UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

———————


FORM 10-K


ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934: For the fiscal year ended December 31, 2017:


Global Boatworks Holdings, Inc.

(Exact name of registrant as specified in its charter)


Florida

333-205604

81-0750562

(State or Other Jurisdiction

(Commission

(I.R.S. Employer

of Incorporation or Organization)

File Number)

Identification No.)


Global Boatworks Holdings, Inc.

2637 Atlantic Blvd. #134

Pompano Beach, FL 33062

(Address of Principal Executive Office) (Zip Code)


954-934-9400

(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act: None


Securities registered pursuant to Section 12(g) of the Act: Common Stock


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes [   ] No [X] 

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.  Yes [   ]  No [X] 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [   ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes [X]  No [   ]


Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  Yes [  ]  No [X]


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


Large accelerated filer [  ]    Accelerated filer [  ]    Non-accelerated filer [  ]    Smaller reporting company [X]   Emerging Growth Company [X]


If an emerging growth company, indicate by check mark 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.  [   ]




Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes [   ]  No [X] 


As of March 31, 2018 we had 1,581,494,004 shares of common stock $.0001 par value outstanding.




TABLE OF CONTENTS

 

 

 

 

Page

PART I

 

 

 

3

 

 

Item 1.

 

Business

 

3

 

 

Item 1A.

 

Risk Factors

 

8

 

 

Item 1B

 

Unresolved Staff Comments

 

13

 

 

Item 2.

 

Properties

 

13

 

 

Item 3.

 

Legal Proceedings

 

13

 

 

Item 4.

 

Mine Safety Disclosures

 

13

PART II

 

 

 

14

 

Item 5.

 

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

14

 

 

Item 6.

 

Selected Financial Data

 

15

 

 

Item 7.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

15

 

 

Item 7A.

 

Quantitative and Qualitative Disclosures About Market Risk

 

19

 

 

Item 8.

 

Financial Statements and Supplementary Data

 

19

 

 

Item 9.

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

20

 

 

Item 9A.

 

Controls and Procedures

 

20

 

 

Item 9B.

 

Other Information

 

21

PART III

 

 

 

22

 

 

Item 10.

 

Directors, Executive Officers and Corporate Governance

 

22

 

 

Item 11.

 

Executive Compensation

 

23

 

 

Item 12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

25

 

 

Item 13.

 

Certain Relationships and Related Transactions, and Director Independence

 

26

 

 

Item 14.

 

Principal Accounting Fees and Services

 

26

PART IV 

 

 

 

28

         Item 15.

 

Exhibits, Financial Statement Schedules

 

28

SIGNATURES

 

 

 

29



2



PART I


Throughout this Annual Report, we refer to Global Boatworks Holdings, Inc. as “we,” “us,” “our,” or “the Company.”


THIS ANNUAL REPORT ON FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS. THESE STATEMENTS RELATE TO FUTURE EVENTS OR OUR FUTURE FINANCIAL PERFORMANCE. IN SOME CASES, YOU CAN IDENTIFY FORWARD-LOOKING STATEMENTS BY STATEMENTS SUCH AS “MAY,” “WILL,” “SHOULD,” “EXPECT,” “PLAN,” “INTEND,” “ANTICIPATE,” “BELIEVE,” “ESTIMATE,” “PROJECT,” “PREDICT,” “POTENTIAL,” OR “CONTINUE,” (INCLUDING THE NEGATIVE OF SUCH TERMS), OR OTHER SIMILAR STATEMENTS. THESE STATEMENTS ARE ONLY ESTIMATIONS AND ARE BASED UPON VARIOUS ASSUMPTIONS THAT MAY NOT BE REALIZED. ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY. IN EVALUATING THESE STATEMENTS, YOU SHOULD SPECIFICALLY CONSIDER VARIOUS FACTORS, INCLUDING, BUT NOT LIMITED TO, THE RISKS OUTLINED BELOW UNDER THE HEADING ITEM 1A CAPTIONED “RISK FACTORS.” THESE FACTORS MAY CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM ANY FORWARD-LOOKING STATEMENT.

 

ALTHOUGH WE BELIEVE THAT THE ESTIMATIONS REFLECTED IN THE FORWARD-LOOKING STATEMENTS ARE REASONABLE, WE CANNOT GUARANTEE FUTURE RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS. MOREOVER, NEITHER WE NOR ANY OTHER PERSON ASSUMES RESPONSIBILITY FOR THE ACCURACY AND COMPLETENESS OF THE FORWARD-LOOKING STATEMENTS. WE DO NOT INTEND TO UPDATE ANY OF THE FORWARD-LOOKING STATEMENTS AFTER THE DATE OF THIS ANNUAL REPORT TO CONFORM SUCH STATEMENTS TO ACTUAL RESULTS OR TO CHANGES IN OUR EXPECTATIONS, UNLESS REQUIRED BY LAW.



ITEM 1.  BUSINESS


Overview


We are incorporated in the state of Florida on May 11, 2015, to acquire our wholly owned subsidiary Global Boatworks, LLC, a Florida limited liability company formed on June 16, 2014, to commercialize upscale stationary vessels built on a barge bottom. We owned two (2) vessels, the Miss Leah, which we acquired from a related party on September 25, 2014, as a prototype and to operate as a short-term rental in Boston Harbor, Massachusetts which we sold in September 2017, and Luxuria I, which was completed in June 2017and is being held for rental and sale.


On May 11, 2015, we issued an aggregate of 6,130,000 shares of our common stock to the owners of Global Boatworks, LLC for one hundred (100%) of its outstanding membership interests.


As a result of our acquisition of Global Boatworks, LLC:



·

Global Boatworks, LLC became our wholly owned subsidiary,


·

The officers and directors of Global Boatworks, LLC became our officers and directors,


·

The shareholders of Global Boatworks, LLC became our shareholders, and


·

The operations of Global Boatworks, LLC became our operations.


Our principal executive office is located at 2637 Atlantic Blvd, #134, Pompano Beach, Florida 33062. Our telephone number is 954-934-9400. Our website is www.globalboatworks.com.


Our auditors have included a “going concern” explanatory paragraph in their audit opinion and we have included a going concern discussion in our financial statement footnotes, meaning that we face uncertainties that our business will not succeed or be viable. Additionally, it is likely that we will need additional capital or additional financing in the future, and if such financing is not available to us on acceptable terms our business may suffer or fail as a result.


Operations


We plan to generate revenues from the rental and sale of our vessels. We currently have one vessel docked in South Florida that is for sale and is also available for rental. During the fiscal year 2017, the Company sold a company-owned vessel known as the Miss Leah that was located in Boston Harbor, Massachusetts. That vessel had been previously available for rental as well.



3




For the years ended December 31, 2016, and December 31, 2017, we had a net loss of $1,281,483 and $ 3,042,629 respectively. For the years ended December 31, 2016, and December 31, 2017, we had revenues of $37,072 and $256,992 respectively. Revenues in 2016 were from short term rentals of our vessel in Boston Harbor, Massachusetts, and in 2017 included rentals of both vessels and the sale of the Miss Leah.


Our operations to date and those of Global Boatworks, LLC, our wholly owned subsidiary include:


·

development of our business plan;

·

acquisition of our company owned vessel, the Miss Leah;

·

locating designers for our Luxuria models;

·

completing the design of our Luxuria models;

·

identifying amenities to be offered with the Luxuria models;

·

construction of the Luxuria I vessel;

·

developing and implementing marketing strategies;

·

marketing the short-term rental of the Miss Leah and Luxuria I on Home Away and Vacation Rentals By Owner (VRBO); and

·

renting the Miss Leah and Luxuria I on a short-term basis as a vacation rental.


Our Company Owned Vessels


On September 25, 2014, we purchased the Miss Leah from a related party. We use d the Miss Leah as a short-term rental property to generate revenue and demonstrate the upscale vessels we plan to offer.


The Miss Leah was built in 2004 and fully renovated in 2011. The Miss Leah is a two (2) story vessel which is one thousand five hundred (1,500) square feet under air, two (2) bedrooms, two (2) bathrooms, wood floors throughout, granite countertops, contemporary stainless steel appliances and a fireplace. Until the time of its sale The Miss Leah was docked at Marina Bay in Boston, Massachusetts. Until the sale of the Miss Leah in September 2017, it was available for rent on a short-term basis for between $200 and $400 per night.


Luxuria Model


We plan to sell an upscale floating vessel known as the Luxuria model. We own the design but were assisted in our design of the Luxuria model by Carlos Vilaca & Associates and Double P Construction, Inc., who have decades of experience in South Florida design and construction.


Our Luxuria model takes between five (5) to seven (7) months to build and is approximately one thousand six hundred and fifty (1,650) square feet under air. The Luxuria model is designed to reflect South Florida’s modern style. Luxuria can be equipped with either single or twin outboard motors and are intended to be docked. The Luxuria model will feature wood floors, marble countertops, modern stainless steel appliances and other upscale amenities.


We expect the Luxuria class vessel will retail for approximately from $1,200,000 to $1,500,000 depending upon the amenities and specifications selected.


We have constructed the first of the Luxuria class, the Luxuria I, that is currently docked in South Florida and is available for short term rental and for sale.


Distribution


We plan to distribute the Luxuria vessels through direct company sales to customers, boat dealerships, yacht brokers and real estate brokers.


Manufacturing


We do not have a written agreement with any manufacturer obligating them to manufacture our vessels. In the process of constructing Luxuria I we have found that there are suitable manufacturers who will be available on commercially reasonable terms as subcontractors to us.


Upon completion of manufacturing, we plan to dock our vessels in Fort Lauderdale, Florida. We believe there are numerous marinas with dockage available on commercially reasonable terms.




4




Revenues


We generated revenue from the rental of Miss Leah until it was sold and will generate revenues from the rental and sale of completed Luxuria model vessels. Upon completion of a Luxuria-class vessel, it has been used as a short-term vacation rental until sold. We plan to dock the completed vessels at Bahia Mar Marina in Fort Lauderdale, Florida, where the vessel can be viewed and rented at a rate of approximately $1,000 per night, until sold.


The Company has pledged the Miss Leah and Luxuria I and future Luxuria II vessels as security for the repayment of certain notes. Therefore, the proceeds of such sales will first go to the repayment of the secured indebtedness.


Target Customers


Our target customers are owners of marinas and other businesses and individuals seeking unique rental properties for their customers, corporations seeking a unique venue for company events and functions, persons seeking a vacation or second home on the water and individuals seeking to live on a floating vessel with the amenities commonly found in a home.


Marketing


We have implemented a marketing strategy. Primarily, part of our sales and marketing efforts will be to participate in boat shows and sales events at South Florida boating locations, typically held in January, February and March of each year. These shows and events are normally held at convention centers or marinas, with area boat distributors and dealers renting space and displaying product information for consumers. Boat shows and other offsite promotions will be an important venue for generating sales.


We believe that a marketing strategy focused on boat shows and related events, social media, print advertising and internet advertising will provide potential customers with the opportunity to view our information about our vessels, which is an optimal strategy to increase sales.


We market our rentals through Homeaway and Vacation Rentals By Owner (VRBO). The Luxuria I is currently listed with a South Florida yacht brokerage.


Property


The Company occupies dockage space for the Luxuria I pursuant to an agreement with Bahia Mar Marina Bay, LLC dated May 1, 2017. We pay annual rents of approximately $55,000.


We occupy approximately four hundred (400) square feet of office space without charge at the residence of Robert Rowe our Chief Executive Officer, President, Treasurer and Director, and Leah Rowe, our Secretary.


Research and Development


We have not spent any amounts on research and development in the prior two (2) years.


Government Regulation


Our business involves the use, handling, storage, and contracting for recycling or disposal of hazardous or toxic substances or wastes, including environmentally sensitive materials, such as motor oil, waste motor oil and filters, transmission fluid, antifreeze, freon, waste paint and lacquer thinner, batteries, solvents, lubricants, degreasing agents, gasoline, and diesel fuels. Accordingly, we are subject to regulation by federal, state, and local authorities establishing requirements for the use, management, handling, and disposal of these materials and health and environmental quality standards, and liability related thereto, and providing penalties for violations of those standards.


We do not believe we have any material environmental liabilities or that compliance with environmental laws, ordinances, and regulations will, individually or in the aggregate, have a material adverse effect on our business, financial condition, or results of operations.


Employees


As of December 31, 2017, we have the following employees:



5




·

Robert Rowe, our President, Chief Executive Officer, Treasurer and Director who spends all his time on our business; and


·

Leah Rowe, Robert Rowe’s wife, our Secretary who spends between ten (10) to fifteen (15) hours per week on our business.


We use the services of independent contractors on an as needed basis.


None of our employees are represented by a collective bargaining agreement, nor have we experienced any work stoppages. We maintain good relationships with our employees.


Material Agreements


On February 2, 2016, we entered into an agreement with Carter, Terry and Company (“Carter Terry), a FINRA registered broker-dealer for the purposes of securing financing. Pursuant thereto we were obligated to pay Carter Terry a fee upon the Company receiving financing based upon their introduction of a funding source. The fee consists a percentage of money raised and the issuance of common stock based upon the amount funded to the Company. The Company has entered into a termination agreement with Carter Terry as of March 22, 2017.


Effective February 16, 2016, we entered into an agreement with StockVest, Inc., a Florida corporation that provides investor relations and public relations services. The agreement was amended on March 1, 2016. As amended StockVest agreed to provide us with services from March 12, 2016 until June 12, 2016, in exchange for $500 and one hundred fifty thousand (150,000) shares of our restricted common stock.


On August 11, 2016 we entered into a Securities Purchase Agreement with Tonaquint Inc., which provided for up to $610,000 in debt financing to the Company (inclusive of an original issue discount of $100,000). This agreement was amended on February 4, 2017 to extend the maturity date to May 11, 2017. In May 2017, the lender bifurcated the original note, which had a then remaining balance of $598,300, into two new notes, Note 1 with a principal balance of $200,000 and Note 2 with a principal balance of $416,249, which included a maturity extension fee of $17,949. Note 1 was collateralized with the Miss Leah and Note 2 with all Company’s assets including the Luxuria I. On September 14, the Company paid off the balance of Note 1 in the amount of $176,986 from the proceeds of the sale of the Miss Leah.


On December 9, 2016, we entered into an agreement (the Agreement) with Oceanside Equities, Inc., (Oceanside), a Florida corporation that provides consulting services. Oceanside agreed to provide us with services from December 9, 2016 until December 8, 2019, in exchange for a one-time fee of $20,000 in cash; $16,000 per month accrued and payable in either cash or shares of restricted common stock at the Company’s election and three million one hundred thousand (3,100,000) shares of our restricted common stock, to be issued 1,100,000 on January 1, 2017, 1,000,000 issued on July 1, 2017 and 1,000,000 issued on January 1, 2018.


On January 5, 2017 we entered into a Securities Purchase Agreement with St George Investments, LLC, which provided for up to $830,000 in debt funding to the Company (inclusive of an original issue discount of $75,000).


On April 15, 2017, the Company entered into a six-month 10% convertible promissory note in the amount of $15,000. In event of default the note carries an interest rate of 18%.


On April 19, 2017, the Company entered into an eight-month financing of the $14,500 Luxuria I annual insurance premium. On June 15, 2017, the Company entered into a six-month financing of the $3,211 Miss Leah 10-month insurance premium. Both of these notes were paid in full at December 31, 2017.


On June 8, 2017, pursuant to a securities purchase agreement and a one year  convertible promissory note for $63,000 the Company received $60,000. In addition, the Company is required to pay $2,500 of the lender’s legal fees and $500 of due diligence fees which were withheld from the funds provided. This note carries a 12% interest rate, with all interest due at maturity.


On July 17, 2017, the company entered into a loan agreement in the amount of $50,000 with a shareholder. The company issued 1,000,000 common shares to the shareholder as consideration for providing us the loan. The shares were valued at $15,000, or $0.015 per share based on the quoted market price and was recorded as a debt discount. The note bears interest at the rate of 12%, payable monthly. Total principal and interest is $52,217 at December 31, 2017.


On August 31, 2017, the Company entered into a six-month 10% convertible promissory note in the amount of $30,000. In



6



event of default the note carries an interest rate of 18%.


On October 18, 2017, pursuant to a securities purchase agreement and a one-year convertible promissory note for $43,000 the Company received $40,000, net of $2,500 of the lender’s legal fees and $500 of due diligence fees which were withheld from the funds provided. This note carries a 12% interest rate, with all interest due at maturity.


Dependence on a Few Customers


We are not dependent on one (1) or a few customers and we do not expect to be so in the future.


Liability


The short term rental of vessels may expose us to potential liabilities for personal injury or property damage claims. We could be included as a defendant in product liability claims relating to defects in manufacture or design of our vessels. We plan to require manufacturers of our vessels to carry and provide proof of product liability insurance. We also maintain third-party product liability insurance in the amount of $300,000 per occurrence, which may not be sufficient for claims against us. Additionally, we carry $300,000 of coverage, per occurrence, for damage to our company owed vessel. There can be no assurance that we will not experience legal claims in excess of our insurance coverage or claims that are ultimately not covered by our insurance policy. If significant claims are made against us, our business, financial condition and results of operations may be adversely affected.


Competition


We operate in a highly competitive environment. In addition to facing competition generally from businesses seeking to attract discretionary spending dollars, the recreational boat industry itself is highly fragmented, resulting in intense competition. We complete with single location boat dealers and, to a lesser degree, with national specialty marine stores, catalog retailers, sporting goods stores and mass merchants. Competition is based on the quality of available products, the price and value of the products and attention to customer service. There is significant competition in the markets which we plan to enter.


Our competitors are large national or regional chains that have substantially greater financial, marketing and other resources than us. There can be no assurance that we will be able to compete successfully against current or future competitors or that competitive pressure will not have a material adverse effect on our business, operating results and financial condition.


Seasonality


Our business, as well as the entire recreational boating industry, is highly seasonal. Generally, boat sales increase starting in January with the onset of the public boat and recreation shows in South Florida, and continue through March.


Our business will be affected by weather patterns which may adversely impact our future operating results. For example, hurricanes in the South Florida area or reduced rainfall levels, as well as excessive rain, may render boating dangerous or inconvenient, thereby curtailing customer demand for our products. In addition, unseasonably cool weather and prolonged winter conditions may lead to a shorter selling season in certain locations. The overall impact on our business from adverse weather conditions in any one (1) market area will continue to represent potential, material adverse risks to our financial performance.


Intellectual Property


We have not registered or patented any intellectual property. Trademarks and trade names distinguish companies from each other. If customers are unable to distinguish our products from those of other companies, we could lose sales to our competitors. We do not have any registered trademarks and trade names, so we only have common law rights with respect to infractions or infringements on its products. Many subtleties exist in product descriptions, offering and names that can easily confuse customers. The name of our principal products may be found in numerous variations of the name and descriptions in various media and product labels. This presents a risk of losing potential customers looking for our products and buying someone else’s because they cannot differentiate between them.


Legal Proceedings


We are not a party to any legal proceedings.




7





ITEM 1A.   RISK FACTORS.


In addition to the information discussed elsewhere in this Annual Report, the following are important risks which could adversely affect our future results. If any of the risks we describe below materialize, or if any unforeseen risk develops, our operating results may suffer, our financial condition may deteriorate, the trading price of our common stock may decline, and our investors could lose all or part of their investment.


Risks Related to Our Financial Condition


There is substantial doubt about our ability to continue as a going concern as a result of our limited operating history and financial resources, and if we are unable to generate significant revenue or secure financing we may be required to cease or curtail our operations.


We incurred net losses of $1,281,483 and $3,042,629 for the fiscal years ended December 31, 2016, and December 31, 2017, respectively. As a result, our independent registered public accounting firm has included an explanatory paragraph in its audit opinion and management has included a footnote regarding our going concern risk that we may be unable to continue as a going concern. Our limited operating history and financial resources raises substantial doubt about our ability to continue as a going concern and our consolidated financial statements contain a going concern qualification.  Our consolidated financial statements do not include adjustments that might result from the outcome of this uncertainty and if we are unable to generate significant revenue or secure financing, we may be required to cease or curtail our operations.


We are an early stage company with little or no historical performance for you to base an investment decision upon, and we may never become profitable.


We are a recently formed company. For the fiscal years ended December 31, 2016, and December 31, 2017, we had revenues of $37,072 and $256,992 respectively. For the fiscal years ended December 31, 2016, and December 31, 2017, we have a net loss of $1,281,483 and $3,042,629 respectively. Accordingly, we have limited historical performance upon which you may evaluate our prospects for achieving our business objectives and becoming profitable in light of the risks, difficulties and uncertainties frequently encountered by early stage companies such as us. Accordingly, before investing in our common stock, you should consider the challenges, expenses and difficulties that we will face as an early stage company, and whether we will ever become profitable.


We are dependent on the sale of our securities to fund our operations.


We are dependent on the sale of our securities to fund our operations and will remain so until we generate sufficient revenues to pay for our operating costs. Our officers and directors have made no written commitments with respect to providing a source of liquidity in the form of cash advances, loans and/or financial guarantees.


If we are unable to generate sufficient revenues for our operating expenses we will need financing, which we may be unable to obtain; should we fail to obtain sufficient financing, our revenues will be negatively impacted.


Because we have limited revenues and lack historical financial data, including revenue data, our future revenues are unpredictable. Our operating expenses are approximately $12,500 per month or $150,000 annually. We will require $12,500 per month or $150,000 over the next twelve (12) months to meet our operational costs, which consist of rent, advertising, salaries and other general, administrative expenses to comply with the costs of being an SEC reporting company.


We are obligated to repay outstanding indebtedness of approximately $1,600,000 during the next 12 months.


There is no assurance we will have sufficient funds available to implement our plan of operations which could cause you to lose your investment.


Until we generate material operating revenues, we require additional debt or equity funding to continue our operations and implement our plan of operations. We intend to raise additional funds from an offering of our stock in the future; however, this offering may never occur, or if it occurs, we may be unable to raise the required funding. We do not have any plans or specific agreements for new sources of funding and we have no agreements for financing in place.


Expenses required to operate as a public company will reduce funds available to develop our business and could negatively affect our stock price and adversely affect our results of operations, cash flow and financial condition.



8



We recently became a publicly traded company.


Operating as a public company is more expensive than operating as a private company, including additional funds required to obtain outside assistance for legal, accounting, investor relations, or other professionals that could be costlier than planned. We may also be required to hire additional staff to comply with additional SEC reporting requirements. We anticipate that the cost of SEC reporting will be approximately $60,000 annually. Our failure to comply with reporting requirements and other provisions of securities laws could negatively affect our stock price and adversely affect our results of operations, cash flow and financial condition. If we fail to meet these obligations and consequently fail to satisfy our SEC reporting obligations, investors will then own stock in a company that does not provide the disclosure available in quarterly, annual reports and other required SEC reports that would be otherwise publicly available leading to increased difficulty in selling their stock due to our becoming a non-reporting issuer.


Risks Related to Our Business


Our business is subject to significant regulations which increase our operating costs; if we fail to comply with these regulations our operations will be negatively impacted.


Our business involves the use, handling, storage, and contracting for recycling or disposal of hazardous or toxic substances or wastes, including environmentally sensitive materials, such as motor oil, waste motor oil and filters, transmission fluid, antifreeze, freon, waste paint and lacquer thinner, batteries, solvents, lubricants, degreasing agents, gasoline, and diesel fuels. Accordingly, we are subject to regulation by federal, state, and local authorities establishing requirements for the use, management, handling, and disposal of these materials and health and environmental quality standards, and liability related thereto, and providing penalties for violations of those standards.


Regulatory approval processes may be expensive, time-consuming and uncertain, and our failure to obtain or comply with these approvals or clearances could harm our business, financial condition and operating results.


Our industry is highly competitive, and our failure to compete effectively could adversely affect our market share, financial condition and future growth.


We operate in a highly competitive environment. In addition to facing competition generally from businesses seeking to attract discretionary spending dollars, the recreational boat industry itself is highly fragmented, resulting in intense competition. We compete with single location boat and yacht dealers and, to a lesser degree, with national specialty marine stores. Dealer competition is based on the quality of available products, the price and value of the products and attention to customer service. There is significant competition in the markets which we plan to enter.


Our competitors are large national or regional chains that have substantially greater financial, marketing and other resources than us. There can be no assurance that we will be able to compete successfully against current or future competitors or that competitive pressure will not have a material adverse effect on our business, operating results and financial condition.


Because Luxuria I, our company owned vessel is pledged as security for loans, if we default on the loans we would lose our primary asset and might not be able to continue our business plan which could cause you to lose your entire investment.


On August 4, 2016 we entered into a Securities Purchase Agreement and Note with Tonaquint Inc., pursuant to which we pledged the Miss Leah as security for the Note. We are obligated to pay the entire principal and interest on May 11, 2018. The loan is secured by the Luxuria I, our company owned vessel. Because Luxuria I is our primary asset and is pledged as security for a loan, you could lose your investment if we default on the loan. Because of our limited revenues and weak financial condition, we may not be able to make the loan payment when due on May 11, 2018. This would cause us to lose our primary asset and we might not be able to implement our business plan which could cause you to lose your entire investment.


On January 5, 2017 we entered into a Securities Purchase Agreement and Note with St George Investments, LLC, pursuant to which we pledged the Luxuria I and the future Luxuria II as security for the Note. We are obligated to pay the entire principal and interest on July 6, 2017. Because the Luxuria I and the future Luxuria II are our primary assets and are pledged as security for a loan, you could lose your investment if we default on the loan. Because of our limited revenues and weak financial condition, we may not be able to make the loan payment when due on July 6, 2018. This would cause us to lose our primary assets and we might not be able to continue our business plan which could cause you to lose your entire investment.




9



The purchase of our products is discretionary and may be negatively impacted by adverse trends in the general economy and make it more difficult for us to generate revenues.


Our business is affected by general economic conditions since our products are discretionary and we depend, to a significant extent, upon a number of factors relating to discretionary consumer spending. These factors include economic conditions and perceptions of such conditions by consumers, employment rates, the level of consumers’ disposable income, business conditions, interest rates, consumer debt levels and availability of credit. Consumer spending on our products may be adversely affected by negative trends and changes in general economic conditions.


The success of our business depends on our ability to market our Luxuria vessels effectively.


Our ability to establish effective marketing and advertising campaigns is the key to our success. Our advertisements must effectively promote our corporate image, our Luxuria vessels and the pricing of such products. If we are unable to create awareness of our products, we may not be able to attract customers. Our marketing activities may not be successful in promoting the products we sell or pricing strategies or in retaining and increasing our customer base. We cannot assure you that our marketing programs will be adequate to create a demand for our products support our future growth, which may result in a material adverse effect on our results of operations.


We may be subject to product liability claims and we do not have insurance coverage for such claims which could negatively impact our financial condition.


By selling boats, we will face an inherent business risk of exposure to product liability claims in the event that the use of our products results in personal injury or death. Also, in the event that any of the components of our vessels is defective, we may be required to recall or replace such components. We maintain product liability insurance coverage in the amount of $300,000 to protect us from such claims, which may not be sufficient coverage for claims against us. A successful product liability claim or series of claims brought against us would negatively impact our business and cause you to lose your investment.


We may be subject to intellectual property rights claims, which are costly to defend, could require us to pay damages and could limit our ability to sell some of our products.


We have no secured intellectual property protection of the Global Boatworks or Luxuria names. Our industry is characterized by vigorous pursuit and protection of intellectual property rights, which has resulted in protracted and expensive litigation for several companies. Third parties may assert claims of misappropriation of trade secrets or infringement of intellectual property rights against us for which we may be liable.


If our business expands, the number of products and competitors in our markets increases and product overlaps occur, infringement claims may increase in number and significance. Intellectual property lawsuits are subject to inherent uncertainties due to the complexity of the technical issues involved, and we cannot be certain that we would be successful in defending ourselves against intellectual property claims. Further, many potential litigants have the capability to dedicate substantially greater resources than we can to enforce their intellectual property rights and to defend claims that may be brought against them. Furthermore, a successful claimant could secure a judgment that requires us to pay substantial damages or prevents us from distributing our products.


If we fail to develop the Global Boatworks and Luxuria brand, cost-effectively, our business may be adversely affected.


The success of our products marketed under the Global Boatworks and Luxuria brands will depend upon the effectiveness of our marketing efforts. Brand promotion activities may not yield increased revenue, and even if they do, any increased revenue may not offset the expenses incurred in building the brands. If we fail to successfully promote and maintain our brands or incur substantial expenses in an unsuccessful attempt to promote and maintain our brands, we may fail to attract enough new customers or retain our existing customers to the extent necessary to realize a sufficient return on our brand-building efforts, and our business and results of operations could suffer.


Risks Related To Our Management


Should we lose the services of Robert Rowe, our Chief Executive Officer, President, Treasurer and Director, our financial condition and proposed expansion may be negatively impacted.


Our future depends on the continued contributions of Robert Rowe, our Chief Executive Officer, President, Treasurer and Director, who would be difficult to replace. Mr. Rowe is our only fulltime employee. Mr. Rowe’s services are critical to the



10



management of our business and operations. We do not maintain key man life insurance on Mr. Rowe. Should we lose the services of Mr. Rowe, we may be unable to replace his services with equally competent and experienced personnel and our operational goals and strategies may be adversely affected, which will negatively affect our potential revenues.


Certain officers and directors devote limited time to our business, which may negatively impact upon our plan of operations, implementation of our business plan and our potential profitability.


Our Chief Executive Officer, President, Treasurer and Director, Robert Rowe is our only full-time employee. Leah Rowe, our Secretary spends approximately fifteen (15) hours per week on our business. The limited amount of full-time employees we employ may be inadequate to implement our plan of operations and develop a profitable business.


Our officers and directors have no experience managing a public company which is required to establish and maintain disclosure controls and procedures and internal control over financial reporting.


We have never operated as a public company and our management has no experience managing a public company which is required to establish and maintain disclosure controls and procedures and internal control over financial reporting. As a result, we may not be able to operate successfully as a public company, even if our operations are successful.  We plan to comply with all of the various rules and regulations, which are required for a public company that is reporting company with the Securities and Exchange Commission. However, if we cannot operate successfully as a public company, your investment may be materially adversely affected.


We incur additional costs and management time related expenses pertaining to SEC reporting obligations and SEC compliance matter and our management has no experience in such matters.


Robert Rowe, our Chief Executive Officer, President, Treasurer and Director is responsible for managing us, including compliance with SEC reporting obligations and maintaining disclosure controls and procedures and internal control over financial reporting. These public reporting requirements and controls are new to these individuals and at times will require us to obtain outside assistance from legal, accounting or other professionals that will increase our costs of doing business.  Should we fail to comply with SEC reporting and internal controls and procedures, we may be subject to securities law violations that may result in additional compliance costs or costs associated with SEC judgments or fines, each of which would increase our costs and negatively affect our potential profitability and our ability to conduct our business.


Because we do not have an audit or compensation committee, shareholders will be required to rely on the members of our Board of Directors, who are not independent, to perform these functions.


We do not have an audit or compensation committee or Board of Directors as a whole that is composed of independent directors. Because our directors are also our officers and controlling shareholders, they are not independent. There is a potential conflict between their or our interests and our shareholders’ interests, since our directors are also our officers who will participate in discussions concerning management compensation and audit issues that may affect management decisions. Until we have an audit or compensation committee or independent directors, there may be less oversight of management decisions and activities and little ability for minority shareholders to challenge or reverse those activities and decisions, even if they are not in the best interests of minority shareholders.


We are an "emerging growth company," and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our common stock less attractive to investors.


We are an "emerging growth company," as defined in the JOBS Act.  For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments, not previously approved.  We could be an emerging growth company for up to five (5) years, although we could lose that status sooner if our revenues exceed $1,000,000,000, if we issue more than $1,000,000,000 in non-convertible debt in a three (3) year period, or if the market value of our common stock held by non-affiliates exceeds $100,000,000 as of any April 30th date before that time, in which case we would no longer be an emerging growth company as of the following April 30th  We cannot predict whether investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.


We have elected to use the extended transition period for complying with new or revised accounting standards under



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Section 102(b)(2) of the JOBS Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.


Risks Related to Our Common Stock


Our officers and directors have voting control over all matters submitted to a vote of our common stockholders, which will prevent our minority shareholders from having the ability to control any of our corporate actions.


As of March 31, 2018, we had 1,581,494,004 shares of common stock outstanding, each entitled to one vote per common share. Our Chief Executive Officer, President, Treasurer and Director, Robert Rowe, beneficially owns 18.4% of the common shares and 1,000,000 preferred shares which represents approximately Fifty point five percent (50.5%) of the total voting power. This entitles Mr. Rowe to control all matters submitted to a vote of our common stockholders. As a result, our management has the ability to determine the outcome of all matters submitted to our stockholders for approval, including the election of directors. Our management’s control of our voting securities may make it impossible to complete some corporate transactions without its support and may prevent a change in our control. In addition, this ownership could discourage the acquisition of our common stock by potential investors and could have an anti-takeover effect, possibly depressing the trading price of our common stock.


We will be subject to penny stock regulations and restrictions and you may have difficulty selling shares of our common stock.


The SEC has adopted regulations which generally define so-called “penny stocks” to be an equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. We anticipate that our common stock will be a “penny stock”, and we will become subject to Rule 15g-9 under the Exchange Act, or the “Penny Stock Rule”. This rule imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers.  For transactions covered by Rule 15g-9, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to sale. As a result, this rule may affect the ability of broker-dealers to sell our common shares and may affect the ability of purchasers to sell any of our common shares in the secondary market.


For any transaction (other than an exempt transaction) involving a penny stock, the rules require delivery, prior to such transaction, of a disclosure schedule prepared by the SEC relating to the penny stock market. Disclosure is also required to be made regarding sales commissions payable to both the broker-dealer and the registered representative, and current quotations for the securities.


Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stock.


We do not anticipate that our common stock will qualify for exemption from the Penny Stock Rule. In any event, even if our common stock is exempt from the Penny Stock Rule, we would remain subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of penny stock, if the SEC finds that such a restriction would be in the public interest.


Sales of our common stock under Rule 144 could reduce the price of our stock.


In general, persons holding restricted securities in a SEC reporting company, including affiliates, must hold their shares for a period of at least six months, may not sell more than one percent (1%) of the total issued and outstanding shares in any ninety (90) day period, and must resell the shares in an unsolicited brokerage transaction at the market price. If substantial amounts of our common stock become available for resale under Rule 144, prevailing market prices for our common stock will be reduced.


We may, in the future, issue additional securities, which would reduce investors’ percent of ownership and may dilute our share value.


Our Articles of Incorporation authorize us to issue 5,000,000,000 shares of common stock and 10,000,000 shares of blank check preferred stock. As of the issuance date of this Form 10-K, we had 1,581,494,004 shares of common stock and 1,000,000 shares of Series A redeemable preferred shares outstanding. Accordingly, we may issue up to an additional 3,443,873,093 shares of common stock and 9,000,000 shares of blank check preferred stock. The future issuance of common stock may result in substantial dilution in the percentage of our common stock held by our then existing



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shareholders. We may value any common stock issued in the future on an arbitrary basis including for acquisitions or other corporate actions and on a fair value basis for shares issued for services that may have the effect of diluting the value of the shares held by our stockholders and may have an adverse effect on any trading market for our common stock. Our Board of Directors may designate the rights, terms and preferences of our authorized but unissued preferred shares at its discretion including conversion and voting preferences without notice to our shareholders.


Because we do not expect to pay dividends for the foreseeable future, investors seeking cash dividends should not purchase our common stock.


We have never declared or paid any cash dividends on our common stock. We currently intend to retain future earnings, if any, to finance our business. As a result, we do not anticipate paying any cash dividends in the foreseeable future. Our payment of any future dividends will be at the sole discretion of our Board of Directors after considering whether we have generated sufficient revenues, our financial condition, operating results, cash needs, growth plans and other factors. Accordingly, investors that are seeking cash dividends should not purchase our common stock.


As an issuer of “penny stock” the protection provided by the federal securities laws relating to forward looking statements does not apply to us.


Although the federal securities law provides a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, if we are a penny stock we will not have the benefit of this safe harbor protection in the event of any claim that the material provided by us contained a material misstatement of fact or was misleading in any material respect because of our failure to include any statements necessary to make the statements not misleading.



ITEM 1B.  UNRESOLVED STAFF COMMENTS


Not applicable.



