 2017, the Company entered into a secured loan with a corporation with a significant shareholder for a loan up to CAD$450,000 for the purpose of purchasing digital currency mining hardware. The loan was non-interest bearing and due on August 31, 2017. The hardware purchased with the loaned funds was as collateral until the loan amount was repaid. If the loan was not repaid when due, the lender was entitled to take sole possession of the hardware, in lieu of the loan.  At September 30, 2017, the Company had not made the required payment of the loan and the lender took sole possession of the hardware.


Director Independence


We have four independent directors. Because our Common Stock is not currently listed on a national securities exchange, we have used the definition of “independence” of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the company or any other individual having a relationship, which in the opinion of the Company’s Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:


 

the director is, or at any time during the past three years was, an employee of the company;

 

 

 

 

the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service);

 

 

 

 

a family member of the director is, or at any time during the past three years was, an executive officer of the company;

 

 

 

 

the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions);

 

 

 

 

the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or

 

 

 

 

the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.


Dr. Kancherla Ravindranath, Dr. Pruthvinath Kancherla and Dr. Ramesh Para are considered independent.  Messrs. Sangha and Cummins are not considered independent because they are officers and directors of the Company.   


We do not currently have a separately designated audit, nominating or compensation committee.


DESCRIPTION OF SECURITIES


General


The Company’s Articles of Incorporation, as amended, authorize the Company to issue 490,000,000 shares of its Common Stock, par value $0.0001 and 10,000,000 shares of preferred stock, par value $0.0001.  The Company has designated 10,000 shares of its preferred stock as Series A Preferred Stock.


Common Stock


The Company is authorized by its Certificate of Incorporation to issue an aggregate of 490,000,000 shares of Common Stock, $0.0001 par value per share (the “Common Stock”).  As of April 20, 2018, 166,043,296 shares of Common Stock were issued and outstanding.


- 37 -



The holders of our Common Stock (i) have equal ratable rights to dividends from funds legally available therefore, when, as and if declared by our Board of Directors; (ii) are entitled to share ratably in all of our assets available for distribution to holders of Common Stock upon liquidation, dissolution or winding up of our affairs; (iii) do not have pre-emptive, subscription or conversion rights and there are no redemption or sinking fund provisions or rights; and (iv) are entitled to one non-cumulative vote per share on all matters on which shareholders may vote.


The shares of our Common Stock are not subject to any future call or assessment and all have equal voting rights. There are no special rights or restrictions of any nature attached to any of the shares of our Common Stock and they all rank at equal rate or “pari passu”, each with the other, as to all benefits, which might accrue to the holders of the shares of our Common Stock. All registered shareholders are entitled to receive a notice of any general annual meeting to be convened.


At any general meeting, subject to the restrictions on joint registered owners of shares of our Common Stock, on a showing of hands every shareholder who is present in person and entitled to vote has one vote, and on a poll every shareholder has one vote for each share of our Common Stock of which he is the registered owner and may exercise such vote either in person or by proxy. Holders of shares of our Common Stock do not have cumulative voting rights, which means that the holders of more than 50% of the outstanding shares, voting for the election of directors, can elect all of the directors to be elected, if they so choose, and, in such event, the holders of the remaining shares will not be able to elect any of our directors.


Preferred Stock


The Company is authorized to issue an aggregate of 10,000,000 shares of preferred stock, par value $0.0001.  The Company has designated 10,000 shares of preferred stock as Series A Preferred Stock.  There are no shares of Series A Preferred Stock currently issued and outstanding.  There are no other classes of preferred stock designated and no shares of preferred stock are issued and outstanding.  


The Preferred Stock authorized by our Articles of Incorporation may be issued in one or more series.  The Board of Directors of the Corporation is authorized to determine or alter the rights, preferences, privileges and restrictions granted or imposed upon any wholly unissued series of Preferred Stock, and within the limitations or restrictions stated in any resolution or resolutions of the Board of Directors originally fixing the number of shares constituting any series, to increase or decrease (but not below the number of shares of any such series then outstanding) the number of shares of any such series subsequent to the issue of shares of that series, to determine the designation and par value of any series and to fix the numbers of shares of any series.


Series A Preferred Stock


The 10,000 authorized but unissued Series A Preferred Stock, if issued, have an aggregate voting power of 45% of the combined voting power of the entire Company’s shares, Common Stock and preferred stock, as long as the Company is in existence. Each holder of the Series A Preferred Stock would have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, and would be entitled to notice of any stockholders’ meeting in accordance with the by-laws of the Company, and be entitled to vote, together with holders of Common Stock, with respect to any question upon which holders of Common Stock have the right to vote. Without the vote or consent of holders of at least a majority of the shares of Series A Preferred Stock then outstanding, the Company may not (i) authorize, create or issue, or increase the authorized number of shares of, any class or series of capital stock ranking prior to or on a parity with the Series A Preferred Stock, (ii) authorize, create or issue any class or series of Common Stock of the Company other than the Common Stock, (iii) authorize any reclassification of the Series A Preferred Stock, (iv) authorize, create or issue any securities convertible into or exercisable for capital stock prohibited by (i) or (ii), (v) amend this Certificate of Designations or (vi) enter into any merger or reorganization, or disposal of assets involving 20% of the total capitalization of the Company.


Subject to the rights of the holders of any other series of preferred stock ranking senior to or on a parity with the Series A Preferred Stock with respect to liquidation and any other class or series of capital stock of the Company ranking senior to or on a parity with the Series A Preferred Stock with respect to liquidation, in the event of any liquidation, dissolution or winding up of the affairs of the Company, whether voluntary or involuntary, the holders of record of the issued and outstanding shares of Series A Preferred Stock shall be entitled to receive, out of the assets of the Company available for distribution to the holders of shares of Series A Preferred Stock, prior and in preference to any distribution of any of the assets of the Company to the holders of Common Stock and any other series of preferred stock ranking junior to the Series A Preferred Stock with respect to liquidation.  The holders of the Series A Preferred Stock are not be entitled to receive dividends per share of Series A Preferred Stock and the Company has no right to redeem the Series A Preferred Stock.


- 38 -



Dividend Policy


We have not declared dividends since our inception. Holders of Common Stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors out of funds legally available. We presently anticipate that all earnings, if any, will be retained for development of our business. Any future disposition of dividends will be at the discretion of our Board of Directors and will depend upon, among other things, our future earnings, operating and financial condition, capital requirements, and other factors.


Transfer Agent and Registrar


The transfer agent and registrar for our Common Stock is VStock Transfer, LLC, with an address at 18 Lafayette Pl, Woodmere, NY 11598. Their phone number is (212) 828-8436.


Warrants


For a more detailed description of the November Warrant and the FA Warrant, see “November Private Placement” above.  For a more detailed description of the April Warrants, see “April Private Placement” above.


Notes


For a more detailed description of the Notes, see “November Private Placement” above.


Other Convertible Securities


As of the date hereof, other than the securities described above, we do not have any other outstanding convertible securities.


PLAN OF DISTRIBUTION


The Selling Security Holders of the securities and any of its pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their securities covered hereby on any trading market, stock exchange or other trading facility on which the securities are traded or in private transactions. These sales may be at fixed or negotiated prices. The Selling Security Holders may use any one or more of the following methods when selling securities:


 

ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

 

 

 

 

block trades in which the broker-dealer will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction;

 

 

 

 

purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

 

 

 

 

an exchange distribution in accordance with the rules of the applicable exchange;

 

 

 

 

privately negotiated transactions;

 

 

 

 

settlement of short sales;

 

 

 

 

in transactions through broker-dealers that agree with the Selling Security Holders to sell a specified number of such securities at a stipulated price per security;

 

 

 

 

through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

 

 

 

 

a combination of any such methods of sale; or

 

 

 

 

 any other method permitted pursuant to applicable law.


The Selling Security Holders may also sell securities under Rule 144 under the Securities Act, if available, rather than under this prospectus.


- 39 -



Broker-dealers engaged by the Selling Security Holders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Security Holders (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.


In connection with the sale of the securities covered hereby, the Selling Security Holders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the securities in the course of hedging the positions they assume. The Selling Security Holders may also sell securities short and deliver these securities to close out their short positions, or loan or pledge the securities to broker-dealers that in turn may sell these securities. The Selling Security Holders may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).


The Selling Security Holders and any broker-dealers or agents that are involved in selling the securities may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Each Selling Security Holder has informed us that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the securities.


We are required to pay certain fees and expenses incurred by us incident to the registration of the securities. We have agreed to indemnify the Selling Security Holders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.


Because the Selling Security Holders may be deemed to be an “underwriter” within the meaning of the Securities Act, it will be subject to the prospectus delivery requirements of the Securities Act, including Rule 172 thereunder. In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than under this prospectus. Each Selling Security Holder has advised us that there is no underwriter or coordinating broker acting in connection with the proposed sale of the resale securities by the Selling Security Holder.


We agreed to keep this prospectus effective until the earlier of (i) the date on which the securities may be resold by the Selling Security Holders without registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for us to be in compliance with the current public information requirement under Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of the securities have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The resale securities will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale securities covered hereby may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.


Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale securities may not simultaneously engage in market making activities with respect to the Common Stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the Selling Security Holders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of the Common Stock by the Selling Security Holders or any other person. We will make copies of this prospectus available to the Selling Security Holders and have informed the Selling Security Holders of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).


SHARES ELIGIBLE FOR FUTURE SALE


The sale of a substantial number of shares of our Common Stock, or the perception that such sales could occur, could adversely affect prevailing market prices for our Common Stock. In addition, any such sale or perception could make it more difficult for us to sell equity, or equity related, securities in the future at a time and price that we deem appropriate. If and when this Registration Statement becomes effective and we become subject to the reporting requirements of the Exchange Act, we might elect to adopt a stock option plan and file a Registration Statement under the Securities Act registering the shares of Common Stock reserved for issuance there under. Following the effectiveness of any such Registration Statement, the shares of Common Stock issued under such plan, other than shares held by affiliates, if any, would be immediately eligible for resale in the public market without restriction.


- 40 -



The sale of shares of our Common Stock which are not registered under the Securities Act, known as “restricted” shares, typically are effected under Rule 144. As of the date of this prospectus we have outstanding an aggregate of 166,043,296 shares of Common Stock of which approximately 133,250,000 shares are restricted Common Stock. All our shares of Common Stock might be sold under Rule 144 after having been held for six months. No prediction can be made as to the effect, if any, that future sales of “restricted” shares of our Common Stock, or the availability of such shares for future sale, will have on the market price of our Common Stock or our ability to raise capital through an offering of our equity securities.


SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS


We do not have any equity compensation plans.


DISCLOSURE OF COMMISSION POSITION

ON INDEMNIFICATION OF SECURITIES ACT LIABILITIES


Our directors and officers are indemnified as provided by the Florida Business Corporation Act and our Bylaws.  We have agreed to indemnify each of our directors and certain officers against certain liabilities, including liabilities under the Securities Act. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the provisions described above, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than our payment of expenses incurred or paid by our director, officer or controlling person 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, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.


LEGAL MATTERS


Poole & Shaffery, LLP will render a legal opinion as to the validity of the securities to be registered hereby.


EXPERTS


No expert or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of the Common Stock was employed on a contingency basis, or had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in the registrant or any of its parents or subsidiaries. Nor was any such person connected with the registrant or any of its parents or subsidiaries as a promoter, managing or principal underwriter, voting trustee, director, officer, or employee.


The financial statements of the Company included in this prospectus and in the registration statement have been audited by Manning Elliott LLP, to the extent and for the period set forth in their report appearing elsewhere herein and in the registration statement and are included in reliance upon such report given upon the authority of said firm as experts in auditing and accounting.


WHERE YOU CAN FIND MORE INFORMATION


We have filed with the SEC a registration statement on Form S-1 under the Securities Act, with respect to the shares of Common Stock being offered by this prospectus. This prospectus does not contain all of the information in the registration statement and its exhibits. For further information with respect to us and the Common Stock offered by this prospectus, we refer you to the registration statement and its exhibits. Statements contained in this prospectus as to the contents of any contract or any other document referred to are not necessarily complete, and in each instance, we refer you to the copy of the contract or other document filed as an exhibit to the registration statement. Each of these statements is qualified in all respects by this reference. You may read and copy any document that we file at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549, on official business days during the hours of 10:00 am and 3:00 pm. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. All filings we make with the SEC are also available on the SEC’s web site at http://www.sec.gov. You may also request a copy of these filings, at no cost, by writing us at Black Cactus Global, Inc., 8275 S. Eastern Avenue, Suite 200, Las Vegas, NV 89123.


- 41 -



We are subject to the periodic reporting requirements of the Exchange Act, and we will file periodic reports, proxy statements and other information with the SEC. These periodic reports, proxy statements and other information are available for inspection and copying at the public reference room and website of the SEC referred to above. You may access our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act with the SEC free of charge at our website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. We have not incorporated by reference into this prospectus the information contained in, or that can be accessed through, our website, and you should not consider it to be a part of this prospectus.


INCORPORATION BY REFERENCE


We incorporate by reference in this prospectus any future filings we make with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act (excluding any information furnished and not filed with the SEC) after the date on which the registration statement that includes this prospectus was initially filed with the SEC (including all such documents we may file with the SEC after the date of the initial registration statement and prior to the effectiveness of the registration statement) and until all offerings under this prospectus are terminated.


Any statement contained in a document incorporated by reference herein shall be deemed to be modified or superseded for all purposes to the extent that a statement contained in this prospectus or in any other subsequently filed document which is also incorporated or deemed to be incorporated by reference, modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus. You may request a copy of these filings (other than an exhibit to a filing unless that exhibit is specifically incorporated by reference into that filing) at no cost by writing, telephoning or e-mailing us at the following address, telephone number or e-mail address:


8275 S. Eastern Avenue, Suite 200

Las Vegas, Nevada, 89123

(702) 724-2643

info@blackcactusglobal.com


- 42 -



INDEX TO THE FINANCIAL STATEMENTS



BLACK CACTUS GLOBAL, INC.


For the Nine Months Ended January 31, 2018 and 2017

(Unaudited)



Balance Sheets as of January 31, 2018 and April 30, 2017

F–2

 

 

Statements of Operations and Comprehensive Loss for the three and nine months ended January 31, 2018 and 2017

F–3

 

 

Statements of Cash Flows for the nine months ended January 31, 2018 and 2017

F–4

 

 

Notes to the Financial Statements

F–5

 

 

ENVOY GROUP CORP.


For the Years Ended April 30, 2017 and 2016



Report of Independent Registered Public Accounting Firm

F–11

 

 

Balance Sheets at April 30, 2017 and 2016

F–12

 

 

Statements of Operations and Comprehensive Loss for the years ended April 30, 2017 and 2016

F–13

 

 

Statements of Stockholders’ Deficit for the years ended April 30, 2017 and 2016

F–14

 

 

Statements of Cash Flows for the years ended April 30, 2017 and 2016

F–15

 

 

Notes to the Financial Statements

F–16

 

 

ENVOY GROUP CORP.


For the Year Ended April 30, 2016 and 2015



Reports of Independent Registered Public Accounting Firms

F–21

 

 

Balance Sheets at April 30, 2016 and 2015

F–22

 

 

Statements of Operations and Comprehensive Loss for the years ended April 30, 2016 and 2015

F–23

 

 

Statements of Stockholders’ Deficit for the years ended April 30, 2016 and 2015

F–24

 

 

Statements of Cash Flows for the years ended April 30, 2016 and 2015

F–25

 

 

Notes to the Financial Statements

F–26

 

 

F-1



BLACK CACTUS GLOBAL, INC.

(Formerly Envoy Group Corp.)

BALANCE SHEETS

(Expressed in U.S. Dollars)



 

 

January 31,

 

April 30,

 

 

 

2018

 

2017

 

 

 

(Unaudited)

 

(Audited)

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

11,556

 

$

3

 

Prepaid expenses and other assets (Note 6)

 

 

388,192

 

 

 

TOTAL ASSETS

 

$

399,748

 

$

3

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

79,184

 

$

37,151

 

Advances payable (Note 8)

 

 

295,000

 

 

 

Amount payable for BitReturn (Note 12)

 

 

350,000

 

 

 

Convertible debentures (Note 10)

 

 

12,161

 

 

 

Due to related parties (Note 7)

 

 

321,217

 

 

1,872

 

 

 

 

 

 

 

 

 

Loans payable (Note 9)

 

 

37,254

 

 

32,916

 

 

 

 

 

 

 

 

 

Total Current Liabilities

 

 

1,094,816

 

 

71,939

 

 

 

 

 

 

 

 

 

Loans payable (Note 9)

 

 

 

 

33,782

 

Total Liabilities

 

 

1,094,816

 

 

105,721

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 10,000,000 shares authorized, of which 10,000 shares designated as Series A, no shares issued and outstanding (Note 14)

 

 

 

 

 

Common stock, $0.0001 par value; 490,000,000 shares authorized; 161,250,000 and 83,000,000 shares issued and 158,050,000 and 83,000,000 shares outstanding as of January 31, 2018 and April 30, 2017, respectively (Note 14)

 

 

15,805

 

 

8,300

 

Shares issuable

 

 

760,832

 

 

14,000

 

Additional paid-in capital

 

 

9,627,699

 

 

74,559

 

Accumulated deficit

 

 

(11,099,404

)

 

(202,577

)

Total Stockholders’ Deficit

 

 

(695,068

)

 

(105,718

)

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

$

399,748

 

$

3

 


Going Concern (Note 2)

Commitment (Note 13)

Subsequent Events (Note 15)


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


F-2



BLACK CACTUS GLOBAL, INC.

(Formerly Envoy Group Corp.)

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Expressed in U.S. Dollars)

(Unaudited)


 

 

For the Three Months
Ended January 31,

 

For the Nine Months
Ended January 31,

 

 

 

2018

 

2017

 

2018

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

Black Cactus license fee

 

$

6,600,000

 

$

 

$

6,600,000

 

$

 

Consulting (Note 9)

 

 

937,691

 

 

 

 

1,638,639

 

 

 

General and administrative

 

 

49,075

 

 

28,851

 

 

71,267

 

 

48,096

 

Investor relations

 

 

78,917

 

 

 

 

78,917

 

 

 

Professional fees

 

 

52,525

 

 

 

 

142,683

 

 

 

Product development and website costs (Note 12)

 

 

460

 

 

 

 

2,349,123

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL OPERATING EXPENSES

 

$

(7,718,668

)

$

(28,851

)

$

(10,880,629

)

$

(48,096

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accretion of discounts on convertible debentures

 

 

(12,161

)

 

 

 

(12,161

)

 

 

Interest expense

 

 

(4,037

)

 

 

 

(4,037

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS AND COMPREHENSIVE LOSS

 

$

(7,734,866

)

$

(28,851

)

$

(10,896,827

)

$

(48,096

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS PER COMMON SHARE,
BASIC AND DILUTED

 

$

(0.05

)

$

(0.00

)

$

(0.10

)

$

(0.00

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING,
BASIC AND DILUTED

 

 

154,011,413

 

 

81,728,000

 

 

113,200,543

 

 

80,576,000

 


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


F-3



BLACK CACTUS GLOBAL, INC.

(Formerly Envoy Group Corp.)

STATEMENTS OF CASH FLOWS

(Expressed in U.S. Dollars)

(Unaudited)


 

 

For the Nine Months Ended
January 31,

 

 

 

2018

 

2017

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

Net loss

 

$

(10,896,827

)

$

(48,096

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

Accretion of loan discounts

 

 

2,947

 

 

1,261

 

Accretion of convertible debt discount

 

 

12,161

 

 

 

Issuance of common stock for BitReturn (Note 12)

 

 

1,900,000

 

 

 

Issuance of common shares for services

 

 

602,833

 

 

 

Issuance of common shares for license agreement (Note 11)

 

 

6,600,000

 

 

 

Shares issuable for services

 

 

660,000

 

 

 

 

 

 

 

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Prepaid expenses

 

 

(284,025

)

 

 

Accounts payable and accrued liabilities

 

 

41,663

 

 

94

 

Amount payable for BitReturn

 

 

350,000

 

 

 

 

 

 

 

 

 

 

 

Net Cash Used in Operating Activities

 

 

(1,011,248

)

 

(46,741

)

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from advances payable

 

 

295,000

 

 

 

Advances from related party, net of repayments

 

 

321,620

 

 

(20,258

)

Proceeds from issuance of common stock

 

 

 

 

30,000

 

Proceeds from issuance of convertible debt, net of debt financing costs

 

 

440,000

 

 

 

Proceeds from (repayments of) loans payable

 

 

(32,474

)

 

38,075

 

 

 

 

 

 

 

 

 

Net Cash Provided by Financing Activities

 

 

1,024,146

 

 

47,817

 

 

 

 

 

 

 

 

 

Net effect of exchange rate changes on cash

 

 

(1,345

)

 

(974

)

 

 

 

 

 

 

 

 

Net Increase in Cash and Cash Equivalents

 

 

11,553

 

 

102

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents, Beginning of Period

 

 

3

 

 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents, End of Period

 

$

11,556

 

$

102

 

 

 

 

 

 

 

 

 

SUPPLEMENTARY CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest paid

 

$

 

$

 

Income taxes paid

 

$

 

$

 


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


F-4



1. NATURE OF BUSINESS


Black Cactus Global, Inc. (formerly Envoy Group Corp.) (the “Company”), was incorporated in the State of Florida on April 8, 2013. The address of the head office is Suite 200, 8275 South Eastern Avenue, Las Vegas, Nevada 89123. In December 2017, the Company acquired an exclusive software license for the Black Cactus blockchain development software platform and related intellectual property (the “Software”) and the Agreement includes a contract with the CEO of Black Cactus LLC to become a Director and Officer of the Company.  The Company plans to use the Software platform to create a crypto trading exchange to support crypto and fiat currencies, music publishing, distribution, supply chain, medical research and trials (refer to Note 11). On December 4, 2017, the Company changed its name to “Black Cactus Global, Inc.”.


2. GOING CONCERN


The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has had no revenue or operations, and only incurred losses since inception. As at January 31, 2018, the Company has a working capital deficiency of $695,068 and an accumulated deficit of $11,099,404. In view of these matters, the Company’s ability to continue as a going concern is dependent upon the Company’s ability to raise sufficient financing to acquire or develop a profitable business. The Company intends to finance its future development activities and its working capital needs largely from the sale of public equity securities with some additional funding from other traditional financing sources, including related party advances and term notes until such time that funds provided by operations are sufficient to fund working capital requirements. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.


3. SIGNIFICANT ACCOUNTING POLICIES


BASIS OF PRESENTATION


These unaudited financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), and are expressed in United States dollars. The Company’s fiscal year-end is April 30.


These interim unaudited financial statements have been prepared in accordance with US GAAP for interim financial information and with the instructions to Securities and Exchange Commission (“SEC”) Form 10-Q. They do not include all of the information and footnotes required by US GAAP to complete financial statements. Therefore, these interim financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended April 30, 2017, included in the Company’s Annual Report on Form 10-K filed with the SEC.


The financial statements included herein are unaudited; however, they contain all normal recurring accruals and adjustments that, in the opinion of management, are necessary to present fairly the Company’s financial position at January 31, 2018, and the results of its operations for the three and nine months ended January 31, 2018 and cash flows for the nine months ended January 31, 2018. The results of operations for the period ended January 31, 2018 are not necessarily indicative of the results to be expected for future quarters or the full year.


The significant accounting policies followed are:


USE OF ESTIMATES


The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates related to fair value measurements, stock-based compensation and deferred income tax asset valuation allowance. Actual results could differ from those estimates.


FINANCIAL INSTRUMENTS


ASC 825, “ Financial Instruments ”, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 825 prioritizes the inputs into three levels that may be used to measure fair value:


F-5



Level 1


Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.


Level 2


Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.


Level 3


Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.


The financial instruments consist principally of cash and cash equivalents, accounts payable, advances payable, due to related party, loans payable and convertible debentures. The fair value of cash and cash equivalents when applicable is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. Derivative liabilities are determined based on “Level 2” inputs, which are significant and observable. The Company believes that the recorded values of all other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations.


Assets and liabilities measured at fair value on a recurring basis were presented on the Company’s balance sheet as of January 31, 2018 and April 30, 2017:


 

Fair Value Measurements Using

 

 

 

 

 

 

 

 

 

Quoted Prices in

Significant

 

 

 

 

Active Markets

Other

Significant

 

 

 

For Identical

Observable

Unobservable

Balance as of

Balance as of

 

Instruments

Inputs

Inputs

January 31,

April 30,

 

(Level 1)

(Level 2)

(Level 3)

2018

2017

 

 

 

 

 

 

Assets:

 

 

 

 

 

Cash and cash equivalents

$   11,556

$        —

$        —

$   11,556

$        3


Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash and cash equivalents. The Company limits its exposure to credit loss by placing its cash and cash equivalents with high credit quality financial institutions.


RECENT ACCOUNTING PRONOUNCEMENTS


The Company has implemented all new mandatory accounting pronouncements that are in effect and there has been no significant impact on its financial statements. The Company does not believe that there are any  new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.


4. FINANCIAL RISK FACTORS


LIQUIDITY RISK


Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at January 31, 2018, the Company has a cash balance of $11,556 and current liabilities of $1,094,816. The Company’s accounts payable and accrued liabilities have contractual maturities of less than 60 days and are subject to normal trade terms. The Company requires additional financing to meet its current obligations. The ability of the Company to continue to identify and evaluate feasible business opportunities, develop products and generate working capital is dependent on its ability to secure additional equity or debt financing.


F-6



FOREIGN EXCHANGE RISK


Foreign exchange risk is the risk that the Company will be subject to foreign currency fluctuations in satisfying obligations related to foreign activities. Loans payable to unrelated third parties may be denominated in Canadian dollars. Foreign exchange risk arises from purchase transactions as well as financial assets and liabilities denominated in these foreign currencies. The Company does not use derivative instruments to hedge exposure to foreign exchange rate risk. However, management of the Company believes there is no significant exposure to foreign currency fluctuations.


5. EQUIPMENT


On June 22, 2017, the Company purchased computer equipment totaling $364,590. The equipment was pledged as security on a loan (See Note 7(b)). Pursuant to the terms of the loan, should the loan remain unpaid past September 30, 2017, the lender would take sole possession of the equipment. The Company did not make the required payment and the equipment was returned to the lender.  As at January 31, 2018 the Company had no equipment.


6. PREPAID EXPENSES AND OTHER ASSETS


The Company’s prepaid expenses and other assets consists of deposits, retainers and advance payments for various services including investor relations, legal, marketing and other costs.


7. RELATED PARTY TRANSACTIONS AND BALANCES


(a)

As at January 31, 2018, the Company was indebted to the majority shareholder in the amount of $321,217 (April 30, 2017- $1,872) for advances of working capital and expenses paid on behalf of the Company. The amount is unsecured, non-interest bearing and due on demand.

 

 

(b)

On June 22, 2017, the Company entered into a secured loan with a corporation with a significant shareholder for a loan up to CAD$450,000 for the purpose of purchasing digital currency mining hardware (“Mining Hardware”). The loan was non-interest bearing and due on August 31, 2017. The Mining Hardware purchased with the loaned funds is held as collateral until the loan amount has been fully repaid. Furthermore, revenue produced by the Mining Hardware purchased with the loaned funds is to be paid to the Lender until the loaned funds are repaid in full. Should the loan remain unpaid past September 30, 2017, the Lender will take sole possession of the Mining Hardware, in lieu of the loan.  As at September 30, 2017, the Company had not made the required payment of the loan and the Lender took sole possession of the Mining Hardware (refer to Note 5).  


8. ADVANCES PAYABLE


On December 20, 2017, the Company received $295,000 from Bellridge Capital L.P. as an advance relating to the second tranche of the Securities Purchase Agreement (refer to Notes 10 and 15).


9. LOANS PAYABLE


The balance presented for loans payable consist of the following amounts:


(a)

On July 15, 2016, the Company entered into a loan agreement for a principal balance of up to $50,000 at any given time. The amount is unsecured, non-interest bearing and due on July 15, 2018. As at January 31, 2018, the Company has received gross loan proceeds of $54,716. Upon receipt of the funds, the Company recorded fair value discounts of $6,836. During the year ended April 30, 2017, the Company repaid $10,600 of principal and recognized accretion of the discount of $2,067. During the nine months ended January 31, 2018, the Company repaid $5,000 of principal and recognized accretion of the discount of $2,947. At January 31, 2018, the net carrying value of the loan was $36,754.

 

 

(b)

As at January 31, 2018, the Company was indebted for loans amounting to $500 (April 30, 2017 - $24,129). The amounts are unsecured, non-interest bearing and due on demand.

 

 

(c)

As at January 31, 2018, the Company was indebted for loans in the amount of $nil (April 30, 2017 - $8,786 (CAD $12,000)). The amount is unsecured, non-interest bearing and due on demand.


F-7



10. CONVERTIBLE DEBENTURES


On November 27, 2017 the entered into and closed on a Securities Purchase Agreement (“SPA”) with Bellridge Capital L.P. (“Bellridge”), pursuant to which the Company issued a senior secured convertible promissory note in the aggregate principal amount of $526,316 (“Note”) for an aggregate purchase price of $500,000, net of a $26,316 original issue discount and $10,000 of legal fees. The Company also incurred additional debt issuance costs of $50,000.  The total debt issue costs of $86,316 have been netted against the principal and will be amortized over the term of the loan using the effective interest rate method. In addition, the Company issued 7,894,737 warrants to Bellridge with a term of six months at an exercise price equal to the lesser of (i) $.10 per share and (ii) 70% of the lowest traded price of the Company’s common stock during the prior twenty consecutive trading days. The Company also agreed to issue 2,793,296 shares to Bellridge in connection with the loan.  The interest on the outstanding principal due under the Note accrues at a rate of 5% per annum. All principal and accrued interest under the Note is due on November 27, 2018 and is convertible into shares of the Company’s Common Stock at a conversion price equal to the lesser of (i) $0.10 and (ii) 70% of the lowest traded market price in the 20 consecutive trading days prior to the conversion date.


The Company has evaluated whether separate financial instruments with the same terms as the conversion features above would meet the characteristics of a derivative instrument as described in paragraphs ASC 815-15-25. The terms of the contracts do not permit net settlement, as the shares delivered upon conversion are not readily convertible to cash. The Company’s trading history indicated that the shares are thinly traded and the market would not absorb the sale of the shares issued upon conversion without significantly affecting the price. As the conversion features would not meet the characteristics of a derivative instrument as described in paragraphs ASC 815-15-25, the conversion features are not required to be separated from the host instrument and accounted for separately. As a result, at January 31, 2018, the conversion features and non-standard anti-dilutions provisions would not meet derivative classification.


The relative fair values of the convertible note, the warrants and the shares were $140,733, $284,751 and $100,832, respectively.  The effective conversion price was then determined to be $0.063. As the stock price at the issuance date was greater than the effective conversion price, it was determined that there was a beneficial conversion feature. The Company recognized the relative fair value of the shares issuable of $100,832 and an equivalent discount that reduced the carrying value of the convertible debt to $425,484.  The Company then recognized the relative fair value of the warrants of $284,751 as additional-paid-in capital and an equivalent discount that further reduced the carrying value of the convertible debt to $140,733. The beneficial conversion feature of $54,417, the OID of $26,316 and debt financing costs of $60,000 discounted the convertible debenture such that the carrying value of the convertible debt on the date of issue was $0. The discount is being expensed over the term of the loan to increase the carrying value to the face value of the loan. The Company determined that there was no derivative liability associated with the debenture under ASC 815-15 Derivatives and Hedging. During the nine months ended January 31, 2018, the Company recorded accretion of discount of $12,161 increasing the carrying value of the loan to $12,161. As at January 31, 2018, the Company has recorded accrued interest of $4,037 (2017 - $nil).


As part of the SPA, Bellridge is loaning the Company a minimum of $500,000 to a maximum of $1,500,000.00 (“Loan”). The first tranche was the $500,000 in form of the Note above. The next tranche of $500,000 will be due in 5 days after the Company receives its first comments concerning the registration statement to be filed and the final tranche of $500,000 will be funded upon the effectiveness of the registration statement that we will file covering the shares of our common stock issuable upon conversion of the notes. Refer to Note 15 for an amendment to the second tranche of the Loan.


In connection with the Note and SPA, the Company also entered into a Registration Rights Agreement obligating the Company to register the shares issuable upon conversion of the Note with the Securities and Exchange Commission. The Company also issued security agreements whereby it granted Bellridge a security interest in its assets and intellectual property. The obligations of the Company to repay the Note are guaranteed by the Company’s subsidiaries. The Company will utilize the proceeds of the Bellridge loan to support its proposed development of the software license obtained from Black Cactus


11. LICENSE


On November 6, 2017 the Company issued 60,000,000 shares of common stock with a fair value of $6,600,000 pursuant to the terms of an Exclusive Software License Agreement (the “Agreement”) with Black Cactus Holdings, LLC (“Black Cactus LLC”) to acquire an exclusive software license for the Black Cactus blockchain development software platform and related intellectual property (the “Software”) and the Agreement includes a service contract with the CEO of Black Cactus LLC to join the Company as a director and officer. The Company plans to use the Software platform to create a crypto trading exchange to support crypto and fiat currencies, music publishing, distribution, supply chain, medical research and trials. The term of the Agreement will remain in effect in perpetuity. In addition, the Company agreed to pay Black Cactus a royalty in the amount of 5% of the net revenue received from the sublicense of the Software and any revenues generated from the use of the Software including other intellectual property that the Company licensed from Black Cactus LLC pursuant to the terms of the Agreement.


F-8



12. PRODUCT DEVELOPMENT AND WEBSITE COSTS


On June 18, 2017, the Company entered into a Definitive Acquisition Agreement involving the internet domain and brand BitReturn. The Agreement represents the Company’s development of a plan to create a technology business in mining digital currency with an operating name of BitReturn. The Company issued 10,000,000 shares of restricted common stock with a fair value of $1,900,000 as payment under the terms of the Agreement, which have been recognized as and included in product development and website costs. The Company is also to make cash payments totaling $350,000 under the terms of the Agreement, and as at January 31, 2018, $350,000 is recorded as an amount payable for BitReturn. Product development and website expenses represent costs of acquiring the brand BitReturn, development of the crypto currency mining product, and creation of the website. These costs do not meet the criteria for capitalization, and therefore have been treated as an operating expense.


13. COMMITMENTS


(a)

On July 1, 2017, the Company entered into a Strategic Management and Advisory Agreement for consulting services and investor relations services to be provided over a period of twelve months commencing July 1, 2017. In consideration, the Company will pay a total monthly fee of $3,000 cash and issue a total of 1,000,000 shares of common stock. On July 26, 2017, the Company issued 1,000,000 shares of common stock with a fair value of $250,000, which has been recorded as a prepaid expense and will be amortized over the term of the agreement (Refer to Note 15). During the nine months ended January 31, 2018, the Company recognized $145,833 of consulting expense.

 

 

(b)

On November 8, 2017, the Company entered into a Financial Advisor Agreement with an unrelated third party for consulting services and investor relations services to be provided over a period of three months commencing November 8, 2017. In consideration, the Company will pay an initial fee of $20,000 cash. In addition, if the Company closes any transactions made with any introduction made by the unrelated third party, the Company shall pay an industry-standard cash fee of 10% on all equity or equity-linked capital invested, which will be recorded as debt financing costs. On November 27, 2017, entered into and closed on a Securities Purchase Agreement (refer to Note 10) whereby the introduction was made by the unrelated third party. During the nine months ended January 31, 2018, the Company recognized $50,000 of debt financing costs (refer to Note 10).

 

 

(c)

On December 19, 2017, the Company entered into a Business Development Consultant Agreement for consulting services to be provided over a period of twelve months commencing December 19, 2017. In consideration, the Company will pay a total monthly fee of 10,000 GBP cash and issue a total of 2,000,000 shares of common stock. Subsequent to January 31, 2018, the Company issued 2,000,000 shares of common stock with a fair value of $660,000. During the nine months ended January 31, 2018, the Company recognized $660,000 of consulting expense.

 

 

(d)

On January 4, 2018, the Company entered into an Equity Research Service Agreement for investor relations services to be provided over a period of twelve months commencing January 4, 2017. In consideration, the Company will issue a total of 150,000 shares of common stock. On January 16, 2017, the Company issued 150,000 shares of common stock with a fair value of $57,000, which has been recorded as a prepaid expense and will be amortized over the term of the agreement. During the nine months ended January 31, 2018, the Company recognized $4,750 of consulting expense.


14. STOCKHOLDERS’ DEFICIT


On November 13, 2017, the Company amended its Articles of Incorporation, increasing the number of common stock authorized from 240,000,000 to 490,000,000, par value of $0.0001, and leaving the number of preferred stock authorized at 10,000,000, par value of $0.0001.


At the time of the amendment, the Company designated 10,000 shares of its authorized but unissued shares of preferred stock as Series A Preferred Stock. The 10,000 Series A Preferred Stock shall have an aggregate voting power of 45% of the combined voting power of the entire Company’s shares, common stock and preferred stock, as long as the Company is in existence. Each holder of the Series A Preferred Stock shall have full voting rights and powers equal to the voting rights and powers of the holders of common stock, and shall be entitled, notwithstanding any provision hereof, to notice of any stockholders’ meeting in accordance with the by-laws of the Company, and shall be entitled to vote, together with holders of common stock, with respect to any question upon which holders of common stock have the right to vote. Without the vote or consent of holders of at least a majority of the shares of Series A Preferred Stock then outstanding, the Company may not (i) authorize, create or issue, or increase the authorized number of shares of, any class or series of capital stock ranking prior to or on a parity with the Series A Preferred Stock, (ii) authorize, create or issue any class or series of common stock of the Company other than the common stock, (iii) authorize any reclassification of the Series A Preferred Stock, (iv) authorize, create or issue any securities convertible into or exercisable for capital stock prohibited by (i) or (ii), (v) amend this Certificate of Designations or (vi) enter into any merger or reorganization, or disposal of assets involving 20% of the total capitalization of the Company.


F-9



Subject to the rights of the holders of any other series of preferred stock ranking senior to or on a parity with the Series A Preferred Stock with respect to liquidation and any other class or series of capital stock of the Company ranking senior to or on a parity with the Series A Preferred Stock with respect to liquidation, in the event of any liquidation, dissolution or winding up of the affairs of the Company, whether voluntary or involuntary, the holders of record of the issued and outstanding shares of Series A Preferred Stock shall be entitled to receive, out of the assets of the Company available for distribution to the holders of shares of Series A Preferred Stock, prior and in preference to any distribution of any of the assets of the Company to the holders of common stock and any other series of preferred stock ranking junior to the Series A Preferred Stock with respect to liquidation.


The holders of the Series A Preferred Stock shall not be entitled to receive dividends per share of Series A Preferred Stock. The Company shall have no rights to redeem Series A Preferred Stock.


COMMON STOCK


On June 26, 2017, the Company issued 1,400,000 shares of common stock for gross proceeds of $14,000, which was received during the year ended April 30, 2017.


On June 27, 2017, the Company issued 10,000,000 shares of common stock with a fair value of $1,900,000 for BitReturn pursuant to a Definitive Acquisition Agreement (refer to Note 13).


On July 1, 2017, the Company issued 1,000,000 shares of common stock with a fair value of $250,000 for investor relations services pursuant to a Strategic Management and Advisory Agreement (refer to Note 14).


On July 26, 2017, the Company issued 2,500,000 shares of common stock with a fair value of $400,000 as signing bonuses pursuant to service agreements and the $400,000 fair value was expensed and included in consulting fees.


On November 6, 2017, the Company issued 60,000,000 shares of common stock with a fair value of $6,600,000 for a license fee pursuant to the Exclusive Software License Agreement (refer to Note 11).


On January 16, 2018, the Company issued 3,200,000 shares of common stock pursuant to the Share Purchase Agreement with an unrelated third party. Under the terms of the Agreement, the Company will purchase all the issued ordinary shares of the unrelated third party from its shareholders, thereby acquiring all the intellectual property, research and development, contracts, accounts receivable and licenses owned by the unrelated third party. In exchange, the Company will issue 3,200,000 shares of its common stock to the unrelated third party’s shareholders. The Agreement will not close and the acquisition will not be complete until the Company receives the source code and software to the unrelated third party’s intellectual property for all of the unrelated third party’s programs, platforms and products and these assets have been independently verified. Additionally, if the shares issued to the unrelated third party shareholders do not have an aggregate value of $2,000,000 by January 15, 2019, the unrelated third party shareholders are entitled to have additional shares issued to them so that they hold shares equal to $2,000,000 as of that date. As at January 31, 2018, the Company has not received the source code and software relating to the intellectual property and the Agreement has not closed. The 3,200,000 shares are being held by the Company until closing of the Agreement.


On January 16, 2018, the Company issued 150,000 shares of common stock with a fair value of $57,000 for investor relations services pursuant to an Equity Research Services Agreement (refer to Note 13).


As at January 31, 2018, there are 161,250,000 shares of common stock issued and 158,050,000 shares of common stock outstanding.


PREFERRED STOCK - SERIES A


As at January 31, 2018, there are no issued and outstanding Series A Preferred Stock.


15. SUBSEQUENT EVENTS


(a)

Subsequent to January 31, 2018, the Company and Bellridge amended the terms of the Securities Purchase Agreement as disclosed in Note 10, to include the $295,000 received in December 2017 as an additional tranche in connection with the convertible note.   Refer to Note 8.  

 

 

(b)

Subsequent to January 31, 2018, the Company issued 2,000,000 shares of common stock to a consultant pursuant to a Business Development Consultant Agreement.


F-10




Report of Independent Registered Public Accounting Firm


To the Board of Directors and Stockholders of

Envoy Group Corp.


We have audited the accompanying balance sheets Envoy Group Corp. as of April 30, 2017 and 2016 and the related statements of operations and comprehensive loss, stockholders’ deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.


We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.


In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Envoy Group Corp. as of April 30, 2017 and 2016, and the results of its operations and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.


The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has a working capital deficit and has accumulated losses since inception. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also discussed in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.



/s/ Manning Elliott LLP


CHARTERED PROFESSIONAL ACCOUNTANTS

Vancouver, Canada

August 11, 2017


F-11



ENVOY GROUP CORP.

BALANCE SHEETS

(Expressed in U.S. Dollars)


 

 

April 30,

 

April 30,

 

 

 

2017

 

2016

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

3

 

$

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

3

 

$

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

37,151

 

$

39,754

 

Due to related party (Note 4)

 

 

1,872

 

 

23,236

 

Loans payable (Note 5)

 

 

32,916

 

 

11,113

 

Total Current Liabilities

 

 

71,939

 

 

74,103

 

 

 

 

 

 

 

 

 

Loans payable (Note 5)

 

 

33,782

 

 

 

TOTAL LIABILITIES

 

 

105,721

 

 

74,103

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 10,000,000 shares authorized, of which
10,000 shares designated as Series A, no shares issued and outstanding (Note 7)

 

 

 

 

 

Common stock, $0.0001 par value; 240,000,000 shares authorized;
83,000,000 and 80,000,000 shares issued and outstanding as of April 30, 2017
and 2016, respectively (Note 7)

 

 

8,300

 

 

8,000

 

Share subscriptions received

 

 

14,000

 

 

 

Additional paid-in capital

 

 

74,559

 

 

38,500

 

Accumulated deficit

 

 

(202,577

)

 

(120,603

)

Total Stockholders’ Deficit

 

 

(105,718

)

 

(74,103

)

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

$

3

 

$

 


Going Concern (Note 2)

Subsequent Event (Note 9)


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


F-12



ENVOY GROUP CORP.

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Expressed in U.S. Dollars)


 

 

For the Years Ended

April 30,

 

 

 

2017

 

2016

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

General and administrative

 

$

56,905

 

$

10,443

 

Professional fees

 

 

25,069

 

 

28,927

 

 

 

 

 

 

 

 

 

NET LOSS AND COMPREHENSIVE LOSS

 

$

(81,974

)

$

(39,370

)

 

 

 

 

 

 

 

 

NET LOSS PER COMMON SHARE, BASIC AND DILUTED

 

$

(0.00

)

$

(0.00

)

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED

 

 

80,789,041

 

 

80,000,000

 


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


F-13



ENVOY GROUP CORP.

STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Expressed in U.S. Dollars)


 

 

 

 

 

Share

 

Additional

 

 

 

Total

 

 

Preferred Stock

 

Common Stock

 

Subscriptions

 

Paid-in

 

Accumulated

 

Stockholders’

 

 

Shares

 

Amount

 

Shares

 

Amount

 

Received

 

Capital

 

Deficit

 

Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance – April 30, 2015

 

$

 

80,000,000

 

$

8,000

 

$

 

$

38,500

 

$

(81,233

)

$

(34,733

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss for the year

 

 

 

 

 

 

 

 

 

 

 

(39,370

)

 

(39,370

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance – April 30, 2016

 

$

 

80,000,000

 

$

8,000

 

$

 

$

38,500

 

$

(120,603

)

$

(74,103

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discount on loan payable

 

 

 

 

 

 

 

 

 

6,359

 

 

 

 

6,359

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock

 

 

 

3,000,000

 

 

300

 

 

 

 

29,700

 

 

 

 

30,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share subscriptions received

 

 

 

 

 

 

 

14,000

 

 

 

 

 

 

14,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss for the year

 

 

 

 

 

 

 

 

 

 

 

(81,974

)

 

(81,974

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance – April 30, 2017

 

$

 

83,000,000

 

$

8,300

 

$

14,000

 

$

74,559

 

$

(202,577

)

$

(105,718

)


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


F-14



ENVOY GROUP CORP.

STATEMENTS OF CASH FLOWS

(Expressed in U.S. Dollars)


 

 

For the Years Ended

April 30,

 

 

 

2017

 

2016

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES

 

 

 

 

 

 

 

Net loss

 

$

(81,974

)

$

(39,370

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

Accretion of loan discounts

 

 

2,067

 

 

 

 

 

 

 

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

 

(1,159

)

 

24,927

 

 

 

 

 

 

 

 

 

Net Cash Used in Operating Activities

 

 

(81,066

)

 

(14,443

)

 

 

 

 

 

 

 

 

CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES

 

 

 

 

 

 

 

Advances from related party, net of repayments

 

 

(21,364

)

 

4,774

 

Proceeds from loans payable, net of repayments

 

 

60,654

 

 

9,563

 

Proceeds from issuance of common stock

 

 

30,000

 

 

 

Share subscriptions received

 

 

14,000

 

 

 

 

 

 

 

 

 

 

 

Net Cash Provided by Financing Activities

 

 

83,290

 

 

14,337

 

 

 

 

 

 

 

 

 

Net effect of exchange rate changes on cash

 

 

(2,221

)

 

 

 

 

 

 

 

 

 

 

Net Increase (Decrease) in Cash and Cash Equivalents

 

 

3

 

 

(106

)

 

 

 

 

 

 

 

 

Cash and Cash Equivalents, Beginning of Year

 

 

 

 

106

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents, End of Year

 

$

3

 

$

 

 

 

 

 

 

 

 

 

SUPPLEMENTARY CASH FLOW INFORMATION:

 

 

 

 

 

 

 

Interest paid

 

$

 

$

 

Income taxes paid

 

$

 

$

 


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


F-15



ENVOY GROUP CORP.

Notes to the Financial Statements

For the Years Ended April 30, 2017 and 2016


NOTE 1. NATURE OF BUSINESS


Envoy Group Corp. (the “Company”), was incorporated in the State of Florida on April 8, 2013. The address of the head office is Suite 200, 8275 South Eastern Avenue, Las Vegas, Nevada 89123. Upon incorporation, it was the Company’s intent to develop a service to provide adult day care. On November 23, 2015, the Company announced that it intends to restructure its business plan and enter the consumer products market. The Company is currently in the process of identifying and evaluating feasible business opportunities. Subsequent to April 30, 2017, the Company entered into an agreement as part of a plan to develop a technology business in digital currency mining (see Note 9).


NOTE 2. GOING CONCERN


The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has had no revenue or operations, and only incurred losses since inception. As at April 30, 2017, the Company has a working capital deficit of $71,936 and an accumulated deficit of $202,577. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon the Company’s ability to raise sufficient financing to acquire or develop a profitable business. The Company intends on financing its future development activities and its working capital needs largely from the sale of public equity securities with some additional funding from other traditional financing sources, including related party advances and term notes until such time that funds provided by operations are sufficient to fund working capital requirements.


NOTE 3. SIGNIFICANT ACCOUNTING POLICIES


The significant accounting policies followed are:


USE OF ESTIMATES


The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates related to fair value measurements and deferred income tax asset valuation allowance. Actual results could differ from those estimates.


FOREIGN CURRENCY TRANSLATION


The Company’s functional and reporting currency is the United States dollar. Occasional transactions may occur in Canadian dollars. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Average monthly rates are used to translate revenues and expenses. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.


FINANCIAL INSTRUMENTS


ASC 825, Financial Instruments, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 825 prioritizes the inputs into three levels that may be used to measure fair value:


F-16



ENVOY GROUP CORP.

Notes to the Financial Statements

For the Years Ended April 30, 2017 and 2016


Level 1


Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.


Level 2


Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.


Level 3


Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.


The financial instruments consist principally of cash, accounts payable, due to related party and loans payable. The fair value of cash when applicable is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The Company believes that the recorded values of all other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or current market rates of interest for similar instruments.


Assets measured at fair value on a recurring basis were presented on the Company’s balance sheet as of April 30, 2017 and 2016:


 

Fair Value Measurements Using

 

 

 

 

 

 

Quoted Prices in

 

Significant

 

 

 

 

 

 

 

 

Active Markets

 

Other

 

Significant

 

 

 

 

 

 

For Identical

 

Observable

 

Unobservable

 

 

 

 

 

 

Instruments

 

Inputs

 

Inputs

 

Balance as of

 

Balance as of

 

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

April 30, 2017

 

April 30, 2016

 

 

$

 

$

 

$

 

$

 

$

 

Assets:

 

 

 

 

 

 

 

 

 

 

Cash

3

 

 

 

3

 

 


The Company does not have any liabilities measured at fair value on a recurring basis presented on the Company’s balance sheet as of April 30, 2017 and 2016.


Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash. The Company limits its exposure to credit loss by placing its cash with high credit quality financial institutions.


CASH AND CASH EQUIVALENTS


All cash investments with an original maturity of three months or less are considered to be cash equivalents.


INCOME TAXES


The Company accounts for income taxes under ASC 740 “Income Taxes.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to 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. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.


F-17



ENVOY GROUP CORP.

Notes to the Financial Statements

For the Years Ended April 30, 2017 and 2016


NET INCOME (LOSS) PER COMMON SHARE


Net income (loss) per share is calculated in accordance with ASC 260, “Earnings Per Share.” The weighted-average number of common shares outstanding during each period is used to compute basic earning or loss per share. Diluted earnings or loss per share is computed using the weighted average number of shares and diluted potential common shares outstanding. Dilutive potential common shares are additional common shares assumed to be exercised.


Basic net income (loss) per common share is based on the weighted average number of shares of common stock outstanding. As of April 30, 2017 and 2016, the Company had no dilutive potential common shares.


RECENT ACCOUNTING PRONOUNCEMENTS


The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.


NOTE 4. RELATED PARTY TRANSACTIONS AND BALANCES


As at April 30, 2017, the Company was indebted to the majority shareholder in the amount of $1,872 (2016 - $23,236) for advances of working capital and expenses paid on behalf of the Company. The amount is unsecured, non-interest bearing and due on demand.


NOTE 5. LOANS PAYABLE


As at April 30, 2017, the Company was indebted to an unrelated third party in the amount of $4,130 (2016 - $1,550). The amount is unsecured, non-interest bearing and due on demand.


As at April 30, 2017, the Company was indebted to an unrelated third party in the amount of $10,000 (2016 - $nil). The amount is unsecured, non-interest bearing and due on September 30, 2017.


As at April 30, 2017, the Company was indebted to an unrelated third party in the amount of $10,000 (2016 - $nil). The amount is unsecured, non-interest bearing and due on demand.


As at April 30, 2017, the Company was indebted to an unrelated third party in the amount of $8,786 (CAD$12,000) (2016 - $9,563 (CAD$12,000)). The amount is unsecured, non-interest bearing and due on demand.


On July 15, 2016, the Company entered into a loan agreement with an unrelated third party for a principal balance of up to $50,000. The amount is unsecured, non-interest bearing and due on July 15, 2018. During the year ended April 30, 2017, the Company received loan proceeds of $48,675. Upon receipt, the Company recorded a discount of $6,360, which reduced the carrying balance of the loan to $42,316. During the year ended April 30, 2017, the Company repaid $10,600 of principal and recognized accretion of the discount of $2,067. At April 30, 2017, the net carrying value of the loan was $33,782.


NOTE 6. FINANCIAL RISK FACTORS


LIQUIDITY RISK


Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at April 30, 2017, the Company has a working capital deficit of $73,753 and requires additional financing to meet its current obligations.  The Company’s accounts payable and accrued liabilities have contractual maturities of less than 60 days and are subject to normal trade terms. The ability of the Company to continue to identify and evaluate feasible business opportunities and pay its financial obligations is dependent on its ability to secure additional equity or debt financing.


F-18



ENVOY GROUP CORP.

Notes to the Financial Statements

For the Years Ended April 30, 2017 and 2016


FOREIGN EXCHANGE RISK


Foreign exchange risk is the risk that the Company will be subject to foreign currency fluctuations in satisfying obligations related to foreign activities. Loans payable to unrelated third parties may be denominated in Canadian dollars. Foreign exchange risk arises from purchase transactions as well as financial assets and liabilities denominated in these foreign currencies. The Company does not use derivative instruments to hedge exposure to foreign exchange rate risk. However, management of the Company believes there is no significant exposure to foreign currency fluctuations.


NOTE 7. STOCKHOLDERS’ DEFICIT


On May 9, 2014, the Company amended its Articles of Incorporation, decreasing the number of common stock authorized from 250,000,000 to 240,000,000, par value of $0.0001, and authorizing 10,000,000, par value of $0.0001, shares of preferred shares.


At the time of the amendment, the Company designated 10,000 shares of its authorized but unissued shares of preferred stock as Series A Preferred Stock. The 10,000 Series A Preferred Stock shall have an aggregate voting power of 45% of the combined voting power of the entire Company’s shares, common stock and preferred stock, as long as the Company is in existence. Each holder of the Series A Preferred Stock shall have full voting rights and powers equal to the voting rights and powers of the holders of common stock, and shall be entitled, notwithstanding any provision hereof, to notice of any stockholders’ meeting in accordance with the by-laws of the Company, and shall be entitled to vote, together with holders of common stock, with respect to any question upon which holders of common stock have the right to vote. Without the vote or consent of holders of at least a majority of the shares of Series A Preferred Stock then outstanding, the Company may not (i) authorize, create or issue, or increase the authorized number of shares of, any class or series of capital stock ranking prior to or on a parity with the Series A Preferred Stock, (ii) authorize, create or issue any class or series of common stock of the Company other than the common stock, (iii) authorize any reclassification of the Series A Preferred Stock, (iv) authorize, create or issue any securities convertible into or exercisable for capital stock prohibited by (i) or (ii), (v) amend this Certificate of Designations or (vi) enter into any merger or reorganization, or disposal of assets involving 20% of the total capitalization of the Company.


Subject to the rights of the holders of any other series of preferred stock ranking senior to or on a parity with the Series A Preferred Stock with respect to liquidation and any other class or series of capital stock of the Company ranking senior to or on a parity with the Series A Preferred Stock with respect to liquidation, in the event of any liquidation, dissolution or winding up of the affairs of the Company, whether voluntary or involuntary, the holders of record of the issued and outstanding shares of Series A Preferred Stock shall be entitled to receive, out of the assets of the Company available for distribution to the holders of shares of Series A Preferred Stock, prior and in preference to any distribution of any of the assets of the Company to the holders of common stock and any other series of preferred stock ranking junior to the Series A Preferred Stock with respect to liquidation.


The holders of the Series A Preferred Stock shall not be entitled to receive dividends per share of Series A Preferred Stock. The Company shall have no rights to redeem Series A Preferred Stock.


COMMON STOCK


On January 24, 2017, the Company issued 3,000,000 shares of common stock for gross proceeds of $30,000.


As at April 30, 2017, the Company has received subscriptions of $14,000 for the subsequent issuance of 1,400,000 shares of common stock (Refer to Note 9).


As at April 30, 2017, there are 83,000,000 shares of common stock issued and outstanding.


PREFERRED STOCK - SERIES A


As at April 30, 2017, there are no issued and outstanding Series A Preferred Stock.


F-19



ENVOY GROUP CORP.

Notes to the Financial Statements

For the Years Ended April 30, 2017 and 2016


NOTE 8. INCOME TAXES


The Company is subject to United States federal and state income taxes at an approximate rate of 35%. The reconciliation of the provision for income taxes at the United States federal and state statutory rate compared to the Company’s income tax expense as reported is as follows:


 

 

April 30, 2017

$

 

April 30, 2016

$

 

 

 

 

 

 

 

 

 

Net loss

 

 

81,974

 

 

39,370

 

Income tax rate

 

 

35%

 

 

35%

 

Expected income tax benefit

 

 

(28,691

)

 

(13,780

)

Valuation allowance change

 

 

28,691

 

 

13,780

 

Provision for income taxes

 

 

 

 

 


The significant components of deferred income tax assets at April 30, 2017 and 2016, are as follows:


 

 

April 30, 2017

$

 

April 30, 2016

$

 

 

 

 

 

 

 

 

 

Net operating loss carryforward

 

 

70,902

 

 

42,211

 

Valuation allowance

 

 

(70,902

)

 

(42,211

)

Net deferred income tax asset

 

 

 

 

 


The Company has net operating loss carryforwards of approximately $202,577 available to offset taxable income in future years which expires beginning in fiscal 2033. The Company has recognized a valuation allowance for the deferred income tax asset since the Company cannot be assured that it is more likely than not that such benefit will be utilized in future years.


NOTE 9. SUBSEQUENT EVENTS


a)

On June 18, 2017, the Company entered into a Definitive Acquisition Agreement (the “Agreement”)  involving the internet domain and brand Bitreturn. The Agreement represents the Company’s development of a plan to create a technology business in mining digital currency with an operating name of BitReturn.  The Company issued 10,000,000 shares of restricted common stock as payment under the terms of the Agreement.   The Company is also to make cash payments totaling $350,000 under the terms of the Agreement, which is to be paid as follows, $200,000 from the first $500,000 raised by private placements, and the final portion of $150,000 within six months or when a cumulative amount of $1,000,000 has been raised by private placements.

 

 

b)

On June 22, 2017, the Company entered into a Loan Agreement (“Loan”) with a non-related third party (“Lender”) whereby the Lender has agreed to advance up to CAD$450,000 for the purpose of purchasing digital currency mining hardware. The Loan is non-interest bearing and due on August 31, 2017. In consideration for the Loan, the Lender will have the option to purchase up to 5,000,000 shares of common stock at a purchase price of $0.02 per share for total proceeds of up to $100,000. As of August 10, 2017, the Company has received CAD$435,000 pursuant to the Loan.

 

 

c)

On June 26, 2017, the Company issued 1,400,000 shares of common stock for gross proceeds of $14,000, which was received during the year ended April 30, 2017 (refer to Note 7).


F-20




Report of Independent Registered Public Accounting Firm


To the Directors and Stockholders


Envoy Group Corp.


We have audited the accompanying balance sheets of Envoy Group Corp. as of April 30, 2016 and 2015 and the related statements of operations and comprehensive loss, stockholders’ deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.


We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.


In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Envoy Group Corp. as of April 30, 2016 and 2015, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.


The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has not generated any revenues and has incurred operating losses since inception. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also discussed in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.



/S/ Manning Elliott LLP


CHARTERED PROFESSIONAL ACCOUNTANTS


Vancouver, Canada


June 6, 2017


F-21



ENVOY GROUP CORP.

BALANCE SHEETS

(Expressed in U.S. Dollars)



 

 

April 30,

 

April 30,

 

 

 

2016

 

2015

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

 

$

106

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

 

$

106

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

39,754

 

$

14,827

 

Due to related party (Note 5)

 

 

23,236

 

 

18,462

 

Loans payable (Note 6)

 

 

11,113

 

 

1,550

 

Total Current Liabilities

 

 

74,103

 

 

34,839

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 10,000,000 shares authorized, of which
10,000 shares designated as Series A, no shares issued and outstanding  (Note 7)

 

 

 

 

 

Common stock, $0.0001 par value; 240,000,000 shares authorized;
80,000,000 shares issued and outstanding (Note 7)

 

 

8,000

 

 

8,000

 

Additional paid-in capital

 

 

38,500

 

 

38,500

 

Accumulated deficit

 

 

(120,603

)

 

(81,233

)

Total Stockholders’ Deficit

 

$

(74,103

)

$

(34,733

)

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

$

 

$

106

 


Going Concern (Note 2)

Subsequent Event (Note 9)


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


F-22



ENVOY GROUP CORP.

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Expressed in U.S. Dollars)



 

 

For the Year Ended

April 30,

 

 

 

2016

 

2015

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

General and administrative

 

$

10,443

 

$

12,065

 

Professional fees

 

 

28,927

 

 

22,668

 

 

 

 

 

 

 

 

 

NET LOSS AND COMPREHENSIVE LOSS

 

$

(39,370

)

$

(34,733

)

 

 

 

 

 

 

 

 

NET LOSS PER COMMON SHARE, BASIC AND DILUTED

 

$

(0.00

)

$

(0.00

)

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED

 

 

80,000,000

 

 

76,219,178

 


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


F-23



ENVOY GROUP CORP.

STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Expressed in U.S. Dollars)



 

 

 

 

 

 

Additional

 

 

 

Total

 

 

 

Preferred Stock

 

Common Stock

 

Paid-in

 

Accumulated

 

Stockholders’

 

 

 

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Deficit

 

Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance – April 30, 2014

 

 

$

 

 

120,000,000

 

$

12,000

 

$

34,500

 

$

(46,500

)

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of common shares to preferred shares

 

10,000

 

 

10

 

 

(60,000,000

)

 

(6,000

)

 

5,990

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of preferred shares to common shares

 

(10,000

)

 

(10

)

 

60,000,000

 

 

6,000

 

 

(5,990

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cancellation of common shares

 

 

 

 

 

(40,000,000

)

 

(4,000

)

 

4,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss for the year

 

 

 

 

 

 

 

 

 

 

 

(34,733

)

 

(34,733

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance – April 30, 2015

 

 

$

 

 

80,000,000

 

$

8,000

 

$

38,500

 

$

(81,233

)

$

(34,733

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss for the year

 

 

 

 

 

 

 

 

 

 

 

(39,370

)

 

(39,370

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance – April 30, 2016

 

 

$

 

 

80,000,000

 

$

8,000

 

$

38,500

 

$

(120,603

)

$

(74,103

)


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


F-24



ENVOY GROUP CORP.

STATEMENTS OF CASH FLOWS

(Expressed in U.S. Dollars)



 

 

For the Year Ended

April 30,

 

 

 

2016

 

2015

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

Net loss

 

$

(39,370

)

$

(34,733

)

 

 

 

 

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

 

24,927

 

 

14,827

 

 

 

 

 

 

 

 

 

Net Cash Used in Operating Activities

 

 

(14,443

)

 

(19,906

)

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

Proceeds from loans payable

 

 

9,563

 

 

18,462

 

Advances from related party

 

 

4,774

 

 

1,550

 

 

 

 

 

 

 

 

 

Net Cash Provided by Financing Activities

 

 

14,337

 

 

20,012

 

 

 

 

 

 

 

 

 

Net (Decrease) Increase in Cash and Cash Equivalents

 

 

(106

)

 

106

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents, Beginning of Year

 

 

106

 

 

0

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents, End of Year

 

$

0

 

$

106

 

 

 

 

 

 

 

 

 

SUPPLEMENTARY CASH FLOW INFORMATION:

 

 

 

 

 

 

 

Interest paid

 

$

 

$

 

Income taxes paid

 

$

 

$

 


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


F-25



ENVOY GROUP CORP.

Notes to the Financial Statements

For the Year Ended April 30, 2016 and 2015


NOTE 1. NATURE OF BUSINESS


Envoy Group Corp. (the “Company”), was incorporated in the State of Florida on April 8, 2013. The address of the head office is Suite 200, 8275 South Eastern Avenue, Las Vegas, Nevada 89123. Upon incorporation, it was the Company’s intent to develop a service to provide adult day care. On November 23, 2015, the Company announced that it intends to restructure its business plan and enter the consumer products market. The Company is currently in the process of identifying and evaluating feasible business opportunities in the consumer products market industry.


NOTE 2. GOING CONCERN


The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has had no revenue or operations, and only incurred losses since inception. As at April 30, 2016, the Company has a working capital deficiency of $74,103 and an accumulated deficit of $120,603. In view of these matters, the Company’s ability to continue as a going concern is dependent upon the Company’s ability to raise sufficient financing to acquire or develop a profitable business. The Company intends on financing its future development activities and its working capital needs largely from the sale of public equity securities with some additional funding from other traditional financing sources, including related party advances and term notes until such time that funds provided by operations are sufficient to fund working capital requirements. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.


NOTE 3. SIGNIFICANT ACCOUNTING POLICIES


The significant accounting policies followed are:


USE OF ESTIMATES


The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates related to fair value measurements and deferred income tax asset valuation allowance. Actual results could differ from those estimates.


FOREIGN CURRENCY TRANSLATION


The Company’s functional and reporting currency is the United States dollar. Occasional transactions may occur in Canadian dollars. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Average monthly rates are used to translate revenues and expenses. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.


FINANCIAL INSTRUMENTS


ASC 825, Financial Instruments, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 825 prioritizes the inputs into three levels that may be used to measure fair value:


Level 1


Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.


F-26



ENVOY GROUP CORP.

Notes to the Financial Statements

For the Year Ended April 30, 2016 and 2015


Level 2


Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.


Level 3


Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.


The financial instruments consist principally of cash, accounts payable, due to related party and loans payable. The fair value of cash when applicable is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The Company believes that the recorded values of all other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations.


Assets measured at fair value on a recurring basis were presented on the Company’s balance sheet as of April 30, 2016 and 2015:


 

Fair Value Measurements Using

 

 

 

 

 

 

Quoted Prices in

 

Significant

 

 

 

 

 

 

 

 

Active Markets

 

Other

 

Significant

 

 

 

 

 

 

For Identical

 

Observable

 

Unobservable

 

 

 

 

 

 

Instruments

 

Inputs

 

Inputs

 

Balance as of

 

Balance as of

 

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

April 30, 2016

 

April 30, 2015

 

 

$

 

$

 

$

 

$

 

$

 

Assets:

 

 

 

 

 

 

 

 

 

 

Cash

 

 

 

 

106

 


The Company does not have any liabilities measured at fair value on a recurring basis presented on the Company’s balance sheet as of April 30, 2016 and 2015.


Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash. The Company limits its exposure to credit loss by placing its cash with high credit quality financial institutions.


CASH AND CASH EQUIVALENTS


All cash investments with an original maturity of three months or less are considered to be cash equivalents.


INCOME TAXES


The Company accounts for income taxes under ASC 740 “Income Taxes.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to 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. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.


F-27



ENVOY GROUP CORP.

Notes to the Financial Statements

For the Year Ended April 30, 2016 and 2015


NET INCOME (LOSS) PER COMMON SHARE


Net income (loss) per share is calculated in accordance with ASC 260, “Earnings Per Share.” The weighted-average number of common shares outstanding during each period is used to compute basic earning or loss per share. Diluted earnings or loss per share is computed using the weighted average number of shares and diluted potential common shares outstanding. Dilutive potential common shares are additional common shares assumed to be exercised.


Basic net income (loss) per common share is based on the weighted average number of shares of common stock outstanding. As of April 30, 2016 and 2015, the Company had no dilutive potential common shares.


RECENT ACCOUNTING PRONOUNCEMENTS


The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.


NOTE 4. FINANCIAL RISK FACTORS


LIQUIDITY RISK


Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at April 30, 2016, the Company has a cash balance of $nil (2015 - $106) and current liabilities of $74,103 (2015 - $34,839). The Company’s accounts payable and accrued liabilities have contractual maturities of less than 60 days and are subject to normal trade terms. The ability of the Company to continue to identify and evaluate feasible business opportunities in the consumer products market and maintain its working capital is dependent on its ability to secure additional equity or debt financing.


FOREIGN EXCHANGE RISK


Foreign exchange risk is the risk that the Company will be subject to foreign currency fluctuations in satisfying obligations related to foreign activities. Loans payable to unrelated third parties may be denominated in Canadian dollars. Foreign exchange risk arises from purchase transactions as well as financial assets and liabilities denominated in these foreign currencies. The Company does not use derivative instruments to hedge exposure to foreign exchange rate risk. However, management of the Company believes there is no significant exposure to foreign currency fluctuations.


NOTE 5. RELATED PARTY TRANSACTIONS AND BALANCES


As at April 30, 2016, the Company was indebted to the majority shareholder in the amount of $23,236 (2015 - $18,462) for advances of working capital and expenses paid on behalf of the Company. The amount is unsecured, non-interest bearing and due on demand.


NOTE 6. LOANS PAYABLE


As at April 30, 2016, the Company was indebted to an unrelated third party in the amount of $1,550 (2015 - $1,550). The amount is unsecured, non-interest bearing and due on demand.


As at April 30, 2016, the Company was indebted to an unrelated third party in the amount of $9,563 (CAD$12,000) (2015 - $Nil). The amount is unsecured, non-interest bearing and due on December 31, 2016.


F-28



ENVOY GROUP CORP.

Notes to the Financial Statements

For the Year Ended April 30, 2016 and 2015


NOTE 7. STOCKHOLDERS’ DEFICIT


On May 9, 2014, the Company amended its Articles of Incorporation, decreasing the number of common stock authorized from 250,000,000 to 240,000,000, par value of $0.0001, and authorizing 10,000,000, par value of $0.0001, shares of preferred shares.


At the time of the amendment, the Company designated 10,000 shares of its authorized but unissued shares of preferred stock as Series A Preferred Stock. The 10,000 Series A Preferred Stock shall have an aggregate voting power of 45% of the combined voting power of the entire Company’s shares, common stock and preferred stock, as long as the Company is in existence. Each holder of the Series A Preferred Stock shall have full voting rights and powers equal to the voting rights and powers of the holders of common stock, and shall be entitled, notwithstanding any provision hereof, to notice of any stockholders’ meeting in accordance with the by-laws of the Company, and shall be entitled to vote, together with holders of common stock, with respect to any question upon which holders of common stock have the right to vote. Without the vote or consent of holders of at least a majority of the shares of Series A Preferred Stock then outstanding, the Company may not (i) authorize, create or issue, or increase the authorized number of shares of, any class or series of capital stock ranking prior to or on a parity with the Series A Preferred Stock, (ii) authorize, create or issue any class or series of common stock of the Company other than the common stock, (iii) authorize any reclassification of the Series A Preferred Stock, (iv) authorize, create or issue any securities convertible into or exercisable for capital stock prohibited by (i) or (ii), (v) amend this Certificate of Designations or (vi) enter into any merger or reorganization, or disposal of assets involving 20% of the total capitalization of the Company.


Subject to the rights of the holders of any other series of preferred stock ranking senior to or on a parity with the Series A Preferred Stock with respect to liquidation and any other class or series of capital stock of the Company ranking senior to or on a parity with the Series A Preferred Stock with respect to liquidation, in the event of any liquidation, dissolution or winding up of the affairs of the Company, whether voluntary or involuntary, the holders of record of the issued and outstanding shares of Series A Preferred Stock shall be entitled to receive, out of the assets of the Company available for distribution to the holders of shares of Series A Preferred Stock, prior and in preference to any distribution of any of the assets of the Company to the holders of common stock and any other series of preferred stock ranking junior to the Series A Preferred Stock with respect to liquidation.


The holders of the Series A Preferred Stock shall not be entitled to receive dividends per share of Series A Preferred Stock. The Company shall have no rights to redeem Series A Preferred Stock.


COMMON STOCK


On May 28, 2014, the Company issued 10,000 shares of Series A preferred stock in exchange for the return of 60,000,000 shares of common stock held by the Company’s majority shareholder.


On September 30, 2014, the Company issued 60,000,000 shares of common stock in exchange for the return of 10,000 shares of Series A preferred stock held by the Company’s majority shareholder.


On September 30, 2014, the Company cancelled 40,000,000 shares of common stock that was returned to the Company by its majority shareholder.


PREFERRED STOCK - SERIES A


On May 28, 2014, the Company issued 10,000 shares of Series A preferred stock in exchange for the return of 60,000,000 shares of common stock held by the Company’s majority shareholder.


On September 30, 2014, the Company issued 60,000,000 shares of common stock in exchange for the return of 10,000 shares of Series A preferred stock held by the Company’s majority shareholder.


As at April 30, 2016, there are no issued and outstanding Series A Preferred Stock issued or outstanding.


F-29



ENVOY GROUP CORP.

Notes to the Financial Statements

For the Year Ended April 30, 2016 and 2015


NOTE 8. INCOME TAXES


The Company is subject to United States federal and state income taxes at an approximate rate of 35%. The reconciliation of the provision for income taxes at the United States federal and state statutory rate compared to the Company’s income tax expense as reported is as follows:


 

 

April 30, 2016

$

 

April 30, 2015

$

 

 

 

 

 

 

 

 

 

Net loss

 

 

39,370

 

 

34,733

 

Income tax rate

 

 

35%

 

 

35%

 

Expected income tax benefit

 

 

(13,780

)

 

(12,157

)

Valuation allowance change

 

 

13,780

 

 

12,157

 

Provision for income taxes

 

 

 

 

 


The significant components of deferred income tax assets at April 30, 2016 and 2015, are as follows:


 

 

April 30, 2016

$

 

April 30, 2015

$

 

 

 

 

 

 

 

 

 

Net operating loss carryforward

 

 

42,211

 

 

28,432

 

Valuation allowance

 

 

(42,211

)

 

(28,432

)

Net deferred income tax asset

 

 

 

 

 


The Company has net operating loss carryforwards of approximately $120,603 available to offset taxable income in future years which expires beginning in fiscal 2033. The Company has recognized a valuation allowance for the deferred income tax asset since the Company cannot be assured that it is more likely than not that such benefit will be utilized in future years.


NOTE 9. SUBSEQUENT EVENT


On January 24, 2017, the Company issued 3,000,000 shares of common stock for gross proceed of $30,000.


F-30



PART II - INFORMATION NOT REQUIRED IN PROSPECTUS

 

Item 13 - Other Expenses of Issuance and Distribution

 

We estimate that expenses in connection with the distribution described in this Registration Statement (other than brokerage commissions, discounts or other expenses relating to the sale of the shares by the selling security holders) will be as set forth below. We will pay all of the expenses with respect to the distribution, and such amounts, with the exception of the Securities and Exchange Commission registration fee, are estimates.

 

 

 

Amount To be Paid

 

SEC registration fee

 

$

1,980.98

 

Accounting fees and expenses

 

$

3,000.00

 

Legal fees and expenses

 

$

*

 

Printing and related expenses

 

$

*

 

Transfer agent fees and expenses

 

$

*

 

Miscellaneous

 

$

*

 

Total

 

$

*

 

__________

 

 

 

 

* To be provided by amendment.

 

 

 

 


Item 14 - Indemnification of Directors and Officers


The Certificate of Incorporation and the Bylaws of our Company provide that our Company will indemnify, to the fullest extent permitted by Florida law, each person who is or was a director, officer, employee or agent of our Company, or who serves or served any other enterprise or organization at the request of our Company. Pursuant to Florida law, this includes elimination of liability for monetary damages for breach of the directors’ fiduciary duty of care to our Company and its stockholders. These provisions do not eliminate the directors’ duty of care and, in appropriate circumstances, equitable remedies such as injunctive or other forms of non-monetary relief will remain available under Florida law. In addition, each director will continue to be subject to liability for breach of the director’s duty of loyalty to our Company, for acts or omissions not in good faith or involving intentional misconduct, for knowing violations of law, for any transaction from which the director derived an improper personal benefit, and for payment of dividends or approval of stock repurchases or redemptions that are unlawful under Florida law. The provision also does not affect a director’s responsibilities under any other laws, such as the federal securities laws or state or federal environmental laws.


We have not entered into any agreements with our directors and executive officers that require us to indemnify these persons against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred (including expenses of a derivative action) in connection with any proceeding, whether actual or threatened, to which any such person may be made a party by reason of the fact that the person is or was a director or officer of our Company or any of our affiliated enterprises.


We do not maintain any policy of directors’ and officers’ liability insurance that insures its directors and officers against the cost of defense, settlement or payment of a judgment under any circumstances.


II-1



Item 15 - Recent Sales of Unregistered Securities


Unregistered Sales of Equity Securities


During the years ended April 30, 2015 and 2016, we did not issue any shares of unregistered securities.


During the year ended April 30, 2017, we issued the following unregistered equity securities:


On January 24, 2017, we issued 3,000,000 shares of common stock to an unrelated, accredited investor for $30,000.  The same investor purchased an additional 1,400,000 shares of common stock from us in April, 2017 and we issued the shares on June 26, 2017.


On June 26, 2017, in connection with the acquisition of BitReturn, we issued 2,500,000 shares to the four principal shareholders of BitReturn, which shares were valued at $1,900,000.


On July 1, 2017, we issued 1,000,000 shares of our common stock valued at $250,000 pursuant to an unrelated consultant for management and consulting services.


On July 26, 2017, we issued 2,500,000 valued at $400,000 as compensation to an unrelated, third party consultant.


On November 6, 2017, we issued 60,000,000 shares of our common stock valued at $6,600,000 to Lawrence Cummins, our CEO, as the consideration we paid for the Black Cactus exclusive license.


On November 27, 2017, we received $500,000 from Bellridge Capital, L.P. for the purchase of a convertible promissory note. Additionally, Bellridge Capital, L.P. received 2,793,296 restricted shares of common stock and a common stock purchase warrant to purchase 7,894,737 shares of common stock.


On December 19, 2017, we entered into an agreement for business development services with an unrelated, third party for a period of 12 months.  As part of the consideration, we issued 2,000,000 shares of our common stock valued at $660,000.


On December 20, 2017, we received $300,000 from Bellridge Capital, L.P. for the purchase of a convertible promissory note.


On January 16, 2018, we issued 150,000 shares of our common stock valued at $57,000 to Align Research Ltd., an unrelated third party, for investor relations services.


On January 16, 2018, we issued 3,200,000 shares of our common stock, to be valued at $2,000,000, in connection with the proposed acquisition of World of Wireless.  We have not delivered these shares as the transaction has not yet closed.


On April 5, 2018, we issued to Bellridge Capital, L.P.  three (3) common stock purchase warrants to purchase an aggregate of 85,000,000 shares of our common stock at $0.10 per share.  Additionally, we issued to Aegis Capital Corp. a financial advisor common stock purchase warrant to purchase 560,717 shares of common stock, which such warrant was deemed effective as of November 27, 2017.


No underwriters were involved in the foregoing sales of securities. The issuances of the securities described above were deemed to be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”) in reliance on Section 4(a)(2) of the Securities Act or Regulation D promulgated under the Securities Act. The recipients of securities in such transactions represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the stock certificates and option agreements issued in such transactions. All recipients had adequate access, through their relationships with us, to information about us.


Item 16 - Exhibits


(a)(3)

Exhibits

 

 

 

The following exhibits are filed as part of this report:


II-2



(b) Exhibits


Exhibit

Number

 

Description

3.1(i)

 

Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the registrant’s registration statement on Form S-1 filed with the Commission on May 23, 2013).

3.1(ii)

 

Amendment to Articles of Incorporation (incorporated by reference to Exhibit 3.3 to the registrant’s Current Report on Form 8-K filed with the Commission on June 9, 2014).

3.1(iii)

 

Amendment to Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed with the Commission on December 1, 2017).

3.2

 

By-Laws (incorporated by reference to Exhibit 3.2 to the registrant’s registration statement on Form S-1 filed with the Commission on May 23, 2013).

4.1

 

Specimen Stock Certificate (incorporated by reference to Exhibit 4.1 to the registrant’s registration statement on Form S-1 filed with the Commission on May 23, 2013).

4.2

 

Senior Secured Convertible Promissory Note (incorporated by reference to Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed with the Commission on December 15, 2017)

4.3

 

Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.2 to the registrant’s Current Report on Form 8-K filed with the Commission on December 15, 2017)

4.4

 

Security Agreement (incorporated by reference to Exhibit 4.3 to the registrant’s Current Report on Form 8-K filed with the Commission on December 15, 2017)

4.5

 

Intellectual Property Security Agreement (incorporated by reference to Exhibit 4.4 to the registrant’s Current Report on Form 8-K filed with the Commission on December 15, 2017)

4.6

 

Subsidiary Guarantee Agreement (incorporated by reference to Exhibit 4.5 to the registrant’s Current Report on Form 8-K filed with the Commission on December 15, 2017)

4.7

 

Form of Senior Secured Convertible Promissory Note issued to Bellridge Capital, L.P. in November 2017 *

4.8

 

Form of Financial Advisory Common Stock Purchase Warrant issued to Aegis Capital Corp. *

4.9

 

Form of Common Stock Purchase Warrants issued to Bellridge Capital, L.P. in April 2017 *

5.1

 

Opinion re: Legality *

10.1

 

Definitive Acquisition Agreement dated June 18, 2017 by and among the registrant and the BitReturn shareholders (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the Commission on June 27, 2017).

10.2

 

Securities Purchase Agreement dated November 27, 2017 by and among the registrant and Black Cactus, LLC (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the Commission on December 15, 2017).

10.3

 

Registration Rights Agreement dated November 27, 2017 by and among the Registrant and Black Cactus, LLC (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the Commission on December 15, 2017)

10.4

 

Amendment to Registration Rights Agreement, dated November 27, 2017 (Amendment dated April 13, 2018) *

10.5

 

Amendment to Securities Purchase Agreement, dated November 27, 2017 (Amendment dated April 5, 2018) *

10.6

 

Securities Purchase Agreement, dated April 5, 2018 *

10.7

 

Registration Rights Agreement, dated April 13, 2018 *

23.1

 

Consent of Manning Elliott LLP *

23.2

 

Consent of Poole & Shaffery, LLP (included in Exhibit 5.1) *

101

 

XBRL data files of Financial Statements and Notes relating to this Form S-1 **


* filed herewith

** In accordance with Regulation S-T, the Interactive Data Files in Exhibit 101 relating to this Form S-1 shall be deemed “furnished” and not “filed.”


II-3



Item 17 - Undertakings

 

(A) 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 to: 

  

  

  

(i)

To include any prospectus required by Section 10(a)(3) of the Securities Act; 

  

  

  

  

(ii)

Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information set forth 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) 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)

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, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering 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 being registered which remain unsold at the termination of the offering. 

  

  

(4)

Insofar as indemnification for liabilities arising under the Securities Act of 1933 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 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.


(B) The issuer is subject to Rule 430C (ss. 230. 430C of this chapter): Each prospectus filed pursuant to Rule 424(b)(ss. 230. 424(b) of this chapter) 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 (ss. 230. 430A of this chapter), 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.


II-4



SIGNATURES


Pursuant to the requirements of the Securities Act of 1933, the registrant has duly authorized this amendment to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Las Vegas, State of Nevada on April 23, 2018.


 

BLACK CACTUS GLOBAL, INC.

 

 

 

 

 

 

 

 

 

 

By:

/s/ Dr. Ramesh Para

 

 

 

Dr. Ramesh Para, CEO

 

 

 

 

 

 

 

 

 

 

By:

/s/ Harpreet Sangha

 

 

 

Harpreet Sangha, CFO

 



Pursuant to the requirements of the Securities Act of 1933, this Amendment to this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.


Signature

 

Title

 

Date

 

 

 

 

 

 

 

 

 

 

/s/ Dr. Ramesh Para

 

CEO and director

 

April 23, 2018

Dr. Ramesh Para

 

(Principal Executive Officer)

 

 

 

 

 

 

 

 

 

 

 

 

/s/ Harpreet Sangha

 

CFO and Chairman of the Board

 

April 23, 2018

Harpreet Sangha

 

(Principal Financial and Accounting Officer)

 

 

 

 

 

 

 

 

 

 

 

 

/s/ Dr. Ravindranath Kancherla

 

Director

 

April 23, 2018

Dr. Ravindranath Kancherla

 

 

 

 

 

 

 

 

 

 

 

 

 

 

/s/ Dr. Pruthvinath Kancherla

 

Director

 

April 23, 2018

Dr. Pruthvinath Kancherla

 

 

 

 

 

 

 

 

 

 

 

 

 

 

/s/ Lawrence Cummins

 

Director

 

April 23, 2018

Lawrence Cummins

 

 

 

 


II-5



144,649,220 Shares of Common Stock



BLACK CACTUS GLOBAL, INC.






PROSPECTUS







_____________, 2018



[ c o v e r p a g e ]




Exhibit 4.7

 

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

Original Issue Date: December 20, 2017

Principal Amount: $315,790

 

Purchase Price: $300,000

 

SENIOR SECURED

CONVERTIBLE PROMISSORY NOTE

DUE DECEMBER 20, 2018

 

THIS SENIOR SECURED CONVERTIBLE PROMISSORY NOTE is one of a series of duly authorized and validly issued Senior Secured Convertible Promissory Notes of Black Cactus Global, Inc., a Florida corporation, f/k/a Envoy Group Corp. (the “ Company ”), having its principal place of business at 8275 S. Eastern Avenue, Suite 200, Las Vegas, NV 89123, designated as its Senior Secured Convertible Promissory Note due December 20, 2018 (this “ Note ”, or the “ Note ” and collectively with the other Notes of such series, the “ Notes ”).

 

FOR VALUE RECEIVED, the Company promises to pay to Bellridge Capital, L.P. or its registered assigns (the “ Holder ”), or shall have paid pursuant to the terms hereunder, the principal sum of $300,000 on December 20, 2018 (the “ Maturity Date ”) or such earlier date as this Note is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Note in accordance with the provisions hereof. This Note is subject to the following additional provisions:

 

Section 1 .           Definitions . For the purposes hereof, in addition to the terms defined elsewhere in this Note and in that certain Securities Purchase Agreement, dated November 27, 2017 (the “ Purchase Agreement ”), between the Company and the Holder, the following terms shall have the following meanings:

 

Alternate Consideration ” shall have the meaning set forth in Section 5(e).


- 1 -



Alternate Conversion Price ” means sixty percent 60% of the lowest traded price in the twenty (20) consecutive Trading Days prior to the Conversion Date.

 

Bankruptcy Event ” means any of the following events: (a) the Company or any Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Subsidiary thereof, (b) there is commenced against the Company or any Subsidiary thereof any such case or proceeding that is not dismissed within sixty (60) days after commencement, (c) the Company or any Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Company or any Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within sixty (60) calendar days after such appointment, (e) the Company or any Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Company or any Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts or (g) the Company or any Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

 

Base Conversion Price ” shall have the meaning set forth in Section 5(b).

 

Beneficial Ownership Limitation ” shall have the meaning set forth in Section 4(d).

 

Buy-In ” shall have the meaning set forth in Section 4(b)(v).

 

Change of Control Transaction ” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of thirty-three percent (33%) of the voting securities of the Company (other than by means of conversion of the Notes and the Conversion Shares issued together with the Notes); (b) the Company merges into or consolidates with any other Person, or any Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction own less than sixty-six percent (66%) of the aggregate voting power of the Company or the successor entity of such transaction; (c) the Company sells or transfers all or substantially all of its assets to another Person and the stockholders of the Company immediately prior to such transaction own less than sixty-six percent (66%) of the aggregate voting power of the acquiring entity immediately after the transaction; (d) a replacement at one time or within a three (3) year period of more than one-half (1/2) of the members of the Board of Directors which is not approved by a majority of those individuals who are members of the Board of Directors on the Original Issue Date (or by those individuals who are serving as members of the Board of Directors on any date whose nomination to the Board of Directors was approved by a majority of the members of the Board of Directors who are members on the date hereof); or (e) the execution by the Company of an agreement to


- 2 -



which the Company is a party or by which it is bound, providing for any of the events set forth in clauses (a) through (d) above.

 

Conversion ” shall have the meaning ascribed to such term in Section 4.

