As filed with the Securities and Exchange Commission on June 22, 2018
File No. 001-
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10
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GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of
the Securities Exchange Act of 1934
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Beyond Commerce, Inc.
(Exact name of registrant as specified in its charter)
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Nevada |
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98-0512515 |
(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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3773 Howard Hughes Pkwy, Suite 500 Las Vegas, Nevada |
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89169 |
(Address of principal executive offices) |
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(Zip Code) |
(Registrant’s telephone number, including area code)
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Copies of communications to:
Darrin M. Ocasio, Esq. |
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George Pursglove |
Sichenzia Ross Ference Kesner LLP |
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President, Chief Executive Officer |
1185 Avenue of the Americas, 37 th Fl. |
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3773 Howard Hughes Parkway, Suite 500 |
New York, New York 10036 |
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Las Vegas, Nevada 89169 |
(212) 930-9700 |
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(702) 675-8022 |
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Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001 per share
Title of each class to be so registered
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Securities to be registered under Section 12(b) of the Act:
None
Securities to be registered under Section 12(g) of the Act:
Common Stock $0.001 Par Value
(Title of Class)
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 þ |
(Do not check if smaller reporting company) |
Emerging growth company ¨ |
If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Table of Contents
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Security Ownership of Certain Beneficial Owners and Management |
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Item 5. |
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Item 6. |
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Item 7. |
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Certain Relationships and Related Transactions, and Director Independence |
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Item 8. |
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Item 9. |
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Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters |
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Item 10. |
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Item 11. |
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Item 12. |
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Item 13. |
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Item 14. |
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Changes and Disagreements with Accountants on Accounting and Financial Disclosure |
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Item 15. |
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F-2 |
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This registration statement on Form 10 contains “forward-looking statements.” These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. We use the words “anticipate”, “believe”, “could”, “design,” “estimate”, “expect”, “intend”, “forecast,” “goal,” “may”, “plan”, “potential”, “predict”, “project”, “should”, “target,” “will,” “would” or the negatives or other tense of such terms and other similar expressions intended to identify forward-looking statements. Forward-looking statements relate to future events or future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels or activity, performance or achievements expressed or implied by these forward-looking statements. These risks and other factors include those listed under Item 1A. Risk Factors and elsewhere in this registration statement. These forward-looking statements include, among other things, statements relating to:
· our anticipated growth strategies and our ability to manage the expansion of our business operations effectively;
· our ability to keep up with rapidly changing technologies and evolving industry standards;
· our ability to source our needs for skilled employees;
· the loss of key members of our senior management; and
· uncertainties with respect to the legal and regulatory environment surrounding our technologies.
If any of these risks and uncertainties materialize, or if the assumptions underlying any of our forward-looking statements prove incorrect, then our actual results, level of activity, performance or achievements may be materially different from what we expect. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if additional information becomes available in the future. Any forward-looking statement speaks only as of the date on which it is made.
Unless otherwise specified, the terms “we,” “us,” “our,” “Company,” “BYOC” and “Beyond Commerce” refer to Beyond Commerce, Inc. and its consolidated subsidiaries.
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About Beyond Commerce
We plan to operate within two markets: (1) the Business-to-Business Internet Marketing Technology and Services market and (2) the Information Management market. Our goal is to develop proprietary software for digital transformation of clients’ existing content. We believe our planned platform, strategy, and suite of software products and services will provide secure and scalable information control solutions for global companies. We believe our planned software will assist organizations in finding, utilizing, and sharing business information between devices in ways that are intuitive, efficient and productive. We believe that our business model will ensure that information will remain secure and private, as necessitated by the current market climate.
In addition, BYOC plans to provide solutions which facilitate the exchange of information and data transactions between supply chain participants, such as manufacturers, retailers, distributors and financial institutions. The goal is to automate potential client internal processes thereby increasing productivity and lowering costs. BYOC plans to develop proprietary algorithms which it will embed in the planned software to enable clients to access data and gain insight into their business, through that data, leading to improved internal decision making.
BYOC plans to offer the proposed software through traditional on-premise solutions, Software as a Service (“SaaS”), as a cloud based solution, or a combination of on-premise, SaaS or cloud based solutions. We will work with our clients and their needs as to which delivery method they prefer. We believe giving clients a choice and flexibility will help us to obtain long-term client value.
Corporate History and Background
Beyond Commerce was incorporated under the laws of the State of Nevada on, January 12, 2006 under the name “Reel Estate Services, Inc.” for the purposes of operating as a media hub for high traffic web properties, utilizing social networking and e-commerce.
On December 28, 2007, the Company entered into an agreement and plan of reorganization with its former shareholder and former sole officer and director, BOOMj.com, Inc. (“BOOMj”), and Time Lending Sub, Inc., a subsidiary of the Company (“Sub”) pursuant to which Sub merged with and into BOOMj. As a result of the merger, the business of BOOMj became the business of the Company. BOOMj operated as a multi-faceted niche portal and social networking site targeting baby boomers and the Generation Jones demographics. Subsequently on January 14, 2008, the Company changed its name to “BOOMj, Inc.”
BOOMj’s operations migrated into an e-commerce platform known as i-SUPPLY, an online storefront that offered easy to use, fully customizable e-commerce services, and revenue solutions for any third-party website large or small, and hosted local ads, providing extensive reach for our proprietary advertising partner network platform. On February 23, 2009, the Company changed its name to “Beyond Commerce, Inc.” and its ticker symbol to “BYOC” in order to better reflect its business strategy.
During the third quarter of 2009 the Company formed another subsidiary, KaChing KaChing, Inc., a Nevada corporation (“KaChing”). KaChing operated an e-commerce platform which provided a complete turn-key e-commerce solution to third-party store owners. KaChing allowed individual online store owners the ability to create, manage and earn money from product sales generated from their individual webstores. On April 22, 2010, KaChing merged out of the Company and into Duke Mining Company, Inc. to become a new public company.
As a result of the merger transaction, KaChing ceased to be a wholly-owned subsidiary, and BYOC’s interest in the outstanding capital stock of KaChing was reduced to 20.8%. On April 17, 2013 Beyond Commerce’s ownership in KaChing was transferred back to Benjamin Mayer of the firm Mayer & Associates. During 2015, the Company wrote off its entire ownership stake in KaChing and used it as a tax loss carry-forward.
On October 9, 2009, LocalAdLink Inc., a wholly-owned subsidiary of the Company (“LocalAdLink”) sold its LocalAdLink Software (the “Software”) and all of their related assets, including the rights to the name LocalAdLink, the LocalAdLink trademark, the website domain “www.LocalAdLink.com” and a local search directory and advertising network that brings local advertising to geo-targeted consumers. The Company continued to sell advertising services as it had prior to the inception of LocalAdLink, Inc., on a different scale and with a greater emphasis on business-to-
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business sales. As of December 31, 2017, the Company decided to close and remove this subsidiary from its financials going forward.
During the second quarter 2010, the Company entered into a share exchange agreement with all of the shareholders of Adjuice, Inc. (“Adjuice”), an online media and marketing company. Pursuant to the agreement, the Company issued 5,100,000 shares of its common stock in exchange for all of the issued and outstanding stock of Adjuice. The purchase of this transaction was to enhance the Company’s presence in the Ad Networking business. The Adjuice network distributed leads to over 350 retail clients along seven major sales verticals, all offering top payouts. Adjuice owned and managed over 120 sites, all optimized for brand recognition and conversion performance. Adjuice had a solid infrastructure for selling its own products, targeting advertisers, publishers and their related downstream partners with Adjuice’s tailored lead generation programs. As of December 31, 2017, the Company decided to close and remove this subsidiary from its financials going forward.
On March 31, 2011, the Company acquired AIM Connection, Inc., a leading direct sales affiliate, SEO provider, social network and website generator. AIM Connection combines Internet marketing techniques and automation software, and allows all aspects of the marketing process to be controlled and managed by the client. As of December 31, 2017, the Company decided to close and remove this subsidiary from its financials going forward.
On July 28, 2011, a judgement with civil case number: 2:08-cv-00496-KJD-LRL was entered in favor of George Pursglove, the Company’s current CEO, from his counter suit against BOOMj.com, a wholly-owned subsidiary of Beyond Commerce, Inc. The judgement was in the amount of $20,775 for damages as to the claim for failure to pay wages, $3,000,000 for damages as to the conversion claim and $3,000,000 for punitive damages for a total of $6,020,775 (the “July Judgment”). The July Judgment accrues interest at a rate of 5.286% per annum. As of March 31, 2018, the total amount of principal and interest was $7,812,426.
In 2017, the Company reevaluated the commercial viability of its previous operations of all of the aforementioned subsidiaries and determined that many of these businesses were no longer viable. The Company discontinued the operations of the aforementioned subsidiaries as of December 31, 2017.
On April 27, 2017, the Company held a Special Meeting of Stockholders where the stockholders approved and ratified, among other things: (i) the reinstatement of Beyond Commerce with the Secretary of State of the State of Nevada and the appointment of Mr. Pursglove as sole director; and (ii) the exchange of a portion of the July Judgment against Beyond Commerce into shares of common stock of the Company
On May 1, 2017, the Company issued Mr. Pursglove 1,556,632 shares of common stock, par value $0.001 per share, reducing the July Judgment by $12,453. On the same date, the Company authorized the designation of its “blank check” preferred stock, par value $0.001 per share, as Series A Convertible Preferred Stock (the “Series A Preferred Stock”).
Effective July 27, 2017, the Company filed a certificate of designation with the Secretary of State of the State of Nevada, pursuant to which it designated the Series A Preferred Stock. Each share of Series A Preferred Stock is convertible into one share of common stock. In addition, each share of Series A Preferred Stock entitles its holder to (i) cumulative, non-participating dividends in preference and priority to any declaration or payment of a dividend on any of the Company’s common stock, at a rate of 12% per annum, and (ii) three times (3x) voting preference over common stock. On the same date, the Company issued 250,000,000 shares of its Series A Preferred Stock to Mr. Pursglove, further reducing the award under the July Judgment owed to Mr. Pursglove by $250,000.
Business Overview and Strategy
We plan to focus on the acquisition of "big data" companies in the Business-to-Business (“B2B”) Internet Marketing Technology and Services (“IMT&S”) market and the Information Management (“IM”) market.
Market Dynamics IMT&S Segment
Market Opportunity : the B2B IMT&S industry is a highly fragmented $345.5 billion global market, with $195 billion derived from the United States, according to the December 2017 Magna Advertising Forecasts Winter Update.
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§ INTEGRATED SEARCH : Data from IBISWorld Search Engines – US Market Research Report, November 2017, indicates that the revenue for this sector was approximately $60 billion last year following five years of 8.8% average growth.
§ MARKET RESEARCH : this global industry segment generated $44.5 billion in revenues last year, as reported from data derived from Statista Business Services – Market Research Industry -- Statistics.
§ BUSINESS BIG DATA ANALYTICS : Industry wide revenues were $122 billion in 2015 with projected revenues reaching $187 Billion by 2019 according to InformationWeek’s Big Data.
§ INTERNET PUBLISHING AND BROADCASTING : $119 billion in revenues were generated last year following annual growth of 14.8% over the previous five years, as shown by data provided by IBISWorld Search Engines – US Market Research Report, November 2017.
Our business objective is to develop, acquire, and deploy disruptive strategic software technology and market-changing business models through selling our own products and the acquisitions of existing companies. We plan to offer a cohesive global digital product and services platform to provide our clients with a single point of contact for all their IMT&S and IM initiatives. Our proposed all-inclusive platform will result in substantial organic growth potential generated through cross-selling and upselling opportunities and future expansion possibilities for BYOC.
To further our business objectives, on December 14, 2017, we entered into an agreement with Service 800 Inc., a Minnesota corporation (“Service 800”) and the sole shareholder of Service 800 (the “Shareholder”), pursuant to which we have agreed to acquire all of the issued and outstanding shares of common stock of Service 800 from the Shareholder (the “Transaction”). Service 800 operates as a premium provider of Customer Feedback Management Platforms to their Fortune 500 and 1000 clients on a global basis. Service 800 provides survey authoring, response rates, feedback types and data analysis on their proprietary, cloud based, automated and centralized platform. Service 800 has currently 40 full time employees that provide services to 130 companies and 300 service organizations. Service 800’s current operations and strategic business plan is to further develop its marketing and Customer Experience platform to use within the framework of its current Fortune 500 and 1000 clients.
No assurance can be given that we will be successful in completing this Transaction or that we will be successful in realizing the anticipated strategic benefits of the Transaction.
Products and Services Overview
Our goal is to help companies and organizations derive value from their information. To do this, we intend to offer services and solutions such as Content Services, Business Process Management, Customer Experience Management, Discovery, Business Network, and Analytics.
With our planned products and services, we plan to deliver our customers the following::
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Increased compliance and information governance resulting in reduced exposure to risk of regulatory sanctions related to how information is handled and protected; |
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Improved operating efficiency through process digitization and automation; |
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Better customer engagement through improved and integrated digital experiences and content delivery; |
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Lower cost of electronic storage and management of information through improved classification and archiving strategies; |
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Reduced infrastructure costs due to, among other factors, legacy decommissioning capabilities of BYOC and cloud and hosted services deployment models; |
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Improved innovation, productivity and time-to-market as a result of letting employees, trading partners and customers work with information and collaborate in ways which are intuitive, automated, and flexible; and |
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Increased revenue streams with the enablement of easy expansion across new channels and, ultimately, new markets. |
Content Services
We plan to facilitate content services with an integrated set of technologies to allow customers to manage information throughout the content services lifecycle and improve business productivity, all while mitigating the risk and controlling the costs of growing volumes of data. We intend to make our content services solutions available via on-premise, SaaS and increasingly cloud-based solutions, which will include next-generation SaaS platform for content services. The proposed SaaS platform will be comprised of a set of consumer-grade, end-user productivity applications that enable users to access, share, create and collaborate on content, across any device.
Business Process Management (BPM)
We believe our planned BPM solution will provide software capabilities for analyzing, automating, monitoring and optimizing structured business processes that typically fall outside the scope of existing enterprise systems. We believe our envisioned BPM solutions will help empower employees, customers and partners.
Our proposed BPM solutions will include 260 Process Suit and 260 Process Solutions.
· 260 Process Suite will put businesses in direct control of its processes and fosters alignment between business and Information Technology (IT), resulting in tangible benefits for both. Our Process Suite will offer a single platform that can be accessed simply through a web browser and is built from the ground up to be truly multi-tenant and support all of the deployment models required for on-premise, private or public clouds.
· 260 Process Suite Solutions will be packaged applications built on the Process Suite and address specific business problems. For some of these solutions, we plan to include Contract Management, Cloud Brokerage Services, Digital Media Supply Chain, and Enterprise App Store, to name a few.
Customer Feedback Management (CFM)
We believe our planned CFM solutions will generate improved time-to-market by giving customers, employees, and channel partners personalized and engaging experiences.
We intend our proposed CFM solutions to will include:
· Web Content Management will provide software for authoring, maintaining, and administering websites designed to offer a “visitor experience” that integrates content from internal and external sources.
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· Digital Asset Management will provide a set of content management services for browsing, searching, viewing, assembling, and delivering rich media content such as images, audio and video.
· Customer Communications Management Software will make it possible for organizations to process and deliver highly personalized documents in paper or electronic format rather than a “one message fits all” approach.
· Social Software will help companies “socialize” their web presence by adding blogs, wikis, ratings and reviews, and build communities for public websites and employee intranets.
· Portal which will enable organizations to aggregate, integrate and personalize corporate information and applications and provide a central, contextualized, and personalized view of information for executives, departments, partners, and customers.
Customer Experience CX
We believe our planned CX solutions will help customers organize and visualize all relevant content to enable business users to quickly locate information in order to make better-informed decisions based on timely, contextualized information.
Our proposed CX solutions shall include:
· Search addresses information security and productivity requirements by securely indexing all information for fast retrieval and real-time monitoring.
· Smart Navigation improves the end-user experience of websites by enabling intuitive visual exploration of site content through contextual navigation.
· Auto-Classification improves the quality of information governance through intelligent metadata extraction and accurate classification of information.
· CX Silos makes it possible for organizations to deal with the issue of so-called “information silos” resulting from, for instance, numerous disconnected information sources across the enterprise. Using a framework of adapters, an information access platform allows organizations to consolidate, decommission, archive and migrate content from virtually any system or information repository.
Business Network (BN)
Our proposed BN solution will be a set of offerings that facilitate efficient, secure, and compliant exchange of information inside and outside the enterprise.
Our proposed BN solutions will include:
· Business-to-Business (B2B) Integration services that help optimize the reliability, reach, and cost efficiency of an enterprise's electronic supply chain while reducing costs, infrastructure and overhead.
· Secure Messaging helps to share and synchronize files across an organization, across teams and with business partners, while leveraging the latest smartphones and tablets to provide information on the go without sacrificing information governance or security.
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BYOC Analytics
We believe our proposed BYOC Analytics solutions in which we plan to develop will help organizations gain insight from their structured and unstructured data, make predictions, visualize and report on business processes, customer interactions and a myriad of other sources of information. This analytical data can then be used to refine business processes or content utilization, make predictions, identify trends, improve customer service or be applied in a multitude of different scenarios.
Our planned BYOC Analytics solutions include:
· Embedded Reporting and Visualization which will be used to embed reports and visualizations of data in an array of applications, including the BYOC EIM Suites and many third-party data sources.
· Big Data Analysis is the analysis of large sets of information from databases, files, Enterprise Resource Planning (ERP) and Customer Relationship Management (CRM) systems and a variety of other sources. Our planned modeling and predictive algorithms may be applied to this data using BYOC solutions to extract meaningful insight or predictive models to solve customer problems or help with operational insight.
Our Business Strategy
Growth
We plan to grow our business and strengthen our future service offerings in the IMT&S market through product development, strategic acquisitions and integration and organic growth. We are a value-oriented and disciplined acquirer. Currently we are in the process of identifying potential acquisitions of companies in the IMT&S markets. As of the date of this registration statement, we have executed two non-binding letters of intent for the potential acquisition of two companies (“LOIs”), and are currently in the due diligence process. While acquiring companies that operate complementary businesses will be one of our leading growth drivers, our growth strategy also includes organic growth through product and software innovation. We plan to create sustained value by expanding distribution and adding value through up-selling and cross-selling across our planned multiple proprietary marketing platforms to our future customers. We believe our ability to leverage our global presence will be helpful to our ability to grow organically.
We plan on acquiring operating companies that will help us provide a well-rounded product line to our future customers. We believe that such acquisitions will be our primary driver to growth, similar to high-performing conglomerates. By focusing on these acquisitions and the integration of niche businesses, we believe this will well position us to incorporating them into our existing platforms and technology services, ultimately allowing us to offer future customers a full suite of software solutions and services.
We have developed a philosophy, which we refer to as “The Beyond Commerce Business System”, that is designed to create value by leveraging a clear set of operational mandates for integrating newly acquired companies and assets. We see our ability to successfully integrate acquired companies and assets into our business as a strength and pursuing strategic acquisitions is an important aspect to our growth strategy. However, no assurance can be given that we will be successful in consummating such acquisitions or that we will be successful in realizing anticipated strategic benefits of such acquisitions.
Funding Agreements
On February 13, 2018, we entered into a financial advisory agreement with Maxim Group, LLC a leading full-service investment banking, securities and wealth management firm (“Maxim”), pursuant to which Maxim will provide certain advisory services, including strategic corporate planning, financial advisory and investment banking services. On May 31, 2018, we entered into a separate financial advisory agreement with Maxim, which effectively expanded the arrangement to include Maxim’s provision of mergers and acquisitions services, to include the sourcing of and negotiation with potential targets. Pursuant to the agreement, Maxim will assist in BYOC’s global expansion plan, and accelerate product growth and innovation. Additionally, Maxim, will among other things, assist the Company in its efforts to become a fully reporting company under Securities and Exchange Commission guidelines and also advise the Company with respect to its efforts to list on a national securities exchange.
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On March 27, 2018, we secured a seventeen (17) month non-dilutive bridge loan in the principal amount of $1 million through Chicago Venture Partners. Within the bridge loan certain milestones must be met, including the Company’s successful registration with the SEC via a Form 10 with audited financials. Currently the Company has no additional commitment for either a debt or equity funding from any source.
Potential Product Revenues
Our forecasted business will consist of four revenue streams: (1) software license; (2) cloud services and subscriptions; (3) customer support; and (4) professional services.
License
Our forecasted license revenues will consist of fees earned from the licensing of software products to our future customers. We believe that license revenues will be impacted by the strength of general economic and industry conditions, the competitive strength of our future software offerings, and our potential acquisitions. A potential customer’s decision to license our software products often involves a comprehensive implementation process across the customer’s network or networks and the licensing and implementation of our planned software products may entail a significant commitment of resources by prospective customers.
Cloud Services and Subscriptions
Our forecasted cloud based services and subscription revenues will consist of (i) software as a service offerings, (ii) managed service arrangements and (iii) subscription revenues relating to on-premise offerings. We believe these offerings will allow our potential customers to transmit a variety of content between various mediums and to securely manage enterprise information without the commitment of investing in related hardware infrastructure.
In addition, we plan to offer B2B integration solutions, such as messaging services, and managed services. Messaging services will (i) allow for the automated and reliable exchange of electronic transaction information, such as purchase orders, invoices, shipment notices and other business documents, among businesses worldwide, and (ii) provide an end-to-end fully outsourced B2B integration solution to our customers, including program implementation, operational management, and customer support. We believe these planned services will enable customers to effectively manage the flow of electronic transaction information with their trading partners and reduce the complexity of disparate standards and communication protocols.
Customer Support
We plan on integrating our proposed customer support offering to customers together with the purchase of a license of our future enterprise information management software products. This customer support will typically renew on an annual basis; customer support revenues will be a sizeable portion of total revenue, as they are with our many of our competitors. Through our planned customer support programs, customers will receive access to software upgrades, a knowledge base, discussions, product information, and an online mechanism to post and review trouble issues. Additionally, our planned customer support teams will handle questions on the use, configuration, and functionality of our products and can help identify software issues, develop solutions, and document enhancement requests for consideration in future product releases.
Professional Service and Other
We plan to provide consulting and learning services to customers and generally these services will relate to the implementation, training and integration of our licensed product offerings into the customer's systems.
We believe our planned consulting services will help customers build solutions that will enable them to leverage their investments in our technology and in existing enterprise systems. Implementation of these services will range from simple modifications to meet specific departmental needs to enterprise applications that will integrate with multiple existing systems.
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Our learning services advisors will analyze our customers' education and training needs, focusing on key learning outcomes and timelines, with a view to creating an appropriate education plan for the employees of our customers who work with our products. Education plans will be designed to be flexible and can be applied to any phase of implementation: pilot, roll-out, upgrade or refresher. Our learning services will employ a blended approach by combining mentoring, instructor-led courses, webinars, eLearning and potentially, focused workshops.
Planned Acquisitions
We believe our future competitive position in the marketplace will be dependent upon our ability to maintain a complex and evolving array of technologies, products, services and capabilities. Considering the continually evolving marketplace in which we intend to operate, we plan to regularly evaluate acquisition opportunities within the IMT&S market and at any time may be in various stages of discussions with respect to such opportunities.
Pursuing strategic acquisitions is an important aspect to our current and future growth strategy, which we expect to continue, in order to strengthen our service offerings in the IMT&S market. As discussed elsewhere in this registration statement, we entered into an agreement for the acquisition of all of the issued and outstanding shares of Service 800. We plan to complete this acquisition during 2018. We also entered into two non-binding LOIs relating to two proposed acquisitions. However, no assurance can be given that we will be successful in completing such acquisitions, or that we will realize the anticipated strategic benefits following close of the proposed acquisitions.
We believe our planned acquisitions support our long-term strategy for growth. We believe such acquisitions will strengthen our competitive position, help us obtain a customer base and provide greater scale to accelerate innovation, and begin revenues. We plan to continue to identify strategic acquisitions of complementary companies, products, services and technologies which we believe will augment our existing business.
Research and Development
The industry in which we plan to operate and compete is subject to rapid technological developments, evolving industry standards, changes in customer requirements and competitive new products and features. As a result, we believe our success, in part, will depend on our ability to build and enhance our products in a timely and efficient manner and to develop and introduce new products that meet client needs while reducing total cost of ownership. To achieve these objectives, we plan to make and expect to make research and development investments through internal and third-party development activities, third-party licensing agreements and potentially through technology acquisitions.
As of December 31, 2017 and 2016, we have not engaged in research and development activities.
Marketing and Sales
Customers
Currently we do not have any customers; however, if we are successful in closing the business combination with Service 800, we will acquire their existing client base of 130 companies and 300 service organizations.
Market and Competition
The IMT&S industry is highly fragmented and competitive. Key competitive factors include contractual terms and competitive pricing, quality of service, reputation, technical and industry expertise, scope of services, innovative service and product offerings. Key success factors include the ability to access the latest available and most efficient technology and techniques; maintain a highly skilled workforce; maintain effective cost controls, and good project management skills.
The market for our proposed products and related services is highly competitive, subject to rapid technological change and shifting customer needs and economic pressures. In the Customer Feedback Management Platform (CX) market, our competitors may have single (or narrowly-tailored) solutions or they may have a range of information management solutions. Given the markets in which we plan to operate and the products and services we plan to offer, we believe our top competitors to be Clarabridge, Confirmit, InMoment, MartizCX, Medallia, NICE, Qualtrics, Satmetrix Systems, SMG and Verint Systems.
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Many of BYOC’s competitors in the IMT&S industry are small and of those, many are non-employing firms. Companies in the industry offer a broad range of product and services tailored to different markets. This mobility has allowed smaller firms to dominate the industry composition, as they tend to provide services to a specific niche market and/or within a specific geographic region. Despite their prevalence, smaller firms contribute only a small percentage of industry revenue. The bulk of revenue is generated by several high-profile global corporations, such as IBM, Hewlett-Packard, EMC Corporation, SAS, and Accenture. Larger companies maintain an advantage over smaller firms in that they can service national and international clients, with more resources and capabilities, and as such are able to command a higher premium.
We believe that certain competitive factors will affect the market for our future software products and related services, which may include: (i) vendor and product reputation; (ii) product quality, performance and price; (iii) the availability of software products on multiple platforms; (iv) product scalability; (v) product integration with other enterprise applications; (vi) software functionality and features; (vii) software ease of use; (viii) the quality of professional services, customer support services and training; and (ix) the ability to address specific customer business problems. We believe the relative importance of each of these factors depends upon the concerns and needs of each specific customer.
Intellectual Property Rights
Our future success and ability to compete will depend on our ability to develop and maintain our intellectual property and proprietary technology and to operate without infringing on the proprietary rights of others. Software products are generally licensed to customers on a non-exclusive basis for internal use in a customer's organization. We plan to also grant rights in intellectual property that we plan on developing or acquiring to third-parties to allow them to market certain of our future products on a non-exclusive or limited-scope exclusive basis for an application of such product or to a specific geographic region.
We plan to rely on a combination of copyright, patent, trademark and trade secret laws, non-disclosure agreements and other contractual provisions to establish and maintain our proprietary rights. The duration of patents is determined by the laws of the country of issuance and for the U.S. is typically 17 years from the date of issuance of the patent or 20 years from the date of filing of the patent application resulting in the patent. While we believe our intellectual property will be an asset, and our ability to maintain and protect our intellectual property rights is important to our success, we do not anticipate that our business will not be materially dependent on any patent, trademark, license, or other intellectual property right.
Employees
We currently only have one full-time employee, Mr. George Pursglove. Mr. Pursglove is our President and Chief Executive Officer. However, if we are successful in completing the acquisition of Service 800, we will acquire their existing employee base of 40 employees and approximately 320 independent contractors.
Item 1A. RISK FACTORS.
An investment in our common stock is highly speculative and involves a high degree of risk. In determining whether to purchase the Company’s common stock, an investor should carefully consider all of the material risks described below, together with the other information contained in this report. An investor should only purchase the Company’s securities if he or she can afford to suffer the loss of his or her entire investment.
General Business and Industry Risks
We have no assets and no current operations and face many of the risks and difficulties frequently encountered by an early stage company.
As of December 31, 2017, the Company chose to close and remove the following subsidiaries from our consolidated financial statements on a go-forward basis: LocalAdLink, Inc., Adjuice, Inc., and Aim Connection, Inc. As a result, we have no assets and no current operations. There can be no assurance that our planned operations will be
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profitable. To begin operations and become profitable, we must raise additional working capital. We have no commitment for funding and there can be no assurance that we will be able to secure additional debt or equity financing and, if obtained, will be available on terms acceptable to us. If we are not successful in securing additional financing when needed, we may be unable to execute our business strategy, which could result in curtailment of our operations.
Although, our Chief Executive Officer has extensive knowledge of the markets in which we plan to operate, assessing the future prospects of our business is challenging in light of both known and unknown risks and difficulties we may encounter. Growth prospects in our industry can be affected by a wide variety of factors including:
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Competition from other similar companies; |
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Changes in underlying consumer behavior; |
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Our ability to access adequate financing on reasonable terms and our ability to raise additional capital in order to fund our operations; |
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Challenges with new products, services and markets; and |
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Fluctuations in the credit markets and demand for credit. |
We may not be able to successfully address these factors, which could negatively impact our growth, harm our business and cause our operating results to be worse than expected.
We have no proven ability to generate revenues, and any investment in our company is risky.
We do not have a meaningful operating history, so it will be difficult for you to evaluate an investment in our stock. We cannot assure that we will generate revenues or be profitable. As a result, investors will bear the risk of complete loss of their investment in the event we are not successful.
The accompanying financial statements have been prepared assuming that we will continue as a going concern.
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As of December 31, 2017, we had an accumulated deficit of $38,466,441. These matters raise substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should we be unable to continue as a going concern. As a result, our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements as of December 31, 2017 with respect to this uncertainty.
Our ability to continue as a going concern is dependent upon our ability to generate profitable business operations in the future and/or obtaining the necessary financing to meet our obligations and repay our liabilities. Management’s plan to continue as a going concern is based on us obtaining additional capital resources through the sale of our securities and/or loans on an as needed basis. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described above and eventually attaining profitable operations.
In addition to the normal risks associated with a new business venture, there can be no assurance that our business plan will be successfully executed. Our ability to execute our business plan will depend on our ability to obtain additional financing and achieve a profitable level of operations. There can be no assurance that sufficient financing will be available, or, if available, that it will be on terms that are satisfactory to us. Even if we are able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing. In this regard, we are restricted by the number of shares available for issuance in an equity financing, and we will likely need to increase out authorized capital in order to take advantage of such financing. However there can be no assurance that we will be successful in obtaining shareholder approval to increase our authorized capital. Further, we cannot give any assurance that we will generate substantial revenues or that our business operations will prove to be profitable. To the extent that we are unsuccessful, we may need to curtail or cease our operations and implement a plan to extend payables or reduce overhead until sufficient additional capital is raised to support further operations. Our ability to continue as a going concern is dependent on management’s plans, which include further implementation of its business plan and continuing to raise funds through debt and/or equity raises
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We must raise additional capital to fund our operations.
We do not currently have sufficient capital to fund our current or anticipated operations. We may be unable to obtain additional capital when required. Future business development activities, as well as our administrative requirements (such as salaries, insurance expenses and general overhead expenses, as well as legal compliance costs and accounting expenses) will require a substantial amount of additional capital and cash flow.
We may need to acquire additional funds in order to develop our business. We may seek to raise such capital through public or private equity financings, partnerships, collaborations, joint ventures, disposition of assets, debt financings or restructurings, bank borrowings or other sources of financing. However, our ability to do so is subject to a number of risks, uncertainties, constraints and consequences, including, but not limited to, the following:
•our ability to raise capital through the issuance of additional shares of our common stock or convertible securities is restricted by the limited number of our residual authorized shares, the potential difficulty of obtaining stockholder approval to increase authorized shares and the restrictive covenants under our secured term loan agreement;
•issuance of equity-based securities will dilute the proportionate ownership of existing stockholders;
•our ability to obtain further funds from any potential loan arrangements is limited by our existing loan and security agreement;
•certain financing arrangements may require us to relinquish rights to various assets and/or impose more restrictive terms than any of our existing or past arrangements; and
•we may be required to meet additional regulatory requirements, and we may be subject to certain contractual limitations, which may increase our costs and harm our ability to obtain funding.
For these and other reasons, additional funding may not be available on favorable terms or at all. If we fail to obtain additional capital when needed, we may be required to delay, scale back or eliminate some or all of our research and development programs, reduce our selling, general and administrative expenses, be unable to attract and retain highly qualified personnel, refrain from making our contractually required payments when due (including debt payments) and/or be forced to cease operations, liquidate our assets and possibly seek bankruptcy protection. Any of these consequences could harm our business, financial condition, operating results and prospects.
Any additional capital raised through the sale of equity may dilute the ownership percentage of our stockholders. Raising any such capital could also result in a decrease in the fair market value of our equity securities because our assets would be owned by a larger pool of outstanding equity. The terms of securities we issue in future capital transactions may be more favorable to our new investors, and may include preferences, superior voting rights and the issuance of other derivative securities, and issuances of incentive awards under equity employee incentive plans, which may have a further dilutive effect.
Our ability to obtain financing may be impaired by factors such as the capital markets (both generally and in our industry in particular), our limited operating history, national unemployment rates and the departure of key employees. Further, economic downturns will likely decrease our revenues and may increase our requirements for capital. If the amount of capital we are able to raise from financing activities, together with our revenues from operations, if any, is not sufficient to satisfy our capital needs (even to the extent that we reduce our operations), we may be required to cease our operations, divest our assets at unattractive prices or obtain financing on unattractive terms.
We have a limited operating history, have generated losses since inception, have not generated any revenues from planned operations and may never achieve profitability.
We are an early pre-revenue stage company and have a limited history of operations. We are faced with all of the risks associated with a company in the early stages of development. Our business is subject to numerous risks associated with a new company engaged in the "big data" arena for the B2B IMT&S space. Such risks include, among other things, potential competition from well-established and well-capitalized companies, unanticipated development, and changes in trends, marketing difficulties and risks associated with intellectual property creation, protection and exploitation. There can be no assurance that we will ever generate revenues or achieve profitability.
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We may encounter delays, uncertainties, and complications typically encountered by early stage businesses, many of which will be beyond our control. These risks include the following: lack of sufficient capital, unanticipated problems, delays, and expenses relating to product development and implementation, lack of intellectual property protection, licensing and marketing difficulties, competition, technological changes, and uncertain market acceptance of our future products and services.
Our planned expense levels will be based in part on our expectations concerning future revenue, which is difficult to forecast accurately based on our stage of development. We may be unable to adjust spending in a timely manner to compensate for any unexpected shortfall in revenue. Further, business development and marketing expenses may increase significantly as we expand operations. To the extent that these expenses precede or are not rapidly followed by a corresponding increase in revenue, our business, operating results, and financial condition may be materially and adversely affected.
Our acquisitions are an important aspect of our growth strategy, but they may not achieve expectations, which could affect our cash flow and profitability.
We plan to acquire companies and operations that complement our planned business operations. These transactions involve numerous business risks, including finding suitable transaction partners, the diversion of management’s attention from other business concerns, extending our product or service offerings into areas in which we have limited experience, entering into new geographic markets, the potential loss of key employees or business relationships and the integration of acquired businesses, any of which could adversely impact our business, financial condition or results of operations.
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An acquisition may negatively affect our business, financial condition, operating results or cash flows because it may require us to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and disputes by third parties, including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to the acquisition; |
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We may encounter difficulties or unforeseen expenditures in integrating the business, technologies, products, personnel or operations of any company that we acquire, particularly if key personnel of the acquired company decide not to work for us; |
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An acquisition, whether or not consummated, may disrupt our ongoing business, divert resources, increase our expenses and distract our management |
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An acquisition may result in a delay or reduction of purchases for both us and the company that we acquired due to uncertainty about continuity and effectiveness of solution from either company; |
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We may not be able to successfully integrate our business through the acquisition of Service 800, and we may not be able to fully realize the anticipated strategic benefits of the acquisition, which includes a complementary business; |
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An acquisition may involve the entry into geographic or business markets in which we have little or no prior experience or where competitors have stronger market positions; |
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Challenges inherent in effectively managing an increased number of employees in diverse locations; |
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The potential strain on our financial and managerial controls and reporting systems and procedures; |
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Potential known and unknown liabilities associated with an acquired company; |
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Our use of cash to pay for acquisitions could limit other potential uses for our cash; |
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The risk of impairment charges related to potential write-downs of acquired assets or goodwill in future acquisitions; and |
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To the extent that we issue a significant amount of equity or convertible debt securities relating to future acquisitions, existing stockholders may be diluted and earnings per share may decrease. |
We may not succeed in addressing these or other risks or any other problems encountered relating to the integration of any acquired business, the inability to integrate successfully the business, technologies, products, personnel or operations of any acquired business, or any significant delay in achieving integration, could have a material adverse effect on our business, financial condition and operating results.
We may be adversely affected by risks associated with potential acquisitions, such as Service 800, including execution risks, failure to realize anticipated strategic benefits, and failure to overcome integration risks, which could adversely affect our growth and profitability.
We plan to grow our business both organically and inorganically, including through the acquisition of Service 800. While we plan to complete the acquisition, there can be no assurance that we will be successful in closing the acquisition. In the event that we do pursue further acquisitions, we may have difficulty executing on such acquisitions and may not realize the anticipated benefits of any transaction we complete. Any of the foregoing matters could materially and adversely affect us.
The integration of Service 800 will likely be a time-consuming process. The integration process will likely require substantial management time and attention, which may divert attention and resources from other important areas, including developing our planned services and products existing business. In addition, we may not be able to fully realize the anticipated strategic benefits of the acquisition, which includes a complementary business. The failure to successfully integrate the combined operations, including retention of key employees, could impact our ability to realize the full benefits of our acquisition of Service 800. If we are not able to achieve the anticipated strategic benefits of the acquisition, it could adversely affect our business, financial condition and results of operations, and could adversely affect the market price of our common stock if the integration or the anticipated financial and strategic benefits of the acquisition are not realized as rapidly as, or to the extent anticipated by us. Failure to achieve the anticipated benefits could result in increased costs and decreases in future revenue and/or net income following the acquisition.
Inadequate protection of our intellectual property could impair our competitive advantage.
Our success and ability to compete depend in part upon our development of proprietary technology and intellectual properties. We will eventually rely primarily on a combination of copyright, trademark, patent, trade secret laws, nondisclosure agreements, and technical measures to protect our future proprietary technology and intellectual properties. We will also limit access to, and distribution of, our proprietary technology and trade secrets through security technologies.
There can be no assurance that our efforts to protect our intellectual property rights will adequately deter misappropriation or independent third-party development of our intellectual property or prevent an unauthorized third party from obtaining or using information that we regard as proprietary.
There can be no assurance that our competitors will not independently develop proprietary technologies similar to ours. Litigation may be necessary in the future to protect our trade secrets or other intellectual property rights or to determine the validity and scope of the proprietary rights of others. Such litigation could result in substantial costs and diversion of resources and could have a material adverse effect on our business, financial condition, and results of operations.
Third parties could claim that we are infringing their patents or other intellectual property rights; we must protect our intellectual property; and others could infringe on or misappropriate our rights.
Open source software includes a broad range of software applications and operating environments produced by companies, development organizations and individual software developers and is typically licensed for use, distribution and modification at a nominal cost or often, free of charge. To the extent that the open source software models expand,
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and non-commercial companies and software developers create and contribute competitive analytical software to the open source community, we may be forced to adjust our pricing, maintenance and distribution strategies and models, which could have a material adverse effect on our financial position and results of operation. In addition, if one of our developers embedded open source software into one or more of our products without our knowledge or authorization or a third party has incorporated open source software into such third-party’s software without disclosing the presence of such open source software and we embedded such third-party software into one or more of our products, we could, under certain circumstances, be required to disclose the source code to such products. Third-parties could claim that we are infringing on their patents or other intellectual property rights.
Our planned technology and products may not achieve commercial success or widespread market acceptance.
The technology and products that we plan to develop, may not achieve customer or widespread market acceptance. Some or all of our planned technology and products may not achieve commercial success as a result of technology problems, competitive cost issues, yield problems, and other factors. Even if we successfully introduce a new product, customers may determine not to adopt or may terminate use of our products for a variety of reasons, including the following:
· superior technologies developed by competitors;
· price considerations;
· lack of anticipated or actual market demand for the products; or
· unfavorable comparisons with products introduced by others.
We may be unable to recover any expenditure we make relating to one or more modern technologies that ultimately prove to be unsuccessful for any reason. In addition, any investments or acquisitions made to enhance technologies may also prove to be unsuccessful.
We may not be able to commercialize our planned technology products or services.