ITEM 2.  PROPERTIES


The Company occupies dockage space for the Luxuria I at the Bahia Mar Marina in Fort Lauderdale, Florida. We occupy approximately four hundred (400) square feet of office space without charge at the residence of Robert Rowe our Chief Executive Officer, President, Treasurer and Director, and Leah Rowe, our Secretary.




ITEM 3.   LEGAL PROCEEDINGS


We are not aware of any pending or threatened legal proceedings in which we are involved.




ITEM 4.   MINE SAFETY DISCLOSURES


The disclosure required by this item is not applicable.



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PART II



ITEM 5.   MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES


Trading Market for Securities


The Company’s securities trade on OTC Markets under symbol GBBT.


The following table sets forth the low and high closing prices for the company’s stock during each quarter of 2017


 

Low Price

High Price

Quarter Ended 3/31/17

$.045

$.14

Quarter Ended 6/30/17

$.013

$.0427

Quarter Ended 9/30/17

$.0022

$.019

Quarter Ended 12/31/17

$.0002

$.0037


Security Holders


As of December 31, 2017, we had thirty-four (34) record holders of our common stock.


Dividends


Since inception we have not paid any dividends on our common or preferred stock. We currently do not anticipate paying any cash dividends in the foreseeable future on our common or preferred stock.  Although we intend to retain our earnings, if any, to finance the exploration and growth of our business, our Board of Directors will have the discretion to declare and pay dividends in the future. Payment of dividends in the future will depend upon our earnings, capital requirements, and other factors, which our Board of Directors may deem relevant.


Issuer Purchases of Equity Securities


None


Recent Sales of Unregistered Equity Securities


In addition to unregistered securities previously disclosed in reports filed with the SEC, we have sold the following securities without registration under the Securities Act of 1933 (the “Securities Act”). None of the issuances involved underwriters, underwriting discounts or commissions, unless otherwise noted. We relied upon Sections 4(2) of the Securities Act, and Rule 506 of the Securities Act of 1933, as amended for the offer and sale of the securities.


Shares Issued for Cash Consideration


On October 19, 2016 the Company entered into a subscription with an existing shareholder and issued the shareholder 600,000 shares priced at $.06 per share.


On December 12, 2016 the Company entered into a subscription with an existing shareholder and issued the shareholder 41,667 shares priced at $.06 per share.


Shares Issued for Services Rendered and Non-Cash Consideration


On January 2, 2017, we issued 1,100,000 common shares to Oceanside Equities, Inc. a Florida corporation controlled by Vince Beatty for consulting services to be rendered under a consulting agreement entered into on December 1, 2016. Pursuant to that agreement we additionally became obligated to issue 1,000,000 shares on July 1, 2017 and 1,000,000 shares on January 2, 2018.


In January 2017, the Company issued 100,000 shares of common stock under a December 5, 2016, promissory note amendment, valued at $0.15 per share based on quoted trading price, or a total of $15,000.


In January 2017, the Company issued 200,000 shares of common stock under a January 18, 2017, consulting agreement, valued at $0.08 per share based on quoted trading price on agreement date, or a total of $16,000.



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In January 2017, the Company issued 250,000 shares of common stock under a January 23, 2017, consulting agreement, valued at $0.14 per share based on quoted trading price on agreement date, or a total of $33,750. Pursuant to this agreement we additionally issued 250,000 shares on March 9, 2017.


On May 4, 2017, the Company issued 75,000 shares of common stock under a consulting agreement.


On May 19, 2017, the Company issued 5,000,000 shares of common stock to each of the Company’s two officers in exchange for services rendered, and 5,000,000 shares to a related party consultant, who is the nephew of the CEO, in exchange for services rendered.  


On May 25, 2017, the Company issued 4,800,000 shares of common stock to settle $48,000 of expenses accrued under a consulting agreement.


On September 5, 2017, the Company issued 446,000,000 shares of common stock upon conversion of $223,000 of accrued liabilities to three related parties.

On December 18, 2017, the Company issued 166,153,846 shares to convert $108,000 of accrued expenses.




ITEM 6.  SELECTED FINANCIAL DATA


Not required.



ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


We were founded in September of 2014 to commercialize luxury living floating vessels. We plan to generate revenues from the sale of and rental of the vessels initially in South Florida. Our newly developed Luxuria model features a South Florida modern style, and is approximately one thousand six hundred (1,600) square feet under air. The vessel offers amenities typically found in a luxury home.


Years Ended December 31, 2017 and 2016


We had vessel sale revenues of $222,187 and $0 for the years ended December 31, 2017 and 2016.


We had rental revenues of $34,805 and $37,072 for the years ended December 31, 2017 and 2016, respectively, or a 6.1% decrease. We sold the Miss Leah in September 2017 and placed the Luxuria I into service on July 1, but were limited in our rental ability because we showed the Luxuria in the Ft Lauderdale International Boat Show.


Cost of revenues was $43,042 compared to $16,729 for the years ended December 31, 2017 and 2016, respectively, or a 157.2% increase. This increase was primarily due to the Luxuria I becoming available for rent and sale on July 1, 2017 and all relevant costs are higher for the Luxuria.


Gross margin was $213,960 and $20,343 for the years ended December 31, 2017 and 2016, respectively.


General and administrative expenses were $1,701,915 compared to $282,363 for the years ended December 31, 2017 and 2016, respectively, an increase of 502.7%. General and administrative expenses are principally composed of public company expenses, insurance, maintenance, officer pay and travel. The primary increase was in stock based compensation for the officers of approximately $1.2 million.


Our professional fees - related party were $1,191,455 compared to $0 for the years ended December 31, 2017 and 2016, respectively. These fees were accrued and converted to common stock with $0 paid in cash, and includes stock issued for services valued at $145,000.


Our professional fees were $247,192 compared to $217,695 for the years ended December 31, 2017 and 2016, respectively an increase of 13.6%.


Our interest expense was $460,451 compared to $479,218 for the years ended December 31, 2017 and 2016, respectively, a decrease of 3.9%. This decrease is due to the conversions of our convertible debt.



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Our derivative income (expense) and change in fair value of derivative was $233,243 and ($321,185) for the years ended December 31, 2017 and 2016, respectively.


We recorded a net loss of ($3,042,629) compared to ($1,281,483) for the years ended December 31, 2017 and 2016, respectively.


Liquidity and Capital Resources Cash Flow Activities


Cash Flow Activities


Our cash decreased $9,404 for the year ended December 31, 2017. We used $382,583 of cash in operating activities during the year. Our operating activities consisted primarily of marketing and selling the Miss Leah, completing the construction of the Luxuria I, and showing the Luxuria in the Ft. Lauderdale International Boat Show in November.


Our cash decreased $36,968 for the year ended December 31, 2016. We used $579,668 of cash in operating activities during the year. Our operating activities consisted primarily of renting and marketing the Miss Leah as well as beginning the construction of the Luxuria I.


Investing Activities


During the year ended December 31, 2017, we purchased $6,296 in fixed assets and received a $20,000 repayment of a loan to a stockholder made in 2016.


During the year ended December 31, 2016, we loaned $50,000 to a stockholder.


Financing Activities


During the year ended December 31, 2017, we funded our working capital requirements principally through the proceeds of third party loans in the amount of $563,000.


During the year ended December 31, 2016, we funded our working capital requirements principally through the proceeds of third party loans in the amount of $492,000 and the sale of common stock in the amount of $119,500.


Critical Accounting Policies and Estimates


The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported in the financial statements, including the notes thereto, and related disclosures of commitments and contingencies, if any. We consider our critical accounting policies to be those that require the more significant judgments and estimates in the preparation of financial statements, including the following:


Use of Estimates


The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.


Fair Value of Financial Instruments


Our financial instruments consist of cash and cash equivalents, prepaid expenses, payables and accrued expenses. Fair value estimates are made at a specific point in time, based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. We consider the carrying values of our financial instruments in the consolidated financial statements to approximate fair value, due to their short-term nature.


Revenue Recognition


Rental Revenue  Revenue is recognized when earned, generally starting when the rental customer takes temporary possession of the floating vessel and through their contracted stay. Revenue is recognized on a gross basis in



16



accordance with ASC 605-45. Cost of Revenue includes the marina dockage fees and fees charged by the web site Homeaway, where the floating vessel is advertised for rent.


Sale Revenue  Revenue is recognized when earned, generally at closing of the sale of a vessel. Revenue is recognized on a gross basis in accordance with ASC 605-45. Cost of Revenue includes the capitalized cost of constructing a vessel.


Construction in progress


Costs to construct vessels are capitalized during the construction phase. Upon completion of a vessel the Company will either sell the vessel or place in it service as a rental property. If the vessel is to be leased the construction costs are transferred to property and equipment held for sale and depreciated over its useful life.


Property and Equipment


Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is provided for using straight-line methods over the estimated useful lives of the respective assets.


Valuation of Long-Lived Assets


We periodically evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If the estimated future cash flows (undiscounted and without interest charges) from the use of an asset were less than the carrying value, a write-down would be recorded to reduce the related asset to its estimated fair value.


Derivatives


The Company evaluates its convertible debt, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for. The result of this accounting treatment is that under certain circumstances the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or expense. Upon conversion or exercise of a convertible note containing an embedded derivative instrument, the instrument is marked to fair value at the conversion date and the debt and derivatives are removed from the balance sheet.  The shares issued upon conversion of the note are recorded at their fair value with gain or loss recognition as applicable.


Equity instruments that are initially classified as equity that become subject to reclassification under this accounting standard are reclassified to liability at the fair value of the instrument on the reclassification date.


Off-Balance Sheet Arrangements


We do not have any off-balance sheet arrangements as defined in Regulation S-K Item 303(a)(4). Recent Accounting Pronouncements


(See “Recently Issued Accounting Pronouncements” in Note 3 m) of Notes to the consolidated Financial Statements.)


Plan of Operations


Historically, we generated revenue from the short-term vacation rental of the Miss Leah, a company owned vessel located in Boston Harbor, Massachusetts. We sold the Miss Leah in September 2017. As of June 30, 2017, we transferred the Luxuria I from construction in process to fixed assets held for rental and sale. We have the Luxuria I listed both for sale and for rental.


As of December 31, 2017, we had cash on hand of $1,107 for our operational needs. Currently, our operating expenses are approximately $12,500 per month.


We were obligated to repay an outstanding loan in one lump payment in the amount of $40,000 on July 15, 2017, which is past due as of the date of this filing and is under negotiations for an extension. We are obligated to repay an outstanding loan in the amount of $417,368 on May 11, 2018. We are obligated to repay an outstanding loan in one lump payment in the amount of $345,050 on July 5, 2018. We are obligated to repay an outstanding loan in one lump payment in the amount of $15,000 on October 15, 2017, which is past due as of the date of this filing but is expected to be converted to common stock. We are obligated to repay three outstanding loans in one lump payment in the amounts of $10,000;



17



$10,000 and $15,500 on May 16, 2018. We are obligated to repay an outstanding loan in one lump payment in the amount of $47,004 on June 7, 2018, which has been converted in its entirety as of the date of this filing. We are obligated to repay an outstanding loan in one lump payment in the amount of $43,000 on October 6, 2018. We are obligated to repay an outstanding loan in one lump payment in the amount of $16,500 on December 30, 2018. As a result of not filing our Annual Report on Form 10-K timely, we have received notification that these last two convertible notes in the amounts of $43,000 and $16,500 are in default, which requires us to pay a default penalty of $29,750, or 50% of the then outstanding loan balances.


If we fail to generate sufficient revenues or raise additional funds to meet our monthly operating costs we would have available cash for our operating needs for approximately zero (0) months.


We are focusing our efforts on commercializing luxury stationary vessels designed in a South Florida modern style. We completed the design of the Luxuria model in the first quarter of 2015, and began construction in March 2016. It was completed as of June 30, 2017. Luxuria I is approximately 1,900 square feet, with two (2) bedrooms and bathrooms, and sleeps up to six (6) people. We are also marketing the concept of custom built smaller versions of  the Luxuria that would cost less to build and have a lower selling price.


We currently have the Luxuria listed with two brokers as a short-term vacation rental property in South Florida and also have it listed for outright sale. We believe that using the Luxuria as a short-term vacation rental in South Florida could provide a year round source of cash flow.


While rental of the Luxuria is expected to provide a relatively steady revenue stream to us, the construction and sale of custom designed and built luxury floating vessels are expected to generate significantly greater revenues and potential profits.


We anticipate that each non-custom vessel will cost approximately $650,000 to construct. Construction will take between three (3) to four (4) months, per vessel. We will require additional funds to develop and carry out our future plans including construction of our second Luxuria class vessel which has not yet commenced. We plan to begin marketing each vessel when manufacturing commences.


Our first Luxuria barge bottom was delivered to us in late February 2016. We issued 425,000 shares of our common stock as payment for this barge bottom, valued at $70,000, or $0.16 per share, under an agreement dated August 11, 2016, at which time the market price of the stock was $0.23 per share. This party has not accepted the stock certificate and recently informed the Company that they want to renegotiate since the market price of the common stock has fallen below the negotiated signed contractual price per share.


The retail price of the Luxuria is between $1,200,000 and $1,500,000. The subsequent sale of the Luxuria vessel would provide sufficient capital to repay the remaining balance of the Company’s debt.


We are currently marketing the Luxuria models to yacht brokers, real estate brokers and boat dealerships.


Our cash balance at December 31, 2017 was approximately $1,100, which is approximately zero (0) months of net cash outflow.


We have an accumulated deficit of $4,647,540 from inception to December 31, 2017. A significant portion of this accumulated deficit is the result of a non-cash expenses such as the issuance of common stock for services rendered, amortization of beneficial conversion feature discounts and amortization of embedded derivative value discounts on convertible debt.


Our future plans to build a second Luxuria class vessel are contingent upon the receipt of capital of at least $700,000.  This may be from a future offering of the Company’s securities or from the sale of the Luxuria


Until such time as the Luxuria I is sold, we will continue to rent the vessel on a vacation rental basis. We are marketing the Luxuria models to yacht brokers, real estate brokers and boat dealerships and have showed it in the Ft Lauderdale boat show in November 2017.



ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS


Not Applicable.




18




ITEM 8.  FINANCIAL STATEMENTS



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


Report of Independent Registered Public Accounting Firm

F-1


Consolidated Balance Sheets

F-2


Consolidated Statements of Operations

F-3


Consolidated Statements of Stockholders’ Deficit

F-4


Consolidated Statements of Cash Flows

F-5


Notes to Consolidated Financial Statements

F-6



19





Report of Independent Registered Public Accounting Firm


To the Stockholders and the Board of Directors of:

Global Boatworks Holdings, Inc.


Opinion on the Financial Statements


We have audited the accompanying consolidated balance sheets of Global Boatworks Holdings, Inc. and Subsidiary (the “Company”) as of December 31, 2017 and 2016, the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows, for each of the two years in the period ended December 31, 2017, and the related notes (collectively referred to as the “consolidated financial statements”).  In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2017 and 2016, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.


Going Concern


The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 2 to the consolidated financial statements, the Company has a net loss and cash used in operations of $3,042,629 and $382,583, respectively, in 2017 and has a working capital deficit, stockholders’ deficit and accumulated deficit of $1,527,467, $1,003,459 and $4,647,540, respectively, at December 31, 2017. Furthermore, the Company has defaulted on some loans, both before and after December 31, 2017. These matters raise substantial doubt about the Company’s ability to continue as a going concern.  Management’s Plan in regards to these matters is also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.


Basis for Opinion


These consolidated financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on the Company’s consolidated 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 audits to obtain reasonable assurance about whether the consolidated 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 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 consolidated 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 consolidated 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 consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.



/s/ Salberg & Company, P.A.


SALBERG & COMPANY, P.A.

We have served as the Company’s auditor since 2015.

Boca Raton, Florida

April 30, 2018






2295 NW Corporate Blvd., Suite 240 • Boca Raton, FL 33431

Phone: (561) 995-8270 • Toll Free: (866) CPA-8500 • Fax: (561) 995-1920

www.salbergco.com • info@salbergco.com

Member National Association of Certified Valuation Analysts • Registered with the PCAOB

Member CPAConnect with Affiliated Offices Worldwide Member Center for Public Company Audit Firms



F-1



Global Boatworks Holdings, Inc.

Consolidated Balance Sheet s

December 31,


ASSETS

2017

 

2016

CURRENT ASSETS

 

 

 

 Cash

$

1,107 

 

$

10,511 

 Construction in progress

 

431,501 

 Short-term loan to stockholder, net of reserve of $30,000 and $0

 

50,000 

 Prepaid officer compensation

 

481,417 

 Prepaid expenses

5,636 

 

47,593 

          Total current assets

6,743 

 

1,021,022 

PROPERTY AND EQUIPMENT - HELD FOR SALE

 

 

 

  Floating vessel held for sale, net of depreciation of $33,859 and $0

643,321 

 

PROPERTY AND EQUIPMENT - OTHER

 

 

 

  Other, net of depreciation of $962 and $0

5,334 

 

  Architectural plans, net of $3,192 and $1,368 amortization

9,574 

 

11,398 

          Net property and equipment

658,229 

 

11,398 

Total Assets

$

664,972 

 

$

1,032,420 

LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ DEFICIT

 

 

 

CURRENT LIABILITIES

 

 

 

  Accounts payable and accrued liabilities

$

198,657 

 

$

127,776 

  Short-term loan from related parties

16,046 

 

200 

  Short-term loans, net of discount of $8,607 and $0

428,660 

 

100,000 

  Short-term convertible notes, net of discounts

501,962 

 

429,906 

  Short-term convertible note, related party, net of discounts

10,297 

 

  Fair value of derivative liability

369,570 

 

780,685 

  Current portion of long term debt

5,130 

 

  Due to related party predecessor

3,888 

 

3,888 

          Total current liabilities

1,534,210 

 

1,442,455 

LONG TERM LIABILITIES

 

 

 

  Long term debt to third party

26,766 

 

  Note Payable and accrued interest for the vessel - related party

106,455 

 

104,482 

           Total long term liabilities

133,221 

 

104,482 

Total Liabilities

1,667,431 

 

1,546,937 

Commitments and Contingencies (note 10)

 

 

 

Redeemable preferred stock series A, 1,000,000 shares designated; 1,000,000

      shares issued and outstanding at December 31, 2017 and December 31,

      2016, respectively ($1,000 redemption value)

1,000 

 

1,000 

STOCKHOLDERS’ DEFICIT

 

 

 

  Preferred stock, par $0.0001, 10,000,000 shares authorized, 9,000,000 available

      for issuance

 

  Common stock, par $0.0001, 5,000,000,000 shares authorized, 732,952,883 and

      21,333,629 shares issued and outstanding at December 31, 2017 and 2016

73,295 

 

2,133 

  Additional paid-in capital

3,570,786 

 

1,087,261 

 Accumulated deficit

(4,647,540)

 

(1,604,911)

          Total stockholders’ deficit

(1,003,459)

 

(515,517)

Total Liabilities, Temporary Equity and  Stockholders’ Deficit

$

664,972 

 

$

1,032,420 


The accompanying notes are an integral part of the consolidated financial statements




F-2



Global Boatworks Holdings, Inc.

Consolidated Statements of Operations

Year ended December 31,


 

2017

 

2016

REVENUES

 

 

 

   Vessel sales

$

222,187 

 

$

   Rental revenue

34,805 

 

37,072 

          Total revenues

256,992 

 

37,072 

 

 

 

 

COST OF REVENUES

 

 

 

   Rental cost of sales

43,032 

 

16,729 

          Total cost of revenues

43,032 

 

16,729 

    GROSS MARGIN

213,960 

 

20,343 

OPERATING EXPENSES

 

 

 

   General and administrative

1,701,915 

 

282,363 

   Depreciation and amortization

36,644 

 

1,368 

   Professional fees - related party

1,191,455 

 

   Professional fees

247,192 

 

217,695 

          Total operating expenses

3,177,206 

 

501,426 

 Loss from operations

(2,963,246)

 

(481,083)

Other (income) expense

 

 

 

   Other income

(993)

 

(3)

   Interest expense

460,451 

 

479,218 

   (Gain) loss on extinguishment of debt and debt conversions, net

(191,232)

 

   Initial and change in fair value of derivative

(233,243)

 

321,185 

   Provision for doubtful loan receivable - related party

30,000 

 

   Loss on accrued expense settlement

14,400 

 

          Total other (income) expense

79,383 

 

800,400 

Net loss

$

(3,042,629)

 

$

(1,281,483)

 

 

 

 

Loss per weighted average common share

$

(0.02)

 

$

(0.13)

 

 

 

 

Number of weighted average common shares outstanding - Basic and Diluted

196,023,326 

 

9,785,136 


The accompanying notes are an integral part of the consolidated financial statements



F-3



Global Boatworks Holdings, Inc.

Consolidated Statement of Changes in Stockholders’ Deficit

For the years ended December 31, 2017 and 2016


 

Preferred Stock Number of

Shares

 

Preferred Stock Par Value

 

Common Stock

Number of

Shares

 

Common Stock Par Value

 

Additional

Paid-in Capital

 

Accumulated

Deficit

 

Total

Stockholders’

Deficit

BALANCE, December 31, 2015

-

 

$

-

 

6,720,000

 

$

672

 

$

146,578

 

$

(323,428)

 

$

(176,178)

Shares issued for services

-

 

-

 

10,822,222

 

1,082

 

655,395

 

 

656,477 

Shares issued for cash

-

 

-

 

1,691,667

 

169

 

119,331

 

 

119,500 

Shares issued upon debt conversion

-

 

-

 

1,574,740

 

157

 

51,543

 

 

51,700 

Shares issued for construction in

   progress

-

 

-

 

425,000

 

43

 

69,957

 

 

70,000 

Shares issued for loan fee

-

 

-

 

100,000

 

10

 

9,990

 

 

10,000 

Reclassification of debt premium

   upon debt conversion

-

 

-

 

-

 

-

 

34,467

 

 

34,467 

Net loss, year ended December 31,

    2016

-

 

-

 

-

 

-

 

-

 

(1,281,483)

 

(1,281,483)

BALANCE , December 31, 2016

-

 

-

 

21,333,629

 

2,133

 

1,087,261

 

(1,604,911)

 

(515,517)

Shares issued for services

-

 

-

 

16,452,778

 

1,646

 

548,564

 

 

550,210 

Shares issued to settle accrued expense

-

 

-

 

616,953,846

 

61,695

 

1,589,536

 

 

1,651,231 

Shares issued upon debt conversion

-

 

-

 

77,112,630

 

7,711

 

229,035

 

 

236,746 

Shares issued for note fee

-

 

-

 

1,000,000

 

100

 

14,900

 

 

15,000 

Shares issued for note extension fee

-

 

-

 

100,000

 

10

 

5,990

 

 

6,000 

Beneficial conversion feature on

    convertible note

-

 

-

 

-

 

-

 

95,500

 

 

95,500 

Net loss, year ended December 31,

    2017

-

 

-

 

-

 

-

 

-

 

(3,042,629)

 

(3,042,629)

BALANCE , December 31, 2017

-

 

$

-

 

732,952,883

 

$

73,295

 

$

3,570,786

 

$

(4,647,540)

 

$

(1,003,459)

 

 

 

 

 

 

 

 

 

 

 

 

 

 


The accompanying notes are an integral part of the consolidated financial statements




F-4



Global Boatworks Holdings, Inc.

Consolidated Statements of Cash Flows

Year ended December 31,

 

2017

 

2016

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

Net loss

$

(3,042,629)

 

$

(1,281,483)

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

 

 

 

        Initial and change in fair value of derivative

(233,243)

 

321,185 

        Common stock issued for services

488,975 

 

        Provision for doubtful loan receivable - related party

30,000 

 

        Loss on accrued expense settlement

14,400 

 

34,467 

        (Gain) loss on debt extinguishment and note conversions, net

(191,232)

 

        Amortization of interest capitalized on note balances

58,213 

 

        Loss on shares issued to settle accrued expense recorded as additional

           compensation

1,256,231 

 

        Issuance of redeemable preferred stock for services

 

1,000 

        Amortization and depreciation

36,644 

 

1,368 

        Amortization of common stock issued for prepaid services

590,832 

 

150,970 

        Amortization of debt discounts

377,584 

 

451,310 

Changes in operating assets and liabilities:

 

 

 

        Increase Luxuria construction in progress

(245,679)

 

(359,338)

        (Increase) decrease in prepaid expenses

13,904 

 

(18,500)

        Increase (decrease) in accounts payable and accrued expenses

449,881 

 

117,381 

        Increase in accrued interest expense

13,535 

 

1,972 

Net cash used in operating activities

(382,583)

 

(579,668)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

Purchase of property and equipment

(6,296)

 

Repayment of loan to stockholder

20,000 

 

Loan to stockholder

 

(50,000)

Net cash provided (used) in investing activities

13,704 

 

(50,000)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

Proceeds from sale of common stock

 

119,500 

Proceeds from cash advance on credit card

2,000 

 

3,500 

Proceeds from officer loan

20,000 

 

200 

Repayments on related party loan

(4,154)

 

Commissions paid on third party loan

 

(22,500)

Payments on third party loans

(199,371)

 

Proceeds from third party loan

541,000 

 

492,000 

Net cash provided by financing activities

359,475 

 

592,700 

Net increase (decrease) in cash

(9,404)

 

(36,968)

CASH, beginning of year

10,511 

 

47,479 

CASH, end of year

$

1,107 

 

$

10,511 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

  Interest paid in cash

$

13,124 

 

$

13,362 

 Income tax paid in cash

$

 

$

Non-Cash Investing and Financing Activities:

 

 

 

 Common stock issued for prepaid services

$

62,834 

 

$

656,477 

 Common stock issued for loan fees

$

21,000 

 

$

10,000 

 Common stock issued upon conversion of convertible debt

$

236,746 

 

$

51,700 

 Common stock issued to acquire construction in process

$

 

$

70,000 

 Modification of note to convertible note

$

60,000 

 

$

51,700 

 Initial derivative value recorded as a discount

$

151,751 

 

$

459,500 

 Reclassification of premium upon conversion

$

 

$

34,467 

 Transfer of construction in progress to fixed assets

$

677,180 

 

$

 Construction in progress cost purchased with third party loan

$

35,000 

 

$

 Common stock issued to settle accrued expenses

$

379,000 

 

$


The accompanying notes are an integral part of the consolidated financial statements



F-5




Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016



(1) NATURE OF OPERATIONS


Global Boatworks Holdings, Inc., (“the Company”, “Global Boatworks”), was formed on May 11, 2015, under the laws of the State of Florida. At formation the Company acquired 100% of the membership interests of Global Boatworks, LLC, (“LLC”) which was formed on June 16, 2014, under the laws of the State of Florida.  The Company’s business activities to date have primarily consisted of the formation and implementation of a business plan for building luxury floating vessels on a barge bottom, the rental activities relating to the existing vessel, Miss Leah, and the construction of the new vessel, Luxuria I.


The accompanying consolidated financial statements include the activities of Global Boatworks Holdings, Inc. and Global Boatworks, LLC, its wholly owned subsidiary.


(2) PRINCIPLES OF CONSOLIDATION, USE OF ESTIMATES AND GOING CONCERN


a) Principles of Consolidation


The Company’s consolidated financial statements include the financial statements of Global Boatworks Holdings, Inc. and its wholly owned subsidiary Global Boatworks, LLC. All intercompany balances and transactions have been eliminated.


b) Use of Estimates


The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 these estimates. Significant estimates in the accompanying consolidated financial statements involved the valuation of construction in progress, depreciable life of the floating vessel, valuation of long lived assets, valuation of derivatives, valuation of common and preferred stock issued as compensation and valuation allowance on deferred income tax assets.


c) Going Concern


The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  The Company has a working capital deficit, accumulated deficit and stockholder’s deficit of $1,527,467; $4,647,540 and $1,003,459, respectively, at December 31, 2017. In addition the Company had a net loss of $3,042,629 and used cash of $382,583 in operating activities in 2017. In addition the Company defaulted on two notes in fiscal 2017 and two of its notes subsequent to the year ended December 31, 2017. These matters raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issuance date of this report.  The Company is expected to have increasing costs and expenses as a result of becoming a publicly held company and constructing new vessels without immediate increases in revenues as they continue to implement their plan of operations. The ability of the Company to continue as a going concern is dependent upon increasing operations, developing sales and obtaining additional capital and financing. The Company is seeking to raise sufficient equity capital to enable it to pay off existing debt. It is also attempting to sell the Luxuria I. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.


(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


a) Cash and cash equivalents


The Company considers all highly liquid securities with original maturities of three months or less when acquired, to be cash equivalents. We had no financial instruments that qualified as cash equivalents at December 31, 2017 or 2016.



F-6




Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016



(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


b) Construction in progress


Costs to construct vessels are capitalized during the construction phase. Upon completion of a vessel the Company will either sell the vessel or place it in service as a rental property. If the vessel is to be leased, the construction costs are transferred to property and equipment and depreciated over its useful life.


c) Property and equipment


All property and equipment are recorded at cost and depreciated over their estimated useful lives, using the straight-line method.  Upon sale or retirement, the cost and related accumulated depreciation are eliminated from their respective accounts, and the resulting gain or loss is included in the results of operations. Repairs and maintenance charges, which do not increase the useful lives of the assets, are charged to operations as incurred.


d) Impairment of long-lived assets


A long-lived asset is tested for impairment whenever events or changes in circumstances indicate that its carrying value amount may not be recoverable. An impairment loss is recognized when the carrying amount of the asset exceeds the sum of the undiscounted cash flows resulting from its use and eventual disposition. The impairment loss is measured as the amount by which the carrying amount of the long-lived assets exceeds its fair value.


e) Financial instruments and Fair value measurements


ASC 825-10 “Financial Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.


ASC 825 also requires disclosures of the fair value of financial instruments. The carrying value of the Company’s current financial instruments, which include cash and cash equivalents, accounts payable and accrued liabilities approximates their fair values because of the short-term maturities of these instruments.


FASB ASC 820 “Fair Value Measurement” clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. It also requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows:


Level 1: Quoted prices in active markets for identical assets or liabilities.


Level 2: Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability.


Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.



F-7




Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016



(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


e) Financial instruments and Fair value measurements (continued)


The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.


The following reflects the Company’s assets and liabilities that are measured at fair value on a recurring and nonrecurring basis at December 31, 2017 and 2016, using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3):



 

 2017

 

2016

Level 3 - Embedded Derivative Liability

$

369,570

 

$

780,685



Changes in Level 3 assets measured at fair value for the year ended December 31, 2017 were as follows:



Balance, December 31, 2015

$

Initial valuation recorded as debt discount

 

682,596 

Change in fair value

 

98,089 

Balance, December 31, 2016

 

780,685 

Portion of initial valuation recorded as debt discount

 

151,751 

Amortization to gain on extinguishment upon conversion or repayment

 

(329,623)

Initial and change in fair value

 

(233,243)

Balance, December 31, 2017

$

369,570 



f) Revenue recognition


Rental Revenue  Revenue is recognized when earned, generally starting when the rental customer takes temporary possession of the floating vessel and through their contracted stay. Revenue is recognized on a gross basis in accordance with ASC 605-45. Cost of Revenue includes the marina dockage fees and fees charged by the web site Homeaway, where the floating vessel is advertised for rent.


Sale Revenue  Revenue is recognized when earned, generally at closing of the sale of a vessel. Revenue is recognized on a gross basis in accordance with ASC 605-45. Cost of Revenue includes the capitalized cost of constructing a vessel.


g) Stock compensation for services rendered


Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the shorter of period the employee or director is required to perform the services in exchange for the award or the vesting period. The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.


Pursuant to ASC 505-50, for share-based payments to non-employees, compensation expense is determined at the A measurement date.” The expense is recognized over the service period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the reporting date.



F-8




Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016



(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


h) Income Taxes


The LLC and the predecessor company, (Financial Innovators), are pass through entities for income tax purposes, therefore there is no income tax provision or liability for these entities through the Company’s incorporation date of May 11, 2015. As a result of the reorganization the Company became a taxable entity on May 11, 2015. Upon becoming a taxable entity, the Company began to use the asset and liability method of ASC 740 to account for income taxes. Under this method, deferred income taxes are determined based on the differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements which will result in taxable or deductible amounts in future years and are measured using the currently enacted tax rates and laws. A valuation allowance is provided to reduce net deferred tax assets to the amount that, based on available evidence, is more likely than not to be realized.


The Company follows the provisions of ASC 740-10, Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority.


The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.


As of December 31, 2017, the tax years 2017, 2016, 2015 and 2014 for the LLC and 2017, 2016 and 2015 for the corporation remain open for IRS audit. The Company has received no notice of audit or any notifications from the IRS for any of the open tax years.


i) Convertible Notes With Fixed Rate Conversion Features


The Company may issue convertible notes, which are convertible into common shares at a fixed discount to the price of the common stock at the time of conversion. The Company measures the fair value of the note at the time of issuance at the fixed monetary value of the payable and records any premium as interest expense on the issuance date.


j) Debt issue costs


The Company accounts for debt issuance cost paid to lenders, or third parties as debt discounts which are amortized over the life of the underlying debt instrument.





F-9




Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016



(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


k) Net income (loss) per share


Basic loss per share excludes dilution and is computed by dividing the loss attributable to stockholders by the weighted-average number of shares outstanding for the period.  Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that shared in the earnings of the Company.  Diluted loss per share is computed by dividing the loss available to stockholders by the weighted average number of shares outstanding for the period and dilutive potential shares outstanding unless consideration of such dilutive potential shares would result in anti-dilution. There were 783,190,707 and 16,511,370 common stock equivalents for the years ended December 31, 2017 or 2016, respectively.


l) Derivatives


The Company evaluates its convertible debt, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for. The result of this accounting treatment is that under certain circumstances the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or expense. Upon conversion or exercise of a convertible note containing an embedded derivative instrument, the instrument is marked to fair value at the conversion date and the debt and derivatives are removed from the balance sheet. The shares issued upon conversion of the note are recorded at their fair value with gain or loss recognition as applicable.


Equity instruments that are initially classified as equity that become subject to reclassification under this accounting standard are reclassified to liability at the fair value of the instrument on the reclassification date.


m) Recent accounting pronouncements


In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers,” which requires companies to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time based on when control of goods and services transfer to a customer. This ASU is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, and entities are permitted to apply either prospectively or retrospectively; early adoption is permitted. This is not expected to have a material impact on our results of operations, cash flows or financial condition.





F-10




Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016



(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


m) Recent accounting pronouncements (continued)


In February 2016, the FASB issued ASU 2016-02, “Leases” which, for operating leases, requires a lessee to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in its balance sheet. The standard also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis. The ASU is effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the effects that the adoption of ASU 2016-02 will have on the Company’s consolidated financial statements.


In December 2016, FASB issued Accounting Standards Update (“ASU”), 2016-20 - Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. The amendments in this Update affect the guidance in Update 2014-09, which is not yet effective. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements for Topic 606 (and any other Topic amended by Update 2014-09). This updated guidance is not expected to have a material impact on our results of operations, cash flows or financial condition.


In May 2017, FASB issued Accounting Standards Update (“ASU”), 2017-09 - Compensation - Stock Compensation: Scope of Modification Accounting. The amendments in this Update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. An entity should account for the effects of a modification unless all the following are met: The fair value (or calculated value or intrinsic value, if such an alternative measurement method is used)


1. of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification.


The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified.


2. The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified.


3. The current disclosure requirements in Topic 718 apply regardless of whether an entity is required to apply modification accounting under the amendments in this Update.


Effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for (1) public business entities for reporting periods for which financial statements have not yet been issued and (2) all other entities for reporting periods for which financial statements have not yet been made available for issuance. This updated guidance is not expected to have a material impact on our results of operations, cash flows or financial condition.





F-11




Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016



(4) CONSTRUCTION IN PROGRESS


Construction in progress represents the capitalized construction of its Luxuria floating vessel(s) being constructed for sale. At December 31, 2016, the Company capitalized $431,501. At June 30, 2017, the Luxuria I was completed and $677,180 was transferred to fixed assets as it is held for rental and/or sale.


