UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

 

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended: December 31, 2017

 

or

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________________to __________________

Commission file number: 000-55049

 

ICOX INNOVATIONS INC.

(Exact name of registrant as specified in its charter)

 

Nevada   27-3098487
State or other jurisdiction of   (I.R.S. Employer
incorporation or organization   Identification No.)

 

4101 Redwood Ave., Building F, Los Angeles, CA 90066
(Address of principal executive offices and Zip Code)

Registrant’s telephone number, including area code: (424) 570-9446

Securities registered pursuant to Section 12(b) of the Act

 

Title of Each Class   Name of each Exchange on which registered
Nil   N/A

 

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

 

Common Stock

(Title of Class)

 

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 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 Web site, 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. [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [  ] Accelerated filer [  ]
Non-accelerated filer [  ] Smaller reporting company [X]
(Do not check if a smaller reporting company)   Emerging growth company [  ]

 

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.

Yes [  } No [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes [  ] No [X]

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.

 

$90,000 based on a price of $0.03 per share multiplied by 3,000,000 shares of common stock held by non-affiliates. Shares of our common stock did not trade during the year ended December 31, 2017. As a result, the aggregate market value has been determined by the conversion price of a convertible note issued on June 8, 2017.

 

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: As of March 30, 2018, there were 11,600,000 shares of common stock outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980). Not Applicable

 

 

 

 

 

 

TABLE OF CONTENTS

 

PART I 3
ITEM 1. BUSINESS 3
ITEM 1A. RISK FACTORS 13
ITEM 1B. UNRESLOVED STAFF COMMENTS 22
ITEM 2. PROPERTIES 22
ITEM 3. LEGAL PROCEEDINGS 22
ITEM 4. MINE SAFETY DISCLOSURES 22
   
PART II 23
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 23
ITEM 6. SELECTED FINANCIAL DATA 25
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 25
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 29
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 29
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 30
ITEM 9A. CONTROLS AND PROCEDURES 30
ITEM 9B. OTHER INFORMATION 32
   
PART III 33
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 38
ITEM 11. EXECUTIVE COMPENSATION 41
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 42
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 44
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 44
   
PART IV 45
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 45
ITEM 16. FORM 10-K SUMMARY 47

 

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PART I

 

ITEM 1. BUSINESS

 

Forward-Looking Statements

 

This annual report contains forward-looking statements. Forward-looking statements are projections of events, revenues, income, future economic performance or management’s plans and objectives for future operations. In some cases, forward-looking statements can be identified by the use of terminology such as “may”, “should”, “expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or “continues” or the negative of these terms or other comparable terminology. Examples of forward-looking statements made in this annual report include or may include, among others, statements about:

 

  our proposed plan of operations;
     
  our financial and operating objectives and strategies to achieve them;
     
  the costs and timing of our services;
     
  our use of available funds;
     
  our capital and funding requirements; and
     
  our other financial or operating performances.

 

The material assumptions supporting these forward-looking statements include, among other things:

 

  our future growth potential, results of operations, future prospects and opportunities;
     
  execution of our business strategy;
     
  there being no material variations in current regulatory environments;
     
  our operating expenses, including general and administrative expenses;
     
  our ability to obtain any necessary financing on acceptable terms;
     
  timing and amount of capital expenditures;
     
  retention of skilled personnel;
     
  continuation of current tax and regulatory regimes; and
     
  general economic and financial market conditions.

 

Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

 

These forward-looking statements are only predictions and involve known and unknown risks, uncertainties and other factors, including:

 

  inability to efficiently manage our operations;
     
  general economic and business conditions;

 

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  our negative operating cash flow;
     
  our ability to obtain additional financing;
     
  increases in capital and operating costs;
     
  general cryptocurrency risks;
     
  technological changes and developments in the blockchain and cryptocurrencies;
     
  risks relating to regulatory changes or actions;
     
  competition for blockchain platforms and technologies; and
     
  other factors discussed under the section entitled “Risk Factors”,

 

any of which may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Further, although we have attempted to identify factors that could cause actual results, levels of activity, performance or achievements to differ materially from those described in forward-looking statements, there may be other factors that cause results, levels of activity, performance or achievements not to be as anticipated, estimated or intended.

 

While these forward-looking statements and any assumptions upon which they are based are made in good faith and reflect management’s current judgment regarding the direction of our business, actual results may vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Accordingly, readers should not place undue reliance on forward-looking statements. Except as required by applicable law, including the securities laws of the United States and Canada, we do not intend to update any of the forward-looking statements to conform these statements to actual results. All forward-looking statements in this annual report are qualified by this cautionary statement.

 

All financial information contained herein is shown in United States dollars unless otherwise stated. Our financial statements are prepared in accordance with United States generally accepted accounting principles. Unless otherwise stated, “$” refers to United States dollars.

 

In this annual report, unless otherwise specified, all references to “shares” refer to shares of common stock in the capital of our company.

 

As used in this annual report, the terms “we”, “us” “our” and “ICOX” mean ICOX Innovations Inc. and its wholly-owned subsidiary, AppCoin Innovations (USA) Inc., unless otherwise specified.

 

Corporate Overview

 

We were incorporated under the laws of the State of Nevada on July 20, 2010 under the name “Redstone Literary Agents, Inc.”. Following incorporation, we commenced the business of representing authors to publishers.

 

Upon the resignation of Mary Wolf as an officer of our company on August 28, 2014, we ceased pursuing the business of representing authors to publishers and sought new business opportunities.

 

In July 2017, we decided to operate a new business of providing services for blockchain and cryptocurrency technologies and incorporated a Nevada subsidiary, AppCoin Innovations (USA) Inc. on August 1, 2017.

 

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Effective August 17, 2017, we completed a merger with our wholly-owned subsidiary, AppCoin Innovations Inc., a Nevada corporation, which was incorporated solely to effect a change in our name. As a result, we changed our name from “Redstone Literary Agents, Inc.” to “AppCoin Innovations Inc.”.

 

Effective February 14, 2018, we completed a merger with our wholly-owned subsidiary, ICOX Innovations Inc., a Nevada corporation, which was incorporated solely to effect a change in our name. As a result, we have changed our name from “AppCoin Innovations Inc.” to “ICOX Innovations Inc.”.

 

Recent Developments

 

On October 18, 2017, we entered into a business services agreement with Business Instincts Group Inc. ( “BIG” ), whereby we retained the services of BIG to provide certain services, including creating, designing and project managing the launching of initial coin offerings for our clients, in consideration for a monthly fee of $35,000 and a signing bonus of $100,000 payable as follows: (i) $50,000 upon closing of up to $750,000 of equity financing and (ii) $50,000 payable on signing of the first client agreement. The agreement continues for a two-year term which will automatically be renewed unless: (i) mutually agreed to by BIG and us, or (ii) written notice of non-renewal is provided by the non-renewing party to the other at least 90 days prior to the end of the term. The agreement may be terminated by either party, without cause, at any time upon the provision of 90 days written notice to the other party. Our chairman, Cameron Chell, is a director, officer and an indirect shareholder of BIG.

 

On November 20, 2017, we entered into a loan agreement with WENN Digital Inc. ( “WENN” ) whereby we provided to WENN a loan in the principal amount of $100,000, which was to be loaned to Ryde GmbH (“ Ryde ”) by WENN. The principal amount of the loan bears interest at an annual rate of 7% and matures on November 20, 2018. As partial consideration for us agreeing to provide the loan to WENN, WENN agreed to issue to us such number of shares such that we will own 7.5% of the issued and outstanding common stock of WENN after the issuance of WENN’s common stock to founding shareholders of WENN. On January 3, 2018, WENN fully repaid us the principal amount of the loan with accrued interest, being $100,843.83.

 

On December 29, 2017, we entered into a business services agreement with WENN and, on March 19, 2018, we entered into the amendment no. 1 to business services agreement dated as of March 15, 2018 with WENN. Pursuant to the business services agreement, we agreed to provide WENN with the services in connection with WENN’s development of an image rights management and protection platform (the “Platform” ) using blockchain technology, including (i) the business development and technical services, (ii) the business launch services and (iii) the post-business launch support services.

 

WENN was created by combining two substantial, existing businesses, Ryde and The WENN Media Group Limited (“ WENN Media ”). To our knowledge, Ryde and WENN Media have deep big data, blockchain development, copyright legal experience, proven AI-enabled image recognition and a post-licensing platform. We understand that WENN plans to build a sustainable community on the blockchain of the world’s photographers, offering them, among other things: (i) an efficient and cost-effective means to manage, protect and monetize their creative work; (ii) fast and free copyright protection registration; (iii) efficient and fully transparent accounting reporting; (iv) instant payments; and (v) innovative new revenue streams. The stockholders of WENN currently include us, Blockchain Merchant Group, Inc., Business Instincts Group Inc., Ryde, and WENN Media and, upon the closing of its acquisitions of Ryde and WENN Media, are expected to include certain shareholders of those entities.

 

We do not intend to find or make referrals to, or otherwise solicit, or assist in any way in the solicitation of, investors for investment in WENN’s coin offerings, act as a placement agent for the sale of WENN’s coins, or otherwise engage in any activity that would require us to register under Section 15(b) of the Securities Exchange Act of 1934, or similar provisions under state law.

 

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The business services agreement with WENN provides that the fees for the services provided in connection with the development and launch of the Platform (the business development and technical services and business launch services) were deemed earned on the date of execution of the business services agreement. We have waived WENN’s requirement to pay the $250,000 fixed fee in connection with the business development and technical services as a concession. We have recognized the business development and technical services fee of $500,000 during the year ended December 31, 2017, which WENN paid in January 2018 upon the completion of its first round of pre-ICO fundraising.

 

The fees for the post-business launch support services (the “Monthly Services” ) are $35,000 per month and they will be due at the beginning of each month in which the Monthly Services are performed. With respect to the Monthly Services, we have agreed to provide the Monthly Services for one year commencing on the date of the Platform Launch (as defined below), after which the business services agreement and the provision of the Monthly Services will automatically renew for a one year period and can be terminated by either our company or WENN with 30 days’ written notice. “Platform Launch” means the publicized product launch of the Platform to the general public, including the ability of the general public to use Tokens as the primary means of exchange for transactions on the Platform.

 

In addition, the business services agreement with WENN provides that the work fee in the amount of $4,175,000 is deemed earned on March 15, 2018 and the work fee is subject to a Renegotiation Obligation (as defined below). The business services agreement with WENN also provides that the additional fee of rights to receive an aggregate of 20,000,000 Platform tokens or coins (the “Tokens” ) pursuant to a Simple Agreement for Future Tokens is also deemed earned on the date of execution of the business services agreement and the additional fee is subject to a Renegotiation Obligation. However, for financial reporting purposes, the work fee and additional fee are deemed earned on the date of the launch of the Platform. If WENN does not raise more than $40 million in connection with its offer and sale for cash of (i) one or more Simple Agreements for Future Tokens ( “SAFTs” ), which SAFTs will entitle the holders thereof to receive Tokens under certain circumstances, and/or, (ii) Tokens, in the event that WENN determines to offer and sell Tokens in lieu of or in addition to SAFTs in connection with its fundraising efforts (collectively, the “WENN Offering” ), prior to May 31, 2018, we will be required to return the work fees and additional fee to WENN and WENN and our company will be required to negotiate in good faith the amount of each of such fee (such requirement to negotiate is referred to herein as the “Renegotiation Obligation” ).

 

We have agreed that WENN will not be responsible for any out-of-pocket expenses incurred by our company in connection with our performance of the services. In addition, we have agreed to pay, and otherwise be financially responsible for (including through the reimbursement of disbursements made by WENN and its affiliates), (i) all legal costs and expenses incurred by WENN, our company and any of their affiliates in connection with the WENN Offering; (ii) all business and travel expenses incurred by WENN, our company and any of their affiliates in connection the WENN Offering; and (iii) all fees and expenses incurred by WENN in connection with its conversion of cryptocurrencies into US dollars in connection with the WENN Offering, including bank, exchange and other similar fees and expenses. WENN will have the right to deduct any such amounts from the fees otherwise payable by it to our company and apply such deducted amounts to the payments to our company.

 

The business services agreement will continue for a period of one year unless earlier terminated by either our company or WENN.

 

Either we or WENN may terminate the business services agreement upon the provision of 30 days’ written notice to the other party. If we provide such notice, WENN may immediately terminate the business services agreement and we will be entitled to no further compensation except for any fees earned prior to the date of the termination. If WENN provides such notice, we may immediately terminate the business services agreement and will be entitled to no further compensation, except for the following lump sum payments: (i) any fees earned to the effective date of termination; and (ii) a lump sum payment of $105,000.

 

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For the purpose of determining our fees earned to the date of the termination in the event that either party terminates the business services agreement, all fees for services in connection with the development and launch of the Platform (the business development and technical services and business launch services) and the additional fee of rights to receive an aggregate of 20,000,000 Tokens are deemed earned on the date of execution of the business services agreement and the work fee is deemed earned as of March 15, 2018. However, the work fees and additional fee are subject to the Renegotiation Obligation. As such, our work fee and additional fee are not determinable or deemed collectible for the financial reporting purposes until the WENN Offering is completed or, if applicable, those fees are renegotiated pursuant to the Renegotiation Obligation.

 

Our chairman and director, Cameron Chell, is a director, officer and an indirect shareholder of Business Instincts Group Inc. which owns 10% of the common stock of WENN and he is also a director, officer and indirect shareholder of Blockchain Merchant Group, Inc. which owns 2.5% of the common stock of WENN and we own 7.5% of the common stock of WENN. Mr. Chell is also a director, chairman and secretary of WENN. Our president, Bruce Elliott, is a former chief marketing officer of WENN.

 

Our first client, WENN, has entered into a licensing partnership agreement with Eastman Kodak Company, which announced the launch of the KODAKOne blockchain platform and KODAKCoin initial coin offering. We are providing the services relating to the KODAKOne blockchain platform and the KODAKCoin initial coin offering pursuant to a business services agreement dated December 29, 2017, as amended as of March 15, 2018 with WENN.

 

Description of Business

 

Overview

 

Our new business is a services and development business that provides a turnkey set of services for companies to develop and integrate blockchain and cryptocurrency technologies into their business operations.

 

A blockchain is a distributed ledger technology which has the potential to bring significant efficiencies to many applications in diversity of fields ranging from global supply chains to financial services and beyond. One of the key promises of blockchains is reduced transaction and networking costs by removing the need for traditional third party intermediaries, such as banks, lawyers, escrow agents, etc. Blockchain is considered a foundational technology.

 

A cryptocurrency is a digital asset – often referred to as a coin or token – that is used as a medium of exchange using cryptography and decentralized control via a blockchain to secure the transaction and to control the creation of additional units of the currency.

 

We anticipate that we will enable companies to focus on their core competencies while providing the necessary resources and expertise to execute a strategy that will enable companies to integrate new blockchain plus cryptocurrency technologies into their business operations. Our plan is to be compensated on a fee-for-services model. We may also accept tokens, coins or equity in payment for our services, to the extent permitted under applicable law.

 

Our services include strategic planning, project planning and program management, structure development and administration, business plan modelling, customer development, including customer discovery and scoping as well as product commercialization and support, technology development and support, whitepaper preparation, due diligence reporting, governance planning and management.

 

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Blockchain Technology

 

Blockchain is a continuously growing list of records called blocks, which are linked and secured using cryptography. Each block contains typically a hash pointer as a link to a previous block, a timestamp and transaction data. By design, blockchains are inherently resistant to modification of the data. Functionally, a blockchain can serve as an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way. For use as a distributed ledger, a blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks and a collusion of the network majority.

 

Blockchains are secure by design and are an example of a distributed computing system and decentralization can be achieved with a blockchain. This makes blockchains potentially suitable for the recording of events, medical records and other records management activities, such as identity management, documenting provenance, digital asset registration and transaction processing.

 

Initial Coin Offerings and Cryptocurrency

 

Initial coin offerings are an important new business tool that facilitates the distribution of a cryptocurrency enabling companies to develop communities in support of their business plans or projects. The community can financially participate in the initial coin offering without the company issuing equity because the community is participating in cryptocurrency via an initial coin offering. By having a structured stake in the company or project, the investors are incentivized to increase the project’s overall value thereby driving the value of the cryptocurrency issued in the initial coin offering. A cryptocurrency is a digital asset – often referred to as a coin or token – that is used as a medium of exchange using cryptography and decentralized control via a blockchain to secure the transaction and to control the creation of additional units of the currency.

 

We may receive fees from initial coin offering proceeds, in a combination of cash and tokens, coins or equity, to the extent permitted under applicable law. We intend to hold cryptocurrencies on our balance sheet and to sell them from time to time via regulated trading exchanges, to the extent permitted under applicable law. We are not involved in the issuance of cryptocurrencies or mining or other related technical cryptocurrency production.

 

Principal Services

 

We plan to generate revenue through the following services:

 

  1. Business Development and Technical Services

 

  Business modeling and scoping and development;
     
  Advisory services surrounding token models, and token incentivisation;
     
  Advisory services surrounding cryptoeconomics creating networks, and utility of tokens;
     
  Assistance & sourcing of technical guidance surrounding creation of working model from conceptual framework; and
     
  Assistance & sourcing of guidance surrounding creation of company application for token usage, storage and transferring.

 

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  2. Blockchain and Technology Program Management

 

  Product vision and road-mapping;
     
  Program development and project management;
     
  Product development and testing.

 

  3. Customer Development

 

  Customer discovery and scoping (not including any distribution or marketing related services, or assistance regarding the offer or sale of any tokens or coins); and
     
  Product commercialization and support.

 

  4. Business Launch Services

 

  Public relations & business development plans and strategies maximizing physical and digital outreach (not including any distribution or marketing related services, or assistance regarding the offer or sale of any tokens or coins);
     
  Initial community development & management strategy;
     
  Establish digital/social media presence (not including any distribution or marketing related services, or assistance regarding the offer or sale of any tokens or coins);
     
  Whitepaper preparation and continued iterative reviews;
     
  Due diligence report;
     
  White labeled investor web wallet;
     
  Website infographics and design and
     
  Smart contract creation, sourcing, conceptualization and high-level specifications;
     
  Provide sourcing, guidance and assistance where required to engineering team surrounding the development of token wallet; and
     
  Specifications of platform website, and database backend built to collect user information.

 

  5. Post-Business Launch Support Services

 

  Public relations to support (not including any distribution or marketing related services, or assistance regarding the offer or sale of any tokens or coins);
     
  Community development and management; and
     
  General support.

 

We do not intend to find or make referrals to, or otherwise solicit, or assist in any way in the solicitation of, investors for investment in our clients’ coin offerings, act as a placement agent for the sale of our clients’ coins, or otherwise engage in any activity that would require us to register under Section 15(b) of the Securities Exchange Act of 1934, or similar provisions under state law.

 

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Sales and Marketing

 

We intend to implement our sales and marketing plan to attract new clients to our blockchain consulting business as follows:

 

  Maintain an online presence through our website and social media channels by utilizing video, written content and social implementations to create awareness;
     
  Sponsorship of cryptocurrency, blockchain and/or initial coin offering ( “ICO” ) related events;
     
  Speaking engagements at industry conferences;
     
  Direct sales channel management programs including both inbound and outbound programs and client referrals; and
     
  Public relations campaigns.

 

Dependence on Few Customers

 

As of March 30, 2018, we have one client which has engaged us to build out its business model, technology strategy, market entry strategy and capital structure, which includes a blockchain platform launch. However, we have several potential customers in our sales pipeline.

 

Competition

 

We are in a novel business of providing services for companies to develop and integrate blockchain and cryptocurrency technologies into their business operations. We compete with the following competitors:

 

  The Argon Group

 

The Argon Group (“ Argon ”) is an investment bank with a focus on digital finance and cryptocurrency and token-based capital markets. Argon provides financial advisory, placement, and technology services to companies seeking to raise equity, debt, and non-dilutive capital. Argon develops technical placement solutions, including digital tokens powered by advanced smart contracts, which Argon operates through a digital asset placement platform called TokenHub.com.

 

  CoinLaunch

 

CoinLaunch recently announced the first end-to-end initial coin offering platform that allows anyone to build, deploy and monetize compliant ICOs through a web-based service. The platform focuses on three groups of cryptocurrency users: ICO creators, funders and promoters. The company provides a Coin Creator that enables users to create their own Ethereum-based ICO. CoinLaunch’s integrated cryptocurrency funding system enables backers to fund various campaigns using a built-in crypto-payment gateway. It also includes an affiliate and referral system that tracks and manages all aspects of the promotion of ICO campaigns. The platform facilitates the payment of referrals using a CoinLaunch Token, which then can be used to purchase ICOs offered on the platform or redeemed for other cryptocurrencies. The platform includes an integrated compliance system that allows for any vetted ICOs to comply with various local regulations, including know-your-client and anti-money laundering regulations.

 

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  CoinList

 

CoinList uses screens and selects blockchain companies. In August 2017, CoinList facilitated the token sale for blockchain-based data storage network Filecoin. CoinList also offers as part of its service a white-labeled compliance infrastructure stack. Purpose-built for token sales, ComplyAPI provides companies with SEC Rule 506 investor accreditation and know-your-client and anti-money laundering compliance due diligence through a simple integration and API.

 

  ConsenSys

 

ConsenSys is a venture production studio building decentralized applications and various developer and end-user tools for blockchain ecosystems, primarily focused on Ethereum. The ConsenSys “hub” coordinates, incubates, accelerates and spawns “spoke” ventures through development, resource sharing, acquisitions, investments and the formation of joint ventures. These spokes benefit from foundational components built by ConsenSys that enable new services and business models to be built on the blockchain. In addition to the development of internal projects and consulting work, ConsenSys is engaged in the identification, development and acquisition of talent and projects on an ongoing basis.

 

  SaftLaunch

 

SaftLaunch.com offers a service for companies seeking to issue an ICO or raise funds through a SAFT agreement, including a proprietary know-your-client and anti-money laundering compliance solution that positions it to co-invest into early stage projects in the pre-ICO phase.

 

  Science

 

Science is launching a bitcoin-related incubation program and claims to be the first ICO incubator to enter the market.

 

  Token Funder

 

Token Funder has created a “smart token asset management platform” or STAMP to facilitate blockchain based securities being crowdfunded. STAMP intends to, among other things, provide token and coin management and governance services for issuers and, subject to any regulatory approvals and/or exemptive relief required, provide for certain transferability of tokens and coins to ensure that a particular token or coin can achieve the access or use function for which it has been principally created.

 

  TokenMarket

 

TokenMarket is a full service ICO provider. Its service offerings include:

 

  o ICO Launchpad, a service for organizing a “crowdsale” with a high quality blockchain industry network, expertise and tools with tradeable digital tokens;
     
  o A token and cryptocurrency database to aid investment decisions with extensive insight whereby its clients can follow ICO calendar and individual assets to be alerted about market opportunities ahead of time, and
     
  o Storage and management of a client’s digital assets in a TokenMarket wallet, which is secured with two-factor authentication.

 

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  Polymath

 

Polymath simplifies the legal process of creating and selling security tokens. It makes a new token standard, the ST20, and enforces government compliance. Only a “list of authorized investors and their Ethereum wallet addresses” can hold ST20 tokens. In order to launch a legally compliant token, Polymath platform brings together issuers, legal delegates, smart contract developers, know-your-client verification, and a decentralized exchange. All transactions on the Polymath platform take place using the native POLY token.

 

Many of our current and potential competitors may have greater brand recognition, longer operating histories, larger customer bases and significantly greater financial, marketing and other resources than we do. Accordingly, these competitors may be able to spend greater amounts on product development, marketing and distribution. This advantage could enable our competitors to acquire larger market share and develop and offer more competitive products and services. Such competition could adversely impact our ability to attain the financing necessary for us to develop our business plan. In the face of competition, we may not be successful in sufficient market share to make our business profitable.

 

Intellectual Property and Technology

 

We do not currently own any intellectual property. We intend to aggressively assert our rights under trade secret, patents, trademark and copyright laws to protect any intellectual property that we create, including product design, product research and concepts and recognized trademarks. These rights may be protected through the acquisition of patents and trademark registrations, the maintenance of trade secrets, the development of trade dress, and, where appropriate, litigation against those who are, in our opinion, infringing these rights.

 

We may initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our proprietary rights. In addition, while we are not aware that our services or proprietary rights infringe the proprietary rights of third parties, we may receive notices from third parties asserting that we have infringed their patents, trademarks, copyrights or other intellectual property rights. Any such claims could be time-consuming, result in costly litigation, cause service stoppages or lead us to enter into royalty or licensing agreements rather than disputing the merits of such claims. An adverse outcome in litigation or similar proceedings could subject us to significant liabilities to third parties, require expenditure of significant resources to develop non-infringing technology, require disputed rights to be licensed from others, or require us to cease operating our business, any of which could have a material adverse effect on our business, operating results and financial condition.

 

As we have just begun our new business, we have devoted no substantial efforts to research and development within the last two fiscal years.

 

Government Regulation

 

Current and future legislation and rulemaking and other regulatory developments, including interpretations released by a regulatory authority, may impact the manner in which bitcoins or other cryptocurrency is viewed or treated for classification and clearing purposes. In particular, bitcoins and other cryptocurrency may not be excluded from the definition of “security” by regulatory rulemaking or interpretation requiring registration of all transactions, unless an exemption is available, including transacting in bitcoin or cryptocurrency amongst owners, and require registration of trading platforms as “exchanges” such as Coinsquare. We cannot be certain as to how future regulatory developments will impact the treatment of bitcoins and other cryptocurrencies under the law. If we determine not to comply with such additional regulatory and registration requirements, we may seek to cease certain of our operations or be subjected to fines, penalties and other governmental action. Any such action may adversely affect an investment in us. Such circumstances would have a material adverse effect on our ability to continue as a going concern or to pursue this segment at all, which would have a material adverse effect on our business, prospects or operations and potentially the value of any cryptocurrencies we hold or expect to acquire for our own account and harm investors.

 

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We intend to comply with any applicable anti-money laundering or know your customer rules relating to tokens imposed by the SEC and Canadian securities regulators.

 

Employees

 

As at March 30, 2018, we have two executive officers, Bruce Elliott, who is our president, and Michael Blum, who is our chief financial officer, secretary, and treasurer, and no employees. Our management oversees all responsibilities in the areas of corporate administration, business development, and research. We also employ consultants on an as-needed-basis to provide specific expertise in areas of product design and development and other business functions including marketing and accounting. We intend to expand our current management to retain skilled directors, officers, and employees with experience relevant to our business focus.

 

ITEM 1A. RISK FACTORS

 

An investment in our common stock involves a number of very significant risks. You should carefully consider the following risks and uncertainties in addition to other information in this annual report in evaluating our company and our business before purchasing our securities. Our business, operating results and financial condition could be seriously harmed as a result of the occurrence of any of the following risks. You could lose all or part of your investment due to any of these risks. You should invest in our common stock only if you can afford to lose your entire investment.

 

General Cryptocurrency Risks

 

Cryptocurrency exchanges and other trading venues are relatively new and, in most cases, largely unregulated and may therefore be subject to fraud and failures.

 

When cryptocurrency exchanges or other trading venues are involved in fraud or experience security failures or other operational issues, such events could result in a reduction in cryptocurrency prices or confidence and impact our success and have a material adverse effect on our ability to continue as a going concern or to pursue this segment at all, which would have a material adverse effect on our business, prospects and operations.

 

Cryptocurrency market prices depend, directly or indirectly, on the prices set on exchanges and other trading venues, which are new and, in most cases, largely unregulated as compared to established, regulated exchanges for securities, commodities or currencies. For example, during the past three years, a number of bitcoin exchanges have closed due to fraud, business failure or security breaches. In many of these instances, the customers of the closed exchanges were not compensated or made whole for partial or complete losses of their account balances. While smaller exchanges are less likely to have the infrastructure and capitalization that may provide larger exchanges with some stability, larger exchanges may be more likely to be appealing targets for hackers and “malware” (i.e., software used or programmed by attackers to disrupt computer operation, gather sensitive information or gain access to private computer systems) and may be more likely to be targets of regulatory enforcement action. We do not maintain any insurance to protect from such risks, and do not expect any insurance for customer accounts to be available (such as federal deposit insurance) at any time in the future, putting customer accounts at risk from such events. In the event we face fraud, security failures, operational issues or similar events such factors would have a material adverse effect on our ability of to continue as a going concern or to pursue this segment at all, which would have a material adverse effect on our business, prospects and operations.

 

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Regulatory changes or actions may alter the nature of an investment in us or restrict the use of cryptocurrencies in a manner that adversely affects our business, prospects or operations.

 

As cryptocurrencies have grown in both popularity and market size, governments around the world have reacted differently to cryptocurrencies, with certain governments deeming them illegal while others have allowed their use and trade.

 

Governments may in the future curtail or outlaw the acquisition, use or redemption of cryptocurrencies. Ownership of, holding or trading in cryptocurrencies may then be considered illegal and subject to sanction. Governments may also take regulatory action that may increase the cost and/or subject cryptocurrency companies to additional regulation. The effect of any future regulatory change on our business or any cryptocurrency that may impact our business is impossible to predict, but such change could be substantial and would have a material adverse effect on our business, prospects and operations.

 

To date, the Securities and Exchange Commission (the “SEC” ) has released statements that state that the United States would, in some circumstances, consider the offer and sale of blockchain tokens pursuant to an ICO subject to federal securities laws. China has released statements and taken similar actions. Canada has also released a notice which indicated that the Canadian Securities Administrators would, in some circumstances, consider the offer and sale of blockchain tokens pursuant to an ICO subject to Canadian securities laws. Although we do not participate in ICOs, our clients and customers may participate in ICOs and these actions may be a prelude to further action which chills widespread acceptance of blockchain and cryptocurrency adoption and have a material adverse effect on our ability to continue as a going concern or to pursue this segment at all, which would have a material adverse effect on our business, prospects or operations.

 

Governments may in the future take regulatory actions that prohibit or severely restrict the right to acquire, own, hold, sell, use or trade cryptocurrencies or to exchange cryptocurrencies for fiat currency. Similar actions by governments or regulatory bodies could result in restriction of the acquisition, ownership, holding, selling, use or trading in our securities. Such a restriction could have a material adverse effect on our ability to continue as a going concern or to pursue this segment at all, raise new capital which would have a material adverse effect on our business, prospects or operations and harm investors in our securities.

 

On-going and future regulatory actions and regulatory change related to our business or cryptocurrencies, may impact our ability to continue to operate and such actions could affect our ability to continue as a going concern or to pursue this segment at all, which would have a material adverse effect on our business, prospects or operations.

 

The development and acceptance of cryptographic and algorithmic protocols governing the issuance of and transactions in cryptocurrencies is subject to a variety of factors that are difficult to evaluate.

 

The use of cryptocurrencies to, among other things, buy and sell goods and services and complete transactions, is part of a new and rapidly evolving industry that employs digital assets based upon a computer-generated mathematical and/or cryptographic protocol. The growth of this industry in general, and the use of cryptocurrencies in particular, is subject to a high degree of uncertainty, and the slowing or stopping of the development or acceptance of developing protocols may occur and is unpredictable. The factors include, but are not limited to:

 

  Continued worldwide growth in the adoption and use of cryptocurrencies;
     
  Governmental and quasi-governmental regulation of cryptocurrencies and their use, or restrictions on or regulation of access to and operation of the network or similar cryptocurrency systems;

 

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  Changes in consumer demographics and public tastes and preferences;
     
  The maintenance and development of the open-source software protocol of the network;
     
  The availability and popularity of other forms or methods of buying and selling goods and services, including new means of using fiat currencies;
     
  General economic conditions and the regulatory environment relating to digital assets; and
     
  Negative consumer sentiment and perception of bitcoin specifically and cryptocurrencies generally.

 

Such events would have a material adverse effect on our ability to continue as a going concern or to pursue this segment at all, which would have a material adverse effect on our business, prospects or operations and potentially the value of any cryptocurrencies we hold or expect to acquire for our own account and harm investors in our securities.

 

Banks and financial institutions may not provide banking services , or may cut off services , to businesses that provide cryptocurrency-related services or that accept cryptocurrencies as payment, including financial institutions of investors in our securities.

 

A number of companies that provide bitcoin and/or other cryptocurrency-related services have been unable to find banks or financial institutions that are willing to provide them with bank accounts and other services . Similarly, a number of companies and individuals or businesses associated with cryptocurrencies may have had and may continue to have their existing bank accounts closed or services discontinued with financial institutions. We also may be unable to obtain or maintain these services for our business. The difficulty that many businesses that provide bitcoin and/or other cryptocurrency-related services have and may continue to have in finding banks and financial institutions willing to provide them services may be decreasing the usefulness of cryptocurrencies as a payment system and harming public perception of cryptocurrencies and could decrease its usefulness and harm its public perception in the future. Similarly, the usefulness of cryptocurrencies as a payment system and the public perception of cryptocurrencies could be damaged if banks or financial institutions were to close the accounts of businesses providing bitcoin and/or other cryptocurrency-related services . This could occur as a result of compliance risk, cost, government regulation or public pressure. The risk applies to securities firms, clearance and settlement firms, national stock and commodities exchanges, the over the counter market and the Depository Trust Company, which, if any of such entities adopts or implements similar policies, rules or regulations, could result in the inability of our investors to open or maintain stock or commodities accounts, including the ability to deposit, maintain or trade our securities. Such factors would have a material adverse effect on our ability to continue as a going concern or to pursue this segment at all, which would have a material adverse effect on our business, prospects or operations and harm investors.

 

The impact of geopolitical events on the supply and demand for cryptocurrencies is uncertain.