A key element of our business strategy involves the development and commercialization of new software technologies and products. The success of this effort depends on numerous factors. We may not be able to expand our business as anticipated and may make substantial investments in product development, and marketing efforts that may not result in any sales. The design and manufacture of products utilizing innovative technology involves a highly complex process that is sensitive to a wide variety of factors. As a result of these factors, we may experience no revenues and no adoption of our planned products or services.
We might not be able to implement our business strategy.
To some extent, our ability to generate cash flow in the future is subject to general economic, financial, competitive, and other factors that are beyond our control. In the event our management has misjudged the market demand, market acceptance of our services, or financial projections and assumptions, results of operations could be adversely affected, and we might not be able to fund our development as planned. If we are unable to finance existing or future projects with cash flow from operations, we will have to adopt one or more alternatives, such as delaying launch, postponing advertising and marketing, canceling development projects and other capital expenditures, or obtaining additional equity/debt financing, or joint venture partners. These sources of additional funds might not be sufficient to finance future projects, and other financing may not be available on acceptable terms, in a timely manner or at all. If we are unable to secure additional financing, we could be forced to limit our business plan, or we may not be able to take advantage of unanticipated opportunities or otherwise respond to unanticipated competitive pressures, which might adversely affect our business, financial condition and results of operations.
We may experience delays in introducing our planned products or services which may adversely affect our revenue.
The timing of a creative process is difficult to predict. In developing our products, we anticipate dates for the launch of the products and associated product introductions. When we state that we will introduce or anticipate introducing a product at a certain time in the future, those expectations are based on completing the associated development or acquisition and implementation work in accordance with our currently anticipated schedules. Unforeseen delays and difficulties in the development process or significant increases in the planned costs of development, or factors outside
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our control may cause the introduction date for the product to be later than anticipated or, in some situations, may cause a product introduction to be discontinued. Any delay or cancellation of planned product development and introduction may decrease the number of products and features we sell and harm our business.
We may become dependent upon third-parties for certain future software and marketing applications development.
We may license certain software upgrades from third-party software developers. Licensed software could be embedded in our future product offerings, and some could be offered as add-on products. If these licenses are discontinued, or become invalid or unenforceable, there can be no assurance that we will be able to develop substitutes for the licensed software independently or that we will be able to obtain alternatives in a timely manner. Any delays in obtaining or developing substitutes for future licensed software applications could result in material adverse impacts to our financial condition and plan of operations.
Software piracy is a persistent problem in the IMT&S industry.
Preventing unauthorized use of computer software is difficult, and software piracy is a persistent problem for the software industry. In addition, the laws of various countries in which we may plan to market and sell our software and marketing applications do not protect our software and intellectual property rights to the same extent as the laws of the US. Despite the precautions that we are planning to take to safeguard our software and marketing application, it may be possible for unauthorized third-parties to reverse engineer or copy our planned products or obtain and use information that we regard as proprietary. There can be no assurance that the steps that we plan to take to protect our proprietary rights will be adequate to prevent misappropriation of our technology. If we fail to protect our Company from misappropriation of our technology, our operations could be materially affected.
Our operating results, once established, may have significant periodic and seasonal fluctuations.
Customer commitments in the IMT&S industry are frequently short-term. In addition to the variable nature of these commitments, other factors may contribute to significant periodic and seasonal fluctuations in results of operations. These factors may include the following:
· the timing of orders;
· the volume of orders relative to capacity to provide technical support or customer service;
· product introductions and market acceptance of new products or new generations of products;
· evolution in the life cycles of customers’ products;
· timing of expenditures in anticipation of future orders;
· effectiveness in managing software development processes;
· changes in cost and availability of labor and components;
· introduction and market acceptance of customers’ products;
· product mix;
· pricing and availability of competitive products; or
· anticipated or unanticipated changes in economic conditions.
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Volatility of consumer preferences makes introducing successful products and services difficult and unpredictable.
Our success will depend on generating revenue from market acceptance of the products we release, but market acceptance cannot be predicted or relied upon. Our business plan involves the development of IMT&S products and the future enhancement of those products. The success of future enhancements cannot be assured regardless of the success of any initial products. If our products fail to gain market acceptance, we may not have sufficient revenues to pay our expenses and continue the ongoing development and acquisition of new products. The failure to successfully anticipate, identify and react to consumer preferences would have an adverse effect on revenues, profitability and the results of operations.
Potential profit margins may decline as a result of increasing pressure on margins.
Our industry is subject to potentially significant pricing pressure caused by many factors. If our estimated gross margin declines and we fail to sufficiently reduce our operating cost or grow our future net revenues, we could incur significant operating losses that we may be unable to fund or sustain for extended periods of time, if at all. This could have a material adverse effect on our results of operations, liquidity and financial condition.
We are dependent on the timely receipt of payment from our clients.
We plan to extend payment terms to our clients. The extension of payment terms and the collection of potential receivables could extend well beyond normal terms outside of our control. Our ability to collect on outstanding receivables, our ability to borrow if needed under any credit facility and our overall financial condition could be negatively affected. Our financial condition and results of operations would be adversely impacted.
Our industry is highly competitive.
The market for marketing statistical software, data mining tools, predictive analytic solutions, both in the US and internationally, is highly fragmented and competitive. However, as our sales channel becomes more visible to potential competitors, some of which have well-recognized brand names and substantial financial, technological, distribution, marketing experience and research and development capabilities, the potential competitors may develop products that compete directly with our products. Competitive pressures from the introduction of novel solutions and products by these companies or other companies could have a material adverse effect on our future business results. There can be no assurance that we will be able to compete successfully or that the competition will not have a material adverse effect on our future business results.
We may experience sporadic sales cycles.
Our sales strategy is focused on our targeted market of Fortune 500 and 1000 businesses with a need for our software, marketing and related services. These “strategic accounts” could produce sales cycles of nine months or more in duration before any revenues are generated by us. These long sales cycles could have an adverse effect on our cash flow and in turn would have a materially adverse effect on our financial condition and results of operations.
We may be subject to risks associated with information disseminated through the Internet.
The safe and secure transmission of confidential information over the Internet has been a significant hurdle to electronic file transfer and communications over the Internet. Any compromise or actual breach of our planned internal security processes, databases and or hardware could deter our targeted clients from using our software and marketing applications and in turn create a materially adverse effect on our financial condition and results of operations.
Possible future transactions with our executive management or their affiliates may create conflicts.
Under prescribed circumstances, our bylaws permit us, under restricted circumstances, to enter into transactions with our affiliates, including the borrowing and lending of funds and joint investments. Currently, our policy is not to enter into any transaction involving joint investments with our Management or their affiliates, or to borrow from or lend money to such persons. However, our policies in each of these regards may change in the future.
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Our rights and the rights of our shareholders to recover claims against our officers and directors are limited.
Nevada law provides that a director has no liability in that capacity if he performs his duties in good faith in a manner he reasonably believes to be in our best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. Our Articles of Incorporation authorize us, and our bylaws require us, to indemnify our directors, officers, employees and agents to the maximum extent permitted under Nevada law.
Additionally, our Articles of Incorporation limit the liability of our directors and officers to us and our shareholders for monetary damages to the maximum extent permitted under Nevada law. As a result, our shareholders and we may have more limited rights against our directors, officers, employees and agents, than might otherwise exist under common law. In addition, we may be obligated to fund the defense costs incurred by our directors, officers, employees and our agents in some cases.
Risks Related to Our Common Stock
Our stock is considered a “penny stock,” and is therefore considered risky.
OTC Pink Sheet stocks, and especially those being offered for less than $5.00 per share, are often known as “penny stocks” and are subject to regulations which mandate the dispersion of certain disclosures to potential investors prior to any investors’ purchase of any penny stocks. Penny stocks are low-priced securities with low trading volume. Consequently, the price of the stock is often volatile and investors may be unable to buy or sell the stock when you desire. The SEC extensively monitors “penny stocks,” and such regulations are enumerated in Exchange Act Section 15(h) and Exchange Act Rules 3a51-1 and 15g-1 through 15g-100. With certain exceptions, brokers selling our stock must adhere to the SEC’s “penny stock” regulations, which requirements include, but are not limited to, the following:
· Brokers must provide you with a risk disclosure document relating to the penny stock market.
· Brokers must disclose price quotations and other information relating to the penny stock market.
· Brokers must disclose any compensation they receive from the sale of our stock.
· Brokers must provide a disclosure of any compensation paid to any associated persons in connection with transactions relating to our stock.
· Brokers must provide you with quarterly account statements.
· Brokers may not sell any of our stock that is held in escrow or trust accounts.
· Prior to selling our stock, brokers must approve your account for buying and selling penny stocks.
· Brokers must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction.
These additional sales practices and the disclosure requirements could impede the sale of our securities. In addition, the liquidity for our securities may be adversely affected, with related adverse effects on the price of our securities.
FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our stock.
In addition to the “penny stock” rules described above, 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 their customers buy our common stock, which may have the effect of reducing the trading activity in our common stock. As a result, fewer broker-dealers may be willing to make a market in our common stock, reducing a stockholder’s ability to resell shares of our common stock, thereby potentially reducing the liquidity of our common stock.
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We have no plans to pay dividends on our Common Stock
We have not previously paid any cash dividends, nor have we determined to pay dividends on any share of preferred stock or shares of Common Stock, except as described in the rights and preferences detailed in the “Certificate of Designation of Preferences” for the Series A Preferred Stock filed with the Secretary of State of the State of Nevada. There can be no assurance that our operations will result in sufficient revenues to enable us to operate at profitable levels or to generate positive cash flows. Furthermore, there is no assurance that the Board of Directors will declare dividends even if profitable. Dividend policy is subject to the discretion of our Board of Directors and will depend on, among other things, our earnings, financial condition, capital requirements and other factors.
If we issue additional shares in the future, it will result in the dilution of our existing stockholders.
We are authorized to issue up to 1,050,000,000 shares of common stock with a par value of $0.001, of which 1,004,200,000 are currently issued and outstanding. Our board of directors, upon the approval of the stockholders, may seek to increase the number of authorized shares in the future and may choose to issue some or all of such shares to acquire one or more businesses or to provide additional financing in the future. The issuance of any such shares will result in a reduction of the book value and market price of the outstanding shares of our common stock. If we issue any such additional shares, such issuance will cause a reduction in the proportionate ownership and voting power of all current shareholders. Further, such issuance may result in a change of control of our company.
Voting power is highly concentrated in holders of our Series A Preferred Stock.
We are authorized to issue up to 250,000,000 shares of preferred stock, all of which are designated Series A Preferred Stock and all of which are currently issued and outstanding. Holders of our Series A Preferred Stock are entitled to three times (3x) voting preference over holders of common stock. Such concentrated control of the Company may adversely affect the price of our common stock. A stockholder that acquires common stock will not have an effective voice in the management of the Company.
We are a “smaller reporting company” and we cannot be certain if the reduced disclosure requirements applicable to smaller reporting companies will make our Common Stock less attractive to investors.
We are an “smaller reporting company,” as defined in Rule 12b-2 under the Exchange Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies, including “emerging growth companies” such as, 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 stockholder approval of any golden parachute payments not previously approved. Our status as a smaller reporting company is determined on an annual basis. We cannot predict if investors will find our Common Stock less attractive or our company less comparable to certain other public companies because we will rely on these exemptions. For example, if we do not adopt a new or revised accounting standard, our future financial results may not be as comparable to the financial results of certain other companies in our industry that adopted such standards. 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.
The requirements of being a reporting public company may strain our resources, divert management’s attention and affect our ability to attract and retain additional executive management and qualified board members.
As a reporting public company, we will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the Dodd-Frank Act, and other applicable securities rules and regulations. Compliance with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources, particularly after we are no longer a “smaller reporting company.” The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and results of operations. As a “smaller reporting company,” we receive certain reporting exemptions under The Sarbanes-Oxley Act.
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Changing laws, regulations and standards relating to corporate governance and public disclosure create uncertainty for public companies, increase legal and financial compliance costs and increase time expenditures for internal personnel. These laws, regulations and standards are subject to interpretation, in many cases due to their lack of specificity, their application in practice may evolve over time as regulators and governing bodies provide new guidance. These changes may result in continued uncertainty regarding compliance matters and may necessitate higher costs due to ongoing revisions to filings, disclosures and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate regulatory or legal proceedings against us and our business may be adversely affected.
As a public company under these rules and regulations, we expect that it may make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee and could also make it more difficult to attract qualified executive officers. \
As a result of disclosure of information in this Form 10 and in filings required of a public company, our business and financial condition will become more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and results of operations could be adversely affected, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business and results of operations.
Our stock price may be volatile, which may result in losses to our shareholders.
The stock markets experienced and may experience significant price and trading volume fluctuations, and the market prices of companies quoted on the Pink Tier of the OTC Marketplace, which is where our stock is currently quoted, have experienced sharp share price and trading volume changes. The trading price of our common stock is likely to be volatile and could fluctuate widely in response to many factors both in and outside of our control, and include but are not limited to the following:
· variations in our operating results;
· changes in expectations of our future financial performance, including financial estimates by securities analysts and investors;
· changes in operating and stock price performance of other companies in our industry;
· additions or departures of key personnel; and
· future sales of our common stock.
Domestic and international stock markets often experience significant price and volume fluctuations. These fluctuations, as well as general economic and political conditions unrelated to our performance, may adversely affect the price of our common stock.
Volatility in the price of our common stock may subject us to securities litigation.
The market for our common stock may be characterized by significant price volatility as compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may, in the future, be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management's attention and resources.
21
Our common stock may become thinly traded and you may be unable to sell at or near ask prices, or at all.
We cannot predict the extent to which an active public market for trading our common stock will be sustained. The trading volume of our common stock may be sporadically or “thinly-traded,” meaning that the number of persons interested in purchasing our common stock at or near bid prices at certain given time may be relatively small or non-existent.
This situation is attributable to a number of factors, including the fact that we are a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community who generate or influence sales volume. Even if we came to the attention of such persons, those persons tend to be risk-averse and may be reluctant to follow, purchase, or recommend the purchase of shares of an unproven company such as ours until such time as we become more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained.
The market price for our common stock may become volatile given our status as a relatively small company, which could lead to wide fluctuations in our share price. You may be unable to sell your common stock at or above your purchase price if at all, which may result in substantial losses to you.
Stockholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include but are not limited to: (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers and (5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns or practices could increase the volatility of our share price.
General risk statement .
Based on all of the foregoing, we believe it is possible for future revenue, expenses and operating results to vary significantly from quarter to quarter and year to year. As a result, quarter-to-quarter and year-to-year comparisons of operating results are not necessarily meaningful or indicative of future performance. Furthermore, we believe that it is possible that in any given quarter or fiscal year our operating results could differ from the expectations of public market analysts or investors. In such event or in the event that adverse conditions prevail, or are perceived to prevail, with respect to our business or generally, the market price of our Common Stock would likely decline.
22
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATIONS
The following is a discussion of the financial condition and results of operation of the Company as of the date of this registration statement. This discussion and analysis should be read in conjunction with the Company’s audited and unaudited consolidated financial statements including the Notes thereto, which are included elsewhere in this registration statement on Form 10.
About Beyond Commerce
We plan to operate within two markets: (1) the Business-to-Business Internet Marketing Technology and Services market and (2) the Information Management market. Our goal is to develop proprietary software for digital transformation of clients’ existing content. We believe our planned platform, strategy, and suite of software products and services will provide secure and scalable information control solutions for global companies. We believe our planned software will assist organizations in finding, utilizing, and sharing business information between devices in ways that are intuitive, efficient and productive. We believe that our business model will ensure that information will remain secure and private, as necessitated by the current market climate.
In addition, BYOC plans to provide solutions which facilitate the exchange of information and data transactions between supply chain participants, such as manufacturers, retailers, distributors and financial institutions. The goal is to automate potential client internal processes thereby increasing productivity and lowering costs. BYOC plans to develop proprietary algorithms which it will embed in the planned software to enable clients to access data and gain insight into their business, through that data, leading to improved internal decision making.
BYOC plans to offer the proposed software through traditional on-premise solutions, SaaS as a cloud based solution, or a combination of on-premise, SaaS or cloud based solutions. We will work with our clients and their needs as to which delivery method they prefer. We believe giving clients a choice and flexibility will help us to obtain long-term client value.
Management believes that the Company will require additional capital to manage its operations over the next 12 months. See “Plan of Operations” on page 29 below for a more complete discussion of the Company’s capital requirements.
Recent Developments
Service 800 Agreement
On December 14, 2017, we entered into an agreement with Service 800 and the sole shareholder of Service 800 (the “Shareholder”), pursuant to which we have agreed to purchase all of the issued and outstanding shares of common stock of Service 800 from the Shareholder (the “Transaction”). Service 800 operates as a premium provider of Customer Feedback Management Platforms to their Fortune 500 and 1000 clients on a global basis. Service 800 provides survey authoring, response rates, feedback types and data analysis on their proprietary, cloud based, automated and centralized platform. Service 800 has currently 40 full time employees that provide services to 130 companies and 300 service organizations. Service 800’s current operations and strategic business plan is to further develop its marketing and Customer Experience platform to use within the framework of its current Fortune 500 and 1000 clients. No assurance can be given that we will be successful in completing the Transaction.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of the Company’s financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent liabilities. On an on-going basis, management evaluates past estimates and judgments, including those related to bad debts, accrued liabilities, derivative liabilities, and contingencies. Management bases its estimates on historical
23
experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.
Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include but are not limited to those discussed below and elsewhere in this annual report, particularly in the section entitled “Risk Factors” beginning on page 11 of this current report.
Critical Accounting Policies
Use of Estimates
The preparation of consolidated financial statements and accompanying notes in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates are used in the determination of depreciation and amortization and the valuation for non-cash issuances of equity instruments, web site, income taxes, and contingencies, among others. Actual results could differ materially from these estimates.
Cash and Cash Equivalents
The Company classifies as cash and cash equivalents amounts on deposit in banks and cash temporarily in various instruments with original maturities of three months or less at the time of purchase. The Company’s cash management system is currently integrated within one banking institution.
Fair Value of Financial Instruments
The carrying value of the current assets and liabilities approximate fair value due to their relatively short maturities.
Fair Value Measurements
Statement of financial accounting standard FASB Topic 820, Disclosures about Fair Value of Financial Instruments, requires that the Company disclose estimated fair values of financial instruments. The carrying amounts reported in the statements of financial position for assets and liabilities qualifying as financial instruments are a reasonable estimate of fair value.
The Company applies the fair value hierarchy as established by GAAP. Assets and liabilities recorded at fair value in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure the fair value as follows.
• Level 1 – quoted prices in active markets for identical assets or liabilities.
• Level 2 – other significant observable inputs for the assets or liabilities through corroboration with market data at the measurement date.
• Level 3 – significant unobservable inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date.
Management considers all of its derivative liabilities to be Level 3 liabilities. At December 31, 2017 and 2016, respectively the Company had outstanding derivative liabilities, including those from related parties of $0 and $2,868,760, respectively.
24
Valuation of Derivative Instruments
ASC 815 “Derivatives and Hedging” requires that embedded derivative instruments be bifurcated and assessed, along with free-standing derivative instruments such as warrants, on their issuance date and measured at their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option pricing formula. Upon conversion of a note where the embedded conversion option has been bifurcated and accounted for as a derivative liability, the Company records the shares at fair value, relieves all related notes, derivatives and debt discounts and recognizes a net gain or loss on debt extinguishment.
Management used the following inputs to value the Derivative Liabilities for the years ended December 31, 2017 and 2016, respectively:
|
2017 Derivative Liability |
2016 Derivative Liability |
Expected term |
1 month to 9 months |
1 month to 2 years |
Exercise price |
$0.00006 - $0.0006 |
$0.0006 -$0.0012 |
Expected volatility |
287% to 765% |
287% to 765% |
Expected dividends |
None |
None |
Risk-free rate |
0.22% to 1.01% |
0.14% to 1.06% |
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and then is revalued at each reporting date, with changes in fair value reported in the consolidated statement of operations. For stock based derivative financial instruments, Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option-pricing model. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.
Once determined, derivative liabilities are adjusted to reflect fair value at the end of each reporting period. Any increase or decrease in the fair value from inception is made quarterly and appears in results of operations as a change in fair market value of derivative liabilities.
Impairment of Long-lived Assets
The Company accounts for long-lived assets in accordance with the provisions of ASC 360-10-35-21, Accounting for the Impairment of Long-Lived Assets . This statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Fair values are determined based on quoted market value, discounted cash flows or internal and external appraisals, as applicable. During 2017 and 2016, the Company did not recognize any impairment charges.
Income Taxes
The Company will account for income taxes under ASC 740-10-30. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely
25
than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income of the consolidated statements of operations in the period that includes the enactment date. A valuation allowance is provided when it is more likely than not that some or all of the deferred tax assets may not be realized.
The Company follows the guidance of ASC 740-10-25 in determining whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. The Company had no material adjustments to its liabilities for unrecognized income tax benefits.
Stock Based Compensation
The Company may issue compensatory stock options or shares to employees, consultants, and other service providers under its 2008 Equity Incentive Plan (the “Plan”). In some cases, it has issued compensatory warrants to service providers outside the Plan. The Company issues new shares of its common stock when employees or service providers exercise options or warrants. All equity-based compensation awarded has been determined under the fair value provisions of ASC 718. This compensation is then expensed over the vesting period of the underlying award. Additionally, for all equity-based compensation awarded prior to the adoption date, compensation for the portion of awards for which the requisite service is performed after the adoption date is recognized as service is rendered. At this time the Company has no warrants outstanding.
Stock-based compensation for awards granted to non-employees is periodically re-measured as the underlying options and warrants vest. The Company recognizes an expense for such awards throughout the performance period as the services are provided by the non-employees, based on the fair value of these options and warrants at each reporting period.
The Company estimates the fair value of stock issuances based on the closing market value of the Company’s stock on the date of grant. There are currently no options outstanding.
Segment Information
The Company’s operations are classified into two principal reportable segments: (i) internet retail store and its e-commerce operations (BOOMj.com d/b/a i-SUPPLY), and (ii) an online media and marketing company (Adjuice, Inc.).
Employee Benefits
The Company currently has no employees. During 2009, the shareholders approved the 2008 Equity Incentive Plan at the shareholders’ annual meeting held on July 24, 2009. This plan, which is discussed elsewhere in this registration statement, is set to expire on September 11, 2018.
Recent Accounting Pronouncements
The Company reviews all of the Financial Accounting Standard Board’s updates periodically to ensure the Company’s compliance of its accounting policies and disclosure requirements to the Codification Topics.
In January 2016, the FASB issued a new standard related to certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The standard will be effective for us beginning January 1, 2019. We are currently evaluating the impact of this standard on our financial statements, including accounting policies, processes, and systems.
In February 2016, the FASB issued a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those
26
leases classified as operating leases under current U.S. GAAP. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. We will be required to recognize and measure leases existing at, or entered into after, the beginning of the earliest comparative period presented using a modified retrospective approach, with certain practical expedients available.
The standard will be effective for us beginning January 1, 2020. The standard may have a material impact on our balance sheets in the future if we entered into new leases, but will not have a material impact on our statement of operations. The most significant impact will be the recognition of ROU assets and lease liabilities for operating leases. We are currently evaluating the impact of this standard on our financial statements, including accounting policies, processes, and systems.
The Company will continue to monitor these emerging issues to assess any potential future impact on its financial statements.
Results of Operations
Financial Presentation
The following sets forth a discussion and analysis of the Company’s financial condition and results of operations for the fiscal years ended December 31, 2017 and 2016, and the three month periods ended March 31, 2018 and 2017. This discussion and analysis should be read in conjunction with our consolidated financial statements appearing elsewhere in this registration statement. The following discussion contains forward-looking statements. Our actual results may differ significantly from the results discussed in such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in “Item 1A — Risk Factors” of this registration statement.
|
|
For the years ended |
|
|
For the quarters ended |
|
|
||||||||||
|
|
December 31, |
|
|
March 31, |
|
|
||||||||||
|
|
(audited) |
|
|
(unaudited) |
|
|
||||||||||
|
|
2017 |
|
|
2016 |
|
|
2018 |
|
|
2017 |
|
|
||||
Consolidated Statement of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
$ |
14,873 |
|
|
$ |
6,681 |
|
|
$ |
8,766 |
|
|
$ |
6,598 |
|
|
Payroll expense |
|
|
217,500 |
|
|
|
180,000 |
|
|
|
90,000 |
|
|
|
45,000 |
|
|
Professional fees |
|
|
15,321 |
|
|
|
2,018 |
|
|
|
514,840 |
|
|
|
1,840 |
|
|
Total costs and operating expenses |
|
$ |
247,694 |
|
|
$ |
188,699 |
|
|
$ |
613,606 |
|
|
$ |
53,438 |
|
|
Loss from operations |
|
|
(247,694 |
) |
|
|
(188,699 |
) |
|
|
(613,606 |
) |
|
|
(53,438 |
) |
|
Non-Operating income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on debt forgiveness |
|
|
5,543,056 |
|
|
|
6,043,076 |
|
|
|
(99,570 |
) |
|
|
763,332 |
|
|
Change in derivative liability |
|
|
(1,560,071 |
) |
|
|
2,435,170 |
|
|
|
- |
|
|
|
2,502,064 |
|
|
Interest expense |
|
|
(436,950 |
) |
|
|
(501,808 |
) |
|
|
- |
|
|
|
(117,316 |
) |
|
Total non-operating income (expense): |
|
$ |
3,546,035 |
|
|
$ |
7,976,438 |
|
|
$ |
(99,570 |
) |
|
$ |
3,148,080 |
|
|
Income (loss) before income taxes |
|
$ |
3,298,340 |
|
|
$ |
7,787,739 |
|
|
$ |
(713,176 |
) |
|
$ |
3,094,642 |
|
|
Provision for income taxes |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
Net income (loss) |
|
$ |
3,298,340 |
|
|
$ |
7,787,739 |
|
|
$ |
(713,176 |
) |
|
$ |
3,094,642 |
|
|
Basic income (loss) per share |
|
$ |
0.00 |
|
|
$ |
0.01 |
|
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
Diluted income (loss) per share |
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
27
|
|
|
|
|
|
|
|
As of March 31 |
||||||
|
|
As of December 31, |
|
|
(unaudited) |
|||||||||
Consolidated Balance Sheet Data: |
|
2017 |
|
|
2016 |
|
|
2018 |
|
|
||||
Cash |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
Receivables |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
Other assets |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
Current liabilities |
|
|
11,275,089 |
|
|
|
14,835,882 |
|
|
|
11,483,265 |
|
|
|
Long-term liabilities |
|
|
- |
|
|
|
- |
|
|
|
50,000 |
|
|
|
Stockholders’ equity (deficit) |
|
$ |
(11,275,089 |
) |
|
$ |
(14,835,882 |
) |
|
$ |
(11,533,265 |
) |
|
Results of Operations
Revenue
The Company is currently a shell with no operations. The Company anticipates commencing operations during 2018.
Revenue was $0 for the three months ended March 31, 2018 and 2017, respectively.
Revenue was $0 for the years ended December 31, 2017 and 2016, respectively, as the Company was reassessing its viability.
Operating Expenses
For the three month period ended March 31, 2018, operating expenses were $613,606 and for the three month period ended March 31, 2017, operating expenses were $53,438. The significant increase in operating expenses came from approximately $392,000 in stock compensation paid to certain consultants for legal and financial advisory services to be rendered.
For the years ended December 31, 2017 and 2017, operating expenses were $247,694 and $188,699, respectively.
This increase of $58,995, or 31.3%, was due to an increase in selling, general and administrative cost, payroll expense and professional fees. A majority of this increase was due to an increase in the salary accrual in the amount of $30,000 for our Chief Executive Officer and President as of December 31, 2017.
Selling general and administrative expenses consisted primarily of consulting fees, professional fees, travel, meals and entertainment relating to be a public company. Selling, general and administrative expenses increased approximately $8,192, or 122%, due to fees paid to our transfer agent.
Non-operating income (expense)
The Company reported income (expense) of ($99,570) and $3,148,080 during the three months ended March 31, 2018 and 2017, respectively.
During the years ended December 31, 2017 and 2016, the Company evaluated its capital structure and determined that a total of $5,343,056 and $6,043,076, respectively, were no longer valid liabilities of the Corporation due to expiration of the statute of limitations for each liability. As a result, the Company reported the forgiven debt as income during the fiscal years ended December 31, 2017 and 2016, respectively. In addition, the Company reported interest expense of $436,950 and $501,808 for the years ended December 31, 2017 and 2016, respectively.
Net Income (loss)
For the three month period March 31, 2018, the Company incurred a net loss of $713,176 as compared to a net income of $3,094,642 for the three month period ended March 31, 2017, which was primarily due to a gain on debt forgiveness and a change in derivative liability.
28
For the year ended December 31, 2017, the Company generated a net income (loss) of $3,298,340 and for the year ended December 31, 2016, the Company generated a net income (loss) of $7,787,739. The substantial decrease in net income was primarily due to gains reported from the forgiven debts described above offset by a chance in derivative liability expense.
The net loss for the three month period ended March 31, 2018 was a result of no revenue coupled with salaries accrued for our CEO and the net income for the three month period ended March 31, 2017 was attributional to stock based compensation paid to certain consultants for legal and financial advisory services to be rendered, a gain on debt forgiveness and a change in derivative liability.
For the year ended December 31, 2016, the Company had an accumulated deficit of $41,764,781 and for year ended December 31, 2017, the Company had an accumulated deficit of $38,466,441.
Our net income for the year ended December 31, 2017, was $3,298,340 compared with net income of $7,787,739 for the year ended December 31, 2016, a decrease of $4,489,399 or 58%. The net income (loss) is influenced by the matters discussed above.
Plan of Operations
Cash Requirements
Over the next 12 months, we intend to carry on business as a development stage IMT&S provider. We anticipate that we will incur the following operating expenses during this period:
We will require funds of approximately $790,000 over the next 12 months to implement our business plan and to operate our business. This capital will be used to build out our infrastructure, to provide for the payment of advisory and accounting services, legal, lease of our office space and anticipated up-listing fees for the OTCQB or the Nasdaq Capital Market, LLC. However there can be no assurance that we will qualify for either exchange or that our application will be approved.
These funds may be raised through equity financing, debt financing, or other sources, which may result in further dilution in the equity ownership of our shares. There is no assurance that we will be able to maintain operations at a level sufficient for an investor to obtain a return on their investment in our common stock, or that we will be able to raise sufficient capital required to implement our business plan on acceptable terms, if at all. Even if we are successful in raising sufficient capital to implement our business plan, we may continue to be unprofitable.
29
Purchase of Significant Equipment
We do not anticipate the purchase or sale of any plant or significant equipment during the next 12 months.
Going Concern
There is substantial doubt about our ability to continue as a going concern.
As of December 31, 2017, we had an accumulated deficit of $38,466,441 and has generated no revenues. The continuity of our future operations is dependent upon our ability to increase sales and brand awareness. These conditions raise substantial doubt about our ability to continue as a going concern. We intend to continue relying upon the issuance of equity securities to finance our operations. In this regard, we are restricted by the number of shares available for issuance in an equity financing, and we will likely need to increase out authorized capital in order to take advantage of such financing. However there can be no assurance that we will be successful in obtaining shareholder approval to increase our authorized capital. However, there can be no assurance we will be successful in raising the funds necessary to maintain operations, or that a self-supporting level of operations will ever be achieved. The likely outcome of these future events is indeterminable. Our financial statements do not include any adjustment to reflect the possible future effect on the recoverability and classification of the assets or the amounts and classification of liabilities that may result should we cease to continue as a going concern.
Liquidity and Capital Resources
Our ability to continue as a going concern is dependent on our ability to raise additional capital and implement its business plan. Since inception, we have been funded by related parties through capital investment and borrowing of funds.
We had total current assets of $0 for the years ended December 31, 2017 and 2016, respectively. Current assets would consist primarily of cash, the value of software, trademarks patents, websites and other intellectual properties. However, because we have decided to close and remove Adjuice and AIM Connections subsidies from our financial statements as of December 31, 2017, thereby cancelling-out all related assets of those companies. The Company carries a $38,466,441 net operating loss on its balance sheet.
We had total current liabilities of $11,275,882 and $14,835,882 for the years ended December 31, 2017 and 2016, respectively. Current liabilities consisted primarily of the accounts payable, accrued payroll and payroll taxes, and the accrued interest and principle due to Mr. Pursglove’s July 2011 Judgment. The decrease in our current liabilities is attributable to the $262,000 in debt which Mr. Pursglove converted into equity.
We had a working capital deficit of $11,275,089 and $14,835,582 for the years ended December 31, 2017 and 2016, respectively. This decrease of $3,560,483, or 24%, resulted primarily from debt forgiveness.
Cash Flow from Operating Activities
For the fiscal years ended December 31, 2017 and 2016, cash provided by (used in) operating activities was $0, respectively.
Cash Flow from Investing Activities
For the fiscal years ended December 31, 2017 and 2016, cash provided by (used in) investing activities was $0, respectively.
30
Cash Flow from Financing Activities
For the fiscal years ended December 31, 2017 and 2016, cash provided by (used in) financing activities was $0, respectively.
Contractual Obligations
As a “smaller reporting company,” we are not required to provide tabular disclosure of contractual obligations.
Inflation
Inflation and changing prices have not had a material effect on our business and we do not expect that inflation or changing prices will materially affect our business in the foreseeable future.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures or capital resources that is material to an investor in our securities.
Seasonality
In the past, our operating results and operating cash flows historically have not been subject to seasonal variations. This pattern may change, however, in the event that we succeed in bringing our planned products to market.
We currently lease virtual office space at 3773 Howard Hughes Parkway, Suite: 500 Las Vegas, NV 89169. We pay an annual fee of $120 for this lease. During 2018, we intend to move the Company’s headquarters to Florida. On April 16, 2018, we entered into a Letter of Intent with Cushman & Wakefield to lease commercial space in an office building located at 222 Lakeview Avenue, Suite 1630, West Palm Beach, FL 22401, which is in the city’s financial district. The Company’s change in corporate headquarters decrease travel time and overall travel expense. The move will also help to facilitate and reduce the cost to maintain and develop the Company’s future business, all of which we intend to maintain on the east coast of the United States. As of the date of this registration statement, we are currently negotiating an eight (8) year term for the office lease in which we anticipate leasing approximately 1,472 square feet of office space for a monthly rental fee of $5,633 for the first year, and increasing approximately 3% each year throughout the term of the lease.
Item 4. Security Ownership of Certain Beneficial Owners and Management .
The following table sets forth certain information with respect to the beneficial ownership of our voting securities as of June 21, 2018, including: (i) any person or group owning more than 5% of any class of voting securities; (ii) each director; (iii) each named executive officer; and (iv) all executive officers and directors as a group.
Beneficial ownership is determined in accordance with Rule 13d-3 of the Securities and Exchange Act of 1934, as amended, and includes having voting and/or investment power with respect to the voting securities. Unless otherwise indicated in the footnotes to the table, each shareholder named in the table has sole voting and investment power with respect to the shares of common stock set forth opposite the shareholder’s name. Unless otherwise indicated, the address of all listed stockholders is c/o Beyond Commerce, Inc., 3773 Howard Hughes Parkway, Suite 500 Las Vegas, NV 89169.
31
As of June 21, 2018, there were 1,004,200,000 shares of the Company’s common stock issued and outstanding and 250,000,000 shares of Series A Preferred Stock issued and outstanding. For a description of our securities, see “Description of Registrant’s Securities to be Registered” on page 39 of this registration statement.
Name of Beneficial Owner |
|
Common Stock Beneficially Owned (1) |
|
|
Percentage of Common Stock Owned (1) |
|
|
Preferred
|
|
|
Percentage of Preferred Stock Owned (1) |
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||||
Directors and Officers: |
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George Pursglove |
|
|
- |
|
|
|
- |
% |
|
|
- |
|
|
|
- |
% |
|
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All officers and directors (1 person) |
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- |
|
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- |
% |
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- |
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|
|
- |
% |
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|
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|
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Beneficial owners of more than 5% |
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|
The 2GP Group, LLC |
(2) |
|
- |
|
|
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- |
|
|
|
206,250,000 |
|
|
|
82.50 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiona Oakley |
|
|
1,556,632 |
|
|
|
* |
% |
|
|
43,750,000 |
|
|
|
17.50 |
% |
|
|
|
|
|
|
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|
|
|
|
|
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|
|
|
|
Caledonian Bank Limited |
(3) |
|
243,600,000 |
|
|
|
24.26 |
% |
|
|
- |
|
|
|
- |
% |
|
|
|
|
|
|
|
|
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|
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|
|
|
Eurolink Investments, Inc. |
(4) |
|
96,000,000 |
|
|
|
9.56 |
% |
|
|
- |
|
|
|
- |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Legion Trading LLC |
(5) |
|
97,800,000 |
|
|
|
9.74 |
% |
|
|
- |
|
|
|
- |
% |
|
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|
|
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|
Universal Partners Corp. |
(6) |
|
97,800,000 |
|
|
|
9.74 |
% |
|
|
|
|
|
|
|
|
*Less than 1%
|
(1) |
Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding. The calculations are based upon 1,004,200,000 shares of common stock issued and outstanding and 250,000,000 shares of Series A Preferred Stock issued and outstanding as of June 21, 2018. |
|
|
|
|
(2) |
The shares are held by an entity controlled by Geordan Pursglove, the son of our President and Chief Executive Officer. Mr. Geordan Pursglove, managing member. holds sole voting and dispositive power over these shares. The address for The 2GP Group, LLC is 102 NE 2 nd St., Suite 915, Boca Raton, FL 33432 |
32
|
|
|
|
(3) |
The Caledonian Bank Limited is controlled by Louise Cooper, who holds sole voting and dispositive power over these shares. The address for this holder is 69 Dr. Roy’s Dr., Grand Cayman KY1-1102, Cayman Islands. |
|
|
|
|
(4) |
The address for Eurolink Investments, Inc. is 25 Water Ln., P.O. Box 2059, Belize City, Belize. |
|
|
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|
(5) |
The address for Legion Trading, LLC is Hunkins Waterfront Plaza, P.O. Box 556, Charleston West Indies, Nevis. |
|
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|
|
(6) |
The address for Universal Partners Corp. is 66 Euphrates Ave., Belize City, Belize. |
We do not currently have, nor are we aware of, any arrangements which if consummated may result in a change of control in the future.
Item 5. Directors and Executive Officers.
Identification of Directors and Executive Officers
The following table sets forth the names and ages of the Company’s current directors and executive officers:
|
|
|
|
|
|
|
Name |
|
Age |
|
Position with the Company |
|
Date of Appointment |
George D. Pursglove |
|
63 |
|
President, Chief Executive Officer, Director Secretary, Treasurer |
|
February 14, 2017 |
There are no agreements with respect to electing directors. Each director of the Company shall serve for a term of one year or until his successor is elected at the Company’s Annual Meeting of Stockholders and is qualified, subject to removal by the Company’s stockholders. The board of directors appoints officers annually and each executive officer serves at the discretion of the board of directors. The Company does not have any standing committees at this time, and due to its small size does not believe that committees are necessary at this time. As of the date of this filing our sole director fulfills the duties of an audit committee. None of the directors held any directorships during the past five years in any company with a class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of such act, or of any company registered as an investment company under the Investment Company Act of 1940.
Director and Officer Biographical Information
George Pursglove – President, Chief Executive Officer, Secretary, Treasurer and Sole Director
Mr. Pursglove has served as our Chairman, President, and Chief Executive Officer since February 14, 2017. His appointment was ratified on April 27, 2017. Prior to this, Mr. Pursglove co-founded Advanced Predictive Analytics, Inc., where he has served as Chairman, President and Chief Executive Officer since July 2009. From October 2006 through October 2007, Mr. Pursglove was the co-founder, President and CEO of BOOMj.com, Inc., an early participant in lifestyle social media and e-commerce and predecessor entity of Beyond Commerce, Inc. From 1997 to 2002, he was founder and CEO of USA Service Systems, a company which provides merchandising and assembly solutions to major retailers. From January 1996 through March 1997 Mr. Pursglove was President and CEO of Univega Holdings, Inc. Mr. Pursglove was Director of Merchandising, Business Services Division for Office Depot from June 1994 through December 1995 and was Divisional Merchandise Manager II for Office Depot’s $600 million office furniture division from March 1993 through June 1994. Prior to Office Depot, he was a co-founder and executive for office supply retailer HQ Office Supplies from August 1988 through December 1992 (which was acquired by Staples) and warehouse home improvement retailer HomeClub from October 1983 through August 1988 (which was acquired by Zayre). In addition to his extensive executive experience, he has served as investor, director and/or consultant. Major experiences include
33
investing in shopping.com and All American SportsClub, Inc., and serving on the board of directors of Choices Entertainment (Nasdaq) and Sims Communication Inc. (Nasdaq). He has been an advocate for children rights through his work as a Guardian ad Litem with the Eleventh Judicial Court for Miami-Dade County, Florida. He holds a degree in Social Science from San Diego State University.