(5) PROPERTY AND EQUIPMENT


Property and Equipment held for sale consists of the following at December 31, 2017 and 2016:



 

 

2017

 

 

2016

Miss Leah floating vessel

$

 

$

-

Luxuria I floating vessel

 

677,180 

 

 

-

Less: accumulated depreciation

 

(33,859)

 

 

-

    Total P&E held for sale

$

643,321 

 

$

0



On September 25, 2014, the Company acquired the Miss Leah, a two story luxury floating vessel in the Cape Cod architectural style built on a barge platform. The Miss Leah was based at a marina in Boston harbor. It was rented out primarily through a third party rental management company on a short term vacation type basis. The Miss Leah was built in 2004 by the founder of the Company and subsequently sold in 2006 to his brother who established the Predecessor’s rental business.  Due to the related party relationship between the Company and the Predecessor the luxury floating vessel was recorded on the Company’s books at its original cost basis of $0 based on its fully depreciated value at the transfer date. As the Miss Leah has been recorded on the books of the Company at a value of $0, there is no depreciation recorded. On September 14, 2017, the Company sold the Miss Leah and recorded sales proceeds of $222,187, net of estimated sales tax due of $14,813.


On June 30, 2017, the Company transferred the Luxuria I, a two-story luxury floating living vessel in the South Florida architectural style, built on a barge platform, from construction in progress to fixed assets as it is complete. The Company has the Luxuria I available for either vacation rental or outright sale. As long as it is available for vacation rental the Company will record depreciation over a 20 year period.


Property and Equipment consists of the following at and December 31, 2017 and 2016:



 

 

2017

 

 

2016

Architectural plans

$

12,766 

 

$

12,766 

Furniture and equipment

 

6,296 

 

 

Less: accumulated amortization and depreciation

 

(4,154)

 

 

(1,368)

    Total P&E

$

14,908 

 

$

11,398 



The Company capitalized the costs of developing the architectural plans for the Luxuria model floating vessel and has begun amortizing the costs over their estimated useful life of seven years, beginning April 1, 2016. Amortization expense for the years ended December 31, 2017 and 2016, was $1,824 and $1,368, respectively.



F-12




Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016



(6) RENTAL PROPERTY AND RELATED NOTE  PAYABLE


On September 25, 2014, the Company acquired the Miss Leah, a two story luxury floating vessel in the Cape Cod architectural style built on a barge platform. The Miss Leah is based at a marina in Boston harbor. It is rented out primarily through a third party rental management company on a short term vacation type basis. The Miss Leah was built in 2004 by the founder of the Company and subsequently sold in 2006 to his brother who established the Predecessor’s rental business.


The terms of this acquisition are for a payable to the related party Predecessor in the amount of $100,000, carrying interest at 2% per annum from the effective date of the transfer date of September 25, 2014 with all principal and interest due on the maturity date of June 20, 2022, which was memorialized in the form of a promissory note in June 2015, effective September 25, 2014. Due to the related party relationship between the Company and the Predecessor the luxury floating vessel was recorded on the Company’s books at its original cost basis of $0 based on its fully depreciated value at the transfer date. Accordingly, the Company charged additional paid-in capital in 2014 as a distribution for $100,000. Outstanding principal and interest totaled $106,455 and $104,482 at December 31, 2017 and 2016, respectively.


(7) SHORT TERM LOANS AND SHORT-TERM CONVERTIBLE NOTES


a) Short term notes


Short term debt including accrued interest was, as follows, at December 31:


 

2017

 

2016

Note 1

$

40,000 

 

$

100,000

Note 2

345,050 

 

-

Note 3

 

-

Note 4

 

-

Note 5

52,217 

 

-

Less: unamortized debt discounts

(8,607)

 

-

Total short term notes, net

$

428,660 

 

$

100,000



NOTE 1: On July 9, 2015, the company entered into a loan agreement in the amount of $151,700 with a shareholder. The company issued 250,000 common shares to the shareholder as consideration for providing us the loan. The shares were valued at $25,000, or $0.10 per share (based on the recent private placement sales) was recorded as a discount and is being amortized at a rate of $2,083 per month over the life of the loan. The note bears interest at the rate of 10%. Prepaid interest in the amount of $15,000 and a loan fee of $1,700 were deducted from the proceeds of the loan. These were amortized each month at the rate of $1,250 and $142 over the life of the loan, respectively. We were obligated to pay the principal and interest due on July 9, 2016. The loan was secured by the Miss Leah, our company owned vessel. The Company paid $6,000 in interest to the holder during the third quarter 2016.




F-13




Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016



(7) SHORT TERM LOANS AND SHORT-TERM CONVERTIBLE NOTES (continued)


a) Short term notes (continued)


The note holder sold $51,700 of this note to a third party in August 2016, and the Company modified the new $51,700 note to add a conversion feature at a conversion rate of 60% of the trading price of the Company’s common stock. This note is considered stock settled debt and accordingly the Company  recorded a premium on the debt of $34,467 as a charge to interest expense on the modification date. This third party converted $51,700 of this in exchange for 1,574,740 shares in fiscal 2016, and the premium was reclassified to additional paid in capital.


The $100,000 remaining balance of the original note was renegotiated into a new note on December 5, 2016 which matured on July 15, 2017. This new note carries interest at a rate of 16.8% which was payable in cash monthly. The Company paid $14,443 in interest during the year ended December 31, 2017. This new note required the Company to issue 100,000 shares which were valued at $6,000 which was recorded as a discount to be amortized over the remaining life of the note. The remaining note balance and unamortized discount balance at December 31, 2017, is $40,000 (see following assignments) and $0. The $40,000 balance of Note 1 matured on July 15, 2017, and is in default. The Company and the lender are negotiating the terms of an extension.


NOTE 2: On January 5, 2017, pursuant to a securities purchase agreement and a secured promissory note for $830,000 available in five tranches, the Company drew $170,000 and received $150,000 in cash net of $15,000 OID and $5,000 legal fees under this nine month secured promissory note. This note is secured by all the assets of the Company, inclusive of the Luxuria I and the Luxuria II, the member interests of its wholly owned LLC and personally guaranteed by Robert Rowe, CEO of the Company. The lender’s security interests are subordinate by law to the security interests of the August 11, 2016 lender.  This note is structured in multiple parts, first the initial $170,000 as drawn and a subsequent $660,000 which can be drawn at the Company’s option. This note does not carry a stated interest rate, (except it is 22% in event of default as defined in the promissory note), but carries an Original Issue Discount (OID) that totals $75,000 and is pro-rata on each tranche drawn. The OID will be amortized over the remaining life of the note from the date drawn. In addition, the Company is required to pay $5,000 of the lender’s legal fees which was applied to the first tranche drawn. which will also be recorded as debt discount and will be amortized over the nine month life of the note. The Company received the second tranche of $110,000 and received $100,000 in cash net of $10,000 OID under this note in March 2017.  The Company received the third tranche of $55,000 and received $50,000 in cash net of $5,000 OID under this note in November 2017. On November 16, 2017, the lender agreed to extend the note for a three month period and an extension fee of $10,050 was added to the principal balance of note. At December 31, 2017, the balance of this note and the unamortized discount is $345,050 and $1,181, respectively. (see Note 15)


This note requires a partial prepayment if and when the Company sells the Luxuria I and Luxuria II, upon the receipt of which the lender has agreed to release the security interest in the vessels. This prepayment is 10% of the profits on the Luxuria I and 33% of the profits on the Luxuria II. If the Company rents/leases either the Luxuria I or II, then the prepayment is 20% of the gross rental revenue. The balance owed for rental revenue at December 31, 2017 is $712 and is included in the note balance.


NOTES 3 AND 4: On April 19, 2017, the Company entered into an eight month financing of the $14,500 Luxuria I annual insurance premium. On June 15, 2017, the Company entered into a six month financing of the $3,211 Miss Leah 10 month insurance premium. The Luxuria portion was paid in full at December 31, 2017, and the Miss Leah was sold in September 2017.




F-14




Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016



(7) SHORT TERM LOANS AND SHORT TERM CONVERTIBLE NOTES (continued)


a) Short term notes (continued)


NOTE 5: On July 17, 2017, the company entered into a loan agreement in the amount of $50,000 with a shareholder. The company issued 1,000,000 common shares to the shareholder as consideration for providing us the loan. The shares were valued at $15,000, or $0.015 per share based on the quoted market price which was recorded as a debt discount and is being amortized at a rate of $1,250 per month over the life of the loan. The note bears interest at the rate of 12%, payable monthly. The unamortized balance of the discount is $7,426 at December 31, 2017. Total unpaid principal and interest is $52,217 at December 31, 2017.


b) Short term convertible notes


Short term convertible debt including accrued interest was as follows at December 31, 2017:



Convertible note 1

$

Convertible note 2

417,368 

Convertible note 3

16,069 

Convertible note 4

10,760 

Convertible note 5

10,760 

Convertible note 6 - related party

16,498 

Convertible note 7

47,004 

Convertible note 8

30,493 

Convertible note 9

44,046 

Less: unamortized debt discounts

(80,739)

Less: related party note, net

(10,297)

Total convertible notes, net

$

501,962 



NOTES 1 AND 2: On August 11, 2016, pursuant to a securities purchase agreement and a secured convertible promissory note for $610,000, the Company drew $305,000 and received $227,500 in cash under this six month secured convertible promissory note. This note is secured by all the assets of the Company, inclusive of the Miss Leah and the Luxuria 1, and the member interests of its wholly owned LLC. This note is structured in two parts, first the initial $305,000 as drawn and a subsequent $305,000 which can be drawn at the Company’s option in amount/s determined by the Company. This note does not carry a stated interest rate, but carries an Original Issue Discount (OID) that totals $100,000 and is proportional to the total amount borrowed. An OID of $50,000 was recorded as a discount to the note for the initial draw and were amortized over the six month life of the note. In addition, the Company is required to pay $10,000 of the lender’s legal fees (pro rata to the draws) and $22,500 of brokerage commission which was withheld from the initial $305,000 draw, both of which were also recorded as debt discounts and were amortized over the six month life of the note. Also, the Company was required to issue 100,000 shares of restricted common stock which was valued at $0.10 per share based on recent stock sales and recorded as a discount to the note and is being amortized over the six month life of the note. This note requires a $200,000 partial prepayment if and when the Company sells the Miss Leah. The note is personally guaranteed by the Company’s CEO, Robert Rowe. In event of default the note carries an interest rate equal to the lesser of 22% per annum or the maximum rate permitted under applicable law.



F-15




Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016



(7) SHORT TERM LOANS AND SHORT TERM CONVERTIBLE NOTES (continued)


b) Short term convertible notes (continued)


On October 5, 2016, the Company drew an additional $122,000 and received $92,000 in cash under this six month secured convertible promissory note. An OID of $20,000 was recorded as a discount to the note for the second draw and was amortized over the remaining life of the note. On November 3, 2016, the Company drew an additional $183,000 and received $150,000 in cash under this six month secured convertible promissory note. An OID of $30,000 and legal costs of $3,000 were recorded as discounts to the note for the third draw and was amortized over the remaining life of the note.


The total note is convertible into common stock upon an event of default as follows:


Lender has the right at any time following an Event of Default, at its election, to convert (each instance of conversion is referred to herein as a “Conversion”) all or any part of the Conversion Eligible Outstanding Balance into shares (“Conversion Shares”) of fully paid and non-assessable common stock, $0.0001 par value per share (“Common Stock”), of Company as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the A Conversion Amount”) divided by the Conversion Price (as defined below).


Subject to the adjustments set forth herein, the conversion price (the A Conversion Price”) for each Conversion shall be equal to 60% (the ”Conversion Factor”) multiplied by the lowest Closing Bid Price in the twenty (20) Trading Days immediately preceding the applicable Conversion. Additionally, 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 (other than an Event of Default for failure to pay the Conversion Eligible Outstanding Balance on the Maturity 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 60% to 55% for purposes of this example. If, thereafter, there are three (3) separate occurrences of a Major Default pursuant to Section 4.1(a), 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.


Due to the variable conversion terms and certain default provisions, the embedded conversion option has been bifurcated and recorded as a derivative liability at an initial fair value of $378,624 with $217,500 recorded as a debt discount and $161,124 as a derivative expense. The October 5, 2016 draw resulted in an initial fair value of $113,616 with $92,000 recorded as a debt discount and $21,616 as a derivative expense.  The November 3, 2016 draw resulted in an initial fair value of $190,356 with $150,000 recorded as a debt discount and $40,356 as a derivative expense. The valuation method utilized during 2016 was the Black-Scholes model with the following range of assumptions: Expected life in years 0.50 to 0.10; the conversion price range of $0.21 to $0.036; Bond equivalent yield rate between 0.29% and 0.63%. The valuation method utilized during 2017 was the Black-Scholes model with the following assumptions: Expected life in years 0.10; Stock price at December 31, 2017 of $0.0011 with the conversion price of $0.00054; Bond equivalent yield rate 1.28%.





F-16




Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016



(7) SHORT TERM LOANS AND SHORT TERM CONVERTIBLE NOTES (continued)


b) Short term convertible notes (continued)


On February 4, 2017, the maturity date was extended to May 11, 2017. Under the terms of this extension, the Company agreed to pay an additional $18,300 in interest at maturity. The Company recorded this interest as a debt discount and is amortizing it to maturity. At December 31, 2017, the unamortized balance is $0.


On March 22, 2017, the Company issued 1,000,000 shares of common stock to settle $30,000 of this note. These shares were valued at $0.073 per share, or $73,000, based on the quoted trading price, and after relieving the related derivative value a gain of $3,463 was recorded. (See Note 11)


In May 2017, the lender bifurcated the original note, which had a then remaining balance of $598,300, into two new notes, Note 1 with a principal balance of $200,000 and Note 2 with a principal balance of $416,249, which included a maturity extension fee of $17,949. Note 1 is collateralized with the Miss Leah and Note 2 with all Company’s assets including the Luxuria I. At December 31, 2017, the unamortized balance of the extension fee is $0.


Note 1 requires a mandatory partial prepayment of up to $200,000 if and when the Company sells the Miss Leah, upon the receipt of which the lender has agreed to release the security interest in the vessel. Note 2 contains no such provision.  All other provisions of the original note are carried over to these two new notes. The maturity date of theses two notes was August 11, 2017. On August 11, 2017, the lender agreed to negotiate three month extensions for both notes which was completed August 14, 2017, and combined extension fee of $17,619 was added to the principal balance of the notes.


On July 18, 2017, the Company issued 2,307,692 shares of common stock upon conversion $18,000 of Note 1. On August 10, 2017, the Company issued 3,800,000 shares of common stock upon conversion $10,944 of Note 1. The bifurcated convertible Notes 1 and  2 in the remaining balances of $182,000 and $416,249 matured on August 11, 2017. On November 11, 2017, the lender agreed to extend Note 2 for an additional three month period and an extension fee of $12,595 was added to the principal balance of note 2. (see Note 15)


On September 14, the Company paid off the balance of Note 1 in the amount of $176,986 from the proceeds of the sale of the Miss Leah.


On October 13, 2017, the Company issued 6,190,000 shares of common stock upon conversion of Note 2 principal in the amount of $8,914. On December 27, 2017, the Company issued 25,000,000 shares of common stock upon conversion of Note 2 principal in the amount of $15,000. At December 31, 2017 the balance was $417,368 and the unamortized discount was $5,750.


NOTE 3: On April 15, 2017, the Company entered into a six month 10% convertible promissory note in the amount of $15,000. In event of default the note carries an interest rate of 18%.


The total note is convertible into common stock as follows:




F-17




Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016



(7) SHORT TERM LOANS AND SHORT TERM CONVERTIBLE NOTES (continued)


b) Short term convertible notes (continued)


Lender has the right at any time, at its election, to convert (each instance of conversion is referred to herein as a “Conversion”) all or any part of the Conversion Eligible Outstanding Balance into shares (“Conversion Shares”) of fully paid and non-assessable common stock, $0.0001 par value per share (“Common Stock”), of Company as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the “Conversion Amount”) divided by the Conversion Price (as defined below). Subject to the adjustments set forth herein, the conversion price (the “Conversion Price”) for each Conversion shall be equal to 60% (the “Conversion Factor”) multiplied by the lowest Closing Bid Price in the fifteen (15) Trading Days immediately preceding the applicable Conversion.


Due to the variable conversion terms and certain default provisions, the embedded conversion option has been recorded as a derivative liability at an initial fair value of $13,472 recorded as a debt discount. The valuation method utilized was the Black-Scholes model with the following assumptions: Expected life in years 0.10; Stock price at April 15, 2017, $0.025 with the conversion price of $0.015; Bond equivalent yield rate 0.92%. At December 31, 2017, the valuation method utilized was the Black-Scholes model with the following assumptions: Expected life in years 0.10; Stock price at December 31, 2017 $0.0011 with the conversion price of $0.00054; Bond equivalent yield rate 1.28%. The principal and interest balance was $16,069 and the unamortized discount balance was $0 at December 31, 2017.The note is in default as of December 31, 2017.


NOTES 4, 5 AND 6: On May 17, 2017, as discussed in section a) above, the $100,000 note holder sold $60,000 of this note to three third parties, one of whom subsequently became a related party, and the Company modified the new $20,000 notes to add a conversion feature at a conversion rate of $0.002 per share, with a maturity date of May 16, 2018. This was treated as a debt extinguishment and a beneficial conversion feature was recorded at issuance of $20,000 per note and will be amortized over the life of the notes. These third parties converted an aggregate of $13,500 of these notes in exchange for 6,750,000 shares in June 2017. (see note 11) On July 26, 2017, two of these third parties converted an aggregate of $11,000 of these notes in exchange for 5,500,000 shares. (see note 11) In September 2017, the Company modified the conversion rate of these notes to $0.0005 per share, which was treated as debt extinguishment whereby the then remaining balance of the discount was amortized as interest expense and new discounts totaling $35,500 were recorded which are being amortized over the remaining life of the notes. At December 31, 2017, the total principal and interest was $38,019 and the unamortized discounts were $14,200.


NOTE 7: On June 8, 2017, pursuant to a securities purchase agreement and a one year convertible promissory note for $63,000 the Company received $60,000. In addition, the Company is required to pay $2,500 of the lender’s legal fees and $500 of due diligence fees which were withheld from the funds provided. This note carries a 12% interest rate, with all interest due at maturity.


The total note is convertible into common stock as follows:


Lender has the right at any time, at its election, to convert (each instance of conversion is referred to herein as a “Conversion”) all or any part of the Conversion Eligible Outstanding Balance into shares (“Conversion Shares”) of fully paid and non-assessable common stock, $0.0001 par value per share (“Common Stock”), of Company as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the “Conversion Amount”) divided by the Conversion Price (as defined below).




F-18




Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016



(7) SHORT TERM LOANS AND SHORT TERM CONVERTIBLE NOTES (continued)


b) Short term convertible notes (continued)


Subject to the adjustments set forth herein, the conversion price (the A Conversion Price”) for each Conversion shall be equal to 61% (the A Conversion Factor”) multiplied by the lowest Closing Bid Price in the ten (10) Trading Days immediately preceding the applicable Conversion.


Due to the variable conversion terms and certain default provisions, the embedded conversion option has been recorded as a derivative liability at an initial fair value of $54,651 recorded as a debt discount. The valuation method utilized was the Black-Scholes model with the following assumptions: Expected life in years 0.10; Stock price at June 15, 2017, $0.017 with the conversion price of $0.0104; Bond equivalent yield rate 1.11%.


On December 15, 2017, the Company issued 10,126,582 shares of common stock upon conversion of $8,000 of Note 7. On December 20, 2017, the Company issued 16,438,356 shares of common stock upon conversion of $12,000 of Note 7.


At December 31, 2017, the valuation method utilized was the Black-Scholes model with the following assumptions: Expected life in years 0.46; Stock price at December 31, 2017 $0.0011 with the conversion price of $0.00054; Bond equivalent yield rate 1.28%. Total principal and interest outstanding at December 31, 2017 was $47,004. The unamortized discount at December 31, 2017 was $17,760.


NOTE 8: On August 31, 2017, the Company entered into a six month 10% convertible promissory note in the amount of $30,000. In event of default the note carries an interest rate of 18%.


The total note is convertible into common stock as follows:


Lender has the right at any time, at its election, to convert (each instance of conversion is referred to herein as a A Conversion”) all or any part of the Conversion Eligible Outstanding Balance into shares (“Conversion Shares”) of fully paid and non-assessable common stock, $0.0001 par value per share (“Common Stock”), of Company as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the A Conversion Amount”) divided by the Conversion Price (as defined below).


Subject to the adjustments set forth herein, the conversion price (the A Conversion Price”) for each Conversion shall be equal to 60% (the A Conversion Factor”) multiplied by the lowest Closing Bid Price in the fifteen (15) Trading Days immediately preceding the applicable Conversion. Due to the variable conversion terms and certain default provisions, the embedded conversion option has been recorded as a derivative liability at an initial fair value of $24,210 recorded as a debt discount. The valuation method utilized was the Black-Scholes model with the following assumptions: Expected life in years 0.10; Stock price at August 31, 2017, $0.0028 with the conversion price of $0.0018; Bond equivalent yield rate 1.08%. At December 31, 2017, the valuation method utilized was the Black-Scholes model with the following assumptions: Expected life in years 0.10; Stock price at December 31, 2017 $0.0011 with the conversion price of $0.00054; Bond equivalent yield rate 1.28%. The principal and interest balance was $30,493 and the unamortized balance was $8,159 at December 31, 2017.




F-19




Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016



(7) SHORT TERM LOANS AND SHORT TERM CONVERTIBLE NOTES (continued)


b) Short term convertible notes (continued)


NOTE 9: On October 18, 2017, pursuant to a securities purchase agreement and a one year convertible promissory note for $43,000 the Company received $40,000, net of $2,500 of the lender’s legal fees and $500 of due diligence fees which were withheld from the funds provided. This note carries a 12% interest rate, with all interest due at maturity.


The total note is convertible into common stock as follows:


Lender has the right at any time, at its election, to convert (each instance of conversion is referred to herein as a A Conversion”) all or any part of the Conversion Eligible Outstanding Balance into shares (“Conversion Shares”) of fully paid and non-assessable common stock, $0.0001 par value per share (“Common Stock”), of Company as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the A Conversion Amount”) divided by the Conversion Price (as defined below).


Subject to the adjustments set forth herein, the conversion price (the “Conversion Price”) for each Conversion shall be equal to 61% (the A Conversion Factor”) multiplied by the lowest Closing Bid Price in the ten (10) Trading Days immediately preceding the applicable Conversion.


Due to the variable conversion terms and certain default provisions, the embedded conversion option has been recorded as a derivative liability at an initial fair value of $41,119 recorded as a debt discount. The valuation method utilized was the Black-Scholes model with the following assumptions: Expected life in years 1.00; Stock price at October 18, 2017, $0.0028 with the conversion price of $0.0014; Bond equivalent yield rate 0.99%.


At December 31, 2017, the valuation method utilized was the Black-Scholes model with the following assumptions: Expected life in years 0.46; Stock price at December 31, 2017 $0.0011 with the conversion price of $0.0005; Bond equivalent yield rate 1.28%. The principal and interest was $44,046 and the unamortized discounts at December 31, 2017 totaled $34,871.


(8) SHORT TERM LOAN - RELATED PARTY


On May 4, 2017, the Company borrowed $20,000 from the Company’s CEO under an informal agreement. This loan carries an interest rate of 8.98% and has a 36 month term. At December 31, 2017, this note balance is $16,046.


As a result of the September 5, 2017, conversion of accrued liability due to a former third party consultant for 192,000,000 shares of common stock this third party consultant became a related party. Convertible Note 6 discussed in Note 7b) is owed to this party. The total amount owed net of discount was $10,297 at December 31, 2017. This party is also the recipient of the shares discussed in Note 9a)


(9) LONG TERM DEBT


In April 2017 the Company entered into a six year loan in the amount of $35,000 to purchase the Suzuki outboard engines for the Luxuria I. This loan carries an interest rate of 6.49% with monthly payments. At December 31, 2017 the balance of this loan was $31,896, of which $5,130 is due within one year.




F-20




Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016



(10) COMMITMENTS AND CONTINGENCIES


a) Stockholders deficit


The Company had the obligation to issue 1,000,000 shares of common stock on July 1, 2017, which has not been issued, and has the obligation to issue another 1,000,000 shares on January 1, 2018, under a new three year consulting agreement entered into on December 9, 2016. These shares will be valued at the market price for shares at the date they are earned. The Company also has the obligation to issue 1,000,000 shares under a six month consulting agreement entered into in November 2017.


b) Leases


The Company occupies dockage space for the Luxuria I pursuant to an annual lease with Bahia Mar Marina Bay, LLC dated May 1, 2017. We pay monthly rent of approximately $4,600. We occupy approximately four hundred (400) square feet of office space without charge at the residence of our Chief Executive Officer, President, Treasurer and Director, and our Secretary.


c) Material Contracts and Agreements


On November 1, 2016, as amended in September 2017, the Company entered into a three year employment agreement with its CEO, Robert Rowe. This agreement calls for him to be paid $20,000 per month in cash and for the Company to issue him 10,000,000 shares of restricted common stock. These shares were issued and valued at the market price on the grant date, $0.0577 per share, for a total of $577,700, which was recorded as prepaid officer compensation and will be amortized over the one year vesting period. The agreement allows him to elect to convert any accrued compensation due him for common stock at a 40% discount market or at such lower price that may have been provided to other parties. The Company recognizes gains or losses on such conversions, on conversion date, as compensation expense. On September 5, 2017, upon conversion the Company recognized a $515,000 conversion loss.


On December 9, 2016, we entered into an agreement (the Agreement) with Oceanside Equities, Inc., (Oceanside), a Florida corporation that provides consulting services. Oceanside agreed to provide us with services from December 9, 2016 until December 8, 2019, in exchange for a one time fee of $20,000 in cash; $16,000 per month accrued and payable in either cash or shares of restricted common stock at the Company’s election and three million one hundred thousand (3,100,000) shares of our restricted common stock, to be issued 1,100,000 on January 1, 2017, 1,000,000 issued on July 1, 2017 and 1,000,000 issued on January 1, 2018.  We will value these shares at the market price on the date they are earned which will be recognized over the term of the contract at the rate of 172,222 shares per month. The agreement allows Oceanside to elect to convert any accrued compensation due him for common stock at a 50% discount market or at such lower price that may have been provided to other parties. The Company recognizes gains or losses on such conversions, on conversion date, as consulting fee expense. On September 5, 2017, upon conversion the Company recognized a $480,000 conversion loss.


On May 19, 2017, as amended in September 2017, the Company entered into a two year consulting agreement with a related party, Ron Rowe II. This agreement calls for him to be paid $8,000 per month in cash and for the Company to issue him 5,000,000 shares of restricted common stock. These shares were issued and valued at the market price on the grant date, $0.029 per share, for a total of $145,000, which was recorded as an immediate consulting expense as it was for past services. The agreement allows the consultant to elect to convert any accrued compensation due him for common stock at a 40% discount market or at such lower price that may have been provided to other parties. The Company recognizes gains or losses on such conversions, on conversion date, as compensation expense. On September 5, 2017, upon conversion the Company recognized a $120,000 conversion loss.




F-21




Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016



(10) COMMITMENTS AND CONTINGENCIES (continued)


d) Investment Banking Agreement


In February 2016 the Company entered into a two year investment banking agreement to raise capital. Pursuant to this agreement the Company is obligated to pay a cash success fee between 6% and 10%, depending on the amount raised as well as issue common stock in the amount of 4% of the amount raised. This agreement has been terminated in March 2017.


e) Common Stock Subscription Agreement


In the last quarter of 2014, as memorialized in May 2015, the Company received a stock subscription agreement from a now former officer and director of the Company for 1,500,000 shares of common stock in exchange for $250,000 in cash or cash equivalents, such as labor and materials for the construction of the barge bottom, or $0.167 per share. Through June 30, 2016 this former officer and director has paid $55,000 and received 330,000 shares, respectively. In August 2016, the Company issued 425,000 shares of our restricted common stock to this former officer and director in exchange for the construction of the barge bottom for Luxuria I, delivered in February, valued at $70,000, based on a negotiated agreement.


f) Legal Matters


From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of December 31, 2017, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations, except as discussed in NOTE 15 SUBSEQUENT EVENTS for Notes 7 and 10.


This party discussed in e) above has not accepted the stock certificate and recently informed the Company that they want to renegotiate since the market price of the common stock has fallen below the negotiated signed contractual price per share.


(11) STOCKHOLDERS’ DEFICIT


At December 31, 2017 and 2016, the Company has 5,000,000,000 shares of par value $0.0001 common stock authorized and 732,952,883 and 21,333,629 shares issued and outstanding, respectively. At December 31, 2017 and 2016, the Company has 10,000,000 shares of par value $0.0001 preferred stock authorized and 1,000,000 and 1,000,000 Redeemable Series A preferred shares issued and outstanding, respectively.


Effective February 16, 2016, we entered into an agreement (the Agreement) with StockVest, Inc., a Florida corporation that provides investor relations and public relations services. The agreement was amended on March 1, 2016. As amended StockVest agreed to provide us with services from March 12, 2016 until June 12, 2016, in exchange for $500 and one hundred fifty thousand (150,000) shares of our restricted common stock. We valued these shares at the price of $.10 per share, based on the most recent sale of common stock by the Company, or an aggregate of $15,000 upon issuance, which was recognized over the life of the contract.


In June 2016, the Company issued 250,000 shares of our restricted common stock to a related party consultant and principal stockholder in exchange for $25,000 of cash.


In the June 2016 the Company issued 500,000 shares of the Company’s common stock to a related party consultant and principal stockholder in exchange for one year of prepaid services, valued at $50,000, or $0.10 per share based on the recent private placement, to be amortized at the rate of $4,167 per month. This was the second issuance as was required under this two year consulting agreement. (See above)



F-22




Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016



(11) STOCKHOLDERS’ DEFICIT (continued)


In June 2016 the Company issued 1,000,000 shares of redeemable Series A preferred stock to the Company’s founder and CEO. The Company recorded these shares at their redemption value of $1,000 which approximates fair value. The only rights and privileges of these shares is super voting rights, 1,000 votes for each preferred share and the right to redeem the shares for $1,000.


In August 2016 the Company issued 100,000 shares of our restricted common stock as a loan fee recorded as a discount valued at the  price of $10,000 or $0.10 per share based on recent stock sales on a new short-term loan, which is being amortized over the life of the loan  (See note 7b).


In August 2016, the Company issued 200,000 shares of our restricted common stock to a related party consultant and principal stockholder in exchange for $20,000 of cash.


In August 2016, the Company issued 425,000 shares of our restricted common stock to a former officer and director in exchange for the construction of the barge bottom for Luxuria I, delivered in February, valued at $70,000. (See note 9)


In August 2016, the Company issued 600,000 shares of restricted common stock in exchange for $36,000 of cash.


In September 2016, the Company issued 42,000 shares of our common stock upon conversion of $4,032 of debt. (See note 12) Related premium of $2,688 was reclassified to additional paid in capital.


In October and November 2016, the Company issued 1,532,740 shares of our common stock upon conversion of $47,668 of debt. (See note 12) Related premium of $31,779 was reclassified to additional paid in capital.


In October 2016, the Company issued 600,000 shares of restricted common stock in exchange for $36,000 of cash.


In November 2016, the Company issued 10,000,000 shares of restricted common stock to the CEO for future services valued at $577,700, or $0.0577 per share, the trading price of the shares on the grant date. The $577,700 was recorded as prepaid officer compensation and is being amortized over the one year vesting period.


In December 2016, the Company issued 41,667 shares of restricted common stock in exchange for $2,500 of cash.


In December 2016, the Company recorded the issuance of 172,222 shares of our restricted common stock to be issued on January 1, 2017, as these shares were earned in 2016. They were valued at $13,778.


On January 1, 2017, the Company issued 927,778 shares of common stock under a consulting agreement. These shares were valued at $0.08 per share, or $62,834.


On January 12, 2017, the Company issued 100,000 shares of common stock pursuant to the replacement $100,000 promissory note. These shares were valued at $0.06 per share, or $6,000, which was recorded as a debt discount and is being amortized over the remaining life of the loan.


On January 18, 2017, the Company issued 200,000 shares of common stock under a consulting agreement. These shares were valued at $0.08 per share, or $16,000.


On January 23, 2017, the Company issued 250,000 shares of common stock under a consulting agreement. These shares were valued at $0.14 per share, or $33,750.




F-23




Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016



(11) STOCKHOLDERS’ DEFICIT (continued)


On March 22, 2017, the Company issued 1,000,000 shares of common stock to settle $30,000 of the outstanding convertible debt. These shares were valued at $0.073 per share, or $73,000 based on the quoted trading price, and after relieving the related derivative value, a gain of $3,463 was recorded. (See Note 7b)


On May 4, 2017, the Company issued 75,000 shares of common stock under a consulting agreement. These shares were valued at $0.035 per share, or $2,625.


On May 19, 2017, the Company issued 5,000,000 and 5,000,000 shares of common stock to the Company’s two officers in exchange for services rendered. These shares were valued at $0.029 per share, or $145,000 and $145,000.  


On May 19, 2017, the Company issued 5,000,000 shares of common stock to the nephew of the Company’s CEO in exchange for services rendered. These shares were valued at $0.029 per share, or $145,000.


On May 25, 2017, the Company issued 4,800,000 shares of common stock to settle $48,000 of expenses accrued under a consulting agreement. These shares were valued at $0.013 per share, or $62,400. Accordingly, the Company recorded $14,400 as a loss on accrued expenses settlement.


On June 17, 2017, the Company issued 2,250,000; 2,250,000 and 2,250,000 shares of common stock to three parties to settle an aggregate $13,500 of debt of Convertible Notes 4, 5 and 6. These shares were valued at $0.002 per share, or $4,500; $4,500 and $4,500. (See Note 7b)


On July 17, 2017 the Company issued 1,000,000 shares as a loan fee to a third party. These shares were valued at the quoted market price of $0.015 per share, or $15,000.


On July 18, 2017, the Company issued 2,307,692 shares of common stock upon conversion of $18,000 of outstanding convertible debt.


On July 18, 2017, the Company issued 5,500,000 shares of common stock upon conversion of $11,000 of outstanding convertible debt. (See Note 7)


On August 18, 2017, the Company issued 3,800,000 shares of common stock upon conversion $10,944 of outstanding convertible debt.  (See Note 7)


On September 5, 2017, the Company issued 446,000,000 shares of common stock upon conversion of $223,000 of accrued liabilities to three related parties and recognized a loss of $1,115,000, charging officer compensation $515,000 and related party professional fees $600,000, valuing the shares at the quoted market price was $0.003 on that date.  (See Note 7b)


On October 13, 2017, the Company issued 6,190,000 shares to convert $8,914 of convertible Note 2 (see Note 7b).


On December 15, 2017, the Company issued 10,126,582 shares to convert $8,000 of convertible Note 7 (see Note 7b).


On December 18, 2017, the Company issued 166,153,846 shares to convert $108,000 of accrued expenses and recorded a loss on conversion of $141,231.




F-24




Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016



(11) STOCKHOLDERS’ DEFICIT (continued)


On December 20, 2017, the Company issued 16,438,356 shares to convert $12,000 of convertible Note 7 (see Note 7b).


On December 27, 2017, the Company issued 25,000,000 shares to convert $15,000 of convertible Note 2 (see Note 7b).


In November the Company became obligated to issue 1,000,000 shares of common stock in exchange for services under a consulting contract. The Company recorded these shares based on the quoted market price of $0.0024, or $2,400 and is amortizing this amount over the term of the contract with $1,600 recognized in 2017.


Valuation of shares issued for services and settlements were based upon the quoted market price on the requisite measurement date.