Conversion Date ” shall have the meaning set forth in Section 4(a).

 

Conversion Schedule ” means the Conversion Schedule in the form of Schedule 1 attached hereto.

 

Conversion Shares ” means, collectively, the shares of Common Stock issuable upon conversion of this Note in accordance with the terms hereof, including without limitation, shares of Common Stock issued upon conversion, redemption, or amortization of this Note, and shares of Common Stock issued and issuable in lieu of the cash payment of interest on this Note in accordance with the terms of this Note.

 

Dilutive Issuance ” shall have the meaning set forth in Section 5(b).

 

Dilutive Issuance Notice ” shall have the meaning set forth in Section 5(b).

 

DTC ” means the Depository Trust Company.

 

DTC/FAST Program ” means the DTC’s Fast Automated Securities Transfer Program.

 

DWAC Eligible ” means that (a) the Common Stock is eligible at DTC for full services pursuant to DTC’s Operational Arrangements, including without limitation transfer through DTC’s DWAC system, (b) the Company has been approved (without revocation) by the DTC’s underwriting department, (c) the Transfer Agent is approved as an agent in the DTC/FAST Program, (d) the Conversion Shares are otherwise eligible for delivery via DWAC, and (e) the Transfer Agent does not have a policy prohibiting or limiting delivery of the Conversion Shares via DWAC.

 

Equity Conditions ” means, during the period in question, (a) no Event of Default shall have occurred, (b) the Company has timely filed (or obtained extensions in respect thereof and filed within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act and the Company has met the current public information requirements of Rule 144(c) under the Securities Act as of the end of the period in question, (c) on any date that the Company desires to make a payment of interest and/or principal in shares of Common Stock instead of cash, the average daily dollar volume of the Company’s common stock for the previous [fifteen (15)] trading days must be greater than [$25,000], (d) the Company shares of common stock must be DWAC Eligible and not subject to a “DTC chill”, (e) the Common Stock has closed above [$0.10] on the Trading Market, and (g) this Note is registered under the Securities Act or the Conversion Shares are deemed “free trading” shares .

 

Event of Default ” shall have the meaning set forth in Section 6(a).

 

Fixed Conversion Price ” shall have the meaning set forth in Section 4(b).


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Fundamental Transaction ” shall have the meaning set forth in Section 5(e).

 

Late Fees ” shall have the meaning set forth in Section 2(c).

 

Mandatory Default Amount ” means the payment of one hundred thirty percent (130%) of the outstanding principal amount of this Note and accrued and unpaid interest hereon, in addition to the payment of all other amounts, costs, expenses and liquidated damages due in respect of this Note.

 

New York Courts ” shall have the meaning set forth in Section 7(d).

 

Note Register ” shall have the meaning set forth in Section 2(b).

 

Notice of Conversion ” shall have the meaning set forth in Section 4(a).

 

Original Issue Date ” means the date of the first issuance of this Note, regardless of any transfers of any Note and regardless of the number of instruments which may be issued to evidence such Note.

 

Person ” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

Required Minimum ” means, as of any date, the maximum aggregate number of shares of Common Stock then issued or potentially issuable in the future pursuant to this Note, including any Conversion Shares issuable upon conversion in full of this Note (including Conversion Shares issuable as payment of interest on this Note), ignoring any conversion limits set forth therein, and assuming that the Fixed Conversion Price is at all times on and after the date of determination one hundred percent (100%) of the then Fixed Conversion Price on the Trading Day immediately prior to the date of determination.

 

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

 

Share Delivery Date ” shall have the meaning set forth in Section 4(c)(ii).

 

Successor Entity ” shall have the meaning set forth in Section 5(e).

 

Trading Day ” means a day on which the principal Trading Market is open for trading.

 

Trading Market ” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE MKT; the Nasdaq Capital Market; the Nasdaq Global Market; the Nasdaq Global Select Market; the New York Stock Exchange; the NYSE MKT, any level of the OTC Markets operated by OTC Markets Group, Inc. or the OTC Bulletin Board (or any successors to any of the foregoing).


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Variable Rate Transaction ” means, collectively, an “Equity Line of Credit” or similar agreement, or a Variable Priced Equity Linked Instrument. For purposes hereof, “Equity Line of Credit” means any transaction involving a written agreement between the Company and an investor or underwriter whereby the Company has the right to “put” its securities to the investor or underwriter over an agreed period of time and at future determined price or price formula (other than customary “preemptive” or “participation” rights or “weighted average” or “full-ratchet” anti-dilution provisions or in connection with fixed-price rights offerings and similar transactions that are not Variable Priced Equity Linked Instruments), and “Variable Priced Equity Linked Instruments” means: (A) any debt or equity securities which are convertible into, exercisable or exchangeable for, or carry the right to receive additional shares of Common Stock either (1) at any conversion, exercise or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for Common Stock at any time after the initial issuance of such debt or equity security, or (2) with a conversion, exercise or exchange price that is subject to being reset on more than one occasion at some future date at any time after the initial issuance of such debt or equity security due to a change in the market price of the Company’s Common Stock since date of initial issuance (other than customary “preemptive” or “participation” rights or “weighted average” or “full-ratchet” anti-dilution provisions or in connection with fixed-price rights offerings and similar transactions), and (B) any amortizing convertible security which amortizes prior to its maturity date, where the Company is required or has the option to (or any investor in such transaction has the option to require the Company to) make such amortization payments in shares of Common Stock which are valued at a price that is based upon and/or varies with the trading prices of or quotations for Common Stock at any time after the initial issuance of such debt or equity security (whether or not such payments in stock are subject to certain equity conditions).

 

VWAP ” means, for or as of any date, the dollar volume-weighted average price for such security on the Trading Market (or, if the Trading Market is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded) during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set to weighted average) or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAP cannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination, recapitalization or other similar transaction during such period.

 

Section 2 .           Interest .


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a)        Payment of Interest in Cash or Kind . The Company shall pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Note at the rate of five percent (5%) % per annum, which twelve (12) months’ interest amount shall be guaranteed. All interest payments hereunder will be payable in cash, or subject to the Equity Conditions, in cash or Common Stock in the Holder’s discretion. Accrued and unpaid interest shall be due on payable on each Conversion Date, prepayment date, and on the Maturity Date, or as otherwise set forth herein.

 

b)        Interest Calculations . Interest shall be calculated on the basis of a 360-day year, consisting of twelve (12) thirty (30) calendar day periods, and shall accrue daily commencing on the Original Issue Date until payment in full of the outstanding principal, together with all accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder, has been made. Interest hereunder will be paid to the Person in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note (the “ Note Register ”).

 

c)        Late Fee . All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at an interest rate equal to the lesser of eighteen percent (18%) per annum or the maximum rate permitted by applicable law (the “ Late Fees ”) which shall accrue daily from the date such interest is due hereunder through and including the date of actual payment in full.

 

d)        Prepayment . So long as no Event of Default (as defined in Section 6(a)) exists, at any time upon ten (10) days written notice to the Holder, the Company may prepay any portion of the principal amount of this Note and any accrued and unpaid interest. If the Company exercises its right to prepay any portion of is Note within ninety (90) calendar days from the Original Issue Date, the Company shall make payment to the Holder an amount in cash equal to the sum of the then outstanding principal amount of this Note being prepaid and accrued and unpaid interest thereon multiplied by 115%. Commencing on the ninety-first (91 st ) calendar day after the Original Issue Date and through the 180 th calendar day after the Original Issue Date, if the Company exercises its right to prepay any portion of this Note it shall make payment to the Holder of an amount in cash equal to the sum of the then outstanding principal amount of this Note being prepaid and accrued and unpaid interest thereon multiplied by 120%. Commencing on the 181 st calendar day after the Original Issue Date and up to the calendar day prior to the Maturity Date, if the Company exercises its right to prepay any portion of this Note it shall make payment to the Holder of an amount in cash equal to the sum of the then outstanding principal amount of this Note being prepaid and accrued and unpaid interest thereon multiplied by 125%. The Holder may continue to convert this Note from the date notice of the prepayment is given until the date of the prepayment.

 

Section 3.            Registration of Transfers and Exchanges.

 

a)        Different Denominations . This Note is exchangeable for an equal aggregate principal amount of Note of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be payable for such registration of transfer or exchange.


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b)        Investment Representations . This Note has been issued subject to certain investment representations of the original Holder and may be transferred or exchanged only in compliance with applicable federal and state securities laws and regulations.

 

c)        Reliance on Note Register . Prior to due presentment for transfer to the Company of this Note, the Company and any agent of the Company may treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.

 

Section 4.            Conversion .

 

a)        Voluntary Conversion . At any time after the Original Issue Date until this Note is no longer outstanding, this Note shall be convertible, in whole or in part, into shares of Common Stock at the option of the Holder, at any time and from time to time (subject to the conversion limitations set forth in Section 4(d) hereof). The Holder shall effect conversions by delivering to the Company a Notice of Conversion, the form of which is attached hereto as Annex A (each, a “ Notice of Conversion ”), specifying therein the principal amount of this Note to be converted and the date on which such conversion shall be effected (such date, the “ Conversion Date ”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is deemed delivered hereunder. No ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required. To effect conversions hereunder, the Holder shall not be required to physically surrender this Note to the Company unless the entire principal amount of this Note, plus all accrued and unpaid interest thereon, has been so converted. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Note in an amount equal to the applicable conversion. The Holder and the Company shall maintain a Conversion Schedule showing the principal amount(s) converted and the date of such conversion(s). The Company may deliver an objection to any Notice of Conversion within one (1) Business Day of delivery of such Notice of Conversion. In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error. The Holder, and any assignee by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note may be less than the amount stated on the face hereof.

 

b)        Conversion Price . The conversion price in effect on any Conversion Date shall be equal to the lesser of (i) ten cents ($0.10), and (ii) seventy percent (70%) of the lowest traded price in the twenty (20) consecutive Trading Days on the Trading Market prior to the Conversion Date (the “ Fixed Conversion Price ”). In the event that the Company has a registration statement on Form S-l with respect to the resale of the Conversion Shares is declared effective by the Commission within ninety (90) calendar days of November [27], 2017, the Fixed Conversion Price shall be equal to the lesser of (i) ten cent ($0.10), and (ii) twenty-five percent (25%) of the lowest traded price in the twenty (20) consecutive Trading Days on the Trading Market prior to the Conversion Date. Notwithstanding anything herein to the contrary, at any time after the occurrence of any Event of Default, the Holder may require the Company to, at such Holder’s


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option and otherwise in accordance with the provisions for conversion herein, convert all or any part of this Note into Common Stock at the Alternate Conversion Price. All such foregoing determinations will be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately decreases or increases the Common Stock during such measuring period. Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 6 hereof and the Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

 

c)        Mechanics of Conversion .

 

i.          Conversion Shares Issuable Upon Conversion of Principal Amount . The number of Conversion Shares issuable upon a conversion hereunder shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Note to be converted and any accrued and unpaid interest to be converted by (y) the Fixed Conversion Price.

 

ii.         Delivery of Certificate Upon Conversion . Not later than two (2) Trading Days after each Conversion Date (the “ Share Delivery Date ”), the Company shall deliver, or cause to be delivered, to the Holder a certificate or certificates representing the Conversion Shares which, on or after the date on which such Conversion Shares are eligible to be sold under Rule 144 without the need for current public information and the Company has received an opinion of counsel to such effect reasonably acceptable to the Company (which opinion the Company will be responsible for obtaining at its cost and expense) shall be free of restrictive legends and trading restrictions, representing the number of Conversion Shares being acquired upon the conversion of this Note. All certificate or certificates required to be delivered by the Company under this Section 4(d) shall be delivered electronically through the Depository Trust Company or another established clearing corporation performing similar functions. If the Conversion Date is prior to the date on which such Conversion Shares are eligible to be sold under Rule 144 without the need for current public information the Conversion Shares shall bear a restrictive legend 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),


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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.”

 

Notwithstanding the foregoing, commencing on such date that the Conversion Shares are eligible for sale under Rule 144 subject to current public information requirements, the Company, upon request and at the sole expense of the Company, shall obtain a legal opinion to allow for such sales under Rule 144.

 

iii.         Failure to Deliver Certificates . If, in the case of any Notice of Conversion, such certificate or certificates are not delivered to or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to the Company at any time on or before its receipt of such certificate or certificates, to rescind such Conversion, in which event the Company shall promptly return to the Holder any original Note delivered to the Company and the Holder shall promptly return to the Company the Common Stock certificates issued to such Holder pursuant to the rescinded Conversion Notice.

 

iv.         Obligation Absolute; Partial Liquidated Damages . The Company’s obligations to issue and deliver the Conversion Shares upon conversion of this Note in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of such Conversion Shares; provided , however , that such delivery shall not operate as a waiver by the Company of any such action the Company may have against the Holder. In the event the Holder of this Note shall elect to convert any or all of the outstanding principal or interest amount hereof, the Company may not refuse conversion based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and or enjoining conversion of all or part of this Note shall have been sought. If the injunction is not granted, the Company shall promptly comply with all conversion obligations herein. If the injunction is obtained, the Company must post a surety bond for the benefit of the Holder in the amount of 150% of the outstanding principal amount of this Note, which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which


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shall be payable to the Holder to the extent it obtains judgment. In the absence of seeking such injunction, the Company shall issue Conversion Shares or, if applicable, cash, upon a properly noticed conversion. If the Company fails for any reason to deliver to the Holder such certificate or certificates pursuant to Section 4(c)(ii) by the Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, $1,000 per Trading Day for each Trading Day after such Share Delivery Date until such certificates are delivered or Holder rescinds such conversion. Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 6 hereof for the Company’s failure to deliver Conversion Shares within the period specified herein and the Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.


v.         Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Conversion . In addition to any other rights available to the Holder, if the Company fails for any reason to deliver to the Holder such certificate or certificates by the Share Delivery Date pursuant to Section 4(c)(ii), and if after such Share Delivery Date the Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Conversion Shares which the Holder was entitled to receive upon the conversion relating to such Share Delivery Date (a “ Buy-In ”), then the Company shall (A) pay in cash to the Holder (in addition to any other remedies available to or elected by the Holder) the amount, if any, by which (x) the Holder’s total purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that the Holder was entitled to receive from the conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B) at the option of the Holder, either reissue (if surrendered) this Note in a principal amount equal to the principal amount of the attempted conversion (in which case such conversion shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued if the Company had timely complied with its delivery requirements under Section 4(c)(ii). For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of this Note with respect to which the actual sale price of the Conversion Shares (including any brokerage commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates


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representing shares of Common Stock upon conversion of this Note as required pursuant to the terms hereof.

 

vi.         Reservation of Shares Issuable Upon Conversion . The Company covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock a number of shares of Common Stock at least equal to three hundred percent (300%) of the Required Minimum (the “Reserve Amount”) for the sole purpose of issuance upon conversion of this Note and payment of interest on this Note, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders of the Notes). The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.

 

vii.        Fractional Shares . No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Note. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Company shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Fixed Conversion Price or round up to the next whole share.

 

viii.       Transfer Taxes and Expenses . The issuance of certificates for shares of the Common Stock on conversion of this Note shall be made without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificates, provided that, the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of this Note so converted and the Company shall not be required to issue or deliver such certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Conversion.

 

d)         Holder’s Conversion Limitations . The Company shall not effect any conversion of principal and/or interest of this Note, and a Holder shall not have the right to convert any principal and/or interest of this Note, to the extent that after giving effect to the conversion set forth on the applicable Notice of Conversion, the Holder (together with the Holder’s Affiliates, and any Persons acting as a group together with the Holder or any of the Holder’s Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted principal amount of this Note beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, any other Notes) beneficially


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owned by the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 4(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 4(d) applies, the determination of whether this Note is convertible (in relation to other securities owned by the Holder together with any Affiliates) and of which principal amount of this Note is convertible shall be in the sole discretion of the Holder, and the submission of a Notice of Conversion shall be deemed to be the Holder’s determination of whether this Note may be converted (in relation to other securities owned by the Holder together with any Affiliates) and which principal amount of this Note is convertible, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, the Holder will be deemed to represent to the Company each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder , For purposes of this Section 4(e), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (ii) a more recent public announcement by the Company, or (iii) a more recent written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “ Beneficial Ownership Limitation ” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of this Note held by the Holder. The Holder, upon not less than sixty-one (61) days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 4(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Note held by the Holder and the Beneficial Ownership Limitation provisions of this Section 4(e) shall continue to apply. Any such increase or decrease will not be effective until the sixty-first (61 st ) day after such notice is delivered to the Company. The Beneficial Ownership Limitation provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 4(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Note.

 

Section 5 .           Certain Adjustments .


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a)         Stock Dividends and Stock Splits . If the Company, at any time while this Note is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion of, or payment of interest on, this Note), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Fixed Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Company) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

b)        Anti-Dilution . If, at any time while this Note remain outstanding, the Company or any Subsidiary, as applicable, sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase or other disposition), any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock at an effective price per share that is lower than the then Conversion Price (such lower price, the “ Base Conversion Price ” and such issuances, collectively, a “ Dilutive Issuance ”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced to equal the Base Conversion Price. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. The Company shall notify the Holder in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 5(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “ Dilutive Issuance Notice ”). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 5(b), upon the occurrence of any Dilutive Issuance, the Holder is entitled to receive a number of Conversion Shares based upon the Base Conversion Price on or after the date of such Dilutive Issuance, regardless of whether the Holder accurately refers to the Base Conversion Price in the Notice of Conversion.

 

c)        Subsequent Rights Offerings . In addition to any adjustments pursuant to Section 5(a) above, if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “ Purchase Rights ”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which


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the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

d)        Pro Rata Distributions . During such time as this Note is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “ Distribution ”), at any time after the issuance of this Note, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Note (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution ( provided , however , to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

e)        Fundamental Transaction . If, at any time while this Note is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of fifty percent (50%) or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, (v) the Company, directly or indirectly, in one or more related transactions consummates a stock


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or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than fifty percent (50%) of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “ Fundamental Transaction ”), then, upon any subsequent conversion of this Note, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation in Section 4(e) on the conversion of this Note), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “ Alternate Consideration ”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Note is convertible immediately prior to such Fundamental Transaction (without regard to any limitation in Section 4(d) on the conversion of this Note). For purposes of any such conversion, the determination of the Fixed Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one (1) share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Fixed Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Note following such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “ Successor Entity ”) to assume in writing all of the obligations of the Company under this Note and any document ancillary hereto, in accordance with the provisions of this Section 5(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the holder of this Note, deliver to the Holder in exchange for this Note a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Note which is convertible for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon conversion of this Note (without regard to any limitations on the conversion of this Note) prior to such Fundamental Transaction, and with a conversion price which applies the conversion price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such conversion price being for the purpose of protecting the economic value of this Note immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Note and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Note and the


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other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.

 

f)         Calculations . All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Company) issued and outstanding.

 

g)        Notice to the Holder .

 

i.          Adjustment to Fixed Conversion Price . Whenever the Fixed Conversion Price is adjusted pursuant to any provision of this Section 5, the Company shall promptly deliver to each Holder a notice setting forth the Fixed Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

ii.          Notice to Allow Conversion by Holder . If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of this Note, and shall cause to be delivered to the Holder at its last address as it shall appear upon the Note Register, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to convert this Note during the 20-day period


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commencing on the date of such notice through the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 

h)         Variable Rate Transaction . So long as this Note remains outstanding or the holder of this Note holds any Conversion Shares, the Company shall not directly or indirectly (i)(A) consummate any exchange of any Indebtedness and/or securities of the Company for any other securities and/or Indebtedness of the Company, (B) cooperate with any person to effect any exchange of securities and/or Indebtedness of the Company in connection with a proposed sale of such securities from an existing holder of such securities to a third party), and/or (C) reduce and/or otherwise change the exercise price, conversion price and/or exchange price of any Common Stock Equivalent of the Company and/or amend any non-convertible Indebtedness of the Company to make it convertible into securities of the Company, (ii) issue or sell any of its securities either (A) at a conversion, exercise or exchange rate or price that is based upon and/or varies with the trading prices of, or quotations for, Common Stock, and/or (B) with a conversion, exercise or exchange rate and/or price that is subject to being reset on one or more occasions either (1) at some future date after the initial issuance of such securities or (2) upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock, and/or (iii) enter into any agreement (including, without limitation, an “equity line of credit” or an “at-the-market offering”) whereby the Company may sell securities at a future determined price. Any transaction contemplated in this Section 5(h), shall be referred to as a “ Variable Rate Transaction ”. The Buyer shall be entitled to obtain injunctive relief against the Company to preclude any Variable Rate Transaction (without the need for the posting of any bond or similar item, which the Company hereby expressly and irrevocably waives the requirement for), which remedy shall be in addition to any right of the Buyer to collect damages. A “Variable Rate Transaction” shall also include mean, collectively, an “Equity Line of Credit” or similar agreement, or a Variable Priced Equity Linked Instrument. For purposes hereof, “Equity Line of Credit” means any transaction involving a written agreement between the Company and an investor or underwriter whereby the Company has the right to “put” its securities to the investor or underwriter over an agreed period of time and at future determined price or price formula (other than customary “preemptive” or “participation” rights or “weighted average” or “full-ratchet” anti-dilution provisions or in connection with fixed-price rights offerings and similar transactions that are not Variable Priced Equity Linked Instruments), and “Variable Priced Equity Linked Instruments” means: (A) any debt or equity securities which are convertible into, exercisable or exchangeable for, or carry the right to receive additional shares of Common Stock either (1) at any conversion, exercise or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for Common Stock at any time after the initial issuance of such debt or equity security, or (2) with a conversion, exercise or exchange price that is subject to being reset on more than one occasion at some future date at any time after the initial issuance of such debt or equity security due to a change in the market price of the Company’s Common Stock since date of initial issuance (other than customary “preemptive” or “participation” rights or “weighted average” or “full-ratchet” anti-dilution provisions or in connection with fixed-price rights offerings and similar transactions), and (B) any amortizing convertible security which amortizes prior to its maturity date, where the Company is required or has the option to (or any investor in such transaction has the option to require the Company to) make such amortization payments in shares of Common Stock which are valued at a price that is based upon and/or varies with the trading prices of or


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quotations for Common Stock at any time after the initial issuance of such debt or equity security (whether or not such payments in stock are subject to certain equity conditions).

 

i)          Exchange Transactions . During the period commencing on the date hereof and for so long as this Note remains outstanding, neither the Company nor any of its affiliates or Subsidiaries, nor any of its or their respective officers, employees, directors, agents or other representatives, will, without the prior written consent of the Holder (which consent may be withheld, delayed or conditioned in the Holder’s sole discretion), directly or indirectly: (a) solicit, initiate, encourage or accept any other inquiries, proposals or offers from any Person (other than the Holder) relating to any exchange (i) of any security of the Company or any of its Subsidiaries for any other security of the Company or any of its Subsidiaries; or (ii) of any indebtedness or other securities of, or claim against, the Company or any of its Subsidiaries relying on the exemption provided by Section 3(a)(10) of the Securities Act (any such transaction described in clauses (i) or (ii), an “ Exchange Transaction ”); (b) enter into, effect, alter, amend, announce or recommend to its stockholders any Exchange Transaction with any Person (other than the Holder); or (c) participate in any discussions, conversations, negotiations or other communications with any Person (other than the Holder) regarding any Exchange Transaction, or furnish to any Person (other than the Holder) any information with respect to any Exchange Transaction, or otherwise cooperate in any way, assist or participate in, facilitate or encourage any effort or attempt by any Person (other than the Holder) to seek an Exchange Transaction involving the Company or any of its Subsidiaries. In addition, for so long as any of the Notes remain outstanding, neither the Company nor any of its affiliates or Subsidiaries, nor any of its or their respective officers, employees, directors, agents or other representatives, will, without the prior written consent of the Holder (which consent may be withheld, delayed or conditioned in the Holder’s sole discretion), directly or indirectly, cooperate in any way, assist or participate in, facilitate or encourage any effort or attempt by any Person (other than the Holder) to effect any acquisition of securities or indebtedness of, or claim against, the Company by such Person from an existing holder of such securities, indebtedness or claim in connection with a proposed exchange of such securities or indebtedness of, or claim against, the Company (whether pursuant to Section 3(a)(9) or 3(a)(10) of the Securities Act or otherwise) (a “ Third Party Exchange Transfer ”). The Company, its affiliates and Subsidiaries, and each of its and their respective officers, employees, directors, agents or other representatives shall immediately cease and cause to be terminated all existing discussions, conversations, negotiations and other communications with any Persons (other than the Holder) with respect to any of the foregoing. The Company shall promptly (and in no event later than 24 hours after receipt) notify (which notice shall be provided orally and in writing and shall identify the Person making the inquiry, request, proposal or offer and set forth the material terms thereof) the Holder after receipt of any inquiry, request, proposal or offer relating to any Exchange Transaction or Third Party Exchange Transfer, and shall promptly (and in no event later than 24 hours after receipt) provide copies to the Holder of any written inquiries, requests, proposals or offers relating thereto. The Company agrees that it and its affiliates and Subsidiaries, and each of its and their respective officers, employees, directors, agents or other representatives Subsidiaries will not enter into any agreement with any Person subsequent to the date hereof which prohibits the Company from providing any information to the Holder in accordance with this provision. For all purposes of this Agreement, violations of the restrictions set forth in this Section 5(h) by any Subsidiary or affiliate of the Company, or any officer, employee, director, agent or other representative of the


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Company or any of its Subsidiaries or affiliates shall be deemed a direct breach of this Section 5(h) by the Company.

 

Section 6 .           Events of Default .

 

a)         “ Event of Default ” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

 

i.          any default in the payment of (A) the principal amount of this Note or (B) interest, liquidated damages and other amounts owing to a Holder on this Note, as and when the same shall become due and payable (whether on a Conversion Date, Amortization Payment Date, or the Maturity Date or by acceleration or otherwise) which default, solely in the case of an interest payment or other default under clause (B) above, is not cured within three (3) Trading Days;

 

ii.         the Company shall fail to observe or perform any other covenant, provision, or agreement contained in this Note (and other than a breach by the Company of its obligations to deliver shares of Common Stock to the Holder upon conversion, which breach is addressed in clause (x) below) which failure is not cured, if possible to cure, within the earlier to occur of (A) three (3) Trading Days after notice of such failure sent by the Holder or by any other Holder to the Company and (B) five (5) Trading Days after the Company has become or should have become aware of such failure;

 

iii.        a default or event of default (subject to any grace or cure period provided in the applicable agreement, document or instrument) shall occur under (A) any of the Transaction Documents or (B) any other agreement, contract, lease, document or instrument to which the Company or any Subsidiary is obligated (and not covered by clause (vi) below);


iv.        any representation or warranty made in this Note, any other Transaction Documents, any written statement pursuant hereto or thereto, any other agreement, contract, lease, document or instrument to which the Company or any Subsidiary is obligated (including those covered by clause (vi) below), or any other report, financial statement or certificate made or delivered to the Holder or any other Holder shall be untrue or incorrect in any material respect as of the date when made or deemed made;

 

v.         the Company or any Subsidiary (as such term is defined in Rule l-02(w) of Regulation S-X) shall be subject to a Bankruptcy Event;

 

vi.        the Company or any Subsidiary shall default on any of its obligations under any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced, any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that (a) involves an obligation greater than


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Fifty Thousand Dollars ($50,000) whether such indebtedness now exists or shall hereafter be created, and (b) results in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;

 

vii.       the Common Stock shall not be eligible for listing or quotation for trading on a Trading Market and shall not be eligible to resume listing or quotation for trading thereon within five (5) Trading Days or the transfer of shares of Common Stock through the Depository Trust Company System is no longer available or “chilled”;

 

viii.      the Company shall be a party to any Change of Control Transaction or Fundamental Transaction (A) without first giving the Holder ten (10) days’ prior written notice of the closing of such Change of Control Transaction or Fundamental Transaction and (B) prior to or simultaneous with the closing of such Change of Control Transaction or Fundamental Transaction, the Holder is not repaid in accordance with Section 2(e) herein;

 

ix.        the Company does not meet the current public information requirements under Rule 144;

 

x.         the Company shall fail for any reason to deliver certificates to a Holder prior to the third (3 rd ) Trading Day after a Conversion Date pursuant to Section 4(c) or the Company shall provide at any time notice to the Holder, including by way of public announcement, of the Company’s intention to not honor requests for conversions of this Note in accordance with the terms hereof;

 

xi.        the Company fails to file with the Commission any required reports under Section 13 or 15(d) of the Exchange Act such that it is not in compliance with Rule 144(c)(1) (or Rule 144(i)(2), if applicable);

 

xii.       the Company or any Subsidiary shall: (i) apply for or consent to the appointment of a receiver, trustee, custodian or liquidator of it or any of its properties; (ii) admit in writing its inability to pay its debts as they mature; (iii) make a general assignment for the benefit of creditors; (iv) be adjudicated a bankrupt or insolvent or be the subject of an order for relief under Title 11 of the United States Code or any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute of any other jurisdiction or foreign country; or (v) file a voluntary petition in bankruptcy, or a petition or an answer seeking reorganization or an arrangement with creditors or to take advantage or any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute, or an answer admitting the material allegations of a petition filed against it in any proceeding under any such law, or (vi) take or permit to be taken any action in furtherance of or for the purpose of effecting any of the foregoing;

 

xiii.       if any order, judgment or decree shall be entered, without the application, approval or consent of the Company or any Subsidiary, by any court of competent


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jurisdiction, approving a petition seeking liquidation or reorganization of the Company or any Subsidiary, or appointing a receiver, trustee, custodian or liquidator of the Company or any Subsidiary, or of all or any substantial part of its assets, and such order, judgment or decree shall continue unstayed and in effect for any period of sixty (60) days;

 

xiv.       the occurrence of any levy upon or seizure or attachment of, or any uninsured loss of or damage to, any property of the Company or any Subsidiary having an aggregate fair value or repair cost (as the case may be) in excess of Fifty Thousand Dollars ($50,000) individually or in the aggregate, and any such levy, seizure or attachment shall not be set aside, bonded or discharged within thirty (30) days after the date thereof;

 

xv.       the Company shall fail to maintain the Reserve Amount;

 

xvi.      any monetary judgment, writ or similar final process shall be entered or filed against the Company, any subsidiary or any of their respective property or other assets for more than Fifty Thousand Dollars ($50,000), and such judgment, writ or similar final process shall remain unvacated, unbonded or unstayed for a period of forty-five (45) calendar days;

 

xvii.     the Company shall fail for any reason to deliver certificates to a Holder on or prior to the third (3 rd ) Trading Day after the Amortization Payment Date pursuant to Section 2(d) (if such Holder requests that the Amortization Payment be made in Common Stock at the Amortization Conversion Rate and subject to the Equity Conditions); or the Company shall provide at any time notice to the Holder, including by way of public announcement, of the Company’s intention to not honor amortizations of this Note in accordance with the terms hereof;

 

xviii.    The Company shall fail to comply with the “use of proceeds” as set forth in the Purchase Agreement;

 

xix.      the Shares of Common Stock are not DWAC Eligible;

 

xx.       the shares of Common Stock are subject to a “DTC chill”;

 

xxi.      the Company, its officers, or any affiliates or agents of the Company have withdrawn or paid cash to any Person other than what might constitute use of petty cash in purely de minims amounts; and

 

xxii.     the Company shall fail to observe or perform any other covenant, provision, or agreement contained in any other Transaction Documents, agreement, contract, lease, document or instrument to which the Company or any Subsidiary is obligated (including those covered by clause (vi) above).

 

b)         Remedies Upon Event of Default . Subject to the Beneficial Ownership Limitation as set forth in Section 4(d), if any Event of Default occurs, then the outstanding principal amount


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of this Note, plus accrued but unpaid interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due and payable at the Holder’s option, in cash or in shares of Common Stock (subject to the Equity Conditions and at the Alternate Conversion Price), at the Mandatory Default Amount. After the occurrence of any Event of Default that results in the eventual acceleration of this Note, the interest rate on this Note shall accrue at an additional interest rate equal to the lesser of two percent (2%) per month (twenty-four percent (24%) per annum) or the maximum rate permitted under applicable law. Upon the payment in full of the Mandatory Default Amount in cash or in shares of Common, the Holder shall promptly surrender this Note to or as directed by the Company. In connection with such acceleration described herein, the Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind (other than the Holder’s election to declare such acceleration), 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 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 6(b). No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

 

Section 7 .           Miscellaneous .

 

a)         Notices . Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by email or facsimile, or sent by a nationally recognized overnight courier service, addressed to the Company, at 8275 S. Eastern Avenue, Suite 200, Las Vegas, NV 89123, or such other address, facsimile number, or email address as the Company may specify for such purposes by notice to the Holder delivered in accordance with this Section 7(a). Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by email or facsimile, or sent by a nationally recognized overnight courier service addressed to each Holder at the email address, facsimile number, or address of the Holder appearing on the books of the Company, or if no such email address, facsimile number, or address appears on the books of the Company, at the principal place of business of such Holder. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 12:00 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 12:00 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (iv) upon actual receipt by the party to whom such notice is required to be given.

 

b)         Absolute Obligation . Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable, on this Note at the


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time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct debt obligation of the Company. This Note ranks pari passu with all other Notes now or hereafter issued under the terms set forth herein.

 

c)         Lost or Mutilated Note . If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to the Company.

 

d)         Governing Law . All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “ New York Courts ”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby. If any party shall commence an action or proceeding to enforce any provisions of this Note, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

 

e)         Waiver . Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note on any other occasion. Any waiver by the Company or the Holder must be in writing.


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f)         Amending the Terms of this Note . The prior written consent of the Holder shall be required for any change or amendment to this Note.

 

g)         Severability . If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. 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 Company 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 Company 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 Company (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.


h)         Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and any of the other Transaction Documents at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any such breach or any such threatened breach, without the necessity of showing economic loss and without any bond or other security being required. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Note.

 

i)          Next Business Day . Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

 

j)          Payment of Collection, Enforcement and Other Costs . If (i) this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Note or


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to enforce the provisions of this Note or (ii) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Note, then the Company shall pay the reasonable and documented out-of-pocket costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, but not limited to, attorneys’ fees and disbursements.

 

k)         Headings . The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of the provisions hereof.

 

l)          Security Interest . The obligations of the Company under this Note shall be secured by that certain Security Agreement, dated November [27], 2017, between the Company and the Holder.

 

*********************

 

(Signature Pages Follow)

 

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly authorized officer as of the date first above indicated.

 

 

ENVOY GROUP CORP.

 

 

 

 

By:

/s/ Harpreet Singh Sangha

 

 

Name: Harpreet Singh Sangha

Title: Chairman / CFO 

 

Facsimile No. for delivery of Notices: ___________


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ANNEX A

 

NOTICE OF CONVERSION

 

The undersigned hereby elects to convert principal under the Senior Secured Convertible Promissory Note, due December 20, 2018 of Black Cactus Global, Inc., a Florida corporation, f/k/a Envoy Group Corp (the “ Company ”), into shares of common stock (the “ Common Stock ”), of the Company according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a person other than the 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.

 

By the delivery of this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Common Stock does not exceed the amounts specified under Section 4 of this Note, as determined in accordance with Section 13(d) of the Exchange Act.

 

The undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock.

 

Conversion calculations:

 

 

Date to Effect Conversion:

 

 

 

Principal Amount of Note to be Converted:

 

 

 

Payment of Interest in Common Stock____ yes ___ no

 

If yes, $______ of Interest Accrued on Account of Conversion at Issue.

 

 

 

Number of shares of Common Stock to be issued:

 

 

 

Signature:

 

 

 

Name:

 

 

 

Delivery Instructions:


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Schedule 1

 

CONVERSION SCHEDULE

 

This Senior Secured Convertible Promissory Note, due on November [__], 2018, in the original principal amount of $[__________] is issued by Envoy Group Corp., a Florida corporation. This Conversion Schedule reflects conversions made under Section 4 of the above referenced Note.

 

Dated:

 

Date of Conversion
(or for first entry,
Original Issue Date)

Amount of
Conversion

Aggregate Principal Amount Remaining Subsequent to Conversion (or original Principal Amount)

Company Attest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


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Exhibit 4.8


NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.


BLACK CACTUS GLOBAL, INC.

Financial Advisor Warrant To Purchase Common Stock

 

Warrant No.: PA-1 

Number of Common Stock: 560,717

Date of Issuance: [___________], 2018 (“ Issuance Date ”)

 

Black Cactus Global, Inc., a corporation organized under the laws of the State of Nevada (the “ Company ”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, AEGIS CAPITAL CORP, the registered holder hereof or its permitted assigns (the “ Holder ”), is entitled, subject to the terms set forth below, to purchase from the Company, at the Exercise Price (as defined in Section 1(b)) then in effect, at any time or times on or after the date hereof (the “ Initial Exercisability Date ”), but not after 11:59 p.m., New York time, on the Expiration Date, up to such number of fully paid and nonassessable Common Stock (as defined below) equal to 560,717, subject to adjustment as provided herein (the “ Warrant Shares ”). Except as otherwise defined herein, capitalized terms in this Warrant to purchase Common Stock (including any warrants to purchase Common Stock issued in exchange, transfer or replacement hereof, this “ Warrant ”), shall have the meanings set forth in Section 18. This Warrant is one of a series of Warrants to purchase Common Stock originally issued pursuant to Section A.2 of the Financial Advisory Agreement, dated as of November 8, 2017 (the “ Subscription Date ”), by and among the Company and Aegis Capital Corp (the warrants to purchase Common Stock issued pursuant to the Financial Advisory Agreement referred to herein as the “ Warrants ”).


1.            EXERCISE OF WARRANT.

 

(a)          Mechanics of Exercise . Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrant may be exercised by the Holder at any time or times on or after the Initial Exercisability Date, in whole or in part, by (i) delivery of a written notice, in the form attached hereto as  Exhibit A  (the “ Exercise Notice ”), of the Holder’s election to exercise this Warrant and (ii) (A) payment to the Company of an amount equal to the applicable Exercise Price (as defined in Section 1(b)) multiplied by the number of Warrant Shares as to which this Warrant is being exercised (the “ Aggregate Exercise Price ”) in cash by wire transfer of immediately available funds or (B) if the provisions of Section 1(d) are applicable, by notifying the Company that this Warrant is being exercised pursuant to a Cashless Exercise (as defined in Section 1(d)). The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder. Execution and delivery of the Exercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original Warrant and issuance of a new Warrant evidencing the right to purchase the remaining number of Warrant Shares. No ink-original Exercise Notice shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Exercise Notice be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering

 

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the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased.  The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise Form within one (1) Business Day of receipt of such notice.   The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.  On or before the first (1 st ) Trading Day following the date on which the Company has received the Exercise Notice, the Company shall transmit by facsimile or e-mail an acknowledgment of confirmation of receipt of the Exercise Notice to the Holder and the Company’s transfer agent (the “ Transfer Agent ”). On or before the earlier of (i) the third (3 rd ) Trading Day and (ii) the number of Trading Days comprising the Standard Settlement Period, following the date on which the Company has received the Exercise Notice, so long as the Holder delivers the Aggregate Exercise Price (or notice of a Cashless Exercise) on or prior to the second (2nd) Trading Day following the date on which the Company has received the Exercise Notice (the “ Share Delivery Date ”) (provided that if the Aggregate Exercise Price has not been delivered by such date, the Share Delivery Date shall be one (1) Trading Day after the Aggregate Exercise Price (or notice of a Cashless Exercise) is delivered), the Company shall, (X) provided that the Transfer Agent is participating in The Depository Trust Company (“ DTC ”) Fast Automated Securities Transfer Program, credit such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit / Withdrawal At Custodian system, or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and dispatch by overnight courier to the address as specified in the Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise. The Company agrees to maintain a transfer agent that is a participant in the DTC Fast Automated Securities Transfer Program so long as this Warrant remains outstanding and exercisable. The Company shall be responsible for all fees and expenses of the Transfer Agent and all fees and expenses with respect to the issuance of Warrant Shares via DTC, if any. Upon delivery of the Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of delivery of the certificates evidencing such Warrant Shares, as the case may be. If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a) and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exercise, then the Company shall as soon as practicable and in no event later than three (3) Trading Days after any exercise and at its own expense, issue a new Warrant (in accordance with Section 7(d)) representing the right to purchase the number of Warrant Shares issuable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised. No fractional Warrant Shares are to be issued upon the exercise of this Warrant, but rather the number of Warrant Shares to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all taxes (other than the Holder’s income taxes) which may be payable with respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant. The Company’s obligations to issue and deliver Warrant Shares in accordance with the terms and subject to the conditions hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination. For purposes of clarity, if the Holder exercises this Warrant (other than by Cashless Exercise) at a time when the Holder may not sell the Warrant Shares without restriction or limitation either (I) pursuant to Rule 144 of the 1933 Act and without the requirement to be in compliance with Rule 144(c)(1) of the 1933 Act (or the Holder does not undertake to resell such Warrant Shares promptly after issuance while the Company is in compliance with the public information requirements of Rule 144(c)(1)) or (II) pursuant to an effective registration statement registering the Warrant Shares for issuance, the Company may satisfy the delivery of Warrant Shares under this Section 1(a) by issue and dispatch by overnight courier to the address as specified in the Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise, which certificate may contain a restrictive legend.

 

(b)          Exercise Price . For purposes of this Warrant, “ Exercise Price ” means $0.10, subject to adjustment as provided herein.

 

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(c)          Company’s Failure to Timely Deliver Securities . If the Company shall fail for any reason or for no reason, in the manner required by Section 1(a), to issue to the Holder on or prior to the Share Delivery Date either (i) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, a certificate for the number of Common Stock to which the Holder is entitled and register such Common Stock on the Company’s share register or if the Transfer Agent is participating in the DTC Fast Automated Securities Transfer Program, to credit the Holder’s balance account with DTC, for such number of Common Stock to which the Holder is entitled upon the Holder’s exercise of this Warrant, or (ii) if the Registration Statement (as defined in Section 1(d)) covering the resale of all of the Warrant Shares that are the subject of the Exercise Notice (the “ Unavailable Warrant Shares ”) is not available for the issuance of such Unavailable Warrant Shares and the Company fails to promptly, but in no event later than one (1) Trading Day thereafter, (A) so notify the Holder and (B) deliver the Warrant Shares electronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit / Withdrawal At Custodian system (the event described in the immediately foregoing clause (ii) is hereinafter referred as a “ Notice Failure ” and together with the event described in clause (i) above, an “ Exercise Failure ”), as the case may be, and if on or after the Share Delivery Date the Holder (or any other Person in respect, or on behalf, of the Holder) purchases (in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale by the Holder of all or any portion of the number of Common Stock equal to or any portion of the number of Common Stock issuable upon such exercise that the Holder anticipated receiving from the Company (a “ Buy-In ”), then, in addition to all other remedies available to the Holder, the Company shall, within three (3) Trading Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the Common Stock so purchased (the “ Buy-In Price ”), at which point the Company’s obligation to deliver such certificate (and to issue such Common Stock) or credit such Holder’s balance account with DTC for such Common Stock shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such Common Stock or credit such Holder’s balance account with DTC, as applicable, and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of Common Stock, times (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the period beginning on the date of the applicable Exercise Notice and ending on the date of such issuance and payment under this Section 1(c). Nothing shall limit the Holder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing Common Stock (or to electronically deliver such Common Stock) upon the exercise of this Warrant as required pursuant to the terms hereof.

 

(d)          Cashless Exercise . Notwithstanding anything contained herein to the contrary, if a Registration Statement on Form S-1 (or other applicable registration statement under the 1933 Act (the “ Registration Statement ”) covering the resale of the Unavailable Warrant Shares is not available for the issuance of such Unavailable Warrant Shares, the Holder may, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the Aggregate Exercise Price, elect instead to exercise this Warrant by means of a cashless exercise (a “ Cashless Exercise ”) in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:


 

(A)

as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock on the principal Trading Market as reported by Bloomberg L.P. as of the time of the Holder’s execution of the applicable Notice of Exercise if such Notice of Exercise is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant to Section 1(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 1(a) hereof after the close of “regular trading hours” on such Trading Day;


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(B)   =

the Exercise Price of this Warrant, as adjusted hereunder; and

 

 

 

 

(X)   =

the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

 

If Warrant Shares are issued in a Cashless Exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the 1933 Act, the Warrant Shares shall take on the registered characteristics of the Warrant being exercised, and the holding period of the Warrant being exercised may be tacked on to the holding period of the Warrant Shares. The Company agrees not to take any position contrary to this Section 1(d).  The Holder’s ability to elect a Cashless Exercise shall occur on the Initial Exercisability Date.  Notwithstanding anything to the contrary contained in this Warrant, the Holder may always, in its sole discretion, exercise this Warrant by means of a Cashless Exercise.