 

Crises may motivate large-scale purchases of cryptocurrencies which could increase the price of cryptocurrencies rapidly. This may increase the likelihood of a subsequent price decrease as crisis-driven purchasing behavior wanes, adversely affecting the value of any cryptocurrencies we hold or expect to acquire for our own account. Such risks are similar to the risks of purchasing commodities in general uncertain times, such as the risk of purchasing, holding or selling gold.

 

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As an alternative to gold or fiat currencies that are backed by central governments, cryptocurrencies, which are relatively new, are subject to supply and demand forces. How such supply and demand will be impacted by geopolitical events is uncertain but could be harmful to us and investors in our securities. Nevertheless, political or economic crises may motivate large-scale acquisitions or sales of cryptocurrencies either globally or locally. Such events would have a material adverse effect on our ability to continue as a going concern or to pursue this segment at all, which would have a material adverse effect on our business, prospects or operations and potentially the value of any cryptocurrencies we hold or expect to acquire for our own account.

 

Acceptance and/or widespread use of cryptocurrency is uncertain.

 

Currently, there is a relatively small use of bitcoins and/or other cryptocurrencies in the retail and commercial marketplace for goods or services . In comparison there is relatively large use by speculators contributing to price volatility.

 

The relative lack of acceptance of cryptocurrencies in the retail and commercial marketplace limits the ability of end-users to use them to pay for goods and services . Such lack of acceptance or decline in acceptances would have a material adverse effect on our ability to continue as a going concern or to pursue this segment at all, which would have a material adverse effect on our business, prospects or operations and potentially the value of any cryptocurrencies we hold or expect to acquire for our own account.

 

Political or economic crises may motivate large-scale sales of Bitcoins and Ethereum, or other cryptocurrencies, which could result in a reduction in value and adversely affect us.

 

As an alternative to fiat currencies that are backed by central governments, digital assets such as bitcoins and Ethereum, which are relatively new, are subject to supply and demand forces based upon the desirability of an alternative, decentralized means of buying and selling goods and services, and it is unclear how such supply and demand will be impacted by geopolitical events. Nevertheless, political or economic crises may motivate large-scale acquisitions or sales of bitcoins and Ethereum and other cryptocurrencies either globally or locally. Large-scale sales of bitcoins and Ethereum or other cryptocurrencies would result in a reduction in their value and could adversely affect us. Such circumstances would have a material adverse effect on our ability to continue as a going concern or to pursue this segment at all, which would have a material adverse effect on our business, prospects or operations and potentially the value of any cryptocurrencies we hold or expect to acquire for our own account and harm investors.

 

It may be illegal now, or in the future, to acquire, own, hold, sell or use bitcoins, Ethereum, or other cryptocurrencies, participate in the blockchain or utilize similar digital assets in one or more countries, the ruling of which would adversely affect us.

 

Although currently bitcoins, Ethereum, and other cryptocurrencies, the blockchain and digital assets generally are not regulated or are lightly regulated in most countries, including the United States, one or more countries such as China and Russia may take regulatory actions in the future that could severely restrict the right to acquire, own, hold, sell or use these digital assets or to exchange for fiat currency. Such restrictions may adversely affect us. Such circumstances would have a material adverse effect on our ability to continue as a going concern or to pursue this segment at all, which would have a material adverse effect on our business, prospects or operations and potentially the value of any cryptocurrencies we hold or expect to acquire for our own account and harm investors.

 

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If regulatory changes or interpretations require the regulation of bitcoins or other digital assets under the securities laws of the United States or elsewhere, including the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 or similar laws of other jurisdictions and interpretations by the SEC, CFTC, IRS, Department of Treasury or other agencies or authorities, we may be required to register and comply with such regulations, including at a state or local level. To the extent that we decide to continue operations, the required registrations and regulatory compliance steps may result in extraordinary expense or burdens to us. We may also decide to cease certain operations. Any disruption of our operations in response to the changed regulatory circumstances may be at a time that is disadvantageous to us.

 

Current and future legislation and SEC rulemaking and other regulatory developments, including interpretations released by a regulatory authority, may impact the manner in which bitcoins or other cryptocurrency is viewed or treated for classification and clearing purposes. In particular, bitcoins and other cryptocurrency may not be excluded from the definition of “security” by SEC rulemaking or interpretation requiring registration of all transactions, unless another exemption is available, including transacting in bitcoin or cryptocurrency amongst owners and require registration of trading platforms as “exchanges” such as Coinsquare. We cannot be certain as to how future regulatory developments will impact the treatment of bitcoins and other cryptocurrencies under the law. If we determine not to comply with such additional regulatory and registration requirements, we may seek to cease certain of our operations or be subjected to fines, penalties and other governmental action. Any such action may adversely affect an investment in us. Such circumstances would have a material adverse effect on our ability to continue as a going concern or to pursue this segment at all, which would have a material adverse effect on our business, prospects or operations and potentially the value of any cryptocurrencies we hold or expect to acquire for our own account and harm investors.

 

Lack of liquid markets, and possible manipulation of blockchain/cryptocurrency based assets may adversely affect us.

 

Digital assets that are represented and trade on a ledger-based platform may not necessarily benefit from viable trading markets. Stock exchanges have listing requirements and vet issuers, requiring them to be subjected to rigorous listing standards and rules and monitoring investors transacting on such platform for fraud and other improprieties. These conditions may not necessarily be replicated on a distributed ledger platform, depending on the platform’s controls and other policies. The more lax a distributed ledger platform is about vetting issuers of digital assets or users that transact on the platform, the higher the potential risk for fraud or the manipulation of digital assets. These factors may decrease liquidity or volume, or increase volatility of digital securities or other assets trading on a ledger-based system, which may adversely affect us. Such circumstances would have a material adverse effect on our ability to continue as a going concern or to pursue this segment at all, which would have a material adverse effect on our business, prospects or operations and potentially the value of any cryptocurrencies we hold or expect to acquire for our own account and harm investors.

 

Risks Related to Our Business

 

We have an evolving business model.

 

As digital assets and blockchain technologies become more widely available, we expect the services and products associated with them to evolve. As a result, to stay current with the industry, our business model may need to evolve as well. From time to time, we may modify aspects of our business model relating to our product mix and service offerings. We cannot offer any assurance that these or any other modifications will be successful or will not result in harm to the business. We may not be able to manage growth effectively, which could damage our reputation, limit our growth and negatively affect our operating results. In addition, we intend to spend between $500,000 and $1,000,000 on various expenses to assist client companies to develop and integrate blockchain and cryptocurrency technologies into their business operations. These expenses that we incur are risk capital and can only be recovered by us if the applicable clients can successfully launch their businesses. Therefore, we risk losing substantial amounts of capital in the event any of our clients do not successfully launch their businesses. Such circumstances would have a material adverse effect on our ability to continue as a going concern or to pursue this segment at all, which would have a material adverse effect on our business, prospects or operations and potentially the value of any cryptocurrencies we hold or expect to acquire for our own account and harm investors.

 

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The loss or potential loss of our exclusion from regulation pursuant to the Securities Exchange Act of 1934, the Investment Company Act of 1940, the Investment Advisors Act of 1940 or any related state exemptions, could require us to restructure our operations.

 

The SEC heavily regulates the manner in which “investment companies,” “investment advisors,” and “broker-dealers” are permitted to conduct their business activities. We believe we will conduct our business in a manner that does not result in us being characterized as an investment company, an investment advisor or a broker-dealer, as we do not believe that we will engage in any of the activities that require registration under the Securities Exchange Act of 1934, the Investment Company Act of 1940, the Investment Advisors Act of 1940 or any similar provisions under state law. We intend to continue to conduct our business in such manner. If, however, we are deemed to be an investment company, an investment advisor, or a broker-dealer, we may be required to institute burdensome compliance requirements and our activities may be restricted, which would affect our business to a material degree. The loss or potential loss of our exclusion from regulation pursuant to the Securities Exchange Act of 1934, the Investment Company Act of 1940, the Investment Advisors Act of 1940 or any related state exemptions, could require us to restructure our operations, which could have an adverse effect on our financial condition and results of operations. In addition, we are determined to have engaged in activities that require any such registration, without obtaining such registration, we could be subject to civil and/or criminal liability, which could have an adverse effect on our financial condition and results of operations.

 

Cryptocurrency inventory, including that maintained by or for us, may be exposed to cybersecurity threats and hacks.

 

As with any computer code generally, flaws in cryptocurrency codes may be exposed by malicious actors. Several errors and defects have been found previously, including those that disabled some functionality for users and exposed users’ information. Flaws in and exploitations of the source code allow malicious actors to take or create money have previously occurred. To date, several hackings have become public knowledge whereby hackers have exploited security vulnerabilities in computer code used by cryptocurrency exchanges, digital wallets and companies that hold cryptocurrency to steal the equivalent of hundreds of millions of dollars based on current exchange rates. Such events would have a material adverse effect on our ability to continue as a going concern or to pursue this segment at all, which would have a material adverse effect on our business, prospects or operations and potentially the value of any cryptocurrencies we hold or expect to acquire for our own account.

 

Competing blockchain platforms and technologies may adversely affect our business.

 

The development and acceptance of competing blockchain platforms or technologies may cause consumers to use alternative distributed ledgers or an alternative to distributed ledgers altogether. This may adversely affect us and our exposure to various blockchain technologies. Such circumstances would have a material adverse effect on our ability to continue as a going concern or to pursue this segment at all, which would have a material adverse effect on our business, prospects or operations and potentially the value of any cryptocurrencies we hold or expect to acquire for our own account and harm investors.

 

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Competition in our market could harm our business.

 

Many of our current and potential competitors may have greater brand recognition, longer operating histories, larger customer bases and significantly greater financial, marketing and other resources than we do. Accordingly, these competitors may be able to spend greater amounts on product development, marketing and distribution. This advantage could enable our competitors to acquire larger market share and develop and offer more competitive products and services. Such competition could adversely impact our ability to attain the financing necessary for us to develop our business plan. In the face of competition, we may not be successful in sufficient market share to make our business profitable.

 

The cryptocurrency assets we hold may be subject to loss, theft or restriction on access.

 

There is a risk that some or all of the cryptocurrency assets we hold from time to time could be lost or stolen. Access to the cryptocurrency assets we hold from time to time could also be restricted by cybercrime (such as a denial of service attack) against a service at which we maintain a hosted online wallet. Any of these events may adversely affect our operations and, consequently, our investments and profitability. The loss or destruction of a private key required to access our digital wallets may be irreversible and we may be denied access for all time to our cryptocurrency holdings. Our loss of access to our private keys or our experience of a data loss relating to our digital wallets could adversely affect our investments and assets.

 

Cryptocurrencies are controllable only by the possessor of both the unique public and private keys relating to the local or online digital wallet in which they are held, which wallet’s public key or address is reflected in the network’s public blockchain. We will publish the public key relating to digital wallets in use when we verify the receipt of transfers and disseminate such information into the network, but we will need to safeguard the private keys relating to such digital wallets. To the extent such private keys are lost, destroyed or otherwise compromised, we will be unable to access the cryptocurrency assets we hold from time to time and such private keys will not be capable of being restored by any network. Any loss of private keys relating to digital wallets used to store the cryptocurrency assets we hold from time to time would have a material adverse effect on our ability to continue as a going concern or to pursue this segment at all, which would have a material adverse effect on our business, prospects or operations and potentially the value of any cryptocurrencies we hold or expect to acquire for our own account.

 

Incorrect or fraudulent coin transactions may be irreversible.

 

Cryptocurrency transactions are irrevocable and stolen or incorrectly transferred coins may be irretrievable. As a result, any incorrectly executed or fraudulent coin transactions could adversely affect our investments and assets.

 

Coin transactions are not, from an administrative perspective, reversible without the consent and active participation of the recipient of the transaction. In theory, cryptocurrency transactions may be reversible with the control or consent of a majority of processing power on the network. Once a transaction has been verified and recorded in a block that is added to the blockchain, an incorrect transfer of a coin or a theft of coin generally will not be reversible and we may not be capable of seeking compensation for any such transfer or theft. It is possible that, through computer or human error, or through theft or criminal action, our coins could be transferred in incorrect amounts or to unauthorized third parties, or to uncontrolled accounts. Such events would have a material adverse effect on our ability to continue as a going concern or to pursue this segment at all, which would have a material adverse effect on our business, prospects or operations and potentially the value of any cryptocurrencies we hold or expect to acquire for our own account.

 

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Since there has been limited precedence set for financial accounting of bitcoin, Ethereum, and other digital assets, it is unclear how we will be required to account for digital assets transactions in the future.

 

Since there has been limited precedence set for the financial accounting of digital assets, it is unclear how we will be required to account for digital asset transactions or assets. Furthermore, a change in regulatory or financial accounting standards could result in the necessity to restate our financial statements. Such a restatement could negatively impact our business, prospects, financial condition and results of operation. Such circumstances would have a material adverse effect on our ability to continue as a going concern or to pursue this segment at all, which would have a material adverse effect on our business, prospects or operations and potentially the value of any cryptocurrencies we hold or expect to acquire for our own account and harm investors.

 

The current state of capital markets, particularly for small companies, is expected to reduce our ability to obtain the financing necessary to continue our business. If we cannot raise the funds that we need to operate and expand our new business, we may go out of business and investors may lose their entire investment in us.

 

Like other smaller companies, we face difficulties in raising capital for our continued operations and to operate and expand our new business. We may not be able to raise money through the sale of our equity securities or through borrowing funds on terms we find acceptable.

 

We have had negative cash flows from operations and if we are not able to obtain further financing, our business operations may fail.

 

We had cash and cash equivalents in the amount of $214,993 and working capital of $697,847 as of December 31, 2017. We anticipate that we will require additional financing while we operate and expand our new business. Further, we anticipate that we will not have sufficient capital to fund our ongoing operations for the next twelve months. We would likely secure any additional financing necessary through a private placement of our common stock through a debt financing. There can be no assurance that any financing will be available to us, or, even if it is, if it will be offered on terms and conditions acceptable to us. Our inability to obtain additional financing in a sufficient amount when needed and upon terms and conditions acceptable to us, could have a material adverse effect upon us. If additional funds are raised by issuing equity securities, dilution to existing or future stockholders will result. If adequate funds are not available on acceptable terms when needed, we may be required to delay, scale back or eliminate the expansion of our new business.

 

We are currently dependent on one client.

 

We currently have one client which has engaged us to build out its business model, technology strategy, market entry strategy and capital structure, which includes a blockchain platform launch. While we have several potential clients in our sales pipeline, there can be no assurance that we will engage additional clients. If our sole client discontinues its business with us, or if our client modifies the terms of its business with us on less favorable terms, the effect on our business, operating results and financial condition may become adverse.

 

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Risks Related to Our Common Stock

 

Because our directors and officers control a large percentage of our voting stock, they have the ability to influence matters affecting our stockholders.

 

Our directors and officers control approximately 31.41% of our voting stock. As a result, they have the ability to influence matters affecting our stockholders, including the election of our directors, the acquisition of assets, and the issuance of securities. Because they control a significant portion of votes, it would be very difficult for investors to replace our management if the investors disagree with the way our business is being operated. Because the influence by our directors and officers could result in management making decisions that are in their best interest and not in the best interest of the investors, you may lose some or all of the value of your investment in our common stock.

 

Because we can issue additional shares of common stock, our stockholders may experience dilution in the future.

 

We are authorized to issue up to 75,000,000 shares of common stock, of which 11,600,000 shares of common stock were issued and outstanding as of March 30, 2018. Our board of directors has the authority to cause us to issue additional shares of common stock without consent of our stockholders. Consequently, stockholders may experience dilution in their ownership of our stock in the future.

 

If the outstanding stock options, convertible notes or subscription receipts are exercised or converted, then we would be required to issue additional shares of our common stock, which will result in dilution to our stockholders’ ownership of our stock.

 

There is currently no established public trading market for our common stock, which makes it difficult for our stockholders to resell their shares.

 

There is currently no established public trading market for our common stock. There is a limited public market for our common stock through our quotation on the OTC Pink operated by the OTC Markets Group. Trading in stocks quoted on the OTC Pink is often thin and is characterized by wide fluctuations in trading prices due to many factors that may be unrelated or have little to do with a company’s operations or business prospects. Moreover, the OTC Pink is not a stock exchange, and trading of securities on the OTC Pink is often more sporadic than the trading of securities listed on a national securities exchange like the NASDAQ or the NYSE. Accordingly, stockholders may have difficulty reselling any of our shares. We cannot assure you that there will be a market for our common stock in the future.

 

Because we do not intend to pay any cash dividends on our common stock in the near future, our stockholders will not be able to receive a return on their shares unless they sell them.

 

We do not anticipate paying any cash dividends on our common stock in the near future. The declaration, payment and amount of any future dividends will be made at the discretion of the board of directors, and will depend upon, among other things, our results of operations, cash flows and financial condition, operating and capital requirements, and other factors the board considers relevant. We may never pay any dividends. Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them.

 

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Our stock is a penny stock. Trading of our stock is restricted by the SEC’s penny stock regulations, which may limit a stockholder’s ability to buy and sell our stock.

 

Our stock is a penny stock. The SEC has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined in Rule 15g-9) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC, which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.

 

The Financial Industry Regulatory Authority sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.

 

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

 

Item 1B. Unresolved Staff Comments

 

Not applicable.

 

ITEM 2. PROPERTIES

 

We do not own any property. Our principal offices are located at 4101 Redwood Ave, Building F. Los Angeles, California 90066. Our office premises are provided to our company at no cost by Cameron Chell, our chairman and director. We believe that our office premises are suitable and adequate for our present needs.

 

ITEM 3. LEGAL PROCEEDINGS

 

We know of no material pending legal proceedings to which our company or subsidiary is a party or of which any of our properties, or the properties of our subsidiary, is the subject. In addition, we do not know of any such proceedings contemplated by any governmental authorities.

 

We know of no material proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder is a party adverse to our company or subsidiary or has a material interest adverse to our company or subsidiary.

 

ITEM 4. MINE SAFETY DISCLOSUREs

 

Not applicable.

 

- 22 -

 

 

PART II

 

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

 

Market Information

 

There is currently no established public trading market for our common stock. Our common stock is not traded on any exchange. There is a limited public market for our common stock. Our common stock has been quoted on the OTC Pink operated by the OTC Markets Group under the trading symbol “ICOX” since November 28, 2017. From August 17, 2017 to November 27, 2017, our common stock was quoted on the OTC Pink under the trading symbol “APCN”. Prior to that, our common stock was quoted on the OTC Pink under the trading symbol “RDLA”. There have not been any trades for our common stock on the OTC Pink operated by the OTC Markets Group.

 

Trading in stocks quoted on the OTC Pink is often thin and is characterized by wide fluctuations in trading prices due to many factors that may be unrelated or have little to do with a company’s operations or business prospects. We cannot assure you that there will be a market for our common stock in the future.

 

Set forth below are the range of high and low bid quotations for the periods indicated as reported by the OTC Pink. The market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not necessarily represent actual transactions.

 

Quarter Ended   High Bid     Low Bid  
December 31, 2017   $ 2.60     $ 1.25  
September 30, 2017   $ 1.25     $ 0.05  
June 30, 2017     Nil       Nil  
March 31, 2017     Nil       Nil  
December 31, 2016     Nil       Nil  
September 30, 2016     Nil       Nil  
June 30, 2016     Nil       Nil  
March 31, 2016     Nil       Nil  

 

Holders of Common Stock

 

As of March 30, 2018, the 11,600,000 issued and outstanding shares of our common stock were held by a total of 57 stockholders of record.

 

Dividends

 

We have not declared any dividends since incorporation and do not anticipate that we will do so in the foreseeable future. Our intention is to retain future earnings, if any, for use in our operations and the expansion of our business.

 

There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where, after giving effect to the distribution of the dividend:

 

- 23 -

 

 

1. We would not be able to pay our debts as they become due in the usual course of business; or
   
2. Our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of stockholders who have preferential rights superior to those receiving the distribution.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

The following table summarizes certain information regarding our equity compensation plans as at December 31, 2017:

 

  Number of securities to be issued upon exercise of outstanding options, warrants and rights    

Weighted-average exercise price of outstanding

options, warrants and

rights

    Number of securities remaining available for future issuance under equity compensation plans (excluding securitiesreflected in column (a))  
Plan category   (a)     (b)     (c)  
Equity compensation plans approved by security holders   Nil     N/A     Nil  
Equity compensation plans not approved by security holders (1)     2,900,000     $ 0.10       100,000  
Total     2,900,000     $ 0.10       100,000  

 

(1) On October 15, 2017, as amended on January 22, 2018, our board of directors adopted and approved the 2017 Equity Incentive Plan. The purpose of the plan is to (a) enable us and any of our affiliates to attract and retain the types of employees, consultants and directors who will contribute to our long range success; (b) provide incentives that align the interests of employees, consultants and directors with those of our stockholders; and (c) promote the success of our business. The plan enables us to grant awards of a maximum of 3,900,000 shares of our stock and awards that may be granted under the plan includes incentive stock options, non-qualified stock options, stock appreciation rights, restricted awards and performance compensation awards.

 

Recent Sales of Unregistered Securities

 

Since the beginning of our fiscal year ended December 31, 2017, we have not sold any equity securities that were not registered under the Securities Act of 1933 that were not previously reported in a quarterly report on Form 10-Q or in a current report on Form 8-K.

 

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

 

None.

 

- 24 -

 

 

ITEM 6. SELECTED FINANCIAL DATA

 

Not applicable.

 

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

 

Our management’s discussion and analysis provides a narrative about our financial performance and condition that should be read in conjunction with the audited consolidated financial statements and related notes thereto included in this annual report. This discussion contains forward looking statements reflecting our current expectations and estimates and assumptions about events and trends that may affect our future operating results or financial position. Our actual results and the timing of certain events could differ materially from those discussed in these forward-looking statements due to a number of factors, including, but not limited to, those set forth in the sections of this annual report titled “Risk Factors” and “Forward-Looking Statements”.

 

Overview

 

We were incorporated under the laws of the State of Nevada on July 20, 2010. Following incorporation, we commenced the business of representing authors to publishers. Upon the resignation of Mary Wolf as an officer of our company on August 28, 2014, we ceased pursuing the business of representing authors to publishers and sought new business opportunities.

 

In July 2017, we decided to operate a new business of providing services for blockchain and cryptocurrency technologies.

 

Our new business is a services and development business that provides a turnkey set of services for companies to develop and integrate blockchain and cryptocurrency technologies into their business operations. We anticipate that we will enable companies to focus on their core competencies while providing the necessary resources and expertise to execute a strategy that will enable companies to integrate new blockchain plus cryptocurrency technologies into their business operations. Our plan is to be compensated on a fee-for-services model. We may also accept tokens, coins or equity in payment for our services, to the extent permitted under applicable law.

 

On December 29, 2017, we entered into a business services agreement with WENN and, on March 19, 2018, we entered into the amendment no. 1 to business services agreement dated as of March 15, 2018 with WENN. Pursuant to the business services agreement, we agreed to provide WENN with the services in connection with WENN’s development of the Platform using blockchain technology, including (i) the business development and technical services, (ii) the business launch services and (iii) the post-business launch support services.

 

WENN has entered into a licensing partnership agreement with Eastman Kodak Company, which announced the launch of the KODAKOne blockchain platform and KODAKCoin ICO. We are providing the services relating to the KODAKOne blockchain platform and the KODAKCoin ICO pursuant to a business services agreement dated December 29, 2017, as amended as of March 15, 2018 with WENN.

 

Results of Operations

 

Revenue

 

We had revenues of $500,000 for the year ended December 31, 2017 compared to $0 in 2016.

 

- 25 -

 

 

The business services agreement dated December 29, 2017, as amended as of March 15, 2018 with WENN provides that the fees for the services provided in connection with the development and launch of the Platform (the business development and technical services and business launch services) were deemed earned on the date of execution of the business services agreement. We have waived WENN’s requirement to pay the $250,000 fixed fee in connection with the business development and technical services as a concession. We have recognized the business development and technical services fee of $500,000 during the year ended December 31, 2017, which WENN paid in January 2018 upon the completion of its first round of pre-ICO fundraising.

 

Operating Expenses

 

We incurred operating expenses of $932,843 and $74,183 for the years ended December 31, 2017 and 2016, respectively, representing an increase of $858,660 between the two periods. These expenses consisted primarily of consulting fees, service costs, professional fees, stock-based compensation, interest and bank charges, and other general and administrative expenses. The increase in operating expenses between the two periods related to an increase in consulting fees from $9,000 in 2016 to $547,542 in 2017 due to our company entering into a consulting agreement with Business Instincts Group and other individuals to provide strategic and project management services, an increase in service costs from $0 in 2016 to $199,920 in 2017 due to services provided to our customer, an increase in professional fees from $58,625 in 2016 to $87,014 in 2017 due to additional legal and accounting costs incurred due to the change in business, an increase in interest and bank charges from $1,500 in 2016 to $1,896 as bank fees has increased to higher level of activities in 2017, and an increase in other general and administrative expenses from $5,058 in 2016 to $96,471 in 2017 as travel costs and advertising expenses have risen as we met with investors, potential clients, and sought to brand our company, and includes the stock-based compensation issued to our directors in 2017.

 

Other Income (Expense)

 

Other income includes $789 interest earned on a loan receivable form a related party compared to $0 for the same period last year. Other expenses include, interest expense on convertible notes payable of $35,004 for the year ended December 31, 2017 compared to $14,013 for the same period last year

 

Net Loss from Operations

 

We incurred net losses from operations of $432,843 and $74,183 for the years ended December 31, 2017 and 2016, respectively, representing a decrease of $358,660, primarily attributable to the factors discussed above under the heading “Operating Expenses”.

 

Liquidity and Capital Resources

 

Working Capital

 

   

As at

December 31, 2017

   

As at

December 31, 2016

 
Current Assets   $ 880,766     $ 56,050  
Current Liabilities     182,919       49,013  
Working Capital   $ 697,847     $ 7,037  

 

Current Assets

 

Current assets of $880,766 as at December 31, 2017 and $56,050 as at December 31, 2016 were comprised of only cash and cash equivalents, accounts receivable, prepaid expenses, and an outstanding loan receivable. The increase in current assets as at December 31, 2017 was due to our company receiving $325,000 in connection with the purchase of convertible notes, $560,000 for a private placement in exchange for shares, and $500,000 in revenue.

 

- 26 -

 

 

Current Liabilities

 

Current liabilities as at December 31, 2017 were attributable to $131,303 in accounts payable and accrued expenses and $51,616 in accounts payable, related party compared to $49,013 in accounts payable and accrued expenses as at December 31, 2016.

 

Cash Flow

 

Our cash flows for the year ended December 31, 2017 and December 31, 2016 are as follows:

 

    Year ended December 31, 2017     Year ended December 31, 2016  
Net cash (used in) operating activities   $ (652,524 )   $ (27,820 )
Net cash (used in) investing activities     (100,000 )     -  
Net cash provided by financing activities     911,467       70,000  
Net changes in cash and cash equivalents   $ 158,943     $ 42,180  

 

Operating Activities

 

Net cash used in operating activities was $652,524 for the year ended December 31, 2017, as compared to $27,820 for the year ended December 31, 2016, an increase of $624,704. The increase in net cash used in operating activities was primarily due to the payment of prepaid expenses, the increase in accounts receivable outstanding, and an increase in operating expenses as a result of an increase in the commencement of new business operations.

 

Investing Activities

 

Net cash used in investing activities was $100,000 for the year ended December 31, 2017 was due to the outstanding loan to a related party and the investment in a related party, as compared to $0 for the year ended December 31, 2016.

 

Financing Activities

 

Financing activities provided cash of $911,467 for the year ended December 31, 2017 and $70,000 for the year ended December 31, 2016. On March 2, 2017, we issued an unsecured convertible note in the principal amount of $20,000. On June 8, 2017, we issued an unsecured convertible note in the principal amount of $10,000. On October 30, 2017, we issued two unsecured convertible notes with a combined principal amount of $325,000. On October 30, 2017, we issued an aggregate of 5,600,000 shares of common stock to 35 subscribers for total consideration of $560,000 and paid offering costs of $3,533.

 

Recent Financing Activities

 

On March 12 and 19, 2018, we completed private placements of an aggregate of 9,113,659 subscription receipts at a price of $0.60 per subscription receipt for aggregate gross proceeds of $5,468,195.40. In the event of the occurrence of the escrow release condition (as defined below), each subscription receipt will automatically convert into one share of our common stock, for no additional consideration. The subscription amounts will be held by an escrow agent until the escrow release condition. The escrow release condition is the receipt by our company of conditional approval for the listing of the shares of our common stock on a Canadian stock exchange. In the event that the escrow release condition is satisfied prior to 5:00 p.m. (Vancouver time) on May 31, 2018, we will deliver a notice to the escrow agent confirming the escrow release condition has been satisfied. Upon receipt of the notice, the escrow agent will, as soon as practicable thereafter, release the subscription amounts to our company and each subscription receipt will automatically convert into one share of our common stock without payment of any additional consideration. If the escrow release condition is not satisfied by 5:00 p.m. (Vancouver time) on May 31, 2018 or if we deliver a written default notice to the escrow agent that the escrow release condition will not be satisfied by that time, the subscription receipts will expire and be of no further force and effect, effective as of the earlier of (i) 5:00 p.m. (Vancouver time) on May 31, 2018 and (ii) the date of the receipt of the default notice, and the subscribers will be entitled to receive from the escrow agent a refund of the subscription amounts held in escrow, without interest and less applicable expenses. In connection with the closing of the private placements, we paid cash finder’s fees in the aggregate amount of $29,399.97 and we agreed to issue 160,865 shares of our common stock at a deemed price of $0.60 per share as the finder’s fee, which will be issued only if the subscription receipts are converted into shares of our common stock.

 

- 27 -

 

 

On March 13, 2018, we entered into a loan agreement with Michael Blum whereby Mr. Blum advanced $100,000 to us. The principal amount of $100,000 is repayable on demand (but no longer than a term of six month) and bears simple interest at a rate of 12% per annum, which is payable upon repayment of the principal amount of $100, 000 . We are entitled to prepay the whole or any portion of the principal amount of $100,000, plus accrued interest on the portion of the principal amount of $100,000 being prepaid, at any time. The loan agreement provides that we must, within five days of the release of funds to us from our private placement of subscription receipts that closed in March 2018, repay the principal amount of $100,000 plus accrued interest in full. The loan agreement also provides that if we obtain any indebtedness on terms that are superior to the terms set forth in the loan agreement, then the terms under the loan agreement will be deemed to be amended, as of March 13, 2018, to match such superior terms in a manner and on terms as nearly equivalent as practicable to such superior terms.

 

On March 26, 2018, we entered into a loan agreement with Greg Burnett, a member of our advisory board, whereby Mr. Burnett advanced $100,000 to us. The principal amount of $100,000 is repayable on demand (but no longer than a term of six month) and bears simple interest at a rate of 12% per annum, which is payable upon repayment of the principal amount of $100,000. We are entitled to prepay the whole or any portion of the principal amount of $100,000, plus accrued interest on the portion of the principal amount of $100,000 being prepaid, at any time. The loan agreement provides that we must, within five days of the release of funds to us from our private placement of subscription receipts that closed in March 2018, repay the principal amount of $100,000 plus accrued interest in full. The loan agreement also provides that if we obtain any indebtedness on terms that are superior to the terms set forth in the loan agreement, then the terms under the loan agreement will be deemed to be amended, as of March 26, 2018, to match such superior terms in a manner and on terms as nearly equivalent as practicable to such superior terms.

 

Cash Requirements

 

We expect that we will require $4.327 million, including our current working capital, to fund our operating expenditures for the next twelve months. Projected working capital requirements for the next twelve months are as follows:

 

- 28 -

 

 

Estimated Working Capital Expenditures During the Next Twelve Months

 

Operating expenses   $ 2,015,000  
General and administrative expenses     2,162,000  
Estimated costs of the listing on a Canadian stock exchange and related expenses     150,000  
Total   $ 4,327,000  

 

Estimated operating expenses for the next 12 months are comprised of blockchain platform launch related expenses such as project management and consulting, legal fees, support agents and monitoring expenses, and blockchain and software expenses. We intend to spend between $0.5 million and $1 million on various expenses to assist companies to develop and integrate blockchain and cryptocurrency technologies into their business operations.

 

Estimated general and administrative expenses for the next 12 months comprised of: $1,260,000 for consulting fees; $250,000 for legal and professional fees; $180,000 for marketing and advertising expenses; $102,000 for trade shows; $250,000 for travel expenses; and $120,000 for miscellaneous and office expenses. Professional fees are expected to include fees related to complying with public reporting requirements, maintaining our quotation on the OTC Pink, conducting capital raises and expenses in connection with our new business.

 

Pursuant to a business services agreement dated December 29, 2017, as amended as of March 15, 2018, with our first client, WENN, WENN paid us $500,000 in fees in connection with the services relating to the business launch. See Business – Recent Developments for additional information.

 

We will require additional cash resources, including from the sale of subscription receipts completed in March 2018 to meet our planned capital expenditures and working capital requirements for the next 12 months. We expect to derive such cash through the sale of subscription receipts completed in March 2018 and, if additional cash resources are necessary, through the sale of other equity or debt securities or by obtaining a credit facility. The sale of additional equity securities will result in dilution to our stockholders. The incurrence of indebtedness will result in debt service obligations, could cause additional dilution to our stockholders, and could require us to agree to financial covenants that could restrict our operations or modify our plans to source a new business opportunity. Financing may not be available in amounts or on terms acceptable to us, if at all. Failure to raise additional funds could cause our company to fail.