Director Independence
Quotations for the Company’s common stock are currently entered on the Pink Tier of the OTC Marketplace, which does not have director independence requirements. In determining whether any of its directors are independent, the Company has applied the definition for “Independent Directors” set out in Nasdaq Listing Rule 5605(a)(2). Mr. Pursglove is our sole director and officer and cannot be viewed as an independent director.
Family Relationship
Geordan Pursglove, managing member of The 2GP Group LLC, which holds 206,250,000 shares of Series A Preferred Stock, is the son of, our executive officer and sole director, Mr. George Pursglove.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers has, during the past ten years:
|
|
1. |
been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences); |
|
|
2. |
had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time; |
|
|
3. |
been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity; |
|
|
4. |
been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
|
|
|
5. |
been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
|
|
6. |
been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
34
Item 6. Executive Compensation .
Summary Compensation Table
The table below summaries the compensation paid or accrued to our named executive officer, as that term is defined in Item 402(m)(2) of Regulation S-K, during its last two completed fiscal years.
|
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|
|
|
Name and Principal Position |
|
Year* |
|
Salary ($) |
|
Bonus ($) |
|
Stock
($) |
|
Option Awards ($) |
|
Non-Equity Incentive Plan Compensation ($) |
|
All Other Compensation ($) |
|
Total ($) |
George D. Pursglove |
|
2017 |
$ |
$45,000* |
|
$0 |
|
$0 |
|
$0 |
|
$0 |
|
$0 |
|
$45,000* |
|
|
2016 |
|
$0 |
|
$0 |
|
$0 |
|
$0 |
|
$0 |
|
$0 |
|
$0 |
*Represents accrued but unpaid salaries during 2017.
There were no other salaries paid in 2017 and 2016. No executive officer received total annual salary and bonus compensation in excess of $100,000.
Summary of Employment Agreements and Material Terms
George Pursglove. On June 1, 2017, we entered into an employment agreement with Mr. Pursglove pursuant to which he shall serve as the Company’s President, Chief Executive Officer and sole Director. The agreement provides for annual base salary of $360,000, payable for a period of three (3) years and provides for other benefits as defined in the agreement. Mr. Pursglove’s employment agreement further provides for the payment of severance under certain conditions. If the Company terminates his employment other than for “cause” or if Mr. Pursglove terminates his employment for “reasonable basis,” Mr. Pursglove shall be entitled to receive (i) his then in-effect base salary, bonuses and incentive compensation, benefits and other compensation that he would otherwise be entitled to receive through the remainder of his term under the agreement; (ii) any bonuses and incentive compensation for any preceding year or for the current year that have been earned, but not been paid as of the effective date of termination; and (iii) payment of all other accrued but unpaid payment and benefits as of the effective date of termination.
Other than as set out in this registration statement on Form-10 we have not entered into any employment or consulting agreements with any of our current officers, directors or employees.
Outstanding Equity Awards at Fiscal Year End
As of the Company’s fiscal years ended December 31, 2017 and 2016, the Company had no outstanding equity awards.
Director Compensation
The Company plans to appoint additional directors and may reimburse its directors for expenses incurred in connection with attending board meetings. The Company has not paid any director's fees or other cash compensation for services rendered as a director since our inception to the date of this filing. The Company has no formal plan for compensating its directors for their service in their capacity as directors.
Compensation Committee Interlocks and Insider Participation
The Company does not have a compensation committee. The board of directors conducts reviews with regards to the compensation of the directors and the Chief Executive Officer once a year. To make its recommendations on such compensation, the board of directors does take into account the types of compensation and the amounts paid to officers of comparable publicly traded companies.
35
Item 7. Certain Relationships and Related Transactions and Director Independence
Transactions with Related Persons, Promoters and Certain Control Persons
On May 1, 2017, we authorized the issuance of 250,000,000 shares of Series A Preferred Stock to Mr. George Pursglove, reducing the July Judgment by approximately $250,000. On August 15, 2017, Mr. Pursglove directed the issuance of 206,250,000 shares of Series A Preferred Stock, valued at approximately $206,250,000, to The 2GP Group, LLC, an entity controlled by Geordan Pursglove, the son of our President, CEO and sole director, Mr. Pursglove. As discussed elsewhere in this registration statement, each share of Series A Preferred Stock entitles its holder to (i) cumulative, non-participating dividends in preference and priority to any declaration or payment of a dividend on any of the Company’s common stock, at a rate of 12% per annum, and (ii) three times (3x) voting preference over common stock.
Other than the foregoing, we have not engaged in any transaction within the past fiscal year and does not plan to engage in any transaction with a related person or a person with a direct or indirect material interest in an amount exceeding $120,000.
Corporate Governance
Director Independence
We currently do not have any independent directors, as the term “independent” is defined by the rules of the NASDAQ Stock Market.
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, 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. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.
Item 9. Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters
Market Information
Our common stock is subject to quotation on the Pink Tier of the OTC Markets under the symbol “BYOC”. There is currently no active trading market in the common stock on the OTC market. In the event that an active trading market commences, there can be no assurance as to the market price of the shares of common stock, whether any trading market will provide liquidity to investors, or whether any trading market will be sustained. For the periods indicated, the following table sets forth the high and low bid prices per share of common stock. The below prices represent inter-dealer quotations during the prior two fiscal years, without retail markup, markdown, or commission and may not necessarily represent actual transactions.
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|
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Fiscal 2017 |
|
Fiscal 2016 |
||||||||
|
|
High |
|
Low |
|
High |
|
Low |
||||
First Quarter ended March 31 |
|
$ |
0.0009 |
|
$ |
0.0005 |
|
$ |
0.0001 |
|
$ |
0.0001 |
Second Quarter ended June 30 |
|
$ |
0.001 |
|
$ |
0.001 |
|
$ |
0.0004 |
|
$ |
0.0001 |
Third Quarter ended September 30 |
|
$ |
0.0065 |
|
$ |
0.005 |
|
$ |
0.0001 |
|
$ |
0.0001 |
Fourth Quarter ended December 31 |
|
$ |
0.029 |
|
$ |
0.024 |
|
$ |
0.0002 |
|
$ |
0.0002 |
36
Rule 144 Shares
In general, under Rule 144, a person who is not one of our affiliates and who is not deemed to have been one of our affiliates at any time during the three months preceding a sale and who has beneficially owned shares of our common stock for at least six months would be entitled to sell them without restriction, subject to the continued availability of current public information about us (which current public information requirement is eliminated after a one-year holding period).
A person who is an affiliate and who has beneficially owned shares of a company’s common stock for at least six months, subject to the continued availability of current public information about us, is entitled to sell within any three-month period a number of shares that does not exceed the greater of:
|
· |
one percent of the number of shares of our company’s common stock then outstanding, which, in our case, will equal approximately 10,000,000 shares as of the date of this Current Report on Form-10; or |
Rule 144 is not available for either a reporting or non-reporting shell company, as defined under Rule 405 of the Securities Act, unless our company: has ceased to be a shell company; is subject to the Exchange Act reporting obligations; has filed all required Exchange Act reports during the preceding twelve months; and at least one year has elapsed from the time the company filed with the SEC, current Form-10 type information reflecting its status as an entity that is not a shell company.
Holders
As of June 21, 2018, our shares of common stock were held by approximately 227 shareholders of record The Transfer Agent of our common stock is TranShare Stock Transfer, located at 15500 Roosevelt Blvd, Suite 301 Clearwater, FL 33760 and their telephone number is (303) 662-1112.
Dividends
Any decisions regarding dividends will be made by our board of directors. We currently intend to retain and use any future earnings for the development and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Our board of directors has complete discretion on whether to pay dividends, subject to the approval of our stockholders. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant.
Securities Authorized for Issuance Under Equity Compensation Plans
On September 11, 2008, our Board of Directors adopted a 2008 Equity Incentive Plan (the “Plan”), and on June 12, 2009 the Board amended the Plan to increase the number of shares of common stock that may be issued under the Plan from 3,500,000 to 7,000,000. Effective April 1, 2010, the Board of Directors further increased the number of shares issuable under the Plan by 10,000,000 to a total of 17,000,000 shares. On July 24, 2009, the Plan was submitted to, and approved by, our stockholders at the 2009 Annual Meeting of stockholders. Under the Plan, we are currently authorized to grant options, restricted stock and stock appreciation rights to purchase up to 17,000,000 shares of common stock to our employees, officers, directors, consultants and advisors. Awards under the plan may consist of stock options (both non-qualified options and options intended to qualify as “Incentive Stock Options” under Section 422 of the Internal Revenue Code of 1986, as amended), restricted stock awards and stock appreciation rights.
The Plan is administered by our Board of Directors or a committee appointed by the Board, which determines the persons to whom awards will be granted, the type of award to be granted, the number of awards to be granted and the specific terms of each grant, including the vesting thereof, subject to the provisions of the plan.
The Plan provides that the exercise price of each incentive stock option may not be less than the fair market value of our common stock on the date of grant (or 110% of the fair market value in the case of a grantee holding more than 10% of our outstanding common stock). The exercise price of a non-qualified stock option shall be no less than the fair market value of the common stock on the date of grant. The maximum number of options that may be granted in any fiscal year to any participant is 5,000,000.
37
The Plan also permits the grant of freestanding stock appreciation rights or in tandem with option awards. The grant price of a stock appreciation right shall be no less than the fair market value of a share on the date of grant of the stock appreciation right. No stock appreciation right shall be exercisable later than the tenth anniversary of its grant. Upon the exercise of a stock appreciation right, a participant shall be entitled to receive common stock at a fair market value equal to the benefit to be received by the exercise.
The Plan also provides us with the ability to grant or sell shares of common stock that are subject to certain transferability, forfeiture, repurchase or other restrictions. The type of restriction, the number of shares of restricted stock granted and other such provisions shall be determined by our Board of Directors or its committee.
Unless otherwise determined by our Board of Directors or its committee, awards granted under the Plan are not transferable other than by will or by the laws of descent and distribution.
The Plan provides that, except as set forth in an individual award agreement, upon the occurrence of a corporate transaction: (1) our Board of Directors or its committee shall notify each participant at least thirty (30) days prior to the consummation of the corporate transaction or as soon as may be practicable and (2) all options and stock appreciation rights shall terminate and all restricted stock shall be forfeited immediately prior to the consummation of such corporate transaction unless the committee determines otherwise in its sole discretion. A “corporate transaction” means (1) a liquidation or dissolution of the Company; (2) a merger or consolidation of the Company with or into another corporation or entity (other than a merger with a wholly-owned subsidiary); or (3) the sale of all or substantially all of the assets of the Company.
Our Board of Directors may alter, amend or terminate the plan in any respect at any time, but no alteration, amendment or termination will adversely affect in any material way any award previously granted under the Plan, without the written consent of the participant holding such award.
This Plan is set to expire on September 11, 2018.
During the years ended December 31, 2017 and 2016, the Company did not issue any stock or options as it had no employees.
Plan Category |
|
Number of Securities to be issued upon exercise of outstanding warrants, options and rights |
|
Weighted average price of outstanding options, warrants and rights |
Number of securities remaining available for future issuance under equity compensation plans (excluding column A) |
Equity Compensation Plans Approved by Securities Holders |
|
17,000,000 |
|
N/A |
N/A |
Equity Compensation Plans Not Approved by Security Holders |
|
0 |
|
N/A |
N/A |
Item 10. Recent Sale or Issuance of Unregistered and Restricted Securities.
On April 27, 2017, the Company issued 1,556,632 shares of common stock, par value $0.001 per share, to Mr. Pursglove, reducing the July Judgment by $12,453.
Effective July 27, 2017, the Company filed a certificate of designation with the Secretary of State of the State of Nevada, pursuant to which it designated the Series A Preferred Stock. Each share of Series A Preferred Stock is convertible into one share of common stock. In addition, each share of Series A Preferred Stock entitles its holder to (i) cumulative, non-participating dividends in preference and priority to any declaration or payment of a dividend on any of the Company’s common stock, at a rate of 12% per annum, and (ii) three times (3x) voting preference over common stock. On the same date, the Company issued 250,000,000 shares of its Series A Preferred Stock to Mr. Pursglove, further reducing the award under the July Judgment owed to Mr. Pursglove by $250,000. Mr. Geordan Pursglove also has advanced the Company $46,275 to pay certain company related expenses.
38
On March 12, 2018, the Company issued 3,500,000 shares of restricted common stock to Maxim Group LLC, as compensation for services to be rendered pursuant to the financial advisory agreement.
On April 16, 2018 the Company issued 700,000 shares of restricted common stock for legal services to be rendered.
In connection with the foregoing issuances, the Company relied upon the exemption from securities registration provided by Section 4(a)(2) under the Securities Act for transactions not involving a public offering.
Item 11. Description of Registrant’s Securities to be Registered .
Capital Stock
Common Stock
We are authorized to issue 1,050,000,000 shares of common stock, par value $0.001 per share. Each outstanding share of common stock entitles the holder thereof to one vote per share on all matters. Our bylaws provide that any vacancy occurring in the board of directors may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the board of directors. Stockholders do not have pre-emptive rights to purchase shares in any future issuance of our common stock.
The holders of shares of our common stock are entitled to dividends out of funds legally available when and as declared by our board of directors. Our board of directors has never declared a dividend and does not anticipate declaring a dividend in the foreseeable future. Should we decide in the future to pay dividends, as a holding company, our ability to do so and meet other obligations depends upon the receipt of dividends or other payments from our operating subsidiary and other holdings and investments. In the event of our liquidation, dissolution or winding up, holders of our common stock are entitled to receive, ratably, the net assets available to stockholders after payment of all creditors.
All of the issued and outstanding shares of our common stock are duly authorized, validly issued, fully paid and non-assessable. To the extent that additional shares of our common stock are issued, the relative interests of existing stockholders will be diluted.
Preferred Stock
We are authorized to issue up to 250,000,000 shares of our “blank check” preferred stock, par value of $0.001. Effective July 27, 2017, we designated 250,000,000 of our “blank check” preferred shares as Series A Preferred Stock, all of which are issued and outstanding as of the date of this registration statement. Each share of Series A Preferred Stock entitles its holder to (i) cumulative, non-participating dividends in preference and priority to any declaration or payment of a dividend on any of the Company’s common stock, at a rate of 12% per annum, and (ii) three times (3x) voting preference over common stock.
Warrants
The Company entered into an agreement in conjunction with the convertible notes payable issued on March 28, 2018 to issue seven (7) warrants valued at $15,000 per warrant which has an exercise price of $0.15 or 65% of the three lowest trading days within a 20 day market price timeframe, whichever is lower to purchase the Company’s $0.001 par value common stock. The warrant also has certain cashless exercise features. The issuance of these warrants is predicated on the completion of the funding requirements within the terms of the security agreement.
Convertible Notes
On March 28, 2018, the Company issued a series of convertible notes in the principal amount of $1,000,000, convertible into shares of common stock, par value $0.001 per share, of the Company.
39
Anti-takeover Effects of Our Articles of Incorporation and By-laws
Our amended and restated articles of incorporation and bylaws contain certain provisions that may have anti-takeover effects, making it more difficult for or preventing a third party from acquiring control of the Company or changing its board of directors and management. According to our bylaws and articles of incorporation, neither the holders of the Company’s common stock nor the holders of the Company's preferred stock have cumulative voting rights in the election of our directors. The combination of the present ownership by a few stockholders of a significant portion of the Company's issued and outstanding common stock and lack of cumulative voting makes it more difficult for other stockholders to replace the Company's board of directors or for a third party to obtain control of the Company by replacing its board of directors.
Anti-takeover Effects of Nevada Law
Business Combinations
The “business combination” provisions of Sections 78.411 to 78.444, inclusive, of the Nevada Revised Statutes, or NRS, prohibit a Nevada corporation with at least 200 stockholders from engaging in various “combination” transactions with any interested stockholder: for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the transaction is approved by the board of directors prior to the date the interested stockholder obtained such status; or after the expiration of the three-year period, unless:
· the transaction is approved by the board of directors or a majority of the voting power held by disinterested stockholders, or
· if the consideration to be paid by the interested stockholder is at least equal to the highest of: (a) the highest price per share paid by the interested stockholder within the three years immediately preceding the date of the announcement of the combination or in the transaction in which it became an interested stockholder, whichever is higher, (b) the market value per share of common stock on the date of announcement of the combination and the date the interested stockholder acquired the shares, whichever is higher, or (c) for holders of preferred stock, the highest liquidation value of the preferred stock, if it is higher.
A “combination” is defined to include mergers or consolidations or any sale, lease exchange, mortgage, pledge, transfer or other disposition, in one transaction or a series of transactions, with an "interested stockholder" having: (a) an aggregate market value equal to 5% or more of the aggregate market value of the assets of the corporation, (b) an aggregate market value equal to 5% or more of the aggregate market value of all outstanding shares of the corporation, or (c) 10% or more of the earning power or net income of the corporation.
In general, an “interested stockholder” is a person who, together with affiliates and associates, owns (or within three years, did own) 10% or more of a corporation's voting stock. The statute could prohibit or delay mergers or other takeover or change in control attempts and, accordingly, may discourage attempts to acquire our company even though such a transaction may offer our stockholders the opportunity to sell their stock at a price above the prevailing market price.
Control Share Acquisitions
The “control share” provisions of Sections 78.378 to 78.3793, inclusive, of the NRS, which apply only to Nevada corporations with at least 200 stockholders, including at least 100 stockholders of record who are Nevada residents, and which conduct business directly or indirectly in Nevada, prohibit an acquirer, under certain circumstances, from voting its shares of a target corporation's stock after crossing certain ownership threshold percentages, unless the acquirer obtains approval of the target corporation's disinterested stockholders. The statute specifies three thresholds: one-fifth or more but less than one-third, one-third but less than a majority, and a majority or more, of the outstanding voting power. Once an acquirer crosses one of the above thresholds, those shares in an offer or acquisition and acquired within 90 days thereof become “control shares” and such control shares are deprived of the right to vote until disinterested stockholders restore the right. These provisions also provide that if control shares are accorded full voting rights and the acquiring person has acquired a majority or more of all voting power, all other stockholders who do not vote in favor of authorizing voting rights to the control shares are entitled to demand payment for the fair value of their shares in accordance with statutory procedures established for dissenters’ rights.
40
Item 12. Indemnification of Directors and Officers .
Section 78.138 of the NRS provides that a director or officer will not be individually liable unless it is proven that (i) the directors or officer's acts or omissions constituted a breach of his or her fiduciary duties, and (ii) such breach involved intentional misconduct, fraud or a knowing violation of the law.
Section 78.7502 of NRS permits a company to indemnify its directors and officers against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with a threatened, pending or completed action, suit or proceeding if the officer or director (i) is not liable pursuant to NRS 78.138 or (ii) acted in good faith and in a manner the officer or director reasonably believed to be in or not opposed to the best interests of the corporation and, if a criminal action or proceeding, had no reasonable cause to believe the conduct of the officer or director was unlawful.
Section 78.751 of NRS permits a Nevada company to indemnify its officers and directors against expenses incurred by them in defending a civil or criminal action, suit or proceeding as they are incurred and in advance of final disposition thereof, upon receipt of an undertaking by or on behalf of the officer or director to repay the amount if it is ultimately determined by a court of competent jurisdiction that such officer or director is not entitled to be indemnified by the company. Section 78.751 of NRS further permits the company to grant its directors and officers additional rights of indemnification under its articles of incorporation or bylaws or otherwise.
Section 78.752 of NRS provides that a Nevada company may purchase and maintain insurance or make other financial arrangements on behalf of any person who is or was a director, officer, employee or agent of the company, or is or was serving at the request of the company as a director, officer, employee or agent of another company, partnership, joint venture, trust or other enterprise, for any liability asserted against him and liability and expenses incurred by him in his capacity as a director, officer, employee or agent, or arising out of his status as such, whether or not the company has the authority to indemnify him against such liability and expenses.
Our Articles of Incorporation provide that no director or officer of the Company will be personally liable to the Company or any of its stockholders for damages for breach of fiduciary duty as a director or officer; provided, however, that the foregoing provision shall not eliminate or limit the liability of a director or officer (i) for acts or omissions which involve intentional misconduct, fraud or knowing violation of law, or (ii) the payment of dividends in violation of
Section 78.300 of NRS. In addition, our bylaws permit for the indemnification and insurance provisions in Chapter 78 of the NRS.
Insofar as indemnification by us for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling the company pursuant to provisions of our articles of incorporation and bylaws, 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 by such director, officer or controlling person of us 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 offered, 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 us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
At the present time, there is no pending litigation or proceeding involving a director, officer, employee or other agent of ours in which indemnification would be required or permitted. We are not aware of any threatened litigation or proceeding, which may result in a claim for such indemnification.
41
Item 13. Financial Statements and Supplementary Data .
Unaudited Financial Statements as of and for the Three Months Ended March 31, 2018 and 2017 |
|
Page |
|
|
|
Unaudited Consolidated Balance Sheets |
|
F-3 |
|
|
|
Unaudited Consolidated Statements of Operations |
|
F-4 |
|
|
|
Unaudited Consolidated Statements of Cash Flows |
|
F-5 |
|
|
|
Notes to the Unaudited Consolidated Financial Statements |
|
F-6 |
42
Beyond Commerce, Inc.
CONDENSED CONSOLIDATED UNAUDITED
FINANCIAL STATEMENTS
FOR THE THREE MONTH PERIODS ENDED
MARCH 31, 2018 & 2017
TABLE OF CONTENTS
|
Page |
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2018 (Unaudited) & DECEMBER 31, 2017 |
F-3 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2018 & 2017 (Unaudited) |
F-4 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2018 & 2017 (Unaudited) |
F-5 |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) |
F-6 |
F- 2
BEYOND COMMERCE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2018 |
|
|
2017 |
|
||
ASSETS |
|
Unaudited |
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash |
|
$ |
- |
|
|
$ |
- |
|
Total current assets |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
263,894 |
|
|
$ |
263,894 |
|
Accounts payable – related party |
|
|
64,881 |
|
|
|
46,275 |
|
Other current liabilities |
|
|
2,854,610 |
|
|
|
2,665,040 |
|
Accrued payroll & related items |
|
|
1,464,395 |
|
|
|
1,464,395 |
|
Accrued payroll taxes |
|
|
1,077,163 |
|
|
|
1,077,163 |
|
Pursglove Judgment payable |
|
|
5,758,322 |
|
|
|
5,758,322 |
|
Total current liabilities |
|
|
11,483,265 |
|
|
|
11,275,089 |
|
|
|
|
|
|
|
|
|
|
Long- term borrowings |
|
|
50,000 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
11,533,265 |
|
|
$ |
11,275,089 |
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mezzanine Equity: |
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value of 250,000,000 shares authorized and 250,000,000 shares issued and outstanding as of March 31, 2018 and December 31,2017 |
|
|
250,000 |
|
|
|
250,000 |
|
Stockholders’ deficit: |
|
|
|
|
|
|
|
|
Common stock, $0.001 par value, 1,050,000,000 shares authorized as of March 31, 2018 and 1,000,000,000 shares authorized as of December 31, 2017 and 1,003,500,000 and 1,000,000,000 issued and outstanding as of March 31, 2018 and at December 31, 2017, respectively. |
|
|
1,003,500 |
|
|
|
1,000,000 |
|
Additional paid in capital |
|
|
26,392,852 |
|
|
|
25,941,352 |
|
Accumulated deficit |
|
|
(39,179,617 |
) |
|
|
(38,466,441 |
) |
Total stockholders' deficit |
|
|
(11,533,265 |
) |
|
|
(11,275,089 |
) |
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' deficit |
|
$ |
- |
|
|
$ |
- |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
F- 3
BEYOND COMMERCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE-MONTH PERIODS ENDED MARCH 31,
UNAUDITED
|
|
|
|
|||||
|
|
2018 |
|
|
2017 |
|
||
Revenues |
|
|
|
|
|
|
||
Net revenues |
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
Selling general and administrative |
|
|
8,766 |
|
|
|
6,598 |
|
Payroll expense |
|
|
90,000 |
|
|
|
45,000 |
|
Professional fees |
|
|
514,840 |
|
|
|
1,840 |
|
Total operating expenses |
|
|
613,606 |
|
|
|
53,438 |
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(613,606 |
) |
|
|
(53,438 |
) |
|
|
|
|
|
|
|
|
|
Non-operating income (expense) |
|
|
|
|
|
|
|
|
Interest expense |
|
|
(99,570 |
) |
|
|
(117,316 |
) |
Gain on debt forgiveness |
|
|
- |
|
|
|
763,332 |
|
Change in derivative liability |
|
|
- |
|
|
|
2,502,064 |
|
Total non-operating income (expense) |
|
|
(99,570 |
) |
|
|
3,148,080 |
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
(713,176 |
) |
|
|
3,094,642 |
|
|
|
|
|
|
|
|
|
|
Provision for income tax |
|
|
- |
|
|
|
- |
|
Net income (loss) |
|
$ |
(713,176 |
) |
|
$ |
3,094,642 |
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share-basic and diluted |
|
$ |
(0.00) |
|
|
$ |
0.00 |
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding basic |
|
|
1,001,011,111 |
|
|
|
998,443,368 |
|
Weighted average number of common shares outstanding diluted |
|
|
1,001,011,111 |
|
|
|
15,890,452,368 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
F- 4
BEYOND COMMERCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE-MONTH PERIODS ENDED MARCH 31,
UNAUDITED
|
|
|
|
|||||
|
|
2018 |
|
|
2017 |
|
||
Net income (loss) |
|
$ |
(713,176 |
) |
|
$ |
3,094,642 |
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Adjustments to reconcile net income (loss) to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Stock issued for services |
|
|
455,000 |
|
|
|
- |
|
Debt forgiveness |
|
|
- |
|
|
|
(763,332 |
) |
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Increase (decrease) in accounts payable |
|
|
18,606 |
|
|
|
83,615 |
|
Increase (decrease) in payroll liabilities |
|
|
180,000 |
|
|
|
45,000 |
|
Increase (decrease) in other current liabilities |
|
|
9,570 |
|
|
|
42,139 |
|
Change in derivative liability |
|
|
- |
|
|
|
(2,502,064 |
) |
Net cash used in operating activities. |
|
$ |
(50,000 |
) |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Cash receipts from convertible notes payable |
|
|
50,000 |
|
|
|
- |
|
Net cash provided from financing activities |
|
$ |
50,000 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning balance |
|
$ |
- |
|
|
$ |
- |
|
Cash and cash equivalents, ending balance |
|
$ |
- |
|
|
$ |
- |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
F- 5
BEYOND COMMERCE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Beyond Commerce, Inc., formerly known as BOOMj, Inc. (the “Company”, “BCI”, and “we”), is a multi-faceted business serving as a media hub for high traffic web properties, and owns and operates synergistic technology, in Ad Networking, and E-Commerce. Our initial business was BOOMj.com, Inc. a niche portal and social networking site for Baby Boomers and Generation Jones. This migrated into our E-Commerce platform known as i-SUPPLY, an online storefront that offered easy to use, fully customizable E-commerce services, and revenue solutions for any third party Web site large or small, and hosted local ads, providing extensive reach for our proprietary advertising partner network platform.
During the third quarter of 2009 the Company formed a subsidiary, KaChing KaChing, Inc., a Nevada corporation (“KaChing Nevada” or “KaChing KaChing” or “KaChing”). This was an E-commerce platform that provided a complete turn-key E-commerce solution to third party Store Owners. On April 22, 2010, KaChing merged with Duke Mining Company, Inc. to become a new public company. As a result of the merger transaction, KaChing KaChing interest in outstanding capital stock of the Company’s. was reduced to 20.8%. This investment was written off in 2015 and therefore the Company no longer has an interest in KaChing KaChing.
During the second quarter 2010 we acquired 100% of the outstanding stock of Adjuice, Inc. in order to enhance our presence in the Ad Networking business. The Adjuice network had distributed leads to over 350 retail clients along seven major verticals, all offering top payouts. Adjuice had owned and managed over 120 sites, all optimized for brand recognition and conversion performance. Adjuice has a solid infrastructure for selling its own products, targeting advertisers and publishers and their related downstream partners with Adjuice’s tailored lead generation programs.
On March 31, 2011, we acquired AIM Connection, Inc., a leading direct sales affiliate, SEO provider, social network and website generator. AIM Connection was the combination of internet marketing techniques and automation software, which allowed its software to be controlled and managed by the client.
During 2017 the Company reevaluated the current status of all these businesses and determined that many of these businesses were no longer viable.
History of the Company
The Company, formerly known as Reel Estate Services, Inc. (“RES”), was incorporated in Nevada on January 12, 2006. As of December 28, 2007, RES was a public shell company, defined by the Securities and Exchange Commission (“SEC”) as an inactive, publicly quoted company with nominal assets and liabilities. Subsequent to the merger with BOOMj.com, on January 14, 2008, RES changed its name to Boomj, Inc.
In December 2008, the Company changed its name from BOOMj, Inc. to Beyond Commerce, Inc. to more accurately reflect the new structure of the Company consisting at that point in time of two operating divisions: BOOMj.com d/b/a i-SUPPLY and until its assets were sold, LocalAdLink, Inc.
Basis of Presentation
The condensed consolidated financial statements and the notes thereto for the periods ended March 31, 2018 and 2017 included herein have been prepared by management and are unaudited. Such condensed financial statements reflect, in the opinion of management, all adjustments necessary to present fairly the financial position and results of operations as of and for the periods indicated and in order to make the financial statements not misleading. All such adjustments are of a normal recurring nature. These interim results are not necessarily indicative of the results for any subsequent period or for the fiscal year ending December 31, 2018.
Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). These consolidated financial statements should be read in conjunction with the financial statements and the notes thereto for the fiscal year ended December 31, 2017.
F- 6
Plan of Operations
Continuing in 2018, the Company has reduced operations significantly and continued a plan to investigate and, if such investigation warrants, acquire a target company or business seeking the perceived advantages of being a publicly held corporation and, to a lesser extent that desires to employ our funds in its business. Our principal business objective for the next 12 months and beyond will be to achieve long-term growth potential through a combination with a business rather than immediate, short-term earnings. We will not restrict our potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business.
The analysis of new business opportunities will be undertaken by our executive management team. In our efforts to analyze potential acquisition targets, we may consider the following kinds of factors:
• Potential for growth, indicated by new technology, anticipated market expansion or new products;
• Competitive position as compared to other firms of similar size and experience within the industry segment as well as within the industry as a whole;
• Strength and diversity of management, either in place or scheduled for recruitment;
• Capital requirements and anticipated availability of required funds, to be provided by us or from operations, through the sale of additional securities, through joint ventures or similar arrangements or from other sources;
• The cost of participation by us as compared to the perceived tangible and intangible values and potentials;
• The extent to which the business opportunity can be advanced;
• The accessibility of required management expertise, personnel, raw materials, services, professional assistance and other required items; and
• Other relevant factors.
In applying the foregoing criteria, no one of which will be controlling, our management will attempt to analyze all factors and circumstances and make a determination based upon reasonable investigative measures and available data. Potentially available business opportunities may occur in many different industries, and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex. Due to the limited capital we have available for investigation, we may not discover or adequately evaluate adverse facts about the opportunity to be acquired.
The manner in which we participate in an opportunity will depend upon the nature of the opportunity, our respective needs and desires as well as those of the promoters of the opportunity, and the relative negotiating strength of us and such promoters.
It is likely that we will acquire our participation in a business opportunity through the issuance of common stock or other securities. Although the terms of any such transaction cannot be predicted, it should be noted that in certain circumstances the criteria for determining whether or not an acquisition is a so-called "tax free" reorganization under Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code"), depends upon the issuance to the stockholders of the acquired company of at least 80% of the common stock of the combined entities immediately following the reorganization. If a transaction were structured to take advantage of these provisions rather than other "tax free" provisions provided under the Code, all prior stockholders would in such circumstances retain 20% or less of the total issued and outstanding shares. Under other circumstances, depending upon the relative negotiating strength of the parties, prior stockholders may retain substantially less than 20% of the total issued and outstanding shares. This could result in substantial additional dilution to the equity of those who were our stockholders prior to such reorganization.
Our present stockholders will likely not have control of a majority of our voting shares following a reorganization transaction. As part of such a transaction, our current director may resign and new directors may be appointed without any vote by stockholders.
F- 7
In the case of an acquisition, the transaction may be accomplished upon the sole determination of our management without any vote or approval by stockholders. In the case of a statutory merger or consolidation directly involving our company, it will likely be necessary to call a stockholders' meeting and obtain the approval of the holders of a majority of the outstanding shares. The necessity to obtain such stockholder approval may result in delay and additional expense in the consummation of any proposed transaction and will also give rise to certain appraisal rights to dissenting stockholders. Most likely, management will seek to structure any such transaction so as not to require stockholder approval if possible.
It is anticipated that the investigation of specific business opportunities and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial cost for accountants, attorneys and others. If a decision not to participate in a specific business opportunity is made, the costs theretofore incurred in the related investigation would not be recoverable. Furthermore, even if an agreement is reached for the participation in a specific business opportunity, the failure to consummate that transaction may result in our loss of the related costs incurred.
We do not currently engage in any business activities that provide us with positive cash flows. As such, the costs of investigating and analyzing business combinations for the next approximately 12 months and beyond will be paid with our current cash and if necessary, with additional funds raised through other sources, which may not be available on favorable terms, if at all.
We do not believe that we will be able to meet these costs with our current cash on hand and will require additional debt or equity funding in order to maintain operations.
NOTE 2. SELECTED ACCOUNTING POLICIES
Use of Estimates
The preparation of consolidated financial statements and accompanying notes in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates are used in the determination of depreciation and amortization and the valuation for non-cash issuances of equity instruments, web site, income taxes, and contingencies, among others. Actual results could differ materially from these estimates.
Fair Value of Financial Instruments
The carrying value of the current assets and liabilities approximate fair value due to their relatively short maturities.
Fair Value Measurements
Statement of financial accounting standard FASB Topic 820, Disclosures about Fair Value of Financial Instruments, requires that the Company disclose estimated fair values of financial instruments. The carrying amounts reported in the statements of financial position for assets and liabilities qualifying as financial instruments are a reasonable estimate of fair value.
The Company applies the fair value hierarchy as established by GAAP. Assets and liabilities recorded at fair value in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure the fair value as follows.
• Level 1 – quoted prices in active markets for identical assets or liabilities.
• Level 2 – other significant observable inputs for the assets or liabilities through corroboration with market data at the measurement date.
• Level 3 – significant unobservable inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date.
Management considers all of its derivative liabilities to be Level 3 liabilities. At March 31,2018 and December 31, 2017, respectively the Company had outstanding derivative liabilities, including those from related parties of $0 and $0, respectively.
F- 8
Valuation of Derivative Instruments
ASC 815 “Derivatives and Hedging” requires that embedded derivative instruments be bifurcated and assessed, along with free-standing derivative instruments such as warrants, on their issuance date and measured at their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option pricing formula. Upon conversion of a note where the embedded conversion option has been bifurcated and accounted for as a derivative liability, the Company records the shares at fair value, relieves all related notes, derivatives and debt discounts and recognizes a net gain or loss on debt extinguishment.
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and then is revalued at each reporting date, with changes in fair value reported in the consolidated statement of operations. For stock based derivative financial instruments, Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option-pricing model. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.
Once determined, derivative liabilities are adjusted to reflect fair value at the end of each reporting period. Any increase or decrease in the fair value from inception is made quarterly and appears in results of operations as a change in fair market value of derivative liabilities.
Impairment of Long-lived Assets
The Company accounts for long-lived assets in accordance with the provisions of ASC 360-10-35-21, Accounting for the Impairment of Long-Lived Assets . This statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Fair values are determined based on quoted market value, discounted cash flows or internal and external appraisals, as applicable. During 2018 and 2017, the Company did not recognize any impairment charges.
Segment Information
The Company’s operations are classified into two principal reportable segments: (i) internet retail store and its e-commerce operations (BOOMj.com d/b/a i-SUPPLY), and (ii) an online media and marketing company (Adjuice, Inc.).
Recent Accounting Pronouncements
The Company reviews all of the Financial Accounting Standard Board’s updates periodically to ensure the Company’s compliance of its accounting policies and disclosure requirements to the Codification Topics.
In January 2016, the FASB issued a new standard related to certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The standard will be effective for us beginning January 1, 2019. We are currently evaluating the impact of this standard on our financial statements, including accounting policies, processes, and systems.
In February 2016, the FASB issued a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases under current U.S. GAAP. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. We will be required to recognize and measure leases existing at, or entered into after, the beginning of the earliest comparative period presented using a modified retrospective approach, with certain practical expedients available.
F- 9
The standard will be effective for us beginning January 1, 2020. The standard may have a material impact on our balance sheets in the future if we entered into new leases, but will not have a material impact on our statement of operations. The most significant impact will be the recognition of ROU assets and lease liabilities for operating leases. We are currently evaluating the impact of this standard on our financial statements, including accounting policies, processes, and systems.
The Company will continue to monitor these emerging issues to assess any potential future impact on its financial statements.
NOTE 3. GOING CONCERN
The Company's financial statements are prepared using generally accepted accounting principles, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. Because of recent events, no certainty of continuation can be stated. The accompanying condensed consolidated financial statements for March 31, 2018 and 2017 have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
The Company has suffered losses from operations and has a working capital deficit, which raises substantial doubt about its ability to continue as a going concern. Management is taking steps to raise additional funds to address its operating and financial cash requirements to continue operations in the next twelve months. Management has devoted a significant amount of time in attempting to raise capital from additional debt and equity financing. Due to its nonexistent revenues, the Company’s ability to continue as a going concern is dependent upon raising additional funds through debt and equity financing and generating revenue or through a merger transaction with a well-capitalized entity. There are no assurances the Company will receive the necessary funding or generate revenue necessary to fund operations. If we are unable to obtain additional funds, or if the funds cannot be obtained on terms favorable to us, we will be required to delay, scale back or eliminate our plans to continue to develop and expand our operations or in the extreme situation, cease operations altogether.
NOTE 4. OTHER CURRENT LIABILITIES
Other current liabilities consist of the following:
|
|
March 31, December 31, |
|
|||||
|
|
2018 |
|
|
2017 |
|
||
Accrued interest |
|
$ |
2,674,482 |
|
|
$ |
2,574,912 |
|
Accrued payroll and related expenses |
|
|
1,464,395 |
|
|
|
1,464,395 |
|
Payroll tax liability |
|
|
1,077,163 |
|
|
|
1,077,163 |
|
Other |
|
|
180,128 |
|
|
|
90,128 |
|
Total other current liabilities |
|
$ |
5,396,168 |
|
|
$ |
5,206,598 |
|
Beginning in 2015, the Company began reviewing certain liabilities as to its continuing outstanding position in regards to the statute of limitations and reduced accordingly.
NOTE 5. LONG TERM BORROWINGS
Long-term borrowings consist of the following: |
|
March 31, December 31, |
|
|||||
|
|
2018 |
|
|
2017 |
|
||
Convertible Promissory Notes, bearing an annual interest rate of 10% secured, due 08/28/2019 |
|
|
50,000 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Total long term borrowings |
|
$ |
50,000 |
|
|
$ |
- |
|
F- 10
NOTE 7. COMMON STOCK, WARRANTS AND PAID IN CAPITAL
Common Stock
As of March 31, 2018, our authorized capital stock consisted of 1,050,000,000 shares of common stock, par value $0.001 per share. As of March 31, 2018, there were 1,003,500,000 issued and outstanding shares of common stock.
On March 5, 2018, the Company’s board of directors increased the authorized shares by 10,000,000 bringing the total authorized to 1,010,000,000. Subsequently on March 26, 2018 the Company’s board of directors increased the authorized shares by another 40,000,000, bringing the total authorized to 1,050,000,000. The Company on March 5, 2018 issued 3,500,000 shares of its $0.001 common stock in relation to its advisory agreement with Maxim Group LLC valued at $455,000.
Holders of common stock are entitled to one vote per share on all matters submitted to a vote of the stockholders, including the election of directors. Except as otherwise required by law, the holders of our common stock possess all voting power. Generally, all matters to be voted on by stockholders must be approved by a majority (or, in the case of election of directors, by a plurality) of the votes entitled to be cast by all shares of our common stock that are present in person or represented by proxy. A vote by the holders of a majority of our outstanding shares is required to effectuate certain fundamental corporate changes such as liquidation, merger or an amendment to our Articles of Incorporation. Our Articles of Incorporation do not provide for cumulative voting in the election of directors. Holders of our common stock have no pre-emptive rights, no conversion rights and there are no redemption provisions applicable to our common stock.