 

(e)          Disputes . In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute in accordance with Section 12.

 

(f)          Beneficial Ownership Limitation on Exercises . Notwithstanding anything to the contrary contained herein, the Company shall not effect the exercise of any portion of this Warrant, and the Holder shall not have the right to exercise any portion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be null and void and treated as if never made, to the extent that after giving effect to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 4.99% (the “ Maximum Percentage ”) of the number of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregate number of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of Common Stock held by the Holder and all other Attribution Parties plus the number of Common Stock issuable upon exercise of this Warrant with respect to which the determination of such sentence is being made, but shall exclude the number of Common Stock which would be issuable upon (A) exercise of the remaining, unexercised portion of this Warrant beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitation contained in this Section 1(f). For purposes of this Section 1(f), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “ 1934 Act ”). For purposes of this Warrant, in determining the number of outstanding Common Stock the Holder may acquire upon the exercise of this Warrant without exceeding the Maximum Percentage, the Holder may rely on the number of outstanding Common Stock as reflected in (x) the Company’s most recent Annual Report on Form 10-K, Current Report on Form 8-K or other public filing made by the Company with the Securities and Exchange Commission (the “ SEC ”), as the case may be, (y) a more recent public announcement by the Company or (z) any other written notice by the Company or the Transfer Agent setting forth the number of Common Stock outstanding (the “ Reported Outstanding Share Number ”). If the Company receives an Exercise Notice from the Holder at a time when the actual number of outstanding Common Stock is less than the Reported Outstanding Share Number, the Company shall (i) notify the Holder in writing of the number of Common Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder’s beneficial ownership, as determined pursuant to this Section 1(f), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be purchased pursuant to such Exercise Notice (the number of shares by which such purchase is reduced, the “ Reduction Shares ”) and (ii) as soon as reasonably practicable, the Company shall return to the Holder any exercise price paid by the Holder for the Reduction Shares. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of Common Stock then outstanding. In any case, the number of outstanding Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number was reported. In the event that the issuance of Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other Attribution Parties


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being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding Common Stock (as determined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficial ownership exceeds the Maximum Percentage (the “ Excess Shares ”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have the power to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, the Company shall return to the Holder the exercise price paid by the Holder for the Excess Shares. Upon delivery of a written notice to the Company, the Holder may from time to time increase or decrease the Maximum Percentage to any other percentage not in excess of 9.99% as specified in such notice;  provided however , that (i) any such increase in the Maximum Percentage will not be effective until the sixty-first (61 st ) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other Attribution Parties and not to any other holder of the Warrants that is not an Attribution Party of the Holder. For purposes of clarity, the Common Stock issuable pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the 1934 Act. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f) to the extent necessary to correct this paragraph or any portion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 1(f) or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to a successor holder of this Warrant.

 

(g)          Insufficient Authorized Shares . If at any time while this Warrant remains outstanding the Company does not have a sufficient number of authorized and unreserved Common Stock to satisfy its obligation to reserve for issuance upon exercise of this Warrant at least a number of Common Stock equal to the maximum number of Common Stock as shall from time to time be necessary to effect the exercise of all of this Warrant then outstanding (the “ Required Reserve Amount ” and the failure to have such sufficient number of authorized and unreserved Common Stock, an “ Authorized Share Failure ”), then the Company shall promptly take all action reasonably necessary to increase the Company’s authorized Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for this Warrant and the other Warrants then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than seventy-five (75) days after the occurrence of such Authorized Share Failure, the Company shall either (x) obtain the written consent of its stockholders for the approval of an increase in the number of authorized Common Stock and provide each stockholder with an information statement with respect thereto or (y) hold a meeting of its stockholders for the approval of an increase in the number of authorized Common Stock. In connection with such meeting, the Company shall provide each stockholder with a proxy statement and shall use its reasonable best efforts to solicit its stockholders’ approval of such increase in authorized Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. Notwithstanding the foregoing, if any such time of an Authorized Share Failure, the Company is able to obtain the written consent of a majority of its issued and outstanding Common Stock to approve the increase in the number of authorized Common Stock, the Company may satisfy this obligation by obtaining such consent and submitting for filing with the SEC an Information Statement on Schedule 14C. The initial number of Common Stock reserved for exercise of this Warrant and the other Warrants and each increase in the number of shares so reserved shall be allocated pro rata among the Holder and the holders of the other Warrants, based on the number of Common Stock that could be issuable upon exercise of this Warrant (without regard to any limitations in exercise and the six (6)-month limitation on the exercise of this Warrant) issued to the Holder on the Issuance Date (the “ Authorized Share Allocation ”). In the event that the Holder shall sell or otherwise transfer this Warrant, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any Common Stock reserved and allocated to any Person which ceases to hold any Warrants shall be allocated to the Holder and the remaining holders of Warrants, pro rata based on the Common Stock issuable upon exercise of the Warrants then held by such holders (without regard to any limitations on the exercise of the Warrants).

 

2.            ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES . The Exercise Price and the number of Warrant Shares shall be adjusted from time to time as follows:

 

(a)          Adjustment Upon Subdivision or Combination of Common Stock . If the Company at any time on or after the Subscription Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding Common Stock into a greater number of shares, the Exercise Price


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in effect immediately prior to such subdivision will be proportionately reduced and the number of Warrant Shares will be proportionately increased. If the Company at any time on or after the Subscription Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of Warrant Shares will be proportionately decreased. Any adjustment under this Section 2(b) shall become effective at the close of business on the date the subdivision or combination becomes effective; provided, however, that the Floor Price will not adjust for any stock split, stock dividend, stock combination, recapitalization or other similar transaction of the Company’s Common Stock.


(b)          Subsequent Equity Sales . If the Company or any subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock Equivalents, at an effective price per share less than the Exercise Price then in effect (such lower price, the “ Base Share Price ” and such issuances collectively, a “ Dilutive Issuance ”) (it being understood and agreed that if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive Common Stock at an effective price per share that is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance at such effective price), then simultaneously with the consummation of each Dilutive Issuance the Exercise Price shall be reduced and only reduced to equal the Base Share Price and the number of Warrant Shares issuable hereunder shall be increased such that the aggregate Exercise Price payable hereunder, after taking into account the decrease in the Exercise Price, shall be equal to the aggregate Exercise Price prior to such adjustment; provided, however, that in no instance shall the Base Share Price be lower than the Floor Price.  Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued.  Notwithstanding the foregoing, no adjustments shall be made, paid or issued under this Section 2(b) in respect of an Exempt Issuance.  The Company shall notify the Holder, in writing, no later than the Trading Day following the issuance or deemed issuance of any Common Stock or Common Stock Equivalents subject to this Section 2(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “ Dilutive Issuance Notice ”).  For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 2(b), upon the occurrence of any Dilutive Issuance, the Holder is entitled to receive a number of Warrant Shares based upon the Base Share Price regardless of whether the Holder accurately refers to the Base Share Price in the Notice of Exercise. If the Company enters into a Variable Rate Transaction, despite the prohibition thereon in the Securities Purchase Agreement, the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion or exercise price at which such securities may be converted or exercised.

 

(b)          Other Events . If any event occurs of the type contemplated by the provisions of this Section 2, but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company’s Board of Directors will make an appropriate adjustment in the Exercise Price and the number of Warrant Shares, as mutually determined by the Company’s Board of Directors and the Required Holders, so as to protect the rights of the Holder;  provided however , that no such adjustment pursuant to this Section 2(c) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2.

 

3.            RIGHTS UPON DISTRIBUTION OF ASSETS . If the Company, at any time while this Warrant is outstanding, shall distribute to all holders of Common Stock (and not to the Holder) evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security other than the Common Stock (which shall be subject to Section 2(b)), then in each such case the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the VWAP determined as of the record date mentioned above, and of which the numerator shall be such VWAP on such record date less the then per share fair market value at such record date of the portion of such assets or evidence of indebtedness or rights or warrants so distributed applicable to one outstanding Common Share as determined by the Board of Directors in good faith.  In either case the adjustments shall be described in a statement provided to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights


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applicable to one Common Share.  Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.  If the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property, options, evidence of indebtedness or any other assets by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “ Distribution ”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the participation in such Distribution ( provided however , that to the extent that the Holder’s right to participate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Distribution to such extent (and shall not be entitled to beneficial ownership of such Common Stock as a result of such Distribution (and beneficial ownership) to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time or times as its right thereto would not result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on any subsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).  To the extent that this Warrant has not been partially or completely exercised at the time of such Distribution, such portion of the Distribution shall be held in abeyance for the benefit of the Holder until the Holder has exercised this Warrant.


4.            PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS .

 

(a)          Purchase Rights . If the Company, at any time while the Warrant is outstanding, shall issue rights, options or warrants to all holders of Common Stock (and not to the Holder) entitling them to subscribe for or purchase Common Stock at a price per share less than the VWAP on the record date mentioned below, then the Exercise Price shall be multiplied by a fraction, of which the denominator shall be the number of Common Stock outstanding on the date of issuance of such rights, options or warrants plus the number of additional Common Stock offered for subscription or purchase, and of which the numerator shall be the number of Common Stock outstanding on the date of issuance of such rights, options or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered (assuming receipt by the Company in full of all consideration payable upon exercise of such rights, options or warrants) would purchase at such VWAP.  Such adjustment shall be made whenever such rights, options or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights, options or warrants.  In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “ Purchase Rights ”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights ( provided however , that to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Right to such extent (and shall not be entitled to beneficial ownership of such Common Stock as a result of such Purchase Right (and beneficial ownership) to such extent) and such Purchase Right to such extent shall be held in abeyance for the benefit of the Holder until such time or times as its right thereto would not result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on any subsequent Purchase Right held similarly in abeyance) to the same extent as if there had been no such limitation).

 

(b)          Fundamental Transactions . The Company shall not enter into or be party to a Fundamental Transaction unless the Successor Entity assumes in writing all of the obligations of the Company


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under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 4(b), including agreements, if so requested by the Holder, to deliver to each holder of the Warrants in exchange for such Warrants a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant, including, without limitation, an adjusted exercise price equal to the value for the Common Stock reflected by the terms of such Fundamental Transaction, and exercisable for a corresponding number of  capital stock equivalent to the Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and satisfactory to the Required Holders, and with an exercise price which applies the exercise price hereunder to such  capital stock (but taking into account the relative value of the Common Stock pursuant to such Fundamental Transaction and the value of such  capital stock, such adjustments to the number of  capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the occurrence or consummation of such Fundamental Transaction). Upon the occurrence or consummation of any Fundamental Transaction, and it shall be a required condition to the occurrence or consummation of any Fundamental Transaction that, the Company and the Successor Entity or Successor Entities, jointly and severally, shall succeed to, and the Company shall cause any Successor Entity or Successor Entities to jointly and severally succeed to, and be added to the term “Company” under this Warrant (so that from and after the date of such Fundamental Transaction, and the provisions of this Warrant referring to the “Company” shall refer instead to each of the Company and the Successor Entity or Successor Entities, jointly and severally), and the Company and the Successor Entity or Successor Entities, jointly and severally, may exercise every right and power of the Company prior thereto and shall assume all of the obligations of the Company prior thereto under this Warrant with the same effect as if the Company and such Successor Entity or Successor Entities, jointly and severally, had been named as the Company in this Warrant, and, solely at the request of the Holder, if the Successor Entity and/or Successor Entities is a publicly traded corporation whose Common Stock is quoted on or listed for trading on an Eligible Market, shall deliver (in addition to and without limiting any right under this Warrant) to the Holder in exchange for this Warrant a security of the Successor Entity and/or Successor Entities evidenced by a written instrument substantially similar in form and substance to this Warrant and exercisable for a corresponding number of  capital stock of the Successor Entity and/or Successor Entities (the “ Successor Capital Stock ”) equivalent to the Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction (such corresponding number of  Successor Capital Stock to be delivered to the Holder shall be equal to the greater of (A) the quotient of (i) the aggregate dollar value of all consideration (including cash consideration and any consideration other than cash (“ Non-Cash Consideration ”), in such Fundamental Transaction, as such values are set forth in any definitive agreement for the Fundamental Transaction that has been executed at the time of the first public announcement of the Fundamental Transaction or, if no such value is determinable from such definitive agreement, as determined in accordance with Section 12 with the term “Non-Cash Consideration” being substituted for the term “Exercise Price”) that the Holder would have been entitled to receive upon the happening of such Fundamental Transaction or the record, eligibility or other determination date for the event resulting in such Fundamental Transaction, had this Warrant been exercised immediately prior to such Fundamental Transaction or the record, eligibility or other determination date for the event resulting in such Fundamental Transaction (without regard to any limitations on the exercise of this Warrant) (the “ Aggregate Consideration ”) divided by (ii) the per share Closing Sale Price of such Successor Capital Stock on the Trading Day immediately prior to the consummation or occurrence of the Fundamental Transaction and (B) the product of (i) the Aggregate Consideration and (ii) the highest exchange ratio pursuant to which any stockholder of the Company may exchange Common Stock for Successor Capital Stock) ( provided however , that to the extent that the Holder’s right to receive any such  publicly traded Common Stock (or their equivalent) of the Successor Entity would result in the Holder and its other Attribution Parties exceeding the Maximum Percentage, if applicable, then the Holder shall not be entitled to receive such shares to such extent (and shall not be entitled to beneficial ownership of such  publicly traded Common Stock (or their equivalent) of the Successor Entity as a result of such consideration to such extent) and the portion of such shares shall be held in abeyance for the Holder until such time or times, as its right thereto would not result in the Holder and its other Attribution Parties exceeding the Maximum Percentage, at which time or times the Holder shall be delivered such shares to the extent as if there had been no such limitation), and such security shall be reasonably satisfactory to the Holder, and with an identical exercise price to the Exercise Price hereunder (such adjustments to the number of  capital stock and such exercise price being for the purpose of protecting after the consummation or occurrence of such Fundamental Transaction the economic value of this Warrant that was in effect immediately prior to the consummation or occurrence of such Fundamental Transaction, as elected by the Holder solely at its option). Upon occurrence or consummation of the Fundamental Transaction, and it shall be a required condition to the occurrence or consummation of such Fundamental Transaction that, the Company and the Successor Entity or


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Successor Entities shall deliver to the Holder confirmation that there shall be issued upon exercise of this Warrant at any time after the occurrence or consummation of the Fundamental Transaction, as elected by the Holder solely at its option, Common Stock, Successor Capital Stock or, in lieu of the Common Stock or Successor Capital Stock (or other securities, cash, assets or other property purchasable upon the exercise of this Warrant prior to such Fundamental Transaction), such  stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights), which for purposes of clarification may continue to be Common Stock, if any, that the Holder would have been entitled to receive upon the happening of such Fundamental Transaction or the record, eligibility or other determination date for the event resulting in such Fundamental Transaction, had this Warrant been exercised immediately prior to such Fundamental Transaction or the record, eligibility or other determination date for the event resulting in such Fundamental Transaction (without regard to any limitations on the exercise of this Warrant), as adjusted in accordance with the provisions of this Warrant. In addition to and not in substitution for any other rights hereunder, prior to the occurrence or consummation of any Fundamental Transaction pursuant to which holders of Common Stock are entitled to receive securities, cash, assets or other property with respect to or in exchange for Common Stock (a “ Corporate Event ”), the Company shall make appropriate provision to ensure that, and any applicable Successor Entity or Successor Entities shall ensure that, and it shall be a required condition to the occurrence or consummation of such Corporate Event that, the Holder will thereafter have the right to receive upon exercise of this Warrant at any time after the occurrence or consummation of the Corporate Event, Common Stock or Successor Capital Stock or, if so elected by the Holder, in lieu of the Common Stock (or other securities, cash, assets or other property) purchasable upon the exercise of this Warrant prior to such Corporate Event (but not in lieu of such items still issuable under Sections 3 and 4(a), which shall continue to be receivable on the Common Stock or on the such  stock, securities, cash, assets or any other property otherwise receivable with respect to or in exchange for Common Stock), such  stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights and any Common Stock) which the Holder would have been entitled to receive upon the occurrence or consummation of such Corporate Event or the record, eligibility or other determination date for the event resulting in such Corporate Event, had this Warrant been exercised immediately prior to such Corporate Event or the record, eligibility or other determination date for the event resulting in such Corporate Event (without regard to any limitations on exercise of this Warrant). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder. The provisions of this Section 4(b) shall apply similarly and equally to successive Fundamental Transactions and Corporate Events. Notwithstanding the foregoing, the Holder may elect, in its sole discretion, by delivery of written notice to the Company, to waive this Section 4(b) and allow the Company to enter into or be a party to a Fundamental Transaction without the assumption of this Warrant pursuant to the provisions of this Section 4(b),  provided however , that any such waiver shall only bind the Holder with respect to this Warrant and not the Holder with respect to any other warrant or other securities of the Company or any holder of other Warrants.


(c)          Black Scholes Value .  Notwithstanding the foregoing and the provisions of Section 4(b) above, at the request of the Holder delivered at any time commencing on the earliest to occur of (x) the public disclosure of any Fundamental Transaction, (y) the consummation of any Fundamental Transaction and (z) the Holder first becoming aware of any Fundamental Transaction through the date that is ninety (90) days after the public disclosure of the consummation of such Fundamental Transaction by the Company pursuant to a Current Report on Form 8-K filed with the SEC, the Company or the Successor Entity (as the case may be) shall purchase this Warrant from the Holder on the date of such request by paying to the Holder cash in an amount equal to the Black Scholes Value.  For purposes of this Section 4(c), “ Black Scholes Value ” means the value of the unexercised portion of this Warrant remaining on the date of the Holder’s request, which value is calculated using the Black Scholes Option Pricing Model for a “call” or “put” option, as elected by the Holder, as obtained from the “OV” function on Bloomberg utilizing (i) an underlying price per share equal to the greater of (1) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading Day immediately preceding the announcement of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the Trading Day of the Holder’s request pursuant to this Section 4(c) and (2) the sum of the price per share being offered in cash in the applicable Fundamental Transaction (if any) plus the value of the non-cash consideration being offered in the applicable Fundamental Transaction (if any), (ii) a strike price equal to the Exercise Price in effect on the date of the Holder’s request pursuant to this Section 4(c), (iii) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of (1) the remaining term of this Warrant as of the date of the Holder’s request pursuant to Section 4(c) and (2) the remaining term of this Warrant as of the date of consummation of the applicable Fundamental Transaction or as of the date of the Holder’s request pursuant to Section 4(c) if such request is prior to the date of the consummation of the applicable


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Fundamental Transaction, (iv) a zero cost of borrow and (v) an expected volatility equal to the greater of 100% and the 30 day volatility obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following the earliest to occur of (A) the public disclosure of the applicable Fundamental Transaction, (B) the consummation of the applicable Fundamental Transaction and (C) the date on which the Holder first became aware of the applicable Fundamental Transaction.

 

(d)         Notwithstanding anything herein to the contrary, the Company shall be required to obtain the prior written consent of the Required Holders to enter into, allow and/or consummate a Fundamental Transaction other than one in which a Successor Entity that is a publicly traded corporation whose stock is quoted or listed for trading on an Eligible Market assumes this Warrant such that the Warrant shall be exercisable for the publicly traded Common of such Successor Entity.

 

5.            NONCIRCUMVENTION . The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all of the provisions of this Warrant and take all action as may be required to protect the rights of the Holder. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Common Stock upon the exercise of this Warrant, and (iii) shall, so long as any of the Warrants are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting the exercise of the Warrants, the Required Reserve Amount to effect the exercise of the Warrants then outstanding (without regard to any limitations on exercise).

 

6.            WARRANT HOLDER NOT DEEMED A STOCKHOLDER . Except as otherwise specifically provided herein, the Holder, solely in such Person’s capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in such Person’s capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which such Person is then entitled to receive upon the due exercise of this Warrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstanding this Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally, contemporaneously with the giving thereof to the stockholders.

 

7.            REISSUANCE OF WARRANTS .

 

(a)          Transfer of Warrant . If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right to purchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.

 

(b)          Lost, Stolen or Mutilated Warrant . Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing the right to purchase the Warrant Shares then underlying this Warrant.

 

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(c)          Exchangeable for Multiple Warrants . This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new warrant or warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of such surrender;  provided however , that no Warrants for fractional Warrant Shares shall be given.

 

(d)          Issuance of New Warrants . Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added to the number of Common Stock underlying the other new warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shall have the same rights and conditions as this Warrant.


8.            “Piggy-Back” Registration Rights .


(a)          Grant of Right . Unless a registration statement covering the exercise of this Warrant and the sale of the Common Stock by the Holder is in effect and available, the Company agrees to register, all or any portion of the Warrant Shares (collectively, the “ Registrable Securities ”) by inclusion of the Registrable Securities as part of any other registration of securities filed by the Company (the “ Registration Statement ”) (other than in connection with a transaction contemplated by Rule 145(a) promulgated under the 1933 Act, or pursuant to Form S-8 or any equivalent form); provided , however , that if, solely in connection with any primary underwritten public offering for the account of the Company, the managing underwriter(s) thereof shall, in its reasonable discretion, impose a limitation on the number of shares of Common Stock which may be included in the Registration Statement because, in such underwriter(s)’ judgment, marketing or other factors dictate such limitation is necessary to facilitate public distribution, then the Company shall be obligated to include in such Registration Statement only such limited portion of the Registrable Securities with respect to which the Holder requested inclusion hereunder as the underwriter shall reasonably permit. Any exclusion of Registrable Securities shall be made pro rata among the Holders seeking to include Registrable Securities in proportion to the number of Registrable Securities sought to be included by such Holders; provided , however , that the Company shall not exclude any Registrable Securities unless the Company has first excluded all outstanding securities, the holders of which are not entitled to inclusion of such securities in such Registration Statement or are not entitled to pro rata inclusion with the Registrable Securities.


(b)          Terms . The Company shall bear all fees and expenses attendant to registering the Registrable Securities pursuant to Section 8(a) hereof, but the Holders shall pay any and all underwriting commissions and the expenses of any legal counsel selected by the Holders to represent them in connection with the sale of the Registrable Securities. In the event of such a proposed registration, the Company shall furnish the then Holders of outstanding Registrable Securities with not less than thirty (30) days written notice prior to the proposed date of filing of such registration statement. Such notice to the Holders shall continue to be given for each registration statement filed by the Company until such time as all of the Registrable Securities have been sold by the Holder. The holders of the Registrable Securities shall exercise the “piggy-back” rights provided for herein by giving written notice within ten (10) days of the receipt of the Company’s notice of its intention to file a registration statement. Except as otherwise provided in this Purchase Warrant, there shall be no limit on the number of times the Holder may request registration under this Section 8(b); provided , however , that such registration rights shall terminate on the sixth anniversary of the Commencement Date.


(c)          General Terms .


(i)           Indemnification . The Company shall indemnify the Holder(s) of the Registrable Securities to be sold pursuant to any registration statement hereunder and each person, if any, who controls such Holders within the meaning of Section 15 of the 1933 Act or Section 20(a) of the 1934 Act, against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in


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investigating, preparing or defending against any claim whatsoever) to which any of them may become subject under the 1933 Act, the 1934 Act or otherwise, arising from such registration statement but only to the same extent and with the same effect as the provisions pursuant to which the Company has agreed to indemnify the Financial Advisor contained in Section G of the Financial Advisory Agreement between the Aegis and the Company, dated as of November 8, 2017.


(ii)          Exercise of Purchase Warrants . Nothing contained in this Purchase Warrant shall be construed as requiring the Holder(s) to exercise their Purchase Warrants prior to or after the initial filing of any registration statement or the effectiveness thereof.


(iii)         Documents to be Delivered by Holder(s) . Each of the Holder(s) participating in any of the foregoing offerings shall furnish to the Company a completed and executed questionnaire provided by the Company requesting information customarily sought of selling security holders.

 

9.            NOTICES . Whenever notice is required to be given under this Warrant, unless otherwise provided herein, with respect to a notice to the Company or to the Holder, such notice shall be given in accordance with Section K of the Financial Advisory Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant, including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon any adjustment of the Exercise Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation;  provided however , in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder. It is expressly understood and agreed that the time of exercise specified by the Holder in each Exercise Notice shall be definitive and may not be disputed or challenged by the Company.

 

10.          AMENDMENT AND WAIVER . Except as otherwise provided herein, the provisions of this Warrant may be amended or waived and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Required Holders.

 

11.          GOVERNING LAW; JURISDICTION; JURY TRIAL . This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to the Company at the address set forth in Section J of the Financial Advisory 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 manner permitted by law. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder.  THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY


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TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

12.          CONSTRUCTION; HEADINGS . This Warrant shall be deemed to be jointly drafted by the Company and all the Holders and shall not be construed against any Person as the drafter hereof. The headings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant.

 

13.          DISPUTE RESOLUTION . In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall submit the disputed determinations or arithmetic calculations via facsimile or electronic mail within two (2) Business Days after receipt of the Exercise Notice giving rise to such dispute, as the case may be, to the Holder. If the Holder and the Company are unable to agree upon such determination or calculation of the Exercise Price or the Warrant Shares within three (3) Business Days after such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, within two (2) Business Days submit via facsimile (a) the disputed determination of the Exercise Price to an independent, reputable investment bank selected by the Holder and approved by the Company, such approval not to be unreasonably withheld or delayed or (b) the disputed arithmetic calculation of the Warrant Shares to the Company’s independent, outside accountant, approved by the Holder, such approval not to be unreasonably withheld or delayed. The Company shall cause at its expense the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than ten (10) Business Days from the time it receives the disputed determinations or calculations. Such investment bank’s or accountant’s determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.

 

14.          REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF . The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual damages for any failure by the Company to comply with the terms of this Warrant. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.

 

15.          TRANSFER . This Warrant and the Warrant Shares may be offered for sale, sold, transferred, pledged or assigned without the consent of the Company.

 

16.          SEVERABILITY . If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

 

17.          DISCLOSURE . Upon receipt or delivery by the Company of any notice in accordance with the terms of this Warrant, unless the Company has in good faith determined that the matters relating to such notice do not constitute material, nonpublic information relating to the Company or its subsidiaries, the Company shall within one (1) Business Day after any such receipt or delivery publicly disclose such material, nonpublic information on a Current Report on Form 8-K or otherwise. In the event that the Company believes that a notice contains material, nonpublic information relating to the Company or its subsidiaries, the Company so shall indicate to such Holder contemporaneously with delivery of such notice, and in the absence of any such indication, the


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Holder shall be allowed to presume that all matters relating to such notice do not constitute material, nonpublic information relating to the Company or its subsidiaries.

 

18.          CERTAIN DEFINITIONS . For purposes of this Warrant, the following terms shall have the following meanings:

 

(a)         “ 1933 Act ” means the Securities Act of 1933, as amended.

 

(b)         “ Affiliate ” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of the stock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

 

(c)         “ Attribution Parties ” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managed accounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliates or principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Group together with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could be aggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subject collectively the Holder and all other Attribution Parties to the Maximum Percentage.


(d)         “ Bid Price ” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the bid price of the Common Stock for the time in question (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

(e)         “ Bloomberg ” means Bloomberg Financial Markets.

 

(f)         “ Business Day ” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

 

(g)         “ Closing Sale Price ” means, for any security as of any date, the last closing trade price for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing trade price, then the last trade price of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last trade price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last trade price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no last trade price is reported for such security by Bloomberg, the average of the ask prices of any market makers for such security as reported in the OTC Link or “pink sheets” by OTC Markets Group Inc. (formerly Pink OTC Markets Inc.). If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved


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pursuant to Section 13. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or other similar transaction during the applicable calculation period.

 

(h)         “ Common Stock ” means (i) the Company’s Common Stock, no par value per share, and (ii) any share capital into which such Common Stock shall have been changed or any share capital resulting from a reclassification of such Common Stock.


(i)         “ Common Stock Equivalents ” means any securities of the Company or any subsidiary which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant, unit, or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

 

(j)         “ Convertible Securities ” means any stock or securities (other than Options) directly or indirectly convertible into or exercisable or exchangeable for Common Stock.

 

(k)         “ Eligible Market ” means the Principal Market, the NYSE American, The NASDAQ Global Market, The NASDAQ Global Market, The NASDAQ Global Select Market, The New York Stock Exchange, Inc., the OTC Bulletin Board, the OTCQX or the OTCQB.

 

(l)         “ Expiration Date ” means the date that is sixty (60) months after the Initial Exercisability Date, or, if such date falls on a day other than a Business Day or on which trading does not take place on the Principal Market (a “ Holiday ”), the next day that is not a Holiday.


(m)         “ Floor Price ” means $0.10.

 

(n)         “ Fundamental Transaction ” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule 1-02 of Regulation S-X) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have its Common Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x) 50% of the outstanding Common Stock, (y) 50% of the outstanding Common Stock calculated as if any Common Stock held by all Subject Entities making or party to, or Affiliated with any Subject Entities making or party to, such purchase, tender or exchange offer were not outstanding; or (z) such number of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the outstanding Common Stock, or (iv) consummate a share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with one or more Subject Entities whereby such Subject Entities, individually or in the aggregate, acquire, either (x) at least 50% of the outstanding Common Stock, (y) at least 50% of the outstanding Common Stock calculated as if any Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchase agreement or other business combination were not outstanding; or (z) such number of Common Stock such that the Subject Entities become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the outstanding Common Stock, or (v) reorganize, recapitalize or reclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding Common Stock, merger, consolidation, business combination, reorganization, recapitalization, spin-off, scheme of arrangement, reorganization, recapitalization or reclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entities as of the Subscription Date calculated as if any Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of the aggregate ordinary voting power represented by issued and


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outstanding Common Stock or other equity securities of the Company sufficient to allow such Subject Entities to effect a statutory short form merger or other transaction requiring other stockholders of the Company to surrender their Common Stock without approval of the stockholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of this definition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to the extent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument or transaction.

 

(o)         “ Group ” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d-5 thereunder.

 

(p)         “ Options ” means any rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities.

 

(q)         “ Parent Entity ” of a Person means an entity that, directly or indirectly, controls the applicable Person, including such entity whose Common Stock or Common Stock or equivalent equity security is quoted or listed on an Eligible Market (or, if so elected by the Required Holders, any other market, exchange or quotation system), or, if there is more than one such Person or such entity, the Person or such entity designated by the Required Holders or in the absence of such designation, such Person or entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.

 

(r)         “ Person ” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.

 

(s)         “ Principal Market ” means The NYSE American Market

 

(t)         “ Required Holders ” means the holders of the Warrants representing at least a majority of the Common Stock underlying the Warrants then outstanding.

 

(u)         “ Securities Purchase Agreement ” means the Securities Purchase Agreement, dated November 27, 2017, entered into by the Company and the purchasers party thereto.

 

(v)         “ Standard Settlement Period ” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary trading market or quotation system from time to time, with respect to trades of the Common Stock as in effect of the date of delivery of the Exercise Notice.

 

(w)         “ Subject Entity ” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.

 

(x)         “ Successor Entity ” means one or more Person or Persons (or, if so elected by the Holder, the Company or Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or one or more Person or Persons (or, if so elected by the Holder, the Company or the Parent Entity) with which such Fundamental Transaction shall have been entered into.

 

(y)         “ Trading Day ” means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded.


(z)         “ VWAP ” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB


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or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.



[Signature Page Follows]



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IN WITNESS WHEREOF,  the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.

 

 

BLACK CACTUS GLOBAL, INC.

 

 

 

 

By:

 

 

Name:

 

 

Title:

Chief Financial Officer



[Signature page to Black Cactus Global, Inc. Warrant]



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EXHIBIT A


EXERCISE NOTICE


TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK


BLACK CACTUS GLOBAL, INC.


The undersigned holder hereby exercises the right to purchase _________________ of the Common Stock, no par value per share (the “ Warrant Shares ”), of Black Cactus Global, Inc., a corporation organized under the laws of the State of Nevada (the “ Company ”), evidenced by the attached Warrant to purchase Common Stock No. PA-____ (the “ Warrant ”). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.

 

1. Form of Exercise Price. The holder intends that payment of the Exercise Price shall be made as:

 

____________ a “ Cash Exercise”  with respect to _________________ Warrant Shares; or

 

____________ a  “Cashless Exercise”  with respect to _______________ Warrant Shares.

 

2. Payment of Exercise Price. In the event that the holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of the Warrant.

 

3. Delivery of Warrant Shares. The Company shall deliver to the holder __________ Warrant Shares in accordance with the terms of the Warrant.

 

Please issue the Warrant Shares in the following name and to the following account:

 

 

Issue to:

 

 

 

 

 

 

 

 

 

 

 

Facsimile Number and Electronic Mail:

 

 

 

Authorization:

 

 

 

By:

 

 

 

Title:

 

 

 

Dated:

 

 

 

Broker Name:

 

 

 

Broker DTC #:

 

 

 

Broker Telephone #:

 

 

 

Account Number:

 

  (if electronic book entry transfer)

 

 

 

Transaction Code Number:

 

  (if electronic book entry transfer)

 


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Exhibit 4.9


WARRANT


NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.


BLACK CACTUS GLOBAL, INC. 

Warrant to Purchase Common Stock

 

Warrant No.: 1

Number of Shares of Common Stock: 28,339,000

Date of Issuance: April 5, 2018 (“ Issuance Date ”)

 

Black Cactus Global, Inc. (f/k/a “Envoy Group Corp.), a corporation organized under the laws of the State of Florida (the “ Company ”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Bellridge Capital, L.P. , the registered holder hereof or its permitted assigns (the “ Holder ”), is entitled, subject to the terms set forth below, to purchase from the Company, at the Exercise Price (as defined in Section 1(b)) then in effect, at any time or times on or after the date hereof (the “ Initial Exercisability Date ”), but not after 11:59 p.m., New York time, on the Expiration Date, up to such number of fully paid and nonassessable Common Stock (as defined below) equal to 28,339,000, subject to adjustment as provided herein (the “ Warrant Shares ”). Except as otherwise defined herein, capitalized terms in this Warrant to purchase Common Stock (including any warrants to purchase Common Stock issued in exchange, transfer or replacement hereof, this “ Warrant ”), shall have the meanings set forth in Section 17. This Warrant is one of a series of Warrants to purchase Common Stock originally issued pursuant to Section 2.1(b) of the Securities Purchase Agreement (the “ Subscription Date ”), by and among the Company and the Holder (the warrants to purchase Common Stock issued pursuant to the Securities Purchase Agreement referred to herein as the “ Warrants ”).


1.        EXERCISE OF WARRANT.

 

(a)        Mechanics of Exercise . Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrant may be exercised by the Holder at any time or times on or after the Initial Exercisability Date, in whole or in part, by (i) delivery of a written notice, in the form attached hereto as  Exhibit A  (the “ Exercise Notice ”), of the Holder’s election to exercise this Warrant and (ii) (A) payment to the Company of an amount equal to the applicable Exercise Price (as defined in Section 1(b)) multiplied by the number of Warrant Shares as to which this Warrant is being exercised (the “ Aggregate Exercise Price ”) in cash by wire transfer of immediately available funds or (B) if the provisions of Section 1(d) are applicable, by notifying the Company that this Warrant is being exercised pursuant to a Cashless Exercise (as defined in Section 1(d)). The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder. Execution and delivery of the Exercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original Warrant and issuance of a new Warrant evidencing the right to purchase the remaining number of Warrant Shares. No ink-original Exercise Notice shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Exercise Notice be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in


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purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased.  The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise Form within one (1) Business Day of receipt of such notice.   The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.  On or before the first (1 st ) Trading Day following the date on which the Company has received the Exercise Notice, the Company shall transmit by facsimile or e-mail an acknowledgment of confirmation of receipt of the Exercise Notice to the Holder and the Company’s transfer agent (the “ Transfer Agent ”). On or before the earlier of (i) the third (3 rd ) Trading Day and (ii) the number of Trading Days comprising the Standard Settlement Period, following the date on which the Company has received the Exercise Notice, so long as the Holder delivers the Aggregate Exercise Price (or notice of a Cashless Exercise) on or prior to the second (2nd) Trading Day following the date on which the Company has received the Exercise Notice (the “ Share Delivery Date ”) (provided that if the Aggregate Exercise Price has not been delivered by such date, the Share Delivery Date shall be one (1) Trading Day after the Aggregate Exercise Price (or notice of a Cashless Exercise) is delivered), the Company shall, (X) provided that the Transfer Agent is participating in The Depository Trust Company (“ DTC ”) Fast Automated Securities Transfer Program, credit such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit / Withdrawal At Custodian system, or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and dispatch by overnight courier to the address as specified in the Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise. The Company agrees to maintain a transfer agent that is a participant in the DTC Fast Automated Securities Transfer Program so long as this Warrant remains outstanding and exercisable. The Company shall be responsible for all fees and expenses of the Transfer Agent and all fees and expenses with respect to the issuance of Warrant Shares via DTC, if any. Upon delivery of the Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of delivery of the certificates evidencing such Warrant Shares, as the case may be. If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a) and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exercise, then the Company shall as soon as practicable and in no event later than three (3) Trading Days after any exercise and at its own expense, issue a new Warrant (in accordance with Section 7(d)) representing the right to purchase the number of Warrant Shares issuable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised. No fractional Warrant Shares are to be issued upon the exercise of this Warrant, but rather the number of Warrant Shares to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all taxes (other than the Holder’s income taxes) which may be payable with respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant. The Company’s obligations to issue and deliver Warrant Shares in accordance with the terms and subject to the conditions hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination. For purposes of clarity, if the Holder exercises this Warrant (other than by Cashless Exercise) at a time when the Holder may not sell the Warrant Shares without restriction or limitation either (I) pursuant to Rule 144 of the 1933 Act and without the requirement to be in compliance with Rule 144(c)(1) of the 1933 Act (or the Holder does not undertake to resell such Warrant Shares promptly after issuance while the Company is in compliance with the public information requirements of Rule 144(c)(1)) or (II) pursuant to an effective registration statement registering the Warrant Shares for issuance, the Company may satisfy the delivery of Warrant Shares under this Section 1(a) by issue and dispatch by overnight courier to the address as specified in the Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise, which certificate may contain a restrictive legend.

 

(b)        Exercise Price . For purposes of this Warrant, “ Exercise Price ” means $0.10, subject to adjustment as provided herein.

 

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(c)        Company’s Failure to Timely Deliver Securities . If the Company shall fail for any reason or for no reason, in the manner required by Section 1(a), to issue to the Holder on or prior to the Share Delivery Date either (i) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, a certificate for the number of Common Stock to which the Holder is entitled and register such Common Stock on the Company’s share register or if the Transfer Agent is participating in the DTC Fast Automated Securities Transfer Program, to credit the Holder’s balance account with DTC, for such number of Common Stock to which the Holder is entitled upon the Holder’s exercise of this Warrant, or (ii) if the Registration Statement (as defined in Section 1(d)) covering the resale of all of the Warrant Shares that are the subject of the Exercise Notice (the “ Unavailable Warrant Shares ”) is not available for the issuance of such Unavailable Warrant Shares and the Company fails to promptly, but in no event later than one (1) Trading Day thereafter, (A) so notify the Holder and (B) deliver the Warrant Shares electronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit / Withdrawal At Custodian system (the event described in the immediately foregoing clause (ii) is hereinafter referred as a “ Notice Failure ” and together with the event described in clause (i) above, an “ Exercise Failure ”), as the case may be, and if on or after the Share Delivery Date the Holder (or any other Person in respect, or on behalf, of the Holder) purchases (in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale by the Holder of all or any portion of the number of Common Stock equal to or any portion of the number of Common Stock issuable upon such exercise that the Holder anticipated receiving from the Company (a “ Buy-In ”), then, in addition to all other remedies available to the Holder, the Company shall, within three (3) Trading Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the Common Stock so purchased (the “ Buy-In Price ”), at which point the Company’s obligation to deliver such certificate (and to issue such Common Stock) or credit such Holder’s balance account with DTC for such Common Stock shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such Common Stock or credit such Holder’s balance account with DTC, as applicable, and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of Common Stock, times (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the period beginning on the date of the applicable Exercise Notice and ending on the date of such issuance and payment under this Section 1(c). Nothing shall limit the Holder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing Common Stock (or to electronically deliver such Common Stock) upon the exercise of this Warrant as required pursuant to the terms hereof.

 

(d)        Cashless Exercise . Notwithstanding anything contained herein to the contrary, if a Registration Statement on Form S-1 (or other applicable registration statement under the 1933 Act (the “ Registration Statement ”) covering the resale of the Unavailable Warrant Shares is not available for the issuance of such Unavailable Warrant Shares, the Holder may, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the Aggregate Exercise Price, elect instead to exercise this Warrant by means of a cashless exercise (a “ Cashless Exercise ”) in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:


 

(A)

as applicable: (i) the lowest traded price of the Company’s Common Stock on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock on the principal Trading Market as reported by Bloomberg L.P. as of the time of the Holder’s execution of the applicable Notice of Exercise if such Notice of Exercise is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant to Section 1(a) hereof or (iii) the lowest traded price of the Company’s Common Stock on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise


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is both executed and delivered pursuant to Section 1(a) hereof after the close of “regular trading hours” on such Trading Day;

 

 

 

 

(B)   =

the Exercise Price of this Warrant, as adjusted hereunder; and

 

 

 

 

(X)   =

the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.


If Warrant Shares are issued in a Cashless Exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the 1933 Act, the Warrant Shares shall take on the registered characteristics of the Warrant being exercised, and the holding period of the Warrant being exercised may be tacked on to the holding period of the Warrant Shares. The Company agrees not to take any position contrary to this Section 1(d).  The Holder’s ability to elect a Cashless Exercise shall occur on the earlier of: (a) the six-month anniversary of the Initial Exercisability Date; or (b) the date the Company has defaulted on its obligations under that certain Amended Registration Rights Agreement dated as of April 5, 2018.

 

(e)        Disputes . In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute in accordance with Section 12.

 

(f)        Beneficial Ownership Limitation on Exercises . Notwithstanding anything to the contrary contained herein, the Company shall not effect the exercise of any portion of this Warrant, and the Holder shall not have the right to exercise any portion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be null and void and treated as if never made, to the extent that after giving effect to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 9.99% (the “ Maximum Percentage ”) of the number of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregate number of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of Common Stock held by the Holder and all other Attribution Parties plus the number of Common Stock issuable upon exercise of this Warrant with respect to which the determination of such sentence is being made, but shall exclude the number of Common Stock which would be issuable upon (A) exercise of the remaining, unexercised portion of this Warrant beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitation contained in this Section 1(f). For purposes of this Section 1(f), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “ 1934 Act ”). For purposes of this Warrant, in determining the number of outstanding Common Stock the Holder may acquire upon the exercise of this Warrant without exceeding the Maximum Percentage, the Holder may rely on the number of outstanding Common Stock as reflected in (x) the Company’s most recent Annual Report on Form 10-K, Current Report on Form 8-K or other public filing made by the Company with the Securities and Exchange Commission (the “ SEC ”), as the case may be, (y) a more recent public announcement by the Company or (z) any other written notice by the Company or the Transfer Agent setting forth the number of Common Stock outstanding (the “ Reported Outstanding Share Number ”). If the Company receives an Exercise Notice from the Holder at a time when the actual number of outstanding Common Stock is less than the Reported Outstanding Share Number, the Company shall (i) notify the Holder in writing of the number of Common Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder’s beneficial ownership, as determined pursuant to this Section 1(f), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be purchased pursuant to such Exercise Notice (the number of shares by which such purchase is reduced, the “ Reduction Shares ”) and (ii) as soon as reasonably practicable, the Company shall return to the Holder any exercise price paid by the Holder for the Reduction Shares. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of Common Stock then outstanding. In any case, the number of outstanding Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder and any other Attribution Party since


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the date as of which the Reported Outstanding Share Number was reported. In the event that the issuance of Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other Attribution Parties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding Common Stock (as determined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficial ownership exceeds the Maximum Percentage (the “ Excess Shares ”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have the power to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, the Company shall return to the Holder the exercise price paid by the Holder for the Excess Shares. Upon delivery of a written notice to the Company, the Holder, in its sole discretion may from time to time increase or decrease the Maximum Percentage to any other percentage not in excess of the lesser of the dollar amount of $1,500,000 per exercise or 9.99% as specified in such notice;  provided however , that (i) any such increase in the Maximum Percentage will not be effective until the sixty-first (61 st ) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other Attribution Parties and not to any other holder of the Warrants that is not an Attribution Party of the Holder. For purposes of clarity, the Common Stock issuable pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the 1934 Act. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f) to the extent necessary to correct this paragraph or any portion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 1(f) or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to a successor holder of this Warrant.