 

Going Concern

 

Our consolidated financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. We have not yet established a source of revenues sufficient to cover our operating costs and to allow us to continue as a going concern. We have incurred losses since inception resulting in an accumulated deficit of $693,008 as at December 31, 2017 (December 31, 2016: $225,950). Our ability to operate as a going concern is dependent on obtaining adequate capital to fund operating losses until we become profitable.

 

In its report on our financial statements for the years ended December 31, 2017 and 2016, our independent registered public accounting firm included an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

See next page.

 

- 29 -

 

 

FINANCIAL STATEMENTS

 

Page
Financial Statements For the Years Ended December 31, 2017 and 2016  
   
Report of Independent Registered Public Accounting firm F-2
   
Consolidated Balance Sheets F-3
   
Consolidated Statements of Operations F-4
   
Consolidated Statements of Cash Flows F-5
   
Consolidated Statements of Changes in Stockholders’ Deficit F-6
   
Notes to Consolidated Financial Statements F-7

 

F- 1

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and

Stockholders of ICOX Innovations, Inc.

 

Opinion on the Financial Statements

 

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

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Consideration of the Company’s Ability to Continue as a Going Concern

 

The accompanying consolidated financial statements have been prepared assuming that ICOX Innovations, Inc. will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has recurring losses from operations and negative cash flows from operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. If the Company is unable to obtain additional financing, there could be a material adverse effect on the Company.

 

Haynie & Company

Salt Lake City, Utah

April 2, 2018

 

We have served as the Company’s auditor since 2018

 

 

F- 2

 

 

ICOX Innovations Inc.

(formerly AppCoin Innovations Inc.)

Consolidated Balance Sheets

 

    December 31, 2017     December 31, 2016  
Assets                
                 
Current Assets                
Cash and cash equivalents   $ 214,993     $ 56,050  
Accounts receivable, related party     500,000       -  
Prepaid expenses     30,000       -  
Prepaid expenses, related party     35,000       -  
Deferred service costs     21       -  
Related party loans receivable and related accrued interest     100,752       -  
Total Current Assets     880,766       56,050  
                 
Investment, related party     37       -  
Total Assets   $ 880,803     $ 56,050  
                 
Liabilities and Stockholders’ Deficit                
                 
Current Liabilities                
Accounts payable and accrued expenses   $ 131,303     $ 49,013  
Accounts payable and accrued expenses, related party     51,616       -  
Total Current Liabilities     182,919       49,013  
                 
Convertible notes payable     500,325       145,325  
Accrued interest on convertible notes     52,949       17,945  
Total Liabilities     736,193       212,283  
                 
Commitments and Contingencies     -       -  
                 
Stockholders’ Equity (Deficit)                
Common stock, $0.001 par value, 75,000,000 shares authorized; 11,600,000 and 6,000,000 shares issued and outstanding as at December 31, 2017 and 2016, respectively     11,600       6,000  
Additional paid-in-capital     826,018       63,717  
Accumulated deficit     (693,008 )     (225,950 )
Total Stockholders’ Equity (Deficit)     144,610       (156,233 )
                 
Total Liabilities and Stockholders’ Equity (Deficit)   $ 880,803     $ 56,050  

 

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

 

F- 3

 

 

ICOX Innovations Inc.

(formerly AppCoin Innovations Inc.)

Consolidated Statement of Operations

 

    Year Ended December 31, 2017     Year Ended December 31, 2016  
             
Revenues                
Service revenue   $ 500,000     $ -  
Total revenues     500,000       -  
                 
Operating expenses                
General and administrative expense     452,923       74,183  
Consulting fees, related party     280,000       -  
Service costs     199,920       -  
Total operating expenses     932,843       74,183  
                 
Net loss from operations     (432,843 )     (74,183 )
                 
Other income (expense)                
Interest income, related party     789       -  
Note interest expense     (35,004 )     (14,013 )
Total other income (expense)     (34,215 )     (14,013 )
                 
Provision for taxes     -       -  
                 
Net loss   $ (467,058 )   $ (88,196 )
                 
Loss per common share – Basic and diluted   $ (0.07 )   $ (0.01 )
                 
Weighted average number of common shares
outstanding, basic and diluted
 
 
 
 
 
6,934,795
 
 
 
 
 
 
 
6,000,000
 
 

 

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

 

F- 4

 

 


ICOX Innovations Inc.

(formerly AppCoin Innovations Inc.)

Consolidated Statements of Cash Flows

 

   

Year Ended

December 31, 2017

   

Year Ended

December 31, 2016

 
Operating activities                
Net loss for the year   $ (467,058 )   $ (88,196 )
Adjustments to reconcile net loss to net cash used in operating activities                
Stock-based compensation     188,934       -  
Stock-based compensation, related party     22,500       -  
Changes in operating assets and liabilities                
Accounts receivable, related party     (500,000 )     -  
Prepaid expense     (30,000 )     -  
Prepaid expense, related party     (35,000 )     -  
Accrued interest receivable, related party     (789 )     -  
Deferred service costs     (21 )     -  
Accrued interest payable     35,004       15,513  
Accounts payable and accrued expenses     82,290       44,863  
Accounts payable and accrued expenses, related party     51,616       -  
Net cash (used in) operating activities     (652,524 )     (27,820 )
                 
Investing activities                
Loan issued to related party     (99,963 )     -  
Investment in related party     (37 )     -  
Net cash (used in) investing activities     (100,000 )     -  
                 
Financing activities                
Proceeds from issuance of convertible notes payable     355,000       70,000  
Proceeds from share issuance     560,000       -  
Share issue costs     (3,533 )        
Net cash provided by financing activities     911,467       70,000  
                 
Net changes in cash and equivalents     158,943       42,180  
                 
Cash and equivalents at beginning of the year     56,050       13,870  
                 
Cash and equivalents at end of the year   $ 214,993     $ 56,050  
                 
SUPPLEMENTAL CASH FLOW INFORMATION                
Cash paid in interest   $ -     $ -  
Cash paid for income taxes   $ -     $ -  
                 
SUPPLEMENTAL DISCLOSURE OF NON-CASH OPERATING
ACTIVITIES
               
Stock-based compensation   $ 188,934     $ -  
Stock-based compensation, related party   $ 22,500     $ -  

 

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

 

F- 5

 

 

ICOX Innovations Inc.

(formerly AppCoin Innovations Inc.)

Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

 

    Common Stock     Additional           Total  
    Number of           Paid-in     Accumulated     Stockholders’  
    Shares     Amount     Capital     Deficit     Equity (Deficit)  
Balance, December 31, 2015     6,000,000     $ 6,000     $ 63,717     $ (137,754 )   $ (68,037 )
Net loss for the year     -       -       -       (88,196 )     (88,196 )
Balance, December 31, 2016     6,000,000       6,000       63,717       (225,950 )     (156,233 )
Share issuance, net of offering costs of $3,533     5,600,000       5,600       550,867       -       556,467  
Stock-based compensation     -       -       188,934       -       188,934  
Stock-based compensation, related party     -       -       22,500       -       22,500  
Net loss for the year     -       -       -       (467,058 )     (467,058 )
Balance, December 31, 2017     11,600,000     $ 11,600     $ 826,018     $ (693,008 )   $ 144,610  

 

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

 

F- 6

 

 

ICOX Innovations Inc.

(formerly AppCoin Innovations Inc.)

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

 

1. NATURE AND CONTINUANCE OF OPERATIONS

 

ICOX Innovations Inc. (formerly AppCoin Innovations Inc., formerly RedStone Literary Agents, Inc.) (the “Company”) was incorporated under the laws of State of Nevada, U.S. on July 20, 2010, with an authorized capital of 75,000,000 common shares, having a par value of $0.001 per share. During the period ended December 31, 2010, the Company commenced operations by issuing shares and developing its publishing service business, focused on representing authors to publishers.

 

On August 1, 2017, the Company incorporated a Nevada subsidiary, AppCoin Innovations (USA) Inc., which will be used to operate the Company’s new business of providing blockchain consulting services.

 

On August 17, 2017, the Company changed its name from “RedStone Literary Agents, Inc.” to “AppCoin Innovations Inc.”

 

On February 14, 2018, the Company changed its name from “AppCoin Innovations Inc.” to “ICOX Innovations Inc.”

 

The Company’s new business model provides a turnkey set of services for companies to develop and integrate blockchain and cryptocurrency technologies into their business operations. The Company will enable its customers to focus on their core competencies while providing the necessary resources and expertise to execute a strategy that will enable companies to integrate new blockchain plus cryptocurrency technologies into their business operations. The Company will be compensated on a fee-for-services model. The Company may also accept tokens or coins in payment for its services, to the extent permitted under applicable law.

 

The Company’s services will include strategic planning, project planning, structure development and administration, business plan modelling, technology development support, whitepaper preparation, due diligence reporting, governance planning and management.

 

Going Concern

 

These consolidated financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred losses since inception resulting in an accumulated deficit of $693,008 as of December 31, 2017 and further losses are anticipated in the pursuit of the Company’s new service business opportunity, raising substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand, loans from directors and/or the private placement of common stock.

 

In order to address the above factors, subsequent to year end, the Company completed private placements of an aggregate of 9,113,659 subscription receipts at a price of $0.60 per subscription receipt for aggregate gross proceeds of $5,468,195.40.

 

The financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

F- 7

 

 

ICOX Innovations Inc.
(formerly AppCoin Innovations Inc.)
Notes to Consolidated Financial Statements
December 31, 2017 and 2016

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles (“ GAAP ”) in the United States of America.

 

Basis of Consolidation

 

The consolidated financial statements include the accounts of the Company and its subsidiary. All intercompany transactions and balances have been eliminated.

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates and these differences could be material.

 

Cash and Cash Equivalents

 

Cash and cash equivalents include short-term, highly liquid investments, such as certificates of deposit or money market funds that are readily convertible to known amounts of cash and have original maturities of three months or less. All cash balances are held by major banking institutions.

 

The carrying amounts of cash and cash equivalents, prepaid expenses, short-term loans receivable, trade payables and convertible notes payable approximate their fair value due to the short-term maturity of such instruments.

 

Contingent Liabilities:

 

The Company accounts for its contingent liabilities in accordance with ASC No. 450 “Contingencies”. A provision is recorded when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

 

With respect to legal matters, provisions are reviewed and adjusted to reflect the impact of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. As of December 31, 2017 and 2016, the Company was not a party to any litigation that could have a material adverse effect on the Company’s business, financial position, results of operations or cash flows.

 

Income Taxes

 

The Company follows the liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the estimated tax consequences attributable to differences between the financial statement carrying values and their respective income tax basis (temporary differences). The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

F- 8

 

 

ICOX Innovations Inc.
(formerly AppCoin Innovations Inc.)
Notes to Consolidated Financial Statements
December 31, 2017 and 2016

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

 

FASB Accounting Standards Codification Topic 740, Income Taxes (“ASC 740”), clarifies the accounting for uncertainty in income taxes recognized in the financial statements. ASC 740 provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits of the position. Income tax positions must meet a more-likely-than-not recognition threshold to be recognized. ASC 740 also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. We have determined that the Company does not have uncertain tax positions on its tax returns for the years 2017 and prior. Based on evaluation of the 2017 transactions and events, the Company does not have any material uncertain tax positions that require measurement.

 

Our policy is to recognize interest and/or penalties related to income tax matters in income tax expense. We had no accrual for interest or penalties on our consolidated balance sheets at December 31, 2017 or 2016, and have not recognized interest and/or penalties in the consolidated statement of operations for the years ended December 31, 2017 or 2016.

 

We are subject to taxation in the U.S. and the state of California. All of our tax years are subject to examination by the U.S. and California tax authorities due to the carry-forward of unutilized net operating losses.

 

Collectability of Accounts Receivable

 

In considering the collectability of accounts receivable, the Company takes into account the legal obligation for payment by the customer, as well as the financial capacity of the customer to fund its obligation to the Company.

 

Earnings per Share

 

The Company computes earnings (loss) per share in accordance with ASC 105, “Earnings per Share” which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic earnings (loss) per share is computed by dividing net loss available to common stockholders by the weighted average number of outstanding common shares during the period. Diluted earnings (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Common shares from the conversion of debt (10,730,310 shares) (Note 3) and exercise of stock options (733,331 shares) (Note 7) have been excluded as their effect is anti-dilutive.

 

Stock-Based Compensation

 

The Company has adopted FASB guidance on stock-based compensation. Under FASB ASC 718-10-30-2, all share-based payments to employees, including grants of employee stock options, are recognized in the income statement based on their fair values. The fair value of the options is calculated based upon the Black Scholes valuation model. (Note 7)

 

F- 9

 

 

ICOX Innovations Inc.
(formerly AppCoin Innovations Inc.)
Notes to Consolidated Financial Statements
December 31, 2017 and 2016

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

 

The Company has issued stock options to employees and non-employees. Stock options granted to non-employees for services or performance not yet rendered would be expensed over the service period or until the goals had been reached. The fair value calculation is recalculated at the end of every reporting period until the goal had been reached, when the expense has been wholly recognized. The stock options granted to non-employees during the year ended December 31, 2017 were for services already rendered in lieu of cash compensation and, as such, the service period has already passed and the entirety of the expense was recognized in the year.

 

Digital Currency Valuation

 

Digital currencies consist of cryptocurrency denominated assets and are included in current assets. Digital currencies are carried at their fair market value determined by an average spot rate of the most liquid digital currency exchanges. On an interim basis, we recognize decreases in the value of the assets caused by market declines. Subsequent increases in the value of these assets through market price recoveries during the same fiscal year are recognized in the later interim period, but may not exceed the total previously recognized decreases in value during the same year. Such unrealized gains or losses resulting from changes the value of the digital currency are recorded in Other Income, net in the consolidated statements of operations. Gains and losses realized upon sale of digital currencies are also recorded in Other Income, net in the consolidated statement of operations.

 

Fair market value is determined by taking the average spot rate from the most liquid digital currency exchanges. Digital currencies are measured using level one fair values, determined by taking the rate from market currency exchanges. Digital currency prices are affected by various forces including global supply and demand, interest rates, exchange rates, inflation or deflation and the global political and economic conditions. The Company may not be able to liquidate its inventory of digital currency at its desired price if required. A decline in the market prices for digital currencies could negatively impact the Company’s future operations. The digital currency market is still a new market and is highly volatile; historical prices are not necessarily indicative of future value; a significant change in the market prices for digital currencies would have a significant impact on the Company’s earnings and financial position.

 

The Company did not hold any digital currency at December 31, 2017 and December 31, 2016.

 

Revenue Recognition

 

Revenue is recognized in accordance with FASB ASC Topic 606, Revenue Recognition. The Company recognizes revenue when persuasive evidence of an arrangement exists, the related services are rendered or delivery has occurred, the price is fixed or determinable and collectability is reasonably assured. The Company has early adopted this policy.

 

The Company primarily generates revenues from professional services consulting agreements. These arrangements are generally entered into on a contingent fee basis. There is no prepayment or retainer required prior to performing services and the entire fees is earned on a contingent basis. The Company also provides monthly post-business launch support services. The recurring monthly post-business launch support services are recognized as revenue each month that the subscription is maintained.

 

The Company generally enters into arrangements for which revenues are contingent upon achieving a pre-determined deliverable or future outcome. Any contingent revenue for these arrangements is not recognized until the contingency is resolved and collectability is reasonably assured.

 

F- 10

 

 

ICOX Innovations Inc.
(formerly AppCoin Innovations Inc.)
Notes to Consolidated Financial Statements
December 31, 2017 and 2016

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

 

Differences between the timing of billings and the recognition of revenue are recognized as either unbilled revenue (a component of accounts receivable) or deferred revenue on the consolidated balance sheet. Revenues recognized for services performed but not yet billed to clients are recorded as unbilled revenue.

 

Reimbursable expenses, including those relating to travel, other out-of-pocket expenses and any third-party costs, are included as a component of revenues. Typically, an equivalent amount of reimbursable expenses are included in total direct client service costs. Taxes collected from customers and remitted to governmental authorities are presented in the statement of operations on a net basis.

 

Service costs

 

The Company’s policy is to defer direct service costs that relate to the earning of contingent fee revenue. These deferred costs are expensed when the contingent fee revenue is recognized or when the earning the contingent fee revenue is in doubt.

 

Reclassification

 

Certain reclassifications have been made to the 2016 financial statements in order for them to conform to the 2017 presentation. Such reclassifications have no impact on the Company’s financial position or results or operations.

 

Recently Adopted Accounting Pronouncements

 

Statement of Cash Flows (ASU 2016-15)

 

This update provides specific guidance to clarify how entities should classify certain cash receipts and cash payments on the statement of cash flows. The update also clarifies the application of the predominance principle when cash receipts and cash payments have aspects of more than one class of cash flows. We will be required to adopt this standard effective January 1, 2018. We do not expect the adoption of this update to have a material effect on our financial statements.

 

Financial Instruments – Recognition and Measurement (ASU 2016-01)

 

This update retains the current accounting for classifying and measuring investments in debt securities and loans, but requires equity investments to be measured at fair value with subsequent changes recognized in net income, except for those accounted for under the equity method or requiring consolidation. We will be required to adopt this standard effective January 1, 2018. We do not expect the adoption of this update to have a material effect on our financial statements.

 

3. ACCOUNTS RECEIVABLE

 

As at December 31, 2017, the Company had outstanding accounts receivable of $500,000 (2016 - $0). The entire amount was received subsequent to year end.

 

F- 11

 

 

ICOX Innovations Inc.
(formerly AppCoin Innovations Inc.)
Notes to Consolidated Financial Statements
December 31, 2017 and 2016

 

4. NOTES PAYABLE

 

On September 14, 2015, the Company entered into a private placement subscription agreement and issued an unsecured convertible note (the “ First Note ”) in the principal amount of $73,825 to one subscriber. The First Note, and accrued interest, will mature five (5) years from the date of issuance and will bear interest at the rate of 18% interest per annum, compounded annually. The principal amount of the First Note, plus any interest accrued thereon, may be converted into shares of common stock of the Company at a conversion price of $0.03 per share. As at December 31, 2017, the First Note had a balance outstanding of $104,334 (2016 - $91,734), comprised of a principal amount of $73,825 and accrued interest of $30,509 (2016 - $17,909). The Company has determined that no beneficial conversion feature exists due to the share value on the date of issuance.

 

On December 31, 2016, the Company entered into a private placement subscription agreement and issued an unsecured convertible note (the “ Second Note ”) in the principal amount of $50,000 to one subscriber. The Second Note, and accrued interest, will mature five (5) years from the date of issuance and will bear interest at the rate of 18% interest per annum, compounded annually. The principal amount of the Second Note, plus any interest accrued thereon, may be converted into shares of common stock of the Company at a conversion price of $0.03 per share. As at December 31, 2017, the Second Note had a balance outstanding of $59,025 (2016 - $50,025), comprised of a principal amount of $50,000 and accrued interest of $9,025 (2016 - $25). The Company has determined that no beneficial conversion feature exists due to the share value on the date of issuance.

 

On December 31, 2016, the Company entered into a private placement subscription agreement and issued an unsecured convertible note (the “ Third Note ”) in the principal amount of $21,500 to one subscriber. The Third Note included repayment of the principal amount of $20,000 for an unsecured note issued on June 6, 2016 plus a $1,500 restructuring fee. The Third Note, and accrued interest, will mature five (5) years from the date of issuance and will bear interest at the rate of 18% interest per annum, compounded annually. The principal amount of the Third Note, plus any interest accrued thereon, may be converted into shares of common stock of the Company at a conversion price of $0.03 per share. As at December 31, 2017, the Third Note had a balance outstanding of $25,380 (2016 - $21,511), comprised of a principal amount of $21,500 and accrued interest of $3,880 (2016 - $11). The Company has determined that no beneficial conversion feature exists due to the share value on the date of issuance.

 

On March 2, 2017, the Company entered into a private placement subscription agreement and issued an unsecured convertible note (the “ Fourth Note ”) in the principal amount of $20,000 to one subscriber. The Fourth Note, and accrued interest, will mature five (5) years from the date of issuance and will bear interest at the rate of 18% interest per annum, compounded annually. The principal amount of the Fourth Note, plus any interest accrued thereon, may be converted into shares of common stock of the Company at a conversion price of $0.03 per share. As at December 31, 2017, the Fourth Note had a balance outstanding of $22,998 (2016 - $0), comprised of a principal amount of $20,000 and accrued interest of $2,998 (2016 - $0). The Company has determined that no beneficial conversion feature exists due to the share value on the date of issuance.

 

F- 12

 

 

ICOX Innovations Inc.
(formerly AppCoin Innovations Inc.)
Notes to Consolidated Financial Statements
December 31, 2017 and 2016

 

4. NOTES PAYABLE (CONT’D)

 

On June 8, 2017, the Company entered into a private placement subscription agreement and issued an unsecured convertible note (the “ Fifth Note ”) in the principal amount of $10,000 to one subscriber. The Fifth Note, and accrued interest, will mature five (5) years from the date of issuance and will bear interest at the rate of 18% interest per annum, compounded annually. The principal amount of the Fifth Note, plus any interest accrued thereon, may be converted into shares of common stock of the Company at a conversion price of $0.03 per share. As at December 31, 2017, the Fifth Note had a balance outstanding of $11,016 (2016 - $0), comprised of a principal amount of $10,000 and accrued interest of $1,016 (2016 - $0). The Company has determined that no beneficial conversion feature exists due to the share value on the date of issuance.

 

On September 7, 2017, the Company received a $250,000 loan from a less than 5% shareholder. The loan is unsecured, repayable on demand and is non-interest bearing. On October 30, 2017, this loan was used to subscribe to an unsecured convertible debenture (the “ Sixth Note ”) in the principal amount of $250,000 to one subscriber. The Sixth Note, and accrued interest, will mature three (3) years from the date of issuance and will bear interest at the rate of 10% interest per annum, compounded annually. The principal amount of the Sixth Note, plus any interest accrued thereon, may be converted into shares of common stock of the Company at a conversion price of $0.10 per share. As at December 31, 2017, the Sixth Note had a balance outstanding of $254,247 (2016 - $0), comprised of a principal amount of $250,000 and accrued interest of $4,247 (2016 - $0). The Company has determined that no beneficial conversion feature exists due to the share value on the date of issuance.

 

On October 30, 2017, the Company entered into a private placement subscription agreement and issued an unsecured convertible note (the “ Seventh Note ”) in the principal amount of $75,000 to one subscriber. The Seventh Note, and accrued interest, will mature three (3) years from the date of issuance and will bear interest at the rate of 10% interest per annum, compounded annually. The principal amount of the Seventh Note, plus any interest accrued thereon, may be converted into shares of common stock of the Company at a conversion price of $0.10 per share. As at December 31, 2017, the Seventh Note had a balance outstanding of $76,274 (2016 - $0), comprised of a principal amount of $75,000 and accrued interest of $1,274 (2016 - $0). The Company has determined that no beneficial conversion feature exists due to the share value on the date of issuance.

 

Based upon the balances as of December 31, 2017, the convertible notes and the related interest will come due in the following years:

 

    Principal     Interest     Total  
2018   $ -     $ -     $ -  
2019     -       -       -  
2020     398,825       36,030       434,855  
2021     71,500       12,905       84,405  
2022     30,000       4,014       34,014  
Total   $ 500,325     $ 52,949     $ 553,274  

 

5. NOTES RECEIVABLE – RELATED PARTY

 

On November 20, 2017, the Company made a $99,963 loan to WENN Digital Inc., a customer of the Company. This loan is unsecured, will mature one (1) year from the date of issuance and will bear interest at the rate of 7% interest per annum. As of December 31, 2017, interest of $789 has been accrued. The Company also received a 7.5% stake in the WENN Digital Inc. for making the loan.

 

F- 13

 

 

ICOX Innovations Inc.
(formerly AppCoin Innovations Inc.)
Notes to Consolidated Financial Statements
December 31, 2017 and 2016

 

6. RELATED PARTY TRANSACTIONS

 

In support of the Company’s efforts and cash requirements, it may rely on advances from stockholders until such time as the Company can support its operations through revenue generation or attain adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment for continued support by stockholders. Amounts represent advances or amounts paid in satisfaction of liabilities.

 

The Company’s office premises were provided to it at no cost by one of its directors. The Company’s director did not take any fees for serving as director during the year ended December 31, 2017.

 

In October 2017, the Company signed an agreement with a company in which the Company’s Chairman is a director, officer, and 30.5% shareholder, to provide strategic management services. The agreement is for a two-year term that will automatically be renewed unless: (i) mutually agreed to by BIG and us, or (ii) written notice of non-renewal is provided by the non-renewing party to the other at least 90 days prior to the end of the term. This agreement committed the Company to pay $35,000 a month and a signing bonus of $100,000 payable as follows: (i) $50,000 upon closing of up to $750,000 of equity financing and (ii) $50,000 payable on signing of the first client agreement. As of December 31, 2017, the Company had trade and other payables owing to this related party of $51,616.

 

Future minimum payments per the agreement are:

 

2018   $ 470,000  
2019     350,000  
Total   $ 820,000  

 

On December 29, 2017, the Company signed a master service agreement with WENN Digital Inc. (“WENN”), a company in which there is a common director. The agreement was amended on March 15, 2018, pursuant to which the Company changed the scope of services to provide WENN with the services in connection with WENN’s development of an image rights management and protection platform (the “Platform”) using blockchain technology, including (i) the business development and technical services, (ii) the business launch services and (iii) the post-business launch support services.

 

The business services agreement with WENN provides that the fees for the services provided in connection with the development and launch of the Platform (the business development and technical services and business launch services) were deemed earned on the date of execution of the business services agreement. The Company has waived WENN’s requirement to pay the $250,000 fixed fee in connection with the business development and technical services as a concession. The Company has recognized the business development and technical services fee of $500,000 during the year ended December 31, 2017, which WENN paid in January 2018 upon the completion of its first round of pre-ICO fundraising.

 

F- 14

 

 

ICOX Innovations Inc.
(formerly AppCoin Innovations Inc.)
Notes to Consolidated Financial Statements
December 31, 2017 and 2016

 

6. RELATED PARTY TRANSACTIONS (CONT’D)

 

The fees for the post-business launch support services (the “Monthly Services” ) are $35,000 per month and they will be due at the beginning of each month in which the Monthly Services are performed. With respect to the Monthly Services, the Company has agreed to provide the Monthly Services for one year commencing on the date of the Platform Launch (as defined below), after which the business services agreement and the provision of the Monthly Services will automatically renew for a one year period and can be terminated by either our company or WENN with 30 days’ written notice. “Platform Launch” means the publicized product launch of the Platform to the general public, including the ability of the general public to use Tokens as the primary means of exchange for transactions on the Platform.

 

In addition, the business services agreement with WENN provides that the work fee in the amount of $4,175,000 is deemed earned on March 15, 2018 and the work fee is subject to a Renegotiation Obligation (as defined below). The business services agreement with WENN also provides that the additional fee of rights to receive an aggregate of 20,000,000 Platform tokens or coins (the “Tokens” ) pursuant to a Simple Agreement for Future Tokens is also deemed earned on the date of execution of the business services agreement and the additional fee is subject to a Renegotiation Obligation. However, for financial reporting purposes, the work fee and additional fee are deemed earned on the date of the launch of the Platform. If WENN does not raise more than $40 million in connection with its offer and sale for cash of (i) one or more Simple Agreements for Future Tokens ( “SAFTs” ), which SAFTs will entitle the holders thereof to receive Tokens under certain circumstances, and/or, (ii) Tokens, in the event that WENN determines to offer and sell Tokens in lieu of or in addition to SAFTs in connection with its fundraising efforts (collectively, the “WENN Offering” ), prior to May 31, 2018, the Company will be required to return the work fees and additional fee to WENN and WENN and our company will be required to negotiate in good faith the amount of each of such fee (such requirement to negotiate is referred to herein as the “Renegotiation Obligation” ).

 

The Company has agreed that WENN will not be responsible for any out-of-pocket expenses incurred by our company in connection with our performance of the services. In addition, the Company has agreed to pay, and otherwise be financially responsible for (including through the reimbursement of disbursements made by WENN and its affiliates), (i) all legal costs and expenses incurred by WENN, our company and any of their affiliates in connection with the WENN Offering; (ii) all business and travel expenses incurred by WENN, our company and any of their affiliates in connection the WENN Offering; and (iii) all fees and expenses incurred by WENN in connection with its conversion of cryptocurrencies into US dollars in connection with the WENN Offering, including bank, exchange and other similar fees and expenses. WENN will have the right to deduct any such amounts from the fees otherwise payable by it to our company and apply such deducted amounts to the payments to our company.

 

The business services agreement will continue for a period of one year unless earlier terminated by either our company or WENN.

 

F- 15

 

 

ICOX Innovations Inc.
(formerly AppCoin Innovations Inc.)
Notes to Consolidated Financial Statements
December 31, 2017 and 2016

 

6. RELATED PARTY TRANSACTIONS (CONT’D)

 

Either the Company or WENN may terminate the business services agreement upon the provision of 30 days’ written notice to the other party. If the Company provides such notice, WENN may immediately terminate the business services agreement and the Company will be entitled to no further compensation except for any fees earned prior to the date of the termination. If WENN provides such notice, the Company may immediately terminate the business services agreement and will be entitled to no further compensation, except for the following lump sum payments: (i) any fees earned to the effective date of termination; and (ii) a lump sum payment of $105,000.

 

For the purpose of determining our fees earned to the date of the termination in the event that either party terminates the business services agreement, all fees for services in connection with the development and launch of the Platform (the business development and technical services and business launch services) and the additional fee of rights to receive an aggregate of 20,000,000 Tokens are deemed earned on the date of execution of the business services agreement and the work fee is deemed earned as of March 15, 2018. However, the work fees and additional fee are subject to the Renegotiation Obligation. As such, our work fee and additional fee are not determinable or deemed collectible for the financial reporting purposes until the WENN Offering is completed or, if applicable, those fees are renegotiated pursuant to the Renegotiation Obligation.

 

The Company’s chairman and one of its directors, Cameron Chell, is a director, officer and an indirect shareholder of Business Instincts Group Inc. which owns 10% of the common stock of WENN and he is also a director, officer and indirect shareholder of Blockchain Merchant Group, Inc. which owns 2.5% of the common stock of WENN and the Company owns 7.5% of the common stock of WENN. Mr. Chell is also a director, chairman, and officer of WENN. Mr. Elliott is a former officer of WENN.

 

7. SHARE CAPITAL

 

The Company’s common stock is issued at a $0.001 par value. 75,000,000 shares have been authorized. As at December 31, 2017, 11,600,000 shares were issued and outstanding (2016 – 6,000,000).

 

On October 30, 2017, the Company entered into a private placement subscription agreement with 35 subscribers, pursuant to which it issued an aggregate of 5,600,000 shares of common stock of the Company at a price of $0.10 per share for aggregate gross proceeds of $560,000.

 

F- 16

 

 

ICOX Innovations Inc.
(formerly AppCoin Innovations Inc.)
Notes to Consolidated Financial Statements
December 31, 2017 and 2016

 

8. STOCK-BASED COMPENSATION

 

The Company has adopted the 2017 Equity Incentive Plan (“the Plan”) under which non-transferable options to purchase common shares of the Company may be granted to directors, officers, employees, or consultants of the Company. The terms of the Plan provide that the Board of Directors have the right to grant options to acquire common shares of the Company at not less than the closing market price of the shares on the day preceding the grant at terms of up to ten years. No amounts are paid or payable by the recipient on receipt of the options. The maximum number of options available for grant is 3,000,000. On January 22, 2018, the maximum number of options available for grant was increased to 3,900,000. As of December 31, 2017, there are 2,900,000 stock options issued (2016 – nil) and 100,000 stock options unissued (2016 – nil).

 

On October 15, 2017, the Company granted a total of 1,400,000 stock options to its directors and officers. The stock options are exercisable at the exercise price of $0.10 per share for a period of ten years from the date of grant. The stock options are exercisable as follows:

 

  (i) 1/3 upon the date of grant;
     
  (ii) 1/3 on the first anniversary date; and
     
  (iii) 1/3 on the second anniversary date.

 

On October 15, 2017, the Company granted a total of 1,325,000 stock options to its consultants. These stock options were granted to consultants who have provided their services for cash compensation below cost, with the stock options providing additional compensation in lieu of cash. The stock options are exercisable at the exercise price of $0.10 per share for a period of ten years from the date of grant. Of the stock options granted, 800,000 are exercisable as follows:

 

  (i) 1/3 upon the date of grant;
     
  (ii) 1/3 on the first anniversary date; and
     
  (iii) 1/3 on the second anniversary date.

 

The remaining 525,000 stock options are exercisable as follows:

 

  (i) 1/3 on the first anniversary date;
     
  (ii) 1/3 on the second anniversary date; and
     
  (iii) 1/3 on the third anniversary date.

 

F- 17

 

 

ICOX Innovations Inc.
(formerly AppCoin Innovations Inc.)
Notes to Consolidated Financial Statements
December 31, 2017 and 2016

 

8. STOCK-BASED COMPENSATION (CONT’D)

 

On November 10, 2017, the Company granted a total of 175,000 stock options to its consultants. The stock options are exercisable at the exercise price of $0.10 per share for a period of ten years from the date of grant. The stock options are exercisable as follows:

 

(i) 1/3 on the first anniversary date;

 

(ii) 1/3 on the second anniversary date; and

 

(iii) 1/3 on the third anniversary date.