Warrants
The Company entered into an agreement in conjunction with the March 28 th convertible notes payable to issue seven (7) warrants valued at $15,000 per warrant which has an exercise price of $0.15 or 65% of the three lowest trading days within a 20 day market price timeframe, whichever is lower to purchase the Company’s $0.001 par value common stock. The warrant also has certain cashless exercise features. The issuance of these warrants is predicated on the completion of the funding requirements within the terms of the security agreement.
2008 Equity Incentive Stock Option Plan
During the three-month period ended March 31, 2018, the Company did not issue any stock options. This plan expires on September 11, 2018.
Dividends
The Company anticipates that all future earnings will be retained to finance future growth. The payment of dividends, if any, in the future to the Company’s common stockholders is within the discretion of the Board of Directors of the Company and will depend upon the Company’s earnings, its capital requirements and financial condition and other
F- 11
relevant factors. The Company has not paid a dividend on its common stock and does not anticipate paying any dividends on its common stock in the foreseeable future but instead intends to retain all earnings, if any, for use in the Company’s business operations .
NOTE 8. COMMITMENTS AND CONTINGENCIES
Legal Matters
In 2008 the Company filed suit against its former co-founder, President, Chief Executive Officer George Pursglove for breach of confidentiality and non-compete while employed and also postemployment, breach of fiduciary duty and other matters, and the Company is seeking to enforce certain non-compete agreements. The former CEO subsequently counter-sued the Company for breach of contract, breach of implied covenant of good faith and fair dealing and other matters. The former CEO is seeking to be awarded $75,000 in cash plus at least 3.3 million shares of stock of the Company. On July 28, 2011, the Company received a jury verdict ordering and adjudging in Case Number 2:08-cv-00496-KJD-LRL where BOOMj.com was the Plaintiff and the former CEO was the Defendant & Counterclaimant, that a judgment be entered in favor of the Defendant and Counterclaimant against the Plaintiff, BOOMj.com, in the amount of $20,775 for damages as to the claim for failure to pay wages, $3,000,000 for damages as to the conversion claim, and $3,000,000 for punitive damages. The current outstanding related to this manner for both March 31, 2018 and December 31, 2017 is $5,758,322. The Company is accruing interest at an annual rate of 5.29% on the outstanding balance. As of March 31, 2018 and December 31, 2017 the Company has accrued interest balance of $2,124,482 and 2,044,912, respectively.
On May 2, 2017 Pursglove debt was reduced by $262,453 through the issuance of 250,000,000 shares of Series A Convertible 12% Cumulative Preferred stock and 1,556,632 shares of Common Stock reducing the balance to $5,758,322.
Operating Lease
Beyond Commerce currently leases virtual office space at 3773 Howard Hughes Parkway, Suite 500 Las Vegas, NV 89169 with plans to move the Company’s headquarters to West Palm Beach, FL. This space has a yearly rent of $120 which expires December 31, 2018. The move of the Company’s corporate headquarters to West Palm Beach will cut down on travel time and overall travel expense. The move will help to facilitate and reduce the cost to maintain and develop the Company’s future business which is all located on the East Coast of the US. The Company has entered into a Letter of Intent (LOI) with Cushman & Wakefield pertaining to specific office space at the Esparante Corporate Center located in the financial district of West Palm Beach, FL.
Tax Lien
On February 17, 2010, the Internal Revenue Service placed a federal tax lien of $756,711 and an additional $161,150 on June 14, 2010, against all of the property and rights to the property of BOOMj.com for unpaid federal payroll withholding taxes for the year ended December 31, 2009. The current amount outstanding including penalty and interest is $1,607,163, which is also inclusive of amounts outstanding for state tax related claims of $63,725. The accrued interest on the balance sheet related to this liability is $550,000 and $530,000 as of March 31, 2018 and December 31, 2017, respectively.
NOTE 9. RELATED PARTIES
On May 2, 2017, the Company authorized and issued 206,250,000 shares of BCI’s Series A Convertible 12% Cumulative Preferred stock at a price of ($.001 par value) per share to The 2GP Group LLC an entity controlled by Geordan Pursglove, our sole director’s son. The Series A Convertible 12% Cumulative Preferred stock include a three times (3x) voting preference. Mr. Geordan Pursglove also has advanced the Company $46,275 to pay certain company related expenses.
Also, on May 2, 2017 George Pursglove’ debt was reduced by $262,453 through the issuance of 250,000,000 shares of Series A Convertible 12% Cumulative Preferred stock of which 43,750,000 were transferred to Fiona Oakley and 1,556,632 shares of Common Stock which also were issued to Fiona Oakley subsequent to this reduction.
The Company recorded $18,606 in advances from Geordan Pursglove as a related party transactions during the three-month period end March 31, 2018.
F- 12
NOTE 10. NET INCOME (LOSS) PER SHARE OF COMMON STOCK
The Company follows ASC 260-10 which requires presentation of basic and diluted Earnings per Share (“EPS”) on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying condensed consolidated financial statements, basic net income (loss) per share of common stock is computed by dividing the net income (loss) by the weighted average number of shares of common stock outstanding during the year. Basic net income (loss) per common share is based upon the weighted average number of common shares outstanding during the period.
There are no stock options or warrants that are exercisable into shares of the Company’s common stock as these were all extinguished; and convertible debt that is convertible into 333,333 and 14,642,009,000 shares of the Company’s common stock are not included in the computation along with 250,000,000 and zero of the Company’s preferred stock for the three month period ended March 31, 2018 and 2017, respectively, as the income share is negligible.
The following is a reconciliation of the numerator and denominator of the basic and diluted earnings per share computations for the three-month period ended March 31, 2018 and 2017:
|
|
Three-month period ended March 31, |
|
||||
|
|
2018 |
|
|
|
2017 |
|
Net income (loss) |
$ |
(713,176) |
|
|
$ |
3,094,641 |
|
Weighted average shares used for basic earnings per share |
1,001,011,111 |
|
|
998,443,368 |
|
||
Incremental diluted shares |
- |
* |
|
14,892,009,000 |
|
||
Weighted average shares used for diluted earnings per share |
1,001,011,111 |
|
|
15,890,452,368 |
|
||
Net income (loss) per share: |
|
|
|
||||
Basic |
$ |
0.00 |
|
|
$ |
0.00 |
|
Diluted |
$ |
0.00 |
|
|
$ |
0.00 |
|
*The shares associated with convertible debt, stock options and stock warrants are not included because the inclusion would be anti-dilutive, (i.e., reduce the net loss per common share).
NOTE 11. SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
The Company paid $0 and $0 for the three months ended March 31, 2018 and 2017, respectively for interest. The Company did not make any payments for income tax during the three months ended March 31, 2018 and 2017. The Company did not make any payments for income tax during the years ended December 31, 2017 and 2016. Other non-cash financing included the Pursglove debt which was reduced by $262,453 through the issuance of 250,000,000 shares of Series A Convertible 12% Cumulative Preferred stock and 1,556,632 shares of Common Stock.
NOTE 12. SUBSEQUENT EVENTS
The Company has not been a reporting Company within the rules of the Securities and Exchange Commission since May of 2011, and has attempted to solicit funding for the continuing operations or a potential sale. We currently plan to investigate and, if such investigation warrants, acquire a target company or business seeking the perceived advantages of being a publicly held corporation and, to a lesser extent that desires to employ our funds in its business. Our principal business objective for the next several months and beyond will be to achieve long-term growth potential through a combination with a business rather than immediate, short-term earnings. We will not restrict our potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business.
On April 16, 2018 the Company issued 700,000 shares of restricted common stock for legal services to be rendered in connection with the Maxim transaction.
While final closing has not yet occurred, the Company has signed a letter of intent to acquire certain entities.
F- 13
Beyond Commerce, Inc.
CONSOLIDATED AUDITED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2017 & 2016
F- 14
TABLE OF CONTENTS
AUDITED |
Page |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
F-16 |
|
|
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2017 & 2016 |
F-17 |
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2017 & 2016 |
F-18 |
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE FOR THE YEARS ENDED DECEMBER 31, 2017 & 2016 |
F-19 |
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT FOR THE YEARS ENDED DECEMBER 31, 2017 & 2016 |
F-20 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
F-21 |
F- 15
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Beyond Commerce, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Beyond Commerce, Inc. (the Company) as of December 31, 2017 and 2016, and the related statements of operations, stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2017, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Consideration of the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the
Company has incurred losses, has not generated sufficient revenue to cover its operating costs, and may be unable to raise further equity in support of operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding those matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Haynie & Company/
Haynie & Company
Salt Lake City, Utah
June 22, 2018
We have served as the Company’s auditor since 2018.
F- 16
BEYOND COMMERCE, INC.
CONSOLIDATED BALANCE SHEETS
AS OF December 31,
|
|
2017 |
|
|
2016 |
|
||
ASSETS |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Short- term borrowings |
|
$ |
- |
|
|
$ |
656,704 |
|
Accounts payable |
|
|
263,894 |
|
|
|
204,925 |
|
Accounts payable – related party |
|
|
46,275 |
|
|
|
- |
|
Note derivative liability |
|
|
- |
|
|
|
2,868,760 |
|
Accrued interest and other current liabilities |
|
|
2,665,040 |
|
|
|
2,670,660 |
|
Accrued payroll & related items |
|
|
1,464,395 |
|
|
|
1,336,895 |
|
Accrued payroll taxes |
|
|
1,077,163 |
|
|
|
1,077,163 |
|
Pursglove Judgment payable |
|
|
5,758,322 |
|
|
|
6,020,775 |
|
Total current liabilities |
|
|
11,275,089 |
|
|
|
14,835,882 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mezzanine Equity: |
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value of 250,000,000 shares authorized and 250,000,000 and 0 shares issued and outstanding as of December 31,2017 and 2016, respectively |
|
|
250,000 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Stockholders’ deficit: |
|
|
|
|
|
|
|
|
Common stock, $0.001 par value, 1,050,000,000 shares authorized as of December 31, 2017 and 2016, and 1,000,000,000 issued and outstanding as of December 31, 2017 and 998,443,368 at December 31, 2016. |
|
|
1,000,000 |
|
|
|
998,444 |
|
Additional paid in capital |
|
|
25,941,352 |
|
|
|
25,930,455 |
|
Accumulated deficit |
|
|
(38,466,441 |
) |
|
|
(41,764,781 |
) |
Total stockholders' deficit |
|
|
(11,275,089 |
) |
|
|
(14,835,882 |
) |
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' deficit |
|
$ |
- |
|
|
$ |
- |
|
The accompanying notes are an integral part of these consolidated financial statements.
F- 17
BEYOND COMMERCE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
For the years ended December 31, |
|
|||||
|
|
2017 |
|
|
2016 |
|
||
|
|
|
|
|
|
|
||
Revenues |
|
|
|
|
|
|
||
Net revenues |
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
Selling general and administrative |
|
|
14,873 |
|
|
|
6,681 |
|
Payroll expense |
|
|
217,500 |
|
|
|
180,000 |
|
Professional fees |
|
|
15,321 |
|
|
|
2,018 |
|
Total costs and operating expenses |
|
|
247,694 |
|
|
|
188,699 |
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(247,694 |
) |
|
|
(188,699 |
) |
|
|
|
|
|
|
|
|
|
Non-operating income (expense) |
|
|
|
|
|
|
|
|
Gain on debt forgiveness |
|
|
5,543,056 |
|
|
|
6,043,076 |
|
Change in derivative liability |
|
|
(1,560,071 |
) |
|
|
2,435,170 |
|
Interest expense |
|
|
(436,950 |
) |
|
|
(501,808 |
) |
Total non-operating income (expense) |
|
|
3,546,035 |
|
|
|
7,976,438 |
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
3,298,340 |
|
|
|
7,787,739 |
|
|
|
|
|
|
|
|
|
|
Provision for income tax |
|
|
- |
|
|
|
- |
|
Net income |
|
$ |
3,298,340 |
|
|
$ |
7,787,739 |
|
|
|
|
|
|
|
|
|
|
Net income per common share-basic |
|
$ |
0.00 |
|
|
$ |
0.01 |
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding basic |
|
|
999,479,701 |
|
|
|
998,443,368 |
|
|
|
|
|
|
|
|
|
|
Net income per common share-diluted |
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding - diluted |
|
|
15,891,488,701 |
|
|
|
20,248,443,368 |
|
The accompanying notes are an integral part of these consolidated financial statements.
F- 18
BEYOND COMMERCE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
For the years ended December 31, |
|
|||||
|
|
2017 |
|
|
2016 |
|
||
Net income |
|
$ |
3,298,340 |
|
|
$ |
7,787,739 |
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Debt forgiveness |
|
|
(5,543,056 |
) |
|
|
(6,043,076 |
) |
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Increase (decrease) in accounts payable |
|
|
105,245 |
|
|
|
8,699 |
|
Increase (decrease) in payroll liabilities |
|
|
217,500 |
|
|
|
180,000 |
|
Change in derivative liability |
|
|
1,560,071 |
|
|
|
(2,435,170 |
) |
Increase (decrease) in other current liabilities |
|
|
361,900 |
|
|
|
501,808 |
|
Net cash used in operating activities |
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning balance |
|
$ |
- |
|
|
$ |
- |
|
Cash and cash equivalents, ending balance |
|
$ |
- |
|
|
$ |
- |
|
The accompanying notes are an integral part of these consolidated financial statements.
F- 19
BEYOND COMMERCE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
AUDITED
|
|
Common Stock |
|
|
Additional |
|
|
|
|
|
|
|
|||||||||
|
|
Shares |
|
|
Par Value |
|
|
Paid-In Capital |
|
|
Accumulated Deficit |
|
|
Stockholders’ Equity/(Deficit) |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balance, January 1, 2016 |
|
|
998,443,368 |
|
|
$ |
998,444 |
|
|
$ |
25,930,455 |
|
|
$ |
(49,552,520 |
) |
|
$ |
(22,623,621 |
) |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,787,739 |
|
|
|
7,787,739 |
|
|
Balance, December 31, 2016 |
|
|
998,443,368 |
|
|
$ |
998,444 |
|
|
$ |
25,930,455 |
|
|
$ |
(41,764,781 |
) |
|
$ |
(14,835,882 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock debt conversion |
|
|
1,556,632 |
|
|
|
1,556 |
|
|
|
10,897 |
|
|
|
|
|
|
|
12,453 |
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,298,340 |
|
|
|
3,298,340 |
|
|
Balance, December 31, 2017 |
|
|
1,000,000,000 |
|
|
$ |
1,000,000 |
|
|
$ |
25,941,352 |
|
|
$ |
(38,466,441 |
) |
|
$ |
(11,525,089 |
) |
The accompanying notes are an integral part of these consolidated financial statements.
F- 20
BEYOND COMMERCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Beyond Commerce, Inc., formerly known as BOOMj, Inc. (the “Company”, “BCI”, and “we”), is a multi-faceted business serving as a media hub for high traffic web properties, and owns and operates synergistic technology, in Ad Networking, and E-Commerce. Our initial business was BOOMj.com, Inc. a niche portal and social networking site for Baby Boomers and Generation Jones. This migrated into our E-Commerce platform known as i-SUPPLY, an online storefront that offered easy to use, fully customizable E-commerce services, and revenue solutions for any third party Web site large or small, and hosted local ads, providing extensive reach for our proprietary advertising partner network platform.
During the third quarter of 2009 the Company formed a subsidiary, KaChing KaChing, Inc., a Nevada corporation (“KaChing Nevada” or “KaChing KaChing” or “KaChing”). This was an E-commerce platform that provided a complete turn-key E-commerce solution to third party Store Owners. On April 22, 2010, KaChing merged with Duke Mining Company, Inc. to become a new public company. As a result of the merger transaction, the Company’s interest in outstanding capital stock of KaChing KaChing, Inc. was reduced to 20.8%. This investment was written off in 2015 and therefore the Company no longer has an interest in KaChing KaChing.
During the second quarter 2010 we acquired 100% of the outstanding stock of Adjuice, Inc. in order to enhance our presence in the Ad Networking business. The Adjuice network had distributed leads to over 350 retail clients along seven major verticals, all offering top payouts. Adjuice had owned and managed over 120 sites, all optimized for brand recognition and conversion performance. Adjuice has a solid infrastructure for selling its own products, targeting advertisers and publishers and their related downstream partners with Adjuice’s tailored lead generation programs.
On March 31, 2011, we acquired AIM Connection, Inc., a leading direct sales affiliate, SEO provider, social network and website generator. AIM Connection was the combination of internet marketing techniques and automation software, which allowed its software to be controlled and managed by the client.
During 2017 the Company reevaluated the current status of all these businesses and determined that many of these businesses were no longer viable.
History of the Company
The Company, formerly known as Reel Estate Services, Inc. (“RES”), was incorporated in Nevada on January 12, 2006. As of December 28, 2007, RES was a public shell company, defined by the Securities and Exchange Commission (“SEC”) as an inactive, publicly quoted company with nominal assets and liabilities. Subsequent to the merger with BOOMj.com, RES changed its name to BOOMj, Inc.
In December 2008, the Company changed its name from BOOMj, Inc. to Beyond Commerce, Inc. to more accurately reflect the new structure of the Company consisting at that time of two operating divisions: BOOMj.com d/b/a i-SUPPLY and until its assets were sold, LocalAdLink, Inc.
Basis of Presentation
The consolidated financial statements and the notes thereto for the years ended December 31, 2017 and 2016 included herein include the accounts of the Company, its wholly-owned subsidiaries BOOMj, Inc. d/b/a i-SUPPLY, AIM Connection Inc. and Adjuice, Inc.
The consolidated financial statements contain certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC. All significant intercompany accounts and transactions have been eliminated in consolidation.
Plan of Operations
Continuing in 2017, the Company had reduced its operations significantly and continues its plan to investigate and if such investigation warrants, acquire a target company or business seeking the perceived advantages of being a publicly held corporation and to a lesser extent that desires to employ our funds in its business. Our principal business objective for the next 12 months and beyond will be to achieve long-term growth potential through a combination with a
F- 21
business rather than immediate, short-term earnings. We will not restrict our potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business.
The analysis of new business opportunities will be undertaken by our executive management team. In our efforts to analyze potential acquisition targets, we may consider the following kinds of factors:
• Potential for growth, indicated by new technology, anticipated market expansion or new products;
• Competitive position as compared to other firms of similar size and experience within the industry segment as well as within the industry as a whole;
• Strength and diversity of management, either in place or scheduled for recruitment;
• Capital requirements and anticipated availability of required funds, to be provided by us or from operations, through the sale of additional securities, through joint ventures or similar arrangements or from other sources;
• The cost of participation by us as compared to the perceived tangible and intangible values and potentials;
• The extent to which the business opportunity can be advanced;
• The accessibility of required management expertise, personnel, raw materials, services, professional assistance and other required items; and
• Other relevant factors.
In applying the foregoing criteria, no one of which will be controlling, our management will attempt to analyze all factors and circumstances and make a determination based upon reasonable investigative measures and available data. Potentially available business opportunities may occur in many different industries, and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex. Due to the limited capital we have available for investigation, we may not discover or adequately evaluate adverse facts about the opportunity to be acquired.
The manner in which we participate in an opportunity will depend upon the nature of the opportunity, our respective needs and desires as well as those of the promoters of the opportunity, and the relative negotiating strength of us and such promoters.
It is likely that we will acquire our participation in a business opportunity through the issuance of common stock or other securities. Although the terms of any such transaction cannot be predicted, it should be noted that in certain circumstances the criteria for determining whether or not an acquisition is a so-called "tax free" reorganization under Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code"), depends upon the issuance to the stockholders of the acquired company of at least 80% of the common stock of the combined entities immediately following the reorganization. If a transaction were structured to take advantage of these provisions rather than other "tax free" provisions provided under the Code, all prior stockholders would in such circumstances retain 20% or less of the total issued and outstanding shares. Under other circumstances, depending upon the relative negotiating strength of the parties, prior stockholders may retain substantially less than 20% of the total issued and outstanding shares. This could result in substantial additional dilution to the equity of those who were our stockholders prior to such reorganization.
Our present stockholders will likely not have control of a majority of our voting shares following a reorganization transaction. As part of such a transaction, our current director may resign and new directors may be appointed without any vote by stockholders.
In the case of an acquisition, the transaction may be accomplished upon the sole determination of our management without any vote or approval by stockholders. In the case of a statutory merger or consolidation directly involving our company, it will likely be necessary to call a stockholders' meeting and obtain the approval of the holders of a majority of the outstanding shares. The necessity to obtain such stockholder approval may result in delay and additional expense in the consummation of any proposed transaction and will also give rise to certain appraisal rights to dissenting stockholders. Most likely, management will seek to structure any such transaction so as not to require stockholder approval if possible.
It is anticipated that the investigation of specific business opportunities and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial cost for accountants, attorneys and others. If a decision not to participate in a specific business opportunity is made, the costs theretofore incurred in the related investigation would not be recoverable.
F- 22
Furthermore, even if an agreement is reached for the participation in a specific business opportunity, the failure to consummate that transaction may result in our loss of the related costs incurred.
We do not currently engage in any business activities that provide us with positive cash flows. As such, the costs of investigating and analyzing business combinations for the next approximately 12 months and beyond will be paid with our current cash and if necessary, with additional funds raised through other sources, which may not be available on favorable terms, if at all.
We do not believe that we will be able to meet these costs with our current cash on hand and will require additional debt or equity funding in order to maintain operations.
NOTE 2. ACCOUNTING POLICIES
Use of Estimates
The preparation of consolidated financial statements and accompanying notes in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates are used in the determination of depreciation and amortization and the valuation for non-cash issuances of equity instruments, web site, income taxes, and contingencies, among others. Actual results could differ materially from these estimates.
Cash and Cash Equivalents
The Company classifies as cash and cash equivalents amounts on deposit in banks and cash temporarily in various instruments with original maturities of three months or less at the time of purchase. The Company’s cash management system is currently integrated within one banking institution.
Fair Value of Financial Instruments
The carrying value of the current assets and liabilities approximate fair value due to their relatively short maturities.
Fair Value Measurements
Statement of financial accounting standard FASB Topic 820, Disclosures about Fair Value of Financial Instruments, requires that the Company disclose estimated fair values of financial instruments. The carrying amounts reported in the statements of financial position for assets and liabilities qualifying as financial instruments are a reasonable estimate of fair value.
The Company applies the fair value hierarchy as established by GAAP. Assets and liabilities recorded at fair value in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure the fair value as follows.
• Level 1 – quoted prices in active markets for identical assets or liabilities.
• Level 2 – other significant observable inputs for the assets or liabilities through corroboration with market data at the measurement date.
• Level 3 – significant unobservable inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date.
Management considers all of its derivative liabilities to be Level 3 liabilities. At December 31, 2017 and 2016, respectively the Company had outstanding derivative liabilities, including those from related parties of $0 and $2,868,760, respectively.
F- 23
Valuation of Derivative Instruments
ASC 815 “Derivatives and Hedging” requires that embedded derivative instruments be bifurcated and assessed, along with free-standing derivative instruments such as warrants, on their issuance date and measured at their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option pricing formula. Upon conversion of a note where the embedded conversion option has been bifurcated and accounted for as a derivative liability, the Company records the shares at fair value, relieves all related notes, derivatives and debt discounts and recognizes a net gain or loss on debt extinguishment.
Management used the following inputs to value the Derivative Liabilities for the years ended December 31, 2017 and 2016, respectively:
|
2017 Derivative Liability |
2016 Derivative Liability |
Expected term |
1 month to 9 months |
1 month to 2 years |
Exercise price |
$0.00006 - $0.0006 |
$0.0006 -$0.0012 |
Expected volatility |
287% to 765% |
287% to 765% |
Expected dividends |
None |
None |
Risk-free rate |
0.22% to 1.01% |
0.14% to 1.06% |
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and then is revalued at each reporting date, with changes in fair value reported in the consolidated statement of operations. For stock based derivative financial instruments, Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option-pricing model. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.
Once determined, derivative liabilities are adjusted to reflect fair value at the end of each reporting period. Any increase or decrease in the fair value from inception is made quarterly and appears in results of operations as a change in fair market value of derivative liabilities.
Impairment of Long-lived Assets
The Company accounts for long-lived assets in accordance with the provisions of ASC 360-10-35-21, Accounting for the Impairment of Long-Lived Assets . This statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Fair values are determined based on quoted market value, discounted cash flows or internal and external appraisals, as applicable. During 2017 and 2016, the Company did not recognize any impairment charges.
Income Taxes
The Company will account for income taxes under ASC 740-10-30. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income of the consolidated statements of operations in the period that includes the enactment date. A valuation allowance is provided when it is more likely than not that some or all of the deferred tax assets may not be realized.
F- 24
The Company follows the guidance of ASC 740-10-25 in determining whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. The Company had no material adjustments to its liabilities for unrecognized income tax benefits.
Stock Based Compensation
The Company may issue compensatory stock options or shares to employees, consultants, and other service providers under its 2008 Equity Incentive Plan (the “Plan”). In some cases, it has issued compensatory warrants to service providers outside the Plan. The Company issues new shares of its common stock when employees or service providers exercise options or warrants. All equity-based compensation awarded has been determined under the fair value provisions of ASC 718. This compensation is then expensed over the vesting period of the underlying award. Additionally, for all equity-based compensation awarded prior to the adoption date, compensation for the portion of awards for which the requisite service is performed after the adoption date is recognized as service is rendered. At this time the Company has no warrants outstanding.
Stock-based compensation for awards granted to non-employees is periodically re-measured as the underlying options and warrants vest. The Company recognizes an expense for such awards throughout the performance period as the services are provided by the non-employees, based on the fair value of these options and warrants at each reporting period.
The Company estimates the fair value of stock issuances based on the closing market value of the Company’s stock on the date of grant. There are currently no options outstanding.
Segment Information
The Company’s operations are classified into two principal reportable segments: (i) internet retail store and its e-commerce operations (BOOMj.com d/b/a i-SUPPLY), and (ii) an online media and marketing company (Adjuice, Inc.).
Employee Benefits
The Company currently has no employees. During 2009, the shareholders approved the 2008 Equity Incentive Plan at the shareholders’ annual meeting held on July 24, 2009. The current Equity Incentive Plan is set to expire on September 11, 2018.
Recent Accounting Pronouncements
The Company reviews all of the Financial Accounting Standard Board’s updates periodically to ensure the Company’s compliance of its accounting policies and disclosure requirements to the Codification Topics.
In January 2016, the FASB issued a new standard related to certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The standard will be effective for us beginning January 1, 2019. We are currently evaluating the impact of this standard on our financial statements, including accounting policies, processes, and systems.
In February 2016, the FASB issued a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases under current U.S. GAAP. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. We will be required to recognize and measure leases existing at, or entered into after, the beginning of the earliest comparative period presented using a modified retrospective approach, with certain practical expedients available.
F- 25
The standard will be effective for us beginning January 1, 2020. The standard may have a material impact on our balance sheets in the future if we entered into new leases, but will not have a material impact on our statement of operations. The most significant impact will be the recognition of ROU assets and lease liabilities for operating leases. We are currently evaluating the impact of this standard on our financial statements, including accounting policies, processes, and systems.
The Company will continue to monitor these emerging issues to assess any potential future impact on its financial statements.
NOTE 3. GOING CONCERN
The Company's financial statements are prepared using generally accepted accounting principles, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. Because of recent events, the Company cannot state with certainty of its ability to continue. The accompanying consolidated financial statements for December 31, 2017 and 2016 have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
The Company has suffered losses from operations and has a working capital deficit, which raises substantial doubt about its ability to continue as a going concern. Management is taking steps to raise additional funds to address its operating and financial cash requirements to continue operations in the next twelve months. Management has devoted a significant amount of time in attempting to raise capital from additional debt and equity financing. Due to its nonexistent revenues, the Company’s ability to continue as a going concern is dependent upon raising additional funds through debt and equity financing and generating revenue or through a merger transaction with a well-capitalized entity. There are no assurances the Company will receive the necessary funding or generate revenue necessary to fund operations. If we are unable to obtain additional funds, or if the funds cannot be obtained on terms favorable to us, we will be required to delay, scale back or eliminate our plans to continue to develop and expand our operations or in the extreme situation, cease operations altogether.
NOTE 4. OTHER CURRENT LIABILITIES
Other current liabilities consist of the following:
|
|
December 31, |
|
|||||
|
|
2017 |
|
|
2016 |
|
||
Accrued interest |
|
$ |
2,574,912 |
|
|
$ |
2,595,482 |
|
Accrued payroll and related expenses |
|
|
1,464,395 |
|
|
|
1,336,895 |
|
Payroll tax liability |
|
|
1,077,163 |
|
|
|
1,077,163 |
|
Other |
|
|
90,128 |
|
|
|
75,178 |
|
Total other current liabilities |
|
$ |
5,206,598 |
|
|
$ |
5,084,718 |
|
Beginning in 2015, the Company began reviewing certain liabilities as to its continuing outstanding position in regards to the statute of limitations and reduced accordingly.
NOTE 5. SHORT TERM BORROWINGS
Short term borrowings consist of the following: |
|
December 31, |
|
|||||
|
|
2017 |
|
|
2016 |
|
||
Sundry Bridge Notes, bearing an annual interest rate of 12%, unsecured, due 1/31/2010 - 10/05/2011* |
|
|
- |
|
|
|
106,704 |
|
Convertible Promissory Notes, bearing a default interest rate of 18%, due 2/26/11* |
|
|
- |
|
|
|
150,000 |
|
Convertible Promissory Notes, bearing a default interest rate of 24%, due 8/17/11* |
|
|
- |
|
|
|
400,000 |
|
Total principal |
|
$ |
- |
|
|
$ |
656,704 |
|
Less: unamortized debt discount |
|
|
- |
|
|
|
- |
|
Total short-term borrowings |
|
$ |
- |
|
|
$ |
656,704 |
|
* The above notes with maturity dates on January 31, 2010, February 26, 2011and August 17, 2011 are in default as of the date of these consolidated financial statements for failure to pay the principal and accrued interest at Maturity.
F- 26
The Company did not enter into any new debt securities during the year ending December 31, 2017, however the Company reevaluated several loans as to their continued liability in relation to the statute of limitations and retired several of these items as the term had expired. The Company recorded $38,670 and $103,528 as interest expense on the above notes for the year ended December 31, 2017 and 2016, respectively.
NOTE 6. COMMON STOCK, WARRANTS AND PAID IN CAPITAL
Common Stock
As of December 31, 2017, our authorized capital stock consisted of 1,000,000,000 shares of common stock, par value $0.001 per share. As of December 31, 2017, there were 1,000,000,000 issued and outstanding shares of common stock. The Company issued 1,556,632 shares of stock during the twelve-month period ended December 31, 2017.
On May 2, 2017, the company converted $12,453 debt related to the Pursglove judgement to one individual. The Company issued 1,556,632 shares of its restricted common stock to convert this debt.
Holders of common stock are entitled to one vote per share on all matters submitted to a vote of the stockholders, including the election of directors. Except as otherwise required by law, the holders of our common stock possess all voting power. Generally, all matters to be voted on by stockholders must be approved by a majority (or, in the case of election of directors, by a plurality) of the votes entitled to be cast by all shares of our common stock that are present in person or represented by proxy. A vote by the holders of a majority of our outstanding shares is required to effectuate certain fundamental corporate changes such as liquidation, merger or an amendment to our Articles of Incorporation. Our Articles of Incorporation do not provide for cumulative voting in the election of directors. Holders of our common stock have no pre-emptive rights, no conversion rights and there are no redemption provisions applicable to our common stock.
Preferred Stock
As of December 31, 2017, our authorized preferred stock consisted of 250,000,000 shares of Series A Convertible 12% Cumulative Preferred stock, par value $0.001 per share. As of December 31, 2017, there were 250,000,000 issued and outstanding shares of preferred stock. Shares and accrued but unpaid dividends are convertible into common stock at the option of the holder at a conversion price equal to the Series A issue price. Dividends will not begin to accrue until a minimum of $500,000 in subscriptions for the Series A preferred stock is reached. Due to the lack of authorized shares available, the preferred stock has been classified as mezzanine equity on the face of the balance sheet.
On May 2, 2017, the Company authorized and issued 250,000,000 shares of BCI’s Series A Convertible 12% Cumulative Preferred stock at a price of ($.001 par value) per share to The 2GP Group LLC as follows: 206,250,000 to an entity controlled by Geordan Pursglove our sole director’s son, and 43,750,000 to Fiona Oakley. Series A Convertible 12% Cumulative Preferred stock include a three times (3x) voting preference. The issuance of the 250,000,000 shares of Series A Convertible 12% Cumulative Preferred shares will decrease the judgment owed to Mr. George Pursglove by $250,000.
The debt related to the Pursglove judgment was reduced by a total of $262,453 as a result of Common and Preferred stock transactions.
Warrants
The Company does not have any outstanding common stock purchase warrants at December 31, 2017 and 2016. Those previous outstanding warrants from previous years all had expired by February 17, 2016.
2008 Equity Incentive Stock Option Plan
On September 11, 2008, our Board of Directors adopted Beyond Commerce’s 2008 Equity Incentive Plan (the “Plan”), and on June 12, 2009 the Board amended the Plan to increase the number of shares of common stock that may be issued under the Plan from 3,500,000 to 7,000,000. Effective April 1, 2010, the Board of Directors further increased the number of shares issuable under the Plan by 10,000,000 to a total of 17,000,000 shares. On July 24, 2009, the Plan was submitted to, and approved by, our stockholders at the 2009 Annual Meeting of stockholders. Under the Plan, we are currently authorized to grant options, restricted stock and stock appreciation rights to purchase up to 17,000,000 shares of common stock to our employees, officers, directors, consultants and advisors. Awards under the plan may consist of stock options (both non-qualified options and options intended to qualify as “Incentive Stock Options” under Section 422 of the Internal Revenue Code of 1986, as amended), restricted stock awards and stock appreciation rights.
F- 27
The Plan is administered by our Board of Directors or a committee appointed by the Board, which determines the persons to whom awards will be granted, the type of award to be granted, the number of awards to be granted and the specific terms of each grant, including the vesting thereof, subject to the provisions of the plan.
The Plan provides that the exercise price of each incentive stock option may not be less than the fair market value of our common stock on the date of grant (or 110% of the fair market value in the case of a grantee holding more than 10% of our outstanding common stock). The exercise price of a non-qualified stock option shall be no less than the fair market value of the common stock on the date of grant. The maximum number of options that may be granted in any fiscal year to any participant is 5,000,000.
The Plan also permits the grant of freestanding stock appreciation rights or in tandem with option awards. The grant price of a stock appreciation right shall be no less than the fair market value of a share on the date of grant of the stock appreciation right. No stock appreciation right shall be exercisable later than the tenth anniversary of its grant. Upon the exercise of a stock appreciation right, a participant shall be entitled to receive common stock at a fair market value equal to the benefit to be received by the exercise.
The Plan also provides us with the ability to grant or sell shares of common stock that are subject to certain transferability, forfeiture, repurchase or other restrictions. The type of restriction, the number of shares of restricted stock granted and other such provisions shall be determined by our Board of Directors or its committee.
Unless otherwise determined by our Board of Directors or its committee, awards granted under the Plan are not transferable other than by will or by the laws of descent and distribution.
The Plan provides that, except as set forth in an individual award agreement, upon the occurrence of a corporate transaction: (1) our Board of Directors or its committee shall notify each participant at least thirty (30) days prior to the consummation of the corporate transaction or as soon as may be practicable and (2) all options and stock appreciation rights shall terminate and all restricted stock shall be forfeited immediately prior to the consummation of such corporate transaction unless the committee determines otherwise in its sole discretion. A “corporate transaction” means (1) a liquidation or dissolution of the Company; (2) a merger or consolidation of the Company with or into another corporation or entity (other than a merger with a wholly-owned subsidiary); or (3) the sale of all or substantially all of the assets of the Company.
Our Board of Directors may alter, amend or terminate the plan in any respect at any time, but no alteration, amendment or termination will adversely affect in any material way any award previously granted under the Plan, without the written consent of the participant holding such award.
During the years ended December 31, 2017 and 2016, the Company did not issue any stock or options as it had no employees.
Stock Options Granted
On September 11, 2008, the Board of Directors approved the issuance of stock options in accordance with the Plan. The employee options had a cliff vesting schedule over a three year period that vested one third after one year of service and then 4.2% per month over the remaining twenty-four months. Options issued to non-employees for meeting performance-based goals, vest immediately. During second quarter of 2011, the Company ceases having any employees therefore per the terms of the 2008 Equity Incentive Stock Option Plan the Service Date Termination provision eliminated all outstanding stock options. As such, the Company does not have any outstanding stock options.
Dividends
The Company anticipates that all future earnings will be retained to finance future growth. The payment of dividends, if any, in the future to the Company’s common stockholders is within the discretion of the Board of Directors of the Company and will depend upon the Company’s earnings, its capital requirements and financial condition and other relevant factors. The Company has not paid a dividend on its common stock and does not anticipate paying any dividends on its common stock in the foreseeable future but instead intends to retain all earnings, if any, for use in the Company’s business operations .
F- 28
NOTE 7. RELATED PARTIES
On May 2, 2017, the Company authorized and issued 206,250,000 shares of BCI’s Series A Convertible 12% Cumulative Preferred stock at a price of ($.001 par value) per share to The 2GP Group LLC an entity controlled by Geordan Pursglove, our sole director’s son. The Series A Convertible 12% Cumulative Preferred stock include a three times (3x) voting preference. Mr. Geordan Pursglove also has advanced the Company $46,275 to pay certain company related expenses.
Also, on May 2, 2017 George Pursglove’ debt was reduced by $262,453 through the issuance of 250,000,000 shares of Series A Convertible 12% Cumulative Preferred stock of which 43,750,000 were transferred to Fiona Oakley and 1,556,632 shares of Common Stock which also were issued to Fiona Oakley subsequent to this reduction.
NOTE 8. INCOME TAXES
A reconciliation of the statutory income tax rates and the Company’s effective tax rate is as follows:
|
|
December 31, |
|
|||||
|
|
2017 |
|
|
2016 |
|
||
|
|
|
|
|
|
|
||
Statutory U.S. federal rate |
|
|
(34.00 |
)% |
|
|
(34.00 |
)% |
Permanent differences |
|
|
- |
|
|
|
- |
|
Valuation allowance |
|
|
34.00 |
% |
|
|
34.00 |
% |
Provision for income tax expense(benefit) |
|
|
0.0 |
% |
|
|
0.0 |
% |
The tax effects of the temporary differences and carry forwards that give rise to deferred tax assets consist of the following:
|
|
2017 |
|
|
2016 |
|
||
Deferred tax assets: |
|
|
|
|
|
|
||
Net operating loss carry-forwards |
|
$ |
12,598,246 |
|
|
$ |
13,719,682 |
|
Accrued expenses |
|
|
3,728,073 |
|
|
|
3,775,868 |
|
Non-cash compensation |
|
|
3,077,009 |
|
|
|
3,077,009 |
|
Derivative liabilities |
|
|
- |
|
|
|
975,378 |
|
Total deferred tax assets |
|
$ |
19,403,328 |
|
|
$ |
21,547,937 |
|
|
|
|
|
|
|
|
|
|
Valuation allowance |
|
|
(19,403,328 |
) |
|
|
(21,547,937 |
) |
Net deferred tax asset |
|
$ |
- |
|
|
$ |
- |
|
At December 31, 2017, the Company had estimated U.S. federal net operating losses of approximately $37,054,000 for income tax purposes which will expire between 2026 and 2027. For financial reporting purposes, the entire amount of the net deferred tax assets has been offset by a valuation allowance due to uncertainty regarding the realization of the assets. The net change in the total valuation allowance for the year ended December 31, 2017 was a decrease of $2,144,609. The Company follows FASC 740-10-25 P which requires a company to evaluate whether a tax position taken by the company will “more likely than not” be sustained upon examination by the appropriate tax authority. The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. The Company believes that its income tax filing positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in a material change to its financial position. Therefore, no reserves for uncertain income tax positions have been recorded.
The Company may not be able to utilize the net operating loss carryforwards for its US income taxes in future periods should it experience a change in ownership as defined in Section 382 of the Internal Revenue Code (“IRC”). Under section 382, should the Company experience a more than 50% change in its ownership over a 3 year period, the Company would be limited based on a formula as defined in the IRC to the amount per year it could utilize in that year of the net operating loss carryforwards. As of December 31, 2017, the Company had not performed an analysis to determine if the Company was subject to the provisions of Section 382. The Company is subject to U.S. federal income tax including state and local jurisdictions. Currently, no federal or state income tax returns are under examination by the respective taxing jurisdictions.
F- 29
The Company's accounting policy is to recognize interest and penalties related to uncertain tax positions in income tax expense. The Company has not accrued interest for any periods in which there are uncertain tax positions.