(12) RELATED PARTIES


a) Rental property


On September 25, 2014, the Company acquired the Miss Leah, a luxury floating vessel built on a barge platform from the Predecessor which is owned by the founders brother. As part of this acquisition transaction the Company issued a promissory note in June 2015 to the Predecessor in the amount of $100,000, carrying an interest rate of 2% effective September 25, 2014, with a maturity date of June 20, 2022. The Company recorded the payable in September 2014 which was formalized with this promissory note in June 2015. At December 31, 2017 and 2016, the Company had accrued interest of $6,455 and $4,482, respectively.


b) Related party payable


In the last quarter 2014, the Predecessor continued to receive some of the revenue from and to pay some of the expenses related to the rental of the Miss Leah. The Company has established a payable to the Predecessor of $3,888 for the net differential resultant therefrom and recorded the related revenue and expenses in the Company’s records.


c) Common stock subscription agreement


In the last quarter 2014 as memorialized in May 2015, the Company received a stock subscription agreement from a now former director of the Company for 1,500,000 shares of common stock in exchange for $250,000 in cash or cash equivalents, or $0.167 per share. In 2014 and 2015 this now former director contributed $5,000 and $50,000 and received 30,000 and 300,000 shares, respectively. In 2016 he constructed the barge bottom for the Luxuria I and received 425,000 shares valued at $70,000.


d) Cash expenses incurred to related parties during each the years ended December 31, presented is as follows:


 

2017

 

2016

Commissions - daughter of founder

$

2,383

 

$

2,640

Construction management - brother of founder

$

28,500

 

$

-

Construction management - nephew of founder

$

24,000

 

$

-

Professional fees - significant stockholder

$

-

 

$

55,335




F-25




Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2016 and 2015


(12) RELATED PARTIES (continued)


e) Common stock issued to related party


On May 19, 2017, the Company issued 5,000,000 shares of common stock to the nephew of the Company’s CEO in exchange for services rendered. These shares were valued at $0.029 per share, or $145,000. These shares were issued under a one year consulting agreement dated in May 2017, which pays the nephew $8,000 per month.


(13) - INCOME TAXES


There was no Federal or State Income Tax expense for the years ended December 31, 2017 and 2016 due to the Company’s net loss.


The Company's effective income tax expense (benefit) differs from the A expected” tax expense for Federal income tax purposes, (computed by applying the United States Federal tax rate of 34% to loss before taxes) as follows:


 

2017

 

2016

Tax (benefit) on net loss before income tax

$

(1,034,495)

 

$

(435,704)

Change in federal tax rates

191,291 

 

Effect of state taxes (net of federal benefit)

(110,447)

 

(46,518)

Stock compensation

879,051 

 

56,810 

Debt premiums

142,085 

 

12,970 

Derivatives

(87,769)

 

120,862 

Change in valuation allowance

20,284 

 

291,580 

    Income tax provision

$

 

$



The Company recognizes deferred tax assets and liabilities for the tax effects of differences between the financial statements and tax basis of assets and liabilities.


The components of net deferred tax assets and liabilities that have been presented in the Company's financial statements are as follows at December 31,:



Deferred income tax assets:

2017

 

2016

    Net operating loss carryforward

$

394,649 

 

$

374,365 

    Accrued wages

 

        Total deferred tax assets

394,649 

 

374,365 

Valuation allowance

(394,649)

 

(374,365)

Net deferred taxes

$

 

$



The Company records a valuation allowance to reduce deferred tax assets, based on the weight of the available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. In determining the need for a valuation allowance, an assessment of all available evidence both positive and negative was required. The Company recorded a valuation allowance of $394,649 and $374,365 in 2017 and 2016, respectively.



F-26




Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2016 and 2015



(13) - INCOME TAXES (continued)


At December 31, 2017, the Company has a net operating loss carryforward of $1,557,109 available to offset future net income expiring through 2037. The utilization of the net operating loss carryforward is dependent on the ability of the Company to generate sufficient taxable income during the carryforward period. In the event that a significant change in ownership of the Company occurs as a result of the issuance of common stock, the utilization of the NOL carry forward will be subject to limitation under certain provisions of the Internal Revenue Code. Management does not presently believe that such a change has occurred.


In accordance with the provisions of ASC 740: Income Taxes, the Company records a liability for uncertain tax positions when it is probable that a loss has been incurred and the amount can be reasonably estimated. At December 31, 2016, the Company has no liabilities for uncertain tax positions. The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings.


On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (Act). The Act makes significant modifications to the provisions of the Internal Revenue Code, including but not limited to, a corporate tax rate decrease to 21% effective as of January 1, 2018. The Company’s net deferred tax assets and liabilities have been revalued at the newly enacted U.S. Corporate rate in the year of enactment. The adjustment related to the revaluation of the deferred tax asset and liability balances is a net charge of approximately $191,000. This expense is fully offset by a change in valuation allowance. Accordingly, there is no impact on income tax expense as of December 31, 2017.


As of December 31, 2017, the tax years 2017, 2016, 2015 and 2014 for the LLC and 2017, 2016 and 2015 for the corporation remain open for IRS audit. The Company has received no notice of audit or any notifications from the IRS for any of the open tax years.


(14) CONCENTRATIONS OF RISK


The Company has only one revenue producing asset at December 31, 2017, the Luxuria I floating vessel, and that asset is located in Bahia Mar Marina, Ft. Lauderdale, FL. The rental season at this location is generally year round. The Company primarily utilizes two booking agents to schedule bookings from customers and collect the revenue. If required the Company believes it could obtain bookings through an alternative provider.


The Company maintains its cash in bank deposit accounts, which may, at times, may exceed federally insured limits. The Company had no cash balances in excess of FDIC insured limits at December 31, 2017 and 2016, respectively.


(15) SUBSEQUENT EVENTS


a) Short Term Debt


The note in the remaining balance of $345,050 matured on January 11, 2018. On January 17, 2018, the lender agreed to extend this note for an additional three month period for an extension fee of $10,351. On April 4, 2018, the lender agreed to extend this note for an additional three month period for an extension fee of $11,712.


On February 9, 2018, $35,000 was extended to the Company as a draw on this note.


b)  Short Term Convertible Notes


NOTE 2: On February 14, 2018, the lender agreed to extend the maturity of the August 4, 2016 Note from February 11, 2018 to May 11, 2018, in exchange for additional interest of $11,076 due at maturity.



F-27




Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2016 and 2015



(15) SUBSEQUENT EVENTS (continued)


b)  Short Term Convertible Notes (continued)


During the first quarter of 2018, the lender converted $121,995 of this note for a total of 709,666,667 shares of common stock in 9 separate conversions.


NOTE 7: During the first quarter of 2018, the lender converted $45,880 of this note for a total of 138,874,454 shares of common stock in 6 separate conversions.


NOTE 10: On March 19, 2018, pursuant to a securities purchase agreement and a nine month convertible promissory note for $16,500 the Company received $16,000. In addition, the Company is required to pay $500 of the lender’s legal fees which were withheld from the funds provided. This note carries a 12% interest rate, with all interest due at maturity.


The total note is convertible into common stock as follows:


Lender has the right at any time, at its election, to convert (each instance of conversion is referred to herein as a “Conversion”) all or any part of the Conversion Eligible Outstanding Balance into shares (“Conversion Shares”) of fully paid and non-assessable common stock, $0.0001 par value per share (“Common Stock”), of Company as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the “Conversion Amount”) divided by the Conversion Price (as defined below).


Subject to the adjustments set forth herein, the conversion price (the “Conversion Price”) for each Conversion shall be equal to 61% (the “Conversion Factor”) multiplied by the lowest Closing Bid Price in the ten (10) Trading Days immediately preceding the applicable Conversion.


Due to the variable conversion terms and certain default provisions, the embedded conversion option will be recorded as a derivative liability.


DEFAULT NOTICE FOR NOTES 7 AND 10: On April 17, 2018, due to the failure to timely file the Annual Report on Form 10-K, the lender automatically issued a default notice for these notes. This default notice requires the Company to pay $89,250 plus all accrued interest. This amount includes a default penalty of $29,750 for the two notes combined, or 50% of the then outstanding principal balances of $59,500 combined.


c) Officer advances


The CEO of the Company has loaned $10,900 to the Company as an undocumented non-interest bearing short term loan.  



F-28




ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE


None.



ITEM 9A.   CONTROLS AND PROCEDURES


Disclosure Controls and Procedures


Under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer the Company conducted an evaluation of the effectiveness of the Company s disclosure controls and procedures, as defined in Rule 13a 15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange Act ), as of the end of the period covered by this annual report. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded as of December 31, 2017 that the Company’s disclosure controls and procedures were not effective such that the information required to be disclosed in the Company’s United States Securities and Exchange Commission (the “SEC”) reports is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, currently the same person to allow timely decisions regarding required disclosure. Further, certain other deficiencies involving internal controls over financial reporting constituted a material weakness as discussed below.


Management’s Annual Report on Internal Control over Financial Reporting


Based on its evaluation under the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission as of December 31, 2017, the Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, concluded that its internal control over financial reporting were not effective as of December 31, 2017. Based on its evaluation, our management concluded that our internal control over financial reporting as of the end of our most recent fiscal year is not effective because there is a material weakness in our internal control over financial reporting as discussed below. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

  

This annual report does not include an attestation report of the Company's independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our independent registered public accounting firm pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, which permanently exempts non-accelerated filers from complying with Section 404(b) of the Sarbanes-Oxley Act of 2002.


Attached as exhibits to this Form 10-K are certifications of the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), which are required in accordance with Rule 13a-14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This “Controls and Procedures” section includes information concerning the controls and controls evaluation referred to in the certifications.


Material Weakness Identified


The Company does not have a full time Controller or Chief Financial Officer and utilizes a part time consultant to perform these critical responsibilities. This lack of full time accounting staff results in a lack of segregation of duties and accounting technical expertise and lack of monitoring controls necessary for an effective system of internal control. Additionally, certain IT controls have not been developed nor adhered to. Because of the size of the Company and the Company’s administrative staff, as well as other reasons noted above, controls related to the segregation of certain duties, and additionally, controls and processes involving the communication, dissemination, and disclosure of information, and moitoring controls have not been developed and the Company has not been able to adhere to them.  Furthermore, we have not formally adopted a written code of business conduct and ethics that governs the Company’s employees, officers, and directors.  Since these entity level programs have a pervasive effect across the organization, as well as other deficiencies, management has determined that these circumstances constitute a material weakness. Additionally, the Board of Directors does not currently have a director who qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K.





20




Changes in Internal Control over Financial Reporting


There have been no changes in our internal control over financial reporting during the fiscal year ended December 31, 2017, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


Inherent Limitations on Effectiveness of Controls


Our management, including the CEO/CFO, does not expect that the Disclosure Controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within our Company have been detected.


These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions of deterioration in the degree of compliance with policies or procedures.




ITEM 9B.   OTHER INFORMATION


Not applicable.



21




ITEM III


ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE


The following table sets forth the name, age, and position of our executive officers and directors. Executive officers are elected annually by our Board of Directors. Each executive officer holds his office until he resigns, is removed by the Board, or his successor is elected and qualified. Directors are elected annually by our shareholders at the annual meeting. Each director holds his office until his successor is elected and qualified or his earlier resignation or removal.


Name

Age

Position

Robert Rowe

68

Chief Executive Officer, President, Treasurer Acting Chief Financial Officer and

Principal Accounting Officer and Director

Leah Rowe

58

Secretary



Robert Rowe, Chief Executive Officer, President, Treasurer,  Acting Chief Financial Officer and Principal Accounting Officer and Director

 

Since our inception on June 16, 2014 to present, Robert Rowe has been our Chief Executive Officer, President, Treasurer and Director. From June 2014 to present Mr. Rowe was the Manager of Global Boatworks, LLC. From January 2005 to present Mr. Rowe was an independent contractor and consultant for Rowe Construction in Pompano Beach, Florida. From January 1999 to January 2005 Mr. Rowe was an independent contractor and consultant for the Miles Group in Lynn, Massachusetts.

 

Mr. Rowe obtained a Bachelor of Science degree in Business Education from Salem State University in June of 1972.

 

Mr. Rowe spends approximately forty (40) hours each week on our business. As our Chief Executive Officer, President, Treasurer and Director, Mr. Rowe provides his experience in the boat manufacturing and sales.

 

Leah Rowe, Secretary

 

Since our inception on June 16, 2014 to present, Leah Rowe has been our Secretary. Ms. Rowe has no prior related work experience.

 

Mrs. Rowe obtained an Associate’s degree in Business Management from North Shore Community College in June of 1991.

 

Leah Rowe spends approximately fifteen (15) hours per week on our business. As our secretary, Ms Rowe provides her experience in business management.


Family Relationships


Robert Rowe our Chief Executive Officer, President, Treasurer and Director is the husband of Leah Rowe, our Secretary. Other than the foregoing, there are no family relationships among our directors and executive officers and shareholders.


Legal Proceedings


On February 21, 1997, Robert Rowe our Chief Executive Officer, President, Treasurer and Director was found guilty of bankruptcy fraud in violation of 18 US Code § 152. There have been no events under any bankruptcy act, no criminal proceedings, no judgments, injunctions, orders or decrees material to the evaluation of the ability and integrity of any of our directors, executive officers, promoters or control persons during the past ten (10) years.


Other than as set forth above, no officer, director, or persons nominated for such positions, promoter or significant employee has been involved in the last ten years in any of the following:


·

Any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two (2) years prior to that time,




22



·

Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses),


·

Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities,


·

Being found by a court of competent jurisdiction (in a civil action), the Commission 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.


·

Having any government agency, administrative agency, or administrative court impose an administrative finding, order, decree, or sanction against them as a result of their involvement in any type of business, securities, or banking activity.


·

Being the subject of a pending administrative proceeding related to their involvement in any type of business, securities, or banking activity.


·

Having any administrative proceeding been threatened against you related to their involvement in any type of business, securities, or banking activity.


Code of Business Conduct and Ethics


We do not have any standing audit, nominating, and compensation committees of the board of directors, or committees performing similar functions.  We do not currently have a Code of Ethics applicable to our principal executive, financial, or accounting officer.  All Board actions have been taken by Written Action rather than formal meetings.


ITEM 11. EXECUTIVE COMPENSATION


The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to the named persons for services rendered in all capacities for the years ending December 31, 2017 and 2016.


Name and Principal Position

 

Year Ended Dec 31

 

Salary

 

Bonus

 

Stock Awards

 

Option Awards

 

Non-Equity Incentive Plan Compensation Earnings

 

Non-

Qualified Deferred Compensation Earnings

 

All Other Compensation

 

Total

 

 

 

 

($)

 

($)

 

($)

 

($)

 

($)

 

($)

 

($)

 

($)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Robert Rowe, CEO, CFO (1)(2)

 

2017

 

279,465(3)

 

-

 

145,000

plus

562,077 conversion loss

 

-

 

-

 

-

 

-

 

986,542

 

 

2016

 

114,800 

 

-

 

578,700

 

-

 

-

 

-

 

 

 

693,500

Leah Rowe, Secretary

 

2017

 

30,600 

 

-

 

145,000

 

-

 

-

 

-

 

-

 

175,600

 

 

2016

 

$

11,400 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,400


(1)

In June 2016, we issued 1,000,000 shares of Redeemable Series A preferred stock to Robert Rowe, our Chief Executive Officer, President, Treasurer and Director valued at their redemption value of $1,000 for services.  


(2)

On November 1, 2016, we issued 10,000,000 common shares to Robert Rowe, our CEO. We valued these shares at $0.0577 per share or an aggregate of $577,700, for future services under a three-year employment agreement.


(3)

For the year ended December 31, 2017, Robert Rowe received $140,465 in cash compensation and $139,000 in stock in lieu of additional cash compensation owed under his employment agreement.




23



Employment Agreements with Management


On May 11, 2015, we entered into an agreement with Robert Rowe, our Chief Executive Officer, President, Treasurer and Director, to provide services to us. The agreement has a term of three (3) years and requires us to pay $1,700 per week to Mr. Rowe for his services as our Chief Executive Officer, President, Treasurer and Director. On November 1, 2016, this agreement was replaced with a new three (3) year employment agreement and requires us to pay $20,000 per month to Mr. Rowe for his services as our Chief Executive Officer, President, Treasurer and Director, which allows for the conversion of his accrued salary into common stock at a 40% discount to the then market price.  


On May 11, 2015, we entered into an agreement with Leah Rowe, our Secretary, to provide services to us. The agreement has a term of three (3) years and requires us to pay $600 per month to Ms. Rowe for her services as our Secretary. On November 1, 2016, this agreement was replaced with a new three (3) year employment agreement and requires us to pay $2,400 per month to Ms. Rowe for her services as our Secretary.


Our Board of Directors determines the compensation paid to our executive officers, based upon the years of service to us, whether services are provided on a full-time basis and the experience and level of skill required.


We may award our officers and directors shares of common stock as non-cash compensation as determined by the Board of Directors from time to time. The Board of Directors will base its decision to grant common stock as compensation on the level of skill required to perform the services rendered and time committed to providing services to us.


Outstanding Equity Awards at the End of the Fiscal Year


We do not have and have never had any equity compensation plans and therefore no equity awards are outstanding as of the date of this Form 10-K.


Director Compensation


Our directors do not receive any other compensation for serving on the board of directors.


Bonuses and Deferred Compensation


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


Options and Stock Appreciation Rights


We do not currently have a stock option or other equity incentive plan. We may adopt one or more such programs in the future.


Payment of Post-Termination Compensation


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


Involvement in Certain Legal Proceedings


On February 21, 1997, Robert Rowe our Chief Executive Officer, President, Treasurer and Director was found guilty of bankruptcy fraud in violation of 18 US Code § 152. There have been no events under any bankruptcy act, no criminal proceedings, no judgments, injunctions, orders or decrees material to the evaluation of the ability and integrity of any of our directors, executive officers, promoters or control persons during the past ten (10) years.


Board of Directors


All directors hold office until the next annual meeting of shareholders and until their successors have been duly elected and qualified. Officers are elected by and serve at the discretion of the board of directors.


Our directors are reimbursed for expenses incurred by them in connection with attending board meetings, but they do not receive any other compensation for serving on the board of directors.




24



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


As of March 31, 2018, we had 1,581,494,004 common shares outstanding. The following table sets forth certain information regarding our shares of common stock beneficially owned as of March 31, 2018, for (i) each stockholder known to be the beneficial owner of five percent (5%) or more of our outstanding shares of common stock, (ii) each named executive officer and director, and (iii) all executive officers and directors as a group. A person is considered to beneficially own any shares: (i) over which such person, directly or indirectly, exercises sole or shared voting or investment power, or (ii) of which such person has the right to acquire beneficial ownership at any time within sixty (60) days through an exercise of stock options or warrants or otherwise.  Unless otherwise indicated, voting and investment power relating to the shares shown in the table for our directors and executive officers is exercised solely by the beneficial owner or shared by the owner and the owner’s spouse or children.

 

For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person has the right to acquire within sixty (60) days of the date of this Annual Report. For purposes of computing the percentage of outstanding shares of our common stock held by each person or group of persons named above, any shares that such person or persons has the right to acquire within sixty (60) days of the Closing Date is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership.

 

Unless otherwise specified, the address of each of the persons set forth below is in care of the Company at 2637 Atlantic Blvd., #134, Pompano Beach, Florida 33062.


AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP

Common Stock

Direct

Indirect

Total

Percentage of Class (1)

Name and Address of Beneficial Owner

 

 

 

 

Executive Officers and Directors

 

 

 

 

Robert Rowe (2)

280,754,615

 5,100,000(2)

285,854,615 (2)

18.4%

Leah Rowe (2)

5,100,000

280,754,615 (2)

285,854,615 (2)

18.4%

 Officers and Directors as a Group

 

 

 285,854,615

18.4%

 

 

 

 

 

Other 5% Holders

 

 

 

 

Oceanside Equities

265,846,154

265,846,154 

17.08%

 Ronald Rowe II

 89,923,077

 0

 89,923,077

5.78%

 

 

 

 

 

Series A Preferred Stock (3)

 

 

 

 

Robert Rowe 100%

1,000,000

1,000,000 

100%

(1)

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Except as otherwise indicated, we believe that the beneficial owners of the common stock listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable.


(2)

Robert Rowe, our Chief Executive Officer, President, Treasurer and Director holds 280,754,615 shares directly and 5,100,000 shares indirectly which are held by his spouse, Leah Rowe, our Secretary. Leah Rowe, our Secretary holds 5,100,000 directly and 280,754,615 shares indirectly which are held by her spouse, Robert Rowe, our Chief Executive Officer, President, Treasurer and Director.


(3)

The Redeemable Series A Preferred Stock has voting rights equal to 1,000 votes of common for each preferred share.




25



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


In June 2016, we issued 1,000,000 shares of Redeemable Series A preferred stock to Robert Rowe, our Chief Executive Officer, President, Treasurer and Director valued at their redemption value of $1,000 for services.


In August 2016, the Company issued 200,000 shares of our restricted common stock to a related party consultant and principal stockholder in exchange for $20,000 of cash.


In August 2016, the Company issued 425,000 shares of our restricted common stock to a former officer and director in exchange for the construction of the barge bottom for Luxuria I, delivered in February, valued at $70,000.


On November 1, 2016, we issued 10,000,000 common shares to Robert Rowe, our CEO. We valued these shares at $0.0577 per share or an aggregate of $577,700, for future services under a three-year employment agreement.


On May 4, 2017, the Company borrowed $20,000 from the Company’s CEO under an informal agreement. This loan carries an interest rate of 8.98% and has a 36-month term. At December 31, 2017, this note balance is $16,046.


On May 19, 2017, the Company entered into a consulting agreement with Ronald Rowe II, the nephew of the Company’s CEO. The agreement calls for compensation at the rate of $8,000 per month. Additionally, Ronald Rowe II was issued 5,000,000 shares of the Company’s common stock as a bonus. These shares were valued at $0.029 per share, or $145,000. The agreement with was maned on Augusts 30, 2017. Additionally, he was issued 48,000,000 shares on September 6, 2017 and 36,923,077 shares on December 8, 2017.


On May 19, 2017, the Company issued 5,000,000 shares of common stock to the nephew of the Company’s CEO in exchange for services rendered. These shares were valued at $0.029 per share, or $145,000.


On September 5, 2017, the Company issued 446,000,000 shares of common stock upon conversion of $223,000 of accrued liabilities to three related parties.


Other than stated above, none of the following persons has any direct or indirect material interest in any transaction to which we are a party during the last two fiscal years or in any proposed transaction to which we are proposed to be a party:


·

Any of our directors or officers;


·

Any proposed nominee for election as our director;


·

Any person who beneficially owns, directly or indirectly, shares carrying more than ten percent (10%) of the voting rights attached to our shares; or


·

Any relative or spouse of any of the foregoing persons, or any relative of such spouse, who has the same house as such person or who is a director or officer of any parent or subsidiary of our company.



ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES


The Company's Board of Directors reviews and approves audit and permissible non-audit services performed by its independent registered public accounting firm, as well as the fees charged for such services.  In its review of non-audit service and its appointment of Salberg & Company, P.A. as our independent registered public accounting firm, the Board considered whether the provision of such services is compatible with maintaining independence.  All of the services provided and fees charged by Salberg & Company, P.A. in 2017 and 2016 were approved by the Board of Directors.  The following table shows the fees for the years ended December 31, 2017 and 2016:


  

2017

2016

Audit Fees (1)

$

29,500

$

30,500

Audit Related Fees (2)

$

0

$

0

Tax Fees (3)

$

0

$

0

All Other Fees

$

0

$

0











































































































































































































































































































































































26



(1)

Audit fees – these fees relate to the audit of our annual consolidated financial statements and the review of our interim quarterly financial statements.

(2)

Audit-related fees – these fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees” and services that are normally provided by the accountant in connection with non-year-end statutory and regulatory filings or engagements.

(3)

Tax fees – no fees of this sort were billed by Salberg & Company P.A., our principal accountant during 2017 or 2016


Pre-Approval Policies and Procedures of Audit and Non-Audit Services of Independent Registered Public Accounting Firm


The Board of Director’s policy is to pre-approve, typically at the beginning of our fiscal year, all audit and non-audit services, other than de minimis non-audit services, to be provided by an independent registered public accounting firm.  These services may include, among others, audit services, audit-related services, tax services and other services and such services are generally subject to a specific budget.  The independent registered public accounting firm and management are required to periodically report to the full Board of Directors regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval, and the fees for the services performed to date.  As part of the Board’s review, the Board will evaluate other known potential engagements of the independent auditor, including the scope of work proposed to be performed and the proposed fees, and approve or reject each service, taking into account whether the services are permissible under applicable law and the possible impact of each non-audit service on the independent auditor’s independence from management.  At audit committee meetings throughout the year, the auditor and management may present subsequent services for approval.  Typically, these would be services such as due diligence for an acquisition, that would not have been known at the beginning of the year.


The Board of Directors has considered the provision of non-audit services provided by our independent registered public accounting firm to be compatible with maintaining their independence.  The audit committee will continue to approve all audit and permissible non-audit services provided by our independent registered public accounting firm.  




27



PART IV


ITEM 15.   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES


Documents filed as part of this Report:



(a)

1.

Financial Statements. See Index to Consolidated Financial Statements, which appears on page F-1 hereof. The financial statements listed in the accompanying Index to Consolidated Financial Statements are filed herewith in response to this Item.

2.

Financial Statements Schedules. All schedules are omitted because they are not applicable or because the required information is contained in the consolidated financial statements or notes included in this report.

3.

Exhibit Index as set forth below.


(b)


EXHIBIT INDEX


Exhibit

No.

 

Exhibit Description

 

Incorporated By Reference (Form)

 

Filed

Herewith

 

 

 

 

 

Date

 

 

 

 

 

 

 

 

3.1

 

Certificate of Incorporation

 

S-1  Exhibit 3.1

7/10/15

 

3.2

 

By-Laws

 

S-1  Exhibit 3.2

7/10/15

 

10.1

 

Employment Agreement Robert Rowe

 

S-1  Exhibit 10.1

7/10/15

 

10.2

 

Employment Agreement Leah Rowe

 

S-1  Exhibit 10.2

7/10/15

 

10.3

 

Promissory Note Global Boatworks LLC & Financial Innovators Corp

 

S-1  Exhibit 10.3

7/10/15

 

10.4

 

Agreement Between Global Boatworks Holdings Inc & Global Boatworks LLC

 

S-1 Exhibit 10.4

7/10/15

 

10.5

 

Agreement with Oceanside Equities

 

S-1  Exhibit 10.5

7/10/15

 

10.7

 

Agreement with Flagship Marine Bay LLC

 

S-1  Exhibit 10.7

8/7/15

 

10.8

 

Invoice Carlos Vilaca & Associates

 

S-1  Exhibit 10.8

8/7/15

 

10.9

 

Invoice Senator Group LLC

 

S-1  Exhibit 10.9

8/7/15

 

10.10

 

Richi Bramos Promissory Note

 

S-1  Exhibit 10.10

8/7/15

 

10.13

 

December 9, 2016, Oceanside Equity Consulting Agreement

 

 

 

X

10.14

 

Securities Purchase Agreement with St George Investments, LLC, dated January 5, 2017

 

 

 

X

10.15

 

10% Convertible Promissory Note dated April 15, 2017

 

 

 

X

10.16

 

Ronald Rowe II Consulting Agreement

 

 

 

X

10.17

 

$50,000 Loan Agreement dated July 17, 2017

 

 

 

X

10.18

 

10% Convertible Promissory Note Dated August 31, 2017

 

 

 

X

10.19

 

Convertible Promissory Note for $43,000

 

 

 

X

10.20

 

$43,000 Note Purchase Agreement dated October 6, 2017

 

 

 

X

31.1

 

Certification Pursuant to Rules 13a-14(a) under the Securities Exchange Act of 1934 as amended

 

 

 

X

32.1

 

Certification Pursuant to 18 U.S.C. Section 1350

 

 

 

X





28





SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.




Global Boatworks Holdings, Inc.



Date: April 30, 2018

By:/s/ Robert Rowe

Robert Rowe

Chief Executive Officer



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.





Date: April 30, 2018

By: /s/ Robert Rowe

 Robert Rowe

 Chief Executive Officer




Date: April 30, 2018

By: /s/ Robert Rowe

 Robert Rowe

 Chief Financial Officer



29



EXHIBIT 10.13




 


EXHIBIT 10.14


NOTE PURCHASE AGREEMENT


THIS NOTE PURCHASE AGREEMENT (this “ Agreement ”), dated as of January 5, 2017, is entered into by and among GLOBAL BOATWORKS HOLDINGS, INC. , a Florida corporation (“ Company ”), G LOBAL BOATWORKS LLC, a Florida limited liability company (“ Boatworks ,” and together with Company, “ Borrower ”), and ST. GEORGE INVESTMENTS LLC, a Utah limited liability company, its successors and/or assigns (“ Investor ”).

A.

Borrower 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 Borrower desires to issue and sell, upon the terms and conditions set forth in this Agreement, a Secured Promissory Note, in the form attached hereto as , in the original principal amount of $830,000.00 (the “ Note ”), upon the terms and subject to the limitations and conditions set forth in such Note.   

C.

Boatworks is a wholly owned subsidiary of Company that (i) is involved in Company’s ongoing business operations, (ii) holds and/or controls various assets, and (iii) is a co-borrower under the Note. The proceeds from the Note will provide substantial benefits to both Company and Boatworks.    

D.

This Agreement, the Note, the Company Security Agreement (as defined below), the Boatworks Security Agreement (as defined below), the Guaranty (as defined below), 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 ”.

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 the Note .

1.1.

Purchase of the Note . Borrower agrees to sell to Investor and Investor agrees to purchase from Borrower the Note. 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 as set forth in the table attached hereto as .

1.2.

Form of Payment . On the Closing Date, (i) Investor shall pay the Purchase Price to Company by delivering the following at the Closing: (A) the Initial Cash Purchase Price, which shall be delivered by wire transfer of immediately available funds to Borrower, in accordance with Company’s written wiring instructions; (B) Investor Note #1 in the principal amount of $150,000.00 duly executed and substantially in the form attached hereto as  (“ 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  (“ 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  (“ Investor Note #3 ”); and (E) Investor Note #4 in the principal amount of $150,000.00 duly executed and substantially in the form attached hereto as  (“ Investor Note #4 ”, and together with Investor Note #1, Investor Note #2, and Investor Note #3, the “ Investor Notes ”); and (ii) Borrower shall deliver the duly executed Note 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  and Section  below, the date of the issuance and sale of the Note pursuant to this Agreement (the “ Closing Date ”) shall be January 5, 2017, 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 be secured by the following:

(a)

The collateral set forth in that certain Security Agreement attached hereto as  listing all of Company’s assets as security for Company’s obligations under the Transaction Documents (the “ Company Security Agreement ”).

(b)

The collateral set forth in that certain Security Agreement attached hereto as  listing all of Boatworks’ assets, including without limitation a floating custom home/vessel known as the “Luxuria I” (HIN ADX15001J516) and a floating custom home/vessel currently under construction known as the “Luxuria II”, as security for Company’s obligations under the Transaction Documents (the “ Boatworks Security Agreement ,” and together with the Company Security Agreement, the “ Security Agreements ”).

(c)

A Guaranty substantially in the form attached hereto as   whereby Robert Rowe, an officer and affiliate of the Company and Boatworks, will personally guaranty all of Company’s and Boatworks’ obligations under the Transaction Documents (as amended from time to time, the “ Guaranty ”).

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 $75,000.00 (the “ OID ”); provided, however, that the OID shall be applied to the Purchase Price on a pro rata basis and shall only be earned with respect to portions of the Purchase Price that are actually delivered to Borrower. In addition, Borrower agrees to pay $5,000.00 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 Note (the “ Transaction Expense Amount ”), all of which amount is included in the initial principal balance of the Note and is fully earned upon issuance thereof.

2.

Investor’s Representations and Warranties . Investor represents and warrants to Borrower that as of the Effective 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.

Borrower’s Representations and Warranties .

3.1.

Company represents and warrants to Investor that as of the Effective Date: (1) 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; (2) 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; (3) Company has registered its common stock, $0.0001 par value per share, of Company (the “ Common Stock ”), under Section 12(g) of the Securities Exchange Act of 1934, as amended (the “ 1934 Act ”), and is obligated to file reports pursuant to Section 13 or Section 15(d) of the 1934 Act; (4) each of the Transaction Documents and the transactions contemplated hereby and thereby, have been duly and validly authorized by Company and all necessary actions have been taken; (5) this Agreement, the Note, the Company Security Agreement, 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; (6) the execution and delivery of the Transaction Documents by Company, the issuance of the Note 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; (7) 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 Note to Investor or the entering into of the Transaction Documents; (8) none of Company’s filings with the SEC 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; (9) Company has filed all reports, schedules, forms, statements and other documents required to be filed by Company with the SEC under the 1934 Act 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; (10) 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; (11) Company has not consummated any financing transaction that has not been disclosed in a periodic filing or current report with the SEC under the 1934 Act; (12) 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; (13) 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; (14) 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; (15) 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 set forth in the Transaction Documents; (16) 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  below, shall be applicable to the Transaction Documents and the transactions contemplated therein; and (17) 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  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.

0.2.

Boatworks represents and warrants to Investor that: (i) Boatworks is a limited liability company duly organized, validly existing and in good standing under the laws of its state of organization and has the requisite company power to own its properties and to carry on its business as now being conducted; (ii) Boatworks is duly qualified as a foreign entity 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; (iii) each of the Transaction Documents and the transactions contemplated hereby and thereby, have been duly and validly authorized by Boatworks; (iv) this Agreement, the Note, the Boatworks Security Agreement and the other applicable Transaction Documents have been duly executed and delivered by Boatworks and constitute the valid and binding obligations of Boatworks enforceable in accordance with their terms, subject as to enforceability only to general principles of equity and to bankruptcy, insolvency, moratorium, and other similar laws affecting the enforcement of creditors’ rights generally; (v) the execution and delivery of this Agreement, the Note, and the other applicable Transaction Documents by Boatworks does not and will not conflict with or result in a breach by Boatworks of any of the terms or provisions of, or constitute a default under (a) Boatworks’s formation documents or operating agreement, each as currently in effect, (b) any indenture, mortgage, deed of trust, or other material agreement or instrument to which Boatworks is a party or by which it or any of its properties or assets are bound, or (c) to Boatworks’s knowledge, any existing applicable law, rule, or regulation or any applicable decree, judgment, or order of any court, United States federal or state regulatory body, administrative agency, or other governmental body having jurisdiction over Boatworks or any of Boatworks’s properties or assets; (vi) Boatworks has taken no action which would give rise to any claim by any person or entity for a brokerage commission, placement agent or finder’s fees or similar payments by Investor relating to the Note or the transactions contemplated hereby; (vii) Investor shall have no obligation with respect to investment 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 Boatworks shall indemnify and hold harmless each of Investor, Investor’s employees, officers, directors, stockholders, 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 or existing fees; and (viii) Boatworks 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 Boatworks 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. Boatworks, being aware of the matters described in subsection (viii) 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.

1.

Borrower Covenants . Until all of Borrower’s obligations under all of the Transaction Documents are paid and performed in full, or within the timeframes otherwise specifically set forth below, Company and, to the extent applicable, Boatworks will at all times comply with the following covenants: (18) so long as Investor beneficially owns the Note 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 the SEC pursuant to Sections 13 or 15(d) of the 1934 Act, 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, and will not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would permit such termination; (19) 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; (20) 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; (21) 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; (22) upon completion of the construction of the Luxuria I and all other floating custom homes/vessels, Company and/or Boatworks shall cooperate fully with Lender and execute all agreements and documents necessary to allow Lender to perfect its security interest in the Luxuria I and any other floating custom home/vessel, which security interest is granted by Company and/or Boatworks to Lender pursuant to the Security Agreements; (23) Company will not have at any given time any Variable Security Holders (as defined below) other than Investor without Investor’s prior written consent, which consent may be granted or withheld in Investor’s sole and absolute discretion; and (24) at Closing and on the first day of each calendar quarter 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  (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. 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, 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.

2.

Conditions to Borrower’s Obligation to Sell . The obligation of Borrower hereunder to issue and sell the Note to Investor at the Closing is subject to the satisfaction, on or before the Closing Date, of each of the following conditions:

2.1.

Investor shall have executed this Agreement and the Investor Notes and delivered the same to Borrower.

2.2.

Investor shall have delivered the Initial Cash Purchase Price to Borrower in accordance with Section  above.

3.

Conditions to Investor’s Obligation to Purchase . The obligation of Investor hereunder to purchase the Note 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:

3.1.

Company shall have executed this Agreement, the Note and the Company Security Agreement and delivered the same to Investor.

3.2.

Boatworks shall have executed this Agreement, the Note and the Boatworks Security Agreement and delivered the same to Investor.  

3.3.

Company’s Chief Executive Officer shall have executed the Officer’s Certificate and the Guaranty and delivered the same to Investor.

3.4.

Company shall have delivered to Investor a fully executed Secretary’s Certificate substantially in the form attached hereto as  evidencing Company’s approval of the Transaction Documents.

3.5.