 

Stock options granted are valued at the fair value calculation based off the Black-Scholes valuation model. The weighted average assumptions used in the calculation are as follows:

 

    For the years ended December 31,  
    2017     2016  
Share price   $ 0.10       N/A  
Exercise price   $ 0.10       N/A  
Time to maturity (years)     10       N/A  
Risk-free interest rate     2.28%-2.40%       N/A  
Expected volatility     191.12%-191.75%       N/A  
Dividend per share   $ 0.00       N/A  
Forfeiture rate     Nil       N/A  

 

    Number of Options     Weighted Average Grant-Date Fair Value ($)     Weighted Average Exercise Price ($)     Weighted Average Remaining Life (Yrs)  
Options outstanding, December 31, 2015     -       -       -       -  
Granted     -       -       -       -  
Exercised     -       -       -       -  
Forfeited     -       -     -       -  
Options outstanding, December 31, 2016     -       -       -       -  
Granted     2,900,000       0.10       0.10       9.8  
Exercised     -       -       -       -  
Forfeited     -       -       -       -  
Options outstanding, December 31, 2017     2,900,000       0.10       0.10       9.8  
Options exercisable, December 31, 2017     733,331       0.10       0.10       9.8  

 

F- 18

 

 

ICOX Innovations Inc.
(formerly AppCoin Innovations Inc.)
Notes to Consolidated Financial Statements
December 31, 2017 and 2016

 

9. INCOME TAXES

 

For the fiscal years 2017 and 2016, there was no provision for income taxes and deferred tax assets have been entirely offset by valuation allowances.

 

As of December 31, 2017 and 2016, the Company had net operating loss carry forwards of approximately $693,008 and $225,850, respectively. The carry forwards expire through the year 2037. The Company’s net operating loss carry forwards may be subject to annual limitations, which could reduce or defer the utilization of the losses as a result of an ownership change as defined in Section 382 of the Internal Revenue Code.

 

The Tax Cuts and Jobs Act was enacted on December 22, 2017 which reduced the U.S. corporate statutory tax rate from 35% to 21% beginning on January 1, 2018. The Company’s tax expense differs from the “expected” tax expense for Federal income tax purposes (computed by applying the United States Federal tax rate of 21% to loss before taxes (2016 – 21%)), as follows:

 

    For the years ended December 31,  
    2017     2016  
Net operating loss before taxes     (467,058 )     (88,196 )
Federal income tax rate     21 %     21 %
Tax expense (benefit) at the statutory rate     (98,082 )     (18,521 )
Non-deductible items                
Tax effect of stock-based compensation (non-qualifying options)     44,401       -  
Change in valuation allowance     53,681       18,521  
Total     -       -  

 

The tax effects of the temporary differences between reportable financial statement income and taxable income are recognized as deferred tax assets and liabilities. The tax effect of significant components of the Company’s deferred tax assets at December 31, 2017 and 2016, respectively, are as follows:

 

    2017     2016  
Deferred tax asset:                
Net operating loss carry forwards     101,110       47,429  
Total gross deferred tax assets     101,110       47,429  
Less: Deferred tax asset valuation allowance     (101,110 )     (47,429 )
Total net deferred tax assets     -       -  

 

In assessing the ability to realize the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

 

The returns filed from the year 2014 going-forward are subject to examination by the IRS.

 

F- 19

 

 

ICOX Innovations Inc.
(formerly AppCoin Innovations Inc.)
Notes to Consolidated Financial Statements
December 31, 2017 and 2016

10. FINANCIAL INSTRUMENTS

 

Fair value is an exit price representing the amount that would be received to sell an asset or aid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.

 

A three-tier fair value hierarchy is established as a base for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:

 

  Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
     
  Level 2: Observable inputs that reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
     
  Level 3: unobservable inputs reflecting our own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participants assumptions that are reasonably available.

 

  Investment in related party

 

    As of December 31,  
    2017     2016  
Investment in related party     37       -  

 

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

 

11. SUBSEQUENT EVENTS

 

On January 3, 2018, WENN Digital Inc. repaid the outstanding $100,000 loan plus accrued interest of $950.

 

As Lead Director, Mr. Geiskopf will be receiving $120,000 in annual compensation.

 

On January 22, 2018, we amended our 2017 Equity Incentive Plan to increase the number of shares of our common stock available for the grant of awards under the plan from 3,000,000 shares to 3,900,000 shares.

 

On February 9, 2018, we appointed Edmund C. Moy as a director of the Company. We granted 100,000 stock options to Mr. Moy at an exercise price of $0.60 per share. Mr. Moy will be receiving $50,000 in annual compensation.

 

On February 14, 2018, we changed our name from “AppCoin Innovations Inc.” to “ICOX Innovations Inc.”. The name change became effective with the OTC Pink operated by the OTC Markets Group at opening for trading on February 14, 2018 under the stock symbol “ICOX”.

 

F- 20

 

 

ICOX Innovations Inc.
(formerly AppCoin Innovations Inc.)
Notes to Consolidated Financial Statements
December 31, 2017 and 2016

 

11. SUBSEQUENT EVENTS (CONT’D)

 

On February 16, 2018, we appointed Steve Beauregard as Member of the Advisory Board of the Company. We granted 25,000 stock options at an exercise price of $0.60 per share. Mr. Beauregard will be receiving $25,000 in annual compensation.

 

On February 16, 2018, we appointed Russell Stidolph as Member of the Advisory Board of the Company. We granted 50,000 stock options at an exercise price of $0.60 per share.

 

On March 13, 2018, we entered into a loan agreement with Michael Blum whereby Mr. Blum advanced $100,000 to us. The principal amount of $100,000 is repayable on demand (but no longer than a term of six month) and bears simple interest at a rate of 12% per annum, which is payable upon repayment of the principal amount of $100,000. We are entitled to prepay the whole or any portion of the principal amount of $100,000, plus accrued interest on the portion of the principal amount of $100,000 being prepaid, at any time. The loan agreement provides that we must, within five days of the release of funds to us from our private placement of subscription receipts that closed in March 2018, repay the principal amount of $100,000 plus accrued interest in full. The loan agreement also provides that if we obtain any indebtedness on terms that are superior to the terms set forth in the loan agreement, then the terms under the loan agreement will be deemed to be amended, as of March 13, 2018, to match such superior terms in a manner and on terms as nearly equivalent as practicable to such superior terms.

 

On March 12 and 19, 2018, we completed private placements of an aggregate of 9,113,659 subscription receipts at a price of $0.60 per subscription receipt for aggregate gross proceeds of $5,468,195.40. In the event of the occurrence of the escrow release condition (as defined below), each subscription receipt will automatically convert into one share of our common stock, for no additional consideration. The subscription amounts will be held by an escrow agent until the escrow release condition. The escrow release condition is the receipt by our company of conditional approval for the listing of the shares of our common stock on a Canadian stock exchange. In the event that the escrow release condition is satisfied prior to 5:00 p.m. (Vancouver time) on May 31, 2018, we will deliver a notice to the escrow agent confirming the escrow release condition has been satisfied. Upon receipt of the notice, the escrow agent will, as soon as practicable thereafter, release the subscription amounts to our company and each subscription receipt will automatically convert into one share of our common stock without payment of any additional consideration. If the escrow release condition is not satisfied by 5:00 p.m. (Vancouver time) on May 31, 2018 or if we deliver a written default notice to the escrow agent that the escrow release condition will not be satisfied by that time, the subscription receipts will expire and be of no further force and effect, effective as of the earlier of (i) 5:00 p.m. (Vancouver time) on May 31, 2018 and (ii) the date of the receipt of the default notice, and the subscribers will be entitled to receive from the escrow agent a refund of the subscription amounts held in escrow, without interest and less applicable expenses. In connection with the closing of the private placements, we paid cash finder’s fees in the aggregate amount of $29,399.97 and we agreed to issue 160,865 shares of our common stock at a deemed price of $0.60 per share as the finder’s fee, which will be issued only if the subscription receipts are converted into shares of our common stock.

 

In connection with this private placement, the Company agreed with each subscriber who purchased these Subscription Receipts to prepare and file a registration statement with respect to 50% of the Shares issuable upon conversion of the Subscription Receipts with the United States Securities and Exchange Commission within 90 days following the closing of the private placement and agreed to use commercially reasonable efforts to have the registration statement declared effective by the United States Securities and Exchange Commission as soon as possible after filing.

 

F- 21

 

 

ICOX Innovations Inc.
(formerly AppCoin Innovations Inc.)
Notes to Consolidated Financial Statements
December 31, 2017 and 2016

 

11. SUBSEQUENT EVENTS (CONT’D)

 

None of the securities issued in the private placement have been registered under the United States Securities Act of 1933, as amended (the “1933 Act”), and none of them may be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the 1933 Act.

 

On March 27, 2018, we entered into a loan agreement with Greg Burnett whereby Mr. Burnett advanced $100,000 to us. The principal amount of $100,000 is repayable on demand (but no longer than a term of six month) and bears simple interest at a rate of 12% per annum, which is payable upon repayment of the principal amount of $100,000. We are entitled to prepay the whole or any portion of the principal amount of $100,000, plus accrued interest on the portion of the principal amount of $100,000 being prepaid, at any time. The loan agreement provides that we must, within five days of the release of funds to us from our private placement of subscription receipts that closed in March 2018, repay the principal amount of $100,000 plus accrued interest in full. The loan agreement also provides that if we obtain any indebtedness on terms that are superior to the terms set forth in the loan agreement, then the terms under the loan agreement will be deemed to be amended, as of March 27, 2018, to match such superior terms in a manner and on terms as nearly equivalent as practicable to such superior terms.

 

F- 22

 

 

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

 

None.

 

ITEM 9A. CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by our company is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC. Our principal executive officer, who is our president, and our principal financial officer, who is our chief financial officer, are responsible for establishing and maintaining disclosure controls and procedures for our company.

 

Our management conducted an evaluation, with the participation of our principal executive officer and our principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934, as of the end of the period covered by this annual report on Form 10-K. Based upon that evaluation, our principal executive officer and our principal financial officer concluded that as a result of the material weaknesses in our internal control over financial reporting described below, our disclosure controls and procedures were not effective as of December 31, 2017.

 

Management’s Annual Report on Internal Control over Financial Reporting

 

Our principal executive officer and our principal financial officer are responsible for establishing and maintaining adequate internal control over financial reporting. Our principal executive officer and our principal financial officer have accessed the effectiveness of our internal control over financial reporting as of the end of the period covered by this annual report on Form 10-K based on the criteria for effective internal control described Internal Control-Integrated Framework issued by the Committee of Sponsoring Organization of the Treadway Commission 2013. Based on this assessment, our principal executive officer and our principal financial officer have concluded our internal control over the financial reporting is not effective due to the following material weaknesses, which existed as of December 31, 2017:

 

  Financial Reporting Systems : We did not maintain a fully integrated financial reporting system throughout the period and as a result, extensive manual analysis, reconciliation and adjustments were required in order to produce financial statements for external reporting purposes; and
     
  Segregation of Duties : We do not currently have a sufficient complement of technical accounting and external reporting personal commensurate to support standalone external financial reporting under U.S. generally accepted accounting principles ( “U.S. GAAP” ) or SEC requirements. Specifically, we did not effectively segregate certain accounting duties due to the small size of our accounting staff, and inability to maintain a sufficient number of adequately trained personnel who have the knowledge and experience with U.S. GAAP and SEC reporting necessary to anticipate and identify risks critical to financial reporting and the closing process. In addition, there were inadequate reviews and approvals by our personnel of certain reconciliations and other processes in day-to-day operations due to the lack of a full complement of accounting staff.

 

   - 30 -  

 

 

We believe that our material weaknesses in internal control over financial reporting and our disclosure controls and procedures relate in part to the fact that we are an emerging business with limited personnel. Management and our board of directors believe that we must allocate additional human and financial resources to address these matters. Throughout the year, we have been continuously improving our monitoring of current reporting systems and our personnel. We intend to continue to make improvements in our internal control over financial reporting and disclosure controls and procedures until our material weaknesses are remediated.

 

Limitations on the Effectiveness of Controls and Permitted Omission from Management’s Assessment

 

Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal control over financial reporting can only provide reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

In light of the material weaknesses described above, additional procedures were performed by our management to ensure that the consolidated financial statements included in this report were prepared in accordance with U.S. GAAP.

 

Remediation

 

  We updated our accounting processes to include new closing procedures and a procedural checklist, the purpose of which are to ensure the accuracy of the financial data for the preparation of our financial statements, and new financial reporting procedures, the purpose of which are to prepare financial statements that fairly present our financial position and results of operations and cash flows in conformity with U.S. GAAP.
     
  We implemented the use of financial statement and reporting disclosure checklists to ensure that all of our related disclosures are properly included and reported.
     
  We implemented the following new policies and procedures:

 

  i) Financial budgets in place as approved by our board of directors;
     
  ii) Business plan was created for the business operations;
     
  iii) Weekly cash flow analysis that is reviewed by our chief financial officer and the senior management team;
     
  iv) Weekly management meetings with clear understanding of roles and responsibilities and tasks;
     
  v) All vendor invoices are reviewed and approved by our chief financial officer and compared to the budgets before processing payments;
     
  vi) Introduced Google Drive. All documents and contracts are centrally stored on the drive with restricted access;

 

  vii) Travel and expense policy implement for all consultants that have expense reports to claim reimbursements from our company;
     
  viii) Code of ethics and business conduct document signed by all consultants;
     
  ix) Disclosure policy document signed by all consultants;
     
  x) Insider trading policy signed by all consultants; and
     
  xi) Social media policy signed by all consultants.

 

   - 31 -  

 

 

Changes in Internal Control over Financial Reporting during the Fourth Quarter of 2017

 

During the fourth quarter of 2017, we made the following changes to our internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934) which materially affected, or are reasonably likely to materially affect, our internal control over financial reporting for the quarter ended December 31, 2017:

 

  We updated our bookkeeping and accounting recordkeeping procedures and moved to Quick Books Online from Excel bookkeeping. With Quick Books Online we have the usual controls and processes that are inherently available in an accounting software package like Quick Books and we eliminated any potential errors that could have occurred using a process of bookkeeping using Excel;
     
  We hired a team of qualified accounting professionals to our company. We hired a new chief financial officer, a controller and a senior accountant during the fourth quarter of 2017. They collectively bring several years of public company reporting experience and oversight to the accounting and financial reporting and internal control processes; and
     
  On October 9, 2017, James P. Geiskopf resigned as our secretary and treasurer and we appointed Michael Blum as the chief financial officer, secretary, treasurer and a director of our company. On October 9, 2017, our board of directors established an audit committee consisting of Michael Blum, James P. Geiskopf and Cameron Chell (replaced with Edmund C. Moy on March 2, 2018). On October 15, 2017, we appointed Bruce Elliott as the president of our company and Mr. Chell resigned as our president and chief executive officer in order to accommodate the appointment of Bruce Elliott as our president. On October 15, 2017, Mr. Chell was appointed as the non-executive chairman.

 

It should be noted that while our management has taken and will continue to take steps to improve our disclosure controls and procedures, our management does not expect that our disclosure controls and procedures or internal financial control over financial reporting will prevent all errors or fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

 

ITEM 9B. OTHER INFORMATION

 

None.

 

   - 32 -  

 

 

PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

Directors and Executive Officers

 

The following individuals serve as our directors and executive officers. All of our directors hold office until the next annual meeting of our stockholders or until their successors have been elected and qualified, or until their death, resignation or removal. Our executive officers are appointed by our board of directors and hold office until their death, resignation or removal from office.

 

Name   Position Held with Our Company   Age   Date First Elected or
Appointed
Bruce Elliott   President   54   October 15, 2017
Michael Blum   Chief Financial Officer, Secretary, Treasurer and Director   41   October 9, 2017
Cameron Chell   Chairman and Director   49   August 21, 2017
James P. Geiskopf   Lead Director   58   August 28, 2014
Edmund C. Moy   Director   60   February 9, 2018

 

Business Experience

 

The following is a brief account of the education and business experience during at least the past five years of each director and executive officer, indicating the person’s principal occupation during that period, and the name and principal business of the organization in which such occupation and employment were carried out.

 

Bruce Elliott

 

On October 15, 2017, Bruce Elliott was appointed as the president of our company. From April 2012 to October 2017, Mr. Elliott served as director of Boston Limited, Isle of Man, a regulated fiduciary and corporate service provider. From January 2013 to October 2017, Mr. Elliott served as director of Boston Ventures Limited, Isle of Man. From December 2017 to February 2018, Mr. Elliott served as the chief marketing officer of WENN.

 

Mr. Elliott is a 25-year eCommerce veteran having held senior leadership roles in privately held and listed companies in online payments, gaming, venture capital and trust and corporate service sectors in North America and Europe. Mr. Elliott is a recognized international conference speaker on entrepreneurship, venture capital and emerging technology trends and has also led venture capital investments into clean tech, gaming, blockchain and fintech companies. Career highlights include Executive Vice President Marketing and Sales of AIM listed Neteller plc, Director of Boston Group Limited and Managing Director of Boston Ventures Limited.

   - 33 -  

 

 

Michael Blum

 

On October 9, 2017, Michael Blum was appointed as the chief financial officer, secretary, treasurer and a director of our company.

 

Mr. Blum started his career in Silicon Valley where he eventually joined PayPal as country manager, Germany and later ran the payments business for eBay in South East Asia and the Pacific. In 2005, he moved into the world of finance, co-founding a hedge fund, Falconhenge Partners which then became part of Magnetar Capital. Since January 2008, Mr. Blum has been a co-founder and the President at Hedgeye Risk Management, a leading online financial media company and he is a director at Hedgeye Cares, the company’s employee driven charity. Since August 2016, he has also served as president of Seven7, LLC, a sports and entertainment focused venture fund. Since July 2013, he has served as managing director at Asia Leisure Capital SA, a hotel and casino management and investment firm. He was previously co-founder and chief financial officer of Firefly Systems Inc. from January 2014 to February 2017. Mr. Blum graduated from Yale University with a Bachelor of Arts in Economics and International studies in 1998.

 

We believe that Mr. Blum is qualified to serve on our board of directors because of his extensive business management and financial expertise derived from his past occupation.

 

Cameron Chell

 

On August 21, 2017, Cameron Chell was appointed as the president and chief executive officer and a director of our company. On October 15, 2017, Mr. Chell resigned as our president and chief executive officer in order to accommodate the appointment of Bruce Elliott as our president. On the same day, Mr. Chell was appointed as the non-executive chairman.

 

Mr. Chell has been the CEO of Business Instincts Group since November 2009. Business Instincts Group is a venture creation accelerator and services firm whose focus is building high-tech startups. The companies that Business Instincts Group has helped build include Draganfly, RaptorRig, ColdBore, UrtheCast, the first commercial video platform on the International Space Station and Slyce, the visual purchasing engine. As well, Mr. Chell has founded several startups including Futurelink, the original cloud computing company. Mr. Chell is currently involved with creating and sourcing new projects, and overseeing corporate development for Business Instincts Group. Business Instincts Group’s venture creation process involves management services that integrate a proprietary strategic planning process (The RIPKIT) into organizations fostering strategic growth, valuation appreciation, liquidity, and management accountability. In this regard Mr Chell’s primary responsibility is to provide project and strategic management facilitation while working with his co-founders, executives, and investors to determine what is most important and specifically how to get it done. Mr. Chell has also been a director and secretary of WENN from December 2017 and chairman of WENN from February 2018.

 

We believe that Mr. Chell is qualified to serve on our board of directors because of his extensive business experience derived from his current and past occupation.

 

James P. Geiskopf

 

Effective August 28, 2014, Mr. Geiskopf was appointed as president, secretary, treasury and director of our company. On August 21, 2017, Mr. Geiskopf resigned as our president. On October 9, 2017, Mr. Geiskopf resigned as our secretary and treasurer. Mr. Geiskopf has been our lead director since August 21, 2017.

 

   - 34 -  

 

 

Mr. Geiskopf currently serves on the board of directors of nFusz, Inc., formerly bBooth, Inc. (since May 7, 2014), a company having shares of common stock registered under the Securities Exchange Act of 1934. He served as a director of Electronic Cigarettes International Group, Ltd. from June 2013 to March 2017. He was the president, secretary, treasurer and a director of Searchbyheadlines.com (now Naked Brand Group Inc.) from December 22, 2011 to July 30, 2012, and the president and director of The Resource Group from 2007 to 2009. From 1986 to 2007, he served as the president and chief executive officer of Budget Rent-a-Car of Fairfield, California. Mr. Geiskopf also served on the board of directors of Suisun Valley Bank from 1986 to 1993 and on the board of directors of Napa Valley Bancorp. from 1991 to 1993.

 

We believe that Mr. Geiskopf is qualified to serve on our board of directors because of his extensive business management and financial expertise derived from his past occupation and his past and current board participation.

 

Edmund C. Moy

 

On February 9, 2018, we appointed Edmund C. Moy as a director of our company.

 

Mr. Moy has been self-employed since July 2013. He has provided autographs for Numismatic Guarantee Corporation since December 2015 and to Profession Coin Grading Services, a division of Collectors Universe (CLCT: NASDAQ) from November 2013 to November 2015. Mr. Moy has also been an author with Whitman Publishing since December 2013, and was a provider of endorsement to Fortress Gold Group from August 2014 to July 2017 and to Morgan Gold from November 2011 to July 2014. As a consultant since August 2013, he has advised the U.S. Department of Labor and the U.S. Department of Transportation during most of 2017 and worked on projects to develop the first Bitcoin IRA and the first state gold bullion depository in America. He has also been a professional speaker since August 2013. He was the vice president for corporate infrastructure of L&L Energy, Inc. from January 2011 to July 2013 and a director of L&L Energy, Inc. from January 2012 to September 2012. From September 2006 to January 2011, Mr. Moy served as Director of the United States Mint, the world’s largest manufacturer of coins and medals. He was appointed by President George W. Bush and unanimously confirmed by the U.S. Senate.

 

He currently serves on the advisory board or board of directors of several privately-held companies: AID:Tech (a blockchain company that fights global corruption in foreign aid and relief with digital identification), OmniSparx (develops healthy decentralized token ecosystems), and Valaurum (which sells the smallest verifiable unit of gold in the world). He is also a member of the Executive Advisory Board for the School of Business & Economics of Seattle Pacific University, the Board of Regents for Trinity International University, and the National Council for C3 Leaders.

 

Mr. Moy has served on public, private and non-profit boards and advisory boards, including coin.co, Axon Connected, LLC, L&L Energy, Inc. (NASDAQ: LLEN), Xactimed, Emerald Health Network, Christianity Today International, and Tau Kappa Epsilon International Fraternity.

 

We believe that Mr. Moy is qualified to serve on our board of directors because of his extensive business experience derived from his current and past occupation.

 

Family Relationships

 

There are no family relationships among our directors or officers.

 

Involvement in Certain Legal Proceedings

 

Except as disclosed below, none of our directors or executive officers have been involved in any of the following events during the past ten years:

 

   - 35 -  

 

 

  (a) 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 years prior to that time;
     
  (b) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
     
  (c) 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;
     
  (d) being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange 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;
     
  (e) being the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: (i) any federal or state securities or commodities law or regulation; or (ii) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease- and-desist order, or removal or prohibition order; or (iii) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
     
  (f) being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Securities Exchange Act of 1934), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

Michael Blum was a co-founder of Firefly Systems Inc. (“ Firefly ”) and acted as the chief financial officer of Firefly from January 2014 to February 2017. Firefly was a start-up in the space launch industry. Firefly grew from nothing in January 2014 to a company with 185 employees in the summer of 2016 with NASA as its flagship customer. When a major European investor backed out of a $32 million funding commitment at the last minute due to the Brexit vote, Firefly’s major stockholder was unwilling to pick-up the pieces and Firefly failed to close its last round of funding by early 2017. As a result, on April 3, 2017, Firefly filed a bankruptcy petition under Chapter 7 in the United States Bankruptcy Court for the Western District of Texas.

 

Michael Blum was elected to the board of directors of XCOR Aerospace, Inc. (“ XCOR ”) in late April 2017. XCOR lost its only customer one or two weeks after his election and the board of directors of XCOR asked Mr. Blum to fill the role of acting chief executive officer and Mr. Blum took over as acting chief executive officer on June 27, 2017. Mr. Blum was unable to save XCOR and, on November 8, 2017, XCOR filed a bankruptcy petition under Chapter 7 in the United States Bankruptcy Court for the Eastern District of California.

 

   - 36 -  

 

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors, and persons who own more than 10% of our common stock, to file reports regarding ownership of, and transactions in, our securities with the Securities and Exchange Commission and to provide us with copies of those filings. Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons we believe that during year ended December 31, 2017 all filing requirements applicable to our executive officers and directors, and persons who own more than 10% of our common stock were complied with, with the exception of the following:

 

Name   Number of
Late Reports
    Number of Transactions
Not Reported on a
Timely Basis
    Failure to File
Requested Forms
James P. Geiskopf     1       1     Nil
Cameron Chell     2       2     Nil
Michael Blum     1       1     Nil

 

Code of Ethics

 

On December 20, 2017, our board of directors adopted a code of ethics and business conduct for directors, senior officers and employees of our company. We adopted the code of ethics and business conduct for the purpose of promoting:

 

  honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest;
     
  full, fair, accurate, timely and understandable disclosure in all reports and documents that we file with, or submits to, the Securities and Exchange Commission and in other public communications made by our company;
     
  compliance with applicable governmental laws, rules and regulations;
     
  the protection of our assets, including corporate opportunities and confidential information;
     
  fair dealing practices;
     
  the prompt internal reporting of violations of the code of ethics and business conduct; and
     
  accountability for adherence to the code of ethics and business conduct.

 

Audit Committee

 

We have an audit committee consisting of Michael Blum, James P. Geiskopf and Edmund C. Moy. Our audit committee assists our board of directors in fulfilling its responsibility to our stockholders relating to corporate accounting matters, the financial reporting practices of our company, and the quality and integrity of the financial reports of our company.

 

Audit Committee Financial Expert

 

Our board of directors has determined that Michael Blum, a member of our audit committee, qualifies as an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K issued by the Securities and Exchange Commission, but Mr. Blum is not “independent” as the term is used by NASDAQ Marketplace Rule 5605(a)(2). We believe that retaining an independent director who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development.

 

Other Committees of Board of Directors

 

We do not have nominating or compensation committees or committees performing similar functions nor do we have a written nominating or compensation committee charter. Our board of directors does not believe that it is necessary to have such committees because it believes that the functions of such committees can be adequately performed by our board of directors.

 

   - 37 -  

 

 

We do not have any defined policy or procedure requirements for our stockholders to submit recommendations or nominations for directors. We do not currently have any specific or minimum criteria for the election of nominees to our board of directors and we do not have any specific process or procedure for evaluating such nominees. Our board of directors assesses all candidates, whether submitted by management or stockholders, and makes recommendations for election or appointment.

 

A stockholder who wishes to communicate with our board of directors may do so by directing a written request to the address appearing on the first page of this annual report.

 

ITEM 11. EXECUTIVE COMPENSATION

 

Summary Compensation

 

The particulars of compensation paid to the following persons:

 

  (a) all individuals serving as our principal executive officer during the year ended December 31, 2017;
     
  (b) each of two most highly compensated executive officers other than our principal executive officer who were serving as executive officers at December 31, 2017; and
     
  (c) up to two additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as our executive officer at December 31, 2017,

 

who we will collectively refer to as the named executive officers, for all services rendered in all capacities to our company for the years ended December 31, 2017 and 2016 are set out in the following summary compensation table:

 

Summary Compensation Table – Years Ended December 31, 2017 and 2016

 

Name and Principal
Position
    Year       Salary ($)       Bonus ($)       Stock Awards ($)       Option Awards ($)     Non-Equity Incentive Plan Compensa- tion ($)       Nonqualified Deferred Compensation Earnings ($)       All Other Compensa- tion ($)       Total ($)  

Bruce Elliott

President (1)

  2017
2016
    27,500
N/A
    7,500
N/A
    -
N/A
   

8,776 (6)

N/A

    -
N/A
    -
N/A
    -
N/A
    43,776
N/A
 

Michael Blum

Chief Financial Officer, Secretary, Treasurer and Director (2)

  2017
2016
    27,500
N/A
    25,000
N/A
    -
N/A
   

17,553 (6)

N/A

    -
N/A
    -
N/A
    -
N/A
    70,052
N/A
 

Cameron Chell

Director and Chairman and Former President and Chief Executive Officer (3)

  2017
2016
    -
N/A
    -
N/A
    -
N/A
   

17,553 (6)

N/A

    -
N/A
    -
N/A
    -
N/A
   

17,553 (4)

N/A

 

James P. Geiskopf

Lead Director and Former President, Secretary and Treasurer (5)

   

2017

2016

     

-

-

     

-

-

     

-

-

     

17,553

(6)

-

   

-

-

     

-

-

     

-

-

     

17,553

-

 

 

   - 38 -  

 

 

Notes:

 

(1) On October 15, 2017, Mr. Elliott was appointed as the president of our company.
   
(2) On October 9, 2017, Mr. Blum was appointed as the chief financial officer, secretary, treasurer and a director of our company.
   
(3) On August 21, 2017, Mr. Chell was appointed as the president and chief executive officer and a director of our company. On October 15, 2017, Mr. Chell resigned as our president and chief executive officer in order to accommodate the appointment of Bruce Elliott as our president. On the same day, Mr. Chell was appointed as the non-executive chairman.
   
(4) Does not include the fees and stock options received by Business Instincts Group Inc. On October 18, 2017, we entered into a business services agreement with Business Instincts Group Inc., a company of which Mr. Chell is a director, officer and indirect shareholder. The fees and stock options received by Business Instincts Group Inc. are compensation for the services provided by that company as a whole and we did not compensate Mr. Chell separately for these services. See Business – Recent Developments for additional information.
   
(5) Effective August 28, 2014, Mr. Geiskopf was appointed as president, secretary, treasury and director of our company. On August 21, 2017, Mr. Geiskopf resigned as our president. On October 9, 2017, Mr. Geiskopf resigned as our secretary and treasurer.
   
(6) Reflects the grant date fair value computed in accordance with FASB ASC Topic 718. See Note 7 of our annual financial statements for the years ended December 31, 2017 and 2016 for a description of the assumptions made in the valuation of these stock options.

 

Narrative Disclosure to Summary Compensation Table

 

In connection with the appointment of Bruce Elliott as president, we have entered into an independent consultant agreement dated October 15, 2017 with Bruce Elliott whereby we agreed to pay Mr. Elliott a signing bonus of $7,500, payable within 30 days, and a consulting fee in the amount of $10,000 per month, which was increased to $12,000 per month commencing on February 1, 2018 with the approval of our board of directors. Subject to compliance with all applicable securities laws, we also agreed to grant to Mr. Elliott 200,000 stock options within 60 days at a price of $0.10 per share, which stock options become exercisable as follows: (i) 1/3 upon the date of grant; (ii) 1/3 on the first anniversary date and (iii) 1/3 on the second anniversary date. The agreement continues for twelve months terms which will automatically be renewed unless we provide 90 days prior written notice of our intention to not renew the agreement. The agreement may be terminated by (i) Mr. Elliott by providing at least 90 days advance notice in writing, (ii) us by giving at least 90 days advance notice in writing, or (iii) us without notice in the event that Mr. Elliott: (a) breaches any term of the agreement, (b) neglects the services or any other duty to be performed under the agreement, (c) engages in any conduct which is dishonest, or damages our reputation or standing, (d) is convicted of any criminal act, (e) engages in any act of moral turpitude, (f) files a voluntary petition in bankruptcy, or (g) is adjudicated as bankrupt or insolvent. Mr. Elliott has also agreed for the term of the agreement not to compete with us in the business of providing services for blockchain initial coin offerings. During the term of the agreement and for a period of one year immediately following the termination or expiration of the agreement, Mr. Elliott has agreed not to solicit or induce any customer, prospective customer, supplier, sales personnel, employee or independent contractor involved with us to terminate or breach any employment, contractual or other relationship with us, or to otherwise discontinue or alter such third party’s relationship with us.

 

   - 39 -  

 

 

In connection with the appointment of Michael Blum as chief financial officer, we have entered into an independent consultant agreement dated October 9, 2017 with Michael Blum whereby we agreed to pay Mr. Blum a signing bonus of $25,000, payable within 30 days, and a consulting fee in the amount of $10,000 per month. Subject to compliance with all applicable securities laws, we also agreed to grant to Mr. Blum stock options in an amount to be determined by our board of directors. The agreement continues for twelve months terms which will automatically be renewed unless we provide 30 days prior written notice of our intention to not renew the agreement. The agreement may be terminated by (i) Mr. Blum by providing at least 30 days advance notice in writing, (ii) us by giving at least 30 days advance notice in writing, or (iii) us without notice in the event that Mr. Blum: (a) breaches any term of the agreement, (b) neglects the services or any other duty to be performed under the agreement, (c) engages in any conduct which is dishonest, or damages our reputation or standing, (d) is convicted of any criminal act, (e) engages in any act of moral turpitude, (f) files a voluntary petition in bankruptcy, or (g) is adjudicated as bankrupt or insolvent. Mr. Blum has also agreed for the term of the agreement not to compete with us in the business of providing services for blockchain initial coin offerings. During the term of the agreement and for a period of one year immediately following the termination or expiration of the agreement, Mr. Blum has agreed not to solicit or induce any customer, prospective customer, supplier, sales personnel, employee or independent contractor involved with us to terminate or breach any employment, contractual or other relationship with us, or to otherwise discontinue or alter such third party’s relationship with us.

 

On October 15, 2017, as amended on January 22, 2018, our board of directors adopted and approved the 2017 Equity Incentive Plan. The purpose of the plan is to (a) enable us and any of our affiliates to attract and retain the types of employees, consultants and directors who will contribute to our long range success; (b) provide incentives that align the interests of employees, consultants and directors with those of our stockholders; and (c) promote the success of our business. The plan enables us to grant awards of a maximum of 3,900,000 shares of our stock and awards that may be granted under the plan includes incentive stock options, non-qualified stock options, stock appreciation rights, restricted awards and performance compensation awards.