NOTE 9. COMMITMENTS AND CONTINGENCIES
Legal Matters
In 2008 the Company filed suit against its former co-founder, President, Chief Executive Officer George Pursglove for breach of confidentiality and non-compete while employed and also postemployment, breach of fiduciary duty and other matters, and the Company is seeking to enforce certain non-compete agreements. The former CEO subsequently counter-sued the Company for breach of contract, breach of implied covenant of good faith and fair dealing and other matters. The former CEO is seeking to be awarded $75,000 in cash plus at least 3.3 million shares of stock of the Company. On July 28, 2011, the Company received a jury verdict ordering and adjudging in Case Number 2:08-cv-00496-KJD-LRL where BOOMj.com was the Plaintiff and the former CEO was the Defendant & Counterclaimant, that a
judgment be entered in favor of the Defendant and Counterclaimant against the Plaintiff, BOOMj.com, in the amount of $20,775 for damages as to the claim for failure to pay wages, $3,000,000 for damages as to the conversion claim, and $3,000,000 for punitive damages. As of December 31, 2017, and 2016 the was $5,758,332 and $6,020,775, respectively outstanding for this matter,. The Company is accruing interest at an annual rate of 5.29% on the outstanding balance. The current balance of the accrued interest as of December 31, 2017 and 2016 was $2,044,912 and $1,726,632, respectively.
On May 2, 2017 the Pursglove debt was reduced by $262,453 through the issuance of 250,000,000 shares of Series A Convertible 12% Cumulative Preferred stock and 1,556,632 shares of Common Stock reducing the balance to $5,758,322.
Operating Lease
Beyond Commerce currently leases virtual office space at 3773 Howard Hughes Parkway, Suite 500 Las Vegas, NV 89169 with plans to move the Company’s headquarters to West Palm Beach, FL. This space has a yearly rent of $120 which expires December 31, 2018. The move of the Company’s corporate headquarters to West Palm Beach will cut down on travel time and overall travel expense.
The move will help to facilitate and reduce the cost to maintain and develop the Company’s future business which is all located on the East Coast of the US. The Company has entered into a Letter of Intent (LOI) with Cushman & Wakefield pertaining to specific office space at the Esparante Corporate Center located in the financial district of West Palm Beach, FL.
Tax Lien
On February 17, 2010, the Internal Revenue Service placed a federal tax lien of $756,711 and an additional $161,150 on June 14, 2010, against all of the property and rights to the property of BOOMj.com for unpaid federal payroll withholding taxes for the year ended December 31, 2009. The current amount outstanding including penalty and interest is $1,607,163, which is also inclusive of amounts outstanding for state tax related claims of $63,725. The accrued interest on the balance sheet related to this liability is $530,000 and $ 450,000 as of December 31, 2017 and 2016, respectively.
NOTE 10. NET LOSS PER SHARE OF COMMON STOCK
The Company follows ASC 260-10, which requires presentation of basic and diluted Earnings per Share (“EPS”) on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying consolidated financial statements, basic net loss per share of common stock is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the year. Basic net loss per common share is based upon the weighted average number of common shares outstanding during the period. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.
F- 30
There are no stock options or warrants that are exercisable into shares of the Company’s common stock as these were all extinguished; and convertible debt that is convertible into 14,642,009,000 and 19,250,000 shares of the Company’s common stock are not included in the computation along with 250,000,000 and zero of the Company’s preferred stock for the year ended December 31, 2017 and 2016, respectively, as the income share is negligible.
The following is a reconciliation of the numerator and denominator of the basic and diluted earnings per share computations for the years ended December 31, 2017 and 2016:
|
|
Years ended December 31, |
|
||||
|
|
2017 |
|
|
|
2016 |
|
Net income (loss) |
$ |
3,298,340 |
|
|
$ |
7,787,739 |
|
Weighted average shares used for basic earnings per share |
|
999,479,701 |
|
|
|
998,443,368 |
|
|
|
|
|
|
|
|
|
Incremental diluted shares |
|
14,892,009,000 |
|
|
|
19,250,000,000 |
|
Weighted average shares used for diluted earnings per share |
|
15,891,488,701 |
|
|
|
20,248,443,368 |
|
|
|
|
|
|
|
|
|
Net income (loss) per share: |
|
|
|
|
|
|
|
Basic |
$ |
0.00 |
|
|
$ |
0.01 |
|
|
|
|
|
|
|
|
|
Diluted |
$ |
0.00 |
|
|
$ |
0.00 |
|
NOTE 11. SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
The Company paid $0 and $0 for the years ended December 31, 2017 and 2016, respectively, for interest. The Company did not make any payments for income tax during the years ended December 31, 2017 and 2016. Other non cash financing included the Pursglove debt which was reduced by $262,453 through the issuance of 250,000,000 shares of Series A Convertible 12% Cumulative Preferred stock and 1,556,632 shares of Common Stock.
NOTE 12. SUBSEQUENT EVENTS
The Company has not been a reporting Company within the rules of the Securities and Exchange Commission (SEC) since May of 2011, and has attempted to solicit funding for the continuing operations or a potential sale. We currently plan to investigate and, if such investigation warrants, acquire a target company or business seeking the perceived advantages of being a publicly held corporation and, to a lesser extent that desires to employ our funds in its business. Our principal business objective for the next several months and beyond will be to achieve long-term growth potential through a combination with a business rather than immediate, short-term earnings. We will not restrict our potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business.
The Company on March 5, 2018, entered into an agreement to retain Maxim Group, LLC ("Maxim") to provide strategic corporate planning, financial advisory and investment banking services. The Company will use Maxim to help plan for its global expansion, as well as accelerate product growth and innovation. Pursuant to its retention, Maxim among other activities, will assist the Company in its efforts to become a fully reporting company under Securities and Exchange Commission guidelines, and advise the Company with respect to its efforts to list on a national exchange. The Company issued 3,500,000 of restricted stock on March 12, 2018 as consulting fees for this transaction.
On March 5, 2018 the Company amended its articles of incorporation to increase the shares authorized to 1,010,000,000
On March 27, 2018 the Company entered into a $1,000,000 bridge loan agreement with Chicago Venture Partners this amount will be loaned to the Company based on certain milestones.
On March 28, 2018 the Company amended its articles of incorporation to increase the shares authorized to 1,050,000,000.
On March 28, 2018 the Company entered into a convertible promissory note and a security purchase agreement (SPA) dated March 28, 2018. The SPA was for a total of $1,000,000, consisting of seven tranches of funding, with the initial tranche consisting of $100,000 and each subsequent investor note equal to $150,000. The parties closed on the first tranche on March 28, 2018. There can be no assurance that the Company will receive any further tranches.
F- 31
On March 28, 2018, the Company entered into a convertible promissory note and a security purchase agreement dated March 28, 2018 in the amount of $50,000. The lender was Iliad Research and Trading, L.P. The notes have a maturity of seventeen (17) months from issuance are due on August 28, 2019. have an interest rate of 10% per annum and are convertible at a price of $0.15 per share. If at the Company’s option decides to repay the loan with shares of its common stock the conversion price becomes 65% of the lowest trading price on the primary trading market on which the Company’s Common Stock is then listed for the twenty (20) trading days immediately prior to conversion. The note may be prepaid, but carries a penalty in association with the remittance amount, as there is an accretion component to satisfy the note with cash. This Note is secured with 39,000,000 of the Company’s $0.001 par value common stock.
On April 16, 2018 the Company issued 700,000 shares of restricted common stock for legal services to be rendered in connection with the Maxim transaction.
While final closing has not yet occurred, the Company has signed a letter of intent to acquire certain entities.
F- 32
Item 14. Changes in and Disagreements with Accountant on Accounting and Financial Disclosure .
None.
Item 15. Financial Statements and Exhibits .
(a) Financial Statements and Schedules
The consolidated financial statements required to be field as part of this registration statement are included in Item 13 hereof.
(b) Exhibits
*Filed herewith.
43
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
BEYOND COMMERCE, INC. |
|
|
|
|
|
|
|
Date: June 22, 2018 |
By: |
/s/ George D. Pursglove |
|
|
George D. Pursglove,
|
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
|
|
|
|
|
Signature |
|
Title |
|
Date |
|
|
|
|
|
/s/ George D. Pursglove |
|
President and Chief Executive Officer/Director |
|
June 22, 2018 |
George D. Pursglove |
|
|
|
|
44
Securities Purchase Agreement
THIS SECURITIES PURCHASE AGREEMENT (this “ Agreement ”), dated as of March 28, 2018, is entered into by and between BEYOND COMMERCE, INC. , a Nevada corporation (“ Company ”), and ILIAD RESEARCH AND TRADING, L.P. , a Utah limited partnership, its successors and/or assigns (“ Investor ”).
A. Company and Investor are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the Securities Act of 1933, as amended (the “ 1933 Act ”), and the rules and regulations promulgated thereunder by the United States Securities and Exchange Commission (the “ SEC ”).
B. Investor desires to purchase and Company desires to issue and sell, upon the terms and conditions set forth in this Agreement (i) a Convertible Promissory Note, in the form attached hereto as 0 , in the original principal amount of $1,000,000.00 (the “ Note ”), convertible into shares of common stock, $0.001 par value per share, of Company (the “ Common Stock ”), upon the terms and subject to the limitations and conditions set forth in such Note, and (ii) seven (7) Warrants to Purchase Shares of Common Stock, each substantially in the form attached hereto as 0 (each, a “ Warrant ”, and collectively, the “ Warrants ”).
C. This Agreement, the Note, the Warrants, the Investor Notes (as defined below), and all other certificates, documents, agreements, resolutions and instruments delivered to any party under or in connection with this Agreement, as the same may be amended from time to time, are collectively referred to herein as the “ Transaction Documents ”.
D. For purposes of this Agreement: “ Conversion Shares ” means all shares of Common Stock issuable upon conversion of all or any portion of the Note; “ Warrant Shares ” means all shares of Common Stock issuable upon the exercise of or pursuant to the Warrants; and “ Securities ” means the Note, the Conversion Shares, the Warrants and the Warrant Shares.
NOW, THEREFORE , in consideration of the above recitals and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Company and Investor hereby agree as follows:
1. Purchase and Sale of Securities .
1.1. Purchase of Securities . Company shall issue and sell to Investor and Investor shall purchase from Company the Note and the Warrants. In consideration thereof, Investor shall pay (i) the amount designated as the initial cash purchase price on the signature page to this Agreement (the “ Initial Cash Purchase Price ”), and (ii) issue to Company the Investor Notes (the sum of the initial principal amounts of the Investor Notes, together with the Initial Cash Purchase Price, the “ Purchase Price ”). The Purchase Price, the OID (as defined below), and the Transaction Expense Amount (as defined below) are allocated to the Tranches (as defined in the Note) of the Note and to the Warrants as set forth in the table attached hereto as 0 . For the avoidance of doubt, the Initial Cash Purchase Price constitutes payment in full for the Initial Tranche (as defined in the Note) and Warrant #1 to Purchase Shares of Common Stock.
1.2. Form of Payment . On the Closing Date (as defined below), (i) Investor shall pay the Purchase Price to Company by delivering the following at the Closing (as defined below): (A) the Initial Cash Purchase Price, which shall be delivered by wire transfer of immediately available funds to Company, in accordance with Company’s written wiring instructions; (B) Investor Note #1 in the principal amount of $100,000.00 duly executed and substantially in the form attached hereto as 0
1
(“ Investor Note #1 ”); (C) Investor Note #2 in the principal amount of $150,000.00 duly executed and substantially in the form attached hereto as 0 (“ Investor Note #2 ”); (D) Investor Note #3 in the principal amount of $150,000.00 duly executed and substantially in the form attached hereto as 0 (“ Investor Note #3 ”); (E) Investor Note #4 in the principal amount of $150,000.00 duly executed and substantially in the form attached hereto as 0 (“ Investor Note #4 ”); (F) Investor Note #5 in the principal amount of $150,000.00 duly executed and substantially in the form attached hereto as 0 (“ Investor Note #5 ”); and (G) Investor Note #6 in the principal amount of $150,000.00 duly executed and substantially in the form attached hereto as 0 (“ Investor Note #6 ”, and together with Investor Note #1, Investor Note #2, Investor Note #3, Investor Note #4, and Investor Note #5, the “ Investor Notes ”); and (ii) Company shall deliver the duly executed Note and Warrants on behalf of Company, to Investor, against delivery of such Purchase Price.
1.3. Closing Date . Subject to the satisfaction (or written waiver) of the conditions set forth in Section 0 and Section 0 below, the date of the issuance and sale of the Securities pursuant to this Agreement (the “ Closing Date ”) shall be March 28, 2018, or such other mutually agreed upon date. The closing of the transactions contemplated by this Agreement (the “ Closing ”) shall occur on the Closing Date by means of the exchange by email of signed .pdf documents, but shall be deemed for all purposes to have occurred at the offices of Hansen Black Anderson Ashcraft PLLC in Lehi, Utah.
1.4. Collateral for the Note . The Note shall not be secured.
1.5. Collateral for Investor Notes . Initially, none of the Investor Notes will be secured, but all or any of the Investor Notes may become secured subsequent to the Closing by such collateral and at such time as determined by Investor in its sole discretion. In the event Investor desires to secure any of the Investor Notes, Company shall timely execute any and all amendments and documents and take such other measures requested by Investor that are necessary or advisable in order to properly secure the applicable Investor Notes.
1.6. Original Issue Discount; Transaction Expense Amount . The Note carries an original issue discount of $90,000.00 (the “ OID ”). In addition, Company agrees to pay $10,000.00 to Investor to cover Investor’s legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the purchase and sale of the Securities (the “ Transaction Expense Amount ”), all of which amount is included in the initial principal balance of the Note. The Purchase Price, therefore, shall be $900,000.00, computed as follows: $1,000,000.00 initial principal balance, less the OID, less the Transaction Expense Amount. The Initial Cash Purchase Price shall be the Purchase Price less the sum of the initial principal amounts of the Investor Notes. The portions of the OID and the Transaction Expense Amount allocated to the Initial Cash Purchase Price are set forth on 0 .
2. Investor’s Representations and Warranties . Investor represents and warrants to Company that as of the Closing Date: (i) this Agreement has been duly and validly authorized; (ii) this Agreement constitutes a valid and binding agreement of Investor enforceable in accordance with its terms; (iii) Investor is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D of the 1933 Act; and (iv) this Agreement and the Investor Notes have been duly executed and delivered on behalf of Investor.
3. Company’s Representations and Warranties . Company represents and warrants to Investor that as of the Closing Date: Company is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation and has the requisite corporate power to own its properties and to carry on its business as now being conducted; Company is duly qualified as a foreign corporation to do business and is in good standing in each jurisdiction where the nature of the business conducted or property owned by it makes such qualification necessary; each of the Transaction
2
Documents and the transactions contemplated hereby and thereby, have been duly and validly authorized by Company and all necessary actions have been taken; this Agreement, the Note, the Warrants, and the other Transaction Documents have been duly executed and delivered by Company and constitute the valid and binding obligations of Company enforceable in accordance with their terms; the execution and delivery of the Transaction Documents by Company, the issuance of Securities in accordance with the terms hereof, and the consummation by Company of the other transactions contemplated by the Transaction Documents do not and will not conflict with or result in a breach by Company of any of the terms or provisions of, or constitute a default under (a) Company’s formation documents or bylaws, each as currently in effect, (b) any indenture, mortgage, deed of trust, or other material agreement or instrument to which Company is a party or by which it or any of its properties or assets are bound, including, without limitation, any listing agreement for the Common Stock, or (c) any existing applicable law, rule, or regulation or any applicable decree, judgment, or order of any court, United States federal, state or foreign regulatory body, administrative agency, or other governmental body having jurisdiction over Company or any of Company’s properties or assets; no further authorization, approval or consent of any court, governmental body, regulatory agency, self-regulatory organization, or stock exchange or market or the stockholders or any lender of Company is required to be obtained by Company for the issuance of the Securities to Investor or the entering into of the Transaction Documents; none of Company’s filings with OTC Markets Group, Inc. (“ OTC Markets ”) contained, at the time they were filed, any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading; Company has filed all reports, schedules, forms, statements and other documents required to be filed by Company with OTC Markets on a timely basis or has received a valid extension of such time of filing and has filed any such report, schedule, form, statement or other document prior to the expiration of any such extension; there is no action, suit, proceeding, inquiry or investigation before or by any court, public board or body pending or, to the knowledge of Company, threatened against or affecting Company before or by any governmental authority or non-governmental department, commission, board, bureau, agency or instrumentality or any other person, wherein an unfavorable decision, ruling or finding would have a material adverse effect on Company or which would adversely affect the validity or enforceability of, or the authority or ability of Company to perform its obligations under, any of the Transaction Documents; Company has not consummated any financing transaction that has not been disclosed in a periodic filing or current report with OTC Markets; Company is not, nor has it been at any time in the previous twelve (12) months, a “Shell Company,” as such type of “issuer” is described in Rule 144(i)(1) under the 1933 Act; with respect to any commissions, placement agent or finder’s fees or similar payments that will or would become due and owing by Company to any person or entity as a result of this Agreement or the transactions contemplated hereby (“ Broker Fees ”), any such Broker Fees will be made in full compliance with all applicable laws and regulations and only to a person or entity that is a registered investment adviser or registered broker-dealer; Investor shall have no obligation with respect to any Broker Fees or with respect to any claims made by or on behalf of other persons for fees of a type contemplated in this subsection that may be due in connection with the transactions contemplated hereby and Company shall indemnify and hold harmless each of Investor, Investor’s employees, officers, directors, stockholders, members, managers, agents, and partners, and their respective affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and attorneys’ fees) and expenses suffered in respect of any such claimed Broker Fees; when issued, the Conversion Shares and the Warrant Shares will be duly authorized, validly issued, fully paid for and non-assessable, free and clear of all liens, claims, charges and encumbrances; neither Investor nor any of its officers, directors, stockholders, members, managers, employees, agents or representatives has made any representations or warranties to Company or any of its officers, directors, employees, agents or representatives except as expressly set forth in the Transaction Documents and, in making its decision to enter into the transactions contemplated by the Transaction Documents, Company is not relying on any representation, warranty, covenant or promise of Investor or its officers, directors, members, managers, employees, agents or representatives other than as
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set forth in the Transaction Documents; Company acknowledges that the State of Utah has a reasonable relationship and sufficient contacts to the transactions contemplated by the Transaction Documents and any dispute that may arise related thereto such that the laws and venue of the State of Utah, as set forth more specifically in Section 0 below, shall be applicable to the Transaction Documents and the transactions contemplated therein; and Company has performed due diligence and background research on Investor and its affiliates including, without limitation, John M. Fife, and, to its satisfaction, has made inquiries with respect to all matters Company may consider relevant to the undertakings and relationships contemplated by the Transaction Documents including, among other things, the following: http://investing.businessweek.com/research/stocks/people/person.asp?personId=7505107&ticker=UAHC; SEC Civil Case No. 07-C-0347 (N.D. Ill.); SEC Civil Action No. 07-CV-347 (N.D. Ill.); and FINRA Case #2011029203701. Company, being aware of the matters described in subsection (17) above, acknowledges and agrees that such matters, or any similar matters, have no bearing on the transactions contemplated by the Transaction Documents and covenants and agrees it will not use any such information as a defense to performance of its obligations under the Transaction Documents or in any attempt to avoid, modify or reduce such obligations.
4. Company Covenants . Until all of Company’s obligations under all of the Transaction Documents are paid and performed in full, or within the timeframes otherwise specifically set forth below, Company will at all times comply with the following covenants: so long as Investor beneficially owns any of the Securities and for at least twenty (20) Trading Days (as defined in the Note) thereafter, Company will timely file on the applicable deadline all reports required to be filed with OTC Markets to maintain the OTC Pink Current Information listing status and will take all reasonable action under its control to ensure that adequate current public information with respect to Company, as required in accordance with Rule 144 of the 1933 Act, is publicly available; the Common Stock shall be listed or quoted for trading on any of (a) NYSE, (b) NASDAQ, (c) OTCQX, (d) OTCQB, or (e) OTC Pink Current Information; when issued, the Conversion Shares and the Warrant Shares will be duly authorized, validly issued, fully paid for and non-assessable, free and clear of all liens, claims, charges and encumbrances; trading in Company’s Common Stock will not be suspended, halted, chilled, frozen, reach zero bid or otherwise cease on Company’s principal trading market; Company will not transfer, assign, sell, pledge, hypothecate or otherwise alienate or encumber the Investor Notes in any way without the prior written consent of Investor, which consent may be given or withheld in Investor’s sole and absolute discretion; Company will not have any Variable Security Holders (as defined below), excluding Investor, without Investor’s prior written consent, which consent may be granted or withheld in Investor’s sole and absolute discretion; at Closing and on the first day of each calendar month for so long as the Note remains outstanding or on any other date during which the Note is outstanding, as may be requested by Investor, Company shall cause its Chief Executive Officer to provide to Investor a certificate in substantially the form attached hereto as 0 (the “ Officer’s Certificate ”) certifying in his personal capacity and in his capacity as Chief Executive Officer of Company the number of Variable Security Holders of Company as of the date the applicable Officer’s Certificate is executed; and Company will not sell or issue any Common Stock pursuant to a Regulation A or Regulation A+ offering at any time without Investor’s prior written consent, which consent may be granted or withheld in Investor’s sole and absolute discretion. For purposes hereof, the term “ Variable Security Holder ” means any holder of any Company securities that (A) have or may have conversion rights of any kind, contingent, conditional or otherwise, in which the number of shares that may be issued pursuant to such conversion right varies with the market price of the Common Stock, or (B) are or may become convertible into Common Stock (including without limitation convertible debt, warrants or convertible preferred stock), with a conversion price that varies with the market price of the Common Stock, even if such security only becomes convertible following an event of default, the passage of time, or another trigger event or condition (each a “ Variable Security Issuance ”). For avoidance of doubt, the issuance of shares of Common Stock under, pursuant to, in exchange for or in connection with any contract or instrument,
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whether convertible or not, is deemed a Variable Security Issuance for purposes hereof if the number of shares of Common Stock to be issued is based upon or related in any way to the market price of the Common Stock, including, but not limited to, Common Stock issued in connection with a Section 3(a)(9) exchange, a Section 3(a)(10) settlement, or any other similar settlement or exchange.
5. Conditions to Company’s Obligation to Sell . The obligation of Company hereunder to issue and sell the Securities to Investor at the Closing is subject to the satisfaction, on or before the Closing Date, of each of the following conditions:
5.1. Investor shall have executed this Agreement and the Investor Notes and delivered the same to Company.
5.2. Investor shall have delivered the Initial Cash Purchase Price to Company in accordance with Section 0 above.
6. Conditions to Investor’s Obligation to Purchase . The obligation of Investor hereunder to purchase the Securities at the Closing is subject to the satisfaction, on or before the Closing Date, of each of the following conditions, provided that these conditions are for Investor’s sole benefit and may be waived by Investor at any time in its sole discretion:
6.1. Company shall have executed this Agreement, the Warrants, and the Note and delivered the same to Investor.
6.2. Company’s Chief Executive Officer shall have executed the Officer’s Certificate and delivered the same to Investor.
6.3. Company shall have delivered to Investor a fully executed Irrevocable Letter of Instructions to Transfer Agent (the “ TA Letter ”) substantially in the form attached hereto as 0 acknowledged and agreed to in writing by Company’s transfer agent (the “ Transfer Agent ”).
6.4. Company shall have delivered to Investor a fully executed Secretary’s Certificate substantially in the form attached hereto as 0 evidencing Company’s approval of the Transaction Documents.
6.5. Company shall have delivered to Investor a fully executed Share Issuance Resolution substantially in the form attached hereto as 0 to be delivered to the Transfer Agent.
6.6. Company shall have delivered to Investor fully executed copies of all other Transaction Documents required to be executed by Company herein or therein.
7. Reservation of Shares . On the date hereof, Company will reserve 39,000,000 shares of Common Stock from its authorized and unissued Common Stock to provide for all issuances of Common Stock under the Note and the Warrants (the “ Share Reserve ”). Company further agrees to add additional shares of Common Stock to the Share Reserve in increments of 4,000,000 shares as and when requested by Investor if as of the date of any such request the number of shares being held in the Share Reserve is less than (i) three (3) times the number of shares of Common Stock obtained by dividing the Outstanding Balance (as defined in the Note) as of the date of the request by the Installment Conversion Price (as defined in the Note), plus (ii) three (3) times the number of Warrant Shares (as determined pursuant to the Warrants) deliverable upon full exercise of the Warrants. Company shall further require the Transfer Agent to hold the shares of Common Stock reserved pursuant to the Share Reserve exclusively for the benefit of Investor and to issue such shares to Investor promptly upon Investor’s delivery of a conversion
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notice under the Note or a notice of exercise under any Warrant. Finally, Company shall require the Transfer Agent to issue shares of Common Stock pursuant to the Note and the Warrants to Investor out of its authorized and unissued shares, and not the Share Reserve, to the extent shares of Common Stock have been authorized, but not issued, and are not included in the Share Reserve. The Transfer Agent shall only issue shares out of the Share Reserve to the extent there are no other authorized shares available for issuance and then only with Investor’s written consent.
8. Terms of Future Financings . So long as the Note is outstanding, upon any issuance by Company of any security with any term or condition more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to Investor in the Transaction Documents, then Company shall notify Investor of such additional or more favorable term and such term, at Investor’s option, shall become a part of the Transaction Documents for the benefit of Investor. Additionally, if Company fails to notify Investor of any such additional or more favorable term, but Investor becomes aware that Company has granted such a term to any third party, Investor may notify Company of such additional or more favorable term and such term shall become a part of the Transaction Documents retroactive to the date on which such term was granted to the applicable third party. The types of terms contained in another security that may be more favorable to the holder of such security include, but are not limited to, terms addressing conversion discounts, conversion lookback periods, interest rates, original issue discounts, stock sale price, conversion price per share, warrant coverage, warrant exercise price, and anti-dilution/conversion and exercise price resets.
9. Miscellaneous . The provisions set forth in this Section 0 shall apply to this Agreement, as well as all other Transaction Documents as if these terms were fully set forth therein; provided, however, that in the event there is a conflict between any provision set forth in this Section 0 and any provision in any other Transaction Document, the provision in such other Transaction Document shall govern.
9.1. Certain Capitalized Terms . To the extent any capitalized term used in any Transaction Document is defined in any other Transaction Document (as noted therein), such capitalized term shall remain applicable in the Transaction Document in which it is so used even if the other Transaction Document (wherein such term is defined) has been released, satisfied, or is otherwise cancelled or terminated.
9.2. Arbitration of Claims . The parties shall submit all Claims (as defined in 0 ) arising under this Agreement or any other Transaction Document or any other agreement between the parties and their affiliates or any Claim relating to the relationship of the parties to binding arbitration pursuant to the arbitration provisions set forth in 0 attached hereto (the “ Arbitration Provisions ”). The parties hereby acknowledge and agree that the Arbitration Provisions are unconditionally binding on the parties hereto and are severable from all other provisions of this Agreement. By executing this Agreement, Company represents, warrants and covenants that Company has reviewed the Arbitration Provisions carefully, consulted with legal counsel about such provisions (or waived its right to do so), understands that the Arbitration Provisions are intended to allow for the expeditious and efficient resolution of any dispute hereunder, agrees to the terms and limitations set forth in the Arbitration Provisions, and that Company will not take a position contrary to the foregoing representations. Company acknowledges and agrees that Investor may rely upon the foregoing representations and covenants of Company regarding the Arbitration Provisions.
9.3. Governing Law; Venue . This Agreement shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Agreement shall be governed by, the internal laws of the State of Utah, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Utah or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Utah.
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Each party consents to and expressly agrees that the exclusive venue for arbitration of any dispute arising out of or relating to any Transaction Document or the relationship of the parties or their affiliates shall be in Salt Lake County, Utah. Without modifying the parties’ obligations to resolve disputes hereunder pursuant to the Arbitration Provisions, for any litigation arising in connection with any of the Transaction Documents (and notwithstanding the terms (specifically including any governing law and venue terms) of any transfer agent services agreement or other agreement between the Transfer Agent and Company, such litigation specifically includes, without limitation any action between or involving Company and the Transfer Agent under the TA Letter or otherwise related to Investor in any way (specifically including, without limitation, any action where Company seeks to obtain an injunction, temporary restraining order, or otherwise prohibit the Transfer Agent from issuing shares of Common Stock to Investor for any reason)), each party hereto hereby (i) consents to and expressly submits to the exclusive personal jurisdiction of any state or federal court sitting in Salt Lake County, Utah, (ii) expressly submits to the exclusive venue of any such court for the purposes hereof, (iii) agrees to not bring any such action (specifically including, without limitation, any action where Company seeks to obtain an injunction, temporary restraining order, or otherwise prohibit the Transfer Agent from issuing shares of Common Stock to Investor for any reason) outside of any state or federal court sitting in Salt Lake County, Utah, and (iv) waives any claim of improper venue and any claim or objection that such courts are an inconvenient forum or any other claim, defense or objection to the bringing of any such proceeding in such jurisdiction or to any claim that such venue of the suit, action or proceeding is improper. Finally, Company covenants and agrees to name Investor as a party in interest in, and provide written notice to Investor in accordance with Section 0 below prior to bringing or filing, any action (including without limitation any filing or action against any person or entity that is not a party to this Agreement, including without limitation the Transfer Agent) that is related in any way to the Transaction Documents or any transaction contemplated herein or therein, including without limitation any action brought by Company to enjoin or prevent the issuance of any shares of Common Stock to Investor by the Transfer Agent, and further agrees to timely name Investor as a party to any such action. Company acknowledges that the governing law and venue provisions set forth in this Section 0 are material terms to induce Investor to enter into the Transaction Documents and that but for Company’s agreements set forth in this Section 0 Investor would not have entered into the Transaction Documents.
9.4. Specific Performance . Company acknowledges and agrees that irreparable damage may occur to Investor in the event that Company fails to perform any material provision of this Agreement or any of the other Transaction Documents in accordance with its specific terms. It is accordingly agreed that Investor shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement or such other Transaction Document and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other remedy to which the Investor may be entitled under the Transaction Documents, at law or in equity. For the avoidance of doubt, in the event Investor seeks to obtain an injunction against Company or specific performance of any provision of any Transaction Document, such action shall not be a waiver of any right of Investor under any Transaction Document, at law, or in equity, including without limitation its rights to arbitrate any Claim pursuant to the terms of the Transaction Documents.
9.5. Calculation Disputes . Notwithstanding the Arbitration Provisions, in the case of a dispute as to any determination or arithmetic calculation under the Transaction Documents, including without limitation, calculating the Outstanding Balance, Warrant Shares, Exercise Shares (as defined in the Warrants), Delivery Shares (as defined in the Warrants), Lender Conversion Price (as defined in the Note), Lender Conversion Shares (as defined in the Note), Installment Conversion Price, Installment Conversion Shares (as defined in the Note), Conversion Factor (as defined in the Note), Market Price (as defined in the Note), or VWAP (as defined in the Note) (each, a “ Calculation ”), Company or Investor (as the case may be) shall submit any disputed Calculation via email or facsimile with confirmation of receipt (i) within two (2) Trading Days after receipt of the applicable notice giving rise to such dispute to
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Company or Investor (as the case may be) or (ii) if no notice gave rise to such dispute, at any time after Investor learned of the circumstances giving rise to such dispute. If Investor and Company are unable to agree upon such Calculation within two (2) Trading Days of such disputed Calculation being submitted to Company or Investor (as the case may be), then Investor will promptly submit via email or facsimile the disputed Calculation to Unkar Systems Inc. (“ Unkar Systems ”). Investor shall cause Unkar Systems to perform the Calculation and notify Company and Investor of the results no later than ten (10) Trading Days from the time it receives such disputed Calculation. Unkar Systems’ determination of the disputed Calculation shall be binding upon all parties absent demonstrable error. Unkar Systems’ fee for performing such Calculation shall be paid by the incorrect party, or if both parties are incorrect, by the party whose Calculation is furthest from the correct Calculation as determined by Unkar Systems. In the event Company is the losing party, no extension of the Delivery Date (as defined in the Note) shall be granted and Company shall incur all effects for failing to deliver the applicable shares in a timely manner as set forth in the Transaction Documents. Notwithstanding the foregoing, Investor may, in its sole discretion, designate an independent, reputable investment bank or accounting firm other than Unkar Systems to resolve any such dispute and in such event, all references to “Unkar Systems” herein will be replaced with references to such independent, reputable investment bank or accounting firm so designated by Investor.
9.6. Counterparts . Each Transaction Document may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument. The parties hereto confirm that any electronic copy of another party’s executed counterpart of a Transaction Document (or such party’s signature page thereof) will be deemed to be an executed original thereof.
9.7. Document Imaging . Investor shall be entitled, in its sole discretion, to image or make copies of all or any selection of the agreements, instruments, documents, and items and records governing, arising from or relating to any of Company’s loans, including, without limitation, this Agreement and the other Transaction Documents, and Investor may destroy or archive the paper originals. The parties hereto (i) waive any right to insist or require that Investor produce paper originals, (ii) agree that such images shall be accorded the same force and effect as the paper originals, (iii) agree that Investor is entitled to use such images in lieu of destroyed or archived originals for any purpose, including as admissible evidence in any demand, presentment or other proceedings, and (iv) further agree that any executed facsimile (faxed), scanned, emailed, or other imaged copy of this Agreement or any other Transaction Document shall be deemed to be of the same force and effect as the original manually executed document.
9.8. Headings . The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.
9.9. Severability . In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform to such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.
9.10. Entire Agreement . This Agreement, together with the other Transaction Documents, contains the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither Company nor Investor makes any representation, warranty, covenant or undertaking with respect to such matters. For the avoidance of doubt, all prior term sheets or other documents between Company and Investor, or any affiliate thereof, related to the transactions contemplated by the Transaction Documents (collectively, “ Prior
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Agreements ”), that may have been entered into between Company and Investor, or any affiliate thereof, are hereby null and void and deemed to be replaced in their entirety by the Transaction Documents. To the extent there is a conflict between any term set forth in any Prior Agreement and the term(s) of the Transaction Documents, the Transaction Documents shall govern.
9.11. No Reliance . Company acknowledges and agrees that neither Investor nor any of its officers, directors, members, managers, representatives or agents has made any representations or warranties to Company or any of its officers, directors, representatives, agents or employees except as expressly set forth in the Transaction Documents and, in making its decision to enter into the transactions contemplated by the Transaction Documents, Company is not relying on any representation, warranty, covenant or promise of Investor or its officers, directors, members, managers, agents or representatives other than as set forth in the Transaction Documents.
9.12. Amendments . No provision of this Agreement may be waived or amended other than by an instrument in writing signed by both parties hereto.
9.13. Notices . Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be deemed effectively given on the earliest of: (i) the date delivered, if delivered by personal delivery as against written receipt therefor or by email to an executive officer, or by facsimile (with successful transmission confirmation), (ii) the earlier of the date delivered or the third Trading Day after deposit, postage prepaid, in the United States Postal Service by certified mail, or (iii) the earlier of the date delivered or the third Trading Day after mailing by express courier, with delivery costs and fees prepaid, in each case, addressed to each of the other parties thereunto entitled at the following addresses (or at such other addresses as such party may designate by five (5) calendar days’ advance written notice similarly given to each of the other parties hereto):
If to Company:
Beyond Commerce, Inc.
Attn: George Pursglove
3773 Howard Hughes Pkwy, Suite 500
Las Vegas, Nevada 89169
If to Investor:
Iliad Research and Trading, L.P.
Attn: John Fife
303 East Wacker Drive, Suite 1040
Chicago, Illinois 60601
With a copy to (which copy shall not constitute notice):
Hansen Black Anderson Ashcraft PLLC
Attn: Jonathan Hansen
3051 West Maple Loop Drive, Suite 325
Lehi, Utah 84043
9.14. Successors and Assigns . This Agreement or any of the severable rights and obligations inuring to the benefit of or to be performed by Investor hereunder may be assigned by Investor to a third party, including its affiliates, in whole or in part, without the need to obtain Company’s
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consent thereto. Company may not assign its rights or obligations under this Agreement or delegate its duties hereunder without the prior written consent of Investor.
9.15. Survival . The representations and warranties of Company and the agreements and covenants set forth in this Agreement shall survive the Closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of Investor. Company agrees to indemnify and hold harmless Investor and all its officers, directors, employees, attorneys, and agents for loss or damage arising as a result of or related to any breach or alleged breach by Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.
9.16. Further Assurances . Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
9.17. Investor’s Rights and Remedies Cumulative; Liquidated Damages . All rights, remedies, and powers conferred in this Agreement and the Transaction Documents are cumulative and not exclusive of any other rights or remedies, and shall be in addition to every other right, power, and remedy that Investor may have, whether specifically granted in this Agreement or any other Transaction Document, or existing at law, in equity, or by statute, and any and all such rights and remedies may be exercised from time to time and as often and in such order as Investor may deem expedient. The parties acknowledge and agree that upon Company’s failure to comply with the provisions of the Transaction Documents, Investor’s damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties’ inability to predict future interest rates and future share prices, Investor’s increased risk, and the uncertainty of the availability of a suitable substitute investment opportunity for Investor, among other reasons. Accordingly, any fees, charges, and default interest due under the Note, the Warrants, and the other Transaction Documents are intended by the parties to be, and shall be deemed, liquidated damages (under Company’s and Investor’s expectations that any such liquidated damages will tack back to the Closing Date for purposes of determining the holding period under Rule 144 under the 1933 Act). The parties agree that such liquidated damages are a reasonable estimate of Investor’s actual damages and not a penalty, and shall not be deemed in any way to limit any other right or remedy Investor may have hereunder, at law or in equity. The parties acknowledge and agree that under the circumstances existing at the time this Agreement is entered into, such liquidated damages are fair and reasonable and are not penalties. All fees, charges, and default interest provided for in the Transaction Documents are agreed to by the parties to be based upon the obligations and the risks assumed by the parties as of the Closing Date and are consistent with investments of this type. The liquidated damages provisions of the Transaction Documents shall not limit or preclude a party from pursuing any other remedy available at law or in equity; provided, however , that the liquidated damages provided for in the Transaction Documents are intended to be in lieu of actual damages.
9.18. Ownership Limitation . Notwithstanding anything to the contrary contained in this Agreement or the other Transaction Documents, if at any time Investor would be issued shares of Common Stock under any of the Transaction Documents, but such issuance would cause Investor (together with its affiliates) to beneficially own a number of shares exceeding the Maximum Percentage (as defined in the Note), then Company must not issue to Investor the shares that would cause Investor to exceed the Maximum Percentage. The shares of Common Stock issuable to Investor that would cause the Maximum Percentage to be exceeded are referred to herein as the “ Ownership Limitation Shares ”. Company shall reserve the Ownership Limitation Shares for the exclusive benefit of Investor. From time to time, Investor may notify Company in writing of the number of the Ownership Limitation Shares that
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may be issued to Investor without causing Investor to exceed the Maximum Percentage. Upon receipt of such notice, Company shall be unconditionally obligated to immediately issue such designated shares to Investor, with a corresponding reduction in the number of the Ownership Limitation Shares. For purposes of this Section, beneficial ownership of Common Stock will be determined under Section 13(d) of the Securities Exchange Act of 1934, as amended.
9.19. Attorneys’ Fees and Cost of Collection . In the event of any arbitration or action at law or in equity to enforce or interpret the terms of this Agreement or any of the other Transaction Documents, the parties agree that the party who is awarded the most money (which, for the avoidance of doubt, shall be determined without regard to any statutory fines, penalties, fees, or other charges awarded to any party) shall be deemed the prevailing party for all purposes and shall therefore be entitled to an additional award of the full amount of the attorneys’ fees, deposition costs, and expenses paid by such prevailing party in connection with arbitration or litigation without reduction or apportionment based upon the individual claims or defenses giving rise to the fees and expenses. Nothing herein shall restrict or impair an arbitrator’s or a court’s power to award fees and expenses for frivolous or bad faith pleading. If (i) the Note or any Warrant is placed in the hands of an attorney for collection or enforcement prior to commencing arbitration or legal proceedings, or is collected or enforced through any arbitration or legal proceeding, or Investor otherwise takes action to collect amounts due under the Note or to enforce the provisions of the Note or any Warrant, or (ii) there occurs any bankruptcy, reorganization, receivership of Company or other proceedings affecting Company’s creditors’ rights and involving a claim under the Note or any Warrant; then Company shall pay the costs incurred by Investor for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees, expenses, deposition costs, and disbursements.
9.20. Waiver . No waiver of any provision of this Agreement shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.
9.21. Waiver of Jury Trial . EACH PARTY TO THIS AGREEMENT IRREVOCABLY WAIVES ANY AND ALL RIGHTS SUCH PARTY MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT, OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, EACH PARTY HERETO ACKNOWLEDGES THAT SUCH PARTY IS KNOWINGLY AND VOLUNTARILY WAIVING SUCH PARTY’S RIGHT TO DEMAND TRIAL BY JURY.