 

(g)        Insufficient Authorized Shares . If at any time while this Warrant remains outstanding the Company does not have a sufficient number of authorized and unreserved Common Stock to satisfy its obligation to reserve for issuance upon exercise of this Warrant at least a number of Common Stock equal to the maximum number of Common Stock as shall from time to time be necessary to effect the exercise of all of this Warrant then outstanding (the “ Required Reserve Amount ” and the failure to have such sufficient number of authorized and unreserved Common Stock, an “ Authorized Share Failure ”), then the Company shall promptly take all action reasonably necessary to increase the Company’s authorized Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for this Warrant and the other Warrants then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than seventy-five (75) days after the occurrence of such Authorized Share Failure, the Company shall either (x) obtain the written consent of its stockholders for the approval of an increase in the number of authorized Common Stock and provide each stockholder with an information statement with respect thereto or (y) hold a meeting of its stockholders for the approval of an increase in the number of authorized Common Stock. In connection with such meeting, the Company shall provide each stockholder with a proxy statement and shall use its reasonable best efforts to solicit its stockholders’ approval of such increase in authorized Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. Notwithstanding the foregoing, if any such time of an Authorized Share Failure, the Company is able to obtain the written consent of a majority of the its issued and outstanding Common Stock to approve the increase in the number of authorized Common Stock, the Company may satisfy this obligation by obtaining such consent and submitting for filing with the SEC an Information Statement on Schedule 14C. The initial number of Common Stock reserved for exercise of this Warrant and the other Warrants and each increase in the number of shares so reserved shall be allocated pro rata among the Holder and the holders of the other Warrants, based on the number of Common Stock that could be issuable upon exercise of this Warrant (without regard to any limitations in exercise and the six (6)-month limitation on the exercise of this Warrant) issued to the Holder on the Issuance Date (the “ Authorized Share Allocation ”). In the event that the Holder shall sell or otherwise transfer this Warrant, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any Common Stock reserved and allocated to any Person which ceases to hold any Warrants shall be allocated to the Holder and the remaining holders of Warrants, pro rata based on the Common Stock issuable upon exercise of the Warrants then held by such holders (without regard to any limitations on the exercise of the Warrants).

 

2.        ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES . The Exercise Price and the number of Warrant Shares shall be adjusted from time to time as follows:

 

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(a)        Adjustment Upon Subdivision or Combination of Common Stock . If the Company at any time on or after the Subscription Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced and the number of Warrant Shares will be proportionately increased. If the Company at any time on or after the Subscription Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of Warrant Shares will be proportionately decreased. Any adjustment under this Section 2(a) shall become effective at the close of business on the date the subdivision or combination becomes effective; provided, however, that the Floor Price will not adjust for any stock split, stock dividend, stock combination, recapitalization or other similar transaction of the Company’s Common Stock.


(b)        Subsequent Equity Sales . If the Company or any subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock Equivalents, at an effective price per share less than the Exercise Price then in effect (such lower price, the “ Base Share Price ” and such issuances collectively, a “ Dilutive Issuance ”) (it being understood and agreed that if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive Common Stock at an effective price per share that is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance at such effective price), then simultaneously with the consummation of each Dilutive Issuance the Exercise Price shall be reduced and only reduced to equal the Base Share Price and the number of Warrant Shares issuable hereunder shall be increased such that the aggregate Exercise Price payable hereunder, after taking into account the decrease in the Exercise Price, shall be equal to the aggregate Exercise Price prior to such adjustment; provided, however, that in no instance shall the Base Share Price be lower than the Floor Price.  Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued.  Notwithstanding the foregoing, no adjustments shall be made, paid or issued under this Section 2(b) in respect of an Exempt Issuance.  The Company shall notify the Holder, in writing, no later than the Trading Day following the issuance or deemed issuance of any Common Stock or Common Stock Equivalents subject to this Section 2(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “ Dilutive Issuance Notice ”).  For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 2(b), upon the occurrence of any Dilutive Issuance, the Holder is entitled to receive a number of Warrant Shares based upon the Base Share Price regardless of whether the Holder accurately refers to the Base Share Price in the Notice of Exercise. If the Company enters into a Variable Rate Transaction, despite the prohibition thereon in the Securities Purchase Agreement, the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion or exercise price at which such securities may be converted or exercised.

 

(c)        Other Events . If any event occurs of the type contemplated by the provisions of this Section 2, but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company’s Board of Directors will make an appropriate adjustment in the Exercise Price and the number of Warrant Shares, as mutually determined by the Company’s Board of Directors and the Required Holders, so as to protect the rights of the Holder;  provided however , that no such adjustment pursuant to this Section 2(c) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2.

 

3.        RIGHTS UPON DISTRIBUTION OF ASSETS . If the Company, at any time while this Warrant is outstanding, shall distribute to all holders of Common Stock (and not to the Holder) evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security other than the Common Stock (which shall be subject to Section 2(b)), then in each such case the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the VWAP determined as of the record date mentioned above, and of which the numerator shall be such VWAP on such record date less the then per share fair market value at such record date of the portion of such assets or


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evidence of indebtedness or rights or warrants so distributed applicable to one outstanding Common Share as determined by the Board of Directors in good faith.  In either case the adjustments shall be described in a statement provided to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one Common Share.  Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.  If the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property, options, evidence of indebtedness or any other assets by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “ Distribution ”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the participation in such Distribution ( provided however , that to the extent that the Holder’s right to participate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Distribution to such extent (and shall not be entitled to beneficial ownership of such Common Stock as a result of such Distribution (and beneficial ownership) to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time or times as its right thereto would not result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on any subsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).  To the extent that this Warrant has not been partially or completely exercised at the time of such Distribution, such portion of the Distribution shall be held in abeyance for the benefit of the Holder until the Holder has exercised this Warrant.


4.        PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS .

 

(a)        Purchase Rights . If the Company, at any time while the Warrant is outstanding, shall issue rights, options or warrants to all holders of Common Stock (and not to the Holder) entitling them to subscribe for or purchase Common Stock at a price per share less than the VWAP on the record date mentioned below, then the Exercise Price shall be multiplied by a fraction, of which the denominator shall be the number of Common Stock outstanding on the date of issuance of such rights, options or warrants plus the number of additional Common Stock offered for subscription or purchase, and of which the numerator shall be the number of Common Stock outstanding on the date of issuance of such rights, options or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered (assuming receipt by the Company in full of all consideration payable upon exercise of such rights, options or warrants) would purchase at such VWAP.  Such adjustment shall be made whenever such rights, options or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights, options or warrants.  In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “ Purchase Rights ”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights ( provided however , that to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Right to such extent (and shall not be entitled to beneficial ownership of such Common Stock as a result of such Purchase Right (and beneficial ownership) to such extent) and such Purchase Right to such extent shall be held in abeyance for the benefit of the Holder until such time or times as its right thereto would not result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on any subsequent Purchase Right held similarly in abeyance) to the same extent as if there had been no such limitation).


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(b)        Fundamental Transactions . The Company shall not enter into or be party to a Fundamental Transaction unless the Successor Entity assumes in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 4(b), including agreements, if so requested by the Holder, to deliver to each holder of the Warrants in exchange for such Warrants a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant, including, without limitation, an adjusted exercise price equal to the value for the Common Stock reflected by the terms of such Fundamental Transaction, and exercisable for a corresponding number of  capital stock equivalent to the Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and satisfactory to the Required Holders, and with an exercise price which applies the exercise price hereunder to such  capital stock (but taking into account the relative value of the Common Stock pursuant to such Fundamental Transaction and the value of such  capital stock, such adjustments to the number of  capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the occurrence or consummation of such Fundamental Transaction). Upon the occurrence or consummation of any Fundamental Transaction, and it shall be a required condition to the occurrence or consummation of any Fundamental Transaction that, the Company and the Successor Entity or Successor Entities, jointly and severally, shall succeed to, and the Company shall cause any Successor Entity or Successor Entities to jointly and severally succeed to, and be added to the term “Company” under this Warrant (so that from and after the date of such Fundamental Transaction, and the provisions of this Warrant referring to the “Company” shall refer instead to each of the Company and the Successor Entity or Successor Entities, jointly and severally), and the Company and the Successor Entity or Successor Entities, jointly and severally, may exercise every right and power of the Company prior thereto and shall assume all of the obligations of the Company prior thereto under this Warrant with the same effect as if the Company and such Successor Entity or Successor Entities, jointly and severally, had been named as the Company in this Warrant, and, solely at the request of the Holder, if the Successor Entity and/or Successor Entities is a publicly traded corporation whose Common Stock is quoted on or listed for trading on an Eligible Market, shall deliver (in addition to and without limiting any right under this Warrant) to the Holder in exchange for this Warrant a security of the Successor Entity and/or Successor Entities evidenced by a written instrument substantially similar in form and substance to this Warrant and exercisable for a corresponding number of  capital stock of the Successor Entity and/or Successor Entities (the “ Successor Capital Stock ”) equivalent to the Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction (such corresponding number of  Successor Capital Stock to be delivered to the Holder shall be equal to the greater of (A) the quotient of (i) the aggregate dollar value of all consideration (including cash consideration and any consideration other than cash (“ Non-Cash Consideration ”), in such Fundamental Transaction, as such values are set forth in any definitive agreement for the Fundamental Transaction that has been executed at the time of the first public announcement of the Fundamental Transaction or, if no such value is determinable from such definitive agreement, as determined in accordance with Section 12 with the term “Non-Cash Consideration” being substituted for the term “Exercise Price”) that the Holder would have been entitled to receive upon the happening of such Fundamental Transaction or the record, eligibility or other determination date for the event resulting in such Fundamental Transaction, had this Warrant been exercised immediately prior to such Fundamental Transaction or the record, eligibility or other determination date for the event resulting in such Fundamental Transaction (without regard to any limitations on the exercise of this Warrant) (the “ Aggregate Consideration ”) divided by (ii) the per share Closing Sale Price of such Successor Capital Stock on the Trading Day immediately prior to the consummation or occurrence of the Fundamental Transaction and (B) the product of (i) the Aggregate Consideration and (ii) the highest exchange ratio pursuant to which any stockholder of the Company may exchange Common Stock for Successor Capital Stock) ( provided however , that to the extent that the Holder’s right to receive any such  publicly traded Common Stock (or their equivalent) of the Successor Entity would result in the Holder and its other Attribution Parties exceeding the Maximum Percentage, if applicable, then the Holder shall not be entitled to receive such shares to such extent (and shall not be entitled to beneficial ownership of such  publicly traded Common Stock (or their equivalent) of the Successor Entity as a result of such consideration to such extent) and the portion of such shares shall be held in abeyance for the Holder until such time or times, as its right thereto would not result in the Holder and its other Attribution Parties exceeding the Maximum Percentage, at which time or times the Holder shall be delivered such shares to the extent as if there had been no such limitation), and such security shall be reasonably satisfactory to the Holder, and with an identical exercise price to the Exercise Price hereunder (such adjustments to the number of  capital stock and such exercise price being for the purpose of protecting after the consummation or occurrence of such Fundamental Transaction the economic value of this Warrant that was in effect immediately


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prior to the consummation or occurrence of such Fundamental Transaction, as elected by the Holder solely at its option). Upon occurrence or consummation of the Fundamental Transaction, and it shall be a required condition to the occurrence or consummation of such Fundamental Transaction that, the Company and the Successor Entity or Successor Entities shall deliver to the Holder confirmation that there shall be issued upon exercise of this Warrant at any time after the occurrence or consummation of the Fundamental Transaction, as elected by the Holder solely at its option, Common Stock, Successor Capital Stock or, in lieu of the Common Stock or Successor Capital Stock (or other securities, cash, assets or other property purchasable upon the exercise of this Warrant prior to such Fundamental Transaction), such  stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights), which for purposes of clarification may continue to be Common Stock, if any, that the Holder would have been entitled to receive upon the happening of such Fundamental Transaction or the record, eligibility or other determination date for the event resulting in such Fundamental Transaction, had this Warrant been exercised immediately prior to such Fundamental Transaction or the record, eligibility or other determination date for the event resulting in such Fundamental Transaction (without regard to any limitations on the exercise of this Warrant), as adjusted in accordance with the provisions of this Warrant. In addition to and not in substitution for any other rights hereunder, prior to the occurrence or consummation of any Fundamental Transaction pursuant to which holders of Common Stock are entitled to receive securities, cash, assets or other property with respect to or in exchange for Common Stock (a “ Corporate Event ”), the Company shall make appropriate provision to ensure that, and any applicable Successor Entity or Successor Entities shall ensure that, and it shall be a required condition to the occurrence or consummation of such Corporate Event that, the Holder will thereafter have the right to receive upon exercise of this Warrant at any time after the occurrence or consummation of the Corporate Event, Common Stock or Successor Capital Stock or, if so elected by the Holder, in lieu of the Common Stock (or other securities, cash, assets or other property) purchasable upon the exercise of this Warrant prior to such Corporate Event (but not in lieu of such items still issuable under Sections 3 and 4(a), which shall continue to be receivable on the Common Stock or on the such  stock, securities, cash, assets or any other property otherwise receivable with respect to or in exchange for Common Stock), such  stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights and any Common Stock) which the Holder would have been entitled to receive upon the occurrence or consummation of such Corporate Event or the record, eligibility or other determination date for the event resulting in such Corporate Event, had this Warrant been exercised immediately prior to such Corporate Event or the record, eligibility or other determination date for the event resulting in such Corporate Event (without regard to any limitations on exercise of this Warrant). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder. The provisions of this Section 4(b) shall apply similarly and equally to successive Fundamental Transactions and Corporate Events. Notwithstanding the foregoing, the Holder may elect, in its sole discretion, by delivery of written notice to the Company, to waive this Section 4(b) and allow the Company to enter into or be a party to a Fundamental Transaction without the assumption of this Warrant pursuant to the provisions of this Section 4(b),  provided however , that any such waiver shall only bind the Holder with respect to this Warrant and not the Holder with respect to any other warrant or other securities of the Company or any holder of other Warrants.


(c)        Black Scholes Value .  Notwithstanding the foregoing and the provisions of Section 4(b) above, at the request of the Holder delivered at any time commencing on the earliest to occur of (x) the public disclosure of any Fundamental Transaction, (y) the consummation of any Fundamental Transaction and (z) the Holder first becoming aware of any Fundamental Transaction through the date that is ninety (90) days after the public disclosure of the consummation of such Fundamental Transaction by the Company pursuant to a Current Report on Form 8-K filed with the SEC, the Company or the Successor Entity (as the case may be) shall purchase this Warrant from the Holder on the date of such request by paying to the Holder cash in an amount equal to the Black Scholes Value.  For purposes of this Section 4(c), “ Black Scholes Value ” means the value of the unexercised portion of this Warrant remaining on the date of the Holder’s request, which value is calculated using the Black Scholes Option Pricing Model for a “call” or “put” option, as elected by the Holder, as obtained from the “OV” function on Bloomberg utilizing (i) an underlying price per share equal to the greater of (1) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading Day immediately preceding the announcement of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the Trading Day of the Holder’s request pursuant to this Section 4(c) and (2) the sum of the price per share being offered in cash in the applicable Fundamental Transaction (if any) plus the value of the non-cash consideration being offered in the applicable Fundamental Transaction (if any), (ii) a strike price equal to the Exercise Price in effect on the date of the Holder’s request pursuant to this Section 4(c), (iii) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of (1) the remaining


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term of this Warrant as of the date of the Holder’s request pursuant to Section 4(c) and (2) the remaining term of this Warrant as of the date of consummation of the applicable Fundamental Transaction or as of the date of the Holder’s request pursuant to Section 4(c) if such request is prior to the date of the consummation of the applicable Fundamental Transaction, (iv) a zero cost of borrow and (v) an expected volatility equal to the greater of 100% and the 30 day volatility obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following the earliest to occur of (A) the public disclosure of the applicable Fundamental Transaction, (B) the consummation of the applicable Fundamental Transaction and (C) the date on which the Holder first became aware of the applicable Fundamental Transaction.

 

(d)       Notwithstanding anything herein to the contrary, the Company shall be required to obtain the prior written consent of the Required Holders to enter into, allow and/or consummate a Fundamental Transaction other than one in which a Successor Entity that is a publicly traded corporation whose stock is quoted or listed for trading on an Eligible Market assumes this Warrant such that the Warrant shall be exercisable for the publicly traded Common Stock such Successor Entity.

 

5.        NONCIRCUMVENTION . The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all of the provisions of this Warrant and take all action as may be required to protect the rights of the Holder. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Common Stock upon the exercise of this Warrant, and (iii) shall, so long as any of the Warrants are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting the exercise of the Warrants, the Required Reserve Amount to effect the exercise of the Warrants then outstanding (without regard to any limitations on exercise).

 

6.        WARRANT HOLDER NOT DEEMED A STOCKHOLDER . Except as otherwise specifically provided herein, the Holder, solely in such Person’s capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in such Person’s capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which such Person is then entitled to receive upon the due exercise of this Warrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstanding this Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally, contemporaneously with the giving thereof to the stockholders.

 

7.        REISSUANCE OF WARRANTS .

 

(a)        Transfer of Warrant . If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right to purchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.

 

(b)        Lost, Stolen or Mutilated Warrant . Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company shall execute and


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deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing the right to purchase the Warrant Shares then underlying this Warrant.

 

(c)        Exchangeable for Multiple Warrants . This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new warrant or warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of such surrender;  provided however , that no Warrants for fractional Warrant Shares shall be given.

 

(d)        Issuance of New Warrants . Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added to the number of Common Stock underlying the other new warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shall have the same rights and conditions as this Warrant.

 

8.        NOTICES . Whenever notice is required to be given under this Warrant, unless otherwise provided herein, with respect to a notice to the Company or to a Holder that is a party to the Securities Purchase Agreement, such notice shall be given in accordance with Section 5.4 of the Amended Securities Purchase Agreement, and, with respect to a notice to a Holder that is not a party to the Amended Securities Purchase Agreement, such notice shall be given in the manner set forth in and pursuant to the terms of Section 5.4 of the Amended Securities Purchase Agreement to Holder’s address, facsimile number or e-mail address in the Company’s records. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant, including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon any adjustment of the Exercise Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation;  provided however , in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder. It is expressly understood and agreed that the time of exercise specified by the Holder in each Exercise Notice shall be definitive and may not be disputed or challenged by the Company.

 

9.        AMENDMENT AND WAIVER . Except as otherwise provided herein, the provisions of this Warrant may be amended or waived and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Required Holders.

 

10.        GOVERNING LAW; JURISDICTION; JURY TRIAL . This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to the Company at the address set forth in Section 5.4 of the Amended Securities Purchase Agreement and agrees that such service shall


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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 manner permitted by law. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder.  THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

11.        CONSTRUCTION; HEADINGS . This Warrant shall be deemed to be jointly drafted by the Company and all the Holders and shall not be construed against any Person as the drafter hereof. The headings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant.

 

12.        DISPUTE RESOLUTION . In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall submit the disputed determinations or arithmetic calculations via facsimile or electronic mail within two (2) Business Days after receipt of the Exercise Notice giving rise to such dispute, as the case may be, to the Holder. If the Holder and the Company are unable to agree upon such determination or calculation of the Exercise Price or the Warrant Shares within three (3) Business Days after such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, within two (2) Business Days submit via facsimile (a) the disputed determination of the Exercise Price to an independent, reputable investment bank selected by the Holder and approved by the Company, such approval not to be unreasonably withheld or delayed or (b) the disputed arithmetic calculation of the Warrant Shares to the Company’s independent, outside accountant, approved by the Holder, such approval not to be unreasonably withheld or delayed. The Company shall cause at its expense the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than ten (10) Business Days from the time it receives the disputed determinations or calculations. Such investment bank’s or accountant’s determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.

 

13.        REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF . The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual damages for any failure by the Company to comply with the terms of this Warrant. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.

 

14.        TRANSFER . This Warrant and the Warrant Shares may be offered for sale, sold, transferred, pledged or assigned without the consent of the Company.

 

15.        SEVERABILITY . If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

 

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16.        DISCLOSURE . Upon receipt or delivery by the Company of any notice in accordance with the terms of this Warrant, unless the Company has in good faith determined that the matters relating to such notice do not constitute material, nonpublic information relating to the Company or its subsidiaries, the Company shall within one (1) Business Day after any such receipt or delivery publicly disclose such material, nonpublic information on a Current Report on Form 8-K or otherwise. In the event that the Company believes that a notice contains material, nonpublic information relating to the Company or its subsidiaries, the Company so shall indicate to such Holder contemporaneously with delivery of such notice, and in the absence of any such indication, the Holder shall be allowed to presume that all matters relating to such notice do not constitute material, nonpublic information relating to the Company or its subsidiaries.

 

17.        CERTAIN DEFINITIONS . For purposes of this Warrant, the following terms shall have the following meanings:

 

(a)       “ 1933 Act ” means the Securities Act of 1933, as amended.

 

(b)       “ Affiliate ” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of the stock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

 

(c)       “ Attribution Parties ” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managed accounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliates or principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Group together with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could be aggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subject collectively the Holder and all other Attribution Parties to the Maximum Percentage.


(d)       “ Bid Price ” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the bid price of the Common Stock for the time in question (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

(e)       “ Bloomberg ” means Bloomberg Financial Markets.

 

(f)       “ Business Day ” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

 

(g)       “ Closing Sale Price ” means, for any security as of any date, the last closing trade price for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing trade price, then the last trade price of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last trade price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last trade price of such security in the over-the-counter market on the electronic bulletin


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board for such security as reported by Bloomberg, or, if no last trade price is reported for such security by Bloomberg, the average of the ask prices of any market makers for such security as reported in the OTC Link or “pink sheets” by OTC Markets Group Inc. (formerly Pink OTC Markets Inc.). If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 12. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or other similar transaction during the applicable calculation period.

 

(h)       “ Common Stock ” means (i) the Company’s Common Stock, no par value per share, and (ii) any share capital into which such Common Stock shall have been changed or any share capital resulting from a reclassification of such Common Stock.


(i)        “ Common Stock Equivalents ” means any securities of the Company or any subsidiary which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant, unit, or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

 

(j)        “ Convertible Securities ” means any stock or securities (other than Options) directly or indirectly convertible into or exercisable or exchangeable for Common Stock.

 

(k)       “ Eligible Market ” means the Principal Market, the NYSE MKT LLC, The NASDAQ Global Market, The NASDAQ Global Select Market, The NASDAQ Capital Market, The New York Stock Exchange, Inc., the OTC Bulletin Board, the OTCQX, the OTCQB, or the OTC Pink Sheets.

 

(l)        “ Expiration Date ” means the date that is sixty (60) months after the Initial Exercisability Date, or, if such date falls on a day other than a Business Day or on which trading does not take place on the Principal Market (a “ Holiday ”), the next day that is not a Holiday.


(m)      “ Floor Price ” means $0.10.

 

(n)       “ Fundamental Transaction ” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule 1-02 of Regulation S-X) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have its Common Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x) 50% of the outstanding Common Stock, (y) 50% of the outstanding Common Stock calculated as if any Common Stock held by all Subject Entities making or party to, or Affiliated with any Subject Entities making or party to, such purchase, tender or exchange offer were not outstanding; or (z) such number of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the outstanding Common Stock, or (iv) consummate a share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with one or more Subject Entities whereby such Subject Entities, individually or in the aggregate, acquire, either (x) at least 50% of the outstanding Common Stock, (y) at least 50% of the outstanding Common Stock calculated as if any Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchase agreement or other business combination were not outstanding; or (z) such number of Common Stock such that the Subject Entities become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the outstanding Common Stock, or (v) reorganize, recapitalize or reclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding Common


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Stock, merger, consolidation, business combination, reorganization, recapitalization, spin-off, scheme of arrangement, reorganization, recapitalization or reclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entities as of the Subscription Date calculated as if any Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of the aggregate ordinary voting power represented by issued and outstanding Common Stock or other equity securities of the Company sufficient to allow such Subject Entities to effect a statutory short form merger or other transaction requiring other stockholders of the Company to surrender their Common Stock without approval of the stockholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of this definition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to the extent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument or transaction.

 

(o)       “ Group ” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d-5 thereunder.

 

(p)       “ Options ” means any rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities.

 

(q)       “ Parent Entity ” of a Person means an entity that, directly or indirectly, controls the applicable Person, including such entity whose Common Stock or Common Stock or equivalent equity security is quoted or listed on an Eligible Market (or, if so elected by the Required Holders, any other market, exchange or quotation system), or, if there is more than one such Person or such entity, the Person or such entity designated by the Required Holders or in the absence of such designation, such Person or entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.

 

(r)       “ Person ” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.

 

(s)       “ Principal Market ” means the OTCQB.

 

(t)       “ Required Holders ” means the holders of the Warrants representing at least a majority of the Common Stock underlying the Warrants then outstanding.

 

(u)       “ Securities Purchase Agreement ” means the Securities Purchase Agreement, dated April 5, 2018, entered into by the Company and the purchasers party thereto.

 

(v)       “ Standard Settlement Period ” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary trading market or quotation system from time to time, with respect to trades of the Common Stock as in effect of the date of delivery of the Exercise Notice.

 

(w)       “ Subject Entity ” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.

 

(x)       “ Successor Entity ” means one or more Person or Persons (or, if so elected by the Holder, the Company or Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or one or more Person or Persons (or, if so elected by the Holder, the Company or the Parent Entity) with which such Fundamental Transaction shall have been entered into.

 

(y)       “ Trading Day ” means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded.


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(z)       “ Trading Market ” means the Company’s primary trading market or quotation system from time to time.


(aa)      “ VWAP ” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.



[Signature Page Follows]



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IN WITNESS WHEREOF,  the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.

 

 

BLACK CACTUS GLOBAL, INC.

 

 

 

 

By:

 

 

Name:

 

 

Title:

Chief Financial Officer



[Signature page to Black Cactus Global, Inc. Warrant]



- 17 -



EXHIBIT A


EXERCISE NOTICE


TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK


BLACK CACTUS GLOBAL, INC.


The undersigned holder hereby exercises the right to purchase _________________ of the Common Stock, no par value per share (the “ Warrant Shares ”), of Black Cactus Global, Inc., a corporation organized under the laws of the Province of Ontario (the “ Company ”), evidenced by the attached Warrant to purchase Common Stock No. CS-____ (the “ Warrant ”). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.

 

1. Form of Exercise Price. The holder intends that payment of the Exercise Price shall be made as:

 

____________ a “ Cash Exercise”  with respect to _________________ Warrant Shares; or

 

____________ a  “Cashless Exercise”  with respect to _______________ Warrant Shares.

 

2. Payment of Exercise Price. In the event that the holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of the Warrant.

 

3. Delivery of Warrant Shares. The Company shall deliver to the holder __________ Warrant Shares in accordance with the terms of the Warrant.

 

Please issue the Warrant Shares in the following name and to the following account:

 

 

Issue to:

 

 

 

 

 

 

 

 

 

 

 

Facsimile Number and Electronic Mail:

 

 

 

Authorization:

 

 

 

By:

 

 

 

Title:

 

 

 

Dated:

 

 

 

Broker Name:

 

 

 

Broker DTC #:

 

 

 

Broker Telephone #:

 

 

 

Account Number:

 

  (if electronic book entry transfer)

 

 

 

Transaction Code Number:

 

  (if electronic book entry transfer)

 


- 18 -



Exhibit 5.1



Writer’s email: cmcdowell@pooleshaffery.com


April 18, 2018

 

Board of Directors

Black Cactus Global, Inc.

8275 S. Eastern Avenue, Suite 200

Las Vegas, NV 89123

 

Re:  Registration on Form S-1

 

Gentlemen:

 

We have acted as counsel to Black Cactus Global, Inc. (f/k/a Envoy Group Corp.), a Florida corporation (the “Company”), in connection with the preparation of a registration statement filed with the Securities and Exchange Commission on Form S-1 (“Registration Statement”) relating to the resale of 144,649,220 shares of common stock (the “Shares”) as described in the Registration Statement.

 

We have examined such records and documents and have made such examination of laws as we considered necessary to form a basis for the opinion set forth herein. In addition, we have obtained certain representations from the Company’s chief executive and chief financial officers. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity with the originals of all documents submitted to us as copies thereof.

 

In this connection, we have examined originals or copies identified to our satisfaction of such documents, corporate and other records, certificates, and other papers as we deemed necessary to examine for purposes of this opinion, including but not limited to the transaction documents related to the Shares being registered in the Registration Statement, the Articles of Incorporation of the Company, the Bylaws of the Company and resolutions of the Board of Directors of the Company.

 

Based solely upon a review of the documents described in paragraph 2 and 3 above, we are of the opinion that the Shares, the resale of which is being registered in the Registration Statement have been duly authorized, and when issued will be validly issued, fully paid, and non-assessable.

 

We consent to the filing of this opinion letter as Exhibit 5.1 to the Registration Statement and to the reference to this firm under the caption “Legal Matters” in the prospectus that is part of the Registration Statement. This opinion is being furnished in accordance with the requirements of Item 16 of Form S-1. Our opinion is expressly limited to the matters set forth above and we render no opinion, whether by implication or otherwise, as to any other matters relating to the Company or the Shares.

 

Sincerely,

POOLE & SHAFFERY, LLP

/s/ Poole & Shaffery, LLP

 

 



Exhibit 10.4


AMENDMENT TO REGISTRATION RIGHTS AGREEMENT


This AMENDMENT TO REGISTRATION AGREEMENT (this “ Amendment ”) dated as of April 11, 2018, and effective as of  November 27, 2017 (the “ Effective Date ”) is entered into by Black Cactus Global, Inc., a Florida corporation/ f/k/a Envoy Group Corp., a Florida corporation (the “ Company ”), and Bellridge Capital, L.P., or its assigns (“ Bellridge” ).


Recitals


WHEREAS, the Company and Bellridge (collectively, the “ Parties ”) entered that certain Registration Rights Agreement, dated November 27, 2017, as amended, modified or supplemented from time to time in accordance with its terms (the “ Agreement ”); and


WHEREAS, the Parties desire that the Agreement be amended to reflect their understanding of the definition of “Registrable Securities”) under the Agreement.


NOW, THEREFORE, in consideration of the foregoing, and of the mutual representations, warranties, covenants, and agreements herein contained, the Parties hereto agree as follows:


Agreement


Section 1.        Defined Terms . Unless otherwise indicated herein, all terms which are capitalized but are not otherwise defined herein shall have the meaning ascribed to them in the Agreement.


Section 2.       Amendment to Agreement.  


(a)       The definition of “Registrable Securities” under Section 1 of the Agreement, is hereby amended and restated in its entirety as follows:


Registrable Securities ” means, as of any date of determination, (a) all of the shares of Common Stock then issued and issuable upon conversion in full of the Notes (assuming on such date the Notes are converted in full without regard to any conversion limitations therein), (b) all shares of Common Stock issued and issuable as interest with respect to the Notes, (c) any additional shares of Common Stock issued and issuable in connection with any anti-dilution provisions in the Notes (without giving effect to any limitations on conversion set forth in the Notes) (d) any additional shares of Common Stock issued and issuable in connection with the Notes, (e) all of the shares of Common Stock then issued and issuable upon exercise in full of the Warrants (assuming on such date the Warrants are exercised in full without regard to any exercise limitations therein), (f) any additional shares of Common Stock issued and issuable in connection with any anti-dilution provisions in the Warrants (without giving effect to any limitations on exercise set forth in the Warrants), (g) any additional shares of Common Stock issued and issuable in connection with the Warrants, (h) the Restricted Shares issued to the Purchaser pursuant to the Purchase Agreement, and (i) any securities issued or then issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect




to the foregoing; provided, however , that any such Registrable Securities shall cease to be Registrable Securities (and the Company shall not be required to maintain the effectiveness of any, or file another, Registration Statement hereunder with respect thereto) for so long as (a) a Registration Statement with respect to the sale of such Registrable Securities is declared effective by the Commission under the Securities Act and such Registrable Securities have been disposed of by the Holder in accordance with such effective Registration Statement, (b) such Registrable Securities have been previously sold in accordance with Rule 144, or (c) such securities become eligible for resale without volume or manner-of-sale restrictions and without current public information pursuant to Rule 144 as set forth in a written opinion letter to such effect, addressed, delivered and acceptable to the Transfer Agent and the affected Holder (assuming that such securities and any securities issuable upon exercise, conversion or exchange of which, or as a dividend upon which, such securities were issued or are issuable, were at no time held by any Affiliate of the Company), as reasonably determined by the Company, upon the advice of counsel to the Company.


(b)       Section 6(b) of the Agreement, is hereby amended and restated in its entirety as follows:


(b)        No Piggyback on Registration Statement . Neither the Company nor any of its security holders (other than the Holder in such capacity pursuant hereto) may include securities of the Company in the Registration Statement filed hereunder other than the Registrable Securities or any securities issued to the Purchaser in any transactions subsequent to the date hereof.


(c)       Section 6(f) of the Agreement, is hereby amended and restated in its entirety as follows:


(f)        Amendments and Waivers . The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holder of 67% or more of the then outstanding Registrable Securities (for purposes of clarification, this includes any Registrable Securities issuable upon conversion or exercise of any Notes or Warrants, respectively). If a Registration Statement does not register all of the Registrable Securities pursuant to a waiver or amendment done in compliance with the previous sentence, then the number of Registrable Securities to be registered for each Holder shall be reduced pro rata among all Holders and each Holder shall have the right to designate which of its Registrable Securities shall be omitted from such Registration Statement. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of the Holder or some Holder and that does not directly or indirectly affect the rights of other Holders may be given only by the Holder or Holders of all of the Registrable Securities to which such waiver or consent relates; provided , however , that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the first sentence of this Section 6(f). No consideration shall be offered or paid to any Person to amend or consent to a


- 2 -



waiver or modification of any provision of this Agreement unless the same consideration also is offered to all of the parties to this Agreement


Section 3.        Ratifications; Inconsistent Provisions; Severability . Except as otherwise expressly provided herein the Agreement is, and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects, except that on and after the Effective Date, all references in the Agreement “this Agreement”, “hereto”, “hereof”, “hereunder” or words of like import referring to the Agreement shall mean the Agreement and as amended by this Amendment. Notwithstanding the foregoing to the contrary, to the extent that there is any inconsistency between the provisions of the Agreement, and this Amendment, the provisions of this Amendment shall control and be binding.  In the event and to the extent that any provision of this Amendment shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect the validity or enforceability of any other provisions of this Amendment, all of which shall remain fully enforceable as set forth herein.


Section 4.        Governing Law .  All questions concerning the construction, validity, enforcement and interpretation of this Amendment (irrespective of the place where it is executed and delivered) shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.  Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Amendment (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York.  Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Amendment), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each of the Parties hereby irrevocably waive personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Amendment and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.  If either of the Parties shall commence an action, suit or proceeding to enforce any provisions of the Amendment, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.


Section 6.        Headings .  The headings contained herein are for convenience only, do not constitute a part of this Amendment and shall not be deemed to limit or affect any of the provisions hereto.


- 3 -



Section 7.        Counterparts .  This Amendment may be executed in any number of counterparts, all of which will constitute one and the same instruments and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other party. Facsimile, PFD, or other electronic transmission of any signed original document shall be deemed the same as delivery of an original.



[ Signature page follows ]



- 4 -



IN WITNESS WHEREOF, the Company has caused this Amendment to be executed as of the date first written above by its respective officers thereunto duly authorized.



BLACK CACTUS GLOBAL, INC.


By:  _____________________________

Name:

Title:


Acknowledged and Accepted as of

the date first written above:



BELLRIDGE CAPITAL, L.P.


By:  _____________________________

Name:

Title:


- 5 -



Exhibit 10.5


AMENDMENT TO SECURITIES PURCHASE AGREEMENT


This AMENDMENT TO SECURITIES PURCHASE AGREEMENT (this “ Amendment ”) dated as of April 11, 2018, and effective as of April 5, 2018 (the “ Effective Date ”) is entered into by Black Cactus Global, Inc., a Florida corporation/ f/k/a Envoy Group Corp., a Florida corporation (the “ Company ”), and Bellridge Capital, L.P., or its assigns (“ Bellridge” ).


Recitals


WHEREAS, the Company and Bellridge (collectively, the “ Parties ”) entered that certain Securities Purchase Agreement, dated April 5, 2018, as amended, modified or supplemented from time to time in accordance with its terms (the “ Agreement ”); and


WHEREAS, the Parties desire that the Agreement be amended to reflect their understanding of the issuance of certain common stock purchase warrants under the Agreement.


NOW, THEREFORE, in consideration of the foregoing, and of the mutual representations, warranties, covenants, and agreements herein contained, the Parties hereto agree as follows:


Agreement


Section 1.        Defined Terms . Unless otherwise indicated herein, all terms which are capitalized but are not otherwise defined herein shall have the meaning ascribed to them in the Agreement.


Section 2.       Amendment to Agreement.


(a)       The section entitled “Background”, subsection (D) contained in the Agreement, is hereby amended and restated in its entirety as follows:


D.       The purchase price of the Warrants shall be $0.0001 (the “ Purchase Price ”).  The Warrants shall have a five (5) year life with a strike prices each equal to the $0.10 (the “ Exercise Prices ”), which may be exercised cashless if the underlying shares are not registered after six (6) months from final Closing (“closing” is defined below)).


(b)       Section 1.1 of the Agreement is hereby amended and restated in its entirety as follows:


1.1       Authorization of Securities. The Board of Directors of the Company has authorized (i) the sale of up to Warrants (which warrants will be issued in three denominations pursuant to Schedule 1.1 hereto) to purchase 85,000,000 shares of Common Stock; and (ii) the reservation of 85,000,000 restricted common shares to be issued upon cash or cashless exercise of the Warrants (the “ Warrant Shares ”).




(c)        Exhibit A to the Agreement is hereby amended and restated in its entirety as follows:


EXHIBIT A


SCHEDULE OF PURCHASERS


Initial Closing


Name of Purchaser

Warrants

Warrant Shares

Total Purchase
Price Amount

Bellridge Capital, L.P.

3

85,000,000

$0.0003


(d)        Schedule 1.1 to the Agreement is hereby amended and restated in its entirety as follows:


Schedule 1.1


Warrant Denominations


Warrant No. 1 - 28,339,000 shares of Common Stock


Warrant No. 2 - 28,330,500 shares of Common Stock


Warrant No. 3 - 28,330,500 shares of Common Stock


Section 3.        Ratifications; Inconsistent Provisions; Severability . Except as otherwise expressly provided herein the Agreement is, and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects, except that on and after the Effective Date, all references in the Agreement “this Agreement”, “hereto”, “hereof”, “hereunder” or words of like import referring to the Agreement shall mean the Agreement and as amended by this Amendment. Notwithstanding the foregoing to the contrary, to the extent that there is any inconsistency between the provisions of the Agreement, and this Amendment, the provisions of this Amendment shall control and be binding.  In the event and to the extent that any provision of this Amendment shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect the validity or enforceability of any other provisions of this Amendment, all of which shall remain fully enforceable as set forth herein.


Section 4.        Governing Law .  All questions concerning the construction, validity, enforcement and interpretation of this Amendment (irrespective of the place where it is executed and delivered) shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.  Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Amendment (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents)


- 2 -



shall be commenced exclusively in the state and federal courts sitting in the City of New York.  Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Amendment), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding.  Each of the Parties hereby irrevocably waive personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Amendment and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.  If either of the Parties shall commence an action, suit or proceeding to enforce any provisions of the Amendment, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.


Section 6.        Headings .  The headings contained herein are for convenience only, do not constitute a part of this Amendment and shall not be deemed to limit or affect any of the provisions hereto.


Section 7.        Counterparts .  This Amendment may be executed in any number of counterparts, all of which will constitute one and the same instruments and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other party. Facsimile, PFD, or other electronic transmission of any signed original document shall be deemed the same as delivery of an original.



[ Signature page follows ]



- 3 -



IN WITNESS WHEREOF, the Company has caused this Amendment to be executed as of the date first written above by its respective officers thereunto duly authorized.



BLACK CACTUS GLOBAL, INC.


By:  _____________________________

Name:

Title:


Acknowledged and Accepted as of

the date first written above:



BELLRIDGE CAPITAL, L.P.


By:  _____________________________

Name:

Title:


- 4 -



Exhibit 10.6

 

SECURITIES PURCHASE AGREEMENT

 

 

 

BY AND AMONG

 

 

 

BLACK CACTUS GLOBAL, INC.

 

AND

 

THE PURCHASERS PARTY HERETO

 

 

 



SCHEDULES AND EXHIBITS

TO

SECURITIES PURCHASE AGREEMENT

 

Schedule 3.2

Subsidiaries

Schedule 3.3.2

Capitalization Matters

Schedule 3.4

Authorization; Binding Obligation

Schedule 3.6

Absence of Liabilities

Schedule 3.8

Changes

Schedule 3.9

Title to Properties and Assets; Liens

Schedule 3.10.1

Owned Intellectual Property and Licensed Intellectual Property

 

 

 

 

 

 

Exhibit A

Schedule of Purchasers

Exhibit B

Form of Warrant

Exhibit C

Form of Registration Rights Agreement

 

- 2 -



BLACK CACTUS GLOBAL, INC.

 

SECURITIES PURCHASE AGREEMENT

 

THIS SECURITIES PURCHASE AGREEMENT (the “ Agreement ”) is entered into as of April 5, 2018, by and among Black Cactus Global, Inc., a Florida corporation (the “ Company ”) and the purchasers identified on Exhibit A on the date hereof (which purchasers are hereinafter collectively referred to as the “ Purchasers ” and each individually as, a “ Purchaser ”).

 

BACKGROUND

 

A.         Unless otherwise defined in this Agreement, capitalized terms used in this Agreement shall have the respective meanings ascribed to such terms in Section 8.

 

B.         The Company is offering (the “ Offering ”) restricted warrants (the “ Warrants ”) (the Warrants and the shares of common stock underlying the warrants, collectively referred to herein as the “ Securities ”) to a holders of that certain promissory note purchased pursuant to that certain Securities Purchase Agreement, dated November 27, 2017, as amended, modified, and supplemented (collectively, the “ November 2017 SPA ”) who qualify as “accredited investors” as defined in Rule 501 of Regulation D promulgated under the Securities Act at a purchase price for the Warrants as described below.

 

C.         The Securities are being offered on a “ best efforts ” basis to existing warrant holders.

 

D.         The purchase price of the Warrants shall be $0.0001 (the “ Purchase Price ”).  The Warrants shall have a five (5) year life with a strike prices equal to the $0.10; $0.15; and $0.20 (the “ Exercise Prices ”), which may be exercised cashless if the underlying shares are not registered after six (6) months from final Closing (“closing” is defined below).

 

E.         The Company desires to issue and sell the Securities to each Purchaser in one or more closings (each a “ Closing ” and collectively the “ Closings ”) as set forth herein.

 

NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, hereby agree as follows:

 

1.          AGREEMENT TO SELL AND PURCHASE.

 

1.1         Authorization of Securities .  The Board of Directors of the Company has authorized (i) the sale of up to Warrants (which warrants will be issued in three denominations pursuant to Schedule 1.1 hereto) to purchase 61,391,250 shares of Common Stock; and (ii) the reservation of 65,000,000 restricted common shares to be issued upon cash or cashless exercise of the Warrants (the “ Warrant Shares ”).

 

1.2         Initial Sale and Purchase of Securities .  Subject to the terms and conditions hereof, and in reliance upon the representations, warranties and covenants contained herein, at the Initial Closing, the Company shall issue and sell to each Purchaser, and each Purchaser shall purchase from the

 

- 3 -



Company, the number of Securities set forth opposite such Purchaser’s name on Exhibit A under the “Initial Securities” column.