 

Effective October 15, 2017, we granted a total of 1,400,000 stock options to our directors and officers (200,000 stock options to Bruce Elliott, 400,000 stock options to Michael Blum, 400,000 stock options to Cameron Chell and 400,000 stock options to James P. Geiskopf). The stock options are exercisable at the exercise price of $0.10 per share for a period of ten years from the date of grant. The stock options become exercisable as follows: (i) 1/3 upon the date of grant; (ii) 1/3 on the first anniversary date and (iii) 1/3 on the second anniversary date.

 

Retirement or Similar Benefit Plans

 

There are no arrangements or plans in which we provide retirement or similar benefits for our directors or executive officers.

 

Resignation, Retirement, Other Termination, or Change in Control Arrangements

 

We have no contract, agreement, plan or arrangement, whether written or unwritten, that provides for payments to our directors or executive officers at, following, or in connection with the resignation, retirement or other termination of its directors or executive officers, or a change in control of our company or a change in our directors’ or executive officers’ responsibilities following a change in control.

 

   - 40 -  

 

 

Outstanding Equity Awards at Fiscal Year-End

 

The following table sets forth for each named executive officer certain information concerning the outstanding equity awards as of December 31, 2017:

 

    Option awards     Stock awards  
Name   Number of securities underlying unexercised options (#) exercisable     Number of securities underlying unexercised options (#) unexercisable     Equity incentive plan awards: Number of securities underlying unexercised unearned options (#)     Option exercise price ($)     Option expiration date   Number of shares or units of stock that have not vested (#)     Market value of shares of units of stock that have not vested ($)     Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#)     Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested ($)  
Bruce Elliott     66,666 (1)     133,334 (1)          -       0.10     October 15, 2027        -          -            -          -  
Michael Blum     133,333 (1)     266,667 (1)     -       0.10     October 15, 2027     -       -       -       -  
Cameron Chell     133,333 (1)     266,667 (1)     -       0.10     October 15, 2027     -       -       -       -  
James P. Geiskopf     133,333 (1)     266,667 (1)     -       0.10     October 15, 2027     -       -       -       -  

 

Notes:

 

(1) The stock options become exercisable as follows: (i) 1/3 upon the date of grant (October 15, 2017); (ii) 1/3 on the first anniversary date and (iii) 1/3 on the second anniversary date.

 

Compensation of Directors

 

During the year ended December 31, 2017, we had no directors who were not the named executive officers.

 

Except for James P. Geiskopf and Edmund C. Moy, we have no formal plan for compensating our directors for their services as directors. Our directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors. In addition, our directors are entitled to reimbursement for reasonable expenses that they incur in connection with the performance of their duties as directors of our company.

 

On January 22, 2018, we entered into an offer letter with James P. Geiskopf, pursuant to which, among other things, we agreed to pay Mr. Geiskopf $120,000 in annual cash compensation commencing on January 1, 2018.

 

   - 41 -  

 

 

In connection with the appointment of Edmund C. Moy as a director on February 9, 2018, we entered into an offer letter dated February 9, 2018 with Mr. Moy, pursuant to which, among other things, we agreed to pay Mr. Moy $50,000 in annual cash compensation and grant 100,000 stock options. Effective February 9, 2018, we granted to Mr. Moy 100,000 stock options, which are exercisable at an exercise price of $0.60 per share until February 9, 2028. The stock options become exercisable as follows: (i) 1/3 on the grant date, (ii) 1/3 on the first anniversary of the grant date and (iii) 1/3 on the second anniversary of the grant date.

 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table sets forth, as of March 30, 2018, certain information with respect to the beneficial ownership of our common stock by each stockholder known by us to be the beneficial owner of more than 5% of any class of our voting securities and by each of our directors, our named executive officers and by our executive officers and directors as a group.

 

Name and Address of Beneficial Owner   Title of Class   Amount and Nature of Beneficial Ownership (1)   Percentage of Class (1)(2)
Bruce Elliott 6 Kermode Road, Crosby, Isle of Man 1M4 4BZ   Common Stock     66,666 (3)     *
Michael Blum 2212 Glenbrook Way, Las Vegas, NV 89117   Common Stock     383,333 (4)     3.27 %
Cameron Chell 561 Indiana Court, Venice Beach, CA 90291   Common Stock     2,208,333 (5)     18.70 %
James P. Geiskopf  3250 Oakland Hills Court, Fairfield, CA 94534   Common Stock     1,133,333 (6)     9.66 %
Edmund C. Moy  4251 Campbell Avenue, Suite 313,  Arlington, VA 22206   Common Stock     33,333 (7)     *
All executive officers and directors as a group (5 persons)   Common Stock     3,824,998       31.41 %

 

Notes

 

* Less than 1%.
   
(1) 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. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Common stock subject to options or warrants currently exercisable or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage ownership of the person holding such option or warrants, but are not deemed outstanding for purposes of computing the percentage ownership of any other person.
   
(2) Percentage of ownership is based on 11,600,000 shares of our common stock issued and outstanding as of March 30, 2018.
   
(3) Comprised of 66,666 options to purchase shares of our common stock exercisable within 60 days.
   
(4) Includes 133,333 options to purchase shares of our common stock exercisable within 60 days.
   
(5) Comprised of 2,000,000 shares of our common stock held indirectly through Blockchain Fund GP Inc., 133,333 options to purchase shares of our common stock exercisable within 60 days, held by Mr. Chell and 75,000 options to purchase shares of our common stock exercisable within 60 days, held by Business Instincts Group Inc. Mr. Chell is the president, corporate secretary and director of Blockchain Fund GP Inc. and has the sole power to vote or direct the vote, and to dispose or direct the disposition of the shares of our common stock held by Blockchain Fund GP Inc. Mr. Chell is the director, officer and indirect shareholder of Business Instincts Group Inc. and has the sole power to vote or direct the vote, and to dispose or direct the disposition of the shares of our common stock held by Business Instincts Group Inc.
   
(6) Includes 133,333 options to purchase shares of our common stock exercisable within 60 days.
   
(7) Includes 33,333 options to purchase shares of our common stock exercisable within 60 days.

 

   - 42 -  

 

 

Changes in Control

 

We are unaware of any arrangement the operation of which may at a subsequent date result in a change of control of our company.

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

Transactions with Related Persons

 

Other than as disclosed below, there has been no transaction, since January 1, 2016, or currently proposed transaction, in which we were or are to be a participant and the amount involved exceeds $4,684.27, being the lesser of $120,000 or one percent of the average of its total assets at year end for the last two completed fiscal years, and in which any of the following persons had or will have a direct or indirect material interest:

 

  (i) any director or executive officer of our company;
     
  (ii) any person who beneficially owns, directly or indirectly, shares carrying more than 5% of any class of our voting securities;
     
  (iii) any person who acquired control of our company when it was a shell company or any person that is part of a group, consisting of two or more persons that agreed to act together for the purpose of acquiring, holding, voting or disposing of our common stock, that acquired control of our company when it was a shell company; and
     
  (iv) any member of the immediate family (including spouse, parents, children, siblings and in- laws) of any of the foregoing persons.

 

On October 30, 2017, we issued 250,000 shares of our common stock to Michael Blum at a price of $0.10 per share for gross proceeds of $25,000.

 

On October 18, 2017, we entered into a business services agreement with Business Instincts Group Inc., on November 20, 2017, we entered into a loan agreement with WENN Digital Inc. and, on December 29, 2017, as amended as of March 15, 2018, we entered into a business services agreement with WENN Digital Inc. Our chairman and director, Cameron Chell, is a director, officer and an indirect shareholder of Business Instincts Group Inc. which owns 10% of the common stock of WENN Digital Inc. and he is also a director, officer and indirect shareholder of Blockchain Merchant Group, Inc. which owns 2.5% of the common stock of WENN Digital Inc. Mr. Chell has also been a director and secretary of WENN Digital Inc. from December 2017 and chairman of WENN Digital Inc. from February 2018. From December 2017 to February 2018, our president, Bruce Elliott, served as the chief marketing officer of WENN Digital Inc. See Business – Recent Developments for additional information.

 

Effective October 15, 2017, we granted 225,000 stock options to Business Instincts Group Inc., a company of which Cameron Chell is a director, officer and indirect shareholder. The stock options are exercisable at the exercise price of $0.10 per share for a period of ten years from the date of grant. The stock options become exercisable as follows: (i) 1/3 upon the date of grant; (ii) 1/3 on the first anniversary date and (iii) 1/3 on the second anniversary date.

 

   - 43 -  

 

 

On March 13, 2018, we entered into a loan agreement with Michael Blum whereby Mr. Blum advanced $100,000 to us. See Management’s Discussion and Analysis of Financial Condition and Results of Operations – Recent Financing Activities for additional information.

 

Compensation for Executive Officers and Directors

 

For information regarding compensation for our executive officers and directors, see “Executive Compensation”.

 

Director Independence

 

We currently act with four directors consisting of Michael Blum, Cameron Chell, James P. Geiskopf and Edmund C. Moy. Our common stock is quoted on the OTC Pink operated by the OTC Markets Group, which does not impose any director independence requirements. Under NASDAQ rule 5605(a)(2), a director is not independent if he or she is also an executive officer or employee of the corporation or was, at any time during the past three years, employed by the corporation. Using this definition of independent director, we have two independent directors, Cameron Chell and Edmund C. Moy.

 

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

 

Audit Fees

 

The following table sets forth the fees billed or expected to be billed to our company for the years ended December 31, 2017 and December 31, 2016 for professional services rendered by Haynie & Company, CPA, our independent registered public accounting firm:

 

Fees   2017     2016  
Audit Fees   $ 25,000 *   $ 11,000  
Audit Related Fees     -       -  
Tax Fees     -       -  
Other Fees     -       -  
Total Fees   $ 25,000     $ 11,000  

 

*Estimated.

 

Pre-Approval Policies and Procedures

 

Our audit committee pre-approves all services provided by our independent registered public accountants. All of the above services and fees were reviewed and approved by our board of directors or our audit committee before the respective services were rendered.

 

Our board of directors has considered the nature and amount of fees billed by our independent registered public accountants and believes that the provision of services for activities unrelated to the audit is compatible with maintaining the independence of our independent registered public accountants.

 

   - 44 -  

 

 

PART IV

 

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

Exhibit

Number

 

Description

(3)   Articles of Incorporation and Bylaws
3.1   Articles of Incorporation (incorporated by reference from our Current Report on Form S-1, filed on March 30, 2011)
3.2   Bylaws (incorporated by reference from our Current Report on Form S-1, filed on March 30, 2011)
3.3   Articles of Merger (incorporated by reference from our Current Report on Form 8-K filed on August 23, 2017)
3.4   Articles of Merger (incorporated by reference from our Current Report on Form 8-K filed on February 15, 2018)
(10)   Material Contracts
10.1   Private Placement Subscription Agreement with Oceanside Strategies Inc. dated September 14, 2015 (incorporated by reference from our Current Report on Form 8-K, filed on September 15, 2015)
10.2   18% Unsecured Convertible Note with Oceanside Strategies Inc. dated September 14, 2015 (incorporated by reference from our Current Report on Form 8-K, filed on September 15, 2015)
10.3   Private Placement Subscription Agreement with Oceanside Strategies Inc. dated December 30, 2016 (incorporated by reference from our Current Report on Form 8-K, filed on January 5, 2017)
10.4   18% Unsecured Convertible Note with Oceanside Strategies Inc. dated December 30, 2016 (incorporated by reference from our Current Report on Form 8-K, filed on January 5, 2017)
10.5   Private Placement Subscription Agreement with Oceanside Strategies Inc. dated December 30, 2016 (incorporated by reference from our Current Report on Form 8-K, filed on January 2, 2018)
10.6   18% Unsecured Convertible Note with Oceanside Strategies Inc. dated December 30, 2016 (incorporated by reference from our Current Report on Form 8-K, filed on January 2, 2018)
10.7   Private Placement Subscription Agreement with Oceanside Strategies Inc. dated March 2, 2017 (incorporated by reference from our Current Report on Form 8-K, filed on March 15, 2017)
10.8   18% Unsecured Convertible Note with Oceanside Strategies Inc. dated March 2, 2017 (incorporated by reference from our Current Report on Form 8-K, filed on March 15, 2017)
10.9   Private Placement Subscription Agreement with Oceanside Strategies Inc. dated June 8, 2017 (incorporated by reference from our Current Report on Form 8-K, filed on January 2, 2018)
10.10   18% Unsecured Convertible Note with Oceanside Strategies Inc. dated June 8, 2017 (incorporated by reference from our Current Report on Form 8-K, filed on January 2, 2018)
10.11   Transfer Agreement dated August 21, 2017 with Blockchain Fund GP Inc. (incorporated by reference from our Current Report on Form 8-K filed on August 23, 2017)
10.12   Business Services Agreement with Business Instincts Group Inc. dated October 18, 2017. (incorporated by reference from our Current Report on Form 8-K filed on October 19, 2017)

 

   - 45 -  

 

 

10.13*   Private Placement Subscription Agreement with Oceanside Strategies Inc. dated October 30, 2017
10.14*   10% Unsecured Convertible Note dated October 30, 2017 issued in connection with Private Placement Subscription Agreement with Oceanside Strategies Inc. dated October 30, 2017
10.15*   Private Placement Subscription Agreement with Hospitality Investors Special Situation Group Pvt. Ltd. dated October 30, 2017
10.16*   10% Unsecured Convertible Note dated October 30, 2017 issued in connection with Private Placement Subscription Agreement with Hospitality Investors Special Situation Group Pvt. Ltd. dated October 30, 2017
10.17   Form of Private Placement Subscription Agreement for Common Stock Offering (incorporated by reference from our Current Report on Form 8-K filed on October 31, 2017)
10.18   Loan Agreement dated November 20, 2017 with WENN Digital Inc. (incorporated by reference from our Current Report on Form 8-K filed on November 27, 2017)
10.19   Independent Consultant Agreement dated effective October 9, 2017 with Bruce Elliott (incorporated by reference from our Current Report on Form 8-K, filed on January 2, 2018)
10.20   Independent Consultant Agreement dated effective October 9, 2017 with Michael Blum (incorporated by reference from our Current Report on Form 8-K, filed on January 2, 2018)
10.21   Business Services Agreement dated effective December 29, 2017 with WENN Digital Inc. (incorporated by reference from our Current Report on Form 8-K, filed on January 2, 2018)
10.22   Form of Subscription Agreement (incorporated by reference from our Current Report on Form 8-K, filed on March 14, 2018)
10.23   Amendment No. 1 to Business Services Agreement dated as of March 15, 2018 with WENN Digital Inc. (incorporated by reference from our Current Report on Form 8-K, filed on March 20, 2018)
10.24*   Offer Letter dated January 22, 2018 with James P. Geiskopf
10.25*   Offer Letter dated February 9, 2018 with Edmund C. Moy
10.26*   2017 Equity Incentive Plan
10.27*   Stock Option Agreement dated October 15, 2017 with James P. Geiskopf
10.28*   Stock Option Agreement dated October 15, 2017 with Cameron Chell
10.29*   Stock Option Agreement dated October 15, 2017 with Michael Blum
10.30*   Stock Option Agreement dated October 15, 2017 with Bruce Elliott
10.31*   Stock Option Agreement dated October 15, 2017 with Business Instincts Group Inc.
10.32*   Stock Option Agreement dated February 9, 2018 with Edmund C. Moy
10.33*   Indemnification Agreement dated December 20, 2017 with James P. Geiskopf
10.34*   Indemnification Agreement dated December 20, 2017 with Cameron Chell
10.35*   Indemnification Agreement dated December 20, 2017 with Michael Blum
10.36*   Indemnification Agreement dated December 20, 2017 with Bruce Elliott
10.37*   Indemnification Agreement dated February 9, 2018 with Edmund C. Moy
(14)   Code of Ethics
14.1*   Code of Ethics and Business Conduct

 

   - 46 -  

 

 

(16)   Letter re Change in Certifying Accountant
16.1   Letter from Pritchett, Siler & Hardy P.C. dated January 22, 2018 (incorporated by reference from our Current Report on Form 8-K, filed on January 22, 2018)
(21)   Subsidiaries
21.1  

Subsidiaries of ICOX Innovations Inc.

AppCoin Innovations (USA) Inc., Nevada corporation

(31)   Rule 13a-14(a) Certifications
31.1*   Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*   Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(32)   Section 1350 Certifications
32.1*   Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*   Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(101)   Interactive Data File
101.INS*   XBRL Instance Document
101.SCH*   XBRL Taxonomy Extension Schema
101.CAL*   XBRL Taxonomy Extension Calculation Linkbase
101.DEF*   XBRL Taxonomy Extension Definition Linkbase
101.LAB*   XBRL Taxonomy Extension Label Linkbase
101.PRE*   XBRL Taxonomy Extension Presentation Linkbase

 

*Filed herewith.

 

ITEM 16. form 10-k summary

 

None.

 

   - 47 -  

 

 

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.

 

ICOX INNOVATIONS INC.  
   
By:  
   
/s/ Bruce Elliott  
Bruce Elliott  
President  
(Principal Executive Officer)  
Date: April 2, 2018  

 

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.

 

/s/ Bruce Elliott  
Bruce Elliott  
President  
(Principal Executive Officer)  
Date: April 2, 2018  
   
/s/ Michael Blum  
Michael Blum  
Chief Financial Officer, Secretary, Treasurer and Director  
(Principal Financial Officer and Principal Accounting Officer)  
Date: April 2, 2018  
   
/s/ Cameron Chell  
Cameron Chell  
Director  
Date: April 2, 2018  
   
/s/ James P. Geiskopf  
James P. Geiskopf  
Director  
Date: April 2, 2018  
   
/s/ Edmund C. Moy  
Edmund C. Moy  
Director  
Date: April 2, 2018  

 

   - 48 -  

 

 

APPCOIN INNOVATIONS INC.
(the “Issuer”)

 

PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT

 

INSTRUCTIONS TO SUBSCRIBER

1. You must complete all the information in the boxes on page 2 and sign where indicated with an “ X ”.
2. If you are resident in Canada, you must complete and sign Exhibit A “Canadian Investor Questionnaire” that starts on page 14. The purpose of this form is to determine whether you meet the standards for participation in a private placement under applicable Canadian securities laws. In order for the Issuer to satisfy its obligations under applicable Canadian securities laws, you may be required to provide additional evidence to verify the information you have provided in Exhibit A “Canadian Investor Questionnaire” that starts on page 14.
3. If you are a “U.S. Purchaser”, as defined in Exhibit B, you must complete and sign Exhibit B “United States Accredited Investor Questionnaire” that starts on page 22.

 

     
  - 2 -  

 

APPCOIN INNOVATIONS INC.

 

PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT

 

The undersigned (the “ Subscriber ”) hereby irrevocably subscribes for and agrees to purchase from AppCoin Innovations Inc. (the “ Issuer ”) an unsecured convertible note of the Issuer (the “ Note ”) in the principal amount set out below. The Subscriber agrees to be bound by the terms and conditions set forth in the attached “Terms and Conditions of Subscription for Notes” .

 

Subscriber Information


OCEANSIDE STRATEGIES INC.                                      

 

Note to be Purchased

 


Principal Amount of Note: $250,000.00          

                           (the “ Principal Amount ” or the

                          “ Subscription Amount ”)

(Name of Subscriber)    
   
Account Reference (if applicable):                                    

 

X /s/ Dain Currie

   
(Signature of Subscriber – if the Subscriber is an Individual)  

 

X

   

(Signature of Authorized Signatory – if the Subscriber is not an Individual)

 

DAIN CURRIE - PRESIDENT                                            

(Name and Title of Authorized Signatory – if the Subscriber is not an Individual)

 

N/A                                                                                         

(SIN, SSN, or other Tax Identification Number of the Subscriber)

 

10 MARKET STREET #684                                            

(Subscriber’s Address, including City and Postal Code)

 

GEORGETOWN, CAYMAN ISLANDS
                                                                                                            

                                  

(Telephone Number)                                              (Email Address)

 

 

 

 

Register the Note as set forth below :

 

SAME AS ABOVE

(Name to Appear on Note Certificate)

 

                                                                                                        

(Account Reference, if applicable)

 

                                                                                                        


(Address, including Postal Code)

   

 

     
  - 3 -  

 

ACCEPTANCE

 

The Issuer hereby accepts the Subscription (as defined herein) on the terms and conditions contained in this private placement subscription agreement (this “ Agreement ”) as of the 30th day of October, 2017 (the “ Closing Date ”).

 

APPCOIN INNOVATIONS INC.


  Per: /s/ Michael Blum  
    Authorized Signatory  

Address: AppCoin Innovations Inc.
561 Indiana Court
Venice Beach, CA 90291
Email: Michael.blum@appcoininnovations.com
Attention: Michael Blum

 

     
  - 4 -  

 

TERMS AND CONDITIONS OF SUBSCRIPTION FOR NOTES

 

1. Subscription

 

1.1 The Subscriber hereby irrevocably subscribes for and agrees to purchase a Note in the Principal Amount as shown on page 2 of this Subscription Agreement (the “ Subscription Amount ”), which is tendered herewith (such subscription and agreement to purchase being the “ Subscription ”), pursuant to the terms and conditions of this Agreement, including those set forth in the form of certificate for the Note (the “ Note Certificate ”) attached as Exhibit C that starts on page 27, and the Issuer agrees to sell the Note to the Subscriber, effective upon the Issuer’s acceptance of this Agreement.

 

1.2 The Note will be unsecured. The Principal Amount of the Note will mature three (3) years (“ Maturity ”) after closing of the Offering (the “ Closing ”). The Principal Amount of the Note will accrue interest at 10% per annum, which interest will be payable at Maturity. The Principal Amount will be convertible at the option of the Subscriber, at any time, into common shares of the Issuer (each, a “ Conversion Share ”) and accrued interest thereon at a conversion price of $0.10 per Conversion Share, subject to adjustment and restrictions as set forth in the Note Certificate. The Note and the Conversion Shares are referred to herein as the “ Securities ”.

 

1.3 The Subscriber acknowledges that the Note has been offered to the Subscriber as part of an offer by the Issuer of unsecured convertible notes and common shares in the aggregate principal amount of $500,000, or such other number as may be determined by the board of directors of the Issuer in its sole discretion (the “ Offering ”).

 

1.4 Unless otherwise provided, all dollar amounts referred to in this Agreement are in lawful money of the United States.

 

2. Payment

 

2.1 The Subscription Amount must accompany this Subscription. The Subscriber authorizes the Issuer to treat the Subscription Amount as an interest free loan until the closing of the Offering (the “ Closing ”).

 

2.2 The Subscriber acknowledges and agrees that this Agreement, the Subscription Amount and any other documents delivered in connection herewith will be held by the Issuer. In the event that this Agreement is not accepted by the Issuer for whatever reason, which the Issuer expressly reserves the right to do, the Issuer will return the Subscription Amount (without interest thereon) to the Subscriber at the address of the Subscriber as set forth on page 2 of this Agreement, or as otherwise directed by the Subscriber.

 

3. Documents Required from Subscriber

 

3.1 The Subscriber must complete, sign and return to the Issuer the following documents:

(a) this Agreement;
(b) if the Subscribers is a resident of Canada, the Canadian Investor Questionnaire (the “ Canadian Questionnaire ”) attached as Exhibit A that starts on page 14, along with any additional evidence that may be requested by the Issuer to verify the information provided in the Canadian Questionnaire;

 

     
  - 5 -  
(c) if the Subscriber is a U.S. Purchaser (as defined in Exhibit B), the United States Accredited Investor Questionnaire (the “ U.S. Questionnaire ” and, together with the Canadian Questionnaire, the “ Questionnaires ”) attached as Exhibit B that starts on page 22; and
(d) such other supporting documentation that the Issuer or counsel of the Issuer (the “ Issuer’s Counsel ”) may request to establish the Subscriber’s qualification as a qualified investor,
(e) and the Subscriber acknowledges and agrees that the Issuer will not consider the Subscription for acceptance unless the Subscriber has provided all of such documents to the Issuer.

 

3.2 As soon as practicable upon any request by the Issuer, the Subscriber will complete, sign and return to the Issuer any additional documents, questionnaires, notices and undertakings as may be required by any regulatory authorities or applicable laws.

 

3.3 The Issuer and the Subscriber acknowledge and agree that the Issuer’s Counsel has acted as counsel only to the Issuer and is not protecting the rights and interests of the Subscriber. The Subscriber acknowledges and agrees that the Issuer and the Issuer’s Counsel have given the Subscriber the opportunity to seek, and are hereby recommending that the Subscriber obtain, independent legal advice with respect to the subject matter of this Agreement and, further, the Subscriber hereby represents and warrants to the Issuer and the Issuer’s Counsel that the Subscriber has sought independent legal advice or waives such advice.

 

4. Conditions and Closing

 

4.1 The Closing Date will occur on such date as may be determined by the Issuer in its sole discretion. The Issuer may, at its discretion, elect to close the Offering in one or more closings, in which event the Issuer may agree with one or more purchasers (including the Subscriber) to complete delivery of the Note to such purchaser(s) against payment therefor at any time on or prior to the Closing Date.

 

4.2 The Closing is conditional upon and subject to:

(a) the Issuer having obtained all necessary approvals and consents, including regulatory approvals for the Offering; and
(b) the issue and sale of the Note being exempt from the requirement to file a prospectus and the requirement to deliver an offering memorandum under applicable securities laws relating to the sale of the Notes, or the Issuer having received such orders, consents or approvals as may be required to permit such sale without the requirement to file a prospectus or deliver an offering memorandum.

4.3 The Subscriber acknowledges that the certificates representing the Note will be available for delivery within two business days of the Closing Date, provided that the Subscriber has satisfied the requirements of Section 3.1 hereof and the Issuer has accepted this Agreement.

 

5. Acknowledgements and Agreements of the Subscriber

 

5.1 The Subscriber acknowledges and agrees that:

 

     
  - 6 -  
(a) none of the Securities have been or will be registered under the United States Securities Act of 1933 , as amended, (the “ 1933 Act ”), or under any securities or “blue sky” laws of any state of the United States, and, unless so registered, may not be offered or sold in the United States or, directly or indirectly, to any U.S. Person (as defined in Section 6.2), except in accordance with the provisions of Regulation S under the 1933 Act (“ Regulation S ”), pursuant to an effective registration statement under the 1933 Act, or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the 1933 Act and in each case only in accordance with applicable state, provincial and foreign securities laws;
(b) the Issuer has not undertaken, and will have no obligation, to register any of the Securities under the 1933 Act or any other applicable securities laws;
(c) the Issuer will refuse to register the transfer of any of the Securities to a U.S. Person not made pursuant to an effective registration statement under the 1933 Act or pursuant to an available exemption from the registration requirements of the 1933 Act and in each case in accordance with applicable laws;
(d) the decision to execute this Agreement and to acquire the Securities has not been based upon any oral or written representation as to fact or otherwise made by or on behalf of the Issuer and such decision is based entirely upon a review of any public information which has been filed by the Issuer with the United State Securities and Exchange Commission (collectively, the “ Public Record ”);
(e) the Issuer and others will rely upon the truth and accuracy of the acknowledgements, representations, warranties, covenants and agreements of the Subscriber contained in this Agreement and the Questionnaires, as applicable, and agrees that if any of such acknowledgements, representations and agreements are no longer accurate or have been breached, the Subscriber will promptly notify the Issuer;
(f) there are risks associated with the purchase of the Securities, as more fully described in the Issuer’s periodic disclosure forming part of the Public Record;
(g) the Subscriber and the Subscriber’s advisor(s) have had a reasonable opportunity to ask questions of and receive answers from the Issuer in connection with the distribution of the Securities hereunder, and to obtain additional information, to the extent possessed or obtainable without unreasonable effort or expense, necessary to verify the accuracy of the information about the Issuer;
(h) a portion of this Offering may be sold pursuant to an agreement between the Issuer and one or more agents registered in accordance with applicable securities laws, in which case the Issuer will pay a fee and/or compensation securities on terms as set out in such agency agreement;
(i) finder’s fees or broker’s commissions may be payable by the Issuer to finders who introduce subscribers to the Issuer;
(j) the books and records of the Issuer were available upon reasonable notice for inspection, subject to certain confidentiality restrictions, by the Subscriber during reasonable business hours at its principal place of business, and all documents, records and books in connection with the distribution of the Securities hereunder have been made available for inspection by the Subscriber, the Subscriber’s legal counsel and/or its advisor(s);

 

     
  - 7 -  
(k) all of the information which the Subscriber has provided to the Issuer is correct and complete and if there should be any change in such information prior to the Closing, the Subscriber will immediately notify the Issuer, in writing, with the details of any such change;
(l) the Issuer is entitled to rely on the representations and warranties of the Subscriber contained in this Agreement and the Questionnaires, as applicable, and the Subscriber will hold harmless the Issuer from any loss or damage it or they may suffer as a result of the Subscriber’s failure to correctly complete this Agreement or the Questionnaires, as applicable;
(m) any resale of the Securities by the Subscriber will be subject to resale restrictions contained in the securities laws applicable to the Issuer, the Subscriber and any proposed transferee and it is the responsibility of the Subscriber to find out what those restrictions are and to comply with such restrictions before selling any of the Securities;
(n) the Subscriber has been advised to consult the Subscriber’s own legal, tax and other advisors with respect to the merits and risks of an investment in the Securities and with respect to applicable resale restrictions, and it is solely responsible (and the Issuer is not in any way responsible) for compliance with:
(i) any applicable laws of the jurisdiction in which the Subscriber is resident in connection with the distribution of the Securities hereunder, and
(ii) applicable resale restrictions;
(o) there may be material tax consequences to the Subscriber of an acquisition or disposition of the Securities and the Issuer gives no opinion and makes no representation to the Subscriber with respect to the tax consequences to the Subscriber under federal, state, provincial, local or foreign tax laws that may apply to the Subscriber’s acquisition or disposition of the Securities;
(p) the Subscriber consents to the placement of a legend or legends on any certificate or other document evidencing any of the Securities setting forth or referring to the restrictions on transferability and sale thereof contained in this Agreement;
(q) the Issuer has advised the Subscriber that the Issuer is relying on an exemption from the requirements to provide the Subscriber with a prospectus and to sell the Securities through a person registered to sell securities under provincial securities laws and other applicable securities laws, and, as a consequence of acquiring the Securities pursuant to such exemption, certain protections, rights and remedies provided by applicable securities laws (including the various provincial securities acts), including statutory rights of rescission or damages, will not be available to the Subscriber;
(r) no securities commission or similar regulatory authority has reviewed or passed on the merits of any of the Securities;
(s) there is no government or other insurance covering any of the Securities; and
(t) this Agreement is not enforceable by the Subscriber unless it has been accepted by the Issuer, and the Issuer reserves the right to reject this Subscription for any reason.

 

     
  - 8 -  

 

6. Representations and Warranties of the Subscriber

 

6.1 The Subscriber hereby represents and warrants to the Issuer (which representations and warranties will survive the Closing) that:

(a) unless the Subscriber has completed Exhibit B, the Subscriber is not a U.S. Person;
(b) the Subscriber is resident in the jurisdiction set out on page 2 of this Agreement;
(c) if the Subscriber is resident outside of Canada:
(i) the Subscriber is knowledgeable of, or has been independently advised as to, the applicable securities laws having application in the jurisdiction in which the Subscriber is resident (the “ International Jurisdiction ”) which would apply to the offer and sale of the Securities,
(ii) the Subscriber is purchasing the Securities pursuant to exemptions from prospectus or equivalent requirements under applicable securities laws or, if such is not applicable, the Subscriber is permitted to purchase the Securities under the applicable laws of the International Jurisdiction without the need to rely on any exemptions,
(iii) the applicable laws of the authorities in the International Jurisdiction do not require the Issuer to make any filings or seek any approvals of any kind whatsoever from any securities regulator of any kind whatsoever in the International Jurisdiction in connection with the offer, issue, sale or resale of any of the Securities,
(iv) the purchase of the Securities by the Subscriber does not trigger:
A. any obligation to prepare and file a prospectus or similar document, or any other report with respect to such purchase in the International Jurisdiction, or
B. any continuous disclosure reporting obligation of the Issuer in the International Jurisdiction, and
(v) the Subscriber will, if requested by the Issuer, deliver to the Issuer a certificate or opinion of local counsel from the International Jurisdiction which will confirm the matters referred to in subparagraphs (ii), (iii) and (iv) above to the satisfaction of the Issuer, acting reasonably;
(d) the Subscriber has the legal capacity and competence to enter into and execute this Agreement and to take all actions required pursuant hereto and, if the Subscriber is a corporate entity, it is duly incorporated and validly subsisting under the laws of its jurisdiction of incorporation and all necessary approvals by its directors, shareholders and others have been obtained to authorize execution and performance of this Agreement on behalf of the Subscriber;
(e) the entering into of this Agreement and the transactions contemplated hereby do not result in the violation of any of the terms and provisions of any law applicable to, or, if applicable, the constating documents of, the Subscriber or of any agreement, written or oral, to which the Subscriber may be a party or by which the Subscriber is or may be bound;

 

     
  - 9 -  
(f) the Subscriber has duly executed and delivered this Agreement and it constitutes a valid and binding agreement of the Subscriber enforceable against the Subscriber;
(g) the Subscriber has received and carefully read this Agreement;
(h) the Subscriber is aware that an investment in the Issuer is speculative and involves certain risks (including those risks disclosed in the Public Record), including the possible loss of the entire investment;
(i) the Subscriber has made an independent examination and investigation of an investment in the Securities and the Issuer and agrees that the Issuer will not be responsible in any way for the Subscriber’s decision to invest in the Securities and the Issuer;
(j) the Subscriber is not an underwriter of, or dealer in, any of the Securities, nor is the Subscriber participating, pursuant to a contractual agreement or otherwise, in the distribution of the Securities;
(k) the Subscriber is not aware of any advertisement of any of the Securities and is not acquiring the Securities as a result of any form of general solicitation or general advertising, including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media, or broadcast over radio or television, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising; and
(l) no person has made to the Subscriber any written or oral representations:
(i) that any person will resell or repurchase any of the Securities,
(ii) that any person will refund the purchase price of any of the Securities, or
(iii) as to the future price or value of any of the Securities.