9.22. Time is of the Essence . Time is expressly made of the essence with respect to each and every provision of this Agreement and the other Transaction Documents.
9.23. No Changes; Signature Pages . Company, as well as the person signing each Transaction Document on behalf of Company, represents and warrants to Investor that it has not made any changes to this Agreement or any other Transaction Document except those that have been conspicuously disclosed to Investor in a “redline” or similar draft of the applicable Transaction Document, which clearly marks all changes Company has made to the applicable Transaction Document.
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Moreover, the versions of the Transaction Documents signed by Company are the same versions Investor delivered to Company as being the “final” versions of the Transaction Documents and Company represents and warrants that it has not made any changes to such “final” versions of the Transaction Documents and that the versions Company signed are the same versions Investor delivered to it. In the event Company has made any changes to any Transaction Document that are not conspicuously disclosed to Investor in a “redline” or similar draft of the applicable Transaction Document and that have not been explicitly accepted and agreed upon by Investor, Company acknowledges and agrees that any such changes shall not be considered part of the final document set. Finally, and in furtherance of the foregoing, Company agrees and authorizes Investor to compile the “final” versions of the Transaction Documents, which shall consist of Company’s executed signature pages for all Transaction Documents being applied to the last set of the Transaction Documents that Investor delivered to Company, and Company agrees that such versions of the Transaction Documents that have been collated by Investor shall be deemed to be the final versions of the Transaction Documents for all purposes.
9.24. Voluntary Agreement . Company has carefully read this Agreement and each of the other Transaction Documents and has asked any questions needed for Company to understand the terms, consequences and binding effect of this Agreement and each of the other Transaction Documents and fully understand them. Company has had the opportunity to seek the advice of an attorney of Company’s choosing, or has waived the right to do so, and is executing this Agreement and each of the other Transaction Documents voluntarily and without any duress or undue influence by Investor or anyone else.
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IN WITNESS WHEREOF, the undersigned Investor and Company have caused this Agreement to be duly executed as of the date first above written.
SUBSCRIPTION AMOUNT :
Principal Amount of Note: $1,000,000 .00
Initial Cash Purchase Price: $50,000 .00
INVESTOR:
ILIAD RESEARCH AND TRADING, L.P.
By: Iliad Management, LLC, its General Partner
By: Fife Trading, Inc., its Manager
By:
John M. Fife, President
COMPANY:
BEYOND COMMERCE, INC.
By:
Printed Name:
Title:
[ Signature Page to Securities Purchase Agreement ]
ATTACHED EXHIBITS:
Exhibit C Allocation of Purchase Price
Exhibit D Form of Investor Note
Exhibit E Officer’s Certificate
Exhibit F Irrevocable Transfer Agent Instructions
Exhibit G Secretary’s Certificate
Exhibit H Share Issuance Resolution
Exhibit I Arbitration Provisions
0
ARBITRATION PROVISIONS
1. Dispute Resolution . For purposes of this 0 , the term “ Claims ” means any disputes, claims, demands, causes of action, requests for injunctive relief, requests for specific performance, liabilities, damages, losses, or controversies whatsoever arising from, related to, or connected with the transactions contemplated in the Transaction Documents and any communications between the parties related thereto, including without limitation any claims of mutual mistake, mistake, fraud, misrepresentation, failure of formation, failure of consideration, promissory estoppel, unconscionability, failure of condition precedent, rescission, and any statutory claims, tort claims, contract claims, or claims to void, invalidate or terminate the Agreement (or these Arbitration Provisions (defined below)) or any of the other Transaction Documents. The term “Claims” specifically excludes a dispute over Calculations. The parties to the Agreement (the “ parties ”) hereby agree that the arbitration provisions set forth in this 0 (“ Arbitration Provisions ”) are binding on each of them. As a result, any attempt to rescind the Agreement (or these Arbitration Provisions) or declare the Agreement (or these Arbitration Provisions) or any other Transaction Document invalid or unenforceable for any reason is subject to these Arbitration Provisions. These Arbitration Provisions shall also survive any termination or expiration of the Agreement. Any capitalized term not defined in these Arbitration Provisions shall have the meaning set forth in the Agreement.
2. Arbitration . Except as otherwise provided herein, all Claims must be submitted to arbitration (“ Arbitration ”) to be conducted exclusively in Salt Lake County, Utah and pursuant to the terms set forth in these Arbitration Provisions. Subject to the arbitration appeal right provided for in Paragraph 5 below (the “ Appeal Right ”), the parties agree that the award of the arbitrator rendered pursuant to Paragraph 4 below (the “ Arbitration Award ”) shall be (a) final and binding upon the parties, (b) the sole and exclusive remedy between them regarding any Claims, counterclaims, issues, or accountings presented or pleaded to the arbitrator, and (c) promptly payable in United States dollars free of any tax, deduction or offset (with respect to monetary awards). Subject to the Appeal Right, any costs or fees, including without limitation attorneys’ fees, incurred in connection with or incident to enforcing the Arbitration Award shall, to the maximum extent permitted by law, be charged against the party resisting such enforcement. The Arbitration Award shall include default interest (as defined or otherwise provided for in the Note, “ Default Interest ”) (with respect to monetary awards) at the rate specified in the Note for Default Interest both before and after the Arbitration Award. Judgment upon the Arbitration Award will be entered and enforced by any state or federal court sitting in Salt Lake County, Utah.
3. The Arbitration Act . The parties hereby incorporate herein the provisions and procedures set forth in the Utah Uniform Arbitration Act, U.C.A. § 78B-11-101 et seq. (as amended or superseded from time to time, the “ Arbitration Act ”). Notwithstanding the foregoing, pursuant to, and to the maximum extent permitted by, Section 105 of the Arbitration Act, in the event of conflict or variation between the terms of these Arbitration Provisions and the provisions of the Arbitration Act, the terms of these Arbitration Provisions shall control and the parties hereby waive or otherwise agree to vary the effect of all requirements of the Arbitration Act that may conflict with or vary from these Arbitration Provisions.
4. Arbitration Proceedings . Arbitration between the parties will be subject to the following:
4.1 Initiation of Arbitration . Pursuant to Section 110 of the Arbitration Act, the parties agree that a party may initiate Arbitration by giving written notice to the other party (“ Arbitration Notice ”) in the same manner that notice is permitted under Section 0 of the Agreement; provided, however , that the Arbitration Notice may not be given by email or fax. Arbitration will be deemed initiated as of the date that the Arbitration Notice is deemed delivered to such other party under Section 0 of the Agreement (the “ Service Date ”). After the Service Date, information may be delivered, and notices may be given, by email or fax pursuant to Section 0 of the Agreement or any other method permitted thereunder. The Arbitration Notice must describe the nature of the controversy, the remedies sought, and the election to commence Arbitration proceedings. All Claims in the Arbitration Notice must be pleaded consistent with the Utah Rules of Civil Procedure.
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4.2 Selection and Payment of Arbitrator .
(a) Within ten (10) calendar days after the Service Date, Investor shall select and submit to Company the names of three (3) arbitrators that are designated as “neutrals” or qualified arbitrators by Utah ADR Services (http://www.utahadrservices.com) (such three (3) designated persons hereunder are referred to herein as the “ Proposed Arbitrators ”). For the avoidance of doubt, each Proposed Arbitrator must be qualified as a “neutral” with Utah ADR Services. Within five (5) calendar days after Investor has submitted to Company the names of the Proposed Arbitrators, Company must select, by written notice to Investor, one (1) of the Proposed Arbitrators to act as the arbitrator for the parties under these Arbitration Provisions. If Company fails to select one of the Proposed Arbitrators in writing within such 5-day period, then Investor may select the arbitrator from the Proposed Arbitrators by providing written notice of such selection to Company.
(b) If Investor fails to submit to Company the Proposed Arbitrators within ten (10) calendar days after the Service Date pursuant to subparagraph (a) above, then Company may at any time prior to Investor so designating the Proposed Arbitrators, identify the names of three (3) arbitrators that are designated as “neutrals” or qualified arbitrators by Utah ADR Service by written notice to Investor. Investor may then, within five (5) calendar days after Company has submitted notice of its Proposed Arbitrators to Investor, select, by written notice to Company, one (1) of the Proposed Arbitrators to act as the arbitrator for the parties under these Arbitration Provisions. If Investor fails to select in writing and within such 5-day period one (1) of the three (3) Proposed Arbitrators selected by Company, then Company may select the arbitrator from its three (3) previously selected Proposed Arbitrators by providing written notice of such selection to Investor.
(c) If a Proposed Arbitrator chosen to serve as arbitrator declines or is otherwise unable to serve as arbitrator, then the party that selected such Proposed Arbitrator may select one (1) of the other three (3) Proposed Arbitrators within three (3) calendar days of the date the chosen Proposed Arbitrator declines or notifies the parties he or she is unable to serve as arbitrator. If all three (3) Proposed Arbitrators decline or are otherwise unable to serve as arbitrator, then the arbitrator selection process shall begin again in accordance with this Paragraph 4.2.
(d) The date that the Proposed Arbitrator selected pursuant to this Paragraph 4.2 agrees in writing (including via email) delivered to both parties to serve as the arbitrator hereunder is referred to herein as the “ Arbitration Commencement Date ”. If an arbitrator resigns or is unable to act during the Arbitration, a replacement arbitrator shall be chosen in accordance with this Paragraph 4.2 to continue the Arbitration. If Utah ADR Services ceases to exist or to provide a list of neutrals and there is no successor thereto, then the arbitrator shall be selected under the then prevailing rules of the American Arbitration Association.
(e) Subject to Paragraph 4.10 below, the cost of the arbitrator must be paid equally by both parties. Subject to Paragraph 4.10 below, if one party refuses or fails to pay its portion of the arbitrator fee, then the other party can advance such unpaid amount (subject to the accrual of Default Interest thereupon), with such amount being added to or subtracted from, as applicable, the Arbitration Award.
4.3 Applicability of Certain Utah Rules . The parties agree that the Arbitration shall be conducted generally in accordance with the Utah Rules of Civil Procedure and the Utah Rules of Evidence. More specifically, the Utah Rules of Civil Procedure shall apply, without limitation, to the filing of any pleadings, motions or memoranda, the conducting of discovery, and the taking of any depositions. The Utah Rules of Evidence shall apply to any hearings, whether telephonic or in person, held by the arbitrator. Notwithstanding the foregoing, it is the parties’ intent that the incorporation of such rules will in no event supersede these Arbitration Provisions. In the event of any conflict between the Utah Rules of Civil Procedure or the Utah Rules of Evidence and these Arbitration Provisions, these Arbitration Provisions shall control.
4.4 Answer and Default . An answer and any counterclaims to the Arbitration Notice shall be required to be delivered to the party initiating the Arbitration within twenty (20) calendar days after the Arbitration Commencement Date. If an answer is not delivered by the required deadline, the arbitrator must provide written notice to the defaulting party stating that the arbitrator will enter a default award against such party if such party does not file an answer within five (5) calendar days of receipt of such notice. If an answer is not filed within the five (5) day extension period, the arbitrator must render a default award, consistent with the relief requested in the Arbitration Notice, against a party that fails to submit an answer within such time period.
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4.5 Related Litigation . The party that delivers the Arbitration Notice to the other party shall have the option to also commence concurrent legal proceedings with any state or federal court sitting in Salt Lake County, Utah (“ Litigation Proceedings ”), subject to the following: (a) the complaint in the Litigation Proceedings is to be substantially similar to the claims set forth in the Arbitration Notice, provided that an additional cause of action to compel arbitration will also be included therein, (b) so long as the other party files an answer to the complaint in the Litigation Proceedings and an answer to the Arbitration Notice, the Litigation Proceedings will be stayed pending an Arbitration Award (or Appeal Panel Award (defined below), as applicable) hereunder, (c) if the other party fails to file an answer in the Litigation Proceedings or an answer in the Arbitration proceedings, then the party initiating Arbitration shall be entitled to a default judgment consistent with the relief requested, to be entered in the Litigation Proceedings, and (d) any legal or procedural issue arising under the Arbitration Act that requires a decision of a court of competent jurisdiction may be determined in the Litigation Proceedings. Any award of the arbitrator (or of the Appeal Panel (defined below)) may be entered in such Litigation Proceedings pursuant to the Arbitration Act.
4.6 Discovery . Pursuant to Section 118(8) of the Arbitration Act, the parties agree that discovery shall be conducted as follows:
(a) Written discovery will only be allowed if the likely benefits of the proposed written discovery outweigh the burden or expense thereof, and the written discovery sought is likely to reveal information that will satisfy a specific element of a claim or defense already pleaded in the Arbitration. The party seeking written discovery shall always have the burden of showing that all of the standards and limitations set forth in these Arbitration Provisions are satisfied. The scope of discovery in the Arbitration proceedings shall also be limited as follows:
(i) To facts directly connected with the transactions contemplated by the Agreement.
(ii) To facts and information that cannot be obtained from another source or in another manner that is more convenient, less burdensome or less expensive than in the manner requested.
(b) No party shall be allowed (i) more than fifteen (15) interrogatories (including discrete subparts), (ii) more than fifteen (15) requests for admission (including discrete subparts), (iii) more than ten (10) document requests (including discrete subparts), or (iv) more than three (3) depositions (excluding expert depositions) for a maximum of seven (7) hours per deposition. The costs associated with depositions will be borne by the party taking the deposition. The party defending the deposition will submit a notice to the party taking the deposition of the estimated attorneys’ fees that such party expects to incur in connection with defending the deposition. If the party defending the deposition fails to submit an estimate of attorneys’ fees within five (5) calendar days of its receipt of a deposition notice, then such party shall be deemed to have waived its right to the estimated attorneys’ fees. The party taking the deposition must pay the party defending the deposition the estimated attorneys’ fees prior to taking the deposition, unless such obligation is deemed to be waived as set forth in the immediately preceding sentence. If the party taking the deposition believes that the estimated attorneys’ fees are unreasonable, such party may submit the issue to the arbitrator for a decision. All depositions will be taken in Utah.
(c) All discovery requests (including document production requests included in deposition notices) must be submitted in writing to the arbitrator and the other party. The party submitting the written discovery requests must include with such discovery requests a detailed explanation of how the proposed discovery requests satisfy the requirements of these Arbitration Provisions and the Utah Rules of Civil Procedure. The receiving party will then be allowed, within five (5) calendar days of receiving the proposed discovery requests, to submit to the arbitrator an estimate of the attorneys’ fees and costs associated with responding to such written discovery requests and a written challenge to each applicable discovery request. After receipt of an estimate of attorneys’ fees and costs and/or challenge(s) to one or more discovery requests, consistent with subparagraph (c) above, the arbitrator will within three (3) calendar days make a finding as to the likely attorneys’ fees and costs associated with responding to the discovery requests and issue an order that (i) requires the requesting party to prepay the attorneys’ fees and costs associated with responding to the discovery requests, and (ii) requires the responding party to respond to the discovery requests as limited by the arbitrator within twenty-five (25) calendar days of the arbitrator’s finding with respect to such discovery requests. If a party entitled to submit an estimate of attorneys’ fees and costs and/or a challenge to discovery requests fails to do so within such 5-day period, the arbitrator will make a finding that (A) there are no attorneys’ fees or costs associated with responding to such discovery requests,
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and (B) the responding party must respond to such discovery requests (as may be limited by the arbitrator) within twenty-five (25) calendar days of the arbitrator’s finding with respect to such discovery requests. Any party submitting any written discovery requests, including without limitation interrogatories, requests for production subpoenas to a party or a third party, or requests for admissions, must prepay the estimated attorneys’ fees and costs, before the responding party has any obligation to produce or respond to the same, unless such obligation is deemed waived as set forth above.
(d) In order to allow a written discovery request, the arbitrator must find that the discovery request satisfies the standards set forth in these Arbitration Provisions and the Utah Rules of Civil Procedure. The arbitrator must strictly enforce these standards. If a discovery request does not satisfy any of the standards set forth in these Arbitration Provisions or the Utah Rules of Civil Procedure, the arbitrator may modify such discovery request to satisfy the applicable standards, or strike such discovery request in whole or in part.
(e) Each party may submit expert reports (and rebuttals thereto), provided that such reports must be submitted within sixty (60) days of the Arbitration Commencement Date. Each party will be allowed a maximum of two (2) experts. Expert reports must contain the following: (i) a complete statement of all opinions the expert will offer at trial and the basis and reasons for them; (ii) the expert’s name and qualifications, including a list of all the expert’s publications within the preceding ten (10) years, and a list of any other cases in which the expert has testified at trial or in a deposition or prepared a report within the preceding ten (10) years; and (iii) the compensation to be paid for the expert’s report and testimony. The parties are entitled to depose any other party’s expert witness one (1) time for no more than four (4) hours. An expert may not testify in a party’s case-in-chief concerning any matter not fairly disclosed in the expert report.
4.6 Dispositive Motions . Each party shall have the right to submit dispositive motions pursuant Rule 12 or Rule 56 of the Utah Rules of Civil Procedure (a “ Dispositive Motion ”). The party submitting the Dispositive Motion may, but is not required to, deliver to the arbitrator and to the other party a memorandum in support (the “ Memorandum in Support ”) of the Dispositive Motion. Within seven (7) calendar days of delivery of the Memorandum in Support, the other party shall deliver to the arbitrator and to the other party a memorandum in opposition to the Memorandum in Support (the “ Memorandum in Opposition ”). Within seven (7) calendar days of delivery of the Memorandum in Opposition, as applicable, the party that submitted the Memorandum in Support shall deliver to the arbitrator and to the other party a reply memorandum to the Memorandum in Opposition (“ Reply Memorandum ”). If the applicable party shall fail to deliver the Memorandum in Opposition as required above, or if the other party fails to deliver the Reply Memorandum as required above, then the applicable party shall lose its right to so deliver the same, and the Dispositive Motion shall proceed regardless.
4.7 Confidentiality . All information disclosed by either party (or such party’s agents) during the Arbitration process (including without limitation information disclosed during the discovery process or any Appeal (defined below)) shall be considered confidential in nature. Each party agrees not to disclose any confidential information received from the other party (or its agents) during the Arbitration process (including without limitation during the discovery process or any Appeal) unless (a) prior to or after the time of disclosure such information becomes public knowledge or part of the public domain, not as a result of any inaction or action of the receiving party or its agents, (b) such information is required by a court order, subpoena or similar legal duress to be disclosed if such receiving party has notified the other party thereof in writing and given it a reasonable opportunity to obtain a protective order from a court of competent jurisdiction prior to disclosure, or (c) such information is disclosed to the receiving party’s agents, representatives and legal counsel on a need to know basis who each agree in writing not to disclose such information to any third party. Pursuant to Section 118(5) of the Arbitration Act, the arbitrator is hereby authorized and directed to issue a protective order to prevent the disclosure of privileged information and confidential information upon the written request of either party.
4.8 Authorization; Timing; Scheduling Order . Subject to all other portions of these Arbitration Provisions, the parties hereby authorize and direct the arbitrator to take such actions and make such rulings as may be necessary to carry out the parties’ intent for the Arbitration proceedings to be efficient and expeditious. Pursuant to Section 120 of the Arbitration Act, the parties hereby agree that an Arbitration Award must be made within one hundred twenty (120) calendar days after the Arbitration Commencement Date. The arbitrator is hereby authorized and directed to hold a scheduling conference within ten (10)
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calendar days after the Arbitration Commencement Date in order to establish a scheduling order with various binding deadlines for discovery, expert testimony, and the submission of documents by the parties to enable the arbitrator to render a decision prior to the end of such 120-day period.
4.9 Relief . The arbitrator shall have the right to award or include in the Arbitration Award (or in a preliminary ruling) any relief which the arbitrator deems proper under the circumstances, including, without limitation, specific performance and injunctive relief, provided that the arbitrator may not award exemplary or punitive damages.
4.10 Fees and Costs . As part of the Arbitration Award, the arbitrator is hereby directed to require the losing party (the party being awarded the least amount of money by the arbitrator, which, for the avoidance of doubt, shall be determined without regard to any statutory fines, penalties, fees, or other charges awarded to any party) to (a) pay the full amount of any unpaid costs and fees of the Arbitration, and (b) reimburse the prevailing party for all reasonable attorneys’ fees, arbitrator costs and fees, deposition costs, other discovery costs, and other expenses, costs or fees paid or otherwise incurred by the prevailing party in connection with the Arbitration.
5. Arbitration Appeal .
5.1 Initiation of Appeal. Following the entry of the Arbitration Award, either party (the “ Appellant ”) shall have a period of thirty (30) calendar days in which to notify the other party (the “ Appellee ”), in writing, that the Appellant elects to appeal (the “ Appeal ”) the Arbitration Award (such notice, an “ Appeal Notice ”) to a panel of arbitrators as provided in Paragraph 5.2 below. The date the Appellant delivers an Appeal Notice to the Appellee is referred to herein as the “ Appeal Date ”. The Appeal Notice must be delivered to the Appellee in accordance with the provisions of Paragraph 4.1 above with respect to delivery of an Arbitration Notice. In addition, together with delivery of the Appeal Notice to the Appellee, the Appellant must also pay for (and provide proof of such payment to the Appellee together with delivery of the Appeal Notice) a bond in the amount of 110% of the sum the Appellant owes to the Appellee as a result of the Arbitration Award the Appellant is appealing. In the event an Appellant delivers an Appeal Notice to the Appellee (together with proof of payment of the applicable bond) in compliance with the provisions of this Paragraph 5.1, the Appeal will occur as a matter of right and, except as specifically set forth herein, will not be further conditioned. In the event a party does not deliver an Appeal Notice (along with proof of payment of the applicable bond) to the other party within the deadline prescribed in this Paragraph 5.1, such party shall lose its right to appeal the Arbitration Award. If no party delivers an Appeal Notice (along with proof of payment of the applicable bond) to the other party within the deadline described in this Paragraph 5.1, the Arbitration Award shall be final. The parties acknowledge and agree that any Appeal shall be deemed part of the parties’ agreement to arbitrate for purposes of these Arbitration Provisions and the Arbitration Act.
5.2 Selection and Payment of Appeal Panel. In the event an Appellant delivers an Appeal Notice to the Appellee (together with proof of payment of the applicable bond) in compliance with the provisions of Paragraph 5.1 above, the Appeal will be heard by a three (3) person arbitration panel (the “ Appeal Panel ”).
(a) Within ten (10) calendar days after the Appeal Date, the Appellee shall select and submit to the Appellant the names of five (5) arbitrators that are designated as “neutrals” or qualified arbitrators by Utah ADR Services (http://www.utahadrservices.com) (such five (5) designated persons hereunder are referred to herein as the “ Proposed Appeal Arbitrators ”). For the avoidance of doubt, each Proposed Appeal Arbitrator must be qualified as a “neutral” with Utah ADR Services, and shall not be the arbitrator who rendered the Arbitration Award being appealed (the “ Original Arbitrator ”). Within five (5) calendar days after the Appellee has submitted to the Appellant the names of the Proposed Appeal Arbitrators, the Appellant must select, by written notice to the Appellee, three (3) of the Proposed Appeal Arbitrators to act as the members of the Appeal Panel. If the Appellant fails to select three (3) of the Proposed Appeal Arbitrators in writing within such 5-day period, then the Appellee may select such three (3) arbitrators from the Proposed Appeal Arbitrators by providing written notice of such selection to the Appellant.
(b) If the Appellee fails to submit to the Appellant the names of the Proposed Appeal Arbitrators within ten (10) calendar days after the Appeal Date pursuant to subparagraph (a) above, then the Appellant may at any time prior to the Appellee so designating the Proposed Appeal Arbitrators, identify the names of five (5) arbitrators that are designated as “neutrals” or qualified arbitrators by Utah ADR Service (none of whom may be the Original Arbitrator) by written notice to the Appellee. The Appellee may then, within five (5) calendar days after the Appellant has submitted notice of its selected arbitrators to the Appellee, select, by
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written notice to the Appellant, three (3) of such selected arbitrators to serve on the Appeal Panel. If the Appellee fails to select in writing within such 5-day period three (3) of the arbitrators selected by the Appellant to serve as the members of the Appeal Panel, then the Appellant may select the three (3) members of the Appeal Panel from the Appellant’s list of five (5) arbitrators by providing written notice of such selection to the Appellee.
(c) If a selected Proposed Appeal Arbitrator declines or is otherwise unable to serve, then the party that selected such Proposed Appeal Arbitrator may select one (1) of the other five (5) designated Proposed Appeal Arbitrators within three (3) calendar days of the date a chosen Proposed Appeal Arbitrator declines or notifies the parties he or she is unable to serve as an arbitrator. If at least three (3) of the five (5) designated Proposed Appeal Arbitrators decline or are otherwise unable to serve, then the Proposed Appeal Arbitrator selection process shall begin again in accordance with this Paragraph 5.2; provided, however , that any Proposed Appeal Arbitrators who have already agreed to serve shall remain on the Appeal Panel.
(d) The date that all three (3) Proposed Appeal Arbitrators selected pursuant to this Paragraph 5.2 agree in writing (including via email) delivered to both the Appellant and the Appellee to serve as members of the Appeal Panel hereunder is referred to herein as the “ Appeal Commencement Date ”. No later than five (5) calendar days after the Appeal Commencement Date, the Appellee shall designate in writing (including via email) to the Appellant and the Appeal Panel the name of one (1) of the three (3) members of the Appeal Panel to serve as the lead arbitrator in the Appeal proceedings. Each member of the Appeal Panel shall be deemed an arbitrator for purposes of these Arbitration Provisions and the Arbitration Act, provided that, in conducting the Appeal, the Appeal Panel may only act or make determinations upon the approval or vote of no less than the majority vote of its members, as announced or communicated by the lead arbitrator on the Appeal Panel. If an arbitrator on the Appeal Panel ceases or is unable to act during the Appeal proceedings, a replacement arbitrator shall be chosen in accordance with Paragraph 5.2 above to continue the Appeal as a member of the Appeal Panel. If Utah ADR Services ceases to exist or to provide a list of neutrals, then the arbitrators for the Appeal Panel shall be selected under the then prevailing rules of the American Arbitration Association.
(d) Subject to Paragraph 5.7 below, the cost of the Appeal Panel must be paid entirely by the Appellant.
5.3 Appeal Procedure. The Appeal will be deemed an appeal of the entire Arbitration Award. In conducting the Appeal, the Appeal Panel shall conduct a de novo review of all Claims described or otherwise set forth in the Arbitration Notice. Subject to the foregoing and all other provisions of this Paragraph 5, the Appeal Panel shall conduct the Appeal in a manner the Appeal Panel considers appropriate for a fair and expeditious disposition of the Appeal, may hold one or more hearings and permit oral argument, and may review all previous evidence and discovery, together with all briefs, pleadings and other documents filed with the Original Arbitrator (as well as any documents filed with the Appeal Panel pursuant to Paragraph 5.4(a) below). Notwithstanding the foregoing, in connection with the Appeal, the Appeal Panel shall not permit the parties to conduct any additional discovery or raise any new Claims to be arbitrated, shall not permit new witnesses or affidavits, and shall not base any of its findings or determinations on the Original Arbitrator’s findings or the Arbitration Award.
5.4 Timing.
(a) Within seven (7) calendar days of the Appeal Commencement Date, the Appellant (i) shall deliver or cause to be delivered to the Appeal Panel copies of the Appeal Notice, all discovery conducted in connection with the Arbitration, and all briefs, pleadings and other documents filed with the Original Arbitrator (which material Appellee shall have the right to review and supplement if necessary), and (ii) may, but is not required to, deliver to the Appeal Panel and to the Appellee a Memorandum in Support of the Appellant’s arguments concerning or position with respect to all Claims, counterclaims, issues, or accountings presented or pleaded in the Arbitration. Within seven (7) calendar days of the Appellant’s delivery of the Memorandum in Support, as applicable, the Appellee shall deliver to the Appeal Panel and to the Appellant a Memorandum in Opposition to the Memorandum in Support. Within seven (7) calendar days of the Appellee’s delivery of the Memorandum in Opposition, as applicable, the Appellant shall deliver to the Appeal Panel and to the Appellee a Reply Memorandum to the Memorandum in Opposition. If the Appellant shall fail to substantially comply with the requirements of clause (i) of this subparagraph (a), the Appellant shall lose its right to appeal the Arbitration Award, and the Arbitration Award shall be final. If the Appellee shall fail to deliver the Memorandum in Opposition as required above, or if the Appellant shall fail to deliver the Reply
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Memorandum as required above, then the Appellee or the Appellant, as the case may be, shall lose its right to so deliver the same, and the Appeal shall proceed regardless.
(b) Subject to subparagraph (a) above, the parties hereby agree that the Appeal must be heard by the Appeal Panel within thirty (30) calendar days of the Appeal Commencement Date, and that the Appeal Panel must render its decision within thirty (30) calendar days after the Appeal is heard (and in no event later than sixty (60) calendar days after the Appeal Commencement Date).
5.5 Appeal Panel Award. The Appeal Panel shall issue its decision (the “ Appeal Panel Award ”) through the lead arbitrator on the Appeal Panel. Notwithstanding any other provision contained herein, the Appeal Panel Award shall (a) supersede in its entirety and make of no further force or effect the Arbitration Award (provided that any protective orders issued by the Original Arbitrator shall remain in full force and effect), (b) be final and binding upon the parties, with no further rights of appeal, (c) be the sole and exclusive remedy between the parties regarding any Claims, counterclaims, issues, or accountings presented or pleaded in the Arbitration, and (d) be promptly payable in United States dollars free of any tax, deduction or offset (with respect to monetary awards). Any costs or fees, including without limitation attorneys’ fees, incurred in connection with or incident to enforcing the Appeal Panel Award shall, to the maximum extent permitted by law, be charged against the party resisting such enforcement. The Appeal Panel Award shall include Default Interest (with respect to monetary awards) at the rate specified in the Note for Default Interest both before and after the Arbitration Award. Judgment upon the Appeal Panel Award will be entered and enforced by a state or federal court sitting in Salt Lake County, Utah.
5.6 Relief. The Appeal Panel shall have the right to award or include in the Appeal Panel Award any relief which the Appeal Panel deems proper under the circumstances, including, without limitation, specific performance and injunctive relief, provided that the Appeal Panel may not award exemplary or punitive damages.
5.7 Fees and Costs. As part of the Appeal Panel Award, the Appeal Panel is hereby directed to require the losing party (the party being awarded the least amount of money by the arbitrator, which, for the avoidance of doubt, shall be determined without regard to any statutory fines, penalties, fees, or other charges awarded to any party) to (a) pay the full amount of any unpaid costs and fees of the Arbitration and the Appeal Panel, and (b) reimburse the prevailing party (the party being awarded the most amount of money by the Appeal Panel, which, for the avoidance of doubt, shall be determined without regard to any statutory fines, penalties, fees, or other charges awarded to any part) the reasonable attorneys’ fees, arbitrator and Appeal Panel costs and fees, deposition costs, other discovery costs, and other expenses, costs or fees paid or otherwise incurred by the prevailing party in connection with the Arbitration (including without limitation in connection with the Appeal).
6. Miscellaneous .
6.1 Severability. If any part of these Arbitration Provisions is found to violate or be illegal under applicable law, then such provision shall be modified to the minimum extent necessary to make such provision enforceable under applicable law, and the remainder of the Arbitration Provisions shall remain unaffected and in full force and effect.
6.2 Governing Law . These Arbitration Provisions shall be governed by the laws of the State of Utah without regard to the conflict of laws principles therein.
6.3 Interpretation . The headings of these Arbitration Provisions are for convenience of reference only and shall not form part of, or affect the interpretation of, these Arbitration Provisions.
6.4 Waiver . No waiver of any provision of these Arbitration Provisions shall be effective unless it is in the form of a writing signed by the party granting the waiver.
6.5 Time is of the Essence . Time is expressly made of the essence with respect to each and every provision of these Arbitration Provisions.
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CONVERTIBLE PROMISSORY NOTE
Effective Date: March 28, 2018 U.S. $1,000,000.00
FOR VALUE RECEIVED, BEYOND COMMERCE, INC. , a Nevada corporation (“ Borrower ”), promises to pay to ILIAD RESEARCH AND TRADING, L.P. , a Utah limited partnership, or its successors or assigns (“ Lender ”), $1,000,000.00 and any interest, fees, charges, and late fees on the date that is seventeen (17) months after the Purchase Price Date (the “ Maturity Date ”) in accordance with the terms set forth herein and to pay interest on the Outstanding Balance (including all Tranches (as defined below), both Conversion Eligible Tranches (as defined below) and Subsequent Tranches (as defined below) that have not yet become Conversion Eligible Tranches) at the rate of ten percent (10%) per annum from the Purchase Price Date until the same is paid in full. This Convertible Promissory Note (this “ Note ”) is issued and made effective as of March 28, 2018 (the “ Effective Date ”). This Note is issued pursuant to that certain Securities Purchase Agreement dated March 28, 2018, as the same may be amended from time to time, by and between Borrower and Lender (the “ Purchase Agreement ”). All interest calculations hereunder shall be computed on the basis of a 360-day year comprised of twelve (12) thirty (30) day months, shall compound daily and shall be payable in accordance with the terms of this Note. Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.
This Note carries an OID of $90,000.00. In addition, Borrower agrees to pay $10,000.00 to Lender to cover Lender’s legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the purchase and sale of this Note (the “ Transaction Expense Amount ”), all of which amount is included in the initial principal balance of this Note. The purchase price for this Note and the Warrants (as defined in the Purchase Agreement) shall be $900,000.00 (the “ Purchase Price ”), computed as follows: $1,000,000.00 original principal balance, less the OID, less the Transaction Expense Amount. The Purchase Price shall be payable by delivery to Borrower at Closing of the Investor Notes (as defined in the Purchase Agreement) and a wire transfer of immediately available funds in the amount of the Initial Cash Purchase Price (as defined in the Purchase Agreement). This Note shall be comprised of seven (7) tranches (each, a “ Tranche ”), consisting of (i) an initial Tranche in an amount equal to $65,000.00 and any interest, costs, fees or charges accrued thereon or added thereto under the terms of this Note and the other Transaction Documents (as defined in the Purchase Agreement) (the “ Initial Tranche ”), and (ii) six (6) additional Tranches, the first additional Tranche in the amount of $110,000.00 and the other five (5) additional Tranches in the amount of $165,000.00 each, plus any interest, costs, fees or charges accrued thereon or added thereto under the terms of this Note and the other Transaction Documents (each, a “ Subsequent Tranche ”). The Initial Tranche shall correspond to the Initial Cash Purchase Price, $5,000.00 of the OID and the Transaction Expense Amount, and may be converted into shares of Common Stock (as defined below) any time subsequent to the Purchase Price Date. The first Subsequent Tranche shall correspond to Investor Note #1 and $10,000.00 of the OID, the second Subsequent Tranche shall correspond to Investor Note #2 and $15,000.00 of the OID, the third Subsequent Tranche shall correspond to Investor Note #3 and $15,000.00 of the OID, the fourth Subsequent Tranche shall correspond to Investor Note #4 and $15,000.00 of the OID, the fifth Subsequent Tranche shall correspond to Investor Note #5 and $15,000.00 of the OID, and the sixth Subsequent Tranche shall correspond to Investor Note #6 and $15,000.00 of the OID. Lender’s right to convert any portion of any of the Subsequent Tranches is conditioned upon Lender’s payment in full of the Investor Note corresponding to such Subsequent Tranche (upon the satisfaction of such condition, such Subsequent Tranche becomes a “ Conversion Eligible Tranche ”). In the event Lender exercises its Lender Offset Right (as defined below) with respect to a portion of an Investor Note and pays in full the remaining outstanding balance of such Investor Note, the Subsequent Tranche that corresponds to such Investor Note shall be deemed to be a Conversion Eligible Tranche only for the portion of such Tranche that was paid for in cash by Lender and the portion of such Investor Note that was offset pursuant to
Lender’s exercise of the Lender Offset Right shall not be included in the applicable Conversion Eligible Tranche. For the avoidance of doubt, subject to the other terms and conditions hereof, the Initial Tranche shall be deemed a Conversion Eligible Tranche as of the Purchase Price Date for all purposes hereunder and may be converted in whole or in part at any time subsequent to the Purchase Price Date, and each Subsequent Tranche that becomes a Conversion Eligible Tranche may be converted in whole or in part at any time subsequent to the first date on which such Subsequent Tranche becomes a Conversion Eligible Tranche. For all purposes hereunder, Conversion Eligible Tranches shall be converted (or redeemed, as applicable) in order of the lowest-numbered Conversion Eligible Tranche and Conversion Eligible Tranches may be converted (or redeemed, as applicable) in one or more separate Conversions (as defined below), as determined in Lender’s sole discretion. At all times hereunder, the aggregate amount of any costs, fees or charges incurred by or assessable against Borrower hereunder, including, without limitation, any fees, charges or premiums incurred in connection with an Event of Default (as defined below), shall be added to the lowest-numbered then-current Conversion Eligible Tranche.
1.1. Payment . Provided there is an Outstanding Balance, on each Installment Date (as defined below), Borrower shall pay to Lender an amount equal to the Installment Amount (as defined below) due on such Installment Date in accordance with Section 8. All payments owing hereunder shall be in lawful money of the United States of America or Conversion Shares (as defined below), as provided for herein, and delivered to Lender at the address or bank account furnished to Borrower for that purpose. All payments shall be applied first to (a) costs of collection, if any, then to (b) fees and charges, if any, then to (c) accrued and unpaid interest, and thereafter, to (d) principal.
1.2. Prepayment . Notwithstanding the foregoing, so long as Borrower has not received a Lender Conversion Notice (as defined below) or an Installment Notice (as defined below) from Lender where the applicable Conversion Shares have not yet been delivered and so long as no Event of Default has occurred since the Effective Date (whether declared by Lender or undeclared and regardless of whether or not cured), then Borrower shall have the right, exercisable on not less than five (5) Trading Days prior written notice to Lender to prepay the Outstanding Balance of this Note, in full, in accordance with this Section 1. Any notice of prepayment hereunder (an “ Optional Prepayment Notice ”) shall be delivered to Lender at its registered address and shall state: (i) that Borrower is exercising its right to prepay this Note, and (ii) the date of prepayment, which shall be not less than five (5) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “ Optional Prepayment Date ”), Borrower shall make payment of the Optional Prepayment Amount (as defined below) to or upon the order of Lender as may be specified by Lender in writing to Borrower. If Borrower exercises its right to prepay this Note, Borrower shall make payment to Lender of an amount in cash equal to 125% (the “ Prepayment Premium ”) multiplied by the then Outstanding Balance of this Note (the “ Optional Prepayment Amount ”). In the event Borrower delivers the Optional Prepayment Amount to Lender prior to the Optional Prepayment Date or without delivering an Optional Prepayment Notice to Lender as set forth herein without Lender’s prior written consent, the Optional Prepayment Amount shall not be deemed to have been paid to Lender until the Optional Prepayment Date. Moreover, in such event the Optional Prepayment Liquidated Damages Amount will automatically be added to the Outstanding Balance of this Note on the day Borrower delivers the Optional Prepayment Amount to Lender. In the event Borrower delivers the Optional Prepayment Amount without an Optional Prepayment Notice, then the Optional Prepayment Date will be deemed to be the date that is five (5) Trading Days from the date that the Optional Prepayment Amount was delivered to Lender and Lender shall be entitled to exercise its conversion rights set forth herein during such five (5) day period. In addition, if Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment Amount due to Lender within two (2) Trading Days following the Optional Prepayment Date, Borrower shall forever forfeit its right to prepay this Note.
2. Security . This Note is not secured.
3. Lender Optional Conversion .
3.1. Lender Conversions . Lender has the right at any time after the Purchase Price Date until the Outstanding Balance has been paid in full, including without limitation (a) until any Optional Prepayment Date (even if Lender has received an Optional Prepayment Notice) or at any time thereafter with respect to any amount that is not prepaid, and (b) during or after any Fundamental Default Measuring Period, at its election, to convert (each instance of conversion is referred to herein as a “ Lender Conversion ”) all or any part of the Outstanding Balance into shares (“ Lender Conversion Shares ”) of fully paid and non-assessable common stock, $0.001 par value per share (“ Common Stock ”), of Borrower as per the following conversion formula: the number of Lender Conversion Shares equals the amount being converted (the “ Conversion Amount ”) divided by the Lender Conversion Price (as defined below). Conversion notices in the form attached hereto as Exhibit A (each, a “ Lender Conversion Notice ”) may be effectively delivered to Borrower by any method of Lender’s choice (including but not limited to facsimile, email, mail, overnight courier, or personal delivery), and all Lender Conversions shall be cashless and not require further payment from Lender. Borrower shall deliver the Lender Conversion Shares from any Lender Conversion to Lender in accordance with Section 9 below.