Boatworks shall have delivered to Investor a fully executed Manager’s Certificate substantially in the form attached hereto as  evidencing Boatworks’s approval of the Transaction Documents.

3.6.

Company and Boatworks shall have delivered to Investor fully executed copies of all other Transaction Documents required to be executed by Company herein or therein.

4.

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 rights, 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.

5.

No Shorting . During the period beginning on the Closing Date and ending on the date the Note has been repaid in full or sold by Investor to a third party that is not an affiliate of Investor, Investor will not directly or through an affiliate engage in any open market Short Sales (as defined below) of the Common Stock; provided; however , that unless and until Company has affirmatively demonstrated by the use of specific evidence that Investor is engaging in open market Short Sales, Investor shall be assumed to be in compliance with the provisions of this Section  and Company shall remain fully obligated to fulfill all of its obligations under the Transaction Documents; and provided, further, that (i) Company shall under no circumstances be entitled to request or demand that Investor either (A) provide trading or other records of Investor or of any party or (B) affirmatively demonstrate that Investor or any other party has not engaged in any such Short Sales in breach of these provisions as a condition to Company’s fulfillment of its obligations under any of the Transaction Documents, (ii) Company shall not assert Investor’s or any other party’s failure to demonstrate such absence of such Short Sales or provide any trading or other records of Investor or any other party as all or part of a defense to any breach of Company’s obligations under any of the Transaction Documents, and (iii) Company shall have no setoff right with respect to any such Short Sales.  As used herein, “ Short Sale ” has the meaning provided in Rule 3b-3 under the 1934 Act.

6.

Miscellaneous . The provisions set forth in this Section  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  and any provision in any other Transaction Document, the provision in such other Transaction Document shall govern.

6.1.

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.

6.2.

Arbitration of Claims . The parties shall submit all Claims (as defined in ) 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  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 and Boatworks each represents, warrants and covenants that it 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 and Boatworks will not take a position contrary to the foregoing representations. Each of Company and Boatworks acknowledges and agrees that Investor may rely upon the foregoing representations and covenants of Company and Boatworks regarding the Arbitration Provisions.

6.3.

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. Each party consents to and expressly agrees that 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, 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 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, Borrower covenants and agrees to name Investor as a party in interest in, and provide written notice to Investor in accordance with Section  below prior to bringing or filing, any action that is related in any way to the Transaction Documents or any transaction contemplated herein or therein, and further agrees to timely name Investor as a party to any such action. Borrower acknowledges that the governing law and venue provisions set forth in this Section  are material terms to induce Investor to enter into the Transaction Documents and that but for Borrower’s agreements set forth in this Section  Investor would not have entered into the Transaction Documents.

6.4.

Specific Performance . Each of Company and Boatworks acknowledges and agrees that irreparable damage may occur to Investor in the event that Company or Boatworks 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 any 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 Boatworks 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.

6.5.

Calculation Disputes . Notwithstanding the Arbitration Provisions, in the case of a dispute as to any determination or arithmetic calculation under the Transaction Documents (each, a “ Calculation ”), Company, Boatworks 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 Company, Boatworks 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, Company and Boatworks are unable to agree upon such Calculation within two (2) Trading Days of such disputed Calculation being submitted to Company, Boatworks 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 ”). Company or Boatworks shall cause Unkar Systems to perform the Calculation and notify Company, Boatworks 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 and manifest 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.

6.6.

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.

6.7.

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 or Boatworks’ 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.

6.8.

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.

6.9.

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.

6.10.

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, none of Company, Boatworks or 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 among Company, Boatworks and Investor, or any affiliate thereof, related to the transactions contemplated by the Transaction Documents (collectively, “ Prior Agreements ”), that may have been entered into between Company, Boatworks 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.

6.11.

No Reliance . Each of Company and Boatworks 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 Boatworks or any of their respective 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.

6.12.

Amendments . No provision of this Agreement may be waived or amended other than by an instrument in writing signed by both parties hereto.

6.13.

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:


Global Boatworks Holdings, Inc.

Attn: Robert Rowe

2637 Atlantic Blvd. #134

Pompano Beach, Florida 33062


If to Boatworks:


Global Boatworks, LLC

Attn: Robert Rowe

2637 Atlantic Blvd. #134

Pompano Beach, Florida 33062


If to Investor:


St. George Investments LLC

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


6.14.

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 or Boatworks’s consent thereto. Neither Company nor Boatworks may assign its rights or obligations under this Agreement or delegate its duties hereunder without the prior written consent of Investor.

6.15.

Survival . The representations and warranties of Company and Boatworks 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. Each of Company and Boatworks 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 or Boatworks of any of their 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.

6.16.

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.

6.17.

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 or Boatworks’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 and the other Transaction Documents are intended by the parties to be, and shall be deemed, liquidated damages (under Company’s, Boatworks’ 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.

6.18.

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 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 (ii) there occurs any bankruptcy, reorganization, receivership of Company or Boatworks or other proceedings affecting Company’s or Boatworks’s creditors’ rights and involving a claim under the Note; then Company and Boatworks 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.

6.19.

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.

6.20.

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 .

6.21.

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.

6.22.

Voluntary Agreement . Each of Company and Boatworks has carefully read this Agreement and each of the other Transaction Documents and has asked any questions needed for Company and Boatworks to understand the terms, consequences and binding effect of this Agreement and each of the other Transaction Documents and fully understand them. Each of Company and Boatworks has had the opportunity to seek the advice of an attorney of such party’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.

[ Remainder of page intentionally left blank; signature page follows ]



 





EXHIBIT 10.14


IN WITNESS WHEREOF, the undersigned Investor, Company and Boatworks have caused this Agreement to be duly executed as of the date first above written.

SUBSCRIPTION AMOUNT :


Principal Amount of Note:

$830,000.00


Initial Cash Purchase Price:

$150,000.00



INVESTOR:


ST. GEORGE INVESTMENTS LLC


By: Fife Trading, Inc., its Manager



By: _________________________

       John M. Fife, President



COMPANY:


GLOBAL BOATWORKS HOLDINGS, INC.



By:_________________________

Printed Name: _________________________

Title: _________________________



BOATWORKS:


GLOBAL BOATWORKS LLC



By:_________________________

Printed Name: _________________________

Title: _________________________



[ Signature Page to Note Purchase Agreement ]




ATTACHED EXHIBITS:


Exhibit A

Note

Exhibit B

Allocation of Purchase Price

Exhibit C

Form of Investor Note

Exhibit D

Company Security Agreement

Exhibit E

Boatworks Security Agreement

Exhibit F

Guaranty

Exhibit G

Officer’s Certificate

Exhibit H

Company Secretary’s Certificate

Exhibit I

Boatworks Manager’s Certificate

Exhibit J

Arbitration Provisions




3





SECURED PROMISSORY NOTE

Effective Date: January 5, 2017

U.S. $830,000.00


FOR VALUE RECEIVED, GLOBAL BOATWORKS HOLDINGS, INC. , a Florida corporation (“ Company ”), and GLOBAL BOATWORKS LLC, a Florida limited liability company (“ Boatworks ”, and together with Company, “ Borrower ”), each with an address of 2637 Atlantic Blvd. #134, Pompano Beach, Florida 33062, promise to pay to ST. GEORGE INVESTMENTS LLC , a Utah limited liability company, or its successors or assigns (“ Lender ”), with an address of 303 East Wacker Drive, Suite 1040, Chicago, Illinois 60601, up to $830,000.00 (or such other amount as may be advanced to Borrower) and any interest, fees, charges, and late fees accrued hereunder on the date that is nine (9) months after the Purchase Price Date (the “ Maturity Date ”). This Secured Promissory Note (this “ Note ”) is issued and made effective as of January 5, 2017 (the “ Effective Date ”). This Note is issued pursuant to that certain Note Purchase Agreement dated January 5, 2017, as the same may be amended from time to time, by and between Borrower and Lender (the “ Purchase Agreement ”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.

This Note carries an OID of $75,000.00. In addition, Borrower agrees to pay $5,000.00 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 shall be $750,000.00 (the “ Purchase Price ”), computed as follows: $830,000.00 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 five (5) tranches (each, a “ Tranche ”), consisting of (i) an initial Tranche in an amount equal to $170,000.00 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) four (4) additional Tranches, each in the amount of $165,000.00, 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, the OID and the Transaction Expense Amount, and shall be fully earned and payable to Lender in accordance with the terms of this Note as of the Purchase Price Date. The first Subsequent Investor Note the second Subsequent Investor Note Investor Note Investor Note the Investor Note costs, fees or charges

1.

Prepayment; Interest .

1.1.

Interest . No interest shall accrue on the Outstanding Balance of this Note unless and until an Event of Default occurs. Immediately following the occurrence of any Event of Default, interest shall automatically 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. Interest calculated 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.

1.2.

Optional Prepayment . Borrower may pay without penalty all or a portion of the amount owed earlier than it is due.  Early payments of less than all principal and interest outstanding will not, unless agreed to by Lender in writing, relieve Borrower of any of Borrower’s obligations hereunder.

1.3.

Mandatory Partial Prepayments and Rental Revenue Sharing .

(a)

Notwithstanding anything to the contrary herein, in the event Borrower sells, transfers, conveys, assigns, or otherwise disposes of the Luxuria I (as defined below), it shall be unconditionally obligated to pay to Lender 10% of the profits (as shall be proven to and verified by Lender to its reasonable satisfaction) from the sale as a partial prepayment to be applied towards the Outstanding Balance. Upon its receipt of such prepayment, Lender covenants and agrees to release its security interest in the Luxuria I; provided that, for the avoidance of doubt, Lender shall have no obligation to release such security interest unless and until it has received such prepayment.

(b)

Notwithstanding anything to the contrary herein, in the event Borrower sells, transfers, conveys, assigns, or otherwise disposes of the Luxuria II (as defined below), it shall be unconditionally obligated to pay to Lender 33% of the profits (as shall be proven to and verified by Lender to its reasonable satisfaction) from the sale as a partial prepayment to be applied towards the Outstanding Balance. Upon its receipt of such prepayment, Lender covenants and agrees to release its security interest in the Luxuria II; provided that, for the avoidance of doubt, Lender shall have no obligation to release such security interest unless and until it has received such prepayment.

(c)

In the event Borrower rents or leases the Luxuria I, the Luxuria II or any other asset of Borrower, it shall be unconditionally obligated to pay Lender 20% of all gross lease/rental revenue (as shall be proven to and verified by Lender to its reasonable satisfaction) received by Borrower as a partial prepayment to be applied towards the Outstanding Balance.

2.

Security . This Note is secured by the following: (i) that certain Security Agreement of even date herewith, as the same may be amended from time to time (the “ Company Security Agreement ”), executed by Company in favor of Lender encumbering all of Company’s assets, as more specifically set forth in the Company Security Agreement, all the terms and conditions of which are hereby incorporated into and made a part of this Note; (ii) that certain Security Agreement of even date herewith, as the same be amended from time to time (the “ Boatworks Security Agreement ”), executed by Boatworks in favor of Lender encumbering all of Boatworks’ assets, including without limitation, the whole of the floating custom home/vessel to be known as the “ Luxuria I ,” HIN ADX15001J516 (Boatworks will be the sole owner of the Luxuria II and the Luxuria I), and the whole of the floating custom home/vessel currently under construction known as the Luxuria II (the “ Luxuria II ”), and all other floating custom homes/vessels made by Borrower, as more specifically set forth in the Boatworks Security Agreement, all the terms and conditions of which are hereby incorporated into and made a part of this Note; and (iii) that certain Guaranty, given by Robert Rowe, an officer and affiliate of Company and Boatworks.

3.

Defaults and Remedies .

3.1.

Defaults . The following are events of default under this Note (each, an “ Event of Default ”): (25) Borrower fails to pay any principal, interest, fees, charges, or any other amount when due and payable hereunder; (26) 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; (27) 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; (28) Borrower makes a general assignment for the benefit of creditors; (29) Borrower files a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); (30) an involuntary bankruptcy proceeding is commenced or filed against Borrower; (31) Borrower defaults or otherwise fails to observe or perform any covenant, obligation, condition or agreement of Borrower contained herein or in any other Transaction Document (as defined in the Purchase Agreement), other than those specifically set forth in this Section  and Section 4 of the Purchase Agreement; (32) any representation, warranty or other statement made or furnished by or on behalf of Borrower 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; (33) the occurrence of a Fundamental Transaction without Lender’s prior written consent; (34) Company effectuates a reverse split of its common stock, $0.0001 par value per share (the “ Common Stock ”), without twenty (20) business days prior written notice to Lender; (35) 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; (36) Borrower fails to observe or perform any covenant set forth in Section 4 of the Purchase Agreement, or (37) Borrower breaches any covenant or other term or condition contained in any Other Agreements.

1.2.

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 (b), (c), (d), (e) or (f) of Section , 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. 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 . 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.

2.

Unconditional Obligation; No Offset . Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset, 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 called for herein in accordance with the terms of this Note.

3.

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.

4.

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.

5.

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.

6.

Resolution of Disputes .

6.1.

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.

6.2.

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.

7.

Cancellation . After repayment of the entire Eligible Outstanding Balance, this Note shall be deemed paid in full, shall automatically be deemed canceled, and shall not be reissued.

8.

Amendments . The prior written consent of both parties hereto shall be required for any change or amendment to this Note.

9.

Assignments . Borrower may not assign this Note without the prior written consent of Lender. This Note may be offered, sold, assigned or transferred by Lender without the consent of Borrower.

10.

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 A , (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.

11.

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.

12.

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.”

13.

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, 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.

14.

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.

15.

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.

16.

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 ]



4




IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed as of the Effective Date.

COMPANY:

GLOBAL BOATWORKS HOLDINGS, INC.



By: _________________________

Name: _________________________

Title: _________________________


BOATWORKS:


GLOBAL BOATWORKS LLC



By: _________________________

Name: _________________________

Title: _________________________



ACKNOWLEDGED, ACCEPTED AND AGREED:

LENDER:

ST. GEORGE INVESTMENTS LLC


By: Fife Trading, Inc., its Manager



By: _________________________

       John M. Fife, President




STATE OF FLORIDA

)

:ss

COUNTY OF __________

)


On this ____ day of January, 2017, personally appeared before me ___________________, personally known to me to be ____________________ of Global Boatworks Holdings, Inc., a Florida corporation, who acknowledged before me that he signed the foregoing instrument as ____________________ for said corporation.


WITNESS my hand and official seal.




Notary Public


STATE OF FLORIDA

)

:ss

COUNTY OF __________

)


On this ____ day of January, 2017, personally appeared before me ___________________, personally known to me to be ____________________ of Global Boatworks LLC, a Florida limited liability company, who acknowledged before me that he signed the foregoing instrument as ____________________ for said limited liability company.


WITNESS my hand and official seal.




Notary Public










[ Signature and Acknowledgement Page to Secured Promissory Note ]






ATTACHMENT 1

DEFINITIONS


For purposes of this Note, the following terms shall have the following meanings:

A1.

Default Effect ” means multiplying the 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.

A2.

Eligible Outstanding Balance ” means the Outstanding Balance of this Note less the sum of each Subsequent Tranche that has not yet become an Eligible Tranche (i.e., Lender has not yet paid the outstanding balance of the Investor Note that corresponds to such Subsequent Tranche).

A3.

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 Company’s Common Stock or Boatworks’s membership units or interests, 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 Company.

A4.

Major Default ” means any Event of Default occurring under Sections  or  of this Note.

A5.

Mandatory Default Amount ” means the Outstanding Balance following the application of the Default Effect.

A6.

Minor Default ” means any Event of Default that is not a Major Default.

A7.

OID ” means an original issue discount.

A8.

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.

A9.

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, offset, or otherwise, plus the OID, the Transaction Expense Amount, accrued but unpaid interest, collection and enforcements costs (including attorneys’ fees) incurred by Lender, and any other fees or charges incurred under this Note.

A10.

Purchase Price Date ” means the date the Initial Cash Purchase Price is delivered by Lender to Borrower.



Attachment 1 to Secured Promissory Note, Page 1






EXHIBIT A


Global Boatworks Holdings, Inc.

2637 Atlantic Blvd. #134

Pompano Beach, Florida 33062



St. George Investments LLC

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 St. George Investments LLC, a Utah limited liability company (the “ Lender ”), pursuant to that certain Secured Promissory Note made by Borrower in favor of Lender on January 5, 2017 (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:

GLOBAL BOATWORKS HOLDINGS, INC.


By: _________________________

Name: _________________________

Title: _________________________





2







EXHIBIT B

ALLOCATION OF PURCHASE PRICE

Purchase Price

Tranche

OID/Transaction Expense

Initial Cash Purchase Price

Initial Tranche

$20,000.00

Investor Note #1

Subsequent Tranche #1

$15,000.00

Investor Note #2

Subsequent Tranche #2

$15,000.00

Investor Note #3

Subsequent Tranche #3

$15,000.00

Investor Note #4

Subsequent Tranche #4

$15,000.00






3







THIS NOTE (AS DEFINED BELOW) MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE ALIENATED OR ENCUMBERED WITHOUT THE PRIOR WRITTEN CONSENT OF INVESTOR (AS DEFINED BELOW). THIS NOTE IS SUBJECT TO A RIGHT OF OFFSET IN FAVOR OF INVESTOR UPON THE OCCURRENCE OF CERTAIN EVENTS AS SET FORTH IN MORE DETAIL IN SECTION  BELOW.


$150,000.00

State of Utah

January 5, 2017


INVESTOR NOTE #1


F OR VALUE RECEIVED, ST. GEORGE INVESTMENTS LLC , a Utah limited liability company (“ Investor ”), hereby promises to pay to GLOBAL BOATWORKS HOLDINGS, INC. , a Florida corporation (“ Holdings ”), or (as so designated by Holdings) G LOBAL BOATWORKS LLC, a Florida limited liability company and subsidiary of Holdings (together with Holdings, “ Company ”, and together with Investor, the “ Parties ”), the principal sum of $150,000.00 together with all accrued and unpaid interest thereon, fees incurred or other amounts owing hereunder, all as set forth below in this Investor Note #1 (this “ Note ”). This Note is issued pursuant to that certain Note Purchase Agreement of even date herewith, entered into by and between Investor and Company (as the same may be amended from time to time, the “ Purchase Agreement ”), pursuant to which Company issued to Investor that certain Secured Promissory Note in the principal amount of $830,000.00 (as the same may be amended from time to time, the “ Company Note ”). All capitalized terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Purchase Agreement.    

1.

Principal and Interest . No interest shall accrue on the outstanding balance of this Note unless and until an Investor Note Default (as defined below) occurs. Immediately following the occurrence of any Investor Note Default, interest shall automatically accrue on the outstanding balance beginning on the date the applicable Investor Note Default occurred at an interest rate equal to the lesser of 22% per annum or the maximum rate permitted under applicable law. Interest calculated 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. The entire unpaid principal balance and all accrued and unpaid interest, if any, under this Note, shall be due and payable on the date that is nine (9) months from the date hereof (the “ Investor Note Maturity Date ”); provided, however , that Investor may elect, in its sole discretion, to extend the Investor Note Maturity Date for up to thirty (30) days by delivering written notice of such election to Company at any time prior to the Investor Note Maturity Date.

2.

Payment . Unless prepaid, all principal and accrued interest under this Note is payable in one lump sum on the Investor Note Maturity Date. All payments of interest and principal shall be (i) in lawful money of the United States of America, and (ii) in the form of immediately available funds. All payments shall be applied first to costs of collection, if any, then to accrued and unpaid interest, and thereafter to principal. Payment of principal and interest hereunder shall be delivered to Company at the address furnished to Investor for that purpose.

3.

Prepayment by Investor . Investor may, with Company’s consent, pay, without penalty, all or any portion of the outstanding balance along with any accrued but unpaid interest on this Note at any time prior to the Investor Note Maturity Date.

4.

Security; Collateral . Investor may, in its sole discretion, designate collateral (the “ Collateral ”) as it deems fit, as security for Investor’s obligations hereunder, which Collateral may be, but is not required to be, real property, a letter of credit with a financial institution determined by Investor in its sole discretion, or pledged membership interests. Upon Investor’s designation of Collateral, each of Investor and Company shall timely execute any and all documents necessary or advisable in order to properly grant a security interest upon the Collateral in favor of Company.

5.

Release . Company covenants and agrees that in the event that this Note is secured by Collateral, Company shall timely execute any and all documents necessary or advisable in order to release such security interest and Collateral to Investor, or Investor’s designee, upon the earlier of (i) the date this Note is paid in full and (ii) the date that is six (6) months and three (3) days following the date such Collateral is given as security for this Note, or such later date as determined in the sole discretion of Investor (the “ Release Date ”). For the avoidance of doubt, as of the date hereof, there is no collateral securing this Note, and after the Release Date, as applicable, there shall be no collateral securing this Note.

6.

Right of Offset . Notwithstanding anything to the contrary herein or in any of the other Transaction Documents, in the event (i) of the occurrence of any Event of Default (as defined in the Company Note) under the Company Note or any other note issued by Company in connection with the Purchase Agreement, (ii) of a breach of any material term, condition, representation, warranty, covenant or obligation of Company under any Transaction Document, or (iii) Company sells, transfers, assigns, pledges or hypothecates this Note, or attempts to do any of the foregoing, whether voluntarily or involuntarily, Investor shall be entitled to deduct and offset any amount owing by Company under the Company Note from any amount owed by Investor under this Note (the “ Investor Offset Right ”), provided that if any of the foregoing events occur and Investor has not yet exercised the Investor Offset Right, the Investor Offset Right shall be automatically exercised on the date that is thirty (30) days prior to the Investor Note Maturity Date (an “ Automatic Offset ”). Other than with respect to an Automatic Offset, Investor may only elect to exercise the Investor Offset Right by delivering to Company an offset notice in a form substantially similar to Exhibit A to the Company Note or another form of Investor’s choosing. In the event that Investor’s exercise of the Investor Offset Right under this Section  results in the full satisfaction of Investor’s obligations under this Note, then Company shall return this Note to Investor for cancellation or, in the event this Note has been lost, stolen or destroyed, Company shall provide Investor with a lost note affidavit in a form reasonably acceptable to Investor.

7.

Default . If any of the events specified below shall occur (each, an “ Investor Note Default ”) Company may declare the unpaid principal balance under this Note, together with all accrued and unpaid interest thereon, fees incurred or other amounts owing hereunder immediately due and payable, by notice in writing to Investor. If any default, other than a Payment Default (as defined below), is curable, then the default may be cured (and no Investor Note Default will have occurred) if Investor, after receiving written notice from Company demanding cure of such default, either (i) cures the default within fifteen (15) days of the receipt of such notice, or (ii) if the cure requires more than fifteen (15) days, immediately initiates steps that Company deems in Company’s reasonable discretion to be sufficient to cure the default and thereafter diligently continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. Each of the following events shall constitute an Investor Note Default:

7.1.

Failure to Pay . Investor’s failure to make any payment when due and payable under this Note (a “ Payment Default ”);

7.2.

Breaches of Covenants . Investor’s failure to observe or perform any other covenant, obligation, condition or agreement contained in this Note;

7.3.

Representations and Warranties . If any representation, warranty, certificate, or other statement (financial or otherwise) made or furnished by or on behalf of Investor to Company in writing in connection with this Note or any of the other Transaction Documents, or as an inducement to Company to enter into the Purchase Agreement, shall be false or misleading in any material respect when made or furnished; and

7.4.

Involuntary Bankruptcy . If any involuntary petition is filed under any bankruptcy or similar law or rule against Investor, and such petition is not dismissed within sixty (60) days, or a receiver, trustee, liquidator, assignee, custodian, sequestrator or other similar official is appointed to take possession of any of the assets or properties of Investor.

8.

Binding Effect; Assignment . This Note shall be binding on the Parties and their respective heirs, successors, and assigns; provided , however , that neither Party shall assign any of its rights hereunder without the prior written consent of the other Party, except that Investor may assign this Note to any of its Affiliates without the prior written consent of Company and, furthermore, Company agrees that it shall not unreasonably withhold, condition or delay its consent to any other assignment of this Note by Investor.

9.

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.

10.

Purchase Agreement; Arbitration of Disputes . By acceptance of this Note, each Party agrees to be bound by the applicable terms, conditions and general provisions of the Purchase Agreement and the other Transaction Documents, including without limitation the Arbitration Provisions attached as an exhibit to the Purchase Agreement.

11.

Customer Identification–USA Patriot Act Notice . Company hereby notifies Investor that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56, signed into law October 26, 2001) (the “ Act ”), and Company’s policies and practices, Company is required to obtain, verify and record certain information and documentation that identifies Investor, which information includes the name and address of Investor and such other information that will allow Company to identify Investor in accordance with the Act.

12.

Lawful Interest . It being the intention of Company and Investor to comply with all applicable laws with regard to the interest charged hereunder, it is agreed that, notwithstanding any provision to the contrary in this Note or any of the other Transaction Documents, no such provision, including without limitation any provision of this Note providing for the payment of interest or other charges, shall require the payment or permit the collection of any amount in excess of the maximum amount of interest permitted by law to be charged for the use or detention, or the forbearance in the collection, of all or any portion of the indebtedness evidenced by this Note or by any extension or renewal hereof (“ Excess Interest ”). If any Excess Interest is provided for, or is adjudicated to be provided for, in this Note, then in such event:

12.1.

the provisions of this Section  shall govern and control;

12.2.

Investor shall not be obligated to pay any Excess Interest;

12.3.

any Excess Interest that Company may have received hereunder shall, at the option of Company, be (i) applied as a credit against the principal balance due under this Note or the accrued and unpaid interest thereon not to exceed the maximum amount permitted by law, or both, (ii) refunded to Investor, or (iii) any combination of the foregoing;

12.4.

the applicable interest rate or rates shall be automatically subject to reduction to the maximum lawful rate allowed to be contracted for in writing under the applicable governing usury laws, and this Note and the Transaction Documents shall be deemed to have been, and shall be, reformed and modified to reflect such reduction in such interest rate or rates; and

12.5.

Investor shall not have any action or remedy against Company for any damages whatsoever or any defense to enforcement of this Note or arising out of the payment or collection of any Excess Interest.

13.

Pronouns . Regardless of their form, all words used in this Note shall be deemed singular or plural and shall have the gender as required by the text.

14.

Headings . The various headings used in this Note as headings for sections or otherwise are for convenience and reference only and shall not be used in interpreting the text of the section in which they appear and shall not limit or otherwise affect the meanings thereof.

15.

Time is of the Essence . Time is of the essence with this Note.

16.

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 the Parties to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect.

17.

Attorneys’ Fees . If any arbitration or action at law or in equity is necessary to enforce this Note or to collect payment under this Note, Company shall be entitled to recover reasonable attorneys’ fees directly related to such enforcement or collection actions.

18.

Amendments and Waivers; Remedies . No failure or delay on the part of either Party hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to either Party hereto at law, in equity or otherwise. Any amendment, supplement or modification of or to any provision of this Note, any waiver of any provision of this Note, and any consent to any departure by either Party from the terms of any provision of this Note, shall be effective (i) only if it is made or given in writing and signed by Investor and Company and (ii) only in the specific instance and for the specific purpose for which made or given.

19.

Notices . Unless otherwise provided for herein, all notices, requests, demands, claims and other communications hereunder shall be given in accordance with the subsection of the Purchase Agreement titled “Notices.” Either Party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by providing notice thereof in the manner set forth in the Purchase Agreement.

20.

Final Note . This Note, together with the other Transaction Documents, contains the complete understanding and agreement of Investor and Company and supersedes all prior representations, warranties, agreements, arrangements, understandings, and negotiations of Investor and Company with respect to the subject matter of the Transaction Documents. THIS NOTE, TOGETHER WITH THE OTHER TRANSACTION DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY ALLEGED PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

21.

Waiver of Jury Trial . EACH OF INVESTOR AND COMPANY 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.

[ Remainder of page intentionally left blank; signature page follows ]



4






IN WITNESS WHEREOF, the Parties have executed this Note as of the date set forth above.


INVESTOR:

      

ST. GEORGE INVESTMENTS LLC


By: Fife Trading, Inc., its Manager



By:_________________________

John M. Fife, President





ACKNOWLEDGED, ACCEPTED AND AGREED:

COMPANY:

GLOBAL BOATWORKS HOLDINGS, INC.


By: _________________________

Name:  _________________________

Title:  _________________________



GLOBAL BOATWORKS LLC


By: _________________________

Name:  _________________________

Title:  _________________________





5







THIS NOTE (AS DEFINED BELOW) MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE ALIENATED OR ENCUMBERED WITHOUT THE PRIOR WRITTEN CONSENT OF INVESTOR (AS DEFINED BELOW). THIS NOTE IS SUBJECT TO A RIGHT OF OFFSET IN FAVOR OF INVESTOR UPON THE OCCURRENCE OF CERTAIN EVENTS AS SET FORTH IN MORE DETAIL IN SECTION  BELOW.


$150,000.00

State of Utah

January 5, 2017


INVESTOR NOTE #2


F OR VALUE RECEIVED, ST. GEORGE INVESTMENTS LLC , a Utah limited liability company (“ Investor ”), hereby promises to pay to GLOBAL BOATWORKS HOLDINGS, INC. , a Florida corporation (“ Holdings ”), or (as so designated by Holdings) G LOBAL BOATWORKS LLC, a Florida limited liability company and subsidiary of Holdings (together with Holdings, “ Company ”, and together with Investor, the “ Parties ”), the principal sum of $150,000.00 together with all accrued and unpaid interest thereon, fees incurred or other amounts owing hereunder, all as set forth below in this Investor Note #2 (this “ Note ”). This Note is issued pursuant to that certain Note Purchase Agreement of even date herewith, entered into by and between Investor and Company (as the same may be amended from time to time, the “ Purchase Agreement ”), pursuant to which Company issued to Investor that certain Secured Promissory Note in the principal amount of $830,000.00 (as the same may be amended from time to time, the “ Company Note ”). All capitalized terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Purchase Agreement.    

22.

Principal and Interest . No interest shall accrue on the outstanding balance of this Note unless and until an Investor Note Default (as defined below) occurs. Immediately following the occurrence of any Investor Note Default, interest shall automatically accrue on the outstanding balance beginning on the date the applicable Investor Note Default occurred at an interest rate equal to the lesser of 22% per annum or the maximum rate permitted under applicable law. Interest calculated 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. The entire unpaid principal balance and all accrued and unpaid interest, if any, under this Note, shall be due and payable on the date that is nine (9) months from the date hereof (the “ Investor Note Maturity Date ”); provided, however , that Investor may elect, in its sole discretion, to extend the Investor Note Maturity Date for up to thirty (30) days by delivering written notice of such election to Company at any time prior to the Investor Note Maturity Date.

23.

Payment . Unless prepaid, all principal and accrued interest under this Note is payable in one lump sum on the Investor Note Maturity Date. All payments of interest and principal shall be (i) in lawful money of the United States of America, and (ii) in the form of immediately available funds. All payments shall be applied first to costs of collection, if any, then to accrued and unpaid interest, and thereafter to principal. Payment of principal and interest hereunder shall be delivered to Company at the address furnished to Investor for that purpose.

24.

Prepayment by Investor . Investor may, with Company’s consent, pay, without penalty, all or any portion of the outstanding balance along with any accrued but unpaid interest on this Note at any time prior to the Investor Note Maturity Date.

25.

Security; Collateral . Investor may, in its sole discretion, designate collateral (the “ Collateral ”) as it deems fit, as security for Investor’s obligations hereunder, which Collateral may be, but is not required to be, real property, a letter of credit with a financial institution determined by Investor in its sole discretion, or pledged membership interests. Upon Investor’s designation of Collateral, each of Investor and Company shall timely execute any and all documents necessary or advisable in order to properly grant a security interest upon the Collateral in favor of Company.

26.

Release . Company covenants and agrees that in the event that this Note is secured by Collateral, Company shall timely execute any and all documents necessary or advisable in order to release such security interest and Collateral to Investor, or Investor’s designee, upon the earlier of (i) the date this Note is paid in full and (ii) the date that is six (6) months and three (3) days following the date such Collateral is given as security for this Note, or such later date as determined in the sole discretion of Investor (the “ Release Date ”). For the avoidance of doubt, as of the date hereof, there is no collateral securing this Note, and after the Release Date, as applicable, there shall be no collateral securing this Note.

27.

Right of Offset . Notwithstanding anything to the contrary herein or in any of the other Transaction Documents, in the event (i) of the occurrence of any Event of Default (as defined in the Company Note) under the Company Note or any other note issued by Company in connection with the Purchase Agreement, (ii) of a breach of any material term, condition, representation, warranty, covenant or obligation of Company under any Transaction Document, or (iii) Company sells, transfers, assigns, pledges or hypothecates this Note, or attempts to do any of the foregoing, whether voluntarily or involuntarily, Investor shall be entitled to deduct and offset any amount owing by Company under the Company Note from any amount owed by Investor under this Note (the “ Investor Offset Right ”), provided that if any of the foregoing events occur and Investor has not yet exercised the Investor Offset Right, the Investor Offset Right shall be automatically exercised on the date that is thirty (30) days prior to the Investor Note Maturity Date (an “ Automatic Offset ”). Other than with respect to an Automatic Offset, Investor may only elect to exercise the Investor Offset Right by delivering to Company an offset notice in a form substantially similar to Exhibit A to the Company Note or another form of Investor’s choosing. In the event that Investor’s exercise of the Investor Offset Right under this Section  results in the full satisfaction of Investor’s obligations under this Note, then Company shall return this Note to Investor for cancellation or, in the event this Note has been lost, stolen or destroyed, Company shall provide Investor with a lost note affidavit in a form reasonably acceptable to Investor.

28.

Default . If any of the events specified below shall occur (each, an “ Investor Note Default ”) Company may declare the unpaid principal balance under this Note, together with all accrued and unpaid interest thereon, fees incurred or other amounts owing hereunder immediately due and payable, by notice in writing to Investor. If any default, other than a Payment Default (as defined below), is curable, then the default may be cured (and no Investor Note Default will have occurred) if Investor, after receiving written notice from Company demanding cure of such default, either (i) cures the default within fifteen (15) days of the receipt of such notice, or (ii) if the cure requires more than fifteen (15) days, immediately initiates steps that Company deems in Company’s reasonable discretion to be sufficient to cure the default and thereafter diligently continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. Each of the following events shall constitute an Investor Note Default:

28.1.

Failure to Pay . Investor’s failure to make any payment when due and payable under this Note (a “ Payment Default ”);

28.2.

Breaches of Covenants . Investor’s failure to observe or perform any other covenant, obligation, condition or agreement contained in this Note;

28.3.

Representations and Warranties . If any representation, warranty, certificate, or other statement (financial or otherwise) made or furnished by or on behalf of Investor to Company in writing in connection with this Note or any of the other Transaction Documents, or as an inducement to Company to enter into the Purchase Agreement, shall be false or misleading in any material respect when made or furnished; and

28.4.

Involuntary Bankruptcy . If any involuntary petition is filed under any bankruptcy or similar law or rule against Investor, and such petition is not dismissed within sixty (60) days, or a receiver, trustee, liquidator, assignee, custodian, sequestrator or other similar official is appointed to take possession of any of the assets or properties of Investor.

29.

Binding Effect; Assignment . This Note shall be binding on the Parties and their respective heirs, successors, and assigns; provided , however , that neither Party shall assign any of its rights hereunder without the prior written consent of the other Party, except that Investor may assign this Note to any of its Affiliates without the prior written consent of Company and, furthermore, Company agrees that it shall not unreasonably withhold, condition or delay its consent to any other assignment of this Note by Investor.

30.

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.

31.

Purchase Agreement; Arbitration of Disputes . By acceptance of this Note, each Party agrees to be bound by the applicable terms, conditions and general provisions of the Purchase Agreement and the other Transaction Documents, including without limitation the Arbitration Provisions attached as an exhibit to the Purchase Agreement.

32.

Customer Identification–USA Patriot Act Notice . Company hereby notifies Investor that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56, signed into law October 26, 2001) (the “ Act ”), and Company’s policies and practices, Company is required to obtain, verify and record certain information and documentation that identifies Investor, which information includes the name and address of Investor and such other information that will allow Company to identify Investor in accordance with the Act.

33.