 

6.2 In this Agreement, the term “U.S. Person” will have the meaning ascribed thereto in Regulation S, and for the purpose of this Agreement includes, but is not limited to: (a) any person in the United States; (b) any natural person resident in the United States; (c) any partnership or corporation organized or incorporated under the laws of the United States; (d) any partnership or corporation organized outside the United States by a U.S. Person principally for the purpose of investing in securities not registered under the 1933 Act, unless it is organized or incorporated, and owned, by accredited investors who are not natural persons, estates or trusts; or (e) any estate or trust of which any executor or administrator or trustee is a U.S. Person.

 

7. Representations and Warranties will be Relied Upon

 

7.1 The Subscriber acknowledges that its representations and warranties contained herein and in the Questionnaires are made by it with the intention that such representations and warranties will be relied upon by the Issuer and the Issuer’s Counsel in determining the Subscriber’s eligibility to purchase the Securities under applicable laws, or (if applicable) the eligibility of others on whose behalf it is contracting hereunder to purchase the Securities under applicable laws. The Subscriber further agrees that, by accepting delivery of the Note Certificate, it will be representing and warranting that its representations and warranties contained herein and in the Questionnaires are true and correct as at the Closing Date with the same force and effect as if they had been made by the Subscriber on the Closing Date and that they will survive the purchase by the Subscriber of the Securities and will continue in full force and effect notwithstanding any subsequent disposition by the Subscriber of the Securities.

 

     
  - 10 -  

 

8. Acknowledgement and Waiver

 

8.1 The Subscriber has acknowledged that the decision to acquire the Securities was solely made on the basis of the Public Record. The Subscriber hereby waives, to the fullest extent permitted by law, any rights of withdrawal, rescission or compensation for damages to which the Subscriber might be entitled in connection with the distribution of any of the Securities.

 

9. Legending and Registration of Subject Securities

 

9.1 The Subscriber hereby acknowledges that a legend or legends may be placed on the certificates representing the Securities to the effect that the Securities represented by such certificates are subject to a hold period and may not be traded until the expiry of such hold period except as permitted by applicable securities laws, and the Subscriber consent to the placement of such legend(s) on any certificate representing the Securities.

 

9.2 The Subscriber hereby acknowledges and agrees to the Issuer making a notation on its records or giving instructions to the registrar and transfer agent of the Issuer in order to implement the restrictions on transfer set forth and described in this Agreement.

 

10. Collection of Personal Information

 

10.1 The Subscriber acknowledges and consents to the fact that the Issuer is collecting the Subscriber’s personal information for the purpose of fulfilling this Agreement and completing the Offering. The Subscriber acknowledges that its personal information (and, if applicable, the personal information of those on whose behalf the Subscriber is contracting hereunder) may be included in record books in connection with the Offering and may be disclosed by the Issuer to: (a) stock exchanges or securities regulatory authorities, (b) the Issuer’s registrar and transfer agent, (c) Canadian tax authorities, (d) authorities pursuant to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) and (e) any of the other parties involved in the Offering, including the Issuer’s Counsel. By executing this Agreement, the Subscriber is deemed to be consenting to the foregoing collection, use and disclosure of the Subscriber’s personal information (and, if applicable, the personal information of those on whose behalf the Subscriber is contracting hereunder) for the foregoing purposes and to the retention of such personal information for as long as permitted or required by applicable laws. Notwithstanding that the Subscriber may be purchasing the Securities as agent on behalf of an undisclosed principal, the Subscriber agrees to provide, on request, particulars as to the nature and identity of such undisclosed principal, and any interest that such undisclosed principal has in the Issuer, all as may be required by the Issuer in order to comply with the foregoing. Furthermore, the Subscriber is hereby notified that:

(a) the Issuer may deliver to any securities commission having jurisdiction over the Issuer, the Subscriber or this Subscription, including any Canadian provincial securities commissions, the United States Securities and Exchange Commission and/or any state securities commissions (collectively, the “ Commissions ”), certain personal information pertaining to the Subscriber, including the Subscriber’s full name, residential address and telephone number, the number of securities of the Issuer owned by the Subscriber, the number of Securities purchased by the Subscriber, the total Subscription Amount paid, the prospectus exemption relied on by the Issuer and the date of distribution of the Notes;

 

     
  - 11 -  
(b) such information is being collected indirectly by the Commissions under the authority granted to them in applicable securities laws;
(c) such information is being collected for the purposes of the administration and enforcement of applicable securities laws; and
(d) the Subscriber may contact the following public official in Ontario with respect to questions about the Ontario Securities Commission’s indirect collection of such information at the following address and telephone number:
(e) Administrative Assistant to the Director of Corporate Finance
Ontario Securities Commission
Suite 1903, Box 55
20 Queen Street West
Toronto, ON M5H 3S8
Telephone: (416) 593-8086

 

11. Costs

 

11.1 The Subscriber acknowledges and agrees that all costs and expenses incurred by the Subscriber (including any fees and disbursements of any special counsel retained by the Subscriber) relating to the purchase of the Note will be borne by the Subscriber.

 

12. Execution of Subscription Agreement

 

12.1 The Issuer and the Issuer’s Counsel will be entitled to rely on delivery by facsimile machine or other means of electronic communication capable of producing a printed copy of an executed copy of this Agreement, and acceptance by the Issuer of such facsimile or electronic copy will be equally effective to create a valid and binding agreement between the Subscriber and the Issuer in accordance with the terms hereof. If less than a complete copy of this Agreement is delivered to the Issuer or the Issuer’s Counsel prior to or at Closing, the Issuer and the Issuer’s Counsel are entitled to assume that the Subscriber accepts and agrees to all of the terms and conditions of the pages not delivered prior to or at Closing unaltered.

 

12.2 The Subscriber hereby authorizes the Issuer to correct any minor errors in, or complete any minor information missing from any part of this Agreement and any other acknowledgements, provisions, forms, certificates or documents executed by the Subscriber and delivered to the Issuer or the Issuer’s Counsel in connection with the Subscription.

 

13. Beneficial Subscribers

 

13.1 Whether or not explicitly stated in this Agreement, any acknowledgement, representation, warranty, covenant or agreement made by the Subscriber in this Agreement, including the exhibits hereto, will be treated as if made by the Disclosed Principal, if any.

 

14. Governing Law

 

14.1 This Agreement is governed by the laws of the State of Nevada.

 

     
  - 12 -  

 

15. Survival

 

15.1 This Agreement, including, without limitation, the representations, warranties and covenants contained herein, will survive and continue in full force and effect and be binding upon the Issuer and the Subscriber, notwithstanding the completion of the purchase of the Securities by the Subscriber.

 

16. Assignment

 

16.1 This Agreement is not transferable or assignable.

 

17. Severability

 

17.1 The invalidity or unenforceability of any particular provision of this Agreement will not affect or limit the validity or enforceability of the remaining provisions of this Agreement.

 

18. Entire Agreement

 

18.1 Except as expressly provided in this Agreement and in the exhibits, agreements, instruments and other documents attached hereto or contemplated or provided for herein, this Agreement contains the entire agreement between the Issuer and the Subscriber with respect to the sale of the Note and there are no other terms, conditions, representations or warranties, whether expressed, implied, oral or written, by statute or common law, by the Issuer or by anyone else.

 

19. Notices

 

19.1 All notices and other communications hereunder will be in writing and will be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication, including facsimile, electronic mail or other means of electronic communication capable of producing a printed copy. Notices to the Subscriber will be directed to the address of the Subscriber set forth on page 2 of this Agreement and notices to the Issuer will be directed to it at the address of the Issuer set forth on page 3 of this Agreement.

 

20. Counterparts and Electronic Means

 

20.1 This Agreement may be executed in any number of counterparts, each of which, when so executed and delivered, will constitute an original and all of which together will constitute one instrument. Delivery of an executed copy of this Agreement by electronic facsimile transmission or other means of electronic communication capable of producing a printed copy will be deemed to be execution and delivery of this Agreement as of the Closing Date.

 

21. Exhibits

 

21.1 The exhibits attached hereto form part of this Agreement.

 

22. Indemnity

 

22.1 The Subscriber will indemnify and hold harmless the Issuer and, where applicable, its directors, officers, employees, agents, advisors and shareholders, from and against any and all loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all fees, costs and expenses whatsoever reasonably incurred in investigating, preparing or defending against any claim, lawsuit, administrative proceeding or investigation whether commenced or threatened) arising out of or based upon any representation or warranty of the Subscriber contained in this Agreement, the Questionnaires, as applicable, or in any document furnished by the Subscriber to the Issuer in connection herewith being untrue in any material respect or any breach or failure by the Subscriber to comply with any covenant or agreement made by the Subscriber to the Issuer in connection therewith.

 

     
  - 13 -  

 

EXHIBIT A

 

CANADIAN INVESTOR QUESTIONNAIRE

 

(ALBERTA, BRITISH COLUMBIA, MANITOBA, NEWFOUNDLAND AND LABRADOR, NEW BRUNSWICK, NOVA SCOTIA, ONTARIO, PRINCE EDWARD ISLAND, QUEBEC, AND SASKATCHEWAN)

 

TO: APPCOIN INNOVATIONS INC. (the “ Issuer ”)

 

RE: Purchase of Convertible Note (the “ Note ”) of the Issuer

 

 

Capitalized terms used in this Canadian Questionnaire (this “ Questionnaire ”) and not specifically defined have the meaning ascribed to them in the Private Placement Subscription Agreement between the Subscriber and the Issuer to which this Exhibit A is attached.

 

In connection with the purchase by the Subscriber (being the undersigned, or if the undersigned is purchasing the Note as agent on behalf of a disclosed beneficial Subscriber, such beneficial Subscriber, will be referred herein as the “ Subscriber ”) of the Note, the Subscriber hereby represents, warrants and certifies to the Issuer that the Subscriber:

(i) is purchasing the Note as principal (or deemed principal under the terms of National Instrument 45-106 - Prospectus Exemptions adopted by the Canadian Securities Administrators (“ NI 45-106 ”));
(ii) (A) is resident in or is subject to the laws of one of the following (check one):

 

  [  ] Alberta [  ] New Brunswick [  ] Prince Edward Island
       
  [  ] British Columbia [  ] Nova Scotia [  ] Quebec
       
  [  ] Manitoba [  ] Ontario [  ] Saskatchewan
       
  [  ] Newfoundland and Labrador  
     
  [  ] United States: _________________________ (List State of Residence)
   
  or

    (B) [  ] is resident in a country other than Canada or the United States; and

(iii) has not been provided with any offering memorandum in connection with the purchase of the Note.

 

In connection with the purchase of the Note, the Subscriber hereby represents, warrants, covenants and certifies that the Subscriber meets one or more of the following criteria:

 

I. SUBSCRIBERS PURCHASING UNDER THE “ACCREDITED INVESTOR” EXEMPTION
 
(a)

the Subscriber is not a trust company or trust company registered under the laws of Prince Edward Island that is not registered or authorized under the Trust and Loan Companies Act (Canada) or under comparable legislation in another jurisdiction of Canada; 

 

     
  - 14 -  

 

(b) the Subscriber is an “accredited investor” within the meaning of NI 45-106, by virtue of satisfying the indicated criterion as set out in Appendix “A” to this certificate (YOU MUST ALSO INITIAL OR PLACE A CHECK-MARK ON THE APPROPRIATE LINE IN APPENDIX “A” ATTACHED TO THIS CERTIFICATE)
   
(c) If the Subscriber is an “accredited investor” within the meaning of NI 45-106 by virtue of satisfying the indicated criterion as set out in paragraphs (d), (f) or (g) of Appendix “A” to this certificate, the Subscriber has provided the Issuer with the signed risk acknowledgement form set out in Appendix “B” to this certificate;

 

II. MINIMUM AMOUNT INVESTMENT

 
(a) the Subscriber is not an individual as that term is defined in applicable Canadian securities laws.
   

(b)

the Subscriber is purchasing the Note as principal for its own account and not for the benefit of any other person;
   
(c) the Note have an acquisition cost to the Subscriber of not less than $150,000, payable in cash at the Closing; and
   
(d) the Subscriber was not created and is not being used solely to purchase or hold securities in reliance on the prospectus exemption provided under Section 2.10 of NI 45-106, it pre-existed the Offering and has a bona fide purpose other than investment in the Note.

 

For the purposes of the Canadian Investor Questionnaire and Appendix “A” attached to the Canadian Investor Questionnaire:

 

(a) an issuer is “ affiliated ” with another issuer if

(i) one of them is the subsidiary of the other, or
(ii) each of them is controlled by the same person;

 

(b) “ control person ” means

(i) a person who holds a sufficient number of the voting rights attached to all outstanding voting securities of an issuer to affect materially the control of the issuer, or
(ii) each person in a combination of persons, acting in concert by virtue of an agreement, arrangement, commitment or understanding, which holds in total a sufficient number of the voting rights attached to all outstanding voting securities of an issuer to affect materially the control of the issuer,

 

and, if a person or combination of persons holds more than 20% of the voting rights attached to all outstanding voting securities of an issuer, the person or combination of persons is deemed, in the absence of evidence to the contrary, to hold a sufficient number of the voting rights to affect materially the control of the issuer;

 

(c) “ director ” means

 

     
  - 15 -  

 

(i) a member of the board of directors of a company or an individual who performs similar functions for a company, and
(ii) with respect to a person that is not a company, an individual who performs functions similar to those of a director of a company;

 

(d) “ eligibility adviser ” means

(i) a person that is registered as an investment dealer and authorized to give advice with respect to the type of security being distributed; and
(ii) in Saskatchewan or Manitoba, also means a lawyer who is a practicing member in good standing with a law society of a jurisdiction of Canada or a public accountant who is a member in good standing of an institute or association of chartered accountants, certified general accountants or certified management accountants in a jurisdiction of Canada provided that the lawyer or public accountant must not:
(A) have a professional, business or personal relationship with the issuer, or any of its directors, executive officers, founders or control persons, and
(B) have acted for or been retained personally or otherwise as an employee, executive officer, director, associate or partner of a person that has acted for or been retained by the issuer or any of its directors, executive officers, founders or control persons within the previous 12 months;

 

(e) “ executive officer ” means, for an issuer, an individual who is

(i) a chair, vice-chair or president,
(ii) a vice-president in charge of a principal business unit, division or function including sales, finance or production, or
(iii) performing a policy-making function in respect of the issuer;

 

(f) “ financial assets ” means

(i) cash,
(ii) securities, or
(iii) a contract of insurance, a deposit or an evidence of a deposit that is not a security for the purposes of securities legislation;
(g) foreign jurisdiction ” means a country other than Canada or a political subdivision of a country other than Canada;

 

(h)          “ founder ” means, in respect of an issuer, a person who,

(i) acting alone, in conjunction, or in concert with one or more persons, directly or indirectly, takes the initiative in founding, organizing or substantially reorganizing the business of the issuer, and

 

     
  - 16 -  
(ii) at the time of the distribution or trade is actively involved in the business of the issuer;
(i) fully managed account ” means an account of a client for which a person makes the investment decisions if that person has full discretion to trade in securities for the account without requiring the client’s express consent to a transaction;
(j) individual ” means a natural person, but does not include
(i) a partnership, unincorporated association, unincorporated syndicate, unincorporated organization or trust, or
(ii) a natural person in the person’s capacity as a trustee, executor, administrator or personal or other legal representative;
(k) investment fund ” means a mutual fund or a non-redeemable investment fund, and, for great certainty in British Columbia, includes an employee venture capital corporation and a venture capital corporation as such terms are defined in National Instrument 81-106 Investment Fund Continuous Disclosure ;
(l) jurisdiction ” or “jurisdiction of Canada” means a province or territory of Canada except when used in the term foreign jurisdiction;
(m) non-redeemable investment fund ” means an issuer:

  (i) whose primary purpose is to invest money provided by its securityholders;
     
  (ii) that does not invest

(A) for the purpose of exercising or seeking to exercise control of an issuer, other than an issuer that is a mutual fund or a non-redeemable investment fund, or
(B) for the purpose of being actively involved in the management of any issuer in which it invests, other than an issuer that is a mutual fund or a non-redeemable investment fund, and

 

(iii) that is not a mutual fund;

 

(n) “ person ” includes

(i) an individual;
(ii) a corporation;
(iii) a partnership, trust, fund and an association, syndicate, organization or other organized group of persons, whether incorporated or not; and
(iv) an individual or other person in that person’s capacity as a trustee, executor, administrator or personal or other legal representative;

 

     
  - 17 -  

 

(o) “ related liabilities ” means

(i) liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets, or
(ii) liabilities that are secured by financial assets; and

 

(p) “ spouse ” means, an individual who,

(i) is married to another individual and is not living separate and apart within the meaning of the Divorce Act (Canada), from the other individual,
(ii) is living with another individual in a marriage-like relationship, including a marriage-like relationship between individuals of the same gender, or
(iii) in Alberta, is an individual referred to in paragraph (i) or (ii), or is an adult interdependent partner within the meaning of the Adult Interdependent Relationships Act (Alberta).

 

The Subscriber agrees that the above representations and warranties will be true and correct both as of the execution of this Questionnaire and as of the Closing and acknowledges that they will survive the completion of the issue of the Securities.

 

The Subscriber acknowledges that the foregoing representations and warranties are made by the Subscriber with the intent that they be relied upon in determining the suitability of the Subscriber to acquire the Securities and that this Questionnaire is incorporated into and forms part of the Agreement.

 

The Subscriber undertakes to immediately notify the Issuer of any change in any statement or other information relating to the Subscriber set forth in the Agreement or in this Questionnaire which takes place prior to the Closing.

 

By completing this Questionnaire, the Subscriber authorizes the indirect collection of this information by each applicable regulatory authority or regulator and acknowledges that such information is made available to the public under applicable laws.

 

DATED as of                   day of                                 , 2017.

 

  X
  Signature of individual (if Subscriber is an individual)
   
  X
  Authorized signatory (if Subscriber is not an individual)
   
  Name of Subscriber (please print)
   
  Name of authorized signatory (please print)

 

     
  - 18 -  

 

APPENDIX “A”
TO CANADIAN INVESTOR QUESTIONNAIRE

 

Accredited Investors only: Please check the appropriate box and initial

 

[  ] (a) except in Ontario, a person registered under the securities legislation of a jurisdiction of Canada as an adviser or dealer,
     
[  ] (b) an individual registered under the securities legislation of a jurisdiction of Canada as a representative of a person referred to in paragraph (a),
     
[  ] (c) an individual formerly registered under the securities legislation of a jurisdiction of Canada, other than an individual formerly registered solely as a representative of a limited market dealer under one or both of the Securities Act (Ontario) or the Securities Act (Newfoundland and Labrador),
     
[  ] (d) an individual who, either alone or with a spouse, beneficially owns financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds $1,000,000 (YOU MUST INDICATE YOUR FINANCIAL ASSETS HERE: $ __________________________ o WITH SPOUSE / o WITHOUT SPOUSE AND ALSO COMPLETE THE RISK ACKNOWLEDGEMENT FORM IN APPENDIX “B” ATTACHED TO THIS CERTIFICATE) ,
     
[  ] (e) an individual who beneficially owns financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds $5,000,000,
     
[  ] (f) an individual whose net income before taxes exceeded $200,000 in each of the 2 most recent calendar years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of the 2 most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year (YOU MUST INDICATE YOUR NET INCOME HERE: $ __________________________ o WITH SPOUSE / o WITHOUT SPOUSE AND ALSO COMPLETE THE RISK ACKNOWLEDGEMENT FORM IN APPENDIX “B” ATTACHED TO THIS CERTIFICATE) ,
     
[  ] (g) an individual who, either alone or with a spouse, has net assets of at least $5,000,000 (YOU MUST INDICATE YOUR NET ASSETS HERE: $ __________________________ o WITH SPOUSE / o WITHOUT SPOUSE AND ALSO COMPLETE THE RISK ACKNOWLEDGEMENT FORM IN APPENDIX “B” ATTACHED TO THIS CERTIFICATE) ,
     
[  ] (h) a person, other than an individual or investment fund, that has net assets of at least $5,000,000 as shown on its most recently prepared financial statements and that has not been created or used solely to purchase or hold securities as an accredited investor as defined in this paragraph (h),

 

[  ] (i) an investment fund that distributes or has distributed its securities only to

  (i) a person that is or was an accredited investor at the time of the distribution,
     
  (ii) a person that acquires or acquired securities in the circumstances referred to in sections 2.10 [Minimum amount investment] of NI 45-106, or 2.19 [Additional investment in investment funds] of NI 45-106, or
     
  (iii) a person described in paragraph (i) or (ii) that acquires or acquired securities under section 2.18 [Investment fund reinvestment] of NI 45-106,

 

 

     
  - 19 -  

 

[  ] (j) an investment fund that distributes or has distributed securities under a prospectus in a jurisdiction of Canada for which the regulator or, in Québec, the securities regulatory authority, has issued a receipt,
     
[  ] (k) a trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on behalf of a fully managed account managed by the trust company or trust corporation, as the case may be,
     
[  ] (l) a person acting on behalf of a fully managed account managed by that person, if that person is registered or authorized to carry on business as an adviser or the equivalent under the securities legislation of a jurisdiction of Canada or a foreign jurisdiction,
     
[  ] (m) a registered charity under the Income Tax Act (Canada) that, in regard to the trade, has obtained advice from an eligibility adviser or an adviser registered under the securities legislation of the jurisdiction of the registered charity to give advice on the securities being traded,
     
[  ] (n) an entity organized in a foreign jurisdiction that is analogous to the entity referred to in paragraph (a) in form and function,
     
[  ] (o) a person in respect of which all of the owners of interests, direct, indirect or beneficial, except the voting securities required by law to be owned by directors, are persons that are accredited investors,
     
[  ] (p) an investment fund that is advised by a person registered as an adviser or a person that is exempt from registration as an adviser,
     
[  ] (q) a person that is recognized or designated by the securities regulatory authority or, except in Ontario and Québec, the regulator as an accredited investor, or
     
[  ] (r) a trust established by an accredited investor for the benefit of the accredited investor’s family members of which a majority of the trustees are accredited investors and all of the beneficiaries are the accredited investor’s spouse, a former spouse of the accredited investor or a parent, grandparent, brother, sister, child or grandchild of that accredited investor, of that accredited investor’s spouse or of that accredited investor’s former spouse.

 

Dated _____________________________, 2017.

 

  X
  Signature of individual (if Subscriber is an individual)
   
  X
  Authorized signatory (if Subscriber is not an individual)
   
  Name of Subscriber (please print)
   
  Name of authorized signatory (please print)

 

     
  - 20 -  

 

 

     
 

 

 

     
  - 21 -  

 

EXHIBIT B

 

UNITED STATES ACCREDITED INVESTOR QUESTIONNAIRE

 

Capitalized terms used in this U.S. Questionnaire (this “ Questionnaire ”) and not specifically defined have the meaning ascribed to them in the Private Placement Subscription Agreement between the Subscriber and the Issuer to which this Exhibit B is attached.

 

This Questionnaire applies only to persons that are U.S. Purchasers. A “ U.S. Purchaser ” is (a) any U.S. Person, (b) any person purchasing the Note on behalf of any U.S. Person, (c) any person that receives or received an offer of the Note while in the United States, or (d) any person that is in the United States at the time the Subscriber’s buy order was made or this Agreement was executed or delivered.

 

The Subscriber understands and agrees that none of the Securities have been or will be registered under the 1933 Act, or applicable state, provincial or foreign securities laws, and the Note is being offered and sold to the Subscriber in reliance upon the exemption provided in Section 4(2) of the 1933 Act and Rule 506 of Regulation D under the 1933 Act for non-public offerings. The Note is being offered and sold within the United States only to “accredited investors” as defined in Rule 501(a) of Regulation D. The Note offered hereby are not transferable except in accordance with the restrictions described herein.

 

The Subscriber represents, warrants, covenants and certifies (which representations, warranties, covenants and certifications will survive the Closing) to the Issuer (and acknowledges that the Issuer is relying thereon) that:

1. it is not resident in Canada;
2. it has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Note and it is able to bear the economic risk of loss of its entire investment;
3. the Issuer has provided to it the opportunity to ask questions and receive answers concerning the terms and conditions of the Offering and it has had access to such information concerning the Issuer as it has considered necessary or appropriate in connection with its investment decision to acquire the Note;
4. it is acquiring the Note for its own account, for investment purposes only and not with a view to any resale, distribution or other disposition of the Securities in violation of the United States securities laws;
5. it (i) has adequate net worth and means of providing for its current financial needs and possible personal contingencies, (ii) has no need for liquidity in this investment, and (iii) is able to bear the economic risks of an investment in the Note for an indefinite period of time;
6. if the Subscriber is an individual (that is, a natural person and not a corporation, partnership, trust or other entity), then it satisfies one or more of the categories indicated below (please place an “X” on the appropriate lines):

 

  ___________ a natural person whose individual net worth, or joint net worth with their spouse, exceeds US$1,000,000, excluding the value of the primary residence of such person(s) and the related amount of indebtedness secured by the primary residence up to its fair market value,

 

     
  - 22 -  

 

  ___________ a natural person who had an individual income in excess of US$200,000 in each of the two most recent years, or joint income with their spouse in excess of US$300,000 in each of those years, and has a reasonable expectation of reaching the same income level in the current year, or
  ___________ a director or executive officer of the Issuer;
7. if the Subscriber is a corporation, partnership, trust or other entity), then it satisfies one or more of the categories indicated below (please place an “X” on the appropriate lines):

 

  ___________ an organization described in Section 501(c)(3) of the United States Internal Revenue Code, a corporation, a Massachusetts or similar business trust or partnership, not formed for the specific purpose of acquiring the Note, with total assets in excess of US$5,000,000,
     
  ___________ a “bank” as defined under Section (3)(a)(2) of the 1933 Act or savings and loan association or other institution as defined in Section 3(a)(5)(A) of the 1933 Act acting in its individual or fiduciary capacity; a broker dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934 (United States); an insurance company as defined in Section 2(13) of the 1933 Act; an investment company registered under the Investment Company Act of 1940 (United States) or a business development company as defined in Section 2(a)(48) of such Act; a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958 (United States); a plan with total assets in excess of US$5,000,000 established and maintained by a state, a political subdivision thereof, or an agency or instrumentality of a state or a political subdivision thereof, for the benefit of its employees; an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 (United States) whose investment decisions are made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company or registered investment adviser, or if the employee benefit plan has total assets in excess of US$5,000,000, or, if a self-directed plan, whose investment decisions are made solely by persons that are accredited investors,
     
  ___________ a private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940 (United States),
     
  ___________ a trust with total assets in excess of US$5,000,000, not formed for the specific purpose of acquiring the Note, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) under the 1933 Act, or
     
  ___________ an entity in which all of the equity owners satisfy the requirements of one or more of the categories set forth in Section 6 above.
8. it has not purchased the Note as a result of any form of general solicitation or general advertising, including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio, internet, television or other form of telecommunications, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising;

 

     
  - 23 -  
9. if the Subscriber decides to offer, sell or otherwise transfer any of the Securities, it will not offer, sell or otherwise transfer any of such Securities directly or indirectly, unless:
(a) the sale is to the Issuer,
(b) the sale is made outside the United States in a transaction meeting the requirements of Rule 904 of Regulation S under the 1933 Act and in compliance with applicable local laws and regulations in which such sale is made;
(c) the sale is made pursuant to the exemption from the registration requirements under the 1933 Act provided by Rule 144 thereunder and in accordance with any applicable state securities or “blue sky” laws, or
(d) the Securities are sold in a transaction that does not require registration under the 1933 Act or any applicable state laws and regulations governing the offer and sale of securities, and
(e) it has prior to such sale pursuant to subsection (c) or (d) furnished to the Issuer an opinion of counsel of recognized standing reasonably satisfactory to the Issuer, to such effect;
10. it understands and acknowledges that upon the issuance thereof, and until such time as the same is no longer required under the applicable requirements of the 1933 Act or applicable U.S. state laws and regulations, the certificates representing the Securities, and all securities issued in exchange therefor or in substitution thereof, will bear a legend in substantially the following form:

 

“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”). THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF APPCOIN INNOVATIONS INC. (THE “ ISSUER ”) THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE ISSUER; (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT OR (C) IN ACCORDANCE WITH THE EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, AND IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES LAWS; OR (D) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE U.S. SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, AND, IN THE CASE OF PARAGRAPH (C) OR (D), THE SELLER FURNISHES TO THE ISSUER AN OPINION OF COUNSEL OF RECOGNIZED STANDING IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO SUCH EFFECT. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE GOOD DELIVERY IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA.”

 

Delivery of certificates bearing such a legend may not constitute “good delivery” in settlement of transactions on Canadian stock exchanges or over-the-counter markets. If the Issuer is a “foreign issuer” with no “substantial U.S. market interest” (all within the meaning of Regulation S under the 1933 Act) at the time of sale, a new certificate, which will constitute “good delivery”, will be made available to the purchaser upon provision by the Subscriber of a declaration together with such other evidence of the availability of an exemption as the Issuer or its transfer agent may reasonably require;

 

     
  - 24 -  
11. it understands and agrees that there may be material tax consequences to the Subscriber of an acquisition or disposition of any of the Securities. The Issuer gives no opinion and makes no representation with respect to the tax consequences to the Subscriber under United States, state, local or foreign tax law of the Subscriber’s acquisition or disposition of the Securities;
12. it consents to the Issuer making a notation on its records or giving instructions to any transfer agent of the Issuer in order to implement the restrictions on transfer set forth and described in this Questionnaire and the Agreement;
13. it is resident in the United States of America, its territories and possessions or any state of the United States or the District of Columbia (collectively the “ United States ”), is a “U.S. Person” as such term is defined in Regulation S or was in the United States at the time the Note were offered or the Agreement was executed; and
14. it understands that the Issuer has no obligation to register any of the Securities or to take action so as to permit sales pursuant to the 1933 Act (including Rule 144 thereunder).

 

The Subscriber undertakes to notify the Issuer immediately of any change in any representation, warranty or other information relating to the Subscriber set forth herein which takes place prior to the Closing.

 

Dated _____________________________, 2017.

 

  X
  Signature of individual (if Subscriber is an individual)
   
  X
  Authorized signatory (if Subscriber is not an individual)
   
   
  Name of Subscriber (please print)
   
   
  Name of authorized signatory (please print)

 

     

 

 

 

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ISSUED IN AN OFFSHORE TRANSACTION TO PERSONS WHO ARE NOT U.S. PERSONS (AS DEFINED HEREIN) PURSUANT TO REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”).

 

NONE OF THE SECURITIES REPRESENTED HEREBY, NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE, HAVE BEEN REGISTERED UNDER THE 1933 ACT OR ANY U.S. STATE SECURITIES LAWS AND, UNLESS SO REGISTERED, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, A U.S. PERSON EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT, AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE AND FOREIGN SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT.

 

Issue Date: October 30, 2017 Principal Amount: $250,000

 

10% UNSECURED CONVERTIBLE NOTE

 

1. General

 

1.1 FOR VALUE RECEIVED, APPCOIN INNOVATIONS INC. (the “ Company ”) promises to pay to O CEANSIDE STRATEGIES INC., having an address at 10 MARKET STREET, #684, GEORGETOWN, CAYMAN ISLANDS (or its registered assigns) (email: dain.currie@gmail.com ) (the “Holder”), the principal sum of TWO HUNDRED FIFTY THOUSAND ( $250,000 ) in lawful currency of the United States (the “Principal Amount”) on or before October 30, 2020 (the “Maturity Date”), and to pay interest to the Holder on the Principal Amount at the rate of 10.0% per annum, in accordance with Section 4.

 

2. Definitions

 

2.1 For the purposes hereof, in addition to the terms defined elsewhere in this Note: (i) capitalized terms not otherwise defined herein have the meanings given to such terms in the Subscription Agreement, and (ii) the following terms shall have the following meanings:

 

  (a) Business Day ” means any day except Saturday, Sunday and any day which is a federal legal holiday in the United States or a day on which banking institutions in the State of California are authorized or required by law or other government action to close;
     
  (b) Conversion Date ” means the Business Day after the Holder provides the Conversion Notice to the Company for the conversion of any portion of the Principal Amount and accrued interest thereon into Conversion Shares pursuant to the terms of this Note;
     
  (c) Conversion Notice ” has the meaning set forth in Section 5.2;
     
  (d) Conversion Price ” means $0.10 per Conversion Share, subject to adjustment as provided in Section 5.7;

 

     
  - 2 -  

 

  (e) Conversion Share ” means a Share into which the Principal Amount, and accrued interest thereon, may be converted pursuant to the terms of this Note;
     
  (f) Issue Date ” has the meaning set forth on the first page of this Note;
     
  (g) Party ” means either the Company or the Holder, as applicable, and “ Parties ” means both of them;
     
  (h) Person ” means any individual, sole proprietorship, limited or unlimited liability corporation, partnership, unincorporated association, unincorporated syndicate, unincorporated organization, body corporate, joint venture, trust, pension fund, union, governmental authority, and a natural person including in such person’s capacity as trustee, heir, beneficiary, executor, administrator or other legal representative;
     
  (i) Share ” means a share of common stock in the capital of the Company; and
     
  (j) Subscription Agreement ” means the private placement subscription agreement between the Parties dated as of the Issue Date, as amended, modified or supplemented from time to time in accordance with its terms.