 

1.3         Issuance of Warrants .  The Warrant shall be in form and substance substantially the same as the form of Warrant in Exhibit B .  

 

2.          CLOSINGS, DELIVERY AND PAYMENT.

 

2.1         Initial Closing .  Subject to the conditions set forth in Section 5 herein, the initial closing of the sale and purchase of the Securities (the “ Initial Closing ”), shall take place electronically on such date and at such time as is agreed between the Company and the Purchasers (such date the “ Initial Closing Date ”), in no event later than April 6, 2018 (the “ Termination Date ”).  

 

2.2         Subsequent Closings .  Subject to the conditions set forth in Section 5, each Subsequent Closing shall take place electronically on such date and at such time as is agreed between the Company and the Purchasers (such date the “ Subsequent Closing Date ”), in no event later than April 9, 2018 (the “Final Termination Date” ).  The Securities sold at the Subsequent Closings are sometimes referred to herein as “ Subsequent Securities .

 

2.3         Delivery; Payment .  At each Closing, subject to the terms and conditions hereof, the Purchasers will deliver the full amount of the Purchase Price in cash by wire transfer of immediately available funds in accordance with instructions provided to each purchaser, or as the Company shall otherwise direct and the Company will deliver instructions to its transfer agent authorizing the issuance of the Warrant included in the Securities purchased by such Purchaser or Subsequent Closing Purchaser, as the case may be, at such Closing and each registered in such Purchaser’s name to purchase such number of Warrant Shares included in the Warrants purchased by such Purchaser or Subsequent Closing Purchaser, as the case may be, at such Closing.  Within five (5) business days following any Closing the Company will deliver, unless otherwise requested by any Purchaser, one (1) certificate registered in such Purchaser’s name representing the Securities purchased by such Purchaser at such Closing and the Warrants included in the Securities purchased by such Purchaser at such Closing.  The Company and the Purchasers, in their mutual discretion, may allow a Purchaser to purchase partial Securities, in which case the Purchaser shall receive a certificate representing the appropriate number of Warrants for the appropriate number of Warrant Shares.

 

3.          REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 

The Company represents and warrants to each of the Purchasers that the statements made in this Section 3, except as qualified in the disclosure schedules referenced herein and attached hereto (the “ Schedules ”), are true and correct on the date hereof, as of the Initial Closing and shall be true and correct as of each Subsequent Closing, except as qualified by any updated Schedules delivered at the Subsequent Closing in accordance with Section 5.1.1 herein, all of which qualifications in the Schedules attached hereto and updated Schedules delivered at the Subsequent Closing shall be deemed to be representations and warranties as if made hereunder.  The Schedules shall be arranged to correspond to the numbered paragraphs contained in this Section 3.  For the avoidance of doubt, information disclosed in one section of the Schedule shall not be deemed disclosed in any other section of the Schedule unless there is an explicit cross reference to such other section.  For purposes of this Section 3, “knowledge” shall mean the personal knowledge of any of the Company’s officers or directors or what they would have known upon having made reasonable inquiry.  

 

3.1         Organization, Good Standing and Qualification .  The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing

 

- 4 -



under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted.  Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents.  Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “ Material Adverse Effect ”) and, no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

 

3.2         Subsidiaries .   Schedule 3.2 contains a true and complete list of each of the Company’s Subsidiaries and their respective jurisdictions of organization.  Except as set forth on Schedule 3.2 , no entity owns or controls any ownership interest or profits interest in any other corporation, limited liability company, limited partnership or other entity.  The Company owns and controls as to all matters 100% of the outstanding ownership and profits interests in each Subsidiary listed on Schedule 3.2 .  Except as set forth on Schedule 3.2 , no entity is a participant in any joint venture, partnership or similar arrangement.   

 

3.3         Capitalization Matters .  

 

3.3.1.    Immediately prior to the Initial Closing and any Subsequent Closing, if and as applicable, the total authorized capital stock of the Company, consists of: (a) 490,000,000 shares of common stock; and (b) 10,000,000 shares of preferred stock, of which none are issued and outstanding.

 

3.3.2.    Immediately prior to the Initial Closing and any Subsequent Closing, if and as applicable, the authorized, issued and outstanding capital stock of the Company is, as set forth on Schedule 3.3.2 and all issued and outstanding shares of capital stock of the Company (a) have been duly authorized and validly issued, (b) are fully paid and nonassessable, and (c) were, in all material respects, issued in compliance with all applicable state and federal laws concerning the issuance of securities.  Except as set forth on Schedule 3.3.2 , (i) there are no outstanding securities of the Company which contain any preemptive, redemption or similar provisions, nor is any holder of securities of the Company entitled to preemptive or similar rights arising out of any agreement or understanding with the Company by virtue of any of the Transaction Documents, and there are no contracts, commitments, understandings or arrangements by which the Company is or may become bound to redeem a Securities of the Company (ii) the Company does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement; and (iii) except as set forth on Schedule 3.3.2 , there are no outstanding options, warrants, agreements, convertible securities, preemptive rights or other rights to subscribe for or to purchase or acquire, any shares of capital stock of the Company or contracts, commitments, understandings, or arrangements by which the Company is or may become bound to issue any shares of capital stock of the Company, or secur­ities or rights convertible or exchangeable into shares of capital stock of the Company.  Except as required by law, including any federal securities rules and regulations, there are no restrictions upon the voting or transfer of any of the shares of capital stock of the Company pursuant to its

 

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Organizational Documents or other governing documents or any agreement or other instruments to which the Company is a party or by which it is bound.  The issuance and sale of the Securities as contemplated hereby will not obligate the Company to issue shares of common stock or other securities to any other person (other than the Purchaser) and will not result in the adjustment of the exercise, conversion, exchange or reset price of any outstanding Securities.  There are no proxies, stockholder agreements, or any other agreements between the Company and any securityholder of the Company or, to the knowledge of the Company, among any securityholders of the Company, including agreements relating to the voting, transfer, redemption or repurchase of any securities of the Company.  The Company does not have any outstanding shareholder purchase rights or “poison pill” or any similar arrangement in effect giving any person the right to purchase any equity interest in the Company upon the occurrence of certain events.

 

3.3.3.    The Warrants are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Encumbrances other than restrictions on transfer provided for in the Transaction Documents.  The Warrant Shares, when issued and paid for in accordance with the terms of the Warrants, will be validly issued, fully paid and nonassessable, free and clear of all Encumbrances imposed by the Company other than restrictions on transfer provided for in the Transaction Documents.  The Company has reserved a sufficient number of shares for issuance of the Warrant Shares, free and clear of all Encumbrances, except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws.

 

3.4         Authorization; Binding Obligations .  All actions by or on behalf of the Company necessary for the authorization of this Agreement and the other Transaction Documents, the performance of all obligations of the Company hereunder and thereunder at each Closing and the authorization, sale, issuance and delivery of the Securities pursuant hereto have been taken.  This Agreement (assuming due execution and delivery by the Purchasers) and the other Transaction Documents (assuming due execution and delivery by all other parties thereto), when executed and delivered, will be valid and binding obligations of the Company and enforceable against it in each case in accordance with its respective terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights, (b) general principles of equity that restrict the availability of equitable remedies, and (c) to the extent that the enforceability of the indemnification provisions of Section 6.16 may be limited by applicable law.  Except as set forth on Schedule 3.4 , the execution, delivery and performance of, and the consummation of the transactions contemplated by, this Agreement and the other Transaction Documents, including without limitation the sale, issuance and delivery of the Securities, have not resulted and will not result in (x) any violation of, or default under, or conflict with, or constitute, with or without the passage of time or the giving of notice or both, any violation of, or default under, or give rise to any right of termination, cancellation or acceleration under (i) any term or provision of (A) the Organizational Documents of the Company, (B) any Contract, agreement, instrument, arrangement or understanding of the Company, or (C) any Order to which the Company is a party or by which any of them or any of their respective properties or assets are bound or (ii) any Requirement of Law applicable to the Company or any of their respective properties or assets or (y) the creation of any Encumbrance upon any of the properties or assets of the Company.

 

3.5         Early Stage Company Status; SEC Reports; Financial Statements .  The Company was incorporated on April 8, 2013.  The Company has filed all reports required to be filed by it under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), in accordance with Section 13 thereof, since it became a publicly reporting company (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein being collectively referred to herein as the “ SEC Reports ”) on a timely basis or has timely filed a valid extension of such time of filing and has filed any

 

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such SEC Reports prior to the expiration of any such extension.  As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the SEC promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  The financial statements of the Company included in the SEC Reports (the “ Financial Statements ) comply in all material respects with applicable accounting requirements and the rules and regulations of the SEC with respect thereto as in effect at the time of filing.  Such financial statements have been prepared in accordance with United States generally accepted accounting principles (“ GAAP ”) applied on a consistent basis during the periods involved, except as may be otherwise specified in such financial statements or the footnotes thereto, and fairly present in all material respects the financial position of the Company as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.  There is no transaction, arrangement, or other relationship between the Company and an unconsolidated or other off-balance sheet entity that is not disclosed in its financial statements that should be disclosed in accordance with GAAP and that would be reasonably likely to have a Material Adverse Effect.

 

3.6         Absence of Liabilities .  Except as set forth on Schedule 3.6 , the Company does not have any Liabilities that are not reflected or disclosed in the audited financial statements of the Company for the year ended April 30, 2017 or the unaudited financial statements of the Company for the quarter ended January 31, 2018.  The Company is not a guarantor or indemnitor of any Liability of any other Person.  Except for operating leases for personal or real property entered into in the ordinary course of business which do not require payments of more than $50,000 in the aggregate during any fiscal year, the Company has not issued any instruments, entered into any agreements, commitments or arrangements or incurred any obligations that would have, or would reasonably be expected to have, the effect of providing the Company with “off balance sheet” financing.

 

3.7         Compliance with Laws .  The Company is not in violation of, or in default under, any Requirement of Law applicable to the Company, or any Order issued or pending against the Company or by which the Company or any of the Company’s properties are bound, except for such violations or defaults that have not had, and could not reasonably be expected to have, a Material Adverse Effect.  

 

3.8         Changes .  Except as set forth on Schedule 3.8 , since January 18, 2018, there has not been:

 

3.8.1.    any effect, event, condition or circumstance (including, without limitation, the initiation of any litigation or other legal, regulatory or investigative proceeding) against the Company that individually or in the aggregate, with or without the passage of time, the giving of notice, or both, has had or could reasonably be expected to have a Material Adverse Effect;

 

3.8.2.    any resignation or termination of any director, officer or key employee of the Company, and the Company has not received notification of any impending resignation from any such Person;

 

3.8.3.    any material changes in the contingent obligations of the Company by way of guaranty, endorsement, indemnity, warranty or otherwise;

 

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3.8.4.    any material damage, destruction or loss adversely affecting the assets, properties, business, financial condition or prospects of the Company, whether or not covered by insurance;

 

3.8.5.    any development, event, change, condition or circumstance that constitutes, whether with or without the passage of time or the giving of notice or both, a default under the Company’s outstanding debt obligation; or

 

3.8.6.    any change in any compensation arrangement or agreement with any employee, consultant, officer, director or stockholder of the Company that would increase the cost of any such agreement or arrangement to the Company by more than $10,000 in each instance;

 

3.8.7.    any labor organization activity of the employees of the Company;

 

3.8.8.    any declaration or payment of any dividend or other distribution of the assets of the Company;

 

3.8.9.    any change in the accounting methods or practices followed by the Company; or

 

3.8.10.  any Contract or commitment made by the Company to do any of the foregoing.

 

3.9         Title to Properties and Assets; Liens, etc .  Except as set forth on Schedule 3.9 , the Company has good and marketable title to the properties and assets it owns, and the Company has a valid license in all properties and assets licensed by it, including the properties and assets reflected as owned in the most recent balance sheet included in the Financial Statements, and has a valid leasehold interest in its leasehold estates.  All facilities, machinery, equipment, fixtures, vehicles and other properties owned, leased or used by the Company are in good operating condition and repair, ordinary wear and tear excepted and are fit and usable for the purposes for which they are being used.  Except as set forth on Schedule 3.9 , the Company is in compliance with all terms of each lease to which it is a party or is otherwise bound.  

 

3.10       Intellectual Property .  

 

3.10.1.  All registrations and applications for registration of all Owned Intellectual Property and all Licensed Intellectual Property (collectively, the “ Company Intellectual Property ”) and applications in process for the Owned Intellectual Property and the Licensed Intellectual Property are identified, on Schedule 3.10.1 , identifying with respect to each such item of Company Intellectual Property, (a) the owner(s) thereof, (b) the jurisdiction(s) of registration, (c) the applicable registration or serial number, if any, (d) the date of expiration, if any, and (e) in the case of Licensed Intellectual Property, whether the Company’s rights with respect thereto are exclusive.  Except as set forth on Schedule 3.10.1 and identified as such, the Company has not licensed any Intellectual Property to or from any Person.  All of the registrations and applications for registration of the Company Intellectual Property are valid, subsisting and in full force and effect, and all actions and payments necessary for the maintenance and continuation of such Company Intellectual Property have been taken or paid.  The Company owns or possesses sufficient legal rights to use all of the Company Intellectual Property and the

 

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exclusive right to use all Owned Intellectual Property and all Licensed Intellectual Property which is identified in Schedule 3.10.1 as being exclusively licensed to the Company.

 

3.10.2.  To the knowledge of the Company, the business as currently conducted and as proposed to be conducted by the Company has not and will not constitute any infringement of the Intellectual Property rights of any other Person.  To the knowledge of the Company, the development of Product candidates and the use, manufacture or sale of the Company’s Products based on the Company Intellectual Property does not, and will not, infringe the Intellectual Property rights of any third Person.  To the knowledge of the Company, no employee or agents of the Company has misappropriated the Intellectual Property rights of any Person.

 

3.10.3.  There are no outstanding options or other rights to acquire any Company Intellectual Property.  To the knowledge of the Company, each licensor of the Licensed Intellectual Property is the sole and exclusive owner of such Licensed Intellectual Property and has the sole and exclusive right and authority to grant licenses to such Licensed Intellectual Property.

 

3.10.4.  The Company has not received any communications alleging or suggesting that it has violated or, by conducting its business as currently conducted or proposed to be conducted, would infringe or misappropriate any of the Intellectual Property rights of any other Person.

 

3.10.5.  It is not necessary to the business of the Company, as currently conducted or as proposed to be conducted, to utilize any inventions, trade secrets or proprietary information of any of its employees, agents, developers, consultants or contractors made prior to their employment by or service to the Company, except for inventions, trade secrets or proprietary information that have been assigned or licensed to the Company.

 

3.10.6.   Since the date of the Company’s incorporation, there has not been any sale, assignment or transfer of any Company Intellectual Property or other intangible assets of the Company.

 

3.10.7.  No Company Intellectual Property is subject to any interference, reissue, reexamination, opposition or cancellation proceeding or any other Legal Proceeding or subject to or otherwise bound by any outstanding Order or Contract (other than in the case of any Licensed Intellectual Property, the Contract pursuant to which the Company licenses the rights to such Licensed Intellectual Property) that restricts in any manner the use, transfer or licensing thereof by the Company or may affect the validity, use or enforceability of such Company Intellectual Property .  The Company does not have any knowledge of any fact or circumstance that would render any portion of the Company Intellectual Property invalid or unenforceable.  

 

3.10.8.   Each current and former officer, employee, agent, developer, consultant and contractor who (a) has had or has access to any Company Intellectual Property has executed a confidentiality and nondisclosure agreement that protects the confidentiality of the trade secrets of the Company Intellectual Property; and (b) contributed to or participated in the creation and/or development of the Company Intellectual Property either: (i) is a party to a “work made for hire” agreement under which the Company is deemed to be the original owner/author of all right, title and interest in the Intellectual Property created or developed by such Person; or (ii) has executed an assignment or an agreement to assign in favor of the Company of all such Person’s right, title and interest in the Intellectual Property.   The Company has the right to: (a)

 

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bring actions for past, present and future infringement, dilution, misappropriation or unauthorized use of the Company Intellectual Property owned or licensed by the Company, injury to goodwill associated with the use of the Company Intellectual Property, unfair competition or trade practices violations of and other violation of the Company Intellectual Property; and (b) with respect to the Company Intellectual Property owned exclusively by the Company, receive all proceeds from the foregoing set forth in subsection (a) hereof, including, without limitation, licenses, royalties income, payments, claims, damages and proceeds of suit.

 

3.10.9.  The execution and delivery of this Agreement and the other Transaction Documents and consummation of the transactions contemplated hereby and thereby will not result in the breach of, or create on behalf of any third party the right to terminate or modify, any license, sublicense, agreement or permission: (a) relating to or affecting any Company Intellectual Property; or (b) pursuant to which the Company is granted a license or otherwise authorized to use any third party Intellectual Property.

 

3.10.10. To the knowledge of the Company, no Person is infringing, violating, misappropriating or making unauthorized use of any of the Company Intellectual Property.

 

3.11       Compliance with Other Instruments .  Except as set forth on Schedule 3.11 , the Company is not in violation or default of any term of its Organizational Documents or its Bylaws, respectively (in each case, as amended to date), or of any provision of any Contract to which it is party or by which it is bound or of any Order applicable to the Company, except for violations or defaults of any Contract, which individually or in the aggregate has not had, or would not reasonably be expected to have, a Material Adverse Effect.

 

3.12       Litigation .  There is no Legal Proceeding pending or, to the knowledge of the Company, threatened against the Company or any investigation of the Company, nor is the Company aware of any fact that would make any of the foregoing reasonably likely to arise.  The Company is not a party or subject to the provisions of any Order.  There is no Legal Proceeding by the Company currently pending or that the Company intends to initiate.

 

3.13       Tax Returns and Payments .

 

3.13.1.  Except as set forth on Schedule 3.13.1 , the Company has filed all Tax Returns required to be filed by it, and the Company has timely paid all Taxes owed (whether or not shown on any Tax Return).  All such Tax Returns were complete and correct, and such Tax Returns correctly reflected the facts regarding the income, business, assets, operations, activities, status and other matters of the Company and any other information required to be shown thereon.  The Company has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any Employee, creditor, independent contractor, shareholder, member or other third party.  The Company has established adequate reserves for all Taxes accrued but not yet payable.   The Company has not been audited by nor have issues been raised or adjustments made or proposed by any tax authority in connection with any such Taxes or Tax Returns.  No deficiency assessment with respect to or proposed adjustment of the Company’s Taxes is pending or, to the knowledge of the Company, threatened.  There is no tax lien (other than for current Taxes not yet due and payable), imposed by any taxing authority, outstanding against the assets, properties or the business of the Company.

 

3.13.2.  The Company has not agreed to make any adjustment under Section 481(a) of the Internal Revenue Code of 1986, as amended (the “ Code ”) (or any

 

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corresponding provision of state, local or foreign tax law) by reason of a change in accounting method or otherwise, and the Company will not be required to make any such adjustment as a result of the transactions contemplated by this Agreement.  The Company has not been nor is a party to any tax sharing or similar agreement.   The Company is not nor has ever been a party to any joint venture, partnership, limited liability company, or other arrangement or Contract which could be treated as a partnership for federal income tax purposes.  The Company is not nor has ever been a “United States real property holding corporation” as that term is defined in Section 897 of the Code.

 

3.14       Employees .

 

3.14.1.  All of the employees of the Company (the “ Employees ”) are identified, by the Company, on Schedule 3.14.1 .  Except as set forth on Schedule 3.14.1 , (a) The Company has not, nor has ever had any, collective bargaining agreements with any of its employees; (b) there is no labor union organizing activity pending or, to the knowledge of the Company, threatened with respect to the Company; (c) no employee has or is subject to any agreement or Contract to which the Company is a party (including, without limitation, licenses, covenants or commitments of any nature) regarding his or her employment or engagement; (d) to the best of the Company’s knowledge, no employee is subject to any Order that would interfere with his or her duties to the Company or that would conflict with the Company’s businesses as currently conducted and as proposed to be conducted; (e) no employee is in violation of any term of any employment contract, proprietary information agreement or any other agreement relating to the right of any such Person to be employed by, or to contract with, the Company; (f) to the best of the Company’s knowledge, the continued employment by the Company of its present employees, and the performance of their respective duties to the Company, will not result in any violation of any term of any employment contract, proprietary information agreement or any other agreement relating to the right of any such individual to be employed by, or to contract with, the Company, and the Company has not received any written notice alleging that such violation has occurred; (g) no Employee or consultant has been granted the right to continued employment by or service to the Company or to any compensation following termination of employment with or service to the Company; and (h) the Company does not have any present intention to terminate the employment or engagement or service of any officer or any significant employee or consultant

 

3.14.2.  There are no outstanding or, to the knowledge of the Company, threatened claims against the Company or any Affiliate (whether under federal or state law, under any employment agreement, or otherwise) asserted by any present or former employee or consultant of the Company.  The Company is not in violation of any law or Requirement of Law concerning immigration or the employment of persons other than U.S.  citizens.

 

3.15       Pension and Other Employee Benefit Plans .

 

3.15.1.   Schedule 3.15.1 sets forth all of the plans, funds, policies, programs and arrangements sponsored or maintained by the Company on behalf of any employee or former employee of the Company (or any dependent or beneficiary of any such Employee or former employee) with respect to (a) deferred compensation or retirement benefits; (b) severance or separation from service benefits (other than those required by law); (c) incentive, performance, stock, share appreciation or bonus awards; (d) health care benefits; (e) disability income or wage continuation benefits; (f) supplemental unemployment benefits; (g) life insurance, death or survivor’s benefits; (h) accrued sick pay or vacation pay; or (i) any other material benefit offered under any arrangement constituting an “employee benefit plan” within the meaning of Section

 

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3(3) of the Employee Retirement Income Securities Act of 1974, as amended (“ ERISA ”) and not excepted by Section 4 of ERISA (the foregoing being collectively called “ Employee Benefit Plans ”).   Schedule 3.15.1 sets forth all such Employee Benefit Plans subject to the provisions of Section 412 of the Code as well as any “multi-employer plans” within the meaning of Section 3(37) of ERISA or Section 4001(a)(3) of ERISA.  The transactions contemplated by this Agreement will not result in any payment or series of payments by the Purchasers or the Company of an “excess parachute payment” within the meaning of Section 280G of the Code or any other severance, bonus or other payment on account of such transactions.  None of the Employee Benefit Plans is under investigation or audit by the United States Department of Labor, the Internal Revenue Service or any other Governmental or Regulatory Authority.  

 

3.15.2.  The Company has complied with its obligations under all applicable Requirements of Law including, without limitation, of ERISA and the Code with respect to such Employee Benefit Plans and all other arrangements that provide compensation or benefits to any Employee and the terms thereof, whether or not such person is directly employed by the Company and there are no pending or, to the knowledge of the Company, threatened actions or claims for benefits by any Employee, other than routine claims for benefits in the ordinary course of business.  No Employee Benefit Plan provides any benefits to any former employees.

 

3.15.3.  All Employee Benefit Plans that are intended to meet the requirements of Section 401(a) of the Code have been determined by the Internal Revenue Service to meet such requirements and have at all times operated in compliance with such requirements.  

 

3.15.4.  All employment Taxes, premiums for employee benefits provided through insurance, contributions to Employee Benefit Plans, and all other compensation and benefits to which employees are entitled, have been timely paid or provided as applicable, and there is no liability for any such payments, contributions or premiums.

 

3.16       Real Property .  The Company does not have any interest in any real estate, except that the Company leases the properties described on Schedule 3.16 (the “ Leased Real Property ”).  The Leased Real Property is adequate for the operations of the Company’s businesses as currently conducted and as contemplated to be conducted.  True and complete copies of the lease agreements (the “ Real Property Leases ”) pertaining to the Leased Real Property have been delivered or made available to the Purchasers.  The Company has paid all amounts due from it, and is not in default under any of the Real Property Leases and there exists no condition or event, which, with the passage of time, giving of notice or both, would reasonably be expected to give rise to a default under or breach of the Real Property Leases.

 

3.17       Relationships with Collaborators and Suppliers .

 

3.17.1.   Collaborators .  Set forth on Schedule 3.17.1 is a list, by the Company, of the material collaborators, research partners and other material service providers of the Company.  For the purposes of this Section “material collaborators” means scientific research collaborators who work with the Company and whose work is expected to impact the development of the Company Intellectual Property and/or the Products, and includes, without limitation, any Person to whom the Company has licensed any of the Company Intellectual Property (collectively, the “ Collaborators ”).  To the best of the Company’s knowledge, the Company maintains good working relationships with all of the Collaborators.  The Company has delivered or made available to the Purchasers a list of the Company’s Contracts with the

 

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Collaborators as set forth on Schedule 3.17.1 .  Except as set forth on Schedule 3.17.1 , none of such Collaborators has terminated or indicated an intention or plan or, to the knowledge of the Company, threatened to terminate its Contract with the Company, or to materially reduce the purchases of products or services from the Company historically made by such Collaborator.

 

3.17.2.   Suppliers .  Set forth on Schedule 3.17.2 is a list of the material suppliers of the Company.  For the purposes of this Section, “material suppliers” means suppliers who provide an essential and material element necessary for the research and development of the Company Intellectual Property or required for the Products (collectively, the “ Suppliers ”).  Except as set forth on Schedule 3.17.2 , none of such Suppliers has terminated or indicated an intention or plan or, to the knowledge of the Company, threatened to terminate its Contract with the Company, or to materially reduce the supply of products or services to the Company historically provided by such Supplier.

 

3.18       Budget .  The Company’s budget most recently delivered by the Company to the Purchasers (the “Budget ”) was prepared in good faith by the Company, and, based on the Company’s experience and the assumptions used in preparing such Budget, constitutes a reasonable estimate of the costs and expenses expected to be incurred by the Company during the time period covered thereby.  Nothing has come to the attention of the Company’s management that would cause such estimated expenses to no longer be reasonable estimates.  The assumptions used in the preparation of such estimated expenses were fair and reasonable when made and continue to be fair and reasonable as of the date hereof.

 

3.19       Permits; Regulatory .  

 

3.19.1  No Regulatory Approval or Consent of, or any designation, declaration or filing with, any Governmental or Regulatory Authority or any other Person is required in connection with the valid execution, delivery and performance of this Agreement and the other Transaction Documents (including, without limitation, the issuance of the Securities), except such Regulatory Approvals, Consents, designations, declarations or filings that have been duly and validly obtained or filed, or with respect to any filings that must be made after the Initial Closing or the Subsequent Closing as will be filed in a timely manner.  The Company has all franchises, Permits, licenses and any similar authority necessary for the conduct of its business as now being conducted.  

 

3.19.2  There are no feasibility, preclinical, clinical or other studies, tests or trials being conducted by or on behalf of or sponsored by the Company or in which the Company or any of its Products is participating.  The feasibility, preclinical, clinical and other studies, tests and trials conducted by or on behalf of or sponsored by the Company or in which the Company or any of the Company’s Products have participated were conducted in accordance with standard medical and scientific research procedures, the protocols established and approved therefor and all applicable Requirements of Law.  The Company has no knowledge of any other studies or tests the results of which are inconsistent with or otherwise call into question the results of the above referenced studies and tests.

 

3.19.3  The Company has not been convicted of any crime.  

 

3.19.4  To the knowledge of the Company, no officer, employee or agent of the Company has been convicted of any felony.  

 

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3.20       Environmental and Safety Laws .  The Company has not caused or allowed, or contracted with any party for, the generation, use, transportation, treatment, storage or disposal of any Hazardous Substances in connection with the operation of its business or otherwise, except in compliance with all applicable Environmental Laws.  To the best of the Company’s knowledge, the Company and the operation of its business are in compliance with all applicable Environmental Laws.  To the best of the Company’s knowledge, all of the Leased Real Property and all other real property which the Company occupies (the “ Premises ”) is in compliance with all applicable Environmental Laws and Orders or directives of any Governmental or Regulatory Authority having jurisdiction under such Environmental Laws, including, without limitation, any Environmental Laws or Orders or directives with respect to any cleanup or remediation of any release or threat of release of Hazardous Substances.  The Company and the operation of its business is and has been in compliance with all applicable Environmental Laws.  To the knowledge of the Company, there have occurred no and there are no events, conditions, circumstances, activities, practices, incidents, or actions that may give rise to any common law or statutory liability, or otherwise form the basis of any Legal Proceeding, any Order, any remedial or responsive action, or any investigation or study involving or relating to the Company, based upon or related to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling, or the emission, discharge, release or threatened release into the environment, of any pollutants, contaminants, chemicals, or industrial, toxic or Hazardous Substance.  To the knowledge of the Company, (a) there is no asbestos contained in or forming a part of any building, structure or improvement comprising a part of any of the Leased Real Property, (b) there are no polychlorinated byphenyls (PCBs) present, in use or stored on any of the Leased Real Property, and (c) no radon gas or the presence of radioactive decay products of radon are present on, or underground at any of the Leased Real Property at levels beyond the minimum safe levels for such gas or products prescribed by applicable Environmental Laws.  The Company has obtained and is maintaining in full force and effect all necessary Permits, licenses and approvals required by all Environmental Laws applicable to the Premises and the business operations conducted thereon, and is in compliance with all such Permits, licenses and approvals.  The Company has not caused or allowed a release, or a threat of release, of any Hazardous Substance onto, at or near the Premises, and, to the knowledge of the Company, neither the Premises nor any property at or near the Premises has ever been subject to a release, or a threat of release, of any Hazardous Substance.  

 

3.21       Offering Valid .  Assuming the accuracy of the representations and warranties of the Purchasers contained in the subscription agreements entered into by each Purchaser in connection with this Agreement, the offer, sale and issuance of the Securities will be exempt from the registration requirements of the Securities Act of 1933, as amended (the “ Securities Act ”), and will be exempt from registration and qualification under applicable state securities laws.

 

3.22       Full Disclosure .  All information furnished, to be furnished or caused to be furnished to the Purchasers with respect to the Company, any of the Company’s businesses, assets, properties, financial position and performance and Liabilities applicable for the purposes of or in connection with this Agreement or any of the other Transaction Documents or any of the transactions contemplated hereby or thereby is or, if furnished after the date of this Agreement and before the applicable Closing Date, shall be true and complete in all material respects and, does not, and if furnished after the date of this Agreement and before such applicable Closing Date, shall not, contain any untrue statement of material fact or fail to state any material fact necessary to make such statement not misleading.

 

3.23       Minutes .  A copy of all minutes of all meetings of directors and stockholders and all actions by written consent without a meeting by the directors and stockholders since February 2012, has been made available to the Purchasers in a virtual data room and accurately reflect all actions taken by the directors (and any committee of the directors) and stockholders with respect to all transactions referred to in such minutes.

 

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3.24       Insurance .   Schedule 3.24 sets forth a list of all policies or binders of fire, casualty, liability, product liability, worker’s compensation, vehicular or other insurance held by the Company concerning its assets and/or its businesses (specifying for each such insurance policy the insurer, the policy number or covering note number with respect to binders, and each pending claim thereunder of more than $5,000) have been made available to the Purchasers in a virtual data room.  Such policies and binders are valid and in full force and effect.  The Company is not in default with respect to any provision contained in any such policy or binder or has failed to give any notice or present any claim of which it has notice under any such policy or binder in a timely fashion.  The Company has not received or given a notice of cancellation or non-renewal with respect to any such policy or binder.  None of the applications for such policies or binders contain any material inaccuracy, and all premiums for such policies and binders have been paid when due.  The Company does not have knowledge of any state of facts or the occurrence of any event that could reasonably be expected to form the basis for any claim against it not fully covered by the policies referred to on Schedule 3.24 .  The Company has not received written notice from any of their respective insurance carriers that any insurance premiums will be materially increased after the applicable Closing Date or that any insurance coverage listed on Schedule 3.24 will not be available after such Closing Date on substantially the same terms as now in effect.  

 

3.25       Investment Company Act .  The Company is not an “investment company”, or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended.

 

3.26       Foreign Payments; Undisclosed Contract Terms .

 

3.26.1.  To the knowledge of the Company, the Company has not made any offer, payment, promise to pay or authorization for the payment of money or an offer, gift, promise to give, or authorization for the giving of anything of value to any Person in violation of the Foreign Corrupt Practices Act of 1977, as amended and the rules and regulations promulgated thereunder.

 

3.26.2.  To the knowledge of the Company, there are no understandings, arrangements, agreements, provisions, conditions or terms relating to, and there have been no payments made to any Person in connection with any agreement, Contract, commitment, lease or other contractual undertaking of the Company which are not expressly set forth in such contractual undertaking.

 

3.27       No Broker .  Reserved.

 

3.28       No General Solicitation .  Neither the Company nor any of its Affiliates, nor any person acting on their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of the Securities or in any other offering of the Company within the last three years.

 

3.29       No Integrated Offering .  Neither the Company nor any of its affiliates, nor any person acting on their behalf has, directly or indirectly, made any offers or sales of any Securities or solicited any offers to buy any Securities, under circumstances that would require registration of any of the Securities under the Securities Act or that is likely to cause this offering of the Securities to be integrated with prior or contemporaneous offerings by the Company for purposes of the Securities Act or any applicable shareholder approval provisions.  Neither the Company nor any of its affiliates, nor any person acting on their behalf has taken any action or steps referred to in the preceding sentence that would require registration of any of the Securities under the Securities Act or cause the offering of the Securities to be integrated with other offerings.  Neither the Company nor any of its affiliates, nor any person acting

 

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on their behalf has taken any action or steps referred to in the preceding sentence that would require registration of any of the Securities under the Securities Act.

 

3.30       Dilution .  Except for the anti-dilution rights described on Schedule 3.30 , no holder of any common stock or Common Stock Equivalents of the Company has any anti-dilution rights.  The Company’s executive officers and directors understand the nature of the Securities being sold hereby and recognize that the issuance of the Securities will have a potential dilutive effect on the equity holdings of other holders of the Company’s equity or rights to receive equity of the Company.  The Company’s Board of Directors has concluded, in its good faith business judgment that the issuance of the Securities is in the best interests of the Company.  The Company specifically acknowledges that its obligation to issue Warrant Shares is binding upon the Company and enforceable regardless of the dilution such issuance may have on the ownership interests of other stockholders of the Company or parties entitled to receive equity of the Company.  

 

3.31       Maintenance Requirements .  The common stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the common stock under the Exchange Act nor has the Company received any notification that the SEC is contemplating terminating such registration.

 

3.32       OFAC .  The Company, to the Company’s knowledge, any director, officer, agent, employee, Affiliate or person acting on behalf of the Company, is not currently subject to any U.S.  sanctions administered by the Office of Foreign Assets Control of the U.S.  Treasury Department (“ OFAC ”); and the Company will not directly or indirectly use the proceeds of the sale of the Securities, or lend, contribute or otherwise make available such proceeds to any joint venture partner or other person or entity, towards any sales or operations in Cuba, Iran, Syria, Sudan, Myanmar or any other country sanctioned by OFAC or for the purpose of financing the activities of any person currently subject to any U.S.  sanctions.

 

3.33       Registration Rights .  Except as required pursuant to the Registration Rights Agreement, the Company is not under any obligation, nor has granted any rights that have not been terminated, to register any of the Company’s currently outstanding securities or any of its securities that may hereafter be issued.

 

3.34       Material Non-Public Information .  Except with respect to the transactions contemplated hereby that will be publicly disclosed, the Company has not provided any Purchaser with any information that the Company believes constitutes material non-public information.

 

3.35       Application of Takeover Protections .  The Company has taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s Organization Documents or the laws of its state of incorporation that is or could become applicable to the Purchaser as a result of the Purchaser and the Company fulfilling their obligations or exercising their rights under this Agreement, including, without limitation, the Company’s issuance of the Securities and the Purchaser’s ownership of the Securities.

 

3.36       Listing and Maintenance Requirements .  The Common Stock is quoted on the OTCQB under the symbol BLGI.  The Company has not, in the twenty-four (24) months preceding the date hereof, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market.

 

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3.37       Disclosure .  Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel with any information that it believes constitutes or might constitute material, non-public information.  The Company understands and confirms that the Purchasers will rely on the foregoing representation in effecting transactions in securities of the Company.  All of the disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company and its Subsidiaries, their respective businesses and the transactions contemplated hereby, including the Schedules to this Agreement, taken as a whole is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.  For the avoidance of doubt, information disclosed in one section of the Schedule shall not be deemed disclosed in any other section of the Schedule unless there is an explicit cross reference to such other section.  The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3 hereof.

 

3.38       Office of Foreign Assets Control .  Neither the Company nor any Subsidiary nor, to the Company’s knowledge, any director, officer, agent, employee or affiliate of the Company or any Subsidiary is currently subject to any U.S.  sanctions administered by the Office of Foreign Assets Control of the U.S.  Treasury Department (“ OFAC ”).

 

3.39       Accountants .  The Company’s accounting firm is set forth on Schedule 3.39 of the Disclosure Schedules.  To the knowledge and belief of the Company, such accounting firm is registered with the Public Company Accounting Oversight Board, and shall express its opinion with respect to the financial statements to be included in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2018.

 

3.40       No Disagreements with Accountants and Lawyers .  There are no disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the Company and the Company is current with respect to any fees owed to its accountants and lawyers which could affect the Company’s ability to perform any of its obligations under any of the Transaction Documents.

 

3.41       Acknowledgement Regarding Purchaser’s Trading Activity .  Anything in this Agreement or elsewhere herein to the contrary notwithstanding (except for Sections 3.34 and 4.21 hereof), it is understood and acknowledged by the Company that: (i) none of the Purchasers has been asked by the Company to agree, nor has any Purchaser agreed, to desist from purchasing or selling, long and/or short, securities of the Company, or “derivative” securities based on securities issued by the Company or to hold the Securities for any specified term, (ii) past or future open market or other transactions by any Purchaser, specifically including, without limitation, Short Sales or “derivative” transactions, before or after the closing of this or future private placement transactions, may negatively impact the market price of the Company’s publicly-traded securities, (iii) any Purchaser, and counter-parties in “derivative” transactions to which any such Purchaser is a party, directly or indirectly, may presently have a “short” position in the Common Stock and (iv) each Purchaser shall not be deemed to have any affiliation with or control over any arm’s length counter-party in any “derivative” transaction.  The Company further understands and acknowledges that (y) one or more Purchasers may engage in hedging activities in accordance with all applicable laws at various times during the period that the Securities are outstanding, including, without limitation, during the periods that the value of the Warrant Shares deliverable with respect to Securities are being determined, and (z) such hedging activities (if any) could reduce the value of the existing stockholders’ equity interests in the Company at and after the time

 

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that the hedging activities are being conducted.  The Company acknowledges that such aforementioned hedging activities do not constitute a breach of any of the Transaction Documents.

 

3.42       Regulation M Compliance .  The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company, other than, in the case of clauses (ii) and (iii), compensation paid to the Company’s placement agent in connection with the placement of the Securities.

 

3.43       Stock Option Plans .  Except as set forth on Schedule 3.43 , as of the date hereof, no stock options have been granted, nor any commitments made to grant stock options, under the Stock Option Plan, and neither the Company nor any Subsidiary has ever had an option plan.  The Company has not knowingly granted, and there is no and has been no Company policy or practice to knowingly grant, stock options prior to, or otherwise knowingly coordinate the grant of stock options with, the release or other public announcement of material information regarding the Company or its Subsidiaries or their financial results or prospects.

 

3.44       Sarbanes-Oxley; Internal Accounting Controls .  The Company and the Subsidiaries are in material compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the Commission thereunder that are effective as of the date hereof and as of the Closing Date.  The Company’s certifying officers have evaluated the effectiveness of the disclosure controls and procedures of the Company and the Subsidiaries as of the end of the period covered by the most recently filed periodic report under the Exchange Act (such date, the “ Evaluation Date ”).  The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date.  Since the Evaluation Date, there have been no changes in the internal control over financial reporting (as such term is defined in the Exchange Act) of the Company and its Subsidiaries that have materially affected, or is reasonably likely to materially affect, the internal control over financial reporting of the Company and its Subsidiaries.

 

3.45       Solvency .  Based on the consolidated financial condition of the Company as of the Closing Date, and the Company’s good faith estimate of the fair market value of its assets, after giving effect to the receipt by the Company of the proceeds from the sale of the Securities hereunder: (i) the fair saleable value of the Company’s assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature, (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, consolidated and projected capital requirements and capital availability thereof, and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its liabilities when such amounts are required to be paid.  The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt).  The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date.   Schedule 3.45 sets forth as of the date hereof all outstanding liens secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments which has not been disclosed in the Reports.  For

 

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the purposes of this Agreement, “ Indebtedness ” means (x) any liabilities for borrowed money or amounts owed in excess of $50,000 other than debt financing from a licensed United States bank regularly engaged in such lending activity, and (y) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Company’s balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, but in all cases excluding trade accounts payable incurred by the Company and its Subsidiaries in the ordinary course of business; and (z) the present value of any lease payments in excess of $50,000 due under leases required to be capitalized in accordance with GAAP.  Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.

 

4.          REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.

 

Each of the Purchasers hereby severally, and not jointly, represents and warrants to the Company that each such Purchaser’s representations and warranties in the subscription agreement entered into in connection with this Agreement are true and correct as of their respective Closing, and such representations and warranties are deemed repeated as if contained herein.

 

5.          CONDITIONS TO THE CLOSING.

 

5.1         Conditions to Purchasers’ Obligations at the Closings .  The obligations of the Purchasers to consummate the transactions contemplated herein to be consummated at the Initial Closing and of each Subsequent Closing, as the case may be, are subject to the satisfaction, on or prior to the date of such Closing, of the conditions set forth below and applicable thereto, which satisfaction shall be determined, or may be waived in writing, by either the Purchasers or Subsequent Closing Purchasers, as the case may be, who have subscribed for at least a majority of the Securities to be purchased at such Closing:

 

5.1.1.     Representations and Warranties; Performance of Obligations .  Each of the representations and warranties of the Company contained herein shall be true and correct on and as of the Initial Closing Date.  As of the Initial Closing, the Company shall have performed and complied with the covenants and provisions of this Agreement required to be performed or complied with by it at or prior to the Initial Closing Date.  As to the Subsequent Closings, each of the representations and warranties of the Company contained herein shall be true and correct on and as of the Subsequent Closing Date, as qualified by any updated Schedules delivered at least five (5) days in advance of the Subsequent Closing to the Subsequent Closing Purchasers participating in the Subsequent Closing.  As to the Subsequent Closings, the Company shall have performed and complied with the covenants and provisions of this Agreement and the other Transaction Documents required to be performed or complied with by it at or prior to the Subsequent Closing Date.  At each Closing, the Purchasers participating in such Closing shall have received certificates of the Company dated as of the date of such Closing, signed by the president or chief executive officer of the Company, certifying as to the fulfillment of the conditions set forth in this Section 5.1 and the truth and accuracy of the representations and warranties of the Company contained herein (as qualified by the most recently delivered Schedules) as of the Initial Closing Date and, as to each Subsequent Closing, the Subsequent Closing Date.

 

5.1.2.     Issuance in Compliance with Laws .  The sale and issuance of the Securities shall be legally permitted by all laws and regulations to which any of the Purchasers and the Company are subject.

 

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5.1.3.     Filings, Consents, Permits, and Waivers .  The Company and the Purchasers shall have made all filings and obtained any and all Consents, Permits, waivers, and Regulatory Approvals necessary for consummation of the transactions contemplated by the Agreement and the other Transaction Documents, including the waivers described on Schedule 5.1.3 , except for such filings as are not due to be made until after the applicable Closing.

 

5.1.4.     Reservation of Warrant Shares .  The Warrant Shares shall have been duly authorized and reserved for issuance by the Board of Directors.

 

5.1.5.     Registration Rights Agreement .  Concurrently with the issuance of the Securities occurring at the Initial Closing and at each Subsequent Closing, the Registration Rights Agreement, substantially in the form attached hereto as Exhibit C (the “ Registration Rights Agreement ”), shall have been executed and delivered by the Company and each Purchaser.

 

5.1.6.     Proceedings and Documents .  All corporate and other proceedings in connection with the transactions contemplated at the Closings and all documents and instruments incident to such transactions shall be reasonably satisfactory in substance and form to the Purchaser and the Purchaser’s counsel, and the Purchaser and the Purchaser’s counsel shall have received all such counterpart originals or certified or other copies of such documents as they may reasonably request.