Lawful Interest . It being the intention of Company and Investor to comply with all applicable laws with regard to the interest charged hereunder, it is agreed that, notwithstanding any provision to the contrary in this Note or any of the other Transaction Documents, no such provision, including without limitation any provision of this Note providing for the payment of interest or other charges, shall require the payment or permit the collection of any amount in excess of the maximum amount of interest permitted by law to be charged for the use or detention, or the forbearance in the collection, of all or any portion of the indebtedness evidenced by this Note or by any extension or renewal hereof (“ Excess Interest ”). If any Excess Interest is provided for, or is adjudicated to be provided for, in this Note, then in such event:

33.1.

the provisions of this Section  shall govern and control;

33.2.

Investor shall not be obligated to pay any Excess Interest;

33.3.

any Excess Interest that Company may have received hereunder shall, at the option of Company, be (i) applied as a credit against the principal balance due under this Note or the accrued and unpaid interest thereon not to exceed the maximum amount permitted by law, or both, (ii) refunded to Investor, or (iii) any combination of the foregoing;

33.4.

the applicable interest rate or rates shall be automatically subject to reduction to the maximum lawful rate allowed to be contracted for in writing under the applicable governing usury laws, and this Note and the Transaction Documents shall be deemed to have been, and shall be, reformed and modified to reflect such reduction in such interest rate or rates; and

33.5.

Investor shall not have any action or remedy against Company for any damages whatsoever or any defense to enforcement of this Note or arising out of the payment or collection of any Excess Interest.

34.

Pronouns . Regardless of their form, all words used in this Note shall be deemed singular or plural and shall have the gender as required by the text.

35.

Headings . The various headings used in this Note as headings for sections or otherwise are for convenience and reference only and shall not be used in interpreting the text of the section in which they appear and shall not limit or otherwise affect the meanings thereof.

36.

Time is of the Essence . Time is of the essence with this Note.

37.

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 the Parties to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect.

38.

Attorneys’ Fees . If any arbitration or action at law or in equity is necessary to enforce this Note or to collect payment under this Note, Company shall be entitled to recover reasonable attorneys’ fees directly related to such enforcement or collection actions.

39.

Amendments and Waivers; Remedies . No failure or delay on the part of either Party hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to either Party hereto at law, in equity or otherwise. Any amendment, supplement or modification of or to any provision of this Note, any waiver of any provision of this Note, and any consent to any departure by either Party from the terms of any provision of this Note, shall be effective (i) only if it is made or given in writing and signed by Investor and Company and (ii) only in the specific instance and for the specific purpose for which made or given.

40.

Notices . Unless otherwise provided for herein, all notices, requests, demands, claims and other communications hereunder shall be given in accordance with the subsection of the Purchase Agreement titled “Notices.” Either Party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by providing notice thereof in the manner set forth in the Purchase Agreement.

41.

Final Note . This Note, together with the other Transaction Documents, contains the complete understanding and agreement of Investor and Company and supersedes all prior representations, warranties, agreements, arrangements, understandings, and negotiations of Investor and Company with respect to the subject matter of the Transaction Documents. THIS NOTE, TOGETHER WITH THE OTHER TRANSACTION DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY ALLEGED PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

42.

Waiver of Jury Trial . EACH OF INVESTOR AND COMPANY 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.

[ Remainder of page intentionally left blank; signature page follows ]



 






IN WITNESS WHEREOF, the Parties have executed this Note as of the date set forth above.


INVESTOR:

      

ST. GEORGE INVESTMENTS LLC


By: Fife Trading, Inc., its Manager



By:_________________________

John M. Fife, President





ACKNOWLEDGED, ACCEPTED AND AGREED:

COMPANY:

GLOBAL BOATWORKS HOLDINGS, INC.


By: _________________________

Name:  _________________________

Title:  _________________________



GLOBAL BOATWORKS LLC


By: _________________________

Name:  _________________________

Title:  _________________________






 






THIS NOTE (AS DEFINED BELOW) MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE ALIENATED OR ENCUMBERED WITHOUT THE PRIOR WRITTEN CONSENT OF INVESTOR (AS DEFINED BELOW). THIS NOTE IS SUBJECT TO A RIGHT OF OFFSET IN FAVOR OF INVESTOR UPON THE OCCURRENCE OF CERTAIN EVENTS AS SET FORTH IN MORE DETAIL IN SECTION  BELOW.


$150,000.00

State of Utah

January 5, 2017


INVESTOR NOTE #3


F OR VALUE RECEIVED, ST. GEORGE INVESTMENTS LLC , a Utah limited liability company (“ Investor ”), hereby promises to pay to GLOBAL BOATWORKS HOLDINGS, INC. , a Florida corporation (“ Holdings ”), or (as so designated by Holdings) G LOBAL BOATWORKS LLC, a Florida limited liability company and subsidiary of Holdings (together with Holdings, “ Company ”, and together with Investor, the “ Parties ”), the principal sum of $150,000.00 together with all accrued and unpaid interest thereon, fees incurred or other amounts owing hereunder, all as set forth below in this Investor Note #3 (this “ Note ”). This Note is issued pursuant to that certain Note Purchase Agreement of even date herewith, entered into by and between Investor and Company (as the same may be amended from time to time, the “ Purchase Agreement ”), pursuant to which Company issued to Investor that certain Secured Promissory Note in the principal amount of $830,000.00 (as the same may be amended from time to time, the “ Company Note ”). All capitalized terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Purchase Agreement.    

43.

Principal and Interest . No interest shall accrue on the outstanding balance of this Note unless and until an Investor Note Default (as defined below) occurs. Immediately following the occurrence of any Investor Note Default, interest shall automatically accrue on the outstanding balance beginning on the date the applicable Investor Note Default occurred at an interest rate equal to the lesser of 22% per annum or the maximum rate permitted under applicable law. Interest calculated 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. The entire unpaid principal balance and all accrued and unpaid interest, if any, under this Note, shall be due and payable on the date that is nine (9) months from the date hereof (the “ Investor Note Maturity Date ”); provided, however , that Investor may elect, in its sole discretion, to extend the Investor Note Maturity Date for up to thirty (30) days by delivering written notice of such election to Company at any time prior to the Investor Note Maturity Date.

44.

Payment . Unless prepaid, all principal and accrued interest under this Note is payable in one lump sum on the Investor Note Maturity Date. All payments of interest and principal shall be (i) in lawful money of the United States of America, and (ii) in the form of immediately available funds. All payments shall be applied first to costs of collection, if any, then to accrued and unpaid interest, and thereafter to principal. Payment of principal and interest hereunder shall be delivered to Company at the address furnished to Investor for that purpose.

45.

Prepayment by Investor . Investor may, with Company’s consent, pay, without penalty, all or any portion of the outstanding balance along with any accrued but unpaid interest on this Note at any time prior to the Investor Note Maturity Date.

46.

Security; Collateral . Investor may, in its sole discretion, designate collateral (the “ Collateral ”) as it deems fit, as security for Investor’s obligations hereunder, which Collateral may be, but is not required to be, real property, a letter of credit with a financial institution determined by Investor in its sole discretion, or pledged membership interests. Upon Investor’s designation of Collateral, each of Investor and Company shall timely execute any and all documents necessary or advisable in order to properly grant a security interest upon the Collateral in favor of Company.

47.

Release . Company covenants and agrees that in the event that this Note is secured by Collateral, Company shall timely execute any and all documents necessary or advisable in order to release such security interest and Collateral to Investor, or Investor’s designee, upon the earlier of (i) the date this Note is paid in full and (ii) the date that is six (6) months and three (3) days following the date such Collateral is given as security for this Note, or such later date as determined in the sole discretion of Investor (the “ Release Date ”). For the avoidance of doubt, as of the date hereof, there is no collateral securing this Note, and after the Release Date, as applicable, there shall be no collateral securing this Note.

48.

Right of Offset . Notwithstanding anything to the contrary herein or in any of the other Transaction Documents, in the event (i) of the occurrence of any Event of Default (as defined in the Company Note) under the Company Note or any other note issued by Company in connection with the Purchase Agreement, (ii) of a breach of any material term, condition, representation, warranty, covenant or obligation of Company under any Transaction Document, or (iii) Company sells, transfers, assigns, pledges or hypothecates this Note, or attempts to do any of the foregoing, whether voluntarily or involuntarily, Investor shall be entitled to deduct and offset any amount owing by Company under the Company Note from any amount owed by Investor under this Note (the “ Investor Offset Right ”), provided that if any of the foregoing events occur and Investor has not yet exercised the Investor Offset Right, the Investor Offset Right shall be automatically exercised on the date that is thirty (30) days prior to the Investor Note Maturity Date (an “ Automatic Offset ”). Other than with respect to an Automatic Offset, Investor may only elect to exercise the Investor Offset Right by delivering to Company an offset notice in a form substantially similar to Exhibit A to the Company Note or another form of Investor’s choosing. In the event that Investor’s exercise of the Investor Offset Right under this Section  results in the full satisfaction of Investor’s obligations under this Note, then Company shall return this Note to Investor for cancellation or, in the event this Note has been lost, stolen or destroyed, Company shall provide Investor with a lost note affidavit in a form reasonably acceptable to Investor.

49.

Default . If any of the events specified below shall occur (each, an “ Investor Note Default ”) Company may declare the unpaid principal balance under this Note, together with all accrued and unpaid interest thereon, fees incurred or other amounts owing hereunder immediately due and payable, by notice in writing to Investor. If any default, other than a Payment Default (as defined below), is curable, then the default may be cured (and no Investor Note Default will have occurred) if Investor, after receiving written notice from Company demanding cure of such default, either (i) cures the default within fifteen (15) days of the receipt of such notice, or (ii) if the cure requires more than fifteen (15) days, immediately initiates steps that Company deems in Company’s reasonable discretion to be sufficient to cure the default and thereafter diligently continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. Each of the following events shall constitute an Investor Note Default:

49.1.

Failure to Pay . Investor’s failure to make any payment when due and payable under this Note (a “ Payment Default ”);

49.2.

Breaches of Covenants . Investor’s failure to observe or perform any other covenant, obligation, condition or agreement contained in this Note;

49.3.

Representations and Warranties . If any representation, warranty, certificate, or other statement (financial or otherwise) made or furnished by or on behalf of Investor to Company in writing in connection with this Note or any of the other Transaction Documents, or as an inducement to Company to enter into the Purchase Agreement, shall be false or misleading in any material respect when made or furnished; and

49.4.

Involuntary Bankruptcy . If any involuntary petition is filed under any bankruptcy or similar law or rule against Investor, and such petition is not dismissed within sixty (60) days, or a receiver, trustee, liquidator, assignee, custodian, sequestrator or other similar official is appointed to take possession of any of the assets or properties of Investor.

50.

Binding Effect; Assignment . This Note shall be binding on the Parties and their respective heirs, successors, and assigns; provided , however , that neither Party shall assign any of its rights hereunder without the prior written consent of the other Party, except that Investor may assign this Note to any of its Affiliates without the prior written consent of Company and, furthermore, Company agrees that it shall not unreasonably withhold, condition or delay its consent to any other assignment of this Note by Investor.

51.

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.

52.

Purchase Agreement; Arbitration of Disputes . By acceptance of this Note, each Party agrees to be bound by the applicable terms, conditions and general provisions of the Purchase Agreement and the other Transaction Documents, including without limitation the Arbitration Provisions attached as an exhibit to the Purchase Agreement.

53.

Customer Identification–USA Patriot Act Notice . Company hereby notifies Investor that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56, signed into law October 26, 2001) (the “ Act ”), and Company’s policies and practices, Company is required to obtain, verify and record certain information and documentation that identifies Investor, which information includes the name and address of Investor and such other information that will allow Company to identify Investor in accordance with the Act.

54.

Lawful Interest . It being the intention of Company and Investor to comply with all applicable laws with regard to the interest charged hereunder, it is agreed that, notwithstanding any provision to the contrary in this Note or any of the other Transaction Documents, no such provision, including without limitation any provision of this Note providing for the payment of interest or other charges, shall require the payment or permit the collection of any amount in excess of the maximum amount of interest permitted by law to be charged for the use or detention, or the forbearance in the collection, of all or any portion of the indebtedness evidenced by this Note or by any extension or renewal hereof (“ Excess Interest ”). If any Excess Interest is provided for, or is adjudicated to be provided for, in this Note, then in such event:

54.1.

the provisions of this Section  shall govern and control;

54.2.

Investor shall not be obligated to pay any Excess Interest;

54.3.

any Excess Interest that Company may have received hereunder shall, at the option of Company, be (i) applied as a credit against the principal balance due under this Note or the accrued and unpaid interest thereon not to exceed the maximum amount permitted by law, or both, (ii) refunded to Investor, or (iii) any combination of the foregoing;

54.4.

the applicable interest rate or rates shall be automatically subject to reduction to the maximum lawful rate allowed to be contracted for in writing under the applicable governing usury laws, and this Note and the Transaction Documents shall be deemed to have been, and shall be, reformed and modified to reflect such reduction in such interest rate or rates; and

54.5.

Investor shall not have any action or remedy against Company for any damages whatsoever or any defense to enforcement of this Note or arising out of the payment or collection of any Excess Interest.

55.

Pronouns . Regardless of their form, all words used in this Note shall be deemed singular or plural and shall have the gender as required by the text.

56.

Headings . The various headings used in this Note as headings for sections or otherwise are for convenience and reference only and shall not be used in interpreting the text of the section in which they appear and shall not limit or otherwise affect the meanings thereof.

57.

Time is of the Essence . Time is of the essence with this Note.

58.

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 the Parties to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect.

59.

Attorneys’ Fees . If any arbitration or action at law or in equity is necessary to enforce this Note or to collect payment under this Note, Company shall be entitled to recover reasonable attorneys’ fees directly related to such enforcement or collection actions.

60.

Amendments and Waivers; Remedies . No failure or delay on the part of either Party hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to either Party hereto at law, in equity or otherwise. Any amendment, supplement or modification of or to any provision of this Note, any waiver of any provision of this Note, and any consent to any departure by either Party from the terms of any provision of this Note, shall be effective (i) only if it is made or given in writing and signed by Investor and Company and (ii) only in the specific instance and for the specific purpose for which made or given.

61.

Notices . Unless otherwise provided for herein, all notices, requests, demands, claims and other communications hereunder shall be given in accordance with the subsection of the Purchase Agreement titled “Notices.” Either Party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by providing notice thereof in the manner set forth in the Purchase Agreement.

62.

Final Note . This Note, together with the other Transaction Documents, contains the complete understanding and agreement of Investor and Company and supersedes all prior representations, warranties, agreements, arrangements, understandings, and negotiations of Investor and Company with respect to the subject matter of the Transaction Documents. THIS NOTE, TOGETHER WITH THE OTHER TRANSACTION DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY ALLEGED PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

63.

Waiver of Jury Trial . EACH OF INVESTOR AND COMPANY 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.

[ Remainder of page intentionally left blank; signature page follows ]



 






IN WITNESS WHEREOF, the Parties have executed this Note as of the date set forth above.


INVESTOR:

      

ST. GEORGE INVESTMENTS LLC


By: Fife Trading, Inc., its Manager



By:_________________________

John M. Fife, President





ACKNOWLEDGED, ACCEPTED AND AGREED:

COMPANY:

GLOBAL BOATWORKS HOLDINGS, INC.


By: _________________________

Name:  _________________________

Title:  _________________________



GLOBAL BOATWORKS LLC


By: _________________________

Name:  _________________________

Title:  _________________________





 







THIS NOTE (AS DEFINED BELOW) MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE ALIENATED OR ENCUMBERED WITHOUT THE PRIOR WRITTEN CONSENT OF INVESTOR (AS DEFINED BELOW). THIS NOTE IS SUBJECT TO A RIGHT OF OFFSET IN FAVOR OF INVESTOR UPON THE OCCURRENCE OF CERTAIN EVENTS AS SET FORTH IN MORE DETAIL IN SECTION  BELOW.


$150,000.00

State of Utah

January 5, 2017


INVESTOR NOTE #4


F OR VALUE RECEIVED, ST. GEORGE INVESTMENTS LLC , a Utah limited liability company (“ Investor ”), hereby promises to pay to GLOBAL BOATWORKS HOLDINGS, INC. , a Florida corporation (“ Holdings ”), or (as so designated by Holdings) G LOBAL BOATWORKS LLC, a Florida limited liability company and subsidiary of Holdings (together with Holdings, “ Company ”, and together with Investor, the “ Parties ”), the principal sum of $150,000.00 together with all accrued and unpaid interest thereon, fees incurred or other amounts owing hereunder, all as set forth below in this Investor Note #4 (this “ Note ”). This Note is issued pursuant to that certain Note Purchase Agreement of even date herewith, entered into by and between Investor and Company (as the same may be amended from time to time, the “ Purchase Agreement ”), pursuant to which Company issued to Investor that certain Secured Promissory Note in the principal amount of $830,000.00 (as the same may be amended from time to time, the “ Company Note ”). All capitalized terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Purchase Agreement.    

64.

Principal and Interest . No interest shall accrue on the outstanding balance of this Note unless and until an Investor Note Default (as defined below) occurs. Immediately following the occurrence of any Investor Note Default, interest shall automatically accrue on the outstanding balance beginning on the date the applicable Investor Note Default occurred at an interest rate equal to the lesser of 22% per annum or the maximum rate permitted under applicable law. Interest calculated 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. The entire unpaid principal balance and all accrued and unpaid interest, if any, under this Note, shall be due and payable on the date that is nine (9) months from the date hereof (the “ Investor Note Maturity Date ”); provided, however , that Investor may elect, in its sole discretion, to extend the Investor Note Maturity Date for up to thirty (30) days by delivering written notice of such election to Company at any time prior to the Investor Note Maturity Date.

65.

Payment . Unless prepaid, all principal and accrued interest under this Note is payable in one lump sum on the Investor Note Maturity Date. All payments of interest and principal shall be (i) in lawful money of the United States of America, and (ii) in the form of immediately available funds. All payments shall be applied first to costs of collection, if any, then to accrued and unpaid interest, and thereafter to principal. Payment of principal and interest hereunder shall be delivered to Company at the address furnished to Investor for that purpose.

66.

Prepayment by Investor . Investor may, with Company’s consent, pay, without penalty, all or any portion of the outstanding balance along with any accrued but unpaid interest on this Note at any time prior to the Investor Note Maturity Date.

67.

Security; Collateral . Investor may, in its sole discretion, designate collateral (the “ Collateral ”) as it deems fit, as security for Investor’s obligations hereunder, which Collateral may be, but is not required to be, real property, a letter of credit with a financial institution determined by Investor in its sole discretion, or pledged membership interests. Upon Investor’s designation of Collateral, each of Investor and Company shall timely execute any and all documents necessary or advisable in order to properly grant a security interest upon the Collateral in favor of Company.

68.

Release . Company covenants and agrees that in the event that this Note is secured by Collateral, Company shall timely execute any and all documents necessary or advisable in order to release such security interest and Collateral to Investor, or Investor’s designee, upon the earlier of (i) the date this Note is paid in full and (ii) the date that is six (6) months and three (3) days following the date such Collateral is given as security for this Note, or such later date as determined in the sole discretion of Investor (the “ Release Date ”). For the avoidance of doubt, as of the date hereof, there is no collateral securing this Note, and after the Release Date, as applicable, there shall be no collateral securing this Note.

69.

Right of Offset . Notwithstanding anything to the contrary herein or in any of the other Transaction Documents, in the event (i) of the occurrence of any Event of Default (as defined in the Company Note) under the Company Note or any other note issued by Company in connection with the Purchase Agreement, (ii) of a breach of any material term, condition, representation, warranty, covenant or obligation of Company under any Transaction Document, or (iii) Company sells, transfers, assigns, pledges or hypothecates this Note, or attempts to do any of the foregoing, whether voluntarily or involuntarily, Investor shall be entitled to deduct and offset any amount owing by Company under the Company Note from any amount owed by Investor under this Note (the “ Investor Offset Right ”), provided that if any of the foregoing events occur and Investor has not yet exercised the Investor Offset Right, the Investor Offset Right shall be automatically exercised on the date that is thirty (30) days prior to the Investor Note Maturity Date (an “ Automatic Offset ”). Other than with respect to an Automatic Offset, Investor may only elect to exercise the Investor Offset Right by delivering to Company an offset notice in a form substantially similar to Exhibit A to the Company Note or another form of Investor’s choosing. In the event that Investor’s exercise of the Investor Offset Right under this Section  results in the full satisfaction of Investor’s obligations under this Note, then Company shall return this Note to Investor for cancellation or, in the event this Note has been lost, stolen or destroyed, Company shall provide Investor with a lost note affidavit in a form reasonably acceptable to Investor.

70.

Default . If any of the events specified below shall occur (each, an “ Investor Note Default ”) Company may declare the unpaid principal balance under this Note, together with all accrued and unpaid interest thereon, fees incurred or other amounts owing hereunder immediately due and payable, by notice in writing to Investor. If any default, other than a Payment Default (as defined below), is curable, then the default may be cured (and no Investor Note Default will have occurred) if Investor, after receiving written notice from Company demanding cure of such default, either (i) cures the default within fifteen (15) days of the receipt of such notice, or (ii) if the cure requires more than fifteen (15) days, immediately initiates steps that Company deems in Company’s reasonable discretion to be sufficient to cure the default and thereafter diligently continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. Each of the following events shall constitute an Investor Note Default:

70.1.

Failure to Pay . Investor’s failure to make any payment when due and payable under this Note (a “ Payment Default ”);

70.2.

Breaches of Covenants . Investor’s failure to observe or perform any other covenant, obligation, condition or agreement contained in this Note;

70.3.

Representations and Warranties . If any representation, warranty, certificate, or other statement (financial or otherwise) made or furnished by or on behalf of Investor to Company in writing in connection with this Note or any of the other Transaction Documents, or as an inducement to Company to enter into the Purchase Agreement, shall be false or misleading in any material respect when made or furnished; and

70.4.

Involuntary Bankruptcy . If any involuntary petition is filed under any bankruptcy or similar law or rule against Investor, and such petition is not dismissed within sixty (60) days, or a receiver, trustee, liquidator, assignee, custodian, sequestrator or other similar official is appointed to take possession of any of the assets or properties of Investor.

71.

Binding Effect; Assignment . This Note shall be binding on the Parties and their respective heirs, successors, and assigns; provided , however , that neither Party shall assign any of its rights hereunder without the prior written consent of the other Party, except that Investor may assign this Note to any of its Affiliates without the prior written consent of Company and, furthermore, Company agrees that it shall not unreasonably withhold, condition or delay its consent to any other assignment of this Note by Investor.

72.

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.

73.

Purchase Agreement; Arbitration of Disputes . By acceptance of this Note, each Party agrees to be bound by the applicable terms, conditions and general provisions of the Purchase Agreement and the other Transaction Documents, including without limitation the Arbitration Provisions attached as an exhibit to the Purchase Agreement.

74.

Customer Identification–USA Patriot Act Notice . Company hereby notifies Investor that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56, signed into law October 26, 2001) (the “ Act ”), and Company’s policies and practices, Company is required to obtain, verify and record certain information and documentation that identifies Investor, which information includes the name and address of Investor and such other information that will allow Company to identify Investor in accordance with the Act.

75.

Lawful Interest . It being the intention of Company and Investor to comply with all applicable laws with regard to the interest charged hereunder, it is agreed that, notwithstanding any provision to the contrary in this Note or any of the other Transaction Documents, no such provision, including without limitation any provision of this Note providing for the payment of interest or other charges, shall require the payment or permit the collection of any amount in excess of the maximum amount of interest permitted by law to be charged for the use or detention, or the forbearance in the collection, of all or any portion of the indebtedness evidenced by this Note or by any extension or renewal hereof (“ Excess Interest ”). If any Excess Interest is provided for, or is adjudicated to be provided for, in this Note, then in such event:

75.1.

the provisions of this Section  shall govern and control;

75.2.

Investor shall not be obligated to pay any Excess Interest;

75.3.

any Excess Interest that Company may have received hereunder shall, at the option of Company, be (i) applied as a credit against the principal balance due under this Note or the accrued and unpaid interest thereon not to exceed the maximum amount permitted by law, or both, (ii) refunded to Investor, or (iii) any combination of the foregoing;

75.4.

the applicable interest rate or rates shall be automatically subject to reduction to the maximum lawful rate allowed to be contracted for in writing under the applicable governing usury laws, and this Note and the Transaction Documents shall be deemed to have been, and shall be, reformed and modified to reflect such reduction in such interest rate or rates; and

75.5.

Investor shall not have any action or remedy against Company for any damages whatsoever or any defense to enforcement of this Note or arising out of the payment or collection of any Excess Interest.

76.

Pronouns . Regardless of their form, all words used in this Note shall be deemed singular or plural and shall have the gender as required by the text.

77.

Headings . The various headings used in this Note as headings for sections or otherwise are for convenience and reference only and shall not be used in interpreting the text of the section in which they appear and shall not limit or otherwise affect the meanings thereof.

78.

Time is of the Essence . Time is of the essence with this Note.

79.

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 the Parties to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect.

80.

Attorneys’ Fees . If any arbitration or action at law or in equity is necessary to enforce this Note or to collect payment under this Note, Company shall be entitled to recover reasonable attorneys’ fees directly related to such enforcement or collection actions.

81.

Amendments and Waivers; Remedies . No failure or delay on the part of either Party hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to either Party hereto at law, in equity or otherwise. Any amendment, supplement or modification of or to any provision of this Note, any waiver of any provision of this Note, and any consent to any departure by either Party from the terms of any provision of this Note, shall be effective (i) only if it is made or given in writing and signed by Investor and Company and (ii) only in the specific instance and for the specific purpose for which made or given.

82.

Notices . Unless otherwise provided for herein, all notices, requests, demands, claims and other communications hereunder shall be given in accordance with the subsection of the Purchase Agreement titled “Notices.” Either Party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by providing notice thereof in the manner set forth in the Purchase Agreement.

83.

Final Note . This Note, together with the other Transaction Documents, contains the complete understanding and agreement of Investor and Company and supersedes all prior representations, warranties, agreements, arrangements, understandings, and negotiations of Investor and Company with respect to the subject matter of the Transaction Documents. THIS NOTE, TOGETHER WITH THE OTHER TRANSACTION DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY ALLEGED PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

84.

Waiver of Jury Trial . EACH OF INVESTOR AND COMPANY 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.

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IN WITNESS WHEREOF, the Parties have executed this Note as of the date set forth above.


INVESTOR:

      

ST. GEORGE INVESTMENTS LLC


By: Fife Trading, Inc., its Manager



By:_________________________

John M. Fife, President





ACKNOWLEDGED, ACCEPTED AND AGREED:

COMPANY:

GLOBAL BOATWORKS HOLDINGS, INC.


By: _________________________

Name: _________________________ 

Title:  _________________________



GLOBAL BOATWORKS LLC


By: _________________________

Name: _________________________ 

Title:  _________________________





 







SECURITY AGREEMENT

THIS SECURITY AGREEMENT (this “ Agreement ”), dated as of January 5, 2017, is executed by Global Boatworks Holdings, Inc., a Florida corporation (“ Debtor ”), in favor of St. George Investments LLC, a Utah limited liability company (“ Secured Party ”).  

A.

Debtor, together with Global Boatworks LLC, a Florida limited liability company and subsidiary of Debtor, has issued to Secured Party a certain Secured Promissory Note of even date herewith, as may be amended from time to time, in the original face amount of $830,000.00 (the “ Note ”).

B.

In order to induce Secured Party to extend the credit evidenced by the Note, Debtor has agreed to enter into this Agreement and to grant Secured Party a security interest in the Collateral (as defined below).

NOW, THEREFORE, in consideration of the above recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Debtor hereby agrees with Secured Party as follows:

85.

Definitions and Interpretation . When used in this Agreement, the following terms have the following respective meanings:

Collateral ” has the meaning given to that term in Section  hereof.

Lien ” shall mean, with respect to any property, any security interest, mortgage, pledge, lien, claim, charge or other encumbrance in, of, or on such property or the income therefrom, including, without limitation, the interest of a vendor or lessor under a conditional sale agreement, capital lease or other title retention agreement, or any agreement to provide any of the foregoing, and the filing of any financing statement or similar instrument under the UCC or comparable law of any jurisdiction.

Intellectual Property ” means all patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses (software or otherwise), information,  know-how,  inventions, discoveries, published and unpublished works of authorship, processes, any and all other proprietary rights, and all rights corresponding to all of the foregoing throughout the world, now owned and existing or hereafter arising, created or acquired.


Obligations ” means (a) all loans, advances, future advances, debts, liabilities and obligations, howsoever arising, owed by Debtor to Secured Party or any affiliate of Secured Party of every kind and description, now existing or hereafter arising, whether created by the Note, this Agreement, that certain Note Purchase Agreement of even date herewith, entered into by and among Debtor, Secured Party and an affiliate of Secured Party (the “ Purchase Agreement ”), any other Transaction Documents (as defined in the Purchase Agreement), any other promissory note issued by Debtor in favor of Secured Party (or any affiliate of Secured Party), any modification or amendment to any of the foregoing, guaranty of payment or other contract or by a quasi-contract, tort, statute or other operation of law, whether incurred or owed directly to Secured Party or as an affiliate of Secured Party or acquired by Secured Party or an affiliate of Secured Party by purchase, pledge or otherwise, (b) all costs and expenses, including attorneys’ fees, incurred by Secured Party or any affiliate of Secured Party in connection with the Note or in connection with the collection or enforcement of any portion of the indebtedness, liabilities or obligations described in the foregoing clause (a), (c) the payment of all other sums, with interest thereon, advanced in accordance herewith to protect the security of this Agreement, and (d) the performance of the covenants and agreements of Debtor contained in this Agreement and all other Transaction Documents.

Permitted Liens ” means (a) Liens for taxes not yet delinquent or Liens for taxes being contested in good faith and by appropriate proceedings for which adequate reserves have been established, and (b) Liens in favor of Secured Party under this Agreement or arising under the other Transaction Documents.

UCC ” means the Uniform Commercial Code as in effect in the state whose laws would govern the security interest in, including without limitation the perfection thereof, and foreclosure of the applicable Collateral.

Unless otherwise defined herein, all terms defined in the UCC have the respective meanings given to those terms in the UCC.

86.

Grant of Security Interest . As security for the Obligations, Debtor hereby pledges to Secured Party and grants to Secured Party a blanket security interest in all right, title, interest, claims and demands of Debtor in and to all assets of Debtor including without limitation the property described in Schedule A hereto, and all replacements, proceeds, products, and accessions thereof (collectively, the “ Collateral ”).

87.

Authorization to File Financing Statements . Debtor hereby irrevocably authorizes Secured Party at any time and from time to time to file in any filing office in any Uniform Commercial Code jurisdiction or other jurisdiction of Debtor or its subsidiaries (including without limitation Florida) any financing statements or documents having a similar effect and amendments thereto that provide any other information required by the Uniform Commercial Code (or similar law of any non-United States jurisdiction, if applicable) of such state or jurisdiction for the sufficiency or filing office acceptance of any financing statement or amendment, including whether Debtor is an organization, the type of organization and any organization identification number issued to Debtor. Debtor agrees to furnish any such information to Secured Party promptly upon Secured Party’s request.

88.

General Representations and Warranties . Debtor represents and warrants to Secured Party that (a) Debtor is the owner of the Collateral and that no other person has any right, title, claim or interest (by way of Lien or otherwise) in, against or to the Collateral, other than Permitted Liens, (b) upon the filing of UCC-1 financing statements with the Florida Secretary of State, Secured Party shall have a perfected first-position security interest in the Collateral to the extent that a security interest in the Collateral can be perfected by such filing, except for Permitted Liens; (c) Debtor has received at least a reasonably equivalent value in exchange for entering into this Agreement, (d) Debtor is not insolvent, as defined in any applicable state or federal statute, nor will Debtor be rendered insolvent by the execution and delivery of this Agreement to Secured Party; and (e) as such, this Agreement is a valid and binding obligation of Debtor.

89.

Additional Covenants . Debtor hereby agrees:

89.1.

to perform all acts that may be necessary to maintain, preserve, protect and perfect in the Collateral, the Lien granted to Secured Party therein, and the perfection and priority of such Lien;

89.2.

to procure, execute (including endorse, as applicable), and deliver from time to time any endorsements, assignments, financing statements, certificates of title, and all other instruments, documents and/or writings reasonably deemed necessary or appropriate by Secured Party to perfect, maintain and protect Secured Party’s Lien hereunder and the priority thereof;

89.3.

to provide at least fifteen (15) days prior written notice to Secured Party of any of the following events: (a) any changes or alterations of Debtor’s name, (b) any changes with respect to Debtor’s address or principal place of business, and (c) the formation of any subsidiaries of Debtor;

89.4.

upon the occurrence of an Event of Default (as defined in the Note) under the Note and, thereafter, at Secured Party’s request, to endorse (up to the outstanding amount under such promissory notes at the time of Secured Party’s request), assign and deliver any promissory notes included in the Collateral to Secured Party, accompanied by such instruments of transfer or assignment duly executed in blank as Secured Party may from time to time specify;

89.5.

to the extent the Collateral is not delivered to Secured Party pursuant to this Agreement, to keep the Collateral at the principal office of Debtor (unless otherwise agreed to by Secured Party in writing), and not to relocate the Collateral to any other locations without the prior written consent of Secured Party;

89.6.

not to sell or otherwise dispose, or offer to sell or otherwise dispose, of the Collateral or any interest therein (other than inventory in the ordinary course of business);  

89.7.

not to, directly or indirectly, allow, grant or suffer to exist any Lien upon any of the Collateral, other than Permitted Liens;

89.8.

not to grant any license or sublicense under any of its Intellectual Property, or enter into any other agreement with respect to any of its Intellectual Property, except in the ordinary course of Debtor’s business;

89.9.

to the extent commercially reasonable and in Debtor’s good faith business judgment: (a) to file and prosecute diligently any patent, trademark or service mark applications pending as of the date hereof or hereafter until all Obligations shall have been paid in full, (b) to make application on unpatented but patentable inventions and on trademarks and service marks, (c) to preserve  and maintain all rights in all of its Intellectual Property, and (d) to ensure that all of its Intellectual Property is and remains enforceable. Any and all costs and expenses incurred in connection with each of Debtor’s obligations under this Section  shall be borne by Debtor. Debtor shall not knowingly and unreasonably abandon any right to file a patent, trademark or service mark application, or abandon any pending patent application, or any other of its Intellectual Property, without the prior written consent of Secured Party except for Intellectual Property that Debtor determines, in the exercise of its good faith business judgment, is not or is no longer material to its business;

89.10.

upon the request of Secured Party at any time or from time to time, and at the sole cost and expense (including, without limitation, reasonable attorneys’ fees) of Debtor, Debtor shall take all actions and execute and deliver any and all instruments, agreements, assignments, certificates and/or documents reasonably required by Secured Party to collaterally assign any and all of Debtor’s foreign patent, copyright and trademark registrations and applications now owned or hereafter acquired to and in favor of Secured Party; and

89.11.

at any time amounts paid by Secured Party under the Transaction Documents are used to purchase Collateral, Debtor shall perform all acts that may be necessary, and otherwise fully cooperate with Secured Party, to cause (a) any such amounts paid by Secured Party to be disbursed directly to the sellers of any such Collateral, (b) all certificates of title pertaining to such Collateral (as applicable) to be properly filed and reissued to reflect Secured Party’s Lien on such Collateral, and (c) all such reissued certificates of title to be delivered to and held by Secured Party.

90.