 

3. Subscription Agreement

 

3.1 The Holder has acquired this Note, and this Note has been issued, pursuant to the Subscription Agreement and this Note is subject in all respects to the terms of the Subscription Agreement and incorporates the terms of the Subscription Agreement, provided that, in the event of a conflict between this Note and the Subscription Agreement, the terms of this Note shall prevail.

 

4. Interest

 

4.1 The Company agrees to pay interest to the Holder on the Principal Amount at the rate of 10.0% per annum, compounded annually. Interest will be payable on the earlier of: (a) the Maturity Date, (b) any Conversion Date, and (c) the date that all amounts owing under this Note are prepaid by the Company in accordance with Section 7. Interest shall be calculated on the basis of a 365-day year and shall accrue daily, commencing on the date of the issuance of this Note, until payment in full of the Principal Amount and all other amounts that may become owing under this Note.

 

     
  - 3 -  

 

5. Conversion

 

5.1 The Parties agree that the Principal Amount, plus any accrued interest thereon, will, at the election of the Holder, be convertible into Conversion Shares subject to the limitations set forth in this Note. Notwithstanding anything to the contrary contained in this Note, this Note shall not be convertible by the Holder, and the Company shall not effect any conversion of this Note or otherwise issue any Conversion Shares pursuant hereto, to the extent (but only to the extent) that, after giving effect to such conversion, the Holder or any of its affiliates would beneficially own in excess of 4.99% (the “ Maximum Percentage ”) of the issued and outstanding Shares after such conversion. To the extent the above limitation applies, the determination of whether this Note shall be convertible (vis-à-vis other convertible, exercisable or exchangeable securities owned by the Holder or any of its affiliates) and of which such securities shall be convertible, exercisable or exchangeable (as among all such securities owned by the Holder and its affiliates) shall, subject to the Maximum Percentage limitation, be determined on the basis of the first submission to the Company for conversion, exercise or exchange (as the case may be). No prior inability to convert this Note or to issue Conversion Shares pursuant to this Section 5.1 shall have any effect on the applicability of the provisions of this Section 5.1 with respect to any subsequent determination of convertibility. For purposes of this Section 5.1, beneficial ownership and all determinations and calculations (including, without limitation, with respect to calculations of percentage ownership) shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “ 1934 Act ”) and the rules and regulations promulgated thereunder. The provisions of this Section 5.1 shall only be implemented in a manner otherwise than in strict conformity with the terms of this Section 5.1 to correct this Section 5.1 (or any portion hereof) which may be defective or inconsistent with the intended Maximum Percentage limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to the Maximum Percentage limitation. The limitations contained in this Section 5.1 shall apply to a successor holder of this Note. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one Business Day confirm orally and in writing to the Holder the number of Shares then outstanding, including by virtue of any prior conversion or exercise of convertible or exercisable securities into Shares, including, without limitation, pursuant to this Note. By written notice to the Company, the Holder may increase or decrease the Maximum Percentage to any other percentage not in excess of 9.99% specified in such notice; provided that: (a) any such increase will not be effective until the 61st day after such notice is delivered to the Company, and (b) any such increase or decrease will apply only to the Holder sending such notice.

 

5.2 In order to effect any conversion under this Note and subject to the limitations set forth in this Note, the Holder must provide written notice (the “ Conversion Notice ”) to the Company setting out the portion of the Principal Amount, and accrued interest thereon, that is to be converted into Conversion Shares.

 

5.3 The number of Conversion Shares issuable upon conversion of the Principal Amount to be converted shall be determined by the quotient obtained by dividing (x) by (y) where (x) is equal to the Principal Amount to be converted and (y) is the Conversion Price.

 

5.4 The number of Conversion Shares issuable upon conversion of any accrued and outstanding interest on this Note shall be determined by the quotient obtained by dividing (x) by (y) where (x) is equal to the amount of accrued interest on the Principal Amount to be converted and (y) is the Conversion Price.

 

5.5 Not later than five Business Days after any Conversion Date, the Company will deliver to the Holder a certificate representing the Conversion Shares (bearing such legends as may be required by applicable law) representing the aggregate number of Conversion Shares being acquired.

 

     
  - 4 -  

 

5.6 Upon any conversion hereunder, the Company shall not be required to issue any fraction of a Conversion Share, and the number of Conversion Shares shall be rounded down to the nearest whole number.

 

5.7 If the Company, at any time while this Note is outstanding: (a) subdivides outstanding Shares into a larger number of Shares, (b) combines (including by way of reverse split) outstanding Shares into a smaller number of Shares, or (c) issues, by reclassification of Shares, any equity securities of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of Shares outstanding before such event and the denominator shall be the number of Shares outstanding after such event. Any adjustment made pursuant to this Section 5.7 shall become effective after the effective date of such subdivision, combination or re-classification.

 

6. Repayment

 

6.1 Payment of this Note (less any tax required to be withheld by the Company) shall be paid to the Holder by the Company by cheque, wire transfer or such other method as may be mutually agreed to by the Parties from time to time.

 

7. Prepayment

 

7.1 Subject to Sections 5 and 7 of this Note, the Company shall pay to the Holder the Principal Amount, and accrued interest thereon, in cash on the Maturity Date. The Company may, at any time prior to the Maturity Date, upon ten calendar days’ prior written notice to the Holder (a “ Prepayment Notice ”), prepay any portion of the Principal Amount and accrued interest thereon, without the prior written consent of the Holder, provided that at the time of such prepayment the Holder is able to convert all amounts being prepaid without exceeding the Maximum Percentage.

 

7.2 The Prepayment Notice shall set forth the date on which prepayment is to occur, such date being no earlier than ten calendar days after the date of the Prepayment Notice and no later than the Maturity Date (in any case, the “ Prepayment Date ”), and shall set forth that portion of the Principal Amount to be prepaid, along with the calculated accrued interest thereon, as through and including the Prepayment Date (the “ Prepayment Amount ”).

 

7.3 The Prepayment Amount (less any tax required to be withheld by the Company) shall be paid to the Holder by the Company by cheque, wire transfer or such other method as may be mutually agreed to by the Parties from time to time. The mailing of such cheque, or payment by other means, by the Company on or before the Prepayment Date shall be deemed to be payment on the Prepayment Date unless the cheque is not paid upon presentation, or payment by such other means as may be mutually agreed to by the Parties is not received prior to the Prepayment Date. If only a part of the Principal Amount is to be prepaid, a new certificate for the balance of the Principal Amount shall be issued at the expense of the Company and delivered to the Holder, together with the cheque representing the Prepayment as provided for in this Section 7.3.

 

     
  - 5 -  

 

7.4 At any time after a Prepayment Notice is given, the Company shall have the right to deliver to the Holder, or to such other Person as may be directed by the Holder, the Prepayment Amount. Upon the delivery of the Prepayment Amount to the Holder being made, or upon the Prepayment Date, whichever is later, the Note shall be, and be deemed to be, paid and the rights of the Holder shall be limited to receiving, without interest, the amount so deposited. Any interest allowed on such deposit shall accrue to the Company.

 

8. Event of Default

 

8.1 For the purposes of this Note, the Company shall be in default upon the occurrence of any one or more of the following events (each such event being, an “ Event of Default ”):

 

  (a) the Company defaults in the payment of any amounts owing under this Note when due and the Company fails to cure such default within ten (10) Business Days after written notice of default is sent by the Holder to the Company;
     
  (b) the Company fails to issue the Conversion Shares within ten (10) Business Days after a Conversion Notice is delivered to the Company;
     
  (c) the Company files a voluntary petition in bankruptcy or is adjudicated bankrupt or insolvent, or files any petition or answer seeking or acquiescing in any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief for itself under any present or future federal, state or other statute, law or regulation relating to bankruptcy, insolvency or other relief for debtors; or seeks, consents to, or acquiesces in, the appointment of any trustee, receiver or liquidator of the Company;
     
  (d) a court of competent jurisdiction enters an order, judgment or decree approving a petition filed against the Company seeking any reorganization, dissolution or similar relief under any present or future federal, state or other statute, law or regulation relating to bankruptcy, insolvency or other relief for debtors, and such order, judgment or decree remains unvacated and unstayed for an aggregate of 60 Business Days (whether or not consecutive) from the first date of entry thereof; or any trustee, receiver or liquidator of the Company is appointed without the consent or acquiescence of the Company and such appointment remains unvacated and unstayed for an aggregate of 60 Business Days (whether or not consecutive); or
     
  (e) the Company ceases or threatens to cease to carry on its business.

 

8.2 If any Event of Default occurs, subject to any cure period, the full Principal Amount, together with interest thereon accrued to the date of the Event of Default, shall become, at the Holder’s election, immediately due and payable in cash. Upon payment of the full Principal Amount, together with accrued interest and any other amounts owing under this Note, this Note shall promptly be surrendered to or as directed by the Company. The Holder need not provide and the Company hereby waives any presentment, demand, protest or other notice of any kind, and the Holder may immediately, subject to any cure period, enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such declaration may be rescinded and annulled by the Holder at any time prior to payment hereunder and the Holder shall have all rights as a Note holder until such time, if any, as the full payment of amounts owing under this Note shall have been received by it. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

 

     
  - 6 -  

 

9. Notices

 

9.1 Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation, any Conversion Notice, shall be in writing, addressed to the Company, and delivered personally or by facsimile, email or overnight courier service to: 3250 Oakland Hills Court, Fairfield, CA 94534; Email: jgeiskopf@aol.com, Attn: Jimmy Geiskopf, or such other email address or physical address as the Company may notify the Holder of from time to time in accordance with Section 9.2.

 

9.2 Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing, addressed to the Holder, and delivered personally or by facsimile, email or overnight courier service to the address of the Holder appearing on the first page of this Note, or such other address as the Holder may notify the Company of from time to time in accordance with Section 9.1.

 

9.3 Any notice or other communication or delivery hereunder shall be deemed given and effective on the earliest of: (a) the date of transmission, if such notice or communication is delivered by facsimile or email transmission prior to 5:30 p.m. (Pacific Standard Time) on a Business Day, (b) the second Business Day following the date of mailing, if sent by overnight courier service, or (c) upon actual receipt by the Party to whom such notice is required to be given.

 

10. Replacement of Note if Lost or Destroyed

 

If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the balance outstanding at such time with respect to the Principal Amount, but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, and indemnity, if requested, all reasonably satisfactory to the Company.

 

11. Governing Law

 

All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of Nevada, without regard to the principles of conflicts of law thereof.

 

12. Waivers

 

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

 

13. Usury

 

If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates applicable laws governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate of interest.

 

14. Next Business Day

 

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

 

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

 

     
  - 7 -  

 

15. Counterparts and Electronic Means

 

This Note may be executed in counterparts, each of which, when so executed and delivered, will constitute an original, and all of which together will constitute one instrument. Delivery of an executed copy of this Note by email transmission or other means of electronic communication capable of producing a printed copy, will be deemed to be execution and delivery of an original copy of this Note as of the Issue Date.

 

IN WITNESS WHEREOF , the Parties have caused this Note to be duly executed as of the Issue Date.

 

APPCOIN INNOVATIONS INC.  
     
Per: /s/ Michael Blum  
  Authorized Signatory  
     
Name: Michael Blum  

 

     
   

 

 

 

 

 

APPCOIN INNOVATIONS INC.
(the “Issuer”)

 

PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT

 

INSTRUCTIONS TO SUBSCRIBER

 

1. You must complete all the information in the boxes on page 2 and sign where indicated with an “ X ”.
   
2. If you are resident in Canada, you must complete and sign Exhibit A “Canadian Investor Questionnaire” that starts on page 14. The purpose of this form is to determine whether you meet the standards for participation in a private placement under applicable Canadian securities laws. In order for the Issuer to satisfy its obligations under applicable Canadian securities laws, you may be required to provide additional evidence to verify the information you have provided in Exhibit A “Canadian Investor Questionnaire” that starts on page 14.
   
3. If you are a “U.S. Purchaser”, as defined in Exhibit B, you must complete and sign Exhibit B “United States Accredited Investor Questionnaire” that starts on page 22.

 

     
  - 2 -  

 

APPCOIN INNOVATIONS INC.

 

PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT

 

The undersigned (the “ Subscriber ”) hereby irrevocably subscribes for and agrees to purchase from AppCoin Innovations Inc. (the “ Issuer ”) an unsecured convertible note of the Issuer (the “ Note ”) in the principal amount set out below. The Subscriber agrees to be bound by the terms and conditions set forth in the attached “Terms and Conditions of Subscription for Notes” .

 

 

 

Subscriber Information

Hospitality Investors Special Situation Group Pvt. Ltd.

 

Note to be Purchased


Principal Amount of Note: $ 75,000.00                          

(the “ Principal Amount ” or the

Subscription Amount ”)

(Name of Subscriber)    
   
Account Reference (if applicable):                                            

 

X

   
(Signature of Subscriber – if the Subscriber is an Individual)  

 

X /s/ Fereed Mangalji

   

(Signature of Authorized Signatory – if the Subscriber is not an Individual)

 

Fereed Mangalji - Director

(Name and Title of Authorized Signatory – if the Subscriber is not an Individual)

 

 

(SIN, SSN, or other Tax Identification Number of the Subscriber)

 

 

(Subscriber’s Address, including City and Postal Code)

6 Battery Rd. #16-03

 



Singapore, Singapore

(Telephone Number)                                        (Email Address)

 

 

 

 

Register the Note as set forth below :

 

(Name to Appear on Note Certificate)

 

(Account Reference, if applicable)

 


(Address, including Postal Code)

   

 

     
  - 3 -  

 

ACCEPTANCE

 

The Issuer hereby accepts the Subscription (as defined herein) on the terms and conditions contained in this private placement subscription agreement (this “ Agreement ”) as of the 30th day of October, 2017 (the “ Closing Date ”).

 

APPCOIN INNOVATIONS INC.

Per: /s/ Michael Blum  
  Authorized Signatory  

 

Address: AppCoin Innovations Inc.  
  561 Indiana Court  
  Venice Beach, CA 90291  
     
Email: Michael.blum@appcoininnovations.com  
     
Attention: Michael Blum  

 

     
  - 4 -  

 

TERMS AND CONDITIONS OF SUBSCRIPTION FOR NOTES

 

1. Subscription

 

1.1 The Subscriber hereby irrevocably subscribes for and agrees to purchase a Note in the Principal Amount as shown on page 2 of this Subscription Agreement (the “ Subscription Amount ”), which is tendered herewith (such subscription and agreement to purchase being the “ Subscription ”), pursuant to the terms and conditions of this Agreement, including those set forth in the form of certificate for the Note (the “ Note Certificate ”) attached as Exhibit C that starts on page 27, and the Issuer agrees to sell the Note to the Subscriber, effective upon the Issuer’s acceptance of this Agreement.

 

1.2 The Note will be unsecured. The Principal Amount of the Note will mature three (3) years (“ Maturity ”) after closing of the Offering (the “ Closing ”). The Principal Amount of the Note will accrue interest at 10% per annum, which interest will be payable at Maturity. The Principal Amount will be convertible at the option of the Subscriber, at any time, into common shares of the Issuer (each, a “ Conversion Share ”) and accrued interest thereon at a conversion price of $0.10 per Conversion Share, subject to adjustment and restrictions as set forth in the Note Certificate. The Note and the Conversion Shares are referred to herein as the “ Securities ”.

 

1.3 The Subscriber acknowledges that the Note has been offered to the Subscriber as part of an offer by the Issuer of unsecured convertible notes and common shares in the aggregate principal amount of $500,000, or such other number as may be determined by the board of directors of the Issuer in its sole discretion (the “ Offering ”).

 

1.4 Unless otherwise provided, all dollar amounts referred to in this Agreement are in lawful money of the United States.

 

2. Payment

 

2.1 The Subscription Amount must accompany this Subscription. The Subscriber authorizes the Issuer to treat the Subscription Amount as an interest free loan until the closing of the Offering (the “ Closing ”).

 

2.2 The Subscriber acknowledges and agrees that this Agreement, the Subscription Amount and any other documents delivered in connection herewith will be held by the Issuer. In the event that this Agreement is not accepted by the Issuer for whatever reason, which the Issuer expressly reserves the right to do, the Issuer will return the Subscription Amount (without interest thereon) to the Subscriber at the address of the Subscriber as set forth on page 2 of this Agreement, or as otherwise directed by the Subscriber.

 

3. Documents Required from Subscriber

 

3.1 The Subscriber must complete, sign and return to the Issuer the following documents:

 

  (a) this Agreement;
     
  (b) if the Subscribers is a resident of Canada, the Canadian Investor Questionnaire (the “ Canadian Questionnaire ”) attached as Exhibit A that starts on page 14, along with any additional evidence that may be requested by the Issuer to verify the information provided in the Canadian Questionnaire;
     
  (c) if the Subscriber is a U.S. Purchaser (as defined in Exhibit B), the United States Accredited Investor Questionnaire (the “ U.S. Questionnaire ” and, together with the Canadian Questionnaire, the “ Questionnaires ”) attached as Exhibit B that starts on page 22; and
     
  (d) such other supporting documentation that the Issuer or counsel of the Issuer (the “ Issuer’s Counsel ”) may request to establish the Subscriber’s qualification as a qualified investor,
     
  (e) and the Subscriber acknowledges and agrees that the Issuer will not consider the Subscription for acceptance unless the Subscriber has provided all of such documents to the Issuer.

 

     
  - 5 -  

 

3.2 As soon as practicable upon any request by the Issuer, the Subscriber will complete, sign and return to the Issuer any additional documents, questionnaires, notices and undertakings as may be required by any regulatory authorities or applicable laws.

 

3.3 The Issuer and the Subscriber acknowledge and agree that the Issuer’s Counsel has acted as counsel only to the Issuer and is not protecting the rights and interests of the Subscriber. The Subscriber acknowledges and agrees that the Issuer and the Issuer’s Counsel have given the Subscriber the opportunity to seek, and are hereby recommending that the Subscriber obtain, independent legal advice with respect to the subject matter of this Agreement and, further, the Subscriber hereby represents and warrants to the Issuer and the Issuer’s Counsel that the Subscriber has sought independent legal advice or waives such advice.

 

4. Conditions and Closing

 

4.1 The Closing Date will occur on such date as may be determined by the Issuer in its sole discretion. The Issuer may, at its discretion, elect to close the Offering in one or more closings, in which event the Issuer may agree with one or more purchasers (including the Subscriber) to complete delivery of the Note to such purchaser(s) against payment therefor at any time on or prior to the Closing Date.

 

4.2 The Closing is conditional upon and subject to:

 

  (a) the Issuer having obtained all necessary approvals and consents, including regulatory approvals for the Offering; and
     
  (b) the issue and sale of the Note being exempt from the requirement to file a prospectus and the requirement to deliver an offering memorandum under applicable securities laws relating to the sale of the Notes, or the Issuer having received such orders, consents or approvals as may be required to permit such sale without the requirement to file a prospectus or deliver an offering memorandum.

 

4.3 The Subscriber acknowledges that the certificates representing the Note will be available for delivery within two business days of the Closing Date, provided that the Subscriber has satisfied the requirements of Section 3.1 hereof and the Issuer has accepted this Agreement.

 

     
  - 6 -  

 

5. Acknowledgements and Agreements of the Subscriber

 

5.1 The Subscriber acknowledges and agrees that:

 

  (a) none of the Securities have been or will be registered under the United States Securities Act of 1933 , as amended, (the “ 1933 Act ”), or under any securities or “blue sky” laws of any state of the United States, and, unless so registered, may not be offered or sold in the United States or, directly or indirectly, to any U.S. Person (as defined in Section 6.2), except in accordance with the provisions of Regulation S under the 1933 Act (“ Regulation S ”), pursuant to an effective registration statement under the 1933 Act, or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the 1933 Act and in each case only in accordance with applicable state, provincial and foreign securities laws;
     
  (b) the Issuer has not undertaken, and will have no obligation, to register any of the Securities under the 1933 Act or any other applicable securities laws;
     
  (c) the Issuer will refuse to register the transfer of any of the Securities to a U.S. Person not made pursuant to an effective registration statement under the 1933 Act or pursuant to an available exemption from the registration requirements of the 1933 Act and in each case in accordance with applicable laws;
     
  (d) the decision to execute this Agreement and to acquire the Securities has not been based upon any oral or written representation as to fact or otherwise made by or on behalf of the Issuer and such decision is based entirely upon a review of any public information which has been filed by the Issuer with the United State Securities and Exchange Commission (collectively, the “ Public Record ”);
     
  (e) the Issuer and others will rely upon the truth and accuracy of the acknowledgements, representations, warranties, covenants and agreements of the Subscriber contained in this Agreement and the Questionnaires, as applicable, and agrees that if any of such acknowledgements, representations and agreements are no longer accurate or have been breached, the Subscriber will promptly notify the Issuer;
     
  (f) there are risks associated with the purchase of the Securities, as more fully described in the Issuer’s periodic disclosure forming part of the Public Record;
     
  (g) the Subscriber and the Subscriber’s advisor(s) have had a reasonable opportunity to ask questions of and receive answers from the Issuer in connection with the distribution of the Securities hereunder, and to obtain additional information, to the extent possessed or obtainable without unreasonable effort or expense, necessary to verify the accuracy of the information about the Issuer;
     
  (h) a portion of this Offering may be sold pursuant to an agreement between the Issuer and one or more agents registered in accordance with applicable securities laws, in which case the Issuer will pay a fee and/or compensation securities on terms as set out in such agency agreement;
     
  (i) finder’s fees or broker’s commissions may be payable by the Issuer to finders who introduce subscribers to the Issuer;
     
  (j) the books and records of the Issuer were available upon reasonable notice for inspection, subject to certain confidentiality restrictions, by the Subscriber during reasonable business hours at its principal place of business, and all documents, records and books in connection with the distribution of the Securities hereunder have been made available for inspection by the Subscriber, the Subscriber’s legal counsel and/or its advisor(s);

 

     
  - 7 -  

 

  (k) all of the information which the Subscriber has provided to the Issuer is correct and complete and if there should be any change in such information prior to the Closing, the Subscriber will immediately notify the Issuer, in writing, with the details of any such change;
     
  (l) the Issuer is entitled to rely on the representations and warranties of the Subscriber contained in this Agreement and the Questionnaires, as applicable, and the Subscriber will hold harmless the Issuer from any loss or damage it or they may suffer as a result of the Subscriber’s failure to correctly complete this Agreement or the Questionnaires, as applicable;
     
  (m) any resale of the Securities by the Subscriber will be subject to resale restrictions contained in the securities laws applicable to the Issuer, the Subscriber and any proposed transferee and it is the responsibility of the Subscriber to find out what those restrictions are and to comply with such restrictions before selling any of the Securities;
     
  (n) the Subscriber has been advised to consult the Subscriber’s own legal, tax and other advisors with respect to the merits and risks of an investment in the Securities and with respect to applicable resale restrictions, and it is solely responsible (and the Issuer is not in any way responsible) for compliance with:

 

    (i) any applicable laws of the jurisdiction in which the Subscriber is resident in connection with the distribution of the Securities hereunder, and
       
    (ii) applicable resale restrictions;

 

  (o) there may be material tax consequences to the Subscriber of an acquisition or disposition of the Securities and the Issuer gives no opinion and makes no representation to the Subscriber with respect to the tax consequences to the Subscriber under federal, state, provincial, local or foreign tax laws that may apply to the Subscriber’s acquisition or disposition of the Securities;
     
  (p) the Subscriber consents to the placement of a legend or legends on any certificate or other document evidencing any of the Securities setting forth or referring to the restrictions on transferability and sale thereof contained in this Agreement;
     
  (q) the Issuer has advised the Subscriber that the Issuer is relying on an exemption from the requirements to provide the Subscriber with a prospectus and to sell the Securities through a person registered to sell securities under provincial securities laws and other applicable securities laws, and, as a consequence of acquiring the Securities pursuant to such exemption, certain protections, rights and remedies provided by applicable securities laws (including the various provincial securities acts), including statutory rights of rescission or damages, will not be available to the Subscriber;
     
  (r) no securities commission or similar regulatory authority has reviewed or passed on the merits of any of the Securities;
     
  (s) there is no government or other insurance covering any of the Securities; and
     
  (t) this Agreement is not enforceable by the Subscriber unless it has been accepted by the Issuer, and the Issuer reserves the right to reject this Subscription for any reason.

 

     
  - 8 -  

 

6. Representations and Warranties of the Subscriber

 

6.1 The Subscriber hereby represents and warrants to the Issuer (which representations and warranties will survive the Closing) that:

 

  (a) unless the Subscriber has completed Exhibit B, the Subscriber is not a U.S. Person;
     
  (b) the Subscriber is resident in the jurisdiction set out on page 2 of this Agreement;
     
  (c) if the Subscriber is resident outside of Canada:

 

    (i) the Subscriber is knowledgeable of, or has been independently advised as to, the applicable securities laws having application in the jurisdiction in which the Subscriber is resident (the “ International Jurisdiction ”) which would apply to the offer and sale of the Securities,
       
    (ii) the Subscriber is purchasing the Securities pursuant to exemptions from prospectus or equivalent requirements under applicable securities laws or, if such is not applicable, the Subscriber is permitted to purchase the Securities under the applicable laws of the International Jurisdiction without the need to rely on any exemptions,
       
    (iii) the applicable laws of the authorities in the International Jurisdiction do not require the Issuer to make any filings or seek any approvals of any kind whatsoever from any securities regulator of any kind whatsoever in the International Jurisdiction in connection with the offer, issue, sale or resale of any of the Securities,
       
    (iv) the purchase of the Securities by the Subscriber does not trigger:

 

      A. any obligation to prepare and file a prospectus or similar document, or any other report with respect to such purchase in the International Jurisdiction, or
         
      B. any continuous disclosure reporting obligation of the Issuer in the International Jurisdiction, and
         
    (v) the Subscriber will, if requested by the Issuer, deliver to the Issuer a certificate or opinion of local counsel from the International Jurisdiction which will confirm the matters referred to in subparagraphs (ii), (iii) and (iv) above to the satisfaction of the Issuer, acting reasonably;

 

  (d) the Subscriber has the legal capacity and competence to enter into and execute this Agreement and to take all actions required pursuant hereto and, if the Subscriber is a corporate entity, it is duly incorporated and validly subsisting under the laws of its jurisdiction of incorporation and all necessary approvals by its directors, shareholders and others have been obtained to authorize execution and performance of this Agreement on behalf of the Subscriber;
     
  (e) the entering into of this Agreement and the transactions contemplated hereby do not result in the violation of any of the terms and provisions of any law applicable to, or, if applicable, the constating documents of, the Subscriber or of any agreement, written or oral, to which the Subscriber may be a party or by which the Subscriber is or may be bound;

 

     
  - 9 -  

 

  (f) the Subscriber has duly executed and delivered this Agreement and it constitutes a valid and binding agreement of the Subscriber enforceable against the Subscriber;
     
  (g) the Subscriber has received and carefully read this Agreement;
     
  (h) the Subscriber is aware that an investment in the Issuer is speculative and involves certain risks (including those risks disclosed in the Public Record), including the possible loss of the entire investment;
     
  (i) the Subscriber has made an independent examination and investigation of an investment in the Securities and the Issuer and agrees that the Issuer will not be responsible in any way for the Subscriber’s decision to invest in the Securities and the Issuer;
     
  (j) the Subscriber is not an underwriter of, or dealer in, any of the Securities, nor is the Subscriber participating, pursuant to a contractual agreement or otherwise, in the distribution of the Securities;
     
  (k) the Subscriber is not aware of any advertisement of any of the Securities and is not acquiring the Securities as a result of any form of general solicitation or general advertising, including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media, or broadcast over radio or television, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising; and
     
  (l) no person has made to the Subscriber any written or oral representations:

 

    (i) that any person will resell or repurchase any of the Securities,
       
    (ii) that any person will refund the purchase price of any of the Securities, or
       
    (iii) as to the future price or value of any of the Securities.

 

6.2 In this Agreement, the term “U.S. Person” will have the meaning ascribed thereto in Regulation S, and for the purpose of this Agreement includes, but is not limited to: (a) any person in the United States; (b) any natural person resident in the United States; (c) any partnership or corporation organized or incorporated under the laws of the United States; (d) any partnership or corporation organized outside the United States by a U.S. Person principally for the purpose of investing in securities not registered under the 1933 Act, unless it is organized or incorporated, and owned, by accredited investors who are not natural persons, estates or trusts; or (e) any estate or trust of which any executor or administrator or trustee is a U.S. Person.

 

7. Representations and Warranties will be Relied Upon

 

7.1 The Subscriber acknowledges that its representations and warranties contained herein and in the Questionnaires are made by it with the intention that such representations and warranties will be relied upon by the Issuer and the Issuer’s Counsel in determining the Subscriber’s eligibility to purchase the Securities under applicable laws, or (if applicable) the eligibility of others on whose behalf it is contracting hereunder to purchase the Securities under applicable laws. The Subscriber further agrees that, by accepting delivery of the Note Certificate, it will be representing and warranting that its representations and warranties contained herein and in the Questionnaires are true and correct as at the Closing Date with the same force and effect as if they had been made by the Subscriber on the Closing Date and that they will survive the purchase by the Subscriber of the Securities and will continue in full force and effect notwithstanding any subsequent disposition by the Subscriber of the Securities.

 

     
  - 10 -  

 

8. Acknowledgement and Waiver

 

8.1 The Subscriber has acknowledged that the decision to acquire the Securities was solely made on the basis of the Public Record. The Subscriber hereby waives, to the fullest extent permitted by law, any rights of withdrawal, rescission or compensation for damages to which the Subscriber might be entitled in connection with the distribution of any of the Securities.

 

9. Legending and Registration of Subject Securities

 

9.1 The Subscriber hereby acknowledges that a legend or legends may be placed on the certificates representing the Securities to the effect that the Securities represented by such certificates are subject to a hold period and may not be traded until the expiry of such hold period except as permitted by applicable securities laws, and the Subscriber consent to the placement of such legend(s) on any certificate representing the Securities.

 

9.2 The Subscriber hereby acknowledges and agrees to the Issuer making a notation on its records or giving instructions to the registrar and transfer agent of the Issuer in order to implement the restrictions on transfer set forth and described in this Agreement.

 

10. Collection of Personal Information

 

10.1 The Subscriber acknowledges and consents to the fact that the Issuer is collecting the Subscriber’s personal information for the purpose of fulfilling this Agreement and completing the Offering. The Subscriber acknowledges that its personal information (and, if applicable, the personal information of those on whose behalf the Subscriber is contracting hereunder) may be included in record books in connection with the Offering and may be disclosed by the Issuer to: (a) stock exchanges or securities regulatory authorities, (b) the Issuer’s registrar and transfer agent, (c) Canadian tax authorities, (d) authorities pursuant to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) and (e) any of the other parties involved in the Offering, including the Issuer’s Counsel. By executing this Agreement, the Subscriber is deemed to be consenting to the foregoing collection, use and disclosure of the Subscriber’s personal information (and, if applicable, the personal information of those on whose behalf the Subscriber is contracting hereunder) for the foregoing purposes and to the retention of such personal information for as long as permitted or required by applicable laws. Notwithstanding that the Subscriber may be purchasing the Securities as agent on behalf of an undisclosed principal, the Subscriber agrees to provide, on request, particulars as to the nature and identity of such undisclosed principal, and any interest that such undisclosed principal has in the Issuer, all as may be required by the Issuer in order to comply with the foregoing. Furthermore, the Subscriber is hereby notified that:

 

     
  - 11 -  

 

  (a) the Issuer may deliver to any securities commission having jurisdiction over the Issuer, the Subscriber or this Subscription, including any Canadian provincial securities commissions, the United States Securities and Exchange Commission and/or any state securities commissions (collectively, the “ Commissions ”), certain personal information pertaining to the Subscriber, including the Subscriber’s full name, residential address and telephone number, the number of securities of the Issuer owned by the Subscriber, the number of Securities purchased by the Subscriber, the total Subscription Amount paid, the prospectus exemption relied on by the Issuer and the date of distribution of the Notes;
     
  (b) such information is being collected indirectly by the Commissions under the authority granted to them in applicable securities laws;
     
  (c) such information is being collected for the purposes of the administration and enforcement of applicable securities laws; and
     
  (d) the Subscriber may contact the following public official in Ontario with respect to questions about the Ontario Securities Commission’s indirect collection of such information at the following address and telephone number:
     
  (e) Administrative Assistant to the Director of Corporate Finance
    Ontario Securities Commission
    Suite 1903, Box 55
    20 Queen Street West
    Toronto, ON M5H 3S8
    Telephone: (416) 593-8086

 

11. Costs

 

11.1 The Subscriber acknowledges and agrees that all costs and expenses incurred by the Subscriber (including any fees and disbursements of any special counsel retained by the Subscriber) relating to the purchase of the Note will be borne by the Subscriber.

 

12. Execution of Subscription Agreement

 

12.1 The Issuer and the Issuer’s Counsel will be entitled to rely on delivery by facsimile machine or other means of electronic communication capable of producing a printed copy of an executed copy of this Agreement, and acceptance by the Issuer of such facsimile or electronic copy will be equally effective to create a valid and binding agreement between the Subscriber and the Issuer in accordance with the terms hereof. If less than a complete copy of this Agreement is delivered to the Issuer or the Issuer’s Counsel prior to or at Closing, the Issuer and the Issuer’s Counsel are entitled to assume that the Subscriber accepts and agrees to all of the terms and conditions of the pages not delivered prior to or at Closing unaltered.