 

5.1.7.     Proceedings and Litigation .  No action, suit or proceeding shall have been commenced by any Person against any party hereto seeking to restrain or delay the purchase and sale of the Securities or the other transactions contemplated by this Agreement or any of the other Transaction Documents.

 

5.1.8.     No Material Adverse Effect .  Since the date hereof, there shall not have occurred any effect, event, condition or circumstance (including, without limitation, the initiation of any litigation or other legal, regulatory or investigative proceeding) that individually or in the aggregate, with or without the passage of time, the giving of notice, or both, that has had, or could reasonably be expected to have, a Material Adverse Effect or which could adversely affect the Company’s ability to perform its respective obligations under this Agreement or any of the other Transaction Documents.

 

5.1.9.     Updated Disclosures .  As to the Subsequent Closings, the Company must have delivered to the Purchasers an updated set of schedules in accordance with Section 5.1.1 and such updated schedules do not reveal any information or the occurrence, since the Initial Closing Date, of any effect, event, condition or circumstance, which individually, or in the aggregate, has had or could reasonably be expected to have, a Material Adverse Effect and do not include any state of facts that occur as a result of the breach by the Company of any of its obligations under this Agreement or any of the other Transaction Documents.  

 

5.1.10.   Payment of Purchase Price .  As to each closing, each Purchaser shall have delivered to the Company the total purchase price to be paid for such Purchaser’s Securities, in the amount set forth opposite such Purchaser’s name on Exhibit A .  

 

5.1.11.   Delivery of Documents at the Initial Closing .  The Company shall have executed and delivered the following documents, on or prior to the Initial Closing Date, and in the case of the Certificates, within five (5) business days thereafter:

 

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(a)         Warrants: An executed Warrant, in substantially the form of Exhibit B , for the Warrants to be issued on the Initial Closing Date;

 

(b)         Commitment Shares from November 27, 2017 Closing: The Company shall have delivered to Bellridge a certificate or evidence of book entry satisfactory to Bellridge that the 2,793,296 commitment shares of its common stock to Bellridge in connection with the loan made to the Company on November 27, 2017, were properly issued as of that date and an opinion of Company counsel that such shares were properly issued as of November 27, 2017.

 

5.1.12.   Delivery of Documents at the Subsequent Closing .  The Company shall have executed and delivered the following documents, on or prior to the Subsequent Closing, and in the case of the Certificates, within a reasonable time thereafter:

 

(a)         Warrants: An executed Warrant, in substantially the form of Exhibit B , for the Warrants to be issued on the Subsequent Closing Date;

 

5.2         Conditions to Obligations of the Company at the Closings .  The obligation of the Company to consummate the transactions contemplated herein to be consummated at the Initial Closing or the Subsequent Closing, as the case may be, is subject to the satisfaction, on or prior to the date of such Closing of the conditions set forth below and applicable thereto, any of which may be waived in writing by the Company:

 

5.2.1.     Representations and Warranties; Performance of Obligations .  Each of the representations and warranties of the Purchasers contained herein shall be true and correct on and as of the Initial Closing Date.  As of the Initial Closing Date, the Purchasers shall have performed and complied with the covenants and provisions of this Agreement required to be performed or complied with by them at or prior to the Initial Closing Date.  As to the Subsequent Closing, each of the representations and warranties of the Purchaser(s) contained herein shall be true and correct on and as of the Subsequent Closing Date.  As to the Subsequent Closing, the Subsequent Closing Purchaser(s) shall have performed and complied with the covenants and provisions of this Agreement required to be performed and complied with by them at or prior to the Subsequent Closing Date.

 

5.2.2.     Proceedings and Litigation .  No action, suit or proceeding shall have been commenced by any Governmental Authority against any party hereto seeking to restrain or delay the purchase and sale of the Securities or the other transactions contemplated by this Agreement.

 

5.2.3.     Qualifications .  All Permits, if any, that are required in connection with the lawful issuance and sale of the Securities pursuant to this Agreement shall be obtained and effective as of the Initial Closing or Subsequent Closing, as applicable.

 

6.          COVENANTS OF THE PARTIES.

 

6.1         Transfer Restrictions.  

 

6.1.1.    The Securities may only be disposed of in compliance with state and federal securities laws.  In connection with any transfer of Securities other than pursuant to an effective registration statement or Rule 144 promulgated under the Securities Act, to the Company or to an Affiliate of a Purchaser, the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably

 

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acceptable to the Company, the form and substance of which shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act.  As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of a Purchaser under this Agreement.

 

6.1.2.    The Purchaser agrees to the imprinting, so long as is required by this Section 6.1, of a legend on any of the Securities, including the Warrant Shares, substantially in the following form:

 

NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

 

6.1.3.    Certificates evidencing the Warrant Shares shall be eligible for issuance without or for removal of the restrictive legend set forth in Section 6.1.2 hereof, (a) following any sale of Warrants or Warrant Shares pursuant to Rule 144, (b) if such Securities or Warrant Shares are eligible for sale under Rule 144, without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such Securities and Warrant Shares and without volume or manner-of-sale restrictions, (c) following any sale of such Shares or Warrant Shares, pursuant to the plan of distribution in an effective registration statement (in compliance with any prospectus delivery requirements), or (d) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission) (the “ Removal Date ”).  The Company shall cause its counsel to issue a legal opinion to the Transfer Agent promptly after the Removal Date if required by the Transfer Agent to effect the issuance without or for removal of the legend hereunder as permitted by applicable law then in effect.  The Company agrees that following the Removal Date, it will, no later than five (5) trading days following the request for issuance without a legend with respect to not yet issued Securities or Warrant Shares, or the delivery by a Purchaser to the Company or the Transfer Agent of a certificate representing Warrant Shares with respect to already issued Shares or Warrant Shares, as the case may be, issued with a restrictive legend, together with any reasonable certifications requested by the Company, the Company’s counsel or the Transfer Agent (such fifth (5th) trading day, the “ Legend Removal Date ”), deliver or cause to be delivered to such Purchaser a certificate representing such shares that is free from all restrictive and other legends.  The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 6.  Certificates for Shares and Warrant Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to the Purchaser by crediting the account of the Purchaser’s prime broker with the Depository Trust Company System as directed by such Purchaser if the Transfer Agent is then a participant in such system and the Company is eligible to use such system and as directed by such Purchaser if either (i) there is an effective registration statement permitting the resale of such Warrant Shares by the

 

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Purchaser (and the Purchaser provides the Company or the Company’s counsel with any requested certifications with respect to future sales of such shares) or (ii) the shares are eligible for resale by the Purchaser under Rule 144, without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such Warrant Shares and without volume or manner-of-sale restrictions.

 

6.1.4.    In addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, as partial liquidated damages and not as a penalty, for each $1,000 of Warrant Shares (based on the VWAP of the Common Stock on the date such Securities are submitted to the Transfer Agent) delivered for removal of the restrictive legend and subject to Section 6.1.3, $10 per Trading Day for each Trading Day after the Removal Date (increasing to $20 per Trading Day after the tenth Trading Day) until such certificate is delivered without a legend.  Nothing herein shall limit such Purchaser’s right to pursue actual damages for the Company’s failure to deliver certificates representing any Securities as required by the Transaction Documents, and such Purchaser shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.

 

6.1.5.     DWAC .  In lieu of delivering physical certificates representing the unlegended shares, upon request of a Purchaser, so long as the certificates therefor do not bear a legend and the Purchaser is not obligated to return such certificate for the placement of a legend thereon, the Company shall cause its transfer agent to electronically transmit the unlegended shares by crediting the account of Purchaser’s prime broker with the Depository Trust Company through its Deposit Withdrawal At Custodian system, provided that the Company’s Common Stock is DTC eligible and the Company’s transfer agent participates in the Deposit Withdrawal at Custodian system.  Such delivery must be made on or before the Removal Date.

 

6.1.6.    In the event a Purchaser shall request delivery of unlegended shares as described in this Section 6.1.6 and the Company is required to deliver such unlegended shares, the Company may not refuse to deliver unlegended shares based on any claim that such Purchaser or anyone associated or affiliated with such Purchaser has not complied with Purchaser’s obligations under the Transaction Documents, or for any other reason, unless, an injunction or temporary restraining order from a court, on notice, restraining and or enjoining delivery of such unlegended shares shall have been sought and obtained by the Company and the Company has posted a surety bond for the benefit of such Purchaser in the amount of the greater of (i) 15% of the amount of the aggregate purchase price of the Warrant Shares which is subject to the injunction or temporary restraining order, or (ii) the VWAP of the Common Stock on the trading day before the issue date of the injunction multiplied by the number of unlegended shares to be subject to the injunction, which bond shall remain in effect until the completion of arbitration/‘litigation of the dispute and the proceeds of which shall be payable to such Purchaser to the extent Purchaser obtains judgment in Purchaser’s favor.

 

6.1.7.     Buy-In .  In addition to any other rights available to Purchaser, if the Company fails to deliver to a Purchaser unlegended shares as required pursuant to this Agreement and after the Removal Date the Purchaser, or a broker on the Purchaser’s behalf, purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Purchaser of the shares of Common Stock which the Purchaser was entitled to receive in unlegended form from the Company (a “ Buy-In ”), then the Company shall promptly pay in cash to the Purchaser (in addition to any remedies available to or elected by the Purchaser) the amount, if any, by which (A) the Purchaser’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (B) the

 

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aggregate purchase price of the shares of Common Stock delivered to the Company for reissuance as unlegended shares together with interest thereon at a rate of 15% per annum accruing until such amount and any accrued interest thereon is paid in full (which amount shall be paid as liquidated damages and not as a penalty).  For example, if a Purchaser purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to $10,000 of purchase price of Warrant Shares delivered to the Company for reissuance as unlegended shares, the Company shall be required to pay the Purchaser $1,000, plus interest, if any.  The Purchaser shall provide the Company written notice indicating the amounts payable to the Purchaser in respect of the Buy-In.

 

6.1.8.    Each Purchaser, severally and not jointly with the other Purchasers, agrees with the Company that such Purchaser will sell the Securities pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom, and that if Securities are sold pursuant to a registration statement, they will be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates representing Securities as set forth in this Section 6.1.8 is predicated upon the Company’s reliance upon this understanding.

 

6.2         Reservation of Shares .  The Company shall at all times while the Warrants are outstanding maintain a reserve from its duly authorized shares of common stock of a number of shares of common stock sufficient to allow for the issuance of Warrant Shares (“ Required Minimum ”).

 

6.3         Replacement of Securities .  If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested.  The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement securities.  If a replacement certificate or instrument evidencing any securities is requested due to a mutilation thereof, the Company may require delivery of such mutilated certificate or instrument as a condition precedent to any issuance of a replacement.

 

6.4         Securities Laws; Publicity .  The Company shall by 8:30 a.m.  (New York City time) on the trading day immediately following a Closing hereunder, or at the latest, prior to the second trading day immediately following a Closing hereunder, file a Current Report on Form 8-K disclosing the material terms of the transactions contemplated hereby and including the Transaction Documents as exhibits thereto to the extent required by law.  The Company shall not publicly disclose the name of Purchaser, or include the name of any Purchaser in any filing with the SEC or any regulatory agency or trading market, without the prior written consent of Purchaser, except: (a) as required by federal securities law in connection with the filing of final Transaction Documents (including signature pages thereto) with the SEC and (b) to the extent such disclosure is required by law, in which case the Company shall provide the Purchaser with prior notice of such disclosure permitted under this clause (b).

 

6.5         Form D; Blue Sky Filings .  The Company agrees to timely file a Form D with respect to the Securities as required under Regulation D promulgated under the Securities Act and to provide a copy thereof, promptly upon request of the Purchaser.  The Company shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to the Purchaser at the Closing under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide evidence of such actions promptly upon request of any Purchaser.

 

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6.6         Equal Treatment of Purchasers .  No consideration (including any modification of any Transaction Document) shall be offered or paid to any person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the same consideration is also offered to all of the parties to the Transaction Documents.

 

6.7         Non-Public Information .  Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company covenants and agrees that neither it, nor any other person acting on its behalf, will provide Purchaser or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto Purchaser shall have executed a written agreement regarding the confidentiality and use of such information.  The Company understands and confirms that Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company.

 

6.8         Permitted Indebtedness .  Until one year after the Effective Date, the Company will not incur any Indebtedness.

 

6.9         Acknowledgment of Dilution .  The Company and Purchasers acknowledges that the issuance of the Securities may result in dilution of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions.  The Company further acknowledges that its obligations under the Transaction Documents, including, without limitation, its obligation to issue the Warrant Shares pursuant to the Transaction Documents, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution or any claim the Company may have against any Purchaser and regardless of the dilutive effect that such issuance may have on the ownership of the other stockholders of the Company.

 

6.10       Furnishing of Information; Public Information .  

 

(a)        Until no Purchaser owns any Securities, the Company covenants to maintain the registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act and to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act and file such reports even if the Company is not then subject to the reporting requirements of the Exchange Act.

 

(b)        At any time commencing on the Initial Closing Date and ending at such time that all of the Securities may be sold without the requirement for the Company to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144, if the Company shall fail for any reason to satisfy the current public information requirement under Rule 144(c) (a “ Public Information Failure ”) then, in addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, as partial liquidated damages and not as a penalty, by reason of any such delay in or reduction of its ability to sell the Securities, an amount in cash equal to two percent (2.0%) of the aggregate Purchase Price held by such Purchaser on the day of a Public Information Failure and on every thirtieth (30th) day (pro-rated for periods totaling less than thirty days) thereafter until the earlier of (a) the date such Public Information Failure is cured and (b) such time that such public information is no longer required for the Purchasers to transfer the Warrant Shares pursuant to Rule 144.  The payments to which a Purchaser shall be entitled pursuant to this Section 6.10 are referred to herein as “ Public Information Failure Payments .” Public Information Failure Payments shall be paid on the earlier of (i) the last day of the calendar month during which such Public Information Failure Payments are incurred and (ii) the third (3rd) Business Day after the event or failure giving rise to the Public Information Failure Payments is cured.  In the event the Company fails to make Public Information Failure Payments in a timely manner, such Public Information Failure Payments shall bear interest at the rate of 1.5% per month (prorated for partial months) until paid in full.  Nothing herein

 

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shall limit such Purchaser’s right to pursue actual damages for the Public Information Failure, and such Purchaser shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.

 

6.11       Integration .  The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market such that it would require shareholder approval prior to the closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction.

 

6.12       Exercise Procedures .  The form of Notice of Exercise included in the Warrants sets forth the totality of the procedures required of the Purchasers in order to exercise the Warrants.  No additional legal opinion, other information or instructions shall be required of the Purchasers to exercise their Warrants.  The Company shall honor exercises of the Warrants and shall deliver Warrant Shares in accordance with the terms, conditions and time periods set forth in the Transaction Documents.

 

6.13       Purchase Price Reset .

 

6.13.1  From the date of this Agreement until the sooner of (i) the Purchaser and his permitted assigns no longer holds any Securities, and (ii) two years after the Effective Date (the “ Protection Period ”), in the event that the Company issues or sells any shares of Common Stock or any Common Stock Equivalent (calculated on an as converted, as exercised basis) pursuant to which shares of Common Stock may be acquired at a price less than the Per Share Purchase Price (a “ Share Dilutive Issuance ”) (adjusted as described in Section 7.26), then the Company shall promptly issue additional shares of Common Stock to the Purchasers who held outstanding Shares on the date of such Share Dilutive Issuance, for no additional consideration, in an amount sufficient that (a) the aggregate Purchase Price paid at the Initial Closing and the Subsequent Closing, if any, for such outstanding Shares held by Purchasers on the date of such Share Dilutive Issuance (whether or not such Purchasers were the Purchasers at the Initial Closing or the Subsequent Closing, if any), when divided by (x) the sum of (i) the total number of outstanding Shares held by the Purchasers on the date of such Share Dilutive Issuance, (ii) any other shares of Common Stock then or theretofore issued in respect of such outstanding Shares (by stock split, stock dividend or otherwise) that resulted in an adjustment to the Per Share Purchase Price referred to above pursuant to Section 7.26, and (iii) all Additional Shares issued with respect to such outstanding Shares held by the Purchasers on the date of such Share Dilutive Issuance that were issued as a result of Share Dilutive Issuances that occurred prior to such Share Dilutive Issuance, will equal the price per share of Common Stock in such Share Dilutive Issuance, (each such adjustment, a “ Share Dilution Adjustment ”, and such shares, the “ Additional Shares ”).  The Additional Shares to be issued in a Share Dilution Adjustment shall be issued by the Company to the Purchasers who held outstanding Shares on the date of the applicable Share Dilutive Issuance (in proportion to the number of such Shares held by such Purchasers on the date of such Share Dilutive Issuance).  Such Share Dilution Adjustment shall be made successively whenever such an issuance is made.  Such Additional Shares must be delivered to the applicable Purchasers not later than the date the Share Dilutive Issuance occurs.

 

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6.13.2  From the date of this Agreement until the end of the Protection Period, in the event that the Company issues or sells any shares of Common Stock or any Common Stock Equivalent (calculated on an as converted, as exercised basis) pursuant to which shares of Common Stock may be acquired at a price less than the exercise price per share of Common Stock that was paid during the Protection Period by a Purchaser upon exercise of a Warrant (a “ Warrant Dilutive Issuance ”) (adjusted as described in Section 7.26), then the Company shall promptly issue additional shares of Common Stock to the Purchasers who on the date of such Warrant Dilutive Issuance held the issued Warrant Shares that were issued upon such exercise, for no additional consideration, in an amount sufficient that (a) the aggregate exercise price paid for such issued Warrant Shares held by the Purchasers on the date of such Warrant Dilutive Issuance (whether or not such Purchasers were the Purchasers who exercised such Warrant), when divided by (x) the sum of (i) the total number of such issued Warrant Shares held by the Purchasers on the date of such Warrant Dilutive Issuance, (ii) any other shares of Common Stock then or theretofore issued in respect of such issued Warrant Shares (by stock split, stock dividend or otherwise) that resulted in an adjustment to the exercise price referred to above pursuant to Section 7.26, and (iii) all Additional Warrant Shares issued with respect to such issued Warrant Shares held by the Purchasers on the date of such Warrant Dilutive Issuance that were issued as a result of Warrant Dilutive Issuances that occurred prior to such Warrant Dilutive Issuance, will equal the price per share of Common Stock in such Warrant Dilutive Issuance, (each such adjustment, a “ Warrant Dilution Adjustment ”, and such shares, the “ Additional Warrant Shares ”).  The Additional Warrant Shares to be issued in a Warrant Dilution Adjustment shall be issued by the Company to the Purchasers who held the applicable issued Warrant Shares on the date of the applicable Warrant Dilutive Issuance (in proportion to the number of such issued Warrant Shares held by such Purchasers on the date of such Warrant Dilutive Issuance).  Such Warrant Dilution Adjustment shall be made successively whenever such an issuance is made.  Such Additional Warrant Shares must be delivered to the applicable Purchasers not later than the date the Warrant Dilutive Issuance occurs.

 

6.13.3  Notwithstanding the foregoing, this Section 6.13 shall not apply in respect of an Exempt Issuance.  No adjustment shall be made hereunder which would require the Purchaser to surrender any shares to the Company.  The holder of outstanding Additional Shares and Additional Warrant Shares is granted the same rights and benefits as a holder of outstanding Shares pursuant to the Transaction Documents, except the rights and benefits of this Section 6.13 and except that such rights and benefits shall not apply to a holder of outstanding Additional Shares or Additional Warrant Shares after such outstanding Additional Share or Additional Warrant Share has been irrevocably sold pursuant to an effective registration statement under the Securities Act or pursuant to Rule 144 without further restrictions or conditions to transfer pursuant to Rule 144.

 

6.14       Indemnification of Purchasers .  Subject to the provisions of this Section 6.16, the Company will indemnify and hold each Purchaser and its directors, officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling persons (each, a “ Purchaser Party ”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and

 

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costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against Purchaser Parties in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not an Affiliate of such Purchaser Party, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is based upon a breach of such Purchaser’s Party’s representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Purchaser Party may have with any such stockholder or any violations by such Purchaser Party of state or federal securities laws or any conduct by such Purchaser Party which constitutes fraud, gross negligence, willful misconduct or malfeasance).  If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party.  Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel, a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel.  The Company will not be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of its representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Purchaser Party may have with any such stockholder or any violations by such Purchaser Party of state or federal securities laws or any conduct by such Purchaser Party which constitutes fraud, gross negligence, willful misconduct or malfeasance.  The indemnification required by this Section 6.16 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or are incurred however, each Purchaser Party who receives such interim payment agrees to reimburse the Company for any such payment made by the Company to such Purchaser Party if it is finally determined in such action or proceeding that such Purchaser Party is not entitled to indemnification pursuant to this Section 6.16.  The indemnity agreements contained herein shall be in addition to any cause of action or similar right of any Purchaser Party against the Company or others and any liabilities the Company may be subject to pursuant to law.

 

6.15       Reservation and Listing of Securities .

 

6.15.1  The Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents in such amount as may then be required to fulfill its obligations in full under the Transaction Documents, but not less than the Required Minimum.

 

6.15.2  If, on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than the Required Minimum on such date, then the Board of Directors shall amend the Company’s certificate or articles of incorporation to increase the number of authorized but unissued shares of Common Stock to at least the Required Minimum at such time, as soon as possible and in any event not later than the 60 th day after such date.

 

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6.15.3  The Company hereby agrees to maintain the listing or quotation of the Common Stock on the Trading Market on which it is currently listed, and concurrently with each Closing, the Company shall apply to list or quote all of the Shares and Warrant Shares at least equal to the Required Minimum on such Trading Market and promptly secure the listing of all of the Shares and Warrant Shares at least equal to the Required Minimum on such Trading Market.  The Company further agrees, if the Company applies to have the Common Stock traded on any other Trading Market, it will then include in such application all of the Shares and Warrant Shares at least equal to the Required Minimum, and will take such other action as is necessary to cause all of the Shares and Warrant Shares at least equal to the Required Minimum to be listed or quoted on such other Trading Market as promptly as possible.  The Company will then take all action necessary to continue the listing or quotation and trading of its Common Stock on a Trading Market until the later of (i) at least five years after the Closing Date, and (ii) for so long as the Warrants are outstanding, and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Trading Market at least until five years after the Closing Date and for so long as the Warrants are outstanding.  In the event the aforedescribed listing is not continuously maintained for five years after the Closing Date (a “ Listing Default ”), then in addition to any other rights the Purchasers may have hereunder or under applicable law, on the first day of a Listing Default and on each monthly anniversary of each such Listing Default date (if the applicable Listing Default shall not have been cured by such date) until the applicable Listing Default is cured, the Company shall pay to each Purchaser an amount in cash, as partial liquidated damages and not as a penalty, equal to 2% of the aggregate Purchase Price and purchase price of Warrant Shares held by such Purchaser on the day of a Listing Default and on every thirtieth day (pro-rated for periods less than thirty days) thereafter until the date such Listing Default is cured.  If the Company fails to pay any liquidated damages pursuant to this Section in a timely manner, the Company will pay interest thereon at a rate of 1.5% per month (pro-rated for partial months) to the Purchaser.

 

6.16       Subsequent Equity Sales .  Without prior written approval from Holder, from the date hereof until such time as the Common Stock and Warrants are no longer outstanding, the Company will not, without the consent of the Purchasers, enter into any Equity Line of Credit or similar agreement, nor issue nor agree to issue any common stock, floating or Variable Priced Equity Linked Instruments nor any of the foregoing or equity with price reset rights (subject to adjustment for stock splits, distributions, dividends, recapitalizations and the like) (collectively, the “ Variable Rate Transaction ”).  For purposes hereof, “ Equity Line of Credit ” shall include any transaction involving a written agreement between the Company and an investor or underwriter whereby the Company has the right to “put” its securities to the investor or underwriter over an agreed period of time and at an agreed price or price formula, and “ Variable Priced Equity Linked Instruments ” shall include: (A) any debt or equity securities which are convertible into, exercisable or exchangeable for, or carry the right to receive additional shares of Common Stock either (1) at any conversion, exercise or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for Common Stock at any time after the initial issuance of such debt or equity security, or (2) with a fixed conversion, exercise or exchange price that is subject to being reset at some future date at any time after the initial issuance of such debt or equity security due to a change in the market price of the Company’s Common Stock since date of initial issuance, and (B) any amortizing convertible security which amortizes prior to its maturity date, where the Company is required or has the option to (or any investor in such transaction has the option to require the Company to) make such amortization payments in shares of Common Stock which are valued at a price that is based upon and/or varies with the trading prices of or quotations for Common Stock at any time after the initial issuance of such debt or equity security (whether or not such payments in stock are

 

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subject to certain equity conditions).  For purposes of determining the total consideration for a convertible instrument (including a right to purchase equity of the Company) issued, subject to an original issue or similar discount or which principal amount is directly or indirectly increased after issuance, the consideration will be deemed to be the actual cash amount received by the Company in consideration of the original issuance of such convertible instrument.  Until twenty-four (24) months after the Effective Date, the Company will not issue any Common Stock or Common Stock Equivalents to those individuals listed on Schedule 6.23 nor will the Company issue any replacement shares of Surrendered Shares except in the amounts and on the terms set forth on Schedule 6.16 .

 

6.17       Capital Changes .  Until the one-year anniversary of the Closing Date, the Company shall not undertake a reverse or forward stock split or reclassification of the Common Stock without 10 days prior written notice to the Purchasers, unless such reverse split is made in conjunction with the listing of the Common Stock on a national securities exchange.

 

6.18       Reimbursement .  If any Purchaser becomes involved in any capacity in any Proceeding by or against any Person who is a stockholder of the Company (except as a result of sales, pledges, margin sales and similar transactions by such Purchaser to or with any current stockholder), solely as a result of such Purchaser’s acquisition of the Securities under this Agreement, the Company will reimburse such Purchaser for its reasonable legal and other expenses (including the cost of any investigation preparation and travel in connection therewith) incurred in connection therewith, as such expenses are incurred.  The reimbursement obligations of the Company under this paragraph shall be in addition to any liability which the Company may otherwise have, shall extend upon the same terms and conditions to any Affiliates of the Purchasers who are actually named in such action, proceeding or investigation, and partners, directors, agents, employees and controlling persons (if any), as the case may be, of the Purchasers and any such Affiliate, and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Company, the Purchasers and any such Affiliate and any such Person.  The Company also agrees that neither the Purchasers nor any such Affiliates, partners, directors, agents, employees or controlling persons shall have any liability to the Company or any Person asserting claims on behalf of or in right of the Company solely as a result of acquiring the Securities under this Agreement.

 

6.19       DTC Program .  At all times that Warrants are outstanding, the Company will employ as the transfer agent for the Common Stock and Warrant Shares a participant in the Depository Trust Company Automated Securities Transfer Program and cause the Common Stock to be transferable pursuant to such program.

 

6.20       Purchaser’s Exercise Limitations .  The Company shall not effect any exercise of the option granted to each Purchaser in Section 2.2 of this Agreement, and a Purchaser shall not have the right to exercise any portion of such option, pursuant to Section 2.2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Exercise Notice, the Purchaser (together with the Purchaser’s Affiliates, and any other Persons acting as a group together with the Purchaser or any of the Purchaser’s Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Purchaser and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of the option with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of the option beneficially owned by the Purchaser or any of its Affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Purchaser or any of its Affiliates.  Except as set forth in the preceding sentence, for purposes of this

 

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Section 6.20, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Purchaser that the Company is not representing to the Purchaser that such calculation is in compliance with Section 13(d) of the Exchange Act and the Purchaser is solely responsible for any schedules required to be filed in accordance therewith.  To the extent that the limitation contained in this Section 6.20 applies, the determination of whether the option is exercisable (in relation to other securities owned by the Purchaser together with any Affiliates) and of which portion of the option is exercisable shall be in the sole discretion of the Purchaser, and the submission of an Exercise Notice shall be deemed to be the Purchaser’s determination of whether the option is exercisable (in relation to other securities owned by the Purchaser together with any Affiliates) and of which portion of the option is exercisable, in each case subject to the Beneficial Ownership Limitation.  To ensure compliance with this restriction, a Purchaser will be deemed to represent to the Company when it delivers an Exercise Notice that such Exercise Notice has not violated the restrictions set forth in this paragraph, and the Company shall have no obligation to verify or confirm the accuracy of such determination.  In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.  For purposes of this Section 6.20, in determining the number of outstanding shares of Common Stock, a Purchaser may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of a Purchaser, the Company shall within two Trading Days confirm orally and in writing to the Purchaser the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including the Warrants, by the Purchaser or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported.  The “ Beneficial Ownership Limitation ” shall be 4.99%, unless a Purchaser elects on its signature page hereto a different amount for its own Beneficial Ownership Limitation (which shall also apply to and supersede the corresponding Beneficial Ownership Limitation as same relates to the Warrants issued to such electing Purchaser) of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of the option.  The Purchaser, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 6.20, provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of the option held by the Purchaser and the provisions of this Section 6.20 shall continue to apply.  Any such increase or decrease will not be effective until the 61 st day after such notice is delivered to the Company.  The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 6.20 to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation.  The limitations contained in this paragraph shall apply to a successor holder of the option right.

 

6.21       Exercise of Warrants in the Event of an Uplist .  Subject to the Beneficial Ownership Limitation of Section 6.20, in the event that the Company completes an uplisting onto a National Securities Exchange, as that term is defined in Section 6 of the Exchange Act, the Purchaser agrees to convert any remaining, unexercised warrants into shares of Common Stock within 60 Trading Days of the effectiveness notice or certification by such National Securities Exchange as reported on the Commission’s EDGAR website.  In the event that the minimum bid price of the Company’s Common Stock as reported on such National Securities Exchange is less than the Exercise Price, as that term is defined in the Warrants, of any remaining Warrants held by the Purchaser, than the Company and the

 

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Purchaser agree that they will, in good faith, determine a fair and reasonable exchange of such remaining Warrants for shares of Common Stock of the Company.

 

7.          MISCELLANEOUS.

 

7.1         Governing Law; Submission to Jurisdiction; Waiver of Trial by Jury .  This Agreement shall be governed in all respects by the laws of the State of New York without regard to the conflict of laws principles of the State of New York or any other jurisdiction.  No suit, action or proceeding with respect to this Agreement or any of the Transaction Documents may be brought in any court or before any similar authority other than in a court of competent jurisdiction in the State of New York and the parties hereby submit to the exclusive jurisdiction of such courts for the purpose of such suit, proceeding or judgment.  Each of the parties hereto hereby irrevocably waives any right which it may have had to bring such an action in any other court, domestic or foreign, or before any similar domestic or foreign authority and agrees not to claim or plead the same.  Each of the parties hereto hereby irrevocably and unconditionally waives trial by jury in any legal action or proceeding in relation to this Agreement or any of the Transaction Documents and for any counterclaim therein.

 

7.2         Survival of Representations and Warranties .  The representations and warranties made by the Company and the Purchasers herein at each Closing shall survive such Closing.  All statements contained in any certificate or other instrument delivered by or on behalf of any party to this Agreement, pursuant to or in connection with the transactions contemplated by this Agreement or any of the other Transaction Documents shall be deemed to be representations and warranties made by such party as of the date of such certificate or other instrument.  

 

7.3         Successors and Assigns .  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of each other party.  Notwithstanding the foregoing (a) any Purchaser may assign or transfer, in whole or, from time to time, in part, the right to purchase all or any portion of the Securities to one or more of its Affiliates (subject to Affiliate qualification as an Accredited Investor) and (b) any Purchaser may assign or transfer any of its rights or obligations under this Agreement, in whole or from time to time in part, to the Company or any other Purchaser or any Affiliate of any other Purchaser.  As a condition of any transfer pursuant to this Section 7.3, the transferee must agree in writing for the benefit of all parties to this Agreement (which writing shall be in form and substance reasonably acceptable to all parties to this Agreement) to be bound by the terms and conditions of this Agreement and all other Transaction Documents with respect to any Shares being transferred hereunder.

 

7.4         Entire Agreement .  This Agreement, the Exhibits and Schedules hereto, the other Transaction Documents and each of the Exhibits delivered pursuant thereto constitute the full and entire understanding and agreement between the parties hereto with regard to the subject matter hereof and thereof and no party hereto shall be liable or bound to any other party hereto in any manner by any representations, warranties, covenants and agreements except as specifically set forth herein and therein.

 

7.5         Severability .  If any provision of the Agreement is held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby.

 

7.6         Amendment and Waiver .  Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Company and the Purchasers (and, to the extent of any assignment under Section 7.3 hereof, their respective permitted assigns and any permitted assigns thereof) holding a majority of the voting power of the then outstanding

 

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Shares and Warrant Shares purchased under this Agreement held by such holders, with each outstanding Share having one vote and each outstanding Warrant Share having one vote and which majority must include Bellridge Capital for so long as Bellridge Capital holds $100,000 of Warrant Shares purchased in the Offering.

 

7.7         Delays or Omissions .  No delay or omission to exercise any right, power or remedy accruing to any party, upon any breach, default or noncompliance by another party under this Agreement, the other Transaction Documents, shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of or in any similar breach, default or noncompliance thereafter occurring.  Any waiver or approval of any kind or character on any Purchaser’s part of any breach, default or noncompliance under this Agreement, the other Transaction Documents or any waiver on such party’s part of any provisions or conditions of the Agreement, the other Transaction Documents, must be in writing and shall be effective only to the extent specifically set forth in such writing.  All remedies, either under this Agreement, the other Transaction Documents, or otherwise afforded to any party, shall be cumulative and not alternative.

 

7.8         Notices .  All notices, requests, demands and other communications given or made in accordance with the provisions of this Agreement shall be addressed (i) if to a Purchaser, at such Purchaser’s address, fax number or email address, as furnished to the Company on the signature page below or as otherwise furnished to the Company by the Purchaser in writing, or (ii) if to the Company, to the attention of the President at such address, fax number or email address furnished to the Purchasers on the signature page below or as otherwise furnished by the Company in writing, and shall be made or sent by a personal delivery or overnight courier, by registered, certified or first class mail, postage prepaid, or by facsimile or electronic mail with confirmation of receipt, and shall be deemed to be given on the date of delivery when made by personal delivery or overnight courier, 48 hours after being deposited in the U.S.  mail, or upon confirmation of receipt when sent by facsimile or electronic mail.  Any party may, by written notice to the other, alter its address, number or respondent, and such notice shall be considered to have been given three (3) days after the overnight delivery, airmailing, faxing or sending via e-mail thereof.  

 

7.9         Expenses .  The Company shall pay all costs and expenses that it incurs with respect to the preparation, negotiation, execution, delivery and performance of this Agreement, including, without limitation, any costs and expenses of its counsel.  The Company shall pay the reasonable fees and expenses of independent counsel for the Purchaser with respect to the negotiation and execution of this Agreement and the other Transaction Documents in accordance with the terms of the Company’s agreement with the Purchaser.

 

7.10       Titles and Subtitles .  The titles of the sections and subsections of the Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

 

7.11       Counterparts; Execution by Facsimile Signature .  This Agreement may be executed in any number of counterparts (including execution by facsimile), each of which shall be an original, but all of which together shall constitute one instrument.  This Agreement may be executed by facsimile signature(s) or scanned electronic signatures, which shall be binding on the party delivering same, to be followed by delivery of originally executed signature pages.

 

7.12       Acknowledgment .  Any investigation or other examination that may have been made at any time by or on behalf of a party to whom representations and warranties are made in this Agreement or in any other Transaction Documents shall not limit, diminish, supersede, act as a waiver of, or in any other way affect the representations, warranties and indemnities contained in this Agreement and the other Transaction Documents, and the respective parties may rely on the representations,

 

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warranties and indemnities made to them in this Agreement and the other Transaction Documents irrespective of and notwithstanding any information obtained by them in the course of any investigation, examination or otherwise, whether before or after any Closing.

 

7.13       Publicity .  Except as otherwise required by law or applicable stock exchange rules, no announcement or other disclosure, public or otherwise, concerning the transactions contemplated by this Agreement shall be made, either directly or indirectly, by any party hereto which mentions another party (or parties) hereto without the prior written consent of such other party (or parties), which consent shall not be unreasonably withheld, delayed or conditioned.

 

7.14       No Third-Party Beneficiaries .  Nothing in this Agreement, express or implied, is intended to confer on any person other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or Liabilities under or by reason of this Agreement.  

 

7.15       Pronouns .  All pronouns contained herein, and any variations thereof, shall be deemed to refer to the masculine, feminine or neutral, singular or plural, as to the identity of the parties hereto may require.

 

7.16       Rescission and Withdrawal Right .  Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights; provided, however, that in the case of a rescission of an exercise of a Warrant, the applicable Purchaser shall be required to return any shares of Common Stock subject to any such rescinded exercise notice concurrently with the return to such Purchaser of the aggregate exercise price paid to the Company for such shares and the restoration of such Purchaser’s right to acquire such shares pursuant to such Purchaser’s Warrant (including, issuance of a replacement warrant certificate evidencing such restored right).

 

7.17       Replacement of Securities .  If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon surrender and cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft, destruction, or mutilation, and of the ownership of such Security.  The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity and bonds) associated with the issuance of such replacement Securities.

 

7.18       Remedies .  In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents.  The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

 

7.19       Payment Set Aside .  To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered

 

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from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

 

7.20       Independent Nature of Purchasers’ Obligations and Rights .  The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document.  Nothing contained herein or in any other Transaction Document, and no action taken by any Purchaser pursuant hereof or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents.  Each Purchaser shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.  Each Purchaser has been represented by its own separate legal counsel in its review and negotiation of the Transaction Documents.  For reasons of administrative convenience only, each Purchaser and its respective counsel have chosen to communicate with the Company through RB.  RB does not represent all of the Purchasers.  The Company has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by any of the Purchasers.  It is expressly understood and agreed that each provision contained in this Agreement and in each other Transaction Document is between the Company and a Purchaser, solely, and not between the Company and the Purchasers collectively and not between and among the Purchasers.

 

7.21       Liquidated Damages .  The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts due thereunder have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.

 

7.22       Saturdays, Sundays, Holidays, etc.  If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken, or such right may be exercised on the next succeeding Business Day.

 

7.23       Construction .  The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto.  In addition, each and every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.

 

7.24       Reserved .  

 

7.25       WAIVER OF JURY TRIAL .  IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT

 

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PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.

 

7.26       Equitable Adjustment .  Trading volume amounts, price/volume amounts and similar figures in the Transaction Documents shall be equitably adjusted (but without duplication) to offset the effect of stock splits, similar events and as otherwise described in this Agreement and Warrants.

 

8.          DEFINITIONS.

 

As used in this Agreement, the following terms shall have the meanings herein specified:

 

8.1        “ Affiliate ” shall mean, with respect to any Person specified: (i) any Person that directly or indirectly through one or more intermediaries controls, is controlled by or under common control with the Person specified; (ii) any director, officer, or Subsidiary of the Person specified; and (iii) the spouse, parents, children, siblings, mothers-in-law, fathers-in law, sons-in-law, daughters-in-law, brothers-in-law, and sisters-in-law of the Person specified, whether arising by blood, marriage or adoption, and any Person who resides in the specified Person’s home.  For any director, officer, or Subsidiary of the Person specified.  For purposes of this definition and without limitation to the previous sentence, (x) “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) of a Person means the power, direct or indirect, to direct or cause the direction of management and policies of such Person, whether through ownership of voting securities, by contract or otherwise, and (y) any Person beneficially owning, directly or indirectly, more than ten percent (10%) or more of any class of voting securities or similar interests of another Person shall be deemed to be an Affiliate of that Person.

 

8.2        “ Agreement ” shall have the meaning set forth in the preamble to this Agreement.

 

8.3        “ Board of Directors ” means the board of directors of the Company.

 

8.4        “ Budget ” shall have the meaning set forth in Section 3.18.

 

8.5        “ Business Day ” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

 

8.6        “ Certificate ” shall have the meaning set forth in Section 5.1.11.

 

8.7        “ Closing ” shall mean the Initial Closing or the Subsequent Closing, as applicable.

 

8.8        “ Closing Date ” shall mean the Initial Closing Date or the Subsequent Closing Date, as applicable.

 

8.9        “ Code ” shall have the meaning set forth in Section 3.13.2.

 

8.10      “ Collaborators ” shall have the meaning set forth in Section 3.17.1.

 

8.11      “ Company ” shall have the meaning set forth in the preamble to this Agreement.

 

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

 

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8.13      “ Common Stock ” means the common stock of the Company, par value $0.0001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.

 

8.14      “ Common Stock Equivalents ” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

 

8.15      “ Company Counsel ” means, Poole & Shaffery.

 

8.16      “ Company Intellectual Property ” shall mean shall mean all Copyrights, Patents, Trademarks, technology, trade secrets, know-how, inventions, methods, techniques and other intellectual property

 

8.17      “ Consents ” shall mean any consents, waivers, approvals, authorizations, or certifications from any Person or under any Contract, Organizational Document or Requirement of Law, as applicable.

 

8.18      “ Contracts ” shall mean any indentures, indebtedness, contracts, leases, agreements, instruments, licenses, undertakings and other commitments, whether written or oral.

 

8.19      “ Copyrights ” shall mean all copyrights, copyrightable works, mask works and databases, including, without limitation, any computer software (object code and source code), Internet web-sites and the content thereof, and any other works of authorship, whether statutory or common law, registered or unregistered, and registrations for and pending applications to register the same including all reissues, extensions and renewals thereto, and all moral rights thereto under the laws of any jurisdiction.

 

8.20      “ Effective Date ” means the earliest of the date that (a) the Initial Registration Statement, as defined in the Registration Rights Agreement, has been declared effective by the Commission, or (b) all of the Shares and Warrant Shares have been sold pursuant to Rule 144 or may be sold pursuant to Rule 144 without the requirement for the Company to be in compliance with the current public information requirement under Rule 144 and without volume or manner-of-sale restrictions and Company counsel has delivered to the Transfer Agent and such holders a standing written unqualified opinion that resales may then be made by such holders of the Shares and Warrant Shares pursuant to such exemption which opinion shall be in form and substance reasonably acceptable to such holders.

 

8.21      “ Employee ” shall have the meaning set forth in Section 3.14.1.

 

8.22      “ Employee Benefit Plans ” shall have the meaning set forth in Section 3.15.1.

 

8.23      “ Encumbrances ” shall mean any Securities interests, liens, encumbrances, pledges, mortgages, conditional or installment sales Contracts, title retention Contracts, transferability restrictions and other claims or burdens of any nature whatsoever.

 

8.24       “ Equity Line of Credit ” shall have the meaning ascribed to such term in Section 6.18.

 

8.25      “ ERISA ” shall have the meaning set forth in Section 3.15.1.

 

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8.26      “ Escrow Agreement ” shall have the meaning set forth in Section 5.1.11.

 

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

 

8.28      “ Exempt Issuance ” means the issuance of (a) shares of Common Stock and options to officers, employees, or directors of the Company prior to and after the Closing Date pursuant to any (i) current stock or option plan previously adopted or (ii) any future stock or option plan duly adopted for such purpose, by a majority of the non-employee members of the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose in the amounts and on the terms set forth on Schedule 8.28 , (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder, and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities and any term thereof have not been amended since the date of this Agreement to increase the number of such securities or to decrease the issue price, exercise price, exchange price or conversion price of such securities and which securities and the principal terms thereof are set forth on Schedule 3.3.2 , and described in the SEC Reports filed not later than ten (10) days before the Closing Date, (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided that any such issuance shall only be to a Person (or to the equityholders of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Company and shall be intended to provide to the Company substantial additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities, and (d) securities issued or issuable pursuant to this Agreement, or the Warrants, including, without limitation, Section 6.14, or upon exercise or conversion of any such securities.

 

8.29      “ Exercise Notice ” shall have the meaning set forth in Section 6.12.

 

8.30      “ FCPA ” means the Foreign Corrupt Practices Act of 1977, as amended.

 

8.31      “ Final Termination Date ” shall have the meaning set forth in Section 2.2.

 

8.32      “ Financial Statements ” shall have the meaning set forth in Section 3.5.