3.2. Lender Conversion Price . Subject to adjustment as set forth in this Note, the price at which Lender has the right to convert all or any portion of the Outstanding Balance into Common Stock is $0.15 per share of Common Stock (the “ Lender Conversion Price ”). However, in the event the Market Capitalization falls below the Minimum Market Capitalization at any time, then in such event (a) the Lender Conversion Price for all Lender Conversions occurring after the first date of such occurrence shall equal the lower of the Lender Conversion Price and the Market Price as of any applicable date of Conversion, and (b) the true-up provisions of Section 11 below shall apply to all Lender Conversions that occur after the first date the Market Capitalization falls below the Minimum Market Capitalization provided that all references to the “Installment Notice” in Section 11 shall be replaced with references to a “Lender Conversion Notice” for purposes of this Section 3.2, all references to “Installment Conversion Shares” in Section 11 shall be replaced with references to “Lender Conversion Shares” for purposes of this Section 3.2, and all references to the “Installment Conversion Price” in Section 11 shall be replaced with references to the “Lender Conversion Price” for purposes of this Section 3.2.
3.3. Application to Installments . Notwithstanding anything to the contrary herein, including without limitation Section 8 hereof, Lender may, in its sole discretion, apply all or any portion of any Lender Conversion toward any Installment Conversion (as defined below), even if such Installment Conversion is pending, as determined in Lender’s sole discretion, by delivering written notice of such election (which notice may be included as part of the applicable Lender Conversion Notice) to Borrower at any date on or prior to the applicable Installment Date. In such event, Borrower may not elect to allocate such portion of the applicable Installment Amount pursuant to this Section 3.3 in the manner prescribed in Section 8.3; rather, Borrower must reduce the applicable Installment Amount by the Conversion Amount described in this Section 3.3.
4.1. Defaults . The following are events of default under this Note (each, an “ Event of Default ”): Borrower fails to pay any principal, interest, fees, charges, or any other amount when due and payable hereunder; Borrower fails to deliver any Lender Conversion Shares in accordance with the terms hereof; Borrower fails to deliver any Installment Conversion Shares (as defined below) or True-Up Shares (as defined below) in accordance with the terms hereof; a receiver, trustee or other
similar official shall be appointed over Borrower or a material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed or discharged within sixty (60) days; Borrower becomes insolvent or generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any; Borrower makes a general assignment for the benefit of creditors; Borrower files a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); an involuntary bankruptcy proceeding is commenced or filed against Borrower; Borrower or any pledgor, trustor, or guarantor of this Note defaults or otherwise fails to observe or perform any covenant, obligation, condition or agreement of Borrower or such pledgor, trustor, or guarantor contained herein or in any other Transaction Document, other than those specifically set forth in this Section 4.1 and Section 4 of the Purchase Agreement; any representation, warranty or other statement made or furnished by or on behalf of Borrower or any pledgor, trustor, or guarantor of this Note to Lender herein, in any Transaction Document, or otherwise in connection with the issuance of this Note is false, incorrect, incomplete or misleading in any material respect when made or furnished; the occurrence of a Fundamental Transaction without Lender’s prior written consent; Borrower fails to maintain the Share Reserve as required under the Purchase Agreement; Borrower effectuates a reverse split of its Common Stock without twenty (20) Trading Days prior written notice to Lender; any money judgment, writ or similar process is entered or filed against Borrower or any subsidiary of Borrower or any of its property or other assets for more than $100,000.00, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) calendar days unless otherwise consented to by Lender; Borrower’s Common Stock fails to be DTC Eligible; Borrower fails to observe or perform any covenant set forth in Section 4 of the Purchase Agreement; or Borrower, any affiliate of Borrower, or any pledgor, trustor, or guarantor of this Note breaches any covenant or other term or condition contained in any Other Agreements.
4.2. Remedies . At any time and from time to time after Lender becomes aware of the occurrence of any Event of Default, Lender may accelerate this Note by written notice to Borrower, with the Outstanding Balance becoming immediately due and payable in cash at the Mandatory Default Amount. Notwithstanding the foregoing, at any time following the occurrence of any Event of Default, Lender may, at its option, elect to increase the Outstanding Balance by applying the Default Effect (subject to the limitation set forth below) via written notice to Borrower without accelerating the Outstanding Balance, in which event the Outstanding Balance shall be increased as of the date of the occurrence of the applicable Event of Default pursuant to the Default Effect, but the Outstanding Balance shall not be immediately due and payable unless so declared by Lender (for the avoidance of doubt, if Lender elects to apply the Default Effect pursuant to this sentence, it shall reserve the right to declare the Outstanding Balance immediately due and payable at any time and no such election by Lender shall be deemed to be a waiver of its right to declare the Outstanding Balance immediately due and payable as set forth herein unless otherwise agreed to by Lender in writing). Notwithstanding the foregoing, upon the occurrence of any Event of Default described in clauses (d), (e), (f), (g) or (h) of Section 4.1, the Outstanding Balance as of the date of acceleration shall become immediately and automatically due and payable in cash at the Mandatory Default Amount, without any written notice required by Lender. At any time following the occurrence of any Event of Default, upon written notice given by Lender to Borrower, interest shall accrue on the Outstanding Balance beginning on the date the applicable Event of Default occurred at an interest rate equal to the lesser of 22% per annum or the maximum rate permitted under applicable law (“ Default Interest ”); provided, however , that no Default Interest shall accrue during the Fundamental Default Measuring Period. For the avoidance of doubt, Lender may continue making Lender Conversions at any time following an Event of Default until such time as the Outstanding Balance is paid in full. Borrower further acknowledges and agrees that Lender may continue making Conversions following the entry of any judgment or arbitration award in favor of Lender until such time that the entire judgment amount or arbitration award is paid in full. Borrower agrees that any judgment or arbitration award will, by its terms, be made convertible into Common Stock. Any Conversions made following a judgment or arbitration award shall be made pursuant to the following formula: the amount of the
judgment or arbitration award being converted divided by 80% of the lowest Closing Bid Price in the ten (10) Trading Days immediately preceding the date of Conversion. In such event, Borrower and Lender agree that it is their expectation that any such judgment amount or arbitration award that is converted will tack back to the Purchase Price Date for purposes of determining the holding period under Rule 144. Borrower and Lender agree and stipulate that any judgment or arbitration award entered against Borrower shall be reduced by $1,000.00 and such $1,000.00 shall become the new Outstanding Balance of this Note and this Note shall expressly survive such judgment or arbitration award. Additionally, following the occurrence of any Event of Default, Borrower may, at its option, pay any Lender Conversion in cash instead of Lender Conversion Shares by paying to Lender on or before the applicable Delivery Date (as defined below) a cash amount equal to the number of Lender Conversion Shares set forth in the applicable Lender Conversion Notice multiplied by the highest intra-day trading price of the Common Stock that occurs during the period beginning on the date the applicable Event of Default occurred and ending on the date of the applicable Lender Conversion Notice. In connection with acceleration described herein, Lender need not provide, and Borrower hereby waives, any presentment, demand, protest or other notice of any kind, and Lender 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 Lender at any time prior to payment hereunder and Lender shall have all rights as a holder of the Note until such time, if any, as Lender receives full payment pursuant to this Section 4.2. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. Nothing herein shall limit Lender’s right to pursue any other remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to Borrower’s failure to timely deliver Conversion Shares upon Conversion of the Note as required pursuant to the terms hereof.
4.3. Fundamental Default Remedies . Notwithstanding anything to the contrary herein, in addition to all other remedies set forth herein, after giving effect to the Lender Offset Right (as defined below), which shall occur automatically upon the occurrence of any Fundamental Default, the Fundamental Liquidated Damages Amount shall be added to the Outstanding Balance upon Lender’s delivery to Borrower of a notice (which notice Lender may deliver to Borrower at any time following the occurrence of a Fundamental Default) setting forth its election to declare a Fundamental Default and the Fundamental Liquidated Damages Amount that will be added to the Outstanding Balance.
4.4. Certain Additional Rights . Notwithstanding anything to the contrary herein, in the event Borrower fails to make any payment when due or fails to deliver any Conversion Shares as and when required under this Note, then (a) the Lender Conversion Price for all Lender Conversions occurring after the date of such failure to pay shall equal the lower of the Lender Conversion Price and the Market Price as of any applicable date of Conversion, and (b) the true-up provisions of Section 11 below shall apply to all Lender Conversions that occur after the date of such failure to pay, provided that all references to the “Installment Notice” in Section 11 shall be replaced with references to a “Lender Conversion Notice” for purposes of this Section 4.4, all references to “Installment Conversion Shares” in Section 11 shall be replaced with references to “Lender Conversion Shares” for purposes of this Section 4.4, and all references to the “Installment Conversion Price” in Section 11 shall be replaced with references to the “Lender Conversion Price” for purposes of this Section 4.4. For the avoidance of doubt, Lender’s exercise of the rights granted to it pursuant to this Section 4.4 shall not relieve Borrower of its obligation to continue paying the Installment Amount on all future Installment Dates.
5. Unconditional Obligation; No Offset . Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset (except as set forth in Section 20 below), deduction or counterclaim of any kind. Borrower hereby waives any rights of offset it now has or may have hereafter against Lender, its successors and assigns, and agrees to make the payments or Conversions called for herein in accordance with the terms of this Note.
6. Waiver . No waiver of any provision of this Note shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.
7. Rights Upon Issuance of Securities .
7.1. Subsequent Equity Sales . Except with respect to Excluded Securities, if Borrower or any subsidiary thereof, as applicable, at any time this Note is outstanding, shall sell, issue or grant any Common Stock, option to purchase Common Stock, right to reprice, preferred shares convertible into Common Stock, or debt, warrants, options or other instruments or securities to Lender or any third party which are convertible into or exercisable or exchangeable for shares of Common Stock (collectively, the “ Equity Securities ”), including without limitation any Deemed Issuance, at an effective price per share less than the then effective Lender Conversion Price (such issuance is referred to herein as a “ Dilutive Issuance ”), then, the Lender Conversion Price shall be automatically reduced and only reduced to equal such lower effective price per share. If the holder of any Equity Securities 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 Dilutive Issuance, be entitled to receive shares of Common Stock at an effective price per share that is less than the Lender Conversion Price, such issuance shall be deemed to have occurred for less than the Lender Conversion Price on the date of such Dilutive Issuance, and the then effective Lender Conversion Price shall be reduced and only reduced to equal such lower effective price per share. Such adjustments described above to the Lender Conversion Price shall be permanent (subject to additional adjustments under this section), and shall be made whenever such Equity Securities are issued. Borrower shall notify Lender, in writing, no later than the Trading Day following the issuance of any Equity Securities subject to this Section 7.1, indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price, or other pricing terms (such notice, the “ Dilutive Issuance Notice ”). For purposes of clarity, whether or not Borrower provides a Dilutive Issuance Notice pursuant to this Section 7.1, upon the occurrence of any Dilutive Issuance, on the date of such Dilutive Issuance the Lender Conversion Price shall be lowered to equal the applicable effective price per share regardless of whether Borrower or Lender accurately refers to such lower effective price per share in any subsequent Installment Notice or Lender Conversion Notice.
7.2. Adjustment of Lender Conversion Price upon Subdivision or Combination of Common Stock . Without limiting any provision hereof, if Borrower at any time on or after the Effective Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Lender Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. Without limiting any provision hereof, if Borrower at any time on or after the Effective Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Lender Conversion Price in effect immediately prior to such combination will be proportionately increased. Any adjustment pursuant to this Section 7.2 shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this Section 7.2 occurs during the period that a Lender Conversion Price is calculated hereunder, then the calculation of such Lender Conversion Price shall be adjusted appropriately to reflect such event.
7.3. Other Events . In the event that Borrower (or any subsidiary) shall take any action to which the provisions hereof are not strictly applicable, or, if applicable, would not operate to protect
Lender from dilution or if any event occurs of the type contemplated by the provisions of this Section 7 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 Borrower’s board of directors shall in good faith determine and implement an appropriate adjustment in the Lender Conversion Price so as to protect the rights of Lender, provided that no such adjustment pursuant to this Section 7.3 will increase the Lender Conversion Price as otherwise determined pursuant to this Section 7, provided further that if Lender does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then Borrower’s board of directors and Lender shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments, whose determination shall be final and binding and whose fees and expenses shall be borne by Borrower.
8.1. Installment Conversion Price . Subject to the adjustments set forth herein, the conversion price for each Installment Conversion (the “ Installment Conversion Price ”) shall be the lesser of (a) the Lender Conversion Price, and (b) the Market Price.
8.2. Installment Conversions . Beginning on the date that is twelve (12) months after the Purchase Price Date and on the same day of each month thereafter until the Maturity Date (each, an “ Installment Date ”), if paying in cash, Borrower shall pay to Lender the applicable Installment Amount due on such date subject to the provisions of this Section 8, and if paying in Installment Conversion Shares (as defined below), Borrower shall deliver such Installment Conversion Shares on or before the Delivery Date. Payments of each Installment Amount may be made (a) in cash; provided, however , that in the event Lender has paid off all or any portion of any Investor Note (such amount that is prepaid, the “ Investor Note Prepayment Amount ”), Borrower may not pay any portion of any Installment Amount in cash for a period of ninety (90) days following the date Investor delivered the applicable Investor Note Prepayment Amount to Borrower (the “ Standstill Period ”) and any payment in cash of any Installment Amount made during the Standstill Period shall be deemed to be a prepayment pursuant to Section 1 above and shall be subject to the Prepayment Premium provided in such section, or (b) by converting such Installment Amount into shares of Common Stock (“ Installment Conversion Shares ”, and together with the Lender Conversion Shares, the “ Conversion Shares ”) in accordance with this Section 8 (each instance of Borrower thus converting, an “ Installment Conversion ”) per the following formula: the number of Installment Conversion Shares equals the portion of the applicable Installment Amount being converted divided by the Installment Conversion Price, or (c) by any combination of the foregoing, so long as the cash is delivered to Lender on the applicable Installment Date and the Installment Conversion Shares are delivered to Lender on or before the applicable Delivery Date. Notwithstanding the foregoing, Borrower will not be entitled to elect an Installment Conversion with respect to any portion of any applicable Installment Amount and shall be required to pay the entire amount of such Installment Amount in cash if on the applicable Installment Date there is an Equity Conditions Failure, and such failure is not waived in writing by Lender. Moreover, in the event Borrower desires to pay all or any portion of any Installment Amount in cash, it must notify Lender in writing of such election and the portion of the applicable Installment Amount it elects to pay in cash not more than twenty-five (25) or less than fifteen (15) Trading Days prior to the applicable Installment Date. If Borrower fails to so notify Lender, it shall not be permitted to elect to pay any portion of such Installment Amount in cash unless otherwise agreed to by Lender in writing or proposed by Lender in an Installment Notice delivered by Lender to Borrower. Notwithstanding the foregoing or anything to the contrary herein, Borrower shall only be obligated to deliver Installment Amounts with respect to Tranches that have become Conversion Eligible Tranches and shall have no obligation to pay to Lender any Installment Amount with respect to any Tranche that has not become a Conversion Eligible Tranche. In furtherance thereof, in the event Borrower has repaid all Conversion Eligible Tranches pursuant to the terms of this Note, it shall have no further obligations to deliver any Installment Amount to Lender unless and until any Subsequent Tranche that was not
previously a Conversion Eligible Tranche becomes a Conversion Eligible Tranche pursuant to the terms of this Note. Notwithstanding that failure to repay this Note in full by the Maturity Date is an Event of Default, the Installment Dates shall continue after the Maturity Date pursuant to this Section 8 until the Outstanding Balance is repaid in full, provided that Lender shall, in Lender’s sole discretion, determine the Installment Amount for each Installment Date after the Maturity Date.
8.3. Allocation of Installment Amounts . Subject to Section 8.2 regarding an Equity Conditions Failure, for each Installment Date, Borrower may elect to allocate the amount of the applicable Installment Amount between cash and Installment Conversion, by email or fax delivery of a notice to Lender substantially in the form attached hereto as Exhibit B (each, an “ Installment Notice ”), provided, that to be effective, each applicable Installment Notice must be received by Lender not more than twenty-five (25) or less than fifteen (15) Trading Days prior to the applicable Installment Date. If Lender has not received an Installment Notice within such time period, then Lender may prepare the Installment Notice and deliver the same to Borrower by fax or email. Following its receipt of such Installment Notice, Borrower may either ratify Lender’s proposed allocation in the applicable Installment Notice or elect to change the allocation by written notice to Lender by email or fax on or before 12:00 p.m. New York time on the applicable Installment Date, so long as the sum of the cash payments and the amount of Installment Conversions equal the applicable Installment Amount, provided that Lender must approve any increase to the portion of the Installment Amount payable in cash. If Borrower fails to notify Lender of its election to change the allocation prior to the deadline set forth in the previous sentence (and seek approval to increase the amount payable in cash), it shall be deemed to have ratified and accepted the allocation set forth in the applicable Installment Notice prepared by Lender. If neither Borrower nor Lender prepare and deliver to the other party an Installment Notice as outlined above, then Borrower shall be deemed to have elected that the entire Installment Amount be converted via an Installment Conversion. Borrower acknowledges and agrees that regardless of which party prepares the applicable Installment Notice, the amounts and calculations set forth thereon are subject to correction or adjustment because of error, mistake, or any adjustment resulting from an Event of Default or other adjustment permitted under the Transaction Documents (an “ Adjustment ”). Furthermore, no error or mistake in the preparation of such notices, or failure to apply any Adjustment that could have been applied prior to the preparation of an Installment Notice may be deemed a waiver of Lender’s right to enforce the terms of the Note, even if such error, mistake, or failure to include an Adjustment arises from Lender’s own calculation. Borrower shall deliver the Installment Conversion Shares from any Installment Conversion to Lender in accordance with Section 9 below on or before each applicable Delivery Date.
9. Method of Conversion Share Delivery . On or before the close of business on the third (3 rd ) Trading Day following each Installment Date or the third (3 rd ) Trading Day following the date of delivery of a Lender Conversion Notice, as applicable (the “ Delivery Date ”), Borrower shall deliver or cause to be delivered to Lender or its broker (as designated in the Lender Conversion Notice), via reputable overnight courier, a certificate or certificates representing the aggregate number of Conversion Shares to which Lender shall be entitled, registered in the name of Lender or its designee. For the avoidance of doubt, Borrower has not met its obligation to deliver Conversion Shares by the Delivery Date unless Lender or its broker, as applicable, has actually received the certificate representing the applicable Conversion Shares no later than the close of business on the relevant Delivery Date pursuant to the terms set forth above. Moreover, and notwithstanding anything to the contrary herein or in any other Transaction Document, in the event Borrower or its transfer agent refuses to deliver any Conversion Shares to Lender on grounds that such issuance is in violation of Rule 144 under the Securities Act of 1933, as amended (“ Rule 144 ”), Borrower shall deliver or cause its transfer agent to deliver the applicable Conversion Shares to Lender with a restricted securities legend, but otherwise in accordance with the provisions of this Section 9. In conjunction therewith, Borrower will also deliver to Lender a written opinion from its counsel or its transfer agent’s counsel opining as to why the issuance of the applicable Conversion Shares violates Rule 144.
10. Conversion Delays . If Borrower fails to deliver Conversion Shares or True-Up Shares in accordance with the timeframes stated in Sections 9 or 11, as applicable, Lender, at any time prior to selling all of those Conversion Shares or True-Up Shares, as applicable, may rescind in whole or in part that particular Conversion attributable to the unsold Conversion Shares or True-Up Shares, with a corresponding increase to the Outstanding Balance (any returned amount will tack back to the Purchase Price Date for purposes of determining the holding period under Rule 144). In addition, for each Lender Conversion, in the event that Lender Conversion Shares are not delivered by the fourth (4 th ) Trading Day (inclusive of the day of the Lender Conversion), a late fee equal to the greater of (a) $500.00 and (b) 2% of the applicable Lender Conversion Share Value rounded to the nearest multiple of $100.00 (but in any event the cumulative amount of such late fees for each Lender Conversion shall not exceed 200% of the applicable Lender Conversion Share Value) will be assessed for each day after the third (3 rd ) Trading Day (inclusive of the day of the Lender Conversion) until Lender Conversion Share delivery is made; and such late fee will be added to the Outstanding Balance (such fees, the “ Conversion Delay Late Fees ”). For illustration purposes only, if Lender delivers a Lender Conversion Notice to Borrower pursuant to which Borrower is required to deliver 100,000 Lender Conversion Shares to Lender and on the Delivery Date such Lender Conversion Shares have a Lender Conversion Share Value of $20,000.00 (assuming a Closing Trade Price on the Delivery Date of $0.20 per share of Common Stock), then in such event a Conversion Delay Late Fee in the amount of $500.00 per day (the greater of $500.00 per day and $20,000.00 multiplied by 2%, which is $400.00) would be added to the Outstanding Balance of the Note until such Lender Conversion Shares are delivered to Lender. For purposes of this example, if the Lender Conversion Shares are delivered to Lender twenty (20) days after the applicable Delivery Date, the total Conversion Delay Late Fees that would be added to the Outstanding Balance would be $10,000.00 (20 days multiplied by $500.00 per day). If the Lender Conversion Shares are delivered to Lender one hundred (100) days after the applicable Delivery Date, the total Conversion Delay Late Fees that would be added to the Outstanding Balance would be $40,000.00 (100 days multiplied by $500.00 per day, but capped at 200% of the Lender Conversion Share Value).
11. True-Up . On the date that is twenty (20) Trading Days (a “ True-Up Date ”) from each date that any Installment Conversion Shares delivered by Borrower to Lender become Free Trading, there shall be a true-up where Borrower shall deliver to Lender additional Installment Conversion Shares (“ True-Up Shares ”) if the Installment Conversion Price as of the True-Up Date is less than the Installment Conversion Price used in the applicable Installment Notice. In such event, Borrower shall deliver to Lender within three (3) Trading Days of the True-Up Date (the “ True-Up Share Delivery Date ”) a number of True-Up Shares equal to the difference between the number of Installment Conversion Shares that would have been delivered to Lender on the True-Up Date based on the Installment Conversion Price as of the True-Up Date and the number of Installment Conversion Shares originally delivered to Lender pursuant to the applicable Installment Notice. For the avoidance of doubt, if the Installment Conversion Price as of the True-Up Date is higher than the Installment Conversion Price set forth in the applicable Installment Notice, then Borrower shall have no obligation to deliver True-Up Shares to Lender, nor shall Lender have any obligation to return any excess Installment Conversion Shares to Borrower under any circumstance. For the convenience of Borrower only, Lender may, in its sole discretion, deliver to Borrower a notice (pursuant to a form of notice substantially in the form attached hereto as Exhibit C ) informing Borrower of the number of True-Up Shares it is obligated to deliver to Lender as of any given True-Up Date, provided that if Lender does not deliver any such notice, Borrower shall not be relieved of its obligation to deliver True-Up Shares pursuant to this Section 11. Notwithstanding the foregoing, if Borrower fails to deliver any required True-Up Shares on or before any applicable True-Up Share Delivery Date, then in such event the Outstanding Balance of this Note will automatically increase by a sum equal to the number of True-Up Shares deliverable as of the applicable True-Up Date multiplied by the Market Price for the Common Stock as of the applicable True-Up Date (under Lender’s and Borrower’s expectations that any such increase will tack back to the Purchase Price Date for purposes of determining the holding period under Rule 144).
12. Ownership Limitation . Notwithstanding anything to the contrary contained in this Note or the other Transaction Documents, if at any time Lender shall or would be issued shares of Common Stock under any of the Transaction Documents, but such issuance would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance) (the “ Maximum Percentage ”), then Borrower must not issue to Lender shares of Common Stock which would exceed the Maximum Percentage. For purposes of this section, beneficial ownership of Common Stock will be determined pursuant to Section 13(d) of the 1934 Act. The shares of Common Stock issuable to Lender that would cause the Maximum Percentage to be exceeded are referred to herein as the “ Ownership Limitation Shares ”. Borrower will reserve the Ownership Limitation Shares for the exclusive benefit of Lender. From time to time, Lender may notify Borrower in writing of the number of the Ownership Limitation Shares that may be issued to Lender without causing Lender to exceed the Maximum Percentage. Upon receipt of such notice, Borrower shall be unconditionally obligated to immediately issue such designated shares to Lender, with a corresponding reduction in the number of the Ownership Limitation Shares. Notwithstanding the forgoing, the term “4.99%” above shall be replaced with “9.99%” at such time as the Market Capitalization is less than $10,000,000.00. Notwithstanding any other provision contained herein, if the term “4.99%” is replaced with “9.99%” pursuant to the preceding sentence, such increase to “9.99%” shall remain at 9.99% until increased, decreased or waived by Lender as set forth below. By written notice to Borrower, Lender may increase, decrease or waive the Maximum Percentage as to itself but any such waiver will not be effective until the 61st day after delivery thereof. The foregoing 61-day notice requirement is enforceable, unconditional and non-waivable and shall apply to all affiliates and assigns of Lender.
13. Payment of Collection Costs . If this Note is placed in the hands of an attorney for collection or enforcement prior to commencing arbitration or legal proceedings, or is collected or enforced through any arbitration or legal proceeding, or Lender otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note, then Borrower shall pay the costs incurred by Lender for such collection, enforcement or action including, without limitation, attorneys’ fees and disbursements. Borrower also agrees to pay for any costs, fees or charges of its transfer agent that are charged to Lender pursuant to any Conversion or issuance of shares pursuant to this Note.
14. Opinion of Counsel . In the event that an opinion of counsel is needed for any matter related to this Note, Lender has the right to have any such opinion provided by its counsel. Lender also has the right to have any such opinion provided by Borrower’s counsel.
15. Governing Law; Venue . This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of Utah, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Utah or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Utah. The provisions set forth in the Purchase Agreement to determine the proper venue for any disputes are incorporated herein by this reference.
16.1. Arbitration of Disputes . By its acceptance of this Note, each party agrees to be bound by the Arbitration Provisions (as defined in the Purchase Agreement) set forth as an exhibit to the Purchase Agreement.
16.2. Calculation Disputes . Notwithstanding the Arbitration Provisions, in the case of a dispute as to any Calculation (as defined in the Purchase Agreement), such dispute will be resolved in the manner set forth in the Purchase Agreement.
17. Cancellation . After repayment or conversion of the entire Outstanding Balance (including without limitation delivery of True-Up Shares pursuant to the payment of the final Installment Amount, if applicable), this Note shall be deemed paid in full, shall automatically be deemed canceled, and shall not be reissued.
18. Amendments . The prior written consent of both parties hereto shall be required for any change or amendment to this Note.
19. Assignments . Borrower may not assign this Note without the prior written consent of Lender. This Note and any shares of Common Stock issued upon conversion of this Note may be offered, sold, assigned or transferred by Lender without the consent of Borrower.
20. Offset Rights . Notwithstanding anything to the contrary herein or in any of the other Transaction Documents, (a) the parties hereto acknowledge and agree that Lender maintains a right of offset pursuant to the terms of the Investor Notes that, under certain circumstances, permits Lender to deduct amounts owed by Borrower under this Note from amounts otherwise owed by Lender under the Investor Notes (the “ Lender Offset Right ”), and (b) at any time Borrower shall be entitled to deduct and offset any amount owing by the initial Lender under the Investor Notes from any amount owed by Borrower under this Note (the “ Borrower Offset Right ”). In order to exercise the Borrower Offset Right, Borrower must deliver to Lender (a) a completed and signed Borrower Offset Right Notice in the form attached hereto as Exhibit D , (b) the original Investor Note being offset marked “cancelled” or, in the event the applicable Investor Note has been lost, stolen or destroyed, a lost note affidavit in a form reasonably acceptable to Lender, and (c) a check payable to Lender in the amount of $250.00. In the event that Borrower’s exercise of the Borrower Offset Right results in the full satisfaction of Borrower’s obligations under this Note, Lender shall return the original Note to Borrower marked “cancelled” or, in the event this Note has been lost, stolen or destroyed, a lost note affidavit in a form reasonably acceptable to Borrower. For the avoidance of doubt, Borrower shall not incur any Prepayment Premium set forth in Section 1 hereof with respect to any portions of this Note that are satisfied by way of a Borrower Offset Right.
21. Time is of the Essence . Time is expressly made of the essence with respect to each and every provision of this Note and the documents and instruments entered into in connection herewith.
22. Notices . Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with the subsection of the Purchase Agreement titled “Notices.”
23. Liquidated Damages . Lender and Borrower agree that in the event Borrower fails to comply with any of the terms or provisions of this Note, Lender’s damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties’ inability to predict future interest rates, future share prices, future trading volumes and other relevant factors. Accordingly, Lender and Borrower agree that any fees, balance adjustments, Default Interest or other charges assessed under this Note are not penalties but instead are intended by the parties to be, and shall be deemed, liquidated damages (under Lender’s and Borrower’s expectations that any such liquidated damages will tack back to the Purchase Price Date for purposes of determining the holding period under Rule 144).
24. Waiver of Jury Trial . EACH OF LENDER AND BORROWER IRREVOCABLY WAIVES ANY AND ALL RIGHTS SUCH PARTY MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS NOTE OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, EACH PARTY HERETO ACKNOWLEDGES THAT SUCH PARTY IS KNOWINGLY AND VOLUNTARILY WAIVING SUCH PARTY’S RIGHT TO DEMAND TRIAL BY JURY.
25. Voluntary Agreement . Borrower has carefully read this Note and has asked any questions needed for Borrower to understand the terms, consequences and binding effect of this Note and fully understand them. Borrower has had the opportunity to seek the advice of an attorney of Borrower’s choosing, or has waived the right to do so, and is executing this Note voluntarily and without any duress or undue influence by Lender or anyone else.
26. Severability . If any part of this Note is construed to be in violation of any law, such part shall be modified to achieve the objective of Borrower and Lender to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect.
[ Remainder of page intentionally left blank; signature page follows ]
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed as of the Effective Date.
BORROWER:
BEYOND COMMERCE, INC.
By:
Name:
Title:
ACKNOWLEDGED, ACCEPTED AND AGREED:
LENDER:
ILIAD RESEARCH AND TRADING, L.P.
By: Iliad Management, LLC, its General Partner
By: Fife Trading, Inc., its Manager
By:
John M. Fife, President
[ Signature Page to Convertible Promissory Note ]
ATTACHMENT 1
DEFINITIONS
For purposes of this Note, the following terms shall have the following meanings:
A1. “ Adjusted Outstanding Balance ” means the Outstanding Balance of this Note as of the date the applicable Fundamental Default occurred less any Conversion Delay Late Fees included in such Outstanding Balance.
A2. “ Approved Stock Plan ” means any equity compensation plan which has been approved by the shareholders of Borrower and is in effect as of the Purchase Price Date, pursuant to which Borrower’s securities may be issued to any employee, officer or director for services provided to Borrower.
A3. “ Bloomberg ” means Bloomberg L.P. (or if that service is not then reporting the relevant information regarding the Common Stock, a comparable reporting service of national reputation selected by Lender and reasonably satisfactory to Borrower).
A4. “ Closing Bid Price ” and “ Closing Trade Price ” means the last closing bid price and last closing trade price, respectively, for the Common Stock on its principal market, as reported by Bloomberg, or, if its principal market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of the Common Stock prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if its principal market is not the principal securities exchange or trading market for the Common Stock, the last closing bid price or last trade price, respectively, of the Common Stock on the principal securities exchange or trading market where the Common Stock is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of the Common Stock in the over-the-counter market on the electronic bulletin board for the Common Stock as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for the Common Stock by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for the Common Stock as reported by OTC Markets Group, Inc., and any successor thereto. If the Closing Bid Price or the Closing Trade Price cannot be calculated for the Common Stock on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Trade Price (as the case may be) of the Common Stock on such date shall be the fair market value as mutually determined by Lender and Borrower. If Lender and Borrower are unable to agree upon the fair market value of the Common Stock, then such dispute shall be resolved in accordance with the procedures in Section 16.2. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.
A5. “ Conversion ” means a Lender Conversion under Section 3 or an Installment Conversion under Section 8.
A6. “ Conversion Eligible Outstanding Balance ” means the Outstanding Balance of this Note less the sum of each Subsequent Tranche that has not yet become a Conversion Eligible Tranche (i.e., Lender has not yet paid the outstanding balance of the Investor Note that corresponds to such Subsequent Tranche).
A7. “ Conversion Factor ” means 65%, subject to the following adjustments. If at any time the average of the three (3) lowest Closing Bid Prices during the twenty (20) Trading Days immediately preceding any date of measurement is below $0.05, then in such event the then-current Conversion Factor shall be reduced by 10% for all future Conversions (subject to other reductions set forth in this section). If at any time after the Effective Date, the Conversion Shares are not DTC Eligible, then the then-current Conversion Factor will automatically be reduced by 5% for all future Conversions. Finally, in addition to the Default Effect, if any Major Default occurs after the Effective Date, the Conversion Factor shall automatically be reduced for all future Conversions by an additional 5% for each of the first three (3) Major Defaults that occur after the Effective Date (for the avoidance of doubt, each occurrence of any Major Default shall be deemed to be a separate occurrence for purposes of the foregoing reductions in Conversion Factor, even if the same Major Default occurs three (3) separate times). For example, the first time the Conversion Shares are not DTC Eligible, the Conversion Factor for future Conversions thereafter will be reduced from 65% to 60% for purposes of this example. If, thereafter, there are three (3) separate occurrences of a Major Default pursuant to Section 4.1(c), then for purposes of this example the Conversion Factor would be reduced by 5% for the first such occurrence, and so on for each of the second and third occurrences of such Major Default.
Attachment 1 to Convertible Promissory Note, Page 1
A8. “ Deemed Issuance ” means an issuance of Common Stock that shall be deemed to have occurred on the latest possible permitted date pursuant to the terms hereof or any applicable Warrant in the event Borrower fails to deliver Conversion Shares as and when required pursuant to Section 9 of the Note or Warrant Shares (as defined in the Purchase Agreement) as and when required pursuant to the Warrants. For the avoidance of doubt, if Borrower has elected or is deemed under Section 8.3 to have elected to pay an Installment Amount in Installment Conversion Shares and fails to deliver such Installment Conversion Shares, such failure shall be considered a Deemed Issuance hereunder even if an Equity Conditions Failure exists at that time or other relevant date of determination.
A9. “ Default Effect ” means multiplying the Conversion Eligible Outstanding Balance as of the date the applicable Event of Default occurred by (a) 15% for each occurrence of any Major Default, or (b) 5% for each occurrence of any Minor Default, and then adding the resulting product to the Outstanding Balance as of the date the applicable Event of Default occurred, with the sum of the foregoing then becoming the Outstanding Balance under this Note as of the date the applicable Event of Default occurred; provided that the Default Effect may only be applied three (3) times hereunder with respect to Major Defaults and three (3) times hereunder with respect to Minor Defaults; and provided further that the Default Effect shall not apply to any Event of Default pursuant to Section 4.1(b) hereof.
A10. “ DTC ” means the Depository Trust Company or any successor thereto.
A11. “ DTC Eligible ” means, with respect to the Common Stock, that such Common Stock is eligible to be deposited in certificate form at the DTC, cleared and converted into electronic shares by the DTC and held in the name of the clearing firm servicing Lender’s brokerage firm for the benefit of Lender.
A12. “ Equity Conditions Failure ” means that any of the following conditions has not been satisfied during any applicable Equity Conditions Measuring Period (as defined below): (a) with respect to the applicable date of determination all of the Conversion Shares would be freely tradable under Rule 144 or without the need for registration under any applicable federal or state securities laws (in each case, disregarding any limitation on conversion of this Note); (b) on each day during the period beginning one month prior to the applicable date of determination and ending on and including the applicable date of determination (the “ Equity Conditions Measuring Period ”), the Common Stock is listed or designated for quotation (as applicable) on any of NYSE, NASDAQ, OTCQX, OTCQB, or OTC Pink Current Information (each, an “ Eligible Market ”) and shall not have been suspended from trading on any such Eligible Market (other than suspensions of not more than two (2) Trading Days and occurring prior to the applicable date of determination due to business announcements by Borrower); (c) on each day during the Equity Conditions Measuring Period, Borrower shall have delivered all shares of Common Stock issuable upon conversion of this Note on a timely basis as set forth in Section 8.1 hereof and all other shares of capital stock required to be delivered by Borrower on a timely basis as set forth in the other Transaction Documents; (d) any shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating Section 11 hereof (Lender acknowledges that Borrower shall be entitled to assume that this condition has been met for all purposes hereunder absent written notice from Lender); (e) any shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating the rules or regulations of the Eligible Market on which the Common Stock is then listed or designated for quotation (as applicable); (f) on each day during the Equity Conditions Measuring Period, no public announcement of a pending, proposed or intended Fundamental Transaction shall have occurred which has not been abandoned, terminated or consummated; (g) Borrower shall have no knowledge of any fact that would reasonably be expected to cause any of the Conversion Shares to not be freely tradable without the need for registration under any applicable state securities laws (in each case, disregarding any limitation on conversion of this Note); (h) on each day during the Equity Conditions Measuring Period, Borrower otherwise shall have been in material compliance with each, and shall not have breached any, term, provision, covenant, representation or warranty of any Transaction Document; (i) without limiting clause (j) above, on each day during the Equity Conditions Measuring Period, there shall not have occurred an Event of Default or an event that with the passage of time or giving of notice would constitute an Event of Default; (k) on each Installment Date, the average and median daily dollar volume of the Common Stock on its principal market for the previous twenty (20) Trading Days shall be greater than $50,000.00; (l) the ten (10) day average VWAP of the Common Stock is greater than $0.05, and (m) the Common Stock shall be DTC Eligible as of each applicable Installment Date or other date of determination.
A13. “ Excluded Securities ” means any shares of Common Stock, options, or convertible securities issued or issuable in connection with any Approved Stock Plan; provided that the option term, exercise price or
Attachment 1 to Convertible Promissory Note, Page 2
similar provisions of any issuances pursuant to such Approved Stock Plan are not amended, modified or changed on or after the Purchase Price Date.
A14. “ Free Trading ” means that (a) the shares or certificate(s) representing the applicable shares of Common Stock have been cleared and approved for public resale by the compliance departments of Lender’s brokerage firm and the clearing firm servicing such brokerage, and (b) such shares are held in the name of the clearing firm servicing Lender’s brokerage firm and have been deposited into such clearing firm’s account for the benefit of Lender.
A15. “ Fundamental Default ” means that Borrower either fails to pay the entire Outstanding Balance to Lender on or before the Maturity Date or fails to pay the Mandatory Default Amount within three (3) Trading Days of the date Lender delivers any notice of acceleration to Borrower pursuant to Section 4.2 of this Note.
A16. “ Fundamental Default Conversion Value ” means the Adjusted Outstanding Balance multiplied by the highest Fundamental Default Ratio that occurs during the Fundamental Default Measuring Period.
A17. “ Fundamental Default Measuring Period ” means a number of months equal to the Outstanding Balance as of the date the Fundamental Default occurred divided by the Installment Amount, with such number being rounded up to the next whole month; provided, however , that if Borrower repays the entire Outstanding Balance prior to the conclusion of the Fundamental Default Measuring Period, the Fundamental Default Measuring Period shall end on the date of repayment. For illustration purposes only, if the Outstanding Balance were equal to $125,000.00 as of the date a Fundamental Default occurred and if the Installment Amount were $28,500.00, then the Fundamental Default Measuring Period would equal five (5) months calculated as follows: $125,000.00/$28,500.00 equals 4.386, rounded up to five (5).
A18. “ Fundamental Default Ratio ” means a ratio that will be calculated on each Trading Day during the Fundamental Default Measuring Period by dividing the Closing Trade Price for the Common Stock on a given Trading Day by the Lender Conversion Price (as adjusted pursuant to the terms hereof) in effect for such Trading Day.
A19. “ Fundamental Liquidated Damages Amount ” means the greater of (a) (i) the quotient of the Outstanding Balance on the date the Fundamental Default occurred divided by the then-current Conversion Factor, minus (ii) the Outstanding Balance on the date the Fundamental Default occurred, or (b) the Fundamental Default Conversion Value.
A20. “ Fundamental Transaction ” means that (a) (i) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, consolidate or merge with or into (whether or not Borrower or any of its subsidiaries is the surviving corporation) any other person or entity, or (ii) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its respective properties or assets to any other person or entity, or (iii) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, allow any other person or entity to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of voting stock of Borrower (not including any shares of voting stock of Borrower held by the person or persons making or party to, or associated or affiliated with the persons or entities making or party to, such purchase, tender or exchange offer), or (iv) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other person or entity whereby such other person or entity acquires more than 50% of the outstanding shares of voting stock of Borrower (not including any shares of voting stock of Borrower held by the other persons or entities making or party to, or associated or affiliated with the other persons or entities making or party to, such stock or share purchase agreement or other business combination), or (v) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, reorganize, recapitalize or reclassify the Common Stock, other than an increase in the number of authorized shares of Borrower’s Common Stock, or (b) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding voting stock of Borrower.