Authorized Action by Secured Party . Debtor hereby irrevocably appoints Secured Party as its attorney-in-fact (which appointment is coupled with an interest) and agrees that Secured Party may perform (but Secured Party shall not be obligated to and shall incur no liability to Debtor or any third party for failure so to do) any act which Debtor is obligated by this Agreement to perform, and to exercise such rights and powers as Debtor might exercise with respect to the Collateral, including the right to (a) collect by legal proceedings or otherwise and endorse, receive and receipt for all dividends, interest, payments, proceeds and other sums and property now or hereafter payable on or on account of the Collateral; (b) enter into any extension, reorganization, deposit, merger, consolidation or other agreement pertaining to, or deposit, surrender, accept, hold or apply other property in exchange for the Collateral; (c) make any compromise or settlement, and take any action Secured Party deems advisable, with respect to the Collateral, including without limitation bringing a suit in Secured Party’s own name to enforce any Intellectual Property; (d) endorse Debtor’s name on all applications, documents, papers and instruments necessary or desirable for Secured Party in the use of any Intellectual Property; (e) grant or issue any exclusive or non-exclusive license under any Intellectual Property to any person or entity; (f) assign, pledge, sell, convey or otherwise transfer title in or dispose of any Intellectual Property to any person or entity; (g) cause the Commissioner of Patents and Trademarks, United States Patent and Trademark Office (or as appropriate, such equivalent agency in foreign countries) to issue any and all patents and related rights and applications to Secured Party as the assignee of Debtor’s entire interest therein; (h) file a copy of this Agreement with any governmental agency, body or authority, including without limitation the United States Patent and Trademark Office and, if applicable, the United States Copyright Office or Library of Congress, at the sole cost and expense of Debtor; (i) insure, process and preserve the Collateral; (j) pay any indebtedness of Debtor relating to the Collateral; (k) execute and file UCC financing statements and other documents, certificates, instruments and agreements with respect to the Collateral or as otherwise required or permitted hereunder; and (l) take any and all appropriate action and execute any and all documents and instruments that may be necessary or useful to accomplish the purposes of this Agreement; provided, however , that Secured Party shall not exercise any such powers granted pursuant to clauses (a) through (g) above prior to the occurrence of an Event of Default and shall only exercise such powers during the continuance of an Event of Default. The powers conferred on Secured Party under this Section  are solely to protect its interests in the Collateral and shall not impose any duty upon it to exercise any such powers. Secured Party shall be accountable only for the amounts that it actually receives as a result of the exercise of such powers, and neither Secured Party nor any of its stockholders, directors, officers, managers, employees or agents shall be responsible to Debtor for any act or failure to act, except with respect to Secured Party’s own gross negligence or willful misconduct. Nothing in this Section  shall be deemed an authorization for Debtor to take any action that it is otherwise expressly prohibited from undertaking by way of other provision of this Agreement.

91.

Default and Remedies .

91.1.

Default . Debtor shall be deemed in default under this Agreement upon the occurrence of an Event of Default.

91.2.

Remedies . Upon the occurrence of any such Event of Default, Secured Party shall have the rights of a secured creditor under the UCC, all rights granted by this Agreement and by law, including, without limiting the foregoing, (a) the right to require Debtor to assemble the Collateral and make it available to Secured Party at a place to be designated by Secured Party, and (b) the right to take possession of the Collateral, and for that purpose Secured Party may enter upon premises on which the Collateral may be situated and remove the Collateral therefrom. Debtor hereby agrees that fifteen (15) days’ notice of a public sale of any Collateral or notice of the date after which a private sale of any Collateral may take place is reasonable. In addition, Debtor waives any and all rights that it may have to a judicial hearing in advance of the enforcement of any of Secured Party’s rights and remedies hereunder, including, without limitation, Secured Party’s right following an Event of Default to take immediate possession of Collateral and to exercise Secured Party’s rights and remedies with respect thereto. Secured Party may also have a receiver appointed to take charge of all or any portion of the Collateral and to exercise all rights of Secured Party under this Agreement. Secured Party may exercise any of its rights under this Section  without demand or notice of any kind. The remedies in this Agreement, including without limitation this Section , are in addition to, not in limitation of, any other right, power, privilege, or remedy, either in law, in equity, or otherwise, to which Secured Party may be entitled. No failure or delay on the part of Secured party in exercising any right, power, or remedy will operate as a waiver thereof, nor will any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right hereunder. All of Secured Party’s rights and remedies, whether evidenced by this Agreement or by any other agreement, instrument or document shall be cumulative and may be exercised singularly or concurrently.

91.3.

Standards for Exercising Rights and Remedies . To the extent that applicable law imposes duties on Secured Party to exercise remedies in a commercially reasonable manner, Debtor acknowledges and agrees that it is not commercially unreasonable for Secured Party (a) to fail to incur expenses reasonably deemed significant by Secured Party to prepare Collateral for disposition, (b) to fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain governmental or third party consents for the collection or disposition of Collateral to be collected or disposed of, (c) to fail to exercise collection remedies against account debtors or other persons obligated on Collateral or to fail to remove liens or encumbrances on or any adverse claims against Collateral, (d) to exercise collection remedies against account debtors and other persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (e) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (f) to contact other persons, whether or not in the same business as Debtor, for expressions of interest in acquiring all or any portion of the Collateral, (g) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the Collateral is of a specialized nature, (h) to dispose of Collateral by utilizing Internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets, (i) to dispose of assets in wholesale rather than retail markets, (j) to disclaim disposition warranties, (k) to purchase insurance or credit enhancements to insure Secured Party against risks of loss, collection or disposition of Collateral or to provide to Secured Party a guaranteed return from the collection or disposition of Collateral, or (l) to the extent deemed appropriate by Secured Party, to obtain the services of other brokers, investment bankers, consultants and other professionals to assist Secured Party in the collection or disposition of any of the Collateral. Debtor acknowledges that the purpose of this Section is to provide non-exhaustive indications of what actions or omissions by Secured Party would fulfill Secured Party’s duties under the UCC in Secured Party’s exercise of remedies against the Collateral and that other actions or omissions by Secured Party shall not be deemed to fail to fulfill such duties solely on account of not being indicated in this Section. Without limitation upon the foregoing, nothing contained in this Section shall be construed to grant any rights to Debtor or to impose any duties on Secured Party that would not have been granted or imposed by this Agreement or by applicable law in the absence of this Section.

91.4.

Marshalling . Secured Party shall not be required to marshal any present or future Collateral for, or other assurances of payment of, the Obligations or to resort to such Collateral or other assurances of payment in any particular order, and all of its rights and remedies hereunder and in respect of such Collateral and other assurances of payment shall be cumulative and in addition to all other rights and remedies, however existing or arising. To the extent that it lawfully may, Debtor hereby agrees that it will not invoke any law relating to the marshalling of Collateral which might cause delay in or impede the enforcement of Secured Party’s rights and remedies under this Agreement or under any other instrument creating or evidencing any of the Obligations or under which any of the Obligations is outstanding or by which any of the Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, Debtor hereby irrevocably waives the benefits of all such laws.

91.5.

Application of Collateral Proceeds . The proceeds and/or avails of the Collateral, or any part thereof, and the proceeds and the avails of any remedy hereunder (as well as any other amounts of any kind held by Secured Party at the time of, or received by Secured Party after, the occurrence of an Event of Default) shall be paid to and applied as follows:

(a)

First, to the payment of reasonable costs and expenses, including all amounts expended to preserve the value of the Collateral, of foreclosure or suit, if any, and of such sale and the exercise of any other rights or remedies, and of all proper fees, expenses, liability and advances, including reasonable legal expenses and attorneys’ fees, incurred or made hereunder by Secured Party;

(b)

Second, to the payment to Secured Party of the amount then owing or unpaid on the Note (to be applied first to accrued interest and fees and second to outstanding principal) and all amounts owed under any of the other Transaction Documents or other documents included within the Obligations; and

(c)

Third, to the payment of the surplus, if any, to Debtor, its successors and assigns, or to whosoever may be lawfully entitled to receive the same.

In the absence of final payment and satisfaction in full of all of the Obligations, Debtor shall remain liable for any deficiency.

92.

Miscellaneous .

92.1.

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 this reference.

92.2.

Non-waiver . No failure or delay on Secured Party’s part in exercising any right hereunder shall operate as a waiver thereof or of any other right nor shall any single or partial exercise of any such right preclude any other further exercise thereof or of any other right.

92.3.

Amendments and Waivers . This Agreement may not be amended or modified, nor may any of its terms be waived, except by written instruments signed by Debtor and Secured Party. Each waiver or consent under any provision hereof shall be effective only in the specific instances for the purpose for which given.

92.4.

Assignment . This Agreement shall be binding upon and inure to the benefit of Secured Party and Debtor and their respective successors and assigns; provided, however , that Debtor may not sell, assign or delegate rights and obligations hereunder without the prior written consent of Secured Party.

92.5.

Cumulative Rights, etc . The rights, powers and remedies of Secured Party under this Agreement shall be in addition to all rights, powers and remedies given to Secured Party by virtue of any applicable law, rule or regulation of any governmental authority, or the Note, all of which rights, powers, and remedies shall be cumulative and may be exercised successively or concurrently without impairing Secured Party’s rights hereunder. Debtor waives any right to require Secured Party to proceed against any person or entity or to exhaust any Collateral or to pursue any remedy in Secured Party’s power.

92.6.

Partial Invalidity . If any part of this Agreement is construed to be in violation of any law, such part shall be modified to achieve the objective of the parties to the fullest extent permitted and the balance of this Agreement shall remain in full force and effect.

92.7.

Expenses . Debtor shall pay on demand all reasonable fees and expenses, including reasonable attorneys’ fees and expenses, incurred by Secured Party in connection with the custody, preservation or sale of, or other realization on, any of the Collateral or the enforcement or attempt to enforce any of the Obligations which are not performed as and when required by this Agreement.

92.8.

Entire Agreement . This Agreement and the other Transaction Documents, taken together, constitute and contain the entire agreement of Debtor and Secured Party with respect to this particular matter and supersede any and all prior agreements, negotiations, correspondence, understandings and communications between the parties, whether written or oral, respecting the subject matter hereof.

92.9.

Governing Law; Venue . Except as otherwise specifically set forth herein, the parties expressly agree that this Agreement shall be governed solely by the laws of the State of Utah, without giving effect to the principles thereof regarding the conflict of laws; provided, however , that enforcement of Secured Party’s rights and remedies against the Collateral as provided herein will be subject to the UCC. The provisions set forth in the Purchase Agreement to determine the proper venue for any disputes are incorporated herein by this reference.

92.10.

Waiver of Jury Trial . EACH PARTY TO THIS AGREEMENT 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 AGREEMENT 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 IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY.

92.11.

Purchase Agreement; Arbitration of Disputes . By executing this Agreement, each party agrees to be bound by the terms, conditions and general provisions of the Purchase Agreement and the other Transaction Documents, including without limitation the Arbitration Provisions (as defined in the Purchase Agreement) set forth as an exhibit to the Purchase Agreement.

92.12.

Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be an original and all of which together shall constitute one instrument. Any electronic copy of a party’s executed counterpart will be deemed to be an executed original.

92.13.

Time of the Essence . Time is expressly made of the essence with respect to each and every provision of this Agreement.

[ Remainder of page intentionally left blank; signature page follows ]



 






IN WITNESS WHEREOF, Secured Party and Debtor have caused this Agreement to be executed as of the day and year first above written.

SECURED PARTY:


ST. GEORGE INVESTMENTS LLC


By: Fife Trading, Inc., its Manager



By:_________________________

John M. Fife, President



DEBTOR:


GLOBAL BOATWORKS HOLDINGS, INC.



By:_________________________

Name: _________________________

Title: _________________________




[ Signature Page to Security Agreement ]






SCHEDULE A

TO SECURITY AGREEMENT


All right, title, interest, claims and demands of Debtor in and to all of Debtor’s assets including without limitation the following property:


1.

All boats, houseboats, and other custom floating home/vessels (and all materials and other parts used in the construction thereof for any such boats, houseboats and custom home/vessels that are in the process of being constructed), including without limitation the custom home/vessels to be known as the “Luxuria I” (HIN ADX15001J516) and the “Luxuria II” (HIN not yet assigned), which are currently under construction.


2.

All membership interests in Debtor’s wholly owned subsidiary Global Boatworks LLC, a Florida limited liability company.  


3.

All customer accounts, insurance contracts, and clients underlying such insurance contracts.


4.

All goods and equipment now owned or hereafter acquired, including, without limitation, all laboratory equipment, computer equipment, office equipment, machinery, fixtures, vehicles, and any interest in any of the foregoing, and all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing, wherever located;


5.

All inventory now owned or hereafter acquired, including, without limitation, all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products including such inventory as is temporarily out of Debtor’s custody or possession or in transit and including any returns upon any accounts or other proceeds, including insurance proceeds, resulting from the sale or disposition of any of the foregoing and any documents of title representing any of the above, and Debtor’s books relating to any of the foregoing;


6.

All accounts receivable, contract rights, general intangibles, legal claims, healthcare insurance receivables, payment intangibles and commercial tort claims, now owned or hereafter acquired, including, without limitation, all patents, patent rights and patent applications (including without limitation, the inventions and improvements described and claimed therein, and (a) all reissues, divisions, continuations, renewals, extensions and continuations-in-part thereof, (b) all income, royalties, damages, proceeds and payments now and hereafter due or payable under or with respect thereto, including, without limitation, damages and payments for past or future infringements thereof, (c) the right to sue for past, present and future infringements thereof, and (d) all rights corresponding thereto throughout the world), trademarks and service marks (and applications and registrations therefor), inventions, discoveries, copyrights and mask works (and applications and registrations therefor), trade names, trade styles, software and computer programs including source code, trade secrets, methods, published and unpublished works of authorship, processes, know how, drawings, specifications, descriptions, and all memoranda, notes, and records with respect to any research and development, goodwill, license agreements, information, any and all other proprietary rights, franchise agreements, blueprints, drawings, purchase orders, customer lists, route lists, infringements, claims, computer programs, computer disks, computer tapes, literature, reports, catalogs, design rights, income tax refunds, payments of insurance and rights to payment of any kind and whether in tangible or intangible form or contained on magnetic media readable by machine together with all such magnetic media, and all rights corresponding to all of the foregoing throughout the world, now owned and existing or hereafter arising, created or acquired;


7.

All now existing and hereafter arising accounts, contract rights, royalties, license rights and all other forms of obligations owing to Debtor arising out of the sale or lease of custom floating homes/vessel, the licensing of technology or the rendering of services by Debtor (subject, in each case, to the contractual rights of third parties to require funds received by Debtor to be expended in a particular manner), whether or not earned by performance, and any and all credit insurance, guaranties, and other security therefor, as well as all merchandise returned to or reclaimed by Debtor and Debtor’s books relating to any of the foregoing;


8.

All documents, cash, deposit accounts, letters of credit, letter of credit rights, supporting obligations, certificates of deposit, instruments, chattel paper, electronic chattel paper, tangible chattel paper and investment property, including, without limitation, all securities, whether certificated or uncertificated, security entitlements, securities accounts, commodity contracts and commodity accounts, and all financial assets held in any securities account or otherwise, wherever located, now owned or hereafter acquired and Debtor’s books relating to the foregoing;


9.

All other assets, goods and personal property of Debtor, wherever located, whether tangible or intangible, and whether now owned or hereafter acquired; and


10.

Any and all claims, rights and interests in any of the above and all substitutions for, additions and accessions to and proceeds and products thereof, including, without limitation, insurance, condemnation, requisition or similar payments and the proceeds thereof.

.






 







SECURITY AGREEMENT

THIS SECURITY AGREEMENT (this “ Agreement ”), dated as of January 5, 2017, is executed by Global Boatworks LLC, a Florida limited liability company (“ Debtor ”), in favor of St. George Investments LLC, a Utah limited liability company (“ Secured Party ”).

A.

Debtor, together with Global Boatworks Holdings, Inc., a Florida corporation and parent of Debtor, has issued to Secured Party a certain Secured Promissory Note of even date herewith, as may be amended from time to time, in the original face amount of $830,000.00 (the “ Note ”).

B.

In order to induce Secured Party to extend the credit evidenced by the Note, Debtor has agreed to enter into this Agreement and to grant Secured Party a security interest in the Collateral (as defined below).

NOW, THEREFORE, in consideration of the above recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Debtor hereby agrees with Secured Party as follows:

1.

Definitions and Interpretation . When used in this Agreement, the following terms have the following respective meanings:

Collateral ” has the meaning given to that term in Section  hereof.

Lien ” shall mean, with respect to any property, any security interest, mortgage, pledge, lien, claim, charge or other encumbrance in, of, or on such property or the income therefrom, including, without limitation, the interest of a vendor or lessor under a conditional sale agreement, capital lease or other title retention agreement, or any agreement to provide any of the foregoing, and the filing of any financing statement or similar instrument under the UCC or comparable law of any jurisdiction.

Intellectual Property ” means all patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses (software or otherwise), information,  know-how,  inventions, discoveries, published and unpublished works of authorship, processes, any and all other proprietary rights, and all rights corresponding to all of the foregoing throughout the world, now owned and existing or hereafter arising, created or acquired.


Obligations ” means (a) all loans, advances, future advances, debts, liabilities and obligations, howsoever arising, owed by Debtor to Secured Party or any affiliate of Secured Party of every kind and description, now existing or hereafter arising, whether created by the Note, this Agreement, that certain Note Purchase Agreement of even date herewith, entered into by and among Debtor, Secured Party and an affiliate of Secured Party (the “ Purchase Agreement ”), any other Transaction Documents (as defined in the Purchase Agreement), any other promissory note issued by Debtor in favor of Secured Party (or any affiliate of Secured Party), any modification or amendment to any of the foregoing, guaranty of payment or other contract or by a quasi-contract, tort, statute or other operation of law, whether incurred or owed directly to Secured Party or as an affiliate of Secured Party or acquired by Secured Party or an affiliate of Secured Party by purchase, pledge or otherwise, (b) all costs and expenses, including attorneys’ fees, incurred by Secured Party or any affiliate of Secured Party in connection with the Note or in connection with the collection or enforcement of any portion of the indebtedness, liabilities or obligations described in the foregoing clause (a), (c) the payment of all other sums, with interest thereon, advanced in accordance herewith to protect the security of this Agreement, and (d) the performance of the covenants and agreements of Debtor contained in this Agreement and all other Transaction Documents.

Permitted Liens ” means (a) Liens for taxes not yet delinquent or Liens for taxes being contested in good faith and by appropriate proceedings for which adequate reserves have been established, and (b) Liens in favor of Secured Party under this Agreement or arising under the other Transaction Documents.

UCC ” means the Uniform Commercial Code as in effect in the state whose laws would govern the security interest in, including without limitation the perfection thereof, and foreclosure of the applicable Collateral.

Unless otherwise defined herein, all terms defined in the UCC have the respective meanings given to those terms in the UCC.

2.

Grant of Security Interest . As security for the Obligations, Debtor hereby pledges to Secured Party and grants to Secured Party a blanket security interest in all right, title, interest, claims and demands of Debtor in and to all of Debtor’s assets including without limitation the property described in Schedule A hereto, and all replacements, proceeds, products, and accessions thereof (collectively, the “ Collateral ”).

3.

Authorization to File Financing Statements . Debtor hereby irrevocably authorizes Secured Party at any time and from time to time to file in any filing office in any Uniform Commercial Code jurisdiction or other jurisdiction of Debtor or its subsidiaries (including without limitation Florida) any financing statements or documents having a similar effect and amendments thereto that provide any other information required by the Uniform Commercial Code (or similar law of any non-United States jurisdiction, if applicable) of such state or jurisdiction for the sufficiency or filing office acceptance of any financing statement or amendment, including whether Debtor is an organization, the type of organization and any organization identification number issued to Debtor. Debtor agrees to furnish any such information to Secured Party promptly upon Secured Party’s request.

4.

General Representations and Warranties . Debtor represents and warrants to Secured Party that (a) Debtor is the owner of the Collateral and that no other person has any right, title, claim or interest (by way of Lien or otherwise) in, against or to the Collateral, other than Permitted Liens, (b) upon the filing of UCC-1 financing statements with the Florida Secretary of State, Secured Party shall have a perfected first-position security interest in the Collateral to the extent that a security interest in the Collateral can be perfected by such filing, except for Permitted Liens; (c) Debtor has received at least a reasonably equivalent value in exchange for entering into this Agreement, including without limitation receiving a portion of the loan proceeds, and thereby will materially benefit from the financial accommodations granted to Debtor by Secured Party pursuant to the Transaction Documents, (d) Debtor is not insolvent, as defined in any applicable state or federal statute, nor will Debtor be rendered insolvent by the execution and delivery of this Agreement to Secured Party; and (e) as such, this Agreement is a valid and binding obligation of Debtor.

5.

Additional Covenants . Debtor hereby agrees:

5.1.

to perform all acts that may be necessary to maintain, preserve, protect and perfect in the Collateral, the Lien granted to Secured Party therein, and the perfection and priority of such Lien;

5.2.

to procure, execute (including endorse, as applicable), and deliver from time to time any endorsements, assignments, financing statements, certificates of title, and all other instruments, documents and/or writings reasonably deemed necessary or appropriate by Secured Party to perfect, maintain and protect Secured Party’s Lien hereunder and the priority thereof;

5.3.

to provide at least fifteen (15) days prior written notice to Secured Party of any of the following events: (a) any changes or alterations of Debtor’s name, (b) any changes with respect to Debtor’s address or principal place of business, and (c) the formation of any subsidiaries of Debtor;

5.4.

upon the occurrence of an Event of Default (as defined in the Note) under the Note and, thereafter, at Secured Party’s request, to endorse (up to the outstanding amount under such promissory notes at the time of Secured Party’s request), assign and deliver any promissory notes included in the Collateral to Secured Party, accompanied by such instruments of transfer or assignment duly executed in blank as Secured Party may from time to time specify;

5.5.

to the extent the Collateral is not delivered to Secured Party pursuant to this Agreement, to keep the Collateral at the principal office of Debtor (unless otherwise agreed to by Secured Party in writing), and not to relocate the Collateral to any other locations without the prior written consent of Secured Party;

5.6.

not to sell or otherwise dispose, or offer to sell or otherwise dispose, of the Collateral or any interest therein (other than inventory in the ordinary course of business);  

5.7.

not to, directly or indirectly, allow, grant or suffer to exist any Lien upon any of the Collateral, other than Permitted Liens;

5.8.

not to grant any license or sublicense under any of its Intellectual Property, or enter into any other agreement with respect to any of its Intellectual Property, except in the ordinary course of Debtor’s business;

5.9.

to the extent commercially reasonable and in Debtor’s good faith business judgment: (a) to file and prosecute diligently any patent, trademark or service mark applications pending as of the date hereof or hereafter until all Obligations shall have been paid in full, (b) to make application on unpatented but patentable inventions and on trademarks and service marks, (c) to preserve  and maintain all rights in all of its Intellectual Property, and (d) to ensure that all of its Intellectual Property is and remains enforceable. Any and all costs and expenses incurred in connection with each of Debtor’s obligations under this Section  shall be borne by Debtor. Debtor shall not knowingly and unreasonably abandon any right to file a patent, trademark or service mark application, or abandon any pending patent application, or any other of its Intellectual Property, without the prior written consent of Secured Party except for Intellectual Property that Debtor determines, in the exercise of its good faith business judgment, is not or is no longer material to its business;

5.10.

upon the request of Secured Party at any time or from time to time, and at the sole cost and expense (including, without limitation, reasonable attorneys’ fees) of Debtor, Debtor shall take all actions and execute and deliver any and all instruments, agreements, assignments, certificates and/or documents reasonably required by Secured Party to collaterally assign any and all of Debtor’s foreign patent, copyright and trademark registrations and applications now owned or hereafter acquired to and in favor of Secured Party;

5.11.

at any time amounts paid by Secured Party under the Transaction Documents are used to purchase Collateral, Debtor shall perform all acts that may be necessary, and otherwise fully cooperate with Secured Party, to cause (a) any such amounts paid by Secured Party to be disbursed directly to the sellers of any such Collateral, (b) all certificates of title pertaining to such Collateral (as applicable) to be properly filed and reissued to reflect Secured Party’s Lien on such Collateral, and (c) all such reissued certificates of title to be delivered to and held by Secured Party; and

5.12.

that it will not use lack of consideration as a defense to its performance of its obligations under this Agreement. Secured Party may rely conclusively on the continuing warranty, hereby made, that Debtor continues to be benefitted by Secured Party’s extension of accommodations to Debtor, and Secured Party shall have no duty to inquire into or confirm the receipt of any such benefits, and this Agreement shall be effective and enforceable by Secured Party without regard to the receipt, nature or value of any such benefits.

6.

Authorized Action by Secured Party . Debtor hereby irrevocably appoints Secured Party as its attorney-in-fact (which appointment is coupled with an interest) and agrees that Secured Party may perform (but Secured Party shall not be obligated to and shall incur no liability to Debtor or any third party for failure so to do) any act which Debtor is obligated by this Agreement to perform, and to exercise such rights and powers as Debtor might exercise with respect to the Collateral, including the right to (a) collect by legal proceedings or otherwise and endorse, receive and receipt for all dividends, interest, payments, proceeds and other sums and property now or hereafter payable on or on account of the Collateral; (b) enter into any extension, reorganization, deposit, merger, consolidation or other agreement pertaining to, or deposit, surrender, accept, hold or apply other property in exchange for the Collateral; (c) make any compromise or settlement, and take any action Secured Party deems advisable, with respect to the Collateral, including without limitation bringing a suit in Secured Party’s own name to enforce any Intellectual Property; (d) endorse Debtor’s name on all applications, documents, papers and instruments necessary or desirable for Secured Party in the use of any Intellectual Property; (e) grant or issue any exclusive or non-exclusive license under any Intellectual Property to any person or entity; (f) assign, pledge, sell, convey or otherwise transfer title in or dispose of any Intellectual Property to any person or entity; (g) cause the Commissioner of Patents and Trademarks, United States Patent and Trademark Office (or as appropriate, such equivalent agency in foreign countries) to issue any and all patents and related rights and applications to Secured Party as the assignee of Debtor’s entire interest therein; (h) file a copy of this Agreement with any governmental agency, body or authority, including without limitation the United States Patent and Trademark Office and, if applicable, the United States Copyright Office or Library of Congress, at the sole cost and expense of Debtor; (i) insure, process and preserve the Collateral; (j) pay any indebtedness of Debtor relating to the Collateral; (k) execute and file UCC financing statements and other documents, certificates, instruments and agreements with respect to the Collateral or as otherwise required or permitted hereunder; and (l) take any and all appropriate action and execute any and all documents and instruments that may be necessary or useful to accomplish the purposes of this Agreement; provided, however , that Secured Party shall not exercise any such powers granted pursuant to clauses (a) through (g) above prior to the occurrence of an Event of Default and shall only exercise such powers during the continuance of an Event of Default. The powers conferred on Secured Party under this Section  are solely to protect its interests in the Collateral and shall not impose any duty upon it to exercise any such powers. Secured Party shall be accountable only for the amounts that it actually receives as a result of the exercise of such powers, and neither Secured Party nor any of its stockholders, directors, officers, managers, employees or agents shall be responsible to Debtor for any act or failure to act, except with respect to Secured Party’s own gross negligence or willful misconduct. Nothing in this Section  shall be deemed an authorization for Debtor to take any action that it is otherwise expressly prohibited from undertaking by way of other provision of this Agreement.

7.

Default and Remedies .

7.1.

Default . Debtor shall be deemed in default under this Agreement upon the occurrence of an Event of Default.

7.2.

Remedies . Upon the occurrence of any such Event of Default, Secured Party shall have the rights of a secured creditor under the UCC, all rights granted by this Agreement and by law, including, without limiting the foregoing, (a) the right to require Debtor to assemble the Collateral and make it available to Secured Party at a place to be designated by Secured Party, and (b) the right to take possession of the Collateral, and for that purpose Secured Party may enter upon premises on which the Collateral may be situated and remove the Collateral therefrom. Debtor hereby agrees that fifteen (15) days’ notice of a public sale of any Collateral or notice of the date after which a private sale of any Collateral may take place is reasonable. In addition, Debtor waives any and all rights that it may have to a judicial hearing in advance of the enforcement of any of Secured Party’s rights and remedies hereunder, including, without limitation, Secured Party’s right following an Event of Default to take immediate possession of Collateral and to exercise Secured Party’s rights and remedies with respect thereto. Secured Party may also have a receiver appointed to take charge of all or any portion of the Collateral and to exercise all rights of Secured Party under this Agreement. Secured Party may exercise any of its rights under this Section  without demand or notice of any kind. The remedies in this Agreement, including without limitation this Section , are in addition to, not in limitation of, any other right, power, privilege, or remedy, either in law, in equity, or otherwise, to which Secured Party may be entitled. No failure or delay on the part of Secured party in exercising any right, power, or remedy will operate as a waiver thereof, nor will any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right hereunder. All of Secured Party’s rights and remedies, whether evidenced by this Agreement or by any other agreement, instrument or document shall be cumulative and may be exercised singularly or concurrently.

7.3.

Standards for Exercising Rights and Remedies . To the extent that applicable law imposes duties on Secured Party to exercise remedies in a commercially reasonable manner, Debtor acknowledges and agrees that it is not commercially unreasonable for Secured Party (a) to fail to incur expenses reasonably deemed significant by Secured Party to prepare Collateral for disposition, (b) to fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain governmental or third party consents for the collection or disposition of Collateral to be collected or disposed of, (c) to fail to exercise collection remedies against account debtors or other persons obligated on Collateral or to fail to remove liens or encumbrances on or any adverse claims against Collateral, (d) to exercise collection remedies against account debtors and other persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (e) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (f) to contact other persons, whether or not in the same business as Debtor, for expressions of interest in acquiring all or any portion of the Collateral, (g) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the Collateral is of a specialized nature, (h) to dispose of Collateral by utilizing Internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets, (i) to dispose of assets in wholesale rather than retail markets, (j) to disclaim disposition warranties, (k) to purchase insurance or credit enhancements to insure Secured Party against risks of loss, collection or disposition of Collateral or to provide to Secured Party a guaranteed return from the collection or disposition of Collateral, or (l) to the extent deemed appropriate by Secured Party, to obtain the services of other brokers, investment bankers, consultants and other professionals to assist Secured Party in the collection or disposition of any of the Collateral. Debtor acknowledges that the purpose of this Section is to provide non-exhaustive indications of what actions or omissions by Secured Party would fulfill Secured Party’s duties under the UCC in Secured Party’s exercise of remedies against the Collateral and that other actions or omissions by Secured Party shall not be deemed to fail to fulfill such duties solely on account of not being indicated in this Section. Without limitation upon the foregoing, nothing contained in this Section shall be construed to grant any rights to Debtor or to impose any duties on Secured Party that would not have been granted or imposed by this Agreement or by applicable law in the absence of this Section.

7.4.

Marshalling . Secured Party shall not be required to marshal any present or future Collateral for, or other assurances of payment of, the Obligations or to resort to such Collateral or other assurances of payment in any particular order, and all of its rights and remedies hereunder and in respect of such Collateral and other assurances of payment shall be cumulative and in addition to all other rights and remedies, however existing or arising. To the extent that it lawfully may, Debtor hereby agrees that it will not invoke any law relating to the marshalling of Collateral which might cause delay in or impede the enforcement of Secured Party’s rights and remedies under this Agreement or under any other instrument creating or evidencing any of the Obligations or under which any of the Obligations is outstanding or by which any of the Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, Debtor hereby irrevocably waives the benefits of all such laws.

7.5.

Application of Collateral Proceeds . The proceeds and/or avails of the Collateral, or any part thereof, and the proceeds and the avails of any remedy hereunder (as well as any other amounts of any kind held by Secured Party at the time of, or received by Secured Party after, the occurrence of an Event of Default) shall be paid to and applied as follows:

(a)

First, to the payment of reasonable costs and expenses, including all amounts expended to preserve the value of the Collateral, of foreclosure or suit, if any, and of such sale and the exercise of any other rights or remedies, and of all proper fees, expenses, liability and advances, including reasonable legal expenses and attorneys’ fees, incurred or made hereunder by Secured Party;

(b)

Second, to the payment to Secured Party of the amount then owing or unpaid on the Note (to be applied first to accrued interest and fees and second to outstanding principal) and all amounts owed under any of the other Transaction Documents or other documents included within the Obligations; and

(c)

Third, to the payment of the surplus, if any, to Debtor, its successors and assigns, or to whosoever may be lawfully entitled to receive the same.

In the absence of final payment and satisfaction in full of all of the Obligations, Debtor shall remain liable for any deficiency.

8.

Miscellaneous .

8.1.

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 this reference.

8.2.

Non-waiver . No failure or delay on Secured Party’s part in exercising any right hereunder shall operate as a waiver thereof or of any other right nor shall any single or partial exercise of any such right preclude any other further exercise thereof or of any other right.

8.3.

Amendments and Waivers . This Agreement may not be amended or modified, nor may any of its terms be waived, except by written instruments signed by Debtor and Secured Party. Each waiver or consent under any provision hereof shall be effective only in the specific instances for the purpose for which given.

8.4.

Assignment . This Agreement shall be binding upon and inure to the benefit of Secured Party and Debtor and their respective successors and assigns; provided, however , that Debtor may not sell, assign or delegate rights and obligations hereunder without the prior written consent of Secured Party.

8.5.

Cumulative Rights, etc . The rights, powers and remedies of Secured Party under this Agreement shall be in addition to all rights, powers and remedies given to Secured Party by virtue of any applicable law, rule or regulation of any governmental authority, or the Note, all of which rights, powers, and remedies shall be cumulative and may be exercised successively or concurrently without impairing Secured Party’s rights hereunder. Debtor waives any right to require Secured Party to proceed against any person or entity or to exhaust any Collateral or to pursue any remedy in Secured Party’s power.

8.6.

Partial Invalidity . If any part of this Agreement is construed to be in violation of any law, such part shall be modified to achieve the objective of the parties to the fullest extent permitted and the balance of this Agreement shall remain in full force and effect.

8.7.

Expenses . Debtor shall pay on demand all reasonable fees and expenses, including reasonable attorneys’ fees and expenses, incurred by Secured Party in connection with the custody, preservation or sale of, or other realization on, any of the Collateral or the enforcement or attempt to enforce any of the Obligations which are not performed as and when required by this Agreement.

8.8.

Entire Agreement . This Agreement and the other Transaction Documents, taken together, constitute and contain the entire agreement of Debtor and Secured Party with respect to this particular matter and supersede any and all prior agreements, negotiations, correspondence, understandings and communications between the parties, whether written or oral, respecting the subject matter hereof.

8.9.

Governing Law; Venue . Except as otherwise specifically set forth herein, the parties expressly agree that this Agreement shall be governed solely by the laws of the State of Utah, without giving effect to the principles thereof regarding the conflict of laws; provided, however , that enforcement of Secured Party’s rights and remedies against the Collateral as provided herein will be subject to the UCC. The provisions set forth in the Purchase Agreement to determine the proper venue for any disputes are incorporated herein by this reference.

8.10.

Waiver of Jury Trial . EACH PARTY TO THIS AGREEMENT 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 AGREEMENT 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 IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY.

8.11.

Purchase Agreement; Arbitration of Disputes . By executing this Agreement, each party agrees to be bound by the terms, conditions and general provisions of the Purchase Agreement and the other Transaction Documents, including without limitation the Arbitration Provisions (as defined in the Purchase Agreement) set forth as an exhibit to the Purchase Agreement.

8.12.

Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be an original and all of which together shall constitute one instrument. Any electronic copy of a party’s executed counterpart will be deemed to be an executed original.

8.13.

Time of the Essence . Time is expressly made of the essence with respect to each and every provision of this Agreement.

[ Remainder of page intentionally left blank; signature page follows ]



 






IN WITNESS WHEREOF, Secured Party and Debtor have caused this Agreement to be executed as of the day and year first above written.

SECURED PARTY:


ST. GEORGE INVESTMENTS LLC


By: Fife Trading, Inc., its Manager



By:_________________________

John M. Fife, President



DEBTOR:


GLOBAL BOATWORKS LLC



By:_________________________

Name: _________________________

Title: _________________________




[ Signature Page to Security Agreement ]






SCHEDULE A

TO SECURITY AGREEMENT


All right, title, interest, claims and demands of Debtor in and to all of Debtor’s assets including without limitation the following property:


1.

All boats, houseboats, and other custom floating home/vessels (and all materials and other parts used in the construction thereof for any such boats, houseboats and custom home/vessels that are in the process of being constructed), including without limitation the custom home/vessels to be known as the “Luxuria I” (HIN ADX15001J516) and the “Luxuria II” (HIN not yet assigned), which are currently under construction.


2.

All customer accounts, insurance contracts, and clients underlying such insurance contracts.


3.

All goods and equipment now owned or hereafter acquired, including, without limitation, all laboratory equipment, computer equipment, office equipment, machinery, fixtures, vehicles, and any interest in any of the foregoing, and all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing, wherever located;


4.