 

8.33      “ GAAP ” shall have the meaning ascribed to such term in Section 3.5.

 

8.34       Reserved .

 

8.35      “ Governmental or Regulatory Authority ” shall mean any court, tribunal, arbitrator, authority, agency, commission, official or other instrumentality of the government of the United States or of any foreign country, any state or any political subdivision of any such government (whether state, provincial, county, city, municipal or otherwise).  

 

8.36      “ Hazardous Substances ” shall mean oil and petroleum products, asbestos, polychlorinated biphenyls, urea formaldehyde and any other materials classified as hazardous or toxic under any Environmental Laws.

 

8.37      “ Indebtedness ” shall have the meaning set forth in Section 3.45.

 

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8.38      “ Indemnified Losses ” shall mean all losses, Liabilities, obligations, claims, demands, damages, penalties, settlements, causes of action, costs and expenses arising out of any third party claim or action against an Indemnified Party, including, without limitation, the actual costs paid in connection with an Indemnified Party’s investigation and evaluation of any claim or right asserted against such Indemnified Party and all reasonable attorneys’, experts’ and accountants’ fees, expenses and disbursements and court costs including, without limitation, those incurred in connection with the Indemnified Party’s enforcement of the indemnification provisions of Section Error! Reference source not found. of this Agreement.

 

8.39      “ Initial Closing ” shall have the meaning set forth in Section 2.1.

 

8.40      “ Initial Closing Date ” shall have the meaning set forth in Section 2.1.

 

8.41      “ Initial Securities ” shall have the meaning set forth in Section 2.1.

 

8.42      “ Leased Real Property ” shall have the meaning set forth in Section 3.17.

 

8.43      “ Legal Proceeding ” shall mean any action, suit, arbitration, claim or investigation by or before any Governmental or Regulatory Authority, any arbitration or alternative dispute resolution panel, or any other legal, administrative or other proceeding.

 

8.44      “ Liabilities ” shall mean all obligations and liabilities including, without limitation, direct or indirect indebtedness, guaranties, endorsements, claims, losses, damages, deficiencies, costs, expenses, or responsibilities, in any of the foregoing cases, whether fixed or unfixed, known or unknown, asserted or unasserted, choate or inchoate, liquidated or unliquidated, or secured or unsecured.

 

8.45      “ Licensed Intellectual Property ” shall mean all Copyrights, Patents, Trademarks, technology rights and licenses, trade secrets, know-how, inventions, methods, techniques and other intellectual property the Company has or has the right to use in connection with its business, as applicable, pursuant to license, sublicense, agreement or permission.

 

8.46      “ Material Adverse Effect ” shall have the meaning set forth in Section 3.1.

 

8.47       “ OFAC ” shall have the meaning ascribed to such term in Section 3.1(hh).

 

8.48      “ Order ” shall mean any judgment, order, writ, decree, stipulation, injunction or other determination whatsoever of any Governmental or Regulatory Authority, arbitrator or any other Person whose finding, ruling or holding is legally binding or is enforceable as a matter of right (in any case, whether preliminary or final and whether voluntarily imposed or consented to).  

 

8.49      “ Organizational Documents ” shall mean, with respect to any Person, such Person’s articles or certificate of incorporation, by-laws or other governing or constitutive documents, if any.

 

8.50      “ Owned Intellectual Property ” shall mean all Copyrights, Patents, Trademarks, technology, trade secrets, know-how, inventions, methods, techniques and other intellectual property owned by the Company or any of its Subsidiaries.

 

8.51       “ Participation in Future Financing ” shall have the meaning ascribed to such term in Section 6.25.

 

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8.52      “ Patents ” shall mean patents and patent applications (including, without limitation, provisional applications, utility applications and design applications), including, without limitation, reissues, patents of addition, continuations, continuations-in-part, substitutions, additions, divisionals, renewals, registrations, confirmations, re-examinations, certificates of inventorship, extensions and the like, any foreign or international equivalent of any of the foregoing, and any domestic or foreign patents or patent applications claiming priority to any of the above.

 

8.53      “ Permits ” shall mean all licenses, permits, certificates of authority, authorizations, approvals, registrations, franchises, rights, Orders, qualifications and similar rights or approvals granted or issued by any Governmental or Regulatory Authority relating to the Business.  

 

8.54      “ Per Securities Purchase Price ” shall have the meaning set forth in Section 1.2.

 

8.55      “ Person ” shall mean any individual, corporation, partnership, firm, joint venture, association, limited liability company, limited liability partnership, joint-stock company, trust, unincorporated organization or Governmental or Regulatory Authority.  

 

8.56       Reserved .

 

8.57      “ Premises ” shall have the meaning set forth in Section 3.20.

 

8.58      “ Proceeding ” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.

 

8.59      “ Protection Period ” shall have the meaning ascribed to such term in Section 6.13.

 

8.60      “ Public Information Failure ” shall have the meaning ascribed to such term in Section 6.10.

 

8.61      “ Public Information Failure Payments ” shall have the meaning ascribed to such term in Section 6.10.

 

8.62      “ Purchase Price ” shall mean the “Total Purchase Price Amount” set forth in Exhibit A for each respective Purchaser.

 

8.63      “ Purchasers ” and “ Purchaser ” shall have the meaning set forth in the preamble to this Agreement.

 

8.64      “ RB ” means Robinson Brog Leinwand Greene Genovese & Gluck PC.

 

8.65      “ Real Property Leases ” shall have the meaning set forth in Section 3.17.

 

8.66       “Registration Rights Agreement ” shall have the meaning set forth in Section 5.1.5.

 

8.67       “ Regulatory Approvals ” shall mean all Consents from all Governmental or Regulatory Authorities.

 

8.68      “ Removal Date ” means the date that all of the issued Shares and Warrant Shares have been sold pursuant to Rule 144 or may be sold pursuant to Rule 144 without the requirement for the

 

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Company to be in compliance with the current public information requirements under Rule 144 and without volume or manner-of-sale restrictions.

 

8.69      “ Required Minimum ” means, as of any date, the maximum aggregate number of shares of Common Stock then issued or potentially issuable in the future pursuant to the Transaction Documents, including any Shares and Warrant Shares issuable upon exercise in full of all Warrants or conversion in full of all shares of Preferred Stock, ignoring any conversion or exercise limits set forth therein, and assuming that any previously unconverted shares of Preferred Stock will be held until the third anniversary of the Closing Date.

 

8.70      “ Requirement of Law ” shall mean any provision of law, statute, treaty, rule, regulation, ordinance or pronouncement having the effect of law, and any Order.

 

8.71      “ Rule 144 ” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

 

8.72      “ Schedules ” shall have the meaning set forth in the preamble to Section 3.

 

8.73      “ SEC ” shall mean Securities and Exchange Commission.

 

8.74      “ SEC Reports ” shall have the meaning ascribed to such term in Section 3.5.

 

8.75       “Securities” shall have the meaning set forth in the preamble of this Agreement.

 

8.76      “ Securities Act ” shall have the meaning set forth in Section 3.21.

 

8.77      “ Securities Laws ” means the securities laws of the United States or any state thereof and the rules and regulations promulgated thereunder.

 

8.78      “ Share Dilution Adjustment ” shall have the meaning ascribed to such term in Section 4.14.

 

8.79      “ Share Dilutive Issuance ” shall have the meaning ascribed to such term in Section 4.14.

 

8.80       Reserved .

 

8.81      “ Short Sales ” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include the location and/or reservation of borrowable shares of Common Stock).

 

8.82      “ Stock Option Plan ” means the Stock Option Plan of the Company in effect as the date of this Agreement, the principal terms of which have been disclosed in the SEC Reports.

 

8.83      “ Subsequent Closing ” shall mean the funding which occurs on the Subsequent Closing Date.

 

8.84      “ Subsequent Closing Date ” shall have the meaning set forth in Section 2.2.

 

8.85      “ Subsequent Closing Purchaser ” shall have the meaning set forth in Section 2.2.

 

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8.86      “ Subsequent Securities ” shall have the meaning set forth in Section 2.2.

 

8.87      “ Subsidiaries ” and “ Subsidiary ” shall mean, with respect to any entity at any date, any direct or indirect corporation, limited or general partnership, limited liability company, trust, estate, association, joint venture or other business entity of which (A) more than 30% of (i) the outstanding capital stock having (in the absence of contingencies) ordinary voting power to elect a majority of the board of directors or other managing body of such entity, (ii) in the case of a partnership or limited liability company, the interest in the capital or profits of such partnership or limited liability company or (iii) in the case of a trust, estate, association, joint venture or other entity, the beneficial interest in such trust, estate, association or other entity business is, at the time of determination, owned or controlled directly or indirectly through one or more intermediaries, by such entity, or (B) is under the actual control of the Company.  

 

8.88      “ Suppliers ” shall have the meaning set forth in Section 3.17.2.

 

8.89      “ Surrendered Shares ” shall have the meaning set forth in Section 5.1.11.

 

8.90      “ Tax Returns ” shall mean any declaration, return, report, estimate, information return, schedule, statements or other document filed or required to be filed in connection with the calculation, assessment or collection of any Taxes or, when none is required to be filed with a taxing authority, the statement or other document issued by, a taxing authority.

 

8.91      “ Taxes ” shall mean (i) any tax, charge, fee, levy or other assessment including, without limitation, any net income, gross income, gross receipts, sales, use, ad valorem , transfer, franchise, profits, payroll, employment, social Securities, unemployment, excise, estimated, stamp, occupancy, occupation, property or other similar taxes, including any interest or penalties thereon, and additions to tax or additional amounts imposed by any federal, state, local or foreign Governmental or Regulatory Authority, domestic or foreign or (ii) any Liability for the payment of any taxes, interest, penalty, addition to tax or like additional amount resulting from the application of Treasury Regulation §1.1502-6 or comparable Requirement of Law.

 

8.92      “ Termination Date ” shall have the meaning ascribed to such term in Section 2.1.

 

8.93      “ Trademarks ” shall mean trademarks, service marks, trade names, corporate names, company names, business names, fictitious business names, trade styles, uniform resource locators (URLs), domain names, trade dress, any other names and locators associated with the Internet, other source of business identifiers, whether registered or unregistered and whether or not currently in use, and registrations, applications to register and all of the goodwill of the business related to the foregoing.

 

8.94      “ Trading Day ” means a day on which the principal Trading Market is open for trading.

 

8.95      “ Trading Market ” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, the OTC Bulletin Board, the OTCQB or the OTCQX (or any successors to any of the foregoing).

 

8.96      “ Transaction Documents ” shall mean this Agreement, the Warrant, the Registration Rights Agreement and all other documents, certificates and instruments executed and delivered at any Closing.

 

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8.97      “ Transfer Agent ” means VStock Transfer, and any successor transfer agent of the Company.

 

8.98      “ Variable Priced Equity Linked Instruments ” shall have the meaning ascribed to such term in Section 6.18.

 

8.99      “ Variable Rate Transaction ” shall have the meaning ascribed to such term in Section 6.18.

 

8.100    “ VWAP ” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P.  (based on a Trading Day from 9:30 a.m.  (New York City time) to 4:02 p.m.  (New York City time)), (b) if the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board, (c) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported on the OTCQX, OTCQB or OTC Pink Marketplace maintained by the OTC Markets Group, Inc.  (or a similar organization or agency succeeding to its functions of reporting prices), the volume weighted average price of the Common Stock on the first such facility (or a similar organization or agency succeeding to its functions of reporting prices), or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

8.101    “ Warrants ” means, collectively, the Common Stock purchase warrants delivered to the Purchasers at any Closing in the form of Exhibit B attached hereto.

 

8.102    “ Warrant Shares ” means the shares of Common Stock issuable upon exercise of the Warrants, provided that any share of Common Stock issued upon exercise of the Warrants shall not constitute an issued Warrant Share for purposes of this Agreement after such share has been irrevocably sold pursuant to an effective registration statement under the Securities Act or pursuant to Rule 144 without further restrictions or conditions to transfer pursuant to Rule 144.

 

[SIGNATURES ON FOLLOWING PAGES]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Securities Purchase Agreement as of April 5, 2018.

 

COMPANY:

 

BLACK CACTUS GLOBAL, INC.

By:       /s/ Harpreet Sangha

Name:  Harpreet Sangha

Title:    Chairman of the Board, CFO

 

Address: 8275 S. Eastern Avenue, Suite 200

Las Vegas, NV 89123

 

Tel:      (702) 724-2643

Fax:     _______________________

email:  _______________________

 

 

[SIGNATURE PAGE OF PURCHASERS FOLLOWS]

 

 

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[SIGNATURE PAGE OF PURCHASERS TO SPA]

 

Name of Purchaser: ________________________________________________________

 

Signature of Authorized Signatory of Purchaser : __________________________________

 

Name of Authorized Signatory: ____________________________________________________

 

Title of Authorized Signatory: _____________________________________________________

 

Email Address of Authorized Signatory: _____________________________________________

 

Facsimile Number of Authorized Signatory: __________________________________________

 

Address for Notice to Purchaser:

 

 

Address for Delivery of Securities to Purchaser (if not same as address for notice):

 

Closing Subscription Amount: _____________

 

EIN Number: _______________________

 

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EXHIBIT A

 

SCHEDULE OF PURCHASERS

 

Initial Closing

 

Name of
Purchaser

Warrants

Warrant
Shares

Total Purchase
Price Amount

Bellridge Capital, L.P.

3

61,391,250

$__________

 

 

 

TOTAL: $__________

 

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EXHIBIT B

 

FORM OF WARRANT

 

 

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Schedule 1.1

 

Warrant Denominations

 

 

- 48 -



Exhibit 10.7


REGISTRATION RIGHTS AGREEMENT

 

This REGISTRATION RIGHTS AGREEMENT (this “ Agreement ”) is made and entered into as of April 11, 2018, and effective as of April 5, 2018, between Black Cactus Global, Inc., a Florida corporation/ f/k/a Envoy Group Corp., a Florida corporation (the “ Company ”), and the purchaser signatory hereto (the “ Purchaser ”).

 

This Agreement is made pursuant to the Securities Purchase Agreement, dated as of even date herewith, between the Company and the Purchaser (the “ Purchase Agreement ”).


The Company and the Purchaser hereby agrees as follows:


1. Definitions .


Capitalized terms used and not otherwise defined herein that are defined in the Purchase Agreement shall have the meanings given such terms in the Purchase Agreement.


As used in this Agreement, the following terms shall have the following meanings:


Advice ” shall have the meaning set forth in Section 6(d).


Effectiveness Date ” means, with respect to the Initial Registration Statement required to be filed hereunder, one hundred twenty (120) days from the Initial Closing; and with respect to any additional Registration Statements which may be required pursuant to Section 2(c) or Section 3(c), the sixtieth (60 th ) calendar day following the date on which an additional Registration Statement is required to be filed hereunder; provided , however , that in the event the Company is notified by the Commission that one or more of the above Registration Statements will not be reviewed or is no longer subject to further review and comments, the Effectiveness Date as to such Registration Statement shall be the fifth (5 th ) Trading Day following the date on which the Company is so notified if such date precedes the dates otherwise required above, provided, further, if such Effectiveness Date falls on a day that is not a Trading Day, then the Effectiveness Date shall be the next succeeding Trading Day.


Effectiveness Period ” shall have the meaning set forth in Section 2(a).


Event ” shall have the meaning set forth in Section 2(d).


Event Date ” shall have the meaning set forth in Section 2(d).


Filing Date ” means, with respect to the Initial Registration Statement required hereunder, April 16, 2018, and, with respect to any additional Registration Statements which may be required pursuant to Section 2(c) or Section 3(c), the earliest practical date on which the Company is permitted by SEC Guidance to file such additional Registration Statement related to the Registrable Securities.


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Holder ” or “ Holder ” means the holder or Holder, as the case may be, from time to time of Registrable Securities.


Indemnified Party ” shall have the meaning set forth in Section 5(c).


Indemnifying Party ” shall have the meaning set forth in Section 5(c).


Initial Registration Statement ” means the initial Registration Statement filed pursuant to this Agreement.


Losses ” shall have the meaning set forth in Section 5(a).


Prospectus ” means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated by the Commission pursuant to the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

 

Registrable Securities ” means, as of any date of determination, (a) all of the shares of Common Stock then issued and issuable upon exercise in full of the Warrants (assuming on such date the Warrants are exercised in full without regard to any exercise limitations therein), (b) any additional shares of Common Stock issued and issuable in connection with any anti-dilution provisions in the Warrants (without giving effect to any limitations on exercise set forth in the Warrants), (c) any additional shares of Common Stock issued and issuable in connection with the Warrants, and (d) any securities issued or then issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing; provided, however , that any such Registrable Securities shall cease to be Registrable Securities (and the Company shall not be required to maintain the effectiveness of any, or file another, Registration Statement hereunder with respect thereto) for so long as (a) a Registration Statement with respect to the sale of such Registrable Securities is declared effective by the Commission under the Securities Act and such Registrable Securities have been disposed of by the Holder in accordance with such effective Registration Statement, (b) such Registrable Securities have been previously sold in accordance with Rule 144, or (c) such securities become eligible for resale without volume or manner-of-sale restrictions and without current public information pursuant to Rule 144 as set forth in a written opinion letter to such effect, addressed, delivered and acceptable to the Transfer Agent and the affected Holder (assuming that such securities and any securities issuable upon exercise, conversion or exchange of which, or as a dividend upon which, such securities were issued or are issuable, were at no time held by any Affiliate of the Company), as reasonably determined by the Company, upon the advice of counsel to the Company.


Registration Statement ” means any registration statement required to be filed hereunder pursuant to Section 2(a) and any additional registration statements contemplated by Section 2(c) or Section 3(c), including (in each case) the Prospectus, amendments and supplements to any


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such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in any such registration statement.


Rule 415 ” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.


Rule 424 ” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.


Selling Stockholder Questionnaire ” shall have the meaning set forth in Section 3(a).


SEC Guidance ” means (i) any publicly-available written or oral guidance of the Commission staff, or any comments, requirements or requests of the Commission staff and (ii) the Securities Act.


2. Registration .


(a)      Not later than the Filing Date, the Company shall file with the Commission a draft Registration Statement on Form S-1 relating to the resale by the Holder of all (or such other number as the Commission will permit) the Registrable Securities.  Subject to the terms of this Agreement, the Company shall use its best efforts to cause a Registration Statement filed under this Agreement (including, without limitation, under Section 3(c)) to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event no later than the applicable Effectiveness Date, and shall use its best efforts to keep such Registration Statement continuously effective under the Securities Act until all Registrable Securities covered by such Registration Statement (i) have been sold, thereunder or pursuant to Rule 144, or (ii) may be sold without volume or manner-of-sale restrictions pursuant to Rule 144 and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144, as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Transfer Agent and the affected Holder (the “ Effectiveness Period ”).


(b)      Notwithstanding the registration obligations set forth in Section 2(a), if the Commission informs the Company that all of the Registrable Securities cannot, as a result of the application of Rule 415, be registered for resale as a secondary offering on a single registration statement, the Company agrees to promptly inform each of the Holder thereof and use its best efforts to file amendments to the Initial Registration Statement as required by the Commission, covering the maximum number of Registrable Securities permitted to be registered by the Commission, on Form S-1 or such other form available to register for resale the Registrable Securities as a secondary offering, subject to the provisions of Section 2(e); with respect to filing on Form S-1 or other appropriate form, and subject to the provisions of Section 2(d) with respect


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to the payment of liquidated damages; provided , however , that prior to filing such amendment, the Company shall be obligated to use diligent efforts to advocate with the Commission for the registration of all of the Registrable Securities in accordance with the SEC Guidance, including without limitation, Compliance and Disclosure Interpretation 612.09.

 

(c)      Notwithstanding any other provision of this Agreement and subject to the payment of liquidated damages pursuant to Section 2(d), if the Commission or any SEC Guidance sets forth a limitation on the number of Registrable Securities permitted to be registered on a particular Registration Statement as a secondary offering (and notwithstanding that the Company used diligent efforts to advocate with the Commission for the registration of all or a greater portion of Registrable Securities), unless otherwise directed in writing by the Holder as to its Registrable Securities, the number of Registrable Securities to be registered on such Registration Statement will be reduced as follows:

 

i.         First, the Company shall reduce or eliminate any securities to be included by any Person other than the Holder; and


ii.        Second, the Company shall reduce the Registrable Securities represented by the Warrant Shares (applied, in the case that some Warrant Shares may be registered, to the Holder on a pro rata basis based on the total number of unregistered Warrant Shares held by the Holder).


In the event of a cutback hereunder, the Company shall give the Holder at least five (5) Trading Days prior written notice along with the calculations as to the Holder’s allotment. In the event the Company amends the Initial Registration Statement in accordance with the foregoing, the Company will use its best efforts to file with the Commission, as promptly as allowed by Commission or SEC Guidance provided to the Company or to registrants of securities in general, one or more registration statements on Form S-1 or such other form available to register for resale those Registrable Securities that were not registered for resale on the Initial Registration Statement, as amended.


(d)      If: (i) the Initial Registration Statement is not filed on or prior to the Filing Date (if the Company files the Initial Registration Statement without the Holder the opportunity to review and comment on the same as required by Section 3(a) herein, the Company shall be deemed to have not satisfied this clause (i)), or (ii) the Company fails to file with the Commission a request for acceleration of a Registration Statement in accordance with Rule 461 promulgated by the Commission pursuant to the Securities Act, within five (5) Trading Days of the date that the Company is notified (orally or in writing, whichever is earlier) by the Commission that such Registration Statement will not be “reviewed” or will not be subject to further review, or (iii) prior to the effective date of a Registration Statement, the Company fails to file a pre-effective amendment and otherwise respond in writing to comments made by the Commission in respect of such Registration Statement within ten (10) calendar days, after the receipt of comments by or notice from the Commission that such amendment is required in order for such Registration Statement to be declared effective, or (iv) a Registration Statement registering for resale all of the Registrable Securities is not declared effective by the Commission by the Effectiveness Date of the Initial Registration Statement, or (v) after the effective date of a Registration Statement, such Registration Statement ceases for any reason to remain


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continuously effective as to all Registrable Securities included in such Registration Statement, or the Holder are otherwise not permitted to utilize the Prospectus therein to resell such Registrable Securities, for more than ten (10) consecutive calendar days or more than an aggregate of fifteen (15) calendar days (which need not be consecutive calendar days) during any 12-month period (any such failure or breach being referred to as an “ Event ”, and for purposes of clauses (i) and (iv), the date on which such Event occurs, and for purpose of clause (ii) the date on which such five (5) Trading Day period is exceeded, and for purpose of clause (iii) the date which such fifteen (15) calendar day period is exceeded, and for purpose of clause (v) the date on which such ten (10) or fifteen (15) calendar day period, as applicable, is exceeded being referred to as “ Event Date ”), then, in addition to any other rights the Holder may have hereunder or under applicable law, on each such Event Date and on each monthly anniversary of each such Event Date (if the applicable Event shall not have been cured by such date) until the applicable Event is cured, the Company shall pay to each Holder an amount in cash, as partial liquidated damages and not as a penalty, equal to the product of one percent (1.0%) multiplied by the aggregate Subscription Amount paid by the Holder pursuant to the Purchase Agreement.  If the Company fails to pay any partial liquidated damages pursuant to this Section in full within seven days after the date payable, the Company will pay interest thereon at a rate of eighteen percent (18%) per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to the Holder, accruing daily from the date such partial liquidated damages are due until such amounts, plus all such interest thereon, are paid in full. The partial liquidated damages pursuant to the terms hereof shall apply on a daily pro rata basis for any portion of a month prior to the cure of an Event.

 

(e)      If Form S-1 is not available for the registration of the resale of Registrable Securities hereunder, the Company shall (i) register the resale of the Registrable Securities on another appropriate form and (ii) undertake to register the Registrable Securities on Form S-1 as soon as such form is available, provided that the Company shall maintain the effectiveness of the Registration Statement then in effect until such time as a Registration Statement on Form S-1 covering the Registrable Securities has been declared effective by the Commission.


3. Registration Procedures .

 

In connection with the Company’s registration obligations hereunder the Company shall have the following obligations:


(a)    Not less than five (5) Trading Days prior to the filing of each Registration Statement and not less than one (1) Trading Day prior to the filing of any related Prospectus or any amendment or supplement thereto (including any document that would be incorporated or deemed to be incorporated therein by reference), the Company shall (i) furnish to the Holder copies of all such documents proposed to be filed, which documents (other than those incorporated or deemed to be incorporated by reference) will be subject to the review of the Holder, and (ii) cause its officers and directors, counsel and independent registered public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of respective counsel to the Holder, to conduct a reasonable investigation within the meaning of the Securities Act. Notwithstanding the above, the Company shall not be obligated to provide the Holder advance copies of any universal registration statement registering securities in addition to those required hereunder, or any Prospectus prepared thereto. The Company shall not file a


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Registration Statement or any such Prospectus or any amendments or supplements thereto to which the Holder of a majority of the Registrable Securities shall reasonably object in good faith, provided that, the Company is notified of such objection in writing no later than five (5) Trading Days after the Holder has been furnished copies of a Registration Statement or one (1) Trading Day after the Holder have been so furnished copies of any related Prospectus or amendments or supplements thereto. Each Holder agrees to furnish to the Company a completed questionnaire in the form attached to this Agreement as Annex A (a “ Selling Stockholder Questionnaire ”) on a date that is not less than two (2) Trading Days prior to the Filing Date or by the end of the fourth (4 th ) Trading Day following the date on which the Holder receives draft materials in accordance with this Section.


(b)      (i) The Company shall prepare and file with the Commission such amendments, including post-effective amendments, to a Registration Statement and the Prospectus used in connection therewith as may be necessary to keep a Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities, (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and, as so supplemented or amended, to be filed pursuant to Rule 424, (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to a Registration Statement or any amendment thereto and provide as promptly as reasonably possible to the Holder true and complete copies of all correspondence from and to the Commission relating to a Registration Statement (provided that, the Company shall excise any information contained therein which would constitute material non-public information regarding the Company or any of its Subsidiaries), and (iv) comply in all material respects with the applicable provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by a Registration Statement during the applicable period in accordance (subject to the terms of this Agreement) with the intended methods of disposition by the Holder thereof set forth in such Registration Statement as so amended or in such Prospectus as so supplemented.


(c)      If during the Effectiveness Period, the number of Registrable Securities at any time exceeds one hundred percent (100%) of the number of shares of Common Stock then registered in a Registration Statement, then the Company shall file as soon as reasonably practicable, but in any case prior to the applicable Filing Date, an additional Registration Statement covering the resale by the Holder of not less than the number of such Registrable Securities.


(d)      The Company shall notify the Holder of Registrable Securities to be sold (which notice shall, pursuant to clauses (iii) through (vi) hereof, be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made) as promptly as reasonably possible (and, in the case of (i)(A) below, not less than one (1) Trading Day prior to such filing) and (if requested by any such Person) confirm such notice in writing no later than one (1) Trading Day following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to a Registration Statement is proposed to be filed, (B) when the Commission notifies the Company whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing on such Registration Statement,


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and (C) with respect to a Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to a Registration Statement or Prospectus or for additional information, (iii) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose, (v) of the occurrence of any event or passage of time that makes the financial statements included in a Registration Statement ineligible for inclusion therein or any statement made in a Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to a Registration Statement, Prospectus or other documents so that, in the case of a Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (vi) of the occurrence or existence of any pending corporate development with respect to the Company that the Company believes may be material and that, in the determination of the Company, makes it not in the best interest of the Company to allow continued availability of a Registration Statement or Prospectus, provided , however , in no event shall any such notice contain any information which would constitute material, non-public information regarding the Company or any of its Subsidiaries.


(e)      The Company shall use its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order stopping or suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment.

 

(f)      The Company shall furnish to each Holder, without charge, at least one (1) conformed copy of each such Registration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference to the extent requested by such Person, and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission; provided, that any such item which is available on the EDGAR system (or successor thereto) need not be furnished in physical form.


(g)      Subject to the terms of this Agreement, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holder in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto, except after the giving of any notice pursuant to Section 3(d).


(h)      The Company shall cooperate with any broker-dealer through which the Holder proposes to resell its Registrable Securities in effecting a filing with the FINRA Corporate


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Financing Department pursuant to FINRA Rule 5110, as requested by any the Holder, and the Company shall pay the filing fee required by such filing within two (2) Business Days of request therefor.


(i)      Prior to any resale of Registrable Securities by the Holder, the Company shall use its best efforts to register or qualify or cooperate with the selling Holder in connection with the registration or qualification (or exemption from the Registration or qualification) of such Registrable Securities for the resale by the Holder under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder reasonably requests in writing, to keep each registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of the Registrable Securities covered by each Registration Statement; provided, that, the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Company to any material tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction.


(j)      If requested by the Holder, the Company shall cooperate with the Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free, to the extent permitted by the Purchase Agreement, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any the Holder may request.


(k)      Upon the occurrence of any event contemplated by Section 3(d), as promptly as reasonably possible under the circumstances taking into account the Company’s good faith assessment of any adverse consequences to the Company and its stockholders of the premature disclosure of such event, prepare a supplement or amendment, including a post-effective amendment, to a Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither a Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Company notifies the Holder in accordance with clauses (iii) through (vi) of Section 3(d) above to suspend the use of any Prospectus until the requisite changes to such Prospectus have been made, then the Holder shall suspend use of such Prospectus. The Company will use its best efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable. The Company shall be entitled to exercise its right under this Section 3(k) to suspend the availability of a Registration Statement and Prospectus, subject to the payment of partial liquidated damages otherwise required pursuant to Section 2(d), for a period not to exceed sixty (60) calendar days (which need not be consecutive days) in any twelve (12)-month period.


(l)      The Company shall comply with all applicable rules and regulations of the Commission.


(m)    The Company shall use its best efforts to maintain eligibility for use of Form S-1 (or any successor form thereto) for the registration of the resale of Registrable Securities.


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(n)    The Company may require each selling Holder to furnish to the Company a certified statement as to the number of shares of Common Stock beneficially owned by the Holder and, if required by the Commission, the natural persons thereof that have voting and dispositive control over the shares. During any periods that the Company is unable to meet its obligations hereunder with respect to the registration of the Registrable Securities solely because any Holder fails to furnish such information within three Trading Days of the Company’s request, any liquidated damages that are accruing at such time as to the Holder only shall be tolled and any Event that may otherwise occur solely because of such delay shall be suspended as to the Holder only, until such information is delivered to the Company.

 

4. Registration Expenses . All fees and expenses incident to the performance of or compliance with, this Agreement by the Company shall be borne by the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses of the Company’s counsel and independent registered public accountants) (A) with respect to filings made with the Commission, (B) with respect to filings required to be made with any Trading Market on which the Common Stock is then listed for trading, (C) in compliance with applicable state securities or Blue Sky laws reasonably agreed to by the Company in writing (including, without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities) and (D) if not previously paid by the Company in connection with an Issuer Filing, with respect to any filing that may be required to be made by any broker through which the Holder intends to make sales of Registrable Securities with FINRA pursuant to FINRA Rule 5110, so long as the broker is receiving no more than a customary brokerage commission in connection with such sale, (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. In no event shall the Company be responsible for any broker or similar commissions of any Holder or, except to the extent provided for in the Transaction Documents, any legal fees or other costs of the Holder.


5. Indemnification .


(a)       Indemnification by the Company . The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, members, partners, agents, brokers (including brokers who offer and sell Registrable Securities as principal as a result of a pledge or any failure to perform under a margin call of Common Stock), investment advisors and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each


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of them, each Person who controls any the Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, members, stockholders, partners, agents and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “ Losses ”), as incurred, arising out of or relating to (1) any untrue or alleged untrue statement of a material fact contained in a Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading or (2) any violation or alleged violation by the Company of the Securities Act, the Exchange Act or any state securities law, or any rule or regulation thereunder, in connection with the performance of its obligations under this Agreement, except to the extent, but only to the extent, that (i) such untrue statements or omissions are based solely upon information regarding the Holder furnished in writing to the Company by the Holder expressly for use therein, or to the extent that such information relates to the Holder or the Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by the Holder expressly for use in a Registration Statement, such Prospectus or in any amendment or supplement thereto or (ii) in the case of an occurrence of an event of the type specified in Section 3(d)(iii)-(vi), the use by the Holder of an outdated, defective or otherwise unavailable Prospectus after the Company has notified the Holder in writing that the Prospectus is outdated, defective or otherwise unavailable for use by the Holder and prior to the receipt by the Holder of the Advice contemplated in Section 6(d), but only if and to the extent that following the receipt of the Advice the misstatement or omission giving rise to such Loss would have been corrected. The Company shall notify the Holder promptly of the institution, threat or assertion of any Proceeding arising from or in connection with the transactions contemplated by this Agreement of which the Company is aware. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified person and shall survive the transfer of any Registrable Securities by any of the Holder in accordance with Section 6(h).


(b)       Indemnification by Holder . Each Holder shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, to the extent arising out of or based solely upon: (x) the Holder’s failure to comply with any applicable prospectus delivery requirements of the Securities Act through no fault of the Company or (y) any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus, or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading (i) to the extent, but only to the extent, that such untrue statement or omission is contained in any


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information so furnished in writing by the Holder to the Company expressly for inclusion in such Registration Statement or such Prospectus or (ii) to the extent, but only to the extent, that such information relates to the Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by the Holder expressly for use in a Registration Statement, such Prospectus or in any amendment or supplement thereto or (iii) in the case of an occurrence of an event of the type specified in Section 3(d)(iii)-(vi), to the extent, but only to the extent, related to the use by the Holder of an outdated, defective or otherwise unavailable Prospectus after the Company has notified the Holder in writing that the Prospectus is outdated, defective or otherwise unavailable for use by the Holder and prior to the receipt by the Holder of the Advice contemplated in Section 6(d), but only if and to the extent that following the receipt of the Advice the misstatement or omission giving rise to such Loss would have been corrected. In no event shall the liability of any selling Holder under this Section 5(b) be greater in amount than the dollar amount of the net proceeds received by the Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation.


(c)       Conduct of Indemnification Proceedings . If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “ Indemnified Party ”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “ Indemnifying Party ”) in writing, and the Indemnifying Party shall have the right to assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that, the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have materially and adversely prejudiced the Indemnifying Party.


An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses, (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding, or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and counsel to the Indemnified Party shall reasonably believe that a material conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and the reasonable fees and expenses of no more than one separate counsel shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld or delayed. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.


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Subject to the terms of this Agreement, all reasonable fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten Trading Days of written notice thereof to the Indemnifying Party; provided, that, the Indemnified Party shall promptly reimburse the Indemnifying Party for that portion of such fees and expenses applicable to such actions for which such Indemnified Party is finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) not to be entitled to indemnification hereunder.


(d)       Contribution . If the indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then each Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in this Agreement, any reasonable attorneys’ or other fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms.


The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 5(d), no Holder shall be required to contribute pursuant to this Section 5(d), in the aggregate, any amount in excess of the amount by which the net proceeds actually received by the Holder from the sale of the Registrable Securities subject to the Proceeding exceeds the amount of any damages that the Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.


The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.


6. Miscellaneous .


(a)      Remedies . In the event of a breach by the Company or by the Holder of any of their respective obligations under this Agreement, each Holder or the Company, as the case may be, in


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addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, shall be entitled to specific performance of its rights under this Agreement. Each of the Company and each Holder agrees that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall not assert or shall waive the defense that a remedy at law would be adequate.


(b)       No Piggyback on Registration Statement . Neither the Company nor any of its security holders (other than the Holder in such capacity pursuant hereto) may include securities of the Company in the Registration Statement filed hereunder other than the Registrable Securities and the securities described in that certain Registration Rights Agreement, dated November 27, 2017, as amended, between the Company and the Purchaser.


(c)       Compliance . Each Holder covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it (unless an exemption therefrom is available) in connection with sales of Registrable Securities pursuant to a Registration Statement.


(d)       Discontinued Disposition . By its acquisition of Registrable Securities, each Holder agrees that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(d)(iii) through (vi), the Holder will forthwith discontinue disposition of such Registrable Securities under a Registration Statement until it is advised in writing (the “ Advice ”) by the Company that the use of the applicable Prospectus (as it may have been supplemented or amended) may be resumed. The Company will use its best efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable. The Company agrees and acknowledges that any periods during which the Holder is required to discontinue the disposition of the Registrable Securities hereunder shall be subject to the provisions of Section 2(d).


(e)       Piggy-Back Registrations . If, at any time during the Effectiveness Period, there is not an effective Registration Statement covering all of the Registrable Securities and the Company shall determine to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with the Company’s stock option or other employee benefit plans, then the Company shall deliver to each Holder a written notice of such determination and, if within fifteen (15) days after the date of the delivery of such notice, any the Holder shall so request in writing, the Company shall include in such registration statement all or any part of such Registrable Securities the Holder requests to be registered; provided , however , that the Company shall not be required to register any Registrable Securities pursuant to this Section 6(e) that are eligible for resale pursuant to Rule 144 (without volume restrictions or current public information requirements) promulgated by the Commission pursuant to the Securities Act or that are the subject of a then effective Registration Statement.


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(f)       Amendments and Waivers . The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holder of 67% or more of the then outstanding Registrable Securities (for purposes of clarification, this includes any Registrable Securities issuable upon exercise of any Warrants). If a Registration Statement does not register all of the Registrable Securities pursuant to a waiver or amendment done in compliance with the previous sentence, then the number of Registrable Securities to be registered for each Holder shall be reduced pro rata among all Holder and each Holder shall have the right to designate which of its Registrable Securities shall be omitted from such Registration Statement. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of the Holder or some Holder and that does not directly or indirectly affect the rights of other Holder may be given only by the Holder or Holder of all of the Registrable Securities to which such waiver or consent relates; provided , however , that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the first sentence of this Section 6(f). No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless the same consideration also is offered to all of the parties to this Agreement.


(g)       Notices . Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be delivered as set forth in the Purchase Agreement.


(h)       Successors and Assigns . This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder. The Company may not assign (except by merger) its rights or obligations hereunder without the prior written consent of all of the Holder of the then outstanding Registrable Securities. Each Holder may assign their respective rights hereunder in the manner and to the Persons as permitted under Section 5.7 of the Purchase Agreement.


(i)       No Inconsistent Agreements . Neither the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Holder in this Agreement or otherwise conflicts with the provisions hereof. Except as set forth on Schedule 6(i) , neither the Company nor any of its Subsidiaries has previously entered into any agreement granting any registration rights with respect to any of its securities to any Person that have not been satisfied in full.


(j)       Execution and Counterparts . This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing


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(or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.


(k)       Governing Law . All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be determined in accordance with the provisions of the Purchase Agreement.


(l)       Cumulative Remedies . The remedies provided herein are cumulative and not exclusive of any other remedies provided by law.


(m)       Severability . If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.


(n)       Headings . The headings in this Agreement are for convenience only, do not constitute a part of the Agreement and shall not be deemed to limit or affect any of the provisions hereof.


(o)       Independent Nature of Holder’ Obligations and Rights . The obligations of each Holder hereunder are several and not joint with the obligations of any other Holder hereunder, and no Holder shall be responsible in any way for the performance of the obligations of any other Holder hereunder. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to constitute the Holder as a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Holder are in any way acting in concert or as a group or entity with respect to such obligations or the transactions contemplated by this Agreement or any other matters, and the Company acknowledges that the Holder are not acting in concert or as a group, and the Company shall not asset any such claim, with respect to such obligations or transactions. Each Holder shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Holder to be joined as an additional party in any proceeding for such purpose. The use of a single agreement with respect to the obligations of the Company contained was solely in the control of the Company, not the action or decision of any Holder, and was done solely for the convenience of the Company and not because it was required or requested to do so by any Holder. It is expressly understood and agreed that each provision contained in this Agreement is between the Company and the Holder, solely, and not between the Company and the Holder collectively and not between and among Holder.


********************

 

(Signature Pages Follow)

 

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


BLACK CACTUS GLOBAL, INC.,



BY:  _____________________________

Name:

Title:



[SIGNATURE PAGE OF HOLDER FOLLOWS]



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[SIGNATURE PAGE OF HOLDER TO RRA]


Name of Holder: Bellridge Capital, L.P.

 

  

 

Signature of Authorized Signatory of Holder :

 

  

 

Name of Authorized Signatory:

 

  

 

Title of Authorized Signatory:

 


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ANNEX A


Selling Stockholder Questionnaire


The undersigned beneficial owner of common stock (the “ Registrable Securities ”) of BLACK CACTUS GLOBAL, INC., A FLORIDA CORPORATION/ F/K/A ENVOY GROUP CORP. (the “ Company ”), understands that the Company has filed or intends to file with the Securities and Exchange Commission (the “ Commission ”) a registration statement (the “ Registration Statement ”) for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the “ Securities Act ”), of the Registrable Securities, in accordance with the terms of the Registration Rights Agreement (the “ Registration Rights Agreement ”) to which this document is annexed.  A copy of the Registration Rights Agreement is available from the Company upon request at the address set forth below.  All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Registration Rights Agreement.


Certain legal consequences arise from being named as a selling stockholder in the Registration Statement and the related prospectus.  Accordingly, Holder and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling stockholder in the Registration Statement and the related prospectus.


NOTICE


The undersigned beneficial owner (the “ Selling Stockholder ”) of Registrable Securities hereby elects to include the Registrable Securities owned by it in the Registration Statement.


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The undersigned hereby provides the following information to the Company and represents and warrants that such information is accurate:


QUESTIONNAIRE


1.         Name.


(a)         Full Legal Name of Selling Stockholder


 

 



(b)         Full Legal Name of Registered Holder (if not the same as (a) above) through which Registrable Securities are held:


 

 



(c)         Full Legal Name of Natural Control Person (which means a natural person who directly or indirectly alone or with others has power to vote or dispose of the securities covered by this Questionnaire):


 

 



2.          Address for Notices to Selling Stockholder:


 

 

 

 

 

 

Telephone:

 

Fax:

 

Contact Person:

 


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3.  Broker-Dealer Status:


 

(a)

Are you a broker-dealer?


Yes   [_]          No   [_]


 

(b)

If “yes” to Section 3(a), did you receive your Registrable Securities as compensation for investment banking services to the Company?


Yes   [_]          No   [_]


 

Note:

If “no” to Section 3(b), the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement.


 

(c)

Are you an affiliate of a broker-dealer?


Yes   [_]          No   [_]


 

(d)

If you are an affiliate of a broker-dealer, do you certify that you purchased the Registrable Securities in the ordinary course of business, and at the time of the purchase of the Registrable Securities to be resold, you had no agreements or understandings, directly or indirectly, with any person to distribute the Registrable Securities?


Yes   [_]          No   [_]


 

Note:

If “no” to Section 3(d), the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement.


4.  Beneficial Ownership of Securities of the Company Owned by the Selling Stockholder.


Except as set forth below in this Item 4, the undersigned is not the beneficial or registered owner of any securities of the Company other than the securities issuable pursuant to the Purchase Agreement.


 

(a)

Type and Amount of other securities beneficially owned by the Selling Stockholder:


 

 

 

 

 

 


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5.  Relationships with the Company:


Except as set forth below, neither the undersigned nor any of its affiliates, officers, directors or principal equity Holder (owners of 5% of more of the equity securities of the undersigned) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years.


State any exceptions here:


 

 

 

 

 

 


The undersigned agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof at any time while the Registration Statement remains effective.


By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to Items 1 through 5 and the inclusion of such information in the Registration Statement and the related prospectus and any amendments or supplements thereto.  The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of the Registration Statement and the related prospectus and any amendments or supplements thereto.


IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent.


Date:

 

 

Beneficial Owner:

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

 

 

Title:

 


PLEASE FAX A COPY (OR EMAIL A .PDF COPY) OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:


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Exhibit 23.1




CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


We consent to the inclusion in the Registration Statement of Black Cactus Global, Inc. (f/k/a Envoy Group Corp.) on Form S-1, of our report dated August 11, 2017, with respect to the financial statements of Black Cactus Global, Inc. for the years ended April 30, 2017 and 2016 and of our report dated June 6, 2017 with respect to the financial statements of Black Cactus Global, Inc. for the years ended April 30, 2016 and 2015. We also consent to the reference of our firm under the caption “Experts” in the Registration Statement.



/s/ Manning Elliott LLP


Vancouver, BC

April 24, 2018