A21. “ Installment Amount ” means $166,666.67 ($1,000,000.00 ÷ 6), plus the sum of any accrued and unpaid interest on all Conversion Eligible Tranches as of the applicable Installment Date, and accrued and unpaid
Attachment 1 to Convertible Promissory Note, Page 3
late charges, if any, under this Note as of the applicable Installment Date, and any other amounts accruing or owing to Lender under this Note as of such Installment Date; provided, however, that, if the remaining amount owing under all then-existing Conversion Eligible Tranches or otherwise with respect to this Note as of the applicable Installment Date is less than the Installment Amount set forth above, then the Installment Amount for such Installment Date (and only such Installment Amount) shall be reduced (and only reduced) by the amount necessary to cause such Installment Amount to equal such outstanding amount.
A22. “ Lender Conversion Share Value ” means the product of the number of Lender Conversion Shares deliverable pursuant to any Lender Conversion multiplied by the Closing Trade Price of the Common Stock on the Delivery Date for such Lender Conversion.
A23. “ Major Default ” means any Event of Default occurring under Sections 4.1(a), 4.1(c), 4.1(l), or 4.1(p) of this Note.
A24. “ Mandatory Default Amount ” means the greater of (a) the Outstanding Balance (including all Tranches, both Conversion Eligible Tranches and Subsequent Tranches that have not yet become Conversion Eligible Tranches) divided by the Installment Conversion Price on the date the Mandatory Default Amount is demanded, multiplied by the VWAP on the date the Mandatory Default Amount is demanded, or (b) the Outstanding Balance following the application of the Default Effect.
A25. “ Market Capitalization ” means a number equal to (a) the average VWAP of the Common Stock for the immediately preceding fifteen (15) Trading Days, multiplied by (b) the aggregate number of outstanding shares of Common Stock as reported on Borrower’s most recently filed Form 10-Q or Form 10-K.
A26. “ Market Price ” means the Conversion Factor multiplied by the average of the three (3) lowest Closing Bid Prices during the twenty (20) Trading Days immediately preceding the applicable Conversion.
A27. “ Minimum Market Capitalization ” means $50,000,000.
A28. “ Minor Default ” means any Event of Default that is not a Major Default or a Fundamental Default.
A29. “ OID ” means an original issue discount.
A30. “ Optional Prepayment Liquidated Damages Amount ” means an amount equal to the difference between (a) the product of (i) the number of shares of Common Stock obtained by dividing (1) the applicable Optional Prepayment Amount by (2) the Lender Conversion Price as of the date Borrower delivered the applicable Optional Prepayment Amount to Lender, multiplied by (ii) the Closing Trade Price of the Common Stock on the date Borrower delivered the applicable Optional Prepayment Amount to Lender, and (b) the applicable Optional Prepayment Amount paid by Borrower to Lender. For illustration purposes only, if the applicable Optional Prepayment Amount were $50,000.00, the Lender Conversion Price as of the date the Optional Prepayment Amount was paid to Lender was equal to $0.75 per share of Common Stock, and the Closing Trade Price of a share of Common Stock as of such date was equal to $1.00, then the Optional Prepayment Liquidated Damages Amount would equal $16,666.67 computed as follows: (a) $66,666.67 (calculated as (i) (1) $50,000.00 divided by (2) $0.75 multiplied by (ii) $1.00) minus (b) $50,000.00.
A31. “ Other Agreements ” means, collectively, (a) all existing and future agreements and instruments between, among or by Borrower (or an affiliate), on the one hand, and Lender (or an affiliate), on the other hand, and (b) any financing agreement or a material agreement that affects Borrower’s ongoing business operations.
A32. “ Outstanding Balance ” means as of any date of determination, the Purchase Price, as reduced or increased, as the case may be, pursuant to the terms hereof for payment, Conversion, offset, or otherwise, plus the OID, the Transaction Expense Amount, accrued but unpaid interest, collection and enforcements costs (including attorneys’ fees) incurred by Lender, transfer, stamp, issuance and similar taxes and fees related to Conversions, and any other fees or charges (including without limitation Conversion Delay Late Fees) incurred under this Note.
A33. “ Purchase Price Date ” means the date the Initial Cash Purchase Price is delivered by Lender to Borrower.
A34. “ Trading Day ” means any day on which the New York Stock Exchange is open for trading.
A35. “ VWAP ” means the volume weighted average price of the Common stock on the principal market for a particular Trading Day or set of Trading Days, as the case may be, as reported by Bloomberg.
Attachment 1 to Convertible Promissory Note, Page 4
EXHIBIT A
Iliad Research and Trading, L.P.
303 East Wacker Drive, Suite 1040
Chicago, Illinois 60601
Beyond Commerce, Inc. Date: ______________
Attn: George Pursglove, CEO
3773 Howard Hughes Pkwy, Suite 500
Las Vegas, Nevada 89169
LENDER CONVERSION NOTICE
The above-captioned Lender hereby gives notice to Beyond Commerce, Inc., a Nevada corporation (the “ Borrower ”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on March 28, 2018 (the “ Note ”), that Lender elects to convert the portion of the Note balance set forth below into fully paid and non-assessable shares of Common Stock of Borrower as of the date of conversion specified below. Said conversion shall be based on the Lender Conversion Price set forth below. In the event of a conflict between this Lender Conversion Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of Lender Conversion Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.
A. Date of Conversion: ____________
B. Lender Conversion #: ____________
C. Conversion Amount: ____________
D. Lender Conversion Price: _______________
E. Lender Conversion Shares: _______________ (C divided by D)
F. Remaining Outstanding Balance of Note: ____________*
G. Remaining Balance of Investor Notes: ____________*
H. Outstanding Balance of Note Net of Balance of Investor Notes: ____________* (F minus G)
* Subject to adjustments for corrections, defaults, interest and other adjustments permitted by the Transaction Documents (as defined in the Purchase Agreement), the terms of which shall control in the event of any dispute between the terms of this Lender Conversion Notice and such Transaction Documents.
The Conversion Amount converted hereunder shall be deducted from the following Conversion Eligible Tranche(s):
Conversion Amount |
Tranche No. |
|
|
|
|
|
|
Additionally, $_________________ of the Conversion Amount converted hereunder shall be deducted from the Installment Amount(s) relating to the following Installment Date(s): __________________________________________.
So that DTC processing can begin, please deliver, via reputable overnight courier, a certificate representing DTC Eligible Lender Conversion Shares to:
Exhibit A to Convertible Promissory Note, Page 1
Name: _____________________________________
Address: _____________________________________
_____________________________________
To the extent the Lender Conversion Shares are not DTC Eligible, please deliver, via reputable overnight courier, a certificate representing the non-DTC Eligible Lender Conversion Shares to the party at the address set forth above.
Sincerely,
Lender:
ILIAD RESEARCH AND TRADING, L.P.
By: Iliad Management, LLC, its General Partner
By: Fife Trading, Inc., its Manager
By:
John M. Fife, President
Exhibit A to Convertible Promissory Note, Page 2
EXHIBIT B
Beyond Commerce, Inc.
3773 Howard Hughes Pkwy, Suite 500
Las Vegas, Nevada 89169
Iliad Research and Trading, L.P. Date: _____________
Attn: John Fife
303 East Wacker Drive, Suite 1040
Chicago, Illinois 60601
INSTALLMENT NOTICE
The above-captioned Borrower hereby gives notice to Iliad Research and Trading, L.P., a Utah limited partnership (the “ Lender ”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on March 28, 2018 (the “ Note ”), of certain Borrower elections and certifications related to payment of the Installment Amount of $_________________ due on ___________, 201_ (the “ Installment Date ”). In the event of a conflict between this Installment Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of Installment Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.
INSTALLMENT CONVERSION AND CERTIFICATIONS
AS OF THE INSTALLMENT DATE
A. INSTALLMENT CONVERSION
A. Installment Date: ____________, 201_
B. Installment Amount: ____________
C. Portion of Installment Amount to be Paid in Cash: ____________
D. Portion of Installment Amount to be Converted into Common Stock: ____________ (B minus C)
E. Installment Conversion Price: _______________ (lower of (i) Lender Conversion Price in effect and (ii) Market Price as of Installment Date)
F. Installment Conversion Shares: _______________ (D divided by E)
G. Remaining Outstanding Balance of Note: ____________ *
H. Remaining Balance of Investor Notes: ____________*
I. Outstanding Balance of Note Net of Balance of Investor Notes: ____________ (G minus H)*
* Subject to adjustments for corrections, defaults, interest and other adjustments permitted by the Transaction Documents (as defined in the Purchase Agreement), the terms of which shall control in the event of any dispute between the terms of this Installment Notice and such Transaction Documents.
B. EQUITY CONDITIONS CERTIFICATION
1. Market Capitalization:________________
(Check One)
2. _________ Borrower herby certifies that no Equity Conditions Failure exists as of the Installment Date.
Exhibit B to Convertible Promissory Note, Page 1
3. _________ Borrower hereby gives notice that an Equity Conditions Failure has occurred and requests a waiver from Lender with respect thereto. The Equity Conditions Failure is as follows:
____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
Sincerely,
Borrower:
BEYOND COMMERCE, INC.
By:
Name:
Title:
ACKNOWLEDGED AND CERTIFIED BY:
Lender:
ILIAD RESEARCH AND TRADING, L.P.
By: Iliad Management, LLC, its General Partner
By: Fife Trading, Inc., its Manager
By:
John M. Fife, President
Exhibit B to Convertible Promissory Note, Page 2
EXHIBIT C
Iliad Research and Trading, L.P.
303 East Wacker Drive, Suite 1040
Chicago, Illinois 60601
Beyond Commerce, Inc. Date: ___________
Attn: George Pursglove, CEO
3773 Howard Hughes Pkwy, Suite 500
Las Vegas, Nevada 89169
TRUE-UP NOTICE
The above-captioned Lender hereby gives notice to Beyond Commerce, Inc., a Nevada corporation (the “ Borrower ”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on March 28, 2018 (the “ Note ”), of True-Up Shares related to _____________, 201_ (the “ Installment Date ”). In the event of a conflict between this True-Up Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of True-Up Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.
TRUE-UP SHARES AND CERTIFICATIONS
AS OF THE TRUE-UP DATE
1. TRUE-UP CONVERSION SHARES
A. Installment Date: ____________, 201_
B. True-Up Date: ____________, 201_
C. Portion of Installment Amount Converted into Common Stock: _____________
D. True-Up Conversion Price: _______________ (lower of (i) Lender Conversion Price in effect and (ii) Market Price as of True-Up Date)
E. True-Up Conversion Shares: _______________ (C divided by D)
F. Installment Conversion Shares Delivered: ________________
G. True-Up Conversion Shares to be Delivered: ________________ (only applicable if E minus F is greater than zero)
2. EQUITY CONDITIONS CERTIFICATION (Section to be completed by Borrower)
A. Market Capitalization:________________
(Check One)
B. _________ Borrower herby certifies that no Equity Conditions Failure exists as of the applicable True-Up Date.
Exhibit C to Convertible Promissory Note, Page 1
C. _________ Borrower hereby gives notice that an Equity Conditions Failure has occurred and requests a waiver from Lender with respect thereto. The Equity Conditions Failure is as follows:
____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
Sincerely,
Lender:
ILIAD RESEARCH AND TRADING, L.P.
By: Iliad Management, LLC, its General Partner
By: Fife Trading, Inc., its Manager
By:
John M. Fife, President
Exhibit C to Convertible Promissory Note, Page 2
EXHIBIT D
Beyond Commerce, Inc.
3773 Howard Hughes Pkwy, Suite 500
Las Vegas, Nevada 89169
Iliad Research and Trading, L.P. Date: _____________
Attn: John Fife
303 East Wacker Drive, Suite 1040
Chicago, Illinois 60601
NOTICE OF EXERCISE
OF BORROWER OFFSET RIGHT
The above-captioned Borrower hereby gives notice to Iliad Research and Trading, L.P., a Utah limited partnership (the “ Lender ”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on March 28, 2018 (the “ Note ”), of Borrower’s election to exercise the Borrower Offset Right as set forth below. In the event of a conflict between this Notice of Exercise of Borrower Offset Right and the Note, the Note shall govern. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.
A. Effective Date of Offset: ____________, 201_
B. Amount of Offset: ____________
C. Investor Note(s) Being Offset: _______________
* Subject to adjustments for corrections, defaults, interest and other adjustments permitted by the Transaction Documents (as defined in the Purchase Agreement), the terms of which shall control in the event of any dispute between the terms of this Notice of Exercise of Borrower Offset Right and such Transaction Documents.
Sincerely,
Borrower:
BEYOND COMMERCE, INC.
By:
Name:
Title:
Exhibit D to Convertible Promissory Note, Page 1
THIS WARRANT AND THE COMMON STOCK ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT AND THE COMMON STOCK ISSUABLE HEREUNDER MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT OR ANY SHARES ISSUABLE HEREUNDER UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO BEYOND COMMERCE, INC. OR ITS TRANSFER AGENT THAT SUCH REGISTRATION IS NOT REQUIRED.
BEYOND COMMERCE, INC.
WARRANT #1 TO PURCHASE SHARES OF COMMON STOCK
1. Issuance . For good and valuable consideration as set forth in the Purchase Agreement (as defined below), including without limitation the Initial Cash Purchase Price (as defined in the Purchase Agreement), the receipt and sufficiency of which are hereby acknowledged by BEYOND COMMERCE, INC. , a Nevada corporation (“ Company ”); ILIAD RESEARCH AND TRADING, L.P. , a Utah limited partnership, its successors and/or registered assigns (“ Investor ”), is hereby granted the right to purchase at any time on or after the Issue Date (as defined below) until the date which is the last calendar day of the month in which the fifth anniversary of the Issue Date occurs (the “ Expiration Date ”), a number of fully paid and non-assessable shares (the “ Warrant Shares ”) of Company’s common stock, par value $0.001 per share (the “ Common Stock ”), equal to $32,500.00 divided by the Market Price (as of the Issue Date), as such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant #1 to Purchase Shares of Common Stock (this “ Warrant ”).
This Warrant is being issued pursuant to the terms of that certain Securities Purchase Agreement dated March 28, 2018, to which Company and Investor are parties (as the same may be amended from time to time, the “ Purchase Agreement ”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference. Moreover, to the extent any defined terms herein are defined in any other Transaction Document (as so noted herein), such defined term shall remain applicable in this Warrant even if the other Transaction Document has been released, satisfied, or is otherwise cancelled.
This Warrant was issued to Investor on March 28, 2018 (the “ Issue Date ”). For the avoidance of doubt, the Initial Cash Purchase Price constitutes payment in full for this Warrant.
2. Exercise of Warrant .
2.1. General .
(a) This Warrant is exercisable in whole or in part at any time and from time to time commencing on the Issue Date and ending on the Expiration Date. Such exercise shall be effectuated by submitting to Company (either by delivery to Company or by email or facsimile transmission) a completed and signed Notice of Exercise substantially in the form attached to this Warrant as Exhibit A (the “ Notice of Exercise ”). The date a Notice of Exercise is either faxed, emailed or delivered to Company shall be the “ Exercise Date ,” provided that, if such exercise represents the full exercise of the outstanding balance of this Warrant, Investor shall tender this Warrant to Company within five (5) Trading Days thereafter, but only if the Delivery Shares to be delivered pursuant to the Notice of Exercise have been delivered to Investor as of such date. The Notice of Exercise shall be executed by Investor and shall indicate (i) the number of Delivery Shares
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to be issued pursuant to such exercise, and (ii) if applicable (as provided below), whether the exercise is a cashless exercise.
(b) Notwithstanding any other provision contained herein or in any other Transaction Document to the contrary, at any time prior to the Expiration Date, Investor may elect a “cashless” exercise of this Warrant for any Warrant Shares whereby Investor shall be entitled to receive a number of shares of Common Stock equal to (i) the excess of the Current Market Value over the aggregate Exercise Price of the Exercise Shares, divided by (ii) the Adjusted Price.
(c) If the Notice of Exercise form elects a “cash” exercise, the Exercise Price per share of Common Stock for the Delivery Shares shall be payable, at the election of Investor, in cash or by certified or official bank check or by wire transfer in accordance with instructions provided by Company at the request of Investor.
(d) Upon the appropriate payment to Company, if any, of the Exercise Price for the Delivery Shares, Company shall promptly, but in no case later than the date that is three (3) Trading Days following the date the Exercise Price is paid to Company (or with respect to a “cashless exercise,” the date that is three (3) Trading Days following the Exercise Date) (the “ Delivery Date ”), provided that the Common Stock is then DTC Eligible (as defined in the Note), deliver or cause Company’s Transfer Agent (as defined in the Purchase Agreement) to deliver to Investor or its broker (as designated in the Notice of Exercise), via reputable overnight courier, a certificate, registered in the name of Investor or its designee, representing DTC Eligible Common Stock equal to the applicable number of Delivery Shares. If the Common Stock is not DTC Eligible at such time, such shall constitute a breach of this Warrant, and Company shall instead, on or before the applicable date set forth above in this subsection, issue and deliver to Investor or its broker (as designated in the Notice of Exercise), via reputable overnight courier, a certificate, registered in the name of Investor or its designee, representing the applicable number of Delivery Shares. For the avoidance of doubt, Company has not met its obligation to deliver Delivery Shares within the required timeframe set forth above unless Investor or its broker, as applicable, has actually received the certificate representing the applicable Delivery Shares no later than the close of business on the latest possible delivery date pursuant to the terms set forth above. Moreover, and notwithstanding anything to the contrary herein or in any other Transaction Document, in the event Company or its Transfer Agent refuses to deliver any Delivery Shares to Investor on grounds that such issuance is in violation of Rule 144 under the 1933 Act (as defined below) (“ Rule 144 ”), Company shall deliver or cause its Transfer Agent to deliver the applicable Delivery Shares to Investor with a restricted securities legend, but otherwise in accordance with the provisions of this Section 2.1(d). In conjunction therewith, Company will also deliver to Investor a written opinion from its counsel or its Transfer Agent’s counsel opining as to why the issuance of the applicable Delivery Shares violates Rule 144.
(e) If Delivery Shares are delivered later than as required under subsection (d) immediately above, Company agrees to pay, in addition to all other remedies available to Investor in the Transaction Documents, a late charge equal to the greater of (i) $500.00 and (ii) 2% of the product of (1) the number of shares of Common Stock not issued to Investor on a timely basis and to which Investor is entitled multiplied by (2) the Closing Trade Price of the Common Stock on the Trading Day immediately preceding the last possible date which Company could have issued such shares of Common Stock to Investor without violating this Warrant, rounded to the nearest multiple of $100.00 (such resulting amount, the “ Warrant Share Value ”) (but in any event the cumulative amount of such late fees for each exercise shall not exceed 200% of the Warrant Share Value), per Trading Day until such Warrant Shares are delivered (the “ Late Fees ”). Company acknowledges and agrees that the failure to timely deliver Delivery Shares hereunder is a material breach of this Warrant
2
and that the Late Fees are properly charged as liquidated damages to compensate Investor for such breach. Company shall pay any Late Fees incurred under this subsection in immediately available funds upon demand; provided, however , that, so long as the Note is outstanding, at the option of Investor, such amount owed may be added to the principal amount of the Note. Furthermore, in the event that Company fails for any reason to effect delivery of the Delivery Shares as required under subsection (d) immediately above, Investor may revoke all or part of the relevant Warrant exercise by delivery of a notice to such effect to Company, whereupon Company and Investor shall each be restored to their respective positions immediately prior to the exercise of the relevant portion of this Warrant, except that the Late Fees described above shall be payable through the date notice of revocation or rescission is given to Company. Finally, in the event Company fails to deliver any Delivery Shares to Investor for a period of ninety (90) days from the Delivery Date, Investor may elect, in its sole discretion, to stop the accumulation of the Late Fees as of such date and require Company to pay to Investor a cash amount equal to (i) the total amount of all Late Fees that have accumulated prior to the date of Investor’s election, plus (ii) the product of the number of Delivery Shares deliverable to Investor on such date if it were to exercise this Warrant with respect to the remaining number of Exercise Shares as of such date multiplied by the Closing Trade Price of the Common Stock on the Delivery Date (the “ Cash Settlement Amount ”). At such time as Investor makes an election to require Company to pay to it the Cash Settlement Amount, such obligation of Company shall be a valid and binding obligation of Company and shall for all purposes be deemed to be a debt obligation of Company owed to Investor as of the date it makes such election. Upon Company’s payment of the Cash Settlement Amount to Investor, this Warrant shall be deemed to have been satisfied. In addition, and for the avoidance of doubt, even if Company could not deliver the number of Delivery Shares deliverable to Investor if it were to exercise this Warrant with respect to the remaining number of Exercise Shares on the date of repayment due to the provisions of Section 2.2, the provisions of Section 2.2 will not apply with respect to Company’s payment of the Cash Settlement Amount.
(f) Investor shall be deemed to be the holder of the Delivery Shares (not including any Ownership Limitation Shares (as defined below)) issuable to it in accordance with the provisions of this Section 2.1 on the Exercise Date.
2.2. Ownership Limitation . Notwithstanding anything to the contrary contained in this Warrant or the other Transaction Documents, if at any time Investor shall or would be issued shares of Common Stock, but such issuance would cause Investor (together with its affiliates) to own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (the “ Maximum Percentage ”), Company must not issue to Investor shares of Common Stock which would exceed the Maximum Percentage. The shares of Common Stock issuable to Investor that would cause the Maximum Percentage to be exceeded are referred to herein as the “ Ownership Limitation Shares ”. In such event, Company shall reserve the Ownership Limitation Shares for the exclusive benefit of Investor. From time to time, Investor may notify Company in writing of the number of the Ownership Limitation Shares that may be issued to Investor without causing Investor to exceed the Maximum Percentage. Upon receipt of such notice, Company shall be unconditionally obligated to immediately issue such designated shares to Investor, with a corresponding reduction in the number of the Ownership Limitation Shares. Notwithstanding the foregoing, the term “4.99%” above shall be replaced with “9.99%” at such time as the Market Capitalization is less than $10,000,000.00. Notwithstanding any other provision contained herein, if the term “4.99%” is replaced with “9.99%” pursuant to the preceding sentence, such change to “9.99%” shall be permanent. By written notice to Company, Investor may increase, decrease or waive the Maximum Percentage as to itself but any such waiver will not be effective until the 61st day after delivery thereof. The foregoing 61-day notice requirement is enforceable, unconditional and non-waivable and shall apply to all affiliates and assigns of Investor.
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3. Mutilation or Loss of Warrant . Upon receipt by Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, Company will execute and deliver to Investor a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void.
4. Rights of Investor . Investor shall not, by virtue of this Warrant alone, be entitled to any rights of a stockholder in Company, either at law or in equity, and the rights of Investor with respect to or arising under this Warrant are limited to those expressed in this Warrant and are not enforceable against Company except to the extent set forth herein.
5. Protection Against Dilution and Other Adjustments .
5.1. Capital Adjustments . If Company shall at any time prior to the expiration of this Warrant subdivide the Common Stock, by splitup or stock split, or otherwise, or combine its Common Stock, or issue additional shares of its Common Stock as a dividend, the number of Warrant Shares issuable upon the exercise of this Warrant shall forthwith be automatically increased proportionately in the case of a subdivision, split or stock dividend, or proportionately decreased in the case of a combination. Appropriate adjustments shall also be made to the Exercise Price and other applicable amounts, but the aggregate purchase price payable for the total number of Warrant Shares purchasable under this Warrant (as adjusted) shall remain the same. Any adjustment under this Section 5.1 shall become effective automatically at the close of business on the date the subdivision or combination becomes effective, or as of the record date of such dividend, or in the event that no record date is fixed, upon the making of such dividend.
5.2. Reclassification, Reorganization and Consolidation . In case of any reclassification, capital reorganization, or change in the capital stock of Company (other than as a result of a subdivision, combination, or stock dividend provided for in Section 5.1 above), then Company shall make appropriate provision so that Investor shall have the right at any time prior to the expiration of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities and property receivable in connection with such reclassification, reorganization, or change by a holder of the same number of shares of Common Stock as were purchasable by Investor immediately prior to such reclassification, reorganization, or change. In any such case appropriate provisions shall be made with respect to the rights and interest of Investor so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities and property deliverable upon exercise hereof, and appropriate adjustments shall be made to the purchase price per Warrant Share payable hereunder, provided the aggregate purchase price shall remain the same.
5.3. Subsequent Equity Sales . If Company or any subsidiary thereof, as applicable, at any time and from time to 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, sell or issue (or announce any offer, sale, grant or any option to purchase or other disposition of) any Common Stock (including any Common Stock issued under the Note, whether upon any type of conversion or any Deemed Issuance), debt, warrants, options, preferred shares or other instruments or securities which are convertible into or exercisable for shares of Common Stock (together herein referred to as “ Equity Securities ”), at an effective price per share less than the Exercise Price (such lower price, the “ Base Share Price ”, and any such issuance, a “ Dilutive Issuance ”) (if the holder of the Common Stock or Equity Securities 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
4
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 less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance), then (a) the Exercise Price shall be reduced and only reduced to equal the Base Share Price, and (b) the number of Warrant Shares issuable upon the exercise of this Warrant shall be increased to an amount equal to the number of Warrant Shares Investor could purchase hereunder for an aggregate Exercise Price, as reduced pursuant to subsection (a) above, equal to the aggregate Exercise Price payable immediately prior to such reduction in Exercise Price, provided that the increase in the number of Exercise Shares issuable under this Warrant made pursuant to this Section 5.3 shall not at any time exceed a number equal to five (5) times the number of Exercise Shares issuable under this Warrant as of the Issue Date (for the avoidance of doubt, the foregoing cap on the number of Exercise Shares issuable hereunder shall only apply to adjustments made pursuant to this Section 5.3 and shall not apply to adjustments made pursuant to Sections 5.1, 5.2 or any other section of this Warrant). Such adjustments shall be made whenever such Common Stock or Equity Securities are issued. Company shall notify Investor, in writing, no later than the Trading Day following the issuance of any Common Stock or Equity Securities subject to this Section 5.3, indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price, or other pricing terms (such notice, the “ Dilutive Issuance Notice ”). Dilutive Issuance Notices shall be in the form set forth in Section 6 below. For purposes of clarification, whether or not Company provides a Dilutive Issuance Notice pursuant to this Section 5.3, upon the occurrence of any Dilutive Issuance, after the date of such Dilutive Issuance, Investor is entitled to receive the increased number of Warrant Shares provided for in subsection (b) above at an Exercise Price equal to the Base Share Price regardless of whether Investor accurately refers to the Base Share Price in the Notice of Exercise. Additionally, following the occurrence of a Dilutive Issuance, all references in this Warrant to “Warrant Shares” shall be a reference to the Warrant Shares as increased pursuant to subsection (b) above, and all references in this Warrant to “Exercise Price” shall be a reference to the Exercise Price as reduced pursuant to subsection (a) above, as the same may occur from time to time hereunder.
5.4. Exceptions to Adjustment . Notwithstanding the provisions of Section 5.3, no adjustment to the Exercise Price shall be effected as a result of an Excepted Issuance.
6. Certificate as to Adjustments . In each case of any adjustment or readjustment in the number or kind of shares issuable on the exercise of this Warrant, or in the Exercise Price, pursuant to the terms hereof, Company at its expense will promptly cause its Chief Financial Officer or other appropriate designee to compute such adjustment or readjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or receivable by Company for any additional shares of Common Stock issued or sold or deemed to have been issued or sold, (b) the number of shares of Common Stock outstanding or deemed to be outstanding, and (c) the Exercise Price and the number of shares of Common Stock to be received upon exercise of this Warrant, in effect immediately prior to such adjustment or readjustment and as adjusted or readjusted as provided in this Warrant. Nothing in this Section 6 shall be deemed to limit any other provision contained herein.
7. Transfer to Comply with the Securities Act . This Warrant and the Warrant Shares have not been registered under the Securities Act of 1933, as amended (the “ 1933 Act ”). Neither this Warrant nor the Warrant Shares may be sold, transferred, pledged or hypothecated without (a) an effective registration statement under the 1933 Act relating to such security or (b) an opinion of counsel reasonably satisfactory to Company that registration is not required under the 1933 Act; provided, however , that the foregoing restrictions on transfer shall not apply to the transfer of the Warrant to an affiliate of Investor. Until such time as registration has occurred under the 1933 Act,
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each certificate for this Warrant and any Warrant Shares shall contain a legend, in form and substance satisfactory to counsel for Company, setting forth the restrictions on transfer contained in this Section 7; provided, however , that Company acknowledges and agrees that any such legend shall be removed from all certificates for DTC Eligible Common Stock delivered hereunder as such Common Stock is cleared and converted into electronic shares by the DTC, and nothing contained herein shall be interpreted to the contrary. Upon receipt of a duly executed assignment of this Warrant, Company shall register the transferee thereon as the new holder on the books and records of Company and such transferee shall be deemed a “registered holder” or “registered assign” for all purposes hereunder, and shall have all the rights of Investor under this Warrant. Until this Warrant is transferred on the books of Company, Company may treat Investor as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary.
8. Notices . Any notice required or permitted hereunder shall be given in the manner provided in the subsection titled “Notices” in the Purchase Agreement, the terms of which are incorporated herein by reference.
9. Supplements and Amendments; Whole Agreement . This Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant, together with the Purchase Agreement, contains the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings with respect to the subject matter hereof and thereof other than as expressly contained herein and therein.
10. Purchase Agreement; Arbitration of Disputes; Calculation Disputes . This Warrant is subject to the terms, conditions and general provisions of the Purchase Agreement, including without limitation the Arbitration Provisions (as defined in the Purchase Agreement) set forth as an exhibit to the Purchase Agreement. In addition, notwithstanding the Arbitration Provisions, in the case of a dispute as to any Calculation (as defined in the Purchase Agreement), such dispute will be resolved in the manner set forth in the Purchase Agreement.
11. Governing Law; Venue . This Warrant shall be 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 Utah, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Utah or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Utah. The provisions set forth in the Purchase Agreement to determine the proper venue for any disputes are incorporated herein by this reference.
12. Waiver of Jury Trial . COMPANY IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS WARRANT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, COMPANY ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY.
13. Remedies . The remedies at law of Investor under this Warrant in the event of any default or threatened default by Company in the performance of or compliance with any of the terms of this Warrant are not and will not be adequate and, without limiting any other remedies available to Investor in the Transaction Documents, at law or equity, to the fullest extent permitted by law, such
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terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise without the obligation to post a bond.
14. Liquidated Damages . Company and Investor agree that in the event Company fails to comply with any of the terms or provisions of this Warrant, Investor’s damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties’ inability to predict future interest rates, future share prices, future trading volumes and other relevant factors. Accordingly, Investor and Company agree that any fees or other charges assessed under this Warrant are not penalties but instead are intended by the parties to be, and shall be deemed, liquidated damages (under Investor’s and Company’s expectations that any such liquidated damages will tack back to the Issue Date for purposes of determining the holding period under Rule 144.
15. Counterparts . This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Signatures delivered via facsimile or email shall be considered original signatures for all purposes hereof.
16. Attorneys’ Fees . In the event of any arbitration, litigation or dispute arising from this Warrant, the parties agree that the party who is awarded the most money (which, for the avoidance of doubt, shall be determined without regard to any statutory fines, penalties, fees, or other charges awarded to any party) shall be deemed the prevailing party for all purposes and shall therefore be entitled to an additional award of the full amount of the attorneys’ fees and expenses paid by said prevailing party in connection with arbitration or litigation without reduction or apportionment based upon the individual claims or defenses giving rise to the fees and expenses. Nothing herein shall restrict or impair an arbitrator’s or a court’s power to award fees and expenses for frivolous or bad faith pleading.
17. Severability . Whenever possible, each provision of this Warrant shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be invalid or unenforceable in any jurisdiction, such provision shall be modified to achieve the objective of the parties to the fullest extent permitted and such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Warrant or the validity or enforceability of this Warrant in any other jurisdiction.
18. Time is of the Essence . Time is expressly made of the essence with respect to each and every provision of this Warrant.
19. Descriptive Headings . Descriptive headings of the sections of this Warrant are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.
[ Remainder of page intentionally left blank; signature page follows ]
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IN WITNESS WHEREOF, Company has caused this Warrant to be duly executed by an officer thereunto duly authorized as of the Issue Date.
COMPANY:
BEYOND COMMERCE, INC.
By:
Name:
Title:
[ Signature Page to Warrant #1 ]
ATTACHMENT 1
DEFINITIONS
For purposes of this Warrant, the following terms shall have the following meanings:
A1. “ Adjusted Price ” means the lower of (i) the Exercise Price (as such Exercise Price may be adjusted from time to time pursuant to the terms of this Warrant), and (ii) the Market Price.
A2. “ Approved Stock Plan ” means any stock option plan which has been approved by the board of directors of Company and is in effect as of the Issue Date, pursuant to which Company’s securities may be issued to any employee, officer or director for services provided to Company.
A3. “ Bloomberg ” means Bloomberg L.P. (or if that service is not then reporting the relevant information regarding the Common Stock, a comparable reporting service of national reputation selected by Investor and reasonably satisfactory to Company).
A4. “ Closing Bid Price ” and “ Closing Trade Price ” means the last closing bid price and last closing trade price, respectively, for the Common Stock on its principal market, as reported by Bloomberg, or, if its principal market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of the Common Stock prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if its principal market is not the principal securities exchange or trading market for the Common Stock, the last closing bid price or last trade price, respectively, of the Common Stock on the principal securities exchange or trading market where the Common Stock is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of the Common Stock in the over-the-counter market on the electronic bulletin board for the Common Stock as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for the Common Stock by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for the Common Stock as reported by OTC Markets Group, Inc., and any successor thereto. If the Closing Bid Price or the Closing Trade Price cannot be calculated for the Common Stock on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Trade Price (as the case may be) of the Common Stock on such date shall be the fair market value as mutually determined by Investor and Company. If Investor and Company are unable to agree upon the fair market value of the Common Stock, then such dispute shall be resolved in accordance with the procedures in the Purchase Agreement governing Calculations. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.
A5. “ Conversion Factor ” means 65%, subject to the following adjustments. If at any time the average of the three (3) lowest Closing Bid Prices in the twenty (20) Trading Days immediately preceding any date of measurement is below $0.05, then in such event the then-current Conversion Factor shall be permanently reduced by 10% (subject to other reductions set forth in this section). If at any time after the Issue Date, the Delivery Shares are not DTC Eligible, then the then-current Conversion Factor will automatically be permanently reduced by 5%. For example, the first time the Delivery Shares are not DTC Eligible, the Conversion Factor for future exercises thereafter will be reduced from 65% to 60% for purposes of this example.
A6. “ Current Market Value ” means an amount equal to the Trade Price multiplied by the number of Exercise Shares specified in the applicable Notice of Exercise.
A7. “ Deemed Issuance ” means an issuance of Common Stock that shall be deemed to have occurred on the latest possible permitted date pursuant to the terms of this Warrant or the Note in the event Company fails to deliver shares of Common Stock as and when required.
A8. “ Delivery Shares ” means those shares of Common Stock issuable and deliverable upon the exercise or partial exercise, as the case may be, of this Warrant.
A9. “ DTC ” means the Depository Trust Company or any successor thereto.
A10. “ DTC Eligible ” means, with respect to the Common Stock, that such Common Stock is eligible to be deposited in certificate form at the DTC, cleared and converted into electronic shares by the DTC and held in the name of the clearing firm servicing Investor’s brokerage firm for the benefit of Investor.
[Attachment 1 to Warrant, Page 1 ]
A11. “ Excepted Issuances ” means any shares of Common Stock, options, or convertible securities issued or issuable in connection with any Approved Stock Plan; provided that the option term, exercise price or similar provisions of any issuance pursuant to such Approved Stock Plan are not amended, modified or changed on or after the Issue Date.
A12. “ Exercise Price ” means $0.15 per share of Common Stock, as the same may be adjusted from time to time pursuant to the terms and conditions of this Warrant.
A13. “ Exercise Shares ” means those Warrant Shares subject to an exercise of this Warrant by Investor. By way of illustration only and without limiting the foregoing, if (i) this Warrant is initially exercisable for 4,180,000 Warrant Shares and Investor has not previously exercised this Warrant, and (ii) Investor were to make a cashless exercise with respect to 5,000 Warrant Shares pursuant to which 6,000 Delivery Shares would be issuable to Investor, then (1) this Warrant shall be deemed to have been exercised with respect to 5,000 Exercise Shares, (2) this Warrant would remain exercisable for 4,175,000 Warrant Shares, and (3) this Warrant shall be deemed to have been exercised with respect to 6,000 Delivery Shares.
A14. “ Market Capitalization ” means the product equal to (a) the average VWAP of the Common Stock for the immediately preceding fifteen (15) Trading Days, multiplied by (b) the aggregate number of outstanding shares of Common Stock as reported on Company’s most recently filed Form 10-Q or Form 10-K.
A15. “ Market Price ” means the Conversion Factor multiplied by the average of the three (3) lowest Closing Bid Prices in the twenty (20) Trading Days immediately preceding the applicable date of exercise. By way of example only, if the Conversion Factor were 75% and the average of the three lowest Closing Bid Prices in the twenty (20) Trading Days immediately preceding the applicable date of exercise were $1.00 then the Market Price would be $0.75 (75% x $1.00).
A16. “ Note ” means that certain Convertible Promissory Note issued by Company to Investor pursuant to the Purchase Agreement, as the same may be amended from time to time, and including any promissory note(s) that replace or are exchanged for such referenced promissory note.
A17. “ Trade Price ” means the higher of: (i) the Closing Trade Price of the Common Stock on the Issue Date; and (ii) the VWAP of the Common Stock for the Trading Day that is two (2) Trading Days prior to the Exercise Date.
A18. “ Trading Day ” means any day the New York Stock Exchange is open for trading.
A19. “ Transaction Documents ” means the Purchase Agreement, the Note, this Warrant, and all other documents, certificates, instruments and agreements entered into or delivered in conjunction therewith, as the same may be amended from time to time.
A20. “ VWAP ” means the volume-weighted average price of the Common Stock on the principal market for a particular Trading Day or set of Trading Days, as the case may be, as reported by Bloomberg.
[Attachment 1 to Warrant, Page 2 ]
EXHIBIT A
NOTICE OF EXERCISE OF WARRANT
TO: BEYOND COMMERCE, INC.
ATTN: _______________
VIA FAX TO: ( )______________ EMAIL: ______________
The undersigned hereby irrevocably elects to exercise the right, represented by Warrant #1 to Purchase Shares of Common Stock dated as of March 28, 2018 (the “ Warrant ”), to purchase shares of the common stock, $0.001 par value (“ Common Stock ”), of Beyond Commerce, Inc., and tenders herewith payment in accordance with Section 2 of the Warrant, as follows:
_______ CASH: $__________________________ = (Exercise Price x Delivery Shares)
_______ Payment is being made by:
_____ enclosed check
_____ wire transfer
_____ other
_______ CASHLESS EXERCISE:
Net number of Delivery Shares to be issued to Investor: ______*
* based on: Current Market Value - (Exercise Price x Exercise Shares)
Adjusted Price
Where:
Trade Price [“ TP ”] = $____________
Exercise Shares = _____________
Current Market Value [TP x Exercise Shares] = $____________
Exercise Price = $____________
Adjusted Price = $____________
Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Warrant.
It is the intention of Investor to comply with the provisions of Section 2.2 of the Warrant regarding certain limits on Investor’s right to receive shares thereunder. Investor believes this exercise complies with the provisions of such Section 2.2. Nonetheless, to the extent that, pursuant to the exercise effected hereby, Investor would receive more shares of Common Stock than permitted under Section 2.2, Company shall not be obligated and shall not issue to Investor such excess shares until such time, if ever, that Investor could receive such excess shares without violating, and in full compliance with, Section 2.2 of the Warrant.
As contemplated by the Warrant, this Notice of Exercise is being sent by email or by facsimile to the fax number and officer indicated above.
If this Notice of Exercise represents the full exercise of the outstanding balance of the Warrant, Investor will surrender (or cause to be surrendered) the Warrant to Company at the address
Exhibit A to Warrant, Page 1
indicated above by express courier within five (5) Trading Days after the Warrant Shares to be delivered pursuant to this Notice of Exercise have been delivered to Investor.
So that DTC processing can begin, please deliver, via reputable overnight courier, a certificate representing DTC Eligible Common Stock equal in number to the Delivery Shares to:
Name: ______________________________________
Address: _____________________________________
_____________________________________
To the extent the Delivery Shares are not DTC Eligible, please deliver a certificate representing non-DTC Eligible Common Stock equal in number to the Delivery Shares to the party and address set forth immediately above.
Dated: _____________________
___________________________
[Name of Investor]
By:________________________
Exhibit A to Warrant, Page 2