All inventory now owned or hereafter acquired, including, without limitation, all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products including such inventory as is temporarily out of Debtor’s custody or possession or in transit and including any returns upon any accounts or other proceeds, including insurance proceeds, resulting from the sale or disposition of any of the foregoing and any documents of title representing any of the above, and Debtor’s books relating to any of the foregoing;


5.

All accounts receivable, contract rights, general intangibles, legal claims, healthcare insurance receivables, payment intangibles and commercial tort claims, now owned or hereafter acquired, including, without limitation, all patents, patent rights and patent applications (including without limitation, the inventions and improvements described and claimed therein, and (a) all reissues, divisions, continuations, renewals, extensions and continuations-in-part thereof, (b) all income, royalties, damages, proceeds and payments now and hereafter due or payable under or with respect thereto, including, without limitation, damages and payments for past or future infringements thereof, (c) the right to sue for past, present and future infringements thereof, and (d) all rights corresponding thereto throughout the world), trademarks and service marks (and applications and registrations therefor), inventions, discoveries, copyrights and mask works (and applications and registrations therefor), trade names, trade styles, software and computer programs including source code, trade secrets, methods, published and unpublished works of authorship, processes, know how, drawings, specifications, descriptions, and all memoranda, notes, and records with respect to any research and development, goodwill, license agreements, information, any and all other proprietary rights, franchise agreements, blueprints, drawings, purchase orders, customer lists, route lists, infringements, claims, computer programs, computer disks, computer tapes, literature, reports, catalogs, design rights, income tax refunds, payments of insurance and rights to payment of any kind and whether in tangible or intangible form or contained on magnetic media readable by machine together with all such magnetic media, and all rights corresponding to all of the foregoing throughout the world, now owned and existing or hereafter arising, created or acquired;


6.

All now existing and hereafter arising accounts, contract rights, royalties, license rights and all other forms of obligations owing to Debtor arising out of the sale or lease of floating custom homes/vessels, the licensing of technology or the rendering of services by Debtor (subject, in each case, to the contractual rights of third parties to require funds received by Debtor to be expended in a particular manner), whether or not earned by performance, and any and all credit insurance, guaranties, and other security therefor, as well as all merchandise returned to or reclaimed by Debtor and Debtor’s books relating to any of the foregoing;


7.

All documents, cash, deposit accounts, letters of credit, letter of credit rights, supporting obligations, certificates of deposit, instruments, chattel paper, electronic chattel paper, tangible chattel paper and investment property, including, without limitation, all securities, whether certificated or uncertificated, security entitlements, securities accounts, commodity contracts and commodity accounts, and all financial assets held in any securities account or otherwise, wherever located, now owned or hereafter acquired and Debtor’s books relating to the foregoing;


8.

All other assets, goods and personal property of Debtor, wherever located, whether tangible or intangible, and whether now owned or hereafter acquired; and


9.

Any and all claims, rights and interests in any of the above and all substitutions for, additions and accessions to and proceeds and products thereof, including, without limitation, insurance, condemnation, requisition or similar payments and the proceeds thereof.

.






 






GUARANTY


THIS GUARANTY, made effective as of January 5, 2017, is given by Robert Rowe, an individual (“ Guarantor ”), for the benefit of St. George Investments LLC, a Utah limited liability company, and its successors, transferees, and assigns (collectively “ Investor ”).


PURPOSE


A.

Global Boatworks Holdings, Inc., a Florida corporation (the “ Company ”), and Global Boatworks LLC, a Florida limited liability company (“ Boatworks ”, and together with Company, “ Borrower ”), have issued to Investor that certain Secured Promissory Note of even date herewith in the original face amount of $830,000.00 (the “ Note ”).


B.

Guarantor is the Chief Executive Officer and a significant stockholder of the Company and the Manager of Boatworks and will materially benefit from the credit evidenced by the Note and other financial accommodations granted to Borrower pursuant to the Note.


C.

Investor agreed to provide the financing to Borrower evidenced by the Note only upon the inducement and representation of Guarantor that Guarantor would guaranty certain indebtedness, liabilities and obligations of Borrower owed to Investor under the Note and all the other Transaction Documents (as defined in the Note), as provided herein.


NOW, THEREFORE, in consideration of $10.00 and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in order to induce Investor to enter into the Transaction Documents and provide the financing contemplated therein, Guarantor hereby agrees for the benefit of Investor as follows:


GUARANTY


1.

Indebtedness Guaranteed .  Guarantor hereby absolutely and unconditionally guarantees the prompt payment in full of the Obligations (as defined below), as and when the same (including without limitation portions thereof) become due and payable. Guarantor acknowledges that the amount of the Obligations may exceed the principal amount of the Note. Guarantor further acknowledges that the foregoing guaranty is made for the timely payment and performance of each of the Obligations and is not merely a guaranty of collection.  For purposes of this Agreement, “ Obligations ” means (a) all loans, advances, debts, liabilities and obligations, howsoever arising, whether documented or undocumented, owed by Borrower to Investor or any affiliate of Investor of every kind and description, now existing or hereafter arising, whether created by the Note, the Purchase Agreement (as defined in the Note), any other Transaction Documents, any modification or amendment to any of the foregoing, guaranty of payment or other contract or by a quasi-contract, tort, statute or other operation of law, whether incurred or owed directly to Investor or an affiliate of Investor or acquired by Investor or an affiliate of Investor by purchase, pledge or otherwise, (b) all costs and expenses, including attorneys’ fees, incurred by Investor or any affiliate of Investor in connection with the Note or in connection with the collection or enforcement of any portion of the indebtedness, liabilities or obligations described in the foregoing clause (a), and (c) the performance of the covenants and agreements of Borrower contained in the Note and the other Transaction Documents.


2.

Representations and Warranties . Guarantor hereby represents and warrants to Investor that:


(a)

Guarantor is an individual that is over 21 years of age and has the legal capacity to execute, deliver and perform his obligations set forth in this Guaranty.  


(b)

This Guaranty constitutes Guarantor’s legal, valid and binding obligation enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).


(c)

The execution, delivery and performance of this Guaranty will not (i) violate any provision of any law, statute, rule or regulation or any order, writ, judgment, injunction, decree, determination or award of any court, governmental agency or arbitrator presently in effect having applicability to Guarantor, or (ii) result in a breach of or constitute a default under any indenture, loan or credit agreement or any other agreement, lease or instrument to which Guarantor is a party or by which he or any of his properties may be bound or result in the creation of any lien thereunder.  Guarantor is not in default under or in violation of any such law, statute, rule or regulation, order, writ, judgment, injunction, decree, determination or award or any such indenture, loan or credit agreement or other agreement, lease or instrument in any case in which the consequences of such default or violation could have a material adverse effect on his properties, assets or condition (financial or otherwise).


(d)

No order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by, any governmental or public body or authority is required on Guarantor’s part to authorize, or is required in connection with the execution, delivery and performance of, or the legality, validity, binding effect or enforceability of, this Guaranty.


(e)

There are no actions, suits or proceedings pending or, to Guarantor’s knowledge, threatened against or affecting Guarantor or any of his properties before any court or arbitrator, or any governmental department, board, agency or other instrumentality which, if determined adversely to Guarantor, would have a material adverse effect on his business, operations, property or condition (financial or otherwise) or on his ability to perform his obligations hereunder.


(f)

(i) This Guaranty is not given with actual intent to hinder, delay or defraud any entity to which Guarantor is, or will become on or after the date of this Guaranty, indebted, (ii) Guarantor has received at least a reasonably equivalent value in exchange for the giving of this Guaranty, (iii) Guarantor is not insolvent, as defined in any applicable state or federal statute, nor will Guarantor be rendered insolvent by the execution and delivery of this Guaranty to Investor, and (iv) Guarantor does not intend to incur debts that will be beyond Guarantor’s ability to pay as such debts become due.


(g)  

Guarantor has examined or has had the full opportunity to examine the Note and all the other Transaction Documents, all the terms of which are acceptable to Guarantor.


(h)  

This Guaranty is given in consideration of Investor entering into the Transaction Documents and providing financing thereunder.


(i)

Guarantor is the Chief Executive Officer and a significant stockholder of the Company (whether directly or indirectly), and thereby will materially benefit from the financial accommodations granted to the Company by Investor pursuant to the Transaction Documents.  Guarantor is the Manager of Boatworks, which is a wholly owned subsidiary of the Company, and thus Guarantor will also benefit from the financial accommodations granted to Boatworks by Investor pursuant to the Transaction Documents. Investor may rely conclusively on the continuing warranty, hereby made, that Guarantor continues to be benefitted by Investor’s extension of credit accommodations to Borrower and Investor shall have no duty to inquire into or confirm the receipt of any such benefits, and this Guaranty shall be effective and enforceable by Investor without regard to the receipt, nature or value of any such benefits.


3.

Alteration of Obligations .  In such manner, upon such terms and at such times as Investor and Borrower deem best and without notice to Guarantor, Investor and Borrower may alter, compromise, accelerate, extend, renew or change the time or manner for the payment of any Obligation, increase or reduce the rate of interest on the Note, release Borrower, as to all or any portion of the Obligations, release, substitute or add any one or more guarantors or endorsers, accept additional or substituted security therefor, or release or subordinate any security therefor.  No exercise or non-exercise by Investor of any right available to Investor, no dealing by Investor with Guarantor or any other guarantor, endorser of the note or any other person, and no change, impairment or release of all or a portion of the obligations of Borrower under any of the Transaction Documents or suspension of any right or remedy of Investor against any person, including, without limitation, Borrower and any other such guarantor, endorser or other person, shall in any way affect any of the obligations of Guarantor hereunder or any security furnished by Guarantor or give Guarantor any recourse against Investor.  Guarantor acknowledges that his obligations hereunder are independent of the obligations of Borrower.


4.

Waiver .  To the extent permitted by law, Guarantor hereby waives and relinquishes all rights and remedies accorded by applicable law to guarantors and agrees not to assert or take advantage of any such rights or remedies, including (without limitation) (a) any right to require Investor to proceed against the Company, Boatworks or any other person or to pursue any other remedy in Investor’s power before proceeding against Guarantor; (b) any defense that may arise by reason of the incapacity, lack of authority, death or disability of any other person or persons or the failure of Investor to file or enforce a claim against the estate (in administration, bankruptcy or any other proceeding) of any other person or persons; (c) demand, protest and notice of any kind, including, without limitation, notice of the existence, creation or incurring of any new or additional indebtedness, liability or obligation or of any action or non-action on the part of Borrower, Investor, any endorser or creditor of Borrower or Guarantor or on the part of any other person whomsoever under this or any other instrument in connection with any obligation or liability or evidence of indebtedness held by Investor as collateral or in connection with any Obligation hereby guaranteed; (d) any defense based upon an election of remedies by Investor which may destroy or otherwise impair the subrogation rights of Guarantor or the right of Guarantor to proceed against Borrower for reimbursement, or both; (e) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (f) any duty on the part of Investor to disclose to Guarantor any facts Investor may now or hereafter know about Borrower, regardless of whether Investor has reason to believe that any such facts materially increase the risk beyond that which Guarantor intends to assume or has reason to believe that such facts are unknown to Guarantor or has a reasonable opportunity to communicate such facts to Guarantor, since Guarantor acknowledges that it is fully responsible for being and keeping informed of the financial condition of Borrower and of all circumstances bearing on the risk of non-payment of any Obligation; (g) any defense arising because of Investor’s election, in any proceeding instituted under the Federal Bankruptcy Code, of the application of Section 1111(b)(2) of the Federal Bankruptcy Code; (h) any defense based on any borrowing or grant of a security interest under Section 364 of the Federal Bankruptcy Code; (i) any claim, right or remedy which Guarantor may now have or hereafter acquire against Borrower that arises hereunder and/or from the performance by Guarantor hereunder, including, without limitation, any claim, right or remedy of Investor against Borrower or any security which Investor now has or hereafter acquires, whether or not such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise; and (j) any obligation of Investor to pursue any other guarantor or any other person, or to foreclose on any collateral.


5.

Bankruptcy .  So long as any Obligation shall be owing to Investor, Guarantor shall not, without the prior written consent of Investor, commence, or join with any other person in commencing, any bankruptcy, reorganization, or insolvency proceeding against Borrower.  The obligations of Guarantor under this Guaranty shall not be altered, limited or affected by any proceeding, voluntary or involuntary, involving the bankruptcy, insolvency, receivership, reorganization, liquidation or arrangement of Borrower, or by any defense which Borrower may have by reason of any order, decree or decision of any court or administrative body resulting from any such proceeding.


6.

Claims in Bankruptcy .  Guarantor shall file in any bankruptcy or other proceeding in which the filing of claims is required or permitted by law all claims that Guarantor may have against Borrower relating to any indebtedness, liability or obligation of Borrower owed to Guarantor and will assign to Investor all rights of Guarantor thereunder.  If Guarantor does not file any such claim, Investor, as attorney-in-fact for Guarantor, is hereby authorized to do so in the name of Guarantor or, in Investor’s discretion, to assign the claim to a nominee and to cause proof of claim to be filed in the name of Investor’s nominee.  The foregoing power of attorney is coupled with an interest and cannot be revoked.  Investor or Investor’s nominee shall have the sole right to accept or reject any plan proposed in such proceeding and to take any other action that a party filing a claim is entitled to do.  In all such cases, whether in administration, bankruptcy or otherwise, the person or persons authorized to pay such claim shall pay to Investor the amount payable on such claim and, to the full extent necessary for that purpose, Guarantor hereby assigns to Investor all of Guarantor’s rights to any such payments or distributions to which Guarantor would otherwise be entitled; provided, however , that Guarantor’s obligations hereunder shall not be deemed satisfied except to the extent that Investor receives cash by reason of any such payment or distribution.  If Investor receives anything hereunder other than cash, the same shall be held as collateral for amounts due under this Guaranty.  If at any time the holder of the Note is required to refund to Borrower any payments made by Borrower under the Note because such payments have been held by a bankruptcy court having jurisdiction over Borrower to constitute a preference under any bankruptcy, insolvency or similar law then in effect, or for any other reason, then in addition to Guarantor’s other obligation under this Guaranty, Guarantor shall reimburse the holder in the aggregate amount of such refund payments.


7.

Costs and Attorneys’ Fees .  If Borrower or Guarantor fails to pay all or any portion of any Obligation, or Guarantor otherwise breaches any provision hereof or otherwise defaults hereunder, Guarantor shall pay all such expenses and actual attorneys’ fees incurred by Investor in connection with the enforcement of any obligations of Guarantor hereunder, including, without limitation, any attorneys’ fees incurred in any negotiation, alternative dispute resolution proceeding subsequently agreed to by the parties, if any, litigation, or bankruptcy proceeding or any appeals from any of such proceedings.


8.

Cumulative Rights .  The amount of Guarantor’s liability and all rights, powers and remedies of Investor hereunder and under any other agreement now or at any time hereafter in force between Investor and Guarantor, including, without limitation, any other guaranty executed by Guarantor relating to any indebtedness, liability or obligation of Borrower owed to Investor, shall be cumulative and not alternative and such rights, powers and remedies shall be in addition to all rights, powers and remedies given to Investor by law.  This Guaranty is in addition to and exclusive of the guaranty of any other guarantor of any indebtedness, liability or obligation of Borrower owed to Investor.  


9.

Independent Obligations . The obligations of Guarantor hereunder are independent of the obligations of Borrower and, to the extent permitted by law, in the event of any breach or default hereunder, a separate action or actions may be brought and prosecuted against Guarantor whether or not Borrower is joined therein or a separate action or actions are brought against Borrower.  Investor may maintain successive actions for other breaches or defaults.  Investor’s rights hereunder shall not be exhausted by Investor’s exercise of any of Investor’s rights or remedies or by any such action or by any number of successive actions until and unless all Obligations have been paid and fully performed.


10.

Severability .  If any part of this Guaranty is construed to be in violation of any law, such part shall be modified to achieve the objective of the parties to the fullest extent permitted and the balance of this Guaranty shall remain in full force and effect.


11.

Successors and Assigns .  This Guaranty shall inure to the benefit of Investor, Investor’s successors and assigns, including the assignees of any Obligation, and shall bind the heirs, executors, administrators, personal representatives, successors and assigns of Guarantor.  This Guaranty may be assigned by Investor with respect to all or any portion of the Obligations, and when so assigned, Guarantor shall be liable to the assignees under this Guaranty without in any manner affecting the liability of Guarantor hereunder with respect to any Obligations retained by Investor.


12.

Notices .  Whenever Guarantor or Investor shall desire to give or serve any notice, demand, request or other communication with respect to this Guaranty, each such notice shall be given in writing (unless otherwise specified herein) and shall be deemed effectively given on the earliest of:


(a)

the date delivered, if delivered by personal delivery as against written receipt therefor or by email to an executive officer, or by confirmed facsimile,

(b)

the fifth Trading Day (as defined in the Note) after deposit, postage prepaid, in the United States Postal Service by registered or certified mail, or

(c)

the third Trading Day after mailing by domestic or international 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 ten (10) calendar days’ advance written notice similarly given to each of the other parties hereto):


If to Guarantor:


Robert Rowe

2637 Atlantic Blvd. #134

Pompano Beach, Florida 33062


If to Investor:


St. George Investments LLC

Attn: John M. Fife

303 East Wacker Drive, Suite 1040

Chicago, Illinois  60601


with a copy to (which shall not constitute notice):


Hansen Black Anderson Ashcraft PLLC

Attn: Jonathan K. Hansen

3051 West Maple Loop Drive, Suite 325

Lehi, Utah 84043

Telephone: 801.922.5000


13.

Application of Payments or Recoveries .  With or without notice to Guarantor, Investor, in Investor’s sole discretion and at any time and from time to time and in such manner and upon such terms as Investor deems fit, may (a) apply any or all payments or recoveries from Borrower or from any other guarantor or endorser under any other instrument or realized from any security, in such manner and order of priority as Investor may determine, to any indebtedness, liability or obligation of Borrower owed to Investor, whether or not such indebtedness, liability or obligation is guaranteed hereby or is otherwise secured or is due at the time of such application; and (b) refund to Borrower any payment received by Investor in connection with any Obligation and payment of the amount refunded shall be fully guaranteed hereby.


14.

Setoff .  Investor shall have a right of setoff against all monies, securities and other property of Guarantor now or hereafter in the possession of, or on deposit with, Investor (if any), whether held in a general or special account or deposit, or for safekeeping or otherwise. Such right is in addition to any right of setoff Investor may have by law.  All rights of setoff may be exercised without notice or demand to Guarantor.  No right of setoff shall be deemed to have been waived by any act or conduct on the part of Investor, or by any neglect to exercise such right of setoff, or by any delay in doing so.  Every right of setoff shall continue in full force and effect until specifically waived or released by an instrument in writing executed by Investor.


15.

Financial Statements .  Guarantor hereby represents and warrants that the most recent financial statements of Company and Guarantor heretofore delivered to Investor, if any, are true and correct in all material respects, have been prepared in accordance with generally accepted accounting practices consistently applied and fairly present the financial condition of Company and Guarantor as of the respective dates thereof and for the period(s) covered thereby, and no material adverse change has occurred in the financial condition or prospects of Company or Guarantor since the respective dates thereof.


16.

Affirmative Covenants . Until each of Company’s other obligations to Investor under the Note shall have been paid in full, unless Investor shall otherwise consent in writing:


A.1.

Guarantor shall furnish to Investor such information regarding the financial condition of Guarantor and Company as Investor may reasonably request.


A.2.

Guarantor will file all tax returns and reports which are required by law to be filed by him or her and will pay before they become delinquent, all taxes, assessments and governmental charges and levies imposed upon it or its property and all claims or demands of any kind which, if unpaid, might result in the creation of a lien or other encumbrance upon his or her property. Upon Investor’s request, Guarantor shall provide Investor with copies of the federal and state tax returns for Guarantor.


A.1.

Guarantor will give prompt written notice to Investor of the commencement of any action, suit or proceeding affecting Guarantor.


A.1.

Guarantor will not sell, mortgage, pledge or otherwise transfer any material portion of his real or personal property, business or other assets without having first obtained Investor’s prior written consent.


A.2.

Guarantor shall not become insolvent or fail to pay his or her debts and liabilities as the same shall become due.


A.3.

Guarantor will take no action with an actual intent to hinder, delay or defraud any present or future creditors of Company or Guarantor, including Investor.  


A.1.

Guarantor shall not incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than the Note.


A.1.

Guarantor shall not make any payment upon any outstanding indebtedness which is or may become subordinated to the obligations or indebtedness owed to Investor.


A.2.

Guarantor will comply in all material respects with all laws, rules and regulations to which he or she may be subject.


A.3.

Guarantor will not permit his or her tangible net worth, as determined by generally accepted accounting principles, to be less than his or her tangible net worth as of the date of this Guaranty.


A.4.

Guarantor covenants and agrees not to assign any of his or her assets to an asset protection trust or any other trust or entity without Lender’s prior written consent and agrees that any transfer in contravention of such covenant shall be null and void ab initio .


17.

Miscellaneous .


17.1  

Governing Law and Venue .  This Guaranty shall be governed by and interpreted in accordance with the laws of the State of Utah for contracts to be wholly performed in such state and without giving effect to the principles thereof regarding the conflict of laws.  Each of the parties consents to the exclusive personal jurisdiction of the federal courts whose districts encompass any part of Salt Lake County or the state courts of the State of Utah sitting in Salt Lake County in connection with any dispute arising under this Guaranty, and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens , to the bringing of any such proceeding in such jurisdictions or to any claim that such venue of the suit, action or proceeding is improper. Nothing in this subsection shall affect or limit any right to serve process in any other manner permitted by law.


17.2

Entire Agreement .  Except as provided in any other written agreement now or at any time hereafter in force between Investor and Guarantor, this Guaranty shall constitute the entire agreement of Guarantor with Investor with respect to the subject matter hereof, and no representation, understanding, promise or condition concerning the subject matter hereof shall be binding upon Investor unless expressed herein.


17.3

Construction .  When the context and construction so require, all words used in the singular herein shall be deemed to have been used in the plural and the masculine shall include the feminine and neuter and vice versa.  The word “person” as used herein shall include any individual, company, firm, association, partnership, corporation, trust or other legal entity of any kind whatsoever.  The headings of this Guaranty are inserted for convenience only and shall have no effect upon the construction or interpretation hereof.


17.4

Waiver .  No provision of this Guaranty or right granted to Investor hereunder can be waived in whole or in part nor can Guarantor be released from Guarantor’s obligations hereunder except by a writing duly executed by an authorized officer of Investor.


17.5

No Subrogation .  Until all indebtedness, liabilities and obligations of Borrower owed to Investor have been paid in full, Guarantor shall not have any right of subrogation.


17.6

Survival .  All representations and warranties contained in this Guaranty shall survive the execution, delivery and performance of this Guaranty and the creation and payment of the Obligations.


17.7

Purchase Agreement; Arbitration of Disputes . By executing this Agreement, Guarantor agrees to be bound by the terms, conditions and general provisions of the Purchase Agreement and the other Transaction Documents, including without limitation the Arbitration Provisions (as defined in the Purchase Agreement) set forth as an exhibit to the Purchase Agreement.


17.8

Waiver of Jury Trial . GUARANTOR HEREBY WAIVES HIS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. GUARANTOR REPRESENTS THAT HE HAS REVIEWED THIS WAIVER AND KNOWINGLY AND VOLUNTARILY WAIVES HIS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS GUARANTY MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.


[Remainder of page intentionally left blank; signature page to follow]



18







IN WITNESS WHEREOF, Guarantor has executed this Guaranty to be effective as of the date first set forth above.



GUARANTOR:





_________________________

Robert Rowe







19 | Page








GLOBAL BOATWORKS HOLDINGS, INC.

OFFICER’S CERTIFICATE



The undersigned, Robert Rowe, Chief Executive Officer of Global Boatworks Holdings, Inc., a Florida corporation (“ Company ”), in connection with the issuance of that certain Secured Promissory Note issued by Company and an affiliate of Company on January 5, 2017 (the “ Note ”) in the original principal amount of $830,000.00 in favor of St. George Investments LLC, a Utah limited liability company (“ Investor ”), pursuant to that certain Note Purchase Agreement dated January 5, 2017 between Investor and Company (the “ Purchase Agreement ”), personally and in his capacity as an officer of Company, hereby represents, warrants and certifies that:


1.

He is the duly appointed Chief Executive Officer of Company.


2.

As of the date hereof, Company has no Variable Security Holders (as defined in the Purchase Agreement).  


3.

He agrees to cause Company to comply with the covenants found in Sections 4(v), (vi), and (vii) of the Purchase Agreement.


4.

He acknowledges that his execution and issuance of this Officer’s Certificate to Investor is a material inducement to Investor’s agreement to purchase the Note on the terms set forth in the Purchase Agreement and that but for his execution and issuance of this Officer’s Certificate, Investor would not have purchased the Note from Company.


IN WITNESS WHEREOF, the undersigned, personally and in his capacity as an officer of Company, has executed this Officer’s Certificate as of January 5, 2017.



_________________________________

Robert Rowe







20 | Page







GLOBAL BOATWORKS HOLDINGS, INC.

SECRETARY’S CERTIFICATE


I, ____________________, hereby certify that I am the duly elected, qualified and acting Secretary of Global Boatworks Holdings, Inc., a Florida corporation (“ Company ”), and I am authorized to execute this Secretary’s Certificate (this “ Certificate ”) on behalf of Company. This Certificate is delivered in connection with that certain Note Purchase Agreement dated January 5, 2017 (the “ Purchase Agreement ”), by and among Company, Global Boatworks LLC, a Florida limited liability company and subsidiary of Company, and St. George Investments LLC, a Utah limited liability company.  

Solely in my capacity as Secretary, I certify that Schedule 1 attached hereto is a true, accurate and complete copy of all of the resolutions adopted by the Board of Directors of Company (the “ Resolutions ”) approving and authorizing the execution, delivery and performance of the Purchase Agreement and related documents to which Company is a party on the date hereof, and the transactions contemplated thereby. Such Resolutions have not been amended, rescinded or modified since their adoption and remain in effect as of the date hereof.

IN WITNESS WHEREOF, I have made this Secretary’s Certificate effective as of January 5, 2017.

Global Boatworks Holdings, Inc.




_________________________

Printed Name: _________________________

Title: Secretary



21 | Page







Schedule 1


BOARD RESOLUTIONS


[attached]


 



22 | Page






GLOBAL BOATWORKS HOLDINGS, INC.

RESOLUTIONS ADOPTED BY THE BOARD OF DIRECTORS

________________________

Effective January 5, 2017

________________________


APPROVAL OF FINANCING


WHEREAS, the Board of Directors (the “ Board ”) of Global Boatworks Holdings, Inc., a Florida corporation (“ Company ”), has determined that it is in the best interests of Company to seek financing in the amount of up to $750,000.00 (the “ Financing ”) through the issuance and sale to St. George Investments LLC, a Utah limited liability company (“ Investor ”), of a Secured Promissory Note as a co-borrower with Global Boatworks LLC, a Florida limited liability company (“ Boatworks ”);

WHEREAS, the terms of the Financing are reflected in a Note Purchase Agreement substantially in the form attached hereto as Exhibit A (the “ Purchase Agreement ”), a Secured Promissory Note issued by Company and Boatworks to Investor in the original principal amount of $830,000.00 substantially in the form attached hereto as Exhibit B (the “ Note ”), a Security Agreement made by Company in favor of Investor substantially in the form attached hereto as , a Security Agreement made by Boatworks in favor of Investor substantially in the form attached hereto as , a series of four (4) Investor Notes made by Investor in favor of Company substantially in the form attached hereto as , a Guaranty given by Robert Rowe, an affiliate and significant stockholder of Company substantially in the form attached hereto as , and all other agreements, certificates, instruments and documents being or to be executed and delivered under or in connection with the Financing (collectively, the “ Financing Documents ”); and

WHEREAS, the Board, having received and reviewed the Financing Documents, believes that it is in the best interests of Company and the stockholders to approve the Financing and the Financing Documents and authorize the officers of Company to execute such documents.

NOW, THEREFORE, BE IT:

RESOLVED, that the Financing is hereby approved and determined to be in the best interests of Company and its stockholders;

RESOLVED FURTHER, that the form, terms and provisions of the Financing Documents (including all exhibits, schedules and other attachments thereto) are hereby ratified, confirmed and approved;

RESOLVED FURTHER, that the Note shall be duly and validly issued upon the issuance and delivery thereof in accordance with the Purchase Agreement;

RESOLVED FURTHER, that each of the officers of Company be, and each of them hereby is, authorized to execute and deliver in the name of and on behalf of Company, each of the Financing Documents and any other related agreements (with such additions to, modifications to, or deletions from such documents as the officer approves, such approval to be conclusively evidenced by such execution and delivery), to conform Company’s minute books and other records to the matters set forth in these resolutions, and to take all other actions on behalf of Company as any of them deem necessary, required, or advisable with respect to the matters set forth in these resolutions;

RESOLVED FURTHER, that the Board hereby determines that all acts and deeds previously performed by the Board and other officers of Company relating to the foregoing matters prior to the date of these resolutions are ratified, confirmed and approved in all respects as the authorized acts and deeds of Company; and

RESOLVED FURTHER, that all prior actions or resolutions of Company’s directors that are inconsistent with the foregoing are hereby amended, corrected and restated to the extent required to be consistent herewith.

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


EXHIBITS ATTACHED TO BOARD RESOLUTIONS:


Exhibit A

PURCHASE AGREEMENT

Exhibit B

NOTE

Exhibit C

COMPANY SECURITY AGREEMENT

Exhibit D

BOATWORKS SECURITY AGREEMENT

Exhibit E

FORM OF INVESTOR NOTE

Exhibit F

GUARANTY


[ Remainder of page intentionally left blank ]




23 | Page







GLOBAL BOATWORKS LLC

MANAGER’S CERTIFICATE


I, ________________, hereby certify that I am the duly elected, qualified and acting Manager of Global Boatworks LLC, a Florida limited liability company (“ Company ”), and I am authorized to execute this Manager’s Certificate (this “ Certificate ”) on behalf of Company. This Certificate is delivered in connection with that certain Note Purchase Agreement dated January 5, 2017 (the “ Purchase Agreement ”), by and among Company, Global Boatworks Holdings, Inc., a Florida corporation and parent of Company, and St. George Investments LLC, a Utah limited liability company. All capitalized terms used but not defined in this Certificate shall have the meanings set forth in the Purchase Agreement.

Solely in my capacity as Manager, I certify that attached hereto as Schedule 1 is a true, accurate and complete copy of all of the resolutions adopted by the Board of Managers of Company (the “ Resolutions ”) approving and authorizing the execution, delivery and performance of certain documents related to the Purchase Agreement to which Company is a party on the date hereof, and the transactions contemplated thereby. Such Resolutions have not been amended, rescinded or modified since their adoption and remain in effect as of the date hereof.

IN WITNESS WHEREOF, I have made this Manager’s Certificate effective as of January 5, 2017.

Global Boatworks LLC




_________________________

Printed Name: ___________

Title: Manager



24 | Page







Schedule 1


BOARD RESOLUTIONS


[attached]


 



25 | Page






GLOBAL BOATWORKS LLC

RESOLUTIONS ADOPTED BY THE BOARD OF MANAGERS

________________________

Effective January 5, 2017

________________________


APPROVAL OF FINANCING


WHEREAS, the Board of Managers (the “ Board ”) of Global Boatworks LLC, a Florida limited liability company (“ Company ”), has determined that it is in the best interests of Company to seek financing in the amount of up to $750,000.00 (the “ Financing ”) through the issuance and sale to St. George Investments LLC, a Utah limited liability company (“ Investor ”), of a Secured Promissory Note as a co-borrower with Global Boatworks Holdings, Inc., a Florida corporation (“ Holdings ”);

WHEREAS, the terms of the Financing are reflected in a Note Purchase Agreement substantially in the form attached hereto as Exhibit A (the “ Purchase Agreement ”), a Secured Promissory Note issued by Company and Holdings to Investor in the original principal amount of $830,000.00 substantially in the form attached hereto as Exhibit B (the “ Note ”), a Security Agreement made by Company in favor of Investor substantially in the form attached hereto as , a Security Agreement made by Holdings in favor of Investor substantially in the form attached hereto as , a series of four (4) Investor Notes made by Investor in favor of Company and Holdings substantially in the form attached hereto as , a Guaranty given by Robert Rowe, an affiliate and significant stockholder of Holdings substantially in the form attached hereto as , and all other agreements, certificates, instruments and documents being or to be executed and delivered under or in connection with the Financing (collectively, the “ Financing Documents ”); and

WHEREAS, the Board, having received and reviewed the Financing Documents, believes that it is in the best interests of Company and the members to approve the Financing and the Financing Documents and authorize the officers of Company to execute such documents.

NOW, THEREFORE, BE IT:

RESOLVED, that the Financing is hereby approved and determined to be in the best interests of Company and its members;

RESOLVED FURTHER, that the form, terms and provisions of the Financing Documents (including all exhibits, schedules and other attachments thereto) are hereby ratified, confirmed and approved;

RESOLVED FURTHER, that the Note shall be duly and validly issued upon the issuance and delivery thereof in accordance with the Purchase Agreement;

RESOLVED FURTHER, that each of the managers of Company be, and each of them hereby is, authorized to execute and deliver in the name of and on behalf of Company, each of the Transaction Documents and any other related agreements (with such additions to, modifications to, or deletions from such documents as the officer approves, such approval to be conclusively evidenced by such execution and delivery), to conform Company’s minute books and other records to the matters set forth in these resolutions, and to take all other actions on behalf of Company as any of them deem necessary, required, or advisable with respect to the matters set forth in these resolutions;

RESOLVED FURTHER, that the Board hereby determines that all acts and deeds previously performed by the managers and/or other officers of Company relating to the foregoing matters prior to the date of these resolutions are ratified, confirmed and approved in all respects as the authorized acts and deeds of Company; and

RESOLVED FURTHER, that all prior actions or resolutions of Company’s managers that are inconsistent with the foregoing are hereby amended, corrected and restated to the extent required to be consistent herewith.


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



EXHIBITS ATTACHED TO BOARD RESOLUTIONS:


Exhibit G

PURCHASE AGREEMENT

Exhibit H

NOTE

Exhibit I

COMPANY SECURITY AGREEMENT

Exhibit J

HOLDINGS SECURITY AGREEMENT

Exhibit K

INVESTOR NOTES

Exhibit L

GUARANTY


[ Remainder of page intentionally left blank ]





















ARBITRATION PROVISIONS


1.

Dispute Resolution . For purposes of this , 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  (“ 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 or Utah 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  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  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  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.

4.2

Selection and Payment of Arbitrator .

(a) Within ten (10) calendar days after the Service Date, Investor shall select and submit to Borrower 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 Borrower the names of the Proposed Arbitrators, Borrower 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 Borrower 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 Borrower.

(b) If Investor fails to submit to Borrower the Proposed Arbitrators within ten (10) calendar days after the Service Date pursuant to subparagraph (a) above, then Borrower 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 Borrower has submitted notice of its Proposed Arbitrators to Investor, select, by written notice to Borrower, 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 Borrower, then Borrower 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.

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, 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) 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 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 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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Arbitration Provisions , Page 1




EXHIBIT 10.15


 



 


EXHIBIT 10.16


 



 


EXHIBIT 10.17





EXHIBIT 10.18




 


EXHIBIT 10.19


 




EXHIBIT 10.20

 




EXHIBIT 31.1


CERTIFICATION PURSUANT TO

SECURITIES EXCHANGE ACT RULES 13a-14 and 15d-14

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert Rowe, Chief Executive Officer and acting Chief Financial Officer of Global Boatworks Holdings, Inc. certify that:



1.

 I have reviewed the Annual Report on Form 10-K of Global Boatworks Holdings, Inc;



2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: April 30, 2018

/s/ Robert Rowe

Robert Rowe

Chief Executive Officer




EXHIBIT 32.1





CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Global Boatworks Holdings, Inc. (the “Company”) on Form 10-K for the period ending December 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert Rowe, as the Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:


(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

Date: April 30, 2018

/s/ Robert Rowe

Robert Rowe

Chief Financial Officer and Chief Executive Officer

 

*A signed original of this written statement required by Section 906 has been provided to Global Boatworks Holdings, Inc. and will be retained by Global Boatworks Holdings, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and is not being filed as part of the Form 10-K or as a separate disclosure document.