 

12.2 The Subscriber hereby authorizes the Issuer to correct any minor errors in, or complete any minor information missing from any part of this Agreement and any other acknowledgements, provisions, forms, certificates or documents executed by the Subscriber and delivered to the Issuer or the Issuer’s Counsel in connection with the Subscription.

 

13. Beneficial Subscribers

 

13.1 Whether or not explicitly stated in this Agreement, any acknowledgement, representation, warranty, covenant or agreement made by the Subscriber in this Agreement, including the exhibits hereto, will be treated as if made by the Disclosed Principal, if any.

 

14. Governing Law

 

14.1 This Agreement is governed by the laws of the State of Nevada.

 

     
  - 12 -  

 

15. Survival

 

15.1 This Agreement, including, without limitation, the representations, warranties and covenants contained herein, will survive and continue in full force and effect and be binding upon the Issuer and the Subscriber, notwithstanding the completion of the purchase of the Securities by the Subscriber.

 

16. Assignment

 

16.1 This Agreement is not transferable or assignable.

 

17. Severability

 

17.1 The invalidity or unenforceability of any particular provision of this Agreement will not affect or limit the validity or enforceability of the remaining provisions of this Agreement.

 

18. Entire Agreement

 

18.1 Except as expressly provided in this Agreement and in the exhibits, agreements, instruments and other documents attached hereto or contemplated or provided for herein, this Agreement contains the entire agreement between the Issuer and the Subscriber with respect to the sale of the Note and there are no other terms, conditions, representations or warranties, whether expressed, implied, oral or written, by statute or common law, by the Issuer or by anyone else.

 

19. Notices

 

19.1 All notices and other communications hereunder will be in writing and will be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication, including facsimile, electronic mail or other means of electronic communication capable of producing a printed copy. Notices to the Subscriber will be directed to the address of the Subscriber set forth on page 2 of this Agreement and notices to the Issuer will be directed to it at the address of the Issuer set forth on page 3 of this Agreement.

 

20. Counterparts and Electronic Means

 

20.1 This Agreement may be executed in any number of counterparts, each of which, when so executed and delivered, will constitute an original and all of which together will constitute one instrument. Delivery of an executed copy of this Agreement by electronic facsimile transmission or other means of electronic communication capable of producing a printed copy will be deemed to be execution and delivery of this Agreement as of the Closing Date.

 

21. Exhibits

 

21.1 The exhibits attached hereto form part of this Agreement.

 

22. Indemnity

 

22.1 The Subscriber will indemnify and hold harmless the Issuer and, where applicable, its directors, officers, employees, agents, advisors and shareholders, from and against any and all loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all fees, costs and expenses whatsoever reasonably incurred in investigating, preparing or defending against any claim, lawsuit, administrative proceeding or investigation whether commenced or threatened) arising out of or based upon any representation or warranty of the Subscriber contained in this Agreement, the Questionnaires, as applicable, or in any document furnished by the Subscriber to the Issuer in connection herewith being untrue in any material respect or any breach or failure by the Subscriber to comply with any covenant or agreement made by the Subscriber to the Issuer in connection therewith.

 

     
  - 13 -  

 

EXHIBIT A

 

CANADIAN INVESTOR QUESTIONNAIRE

 

(ALBERTA, BRITISH COLUMBIA, MANITOBA, NEWFOUNDLAND AND LABRADOR, NEW BRUNSWICK, NOVA SCOTIA, ONTARIO, PRINCE EDWARD ISLAND, QUEBEC, AND SASKATCHEWAN)

 

TO: APPCOIN INNOVATIONS INC. (the “ Issuer ”)

 

RE: Purchase of Convertible Note (the “ Note ”) of the Issuer

 

 

Capitalized terms used in this Canadian Questionnaire (this “ Questionnaire ”) and not specifically defined have the meaning ascribed to them in the Private Placement Subscription Agreement between the Subscriber and the Issuer to which this Exhibit A is attached.

 

In connection with the purchase by the Subscriber (being the undersigned, or if the undersigned is purchasing the Note as agent on behalf of a disclosed beneficial Subscriber, such beneficial Subscriber, will be referred herein as the “ Subscriber ”) of the Note, the Subscriber hereby represents, warrants and certifies to the Issuer that the Subscriber:

 

  (i) is purchasing the Note as principal (or deemed principal under the terms of National Instrument 45-106 - Prospectus Exemptions adopted by the Canadian Securities Administrators (“ NI 45-106 ”));

 

  (ii) (A) is resident in or is subject to the laws of one of the following (check one):

 

  [  ] Alberta [  ] New Brunswick [  ] Prince Edward Island
       
  [  ] British Columbia [  ] Nova Scotia [  ] Quebec
       
  [  ] Manitoba [  ] Ontario [  ] Saskatchewan
       
  [  ] Newfoundland and Labrador  
     
  [  ] United States: __________________________ (List State of Residence)

 

or

 

    (B) [  ] is resident in a country other than Canada or the United States; and

 

  (iii) has not been provided with any offering memorandum in connection with the purchase of the Note.

 

In connection with the purchase of the Note, the Subscriber hereby represents, warrants, covenants and certifies that the Subscriber meets one or more of the following criteria:

  

I. SUBSCRIBERS PURCHASING UNDER THE “ACCREDITED INVESTOR” EXEMPTION

 

(a) the Subscriber is not a trust company or trust company registered under the laws of Prince Edward Island that is not registered or authorized under the Trust and Loan Companies Act (Canada) or under comparable legislation in another jurisdiction of Canada;
   
(b) the Subscriber is an “accredited investor” within the meaning of NI 45-106, by virtue of satisfying the indicated criterion as set out in Appendix “A” to this certificate (YOU MUST ALSO INITIAL OR PLACE A CHECK-MARK ON THE APPROPRIATE LINE IN APPENDIX “A” ATTACHED TO THIS CERTIFICATE)
   
(c) If the Subscriber is an “accredited investor” within the meaning of NI 45-106 by virtue of satisfying the indicated criterion as set out in paragraphs (d), (f) or (g) of Appendix “A” to this certificate, the Subscriber has provided the Issuer with the signed risk acknowledgement form set out in Appendix “B” to this certificate;

 

 

     
  - 14 -  

 

II.MINIMUM AMOUNT INVESTMENT

 

(a) the Subscriber is not an individual as that term is defined in applicable Canadian securities laws.
   
(b) the Subscriber is purchasing the Note as principal for its own account and not for the benefit of any other person;
   
(c) the Note have an acquisition cost to the Subscriber of not less than $150,000, payable in cash at the Closing; and
   
(d) the Subscriber was not created and is not being used solely to purchase or hold securities in reliance on the prospectus exemption provided under Section 2.10 of NI 45-106, it pre-existed the Offering and has a bona fide purpose other than investment in the Note.

 

For the purposes of the Canadian Investor Questionnaire and Appendix “A” attached to the Canadian Investor Questionnaire:

 

  (a) an issuer is “ affiliated ” with another issuer if
     
    (i) one of them is the subsidiary of the other, or
       
    (ii) each of them is controlled by the same person;
       
  (b) control person ” means
     
    (i) a person who holds a sufficient number of the voting rights attached to all outstanding voting securities of an issuer to affect materially the control of the issuer, or
       
    (ii) each person in a combination of persons, acting in concert by virtue of an agreement, arrangement, commitment or understanding, which holds in total a sufficient number of the voting rights attached to all outstanding voting securities of an issuer to affect materially the control of the issuer,
       
    and, if a person or combination of persons holds more than 20% of the voting rights attached to all outstanding voting securities of an issuer, the person or combination of persons is deemed, in the absence of evidence to the contrary, to hold a sufficient number of the voting rights to affect materially the control of the issuer;

     
  - 15 -  

  (c) director ” means
       
    (i) a member of the board of directors of a company or an individual who performs similar functions for a company, and
       
    (ii) with respect to a person that is not a company, an individual who performs functions similar to those of a director of a company;
       
  (d) eligibility adviser ” means
       
    (i) a person that is registered as an investment dealer and authorized to give advice with respect to the type of security being distributed; and
       
    (ii) in Saskatchewan or Manitoba, also means a lawyer who is a practicing member in good standing with a law society of a jurisdiction of Canada or a public accountant who is a member in good standing of an institute or association of chartered accountants, certified general accountants or certified management accountants in a jurisdiction of Canada provided that the lawyer or public accountant must not:
       
      (A) have a professional, business or personal relationship with the issuer, or any of its directors, executive officers, founders or control persons, and
         
      (B) have acted for or been retained personally or otherwise as an employee, executive officer, director, associate or partner of a person that has acted for or been retained by the issuer or any of its directors, executive officers, founders or control persons within the previous 12 months;
  (e) executive officer ” means, for an issuer, an individual who is
       
    (i) a chair, vice-chair or president,
       
    (ii) a vice-president in charge of a principal business unit, division or function including sales, finance or production, or
       
    (iii) performing a policy-making function in respect of the issuer;
       
  (f) financial assets ” means
       
    (i) cash,
       
    (ii) securities, or
       
    (iii) a contract of insurance, a deposit or an evidence of a deposit that is not a security for the purposes of securities legislation;
       
  (g) foreign jurisdiction ” means a country other than Canada or a political subdivision of a country other than Canada;

     
  - 16 -  

  (h) founder ” means, in respect of an issuer, a person who,
       
    (i) acting alone, in conjunction, or in concert with one or more persons, directly or indirectly, takes the initiative in founding, organizing or substantially reorganizing the business of the issuer, and
       
    (ii) at the time of the distribution or trade is actively involved in the business of the issuer;
       
  (i) fully managed account ” means an account of a client for which a person makes the investment decisions if that person has full discretion to trade in securities for the account without requiring the client’s express consent to a transaction;
       
  (j) individual ” means a natural person, but does not include
       
    (i) a partnership, unincorporated association, unincorporated syndicate, unincorporated organization or trust, or
       
    (ii) a natural person in the person’s capacity as a trustee, executor, administrator or personal or other legal representative;
       
  (k) investment fund ” means a mutual fund or a non-redeemable investment fund, and, for great certainty in British Columbia, includes an employee venture capital corporation and a venture capital corporation as such terms are defined in National Instrument 81-106 Investment Fund Continuous Disclosure ;
       
  (l)

jurisdiction ” or “jurisdiction of Canada” means a province or territory of Canada except when used in the term foreign jurisdiction;

 

  (m) non-redeemable investment fund ” means an issuer:
       
    (i) whose primary purpose is to invest money provided by its securityholders;
       
    (ii)

that does not invest

 

      (A) for the purpose of exercising or seeking to exercise control of an issuer, other than an issuer that is a mutual fund or a non-redeemable investment fund, or
         
      (B)

for the purpose of being actively involved in the management of any issuer in which it invests, other than an issuer that is a mutual fund or a non-redeemable investment fund, and

 

    (iii) that is not a mutual fund;
       
  (n) person ” includes
       
    (i) an individual;
       
    (ii) a corporation;
       
    (iii) a partnership, trust, fund and an association, syndicate, organization or other organized group of persons, whether incorporated or not; and
       
    (iv) an individual or other person in that person’s capacity as a trustee, executor, administrator or personal or other legal representative;

     
  - 17 -  

  (o) related liabilities ” means
       
    (i) liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets, or
       
    (ii) liabilities that are secured by financial assets; and
       
  (p) spouse ” means, an individual who,
       
    (i) is married to another individual and is not living separate and apart within the meaning of the Divorce Act (Canada), from the other individual,
       
    (ii) is living with another individual in a marriage-like relationship, including a marriage-like relationship between individuals of the same gender, or
       
    (iii) in Alberta, is an individual referred to in paragraph (i) or (ii), or is an adult interdependent partner within the meaning of the Adult Interdependent Relationships Act (Alberta).

The Subscriber agrees that the above representations and warranties will be true and correct both as of the execution of this Questionnaire and as of the Closing and acknowledges that they will survive the completion of the issue of the Securities.

 

The Subscriber acknowledges that the foregoing representations and warranties are made by the Subscriber with the intent that they be relied upon in determining the suitability of the Subscriber to acquire the Securities and that this Questionnaire is incorporated into and forms part of the Agreement.

 

The Subscriber undertakes to immediately notify the Issuer of any change in any statement or other information relating to the Subscriber set forth in the Agreement or in this Questionnaire which takes place prior to the Closing.

 

By completing this Questionnaire, the Subscriber authorizes the indirect collection of this information by each applicable regulatory authority or regulator and acknowledges that such information is made available to the public under applicable laws.

 

DATED as of                            day of                                        , 2017.

 



    X
    Signature of individual (if Subscriber is an individual)
     
    X
    Authorized signatory (if Subscriber is not an individual)
     
     
    Name of Subscriber (please print)
     
     
    Name of authorized signatory (please print)

 

     
  - 18 -  

 

APPENDIX “A”
TO CANADIAN INVESTOR QUESTIONNAIRE

 

Accredited Investors only: Please check the appropriate box and initial

 

[  ] (a) except in Ontario, a person registered under the securities legislation of a jurisdiction of Canada as an adviser or dealer,
     
[  ] (b) an individual registered under the securities legislation of a jurisdiction of Canada as a representative of a person referred to in paragraph (a),
     
[  ] (c) an individual formerly registered under the securities legislation of a jurisdiction of Canada, other than an individual formerly registered solely as a representative of a limited market dealer under one or both of the Securities Act (Ontario) or the Securities Act (Newfoundland and Labrador),
     
[  ] (d) an individual who, either alone or with a spouse, beneficially owns financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds $1,000,000 (YOU MUST INDICATE YOUR FINANCIAL ASSETS HERE: $ __________________________ [  ] WITH SPOUSE / [  ] WITHOUT SPOUSE AND ALSO COMPLETE THE RISK ACKNOWLEDGEMENT FORM IN APPENDIX “B” ATTACHED TO THIS CERTIFICATE) ,
     
[  ] (e) an individual who beneficially owns financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds $5,000,000,
     
[  ] (f) an individual whose net income before taxes exceeded $200,000 in each of the 2 most recent calendar years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of the 2 most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year (YOU MUST INDICATE YOUR NET INCOME HERE: $ __________________________ [  ] WITH SPOUSE / [  ] WITHOUT SPOUSE AND ALSO COMPLETE THE RISK ACKNOWLEDGEMENT FORM IN APPENDIX “B” ATTACHED TO THIS CERTIFICATE) ,
     
[  ] (g) an individual who, either alone or with a spouse, has net assets of at least $5,000,000 (YOU MUST INDICATE YOUR NET ASSETS HERE: $ __________________________ [  ] WITH SPOUSE / [  ] WITHOUT SPOUSE AND ALSO COMPLETE THE RISK ACKNOWLEDGEMENT FORM IN APPENDIX “B” ATTACHED TO THIS CERTIFICATE) ,
     
[  ] (h) a person, other than an individual or investment fund, that has net assets of at least $5,000,000 as shown on its most recently prepared financial statements and that has not been created or used solely to purchase or hold securities as an accredited investor as defined in this paragraph (h),
     
[  ] (i) an investment fund that distributes or has distributed its securities only to

 

    (i) a person that is or was an accredited investor at the time of the distribution,
       
    (ii) a person that acquires or acquired securities in the circumstances referred to in sections 2.10 [Minimum amount investment] of NI 45-106, or 2.19 [Additional investment in investment funds] of NI 45-106, or
       
    (iii) a person described in paragraph (i) or (ii) that acquires or acquired securities under section 2.18 [Investment fund reinvestment] of NI 45-106,

 

     
  - 19 -  

 

[  ] (j) an investment fund that distributes or has distributed securities under a prospectus in a jurisdiction of Canada for which the regulator or, in Québec, the securities regulatory authority, has issued a receipt,
     
[  ] (k) a trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on behalf of a fully managed account managed by the trust company or trust corporation, as the case may be,
     
[  ] (l) a person acting on behalf of a fully managed account managed by that person, if that person is registered or authorized to carry on business as an adviser or the equivalent under the securities legislation of a jurisdiction of Canada or a foreign jurisdiction,
     
[  ] (m) a registered charity under the Income Tax Act (Canada) that, in regard to the trade, has obtained advice from an eligibility adviser or an adviser registered under the securities legislation of the jurisdiction of the registered charity to give advice on the securities being traded,
     
[  ] (n) an entity organized in a foreign jurisdiction that is analogous to the entity referred to in paragraph (a) in form and function,
     
[  ] (o) a person in respect of which all of the owners of interests, direct, indirect or beneficial, except the voting securities required by law to be owned by directors, are persons that are accredited investors,
     
[  ] (p) an investment fund that is advised by a person registered as an adviser or a person that is exempt from registration as an adviser,
     
[  ] (q) a person that is recognized or designated by the securities regulatory authority or, except in Ontario and Québec, the regulator as an accredited investor, or
     
[  ] (r) a trust established by an accredited investor for the benefit of the accredited investor’s family members of which a majority of the trustees are accredited investors and all of the beneficiaries are the accredited investor’s spouse, a former spouse of the accredited investor or a parent, grandparent, brother, sister, child or grandchild of that accredited investor, of that accredited investor’s spouse or of that accredited investor’s former spouse.

 

Dated _____________________________, 2017.

 

    X
   

Signature of individual (if Subscriber is an individual)

 

    X
    Authorized signatory (if Subscriber is not an individual)
   

 

 

    Name of Subscriber (please print)
   

 

 

    Name of authorized signatory (please print)

 

     
  - 20 -  

 

 

     
  - 21 -  

 

 

 

     
  - 22 -  

 

EXHIBIT B

 

UNITED STATES ACCREDITED INVESTOR QUESTIONNAIRE

 

Capitalized terms used in this U.S. Questionnaire (this “ Questionnaire ”) and not specifically defined have the meaning ascribed to them in the Private Placement Subscription Agreement between the Subscriber and the Issuer to which this Exhibit B is attached.

 

This Questionnaire applies only to persons that are U.S. Purchasers. A “ U.S. Purchaser ” is (a) any U.S. Person, (b) any person purchasing the Note on behalf of any U.S. Person, (c) any person that receives or received an offer of the Note while in the United States, or (d) any person that is in the United States at the time the Subscriber’s buy order was made or this Agreement was executed or delivered.

 

The Subscriber understands and agrees that none of the Securities have been or will be registered under the 1933 Act, or applicable state, provincial or foreign securities laws, and the Note is being offered and sold to the Subscriber in reliance upon the exemption provided in Section 4(2) of the 1933 Act and Rule 506 of Regulation D under the 1933 Act for non-public offerings. The Note is being offered and sold within the United States only to “accredited investors” as defined in Rule 501(a) of Regulation D. The Note offered hereby are not transferable except in accordance with the restrictions described herein.

 

The Subscriber represents, warrants, covenants and certifies (which representations, warranties, covenants and certifications will survive the Closing) to the Issuer (and acknowledges that the Issuer is relying thereon) that:

 

1. it is not resident in Canada;
   
2. it has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Note and it is able to bear the economic risk of loss of its entire investment;
   
3. the Issuer has provided to it the opportunity to ask questions and receive answers concerning the terms and conditions of the Offering and it has had access to such information concerning the Issuer as it has considered necessary or appropriate in connection with its investment decision to acquire the Note;
   
4. it is acquiring the Note for its own account, for investment purposes only and not with a view to any resale, distribution or other disposition of the Securities in violation of the United States securities laws;
   
5. it (i) has adequate net worth and means of providing for its current financial needs and possible personal contingencies, (ii) has no need for liquidity in this investment, and (iii) is able to bear the economic risks of an investment in the Note for an indefinite period of time;
   
6. if the Subscriber is an individual (that is, a natural person and not a corporation, partnership, trust or other entity), then it satisfies one or more of the categories indicated below (please place an “X” on the appropriate lines):

 

     
  - 23 -  

 

  ___________

a natural person whose individual net worth, or joint net worth with their spouse, exceeds US$1,000,000, excluding the value of the primary residence of such person(s) and the related amount of indebtedness secured by the primary residence up to its fair market value,

  ___________ a natural person who had an individual income in excess of US$200,000 in each of the two most recent years, or joint income with their spouse in excess of US$300,000 in each of those years, and has a reasonable expectation of reaching the same income level in the current year, or
  ___________ a director or executive officer of the Issuer;

 

7. if the Subscriber is a corporation, partnership, trust or other entity), then it satisfies one or more of the categories indicated below (please place an “X” on the appropriate lines):

 

  ___________ an organization described in Section 501(c)(3) of the United States Internal Revenue Code, a corporation, a Massachusetts or similar business trust or partnership, not formed for the specific purpose of acquiring the Note, with total assets in excess of US$5,000,000,
  ___________ a “bank” as defined under Section (3)(a)(2) of the 1933 Act or savings and loan association or other institution as defined in Section 3(a)(5)(A) of the 1933 Act acting in its individual or fiduciary capacity; a broker dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934 (United States); an insurance company as defined in Section 2(13) of the 1933 Act; an investment company registered under the Investment Company Act of 1940 (United States) or a business development company as defined in Section 2(a)(48) of such Act; a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958 (United States); a plan with total assets in excess of US$5,000,000 established and maintained by a state, a political subdivision thereof, or an agency or instrumentality of a state or a political subdivision thereof, for the benefit of its employees; an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 (United States) whose investment decisions are made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company or registered investment adviser, or if the employee benefit plan has total assets in excess of US$5,000,000, or, if a self-directed plan, whose investment decisions are made solely by persons that are accredited investors,
  ___________ a private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940 (United States),
  ___________ a trust with total assets in excess of US$5,000,000, not formed for the specific purpose of acquiring the Note, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) under the 1933 Act, or
  ___________ an entity in which all of the equity owners satisfy the requirements of one or more of the categories set forth in Section 6 above.

 

8. it has not purchased the Note as a result of any form of general solicitation or general advertising, including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio, internet, television or other form of telecommunications, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising;

 

     
  - 24 -  

 

9. if the Subscriber decides to offer, sell or otherwise transfer any of the Securities, it will not offer, sell or otherwise transfer any of such Securities directly or indirectly, unless:

 

  (a) the sale is to the Issuer,
     
  (b) the sale is made outside the United States in a transaction meeting the requirements of Rule 904 of Regulation S under the 1933 Act and in compliance with applicable local laws and regulations in which such sale is made;
     
  (c) the sale is made pursuant to the exemption from the registration requirements under the 1933 Act provided by Rule 144 thereunder and in accordance with any applicable state securities or “blue sky” laws, or
     
  (d) the Securities are sold in a transaction that does not require registration under the 1933 Act or any applicable state laws and regulations governing the offer and sale of securities, and
     
  (e) it has prior to such sale pursuant to subsection (c) or (d) furnished to the Issuer an opinion of counsel of recognized standing reasonably satisfactory to the Issuer, to such effect;

 

10. it understands and acknowledges that upon the issuance thereof, and until such time as the same is no longer required under the applicable requirements of the 1933 Act or applicable U.S. state laws and regulations, the certificates representing the Securities, and all securities issued in exchange therefor or in substitution thereof, will bear a legend in substantially the following form:

 

“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”). THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF APPCOIN INNOVATIONS INC. (THE “ ISSUER ”) THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE ISSUER; (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT OR (C) IN ACCORDANCE WITH THE EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, AND IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES LAWS; OR (D) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE U.S. SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, AND, IN THE CASE OF PARAGRAPH (C) OR (D), THE SELLER FURNISHES TO THE ISSUER AN OPINION OF COUNSEL OF RECOGNIZED STANDING IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO SUCH EFFECT. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE GOOD DELIVERY IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA.”

 

Delivery of certificates bearing such a legend may not constitute “good delivery” in settlement of transactions on Canadian stock exchanges or over-the-counter markets. If the Issuer is a “foreign issuer” with no “substantial U.S. market interest” (all within the meaning of Regulation S under the 1933 Act) at the time of sale, a new certificate, which will constitute “good delivery”, will be made available to the purchaser upon provision by the Subscriber of a declaration together with such other evidence of the availability of an exemption as the Issuer or its transfer agent may reasonably require;

 

     
  - 25 -  

 

11. it understands and agrees that there may be material tax consequences to the Subscriber of an acquisition or disposition of any of the Securities. The Issuer gives no opinion and makes no representation with respect to the tax consequences to the Subscriber under United States, state, local or foreign tax law of the Subscriber’s acquisition or disposition of the Securities;
   
12. it consents to the Issuer making a notation on its records or giving instructions to any transfer agent of the Issuer in order to implement the restrictions on transfer set forth and described in this Questionnaire and the Agreement;
   
13. it is resident in the United States of America, its territories and possessions or any state of the United States or the District of Columbia (collectively the “ United States ”), is a “U.S. Person” as such term is defined in Regulation S or was in the United States at the time the Note were offered or the Agreement was executed; and
   
14. it understands that the Issuer has no obligation to register any of the Securities or to take action so as to permit sales pursuant to the 1933 Act (including Rule 144 thereunder).

 

The Subscriber undertakes to notify the Issuer immediately of any change in any representation, warranty or other information relating to the Subscriber set forth herein which takes place prior to the Closing.

 

Dated _____________________________, 2017.

 

    X
    Signature of individual (if Subscriber is an individual)
     
    X
    Authorized signatory (if Subscriber is not an individual)
     
     
    Name of Subscriber (please print)
     
     
    Name of authorized signatory (please print)

 

     
   

 

 

 

 

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ISSUED IN AN OFFSHORE TRANSACTION TO PERSONS WHO ARE NOT U.S. PERSONS (AS DEFINED HEREIN) PURSUANT TO REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”).

 

NONE OF THE SECURITIES REPRESENTED HEREBY, NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE, HAVE BEEN REGISTERED UNDER THE 1933 ACT OR ANY U.S. STATE SECURITIES LAWS AND, UNLESS SO REGISTERED, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, A U.S. PERSON EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT, AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE AND FOREIGN SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT.

 

Issue Date: October 30, 2017 Principal Amount: $75,000  

 

10% UNSECURED CONVERTIBLE NOTE

 

1. General

 

1.1 FOR VALUE RECEIVED, APPCOIN INNOVATIONS INC. (the “ Company ”) promises to pay to CANACCORD GENUITY CORP. , having an address at 2200-609 GRANVILLE STREET, VANCOUVER, BC, V7Y 1H2 (or its registered assigns) (the “ Holder ”), the principal sum of SEVENTY-FIVE THOUSAND ( $75,000 ) in lawful currency of the United States (the “ Principal Amount ”) on or before October 30, 2020 (the “ Maturity Date ”), and to pay interest to the Holder on the Principal Amount at the rate of 10.0% per annum, in accordance with Section 4.

 

2. Definitions

 

2.1 For the purposes hereof, in addition to the terms defined elsewhere in this Note: (i) capitalized terms not otherwise defined herein have the meanings given to such terms in the Subscription Agreement, and (ii) the following terms shall have the following meanings:

 

  (a) Business Day ” means any day except Saturday, Sunday and any day which is a federal legal holiday in the United States or a day on which banking institutions in the State of California are authorized or required by law or other government action to close;
     
  (b) Conversion Date ” means the Business Day after the Holder provides the Conversion Notice to the Company for the conversion of any portion of the Principal Amount and accrued interest thereon into Conversion Shares pursuant to the terms of this Note;
     
  (c) Conversion Notice ” has the meaning set forth in Section 5.2;
     
  (d) Conversion Price ” means $0.10 per Conversion Share, subject to adjustment as provided in Section 5.7;

 

     
  - 2 -  

 

  (e) Conversion Share ” means a Share into which the Principal Amount, and accrued interest thereon, may be converted pursuant to the terms of this Note;
     
  (f) Issue Date ” has the meaning set forth on the first page of this Note;
     
  (g) Party ” means either the Company or the Holder, as applicable, and “ Parties ” means both of them;
     
  (h) Person ” means any individual, sole proprietorship, limited or unlimited liability corporation, partnership, unincorporated association, unincorporated syndicate, unincorporated organization, body corporate, joint venture, trust, pension fund, union, governmental authority, and a natural person including in such person’s capacity as trustee, heir, beneficiary, executor, administrator or other legal representative;
     
  (i) Share ” means a share of common stock in the capital of the Company; and
     
  (j) Subscription Agreement ” means the private placement subscription agreement between the Parties dated as of the Issue Date, as amended, modified or supplemented from time to time in accordance with its terms.

 

3. Subscription Agreement

 

3.1 The Holder has acquired this Note, and this Note has been issued, pursuant to the Subscription Agreement and this Note is subject in all respects to the terms of the Subscription Agreement and incorporates the terms of the Subscription Agreement, provided that, in the event of a conflict between this Note and the Subscription Agreement, the terms of this Note shall prevail.

 

4. Interest

 

4.1 The Company agrees to pay interest to the Holder on the Principal Amount at the rate of 10.0% per annum, compounded annually. Interest will be payable on the earlier of: (a) the Maturity Date, (b) any Conversion Date, and (c) the date that all amounts owing under this Note are prepaid by the Company in accordance with Section 7. Interest shall be calculated on the basis of a 365-day year and shall accrue daily, commencing on the date of the issuance of this Note, until payment in full of the Principal Amount and all other amounts that may become owing under this Note.

 

     
  - 3 -  

 

5. Conversion

 

5.1 The Parties agree that the Principal Amount, plus any accrued interest thereon, will, at the election of the Holder, be convertible into Conversion Shares subject to the limitations set forth in this Note. Notwithstanding anything to the contrary contained in this Note, this Note shall not be convertible by the Holder, and the Company shall not effect any conversion of this Note or otherwise issue any Conversion Shares pursuant hereto, to the extent (but only to the extent) that, after giving effect to such conversion, the Holder or any of its affiliates would beneficially own in excess of 4.99% (the “ Maximum Percentage ”) of the issued and outstanding Shares after such conversion. To the extent the above limitation applies, the determination of whether this Note shall be convertible (vis-à-vis other convertible, exercisable or exchangeable securities owned by the Holder or any of its affiliates) and of which such securities shall be convertible, exercisable or exchangeable (as among all such securities owned by the Holder and its affiliates) shall, subject to the Maximum Percentage limitation, be determined on the basis of the first submission to the Company for conversion, exercise or exchange (as the case may be). No prior inability to convert this Note or to issue Conversion Shares pursuant to this Section 5.1 shall have any effect on the applicability of the provisions of this Section 5.1 with respect to any subsequent determination of convertibility. For purposes of this Section 5.1, beneficial ownership and all determinations and calculations (including, without limitation, with respect to calculations of percentage ownership) shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “ 1934 Act ”) and the rules and regulations promulgated thereunder. The provisions of this Section 5.1 shall only be implemented in a manner otherwise than in strict conformity with the terms of this Section 5.1 to correct this Section 5.1 (or any portion hereof) which may be defective or inconsistent with the intended Maximum Percentage limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to the Maximum Percentage limitation. The limitations contained in this Section 5.1 shall apply to a successor holder of this Note. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one Business Day confirm orally and in writing to the Holder the number of Shares then outstanding, including by virtue of any prior conversion or exercise of convertible or exercisable securities into Shares, including, without limitation, pursuant to this Note. By written notice to the Company, the Holder may increase or decrease the Maximum Percentage to any other percentage not in excess of 9.99% specified in such notice; provided that: (a) any such increase will not be effective until the 61st day after such notice is delivered to the Company, and (b) any such increase or decrease will apply only to the Holder sending such notice.

 

5.2 In order to effect any conversion under this Note and subject to the limitations set forth in this Note, the Holder must provide written notice (the “ Conversion Notice ”) to the Company setting out the portion of the Principal Amount, and accrued interest thereon, that is to be converted into Conversion Shares.

 

5.3 The number of Conversion Shares issuable upon conversion of the Principal Amount to be converted shall be determined by the quotient obtained by dividing (x) by (y) where (x) is equal to the Principal Amount to be converted and (y) is the Conversion Price.

 

5.4 The number of Conversion Shares issuable upon conversion of any accrued and outstanding interest on this Note shall be determined by the quotient obtained by dividing (x) by (y) where (x) is equal to the amount of accrued interest on the Principal Amount to be converted and (y) is the Conversion Price.

 

5.5 Not later than five Business Days after any Conversion Date, the Company will deliver to the Holder a certificate representing the Conversion Shares (bearing such legends as may be required by applicable law) representing the aggregate number of Conversion Shares being acquired.

 

     
  - 4 -  

 

5.6 Upon any conversion hereunder, the Company shall not be required to issue any fraction of a Conversion Share, and the number of Conversion Shares shall be rounded down to the nearest whole number.

 

5.7 If the Company, at any time while this Note is outstanding: (a) subdivides outstanding Shares into a larger number of Shares, (b) combines (including by way of reverse split) outstanding Shares into a smaller number of Shares, or (c) issues, by reclassification of Shares, any equity securities of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of Shares outstanding before such event and the denominator shall be the number of Shares outstanding after such event. Any adjustment made pursuant to this Section 5.7 shall become effective after the effective date of such subdivision, combination or re-classification.

 

6. Repayment

 

6.1 Payment of this Note (less any tax required to be withheld by the Company) shall be paid to the Holder by the Company by cheque, wire transfer or such other method as may be mutually agreed to by the Parties from time to time.

 

7. Prepayment

 

7.1 Subject to Sections 5 and 7 of this Note, the Company shall pay to the Holder the Principal Amount, and accrued interest thereon, in cash on the Maturity Date. The Company may, at any time prior to the Maturity Date, upon ten calendar days’ prior written notice to the Holder (a “ Prepayment Notice ”), prepay any portion of the Principal Amount and accrued interest thereon, without the prior written consent of the Holder, provided that at the time of such prepayment the Holder is able to convert all amounts being prepaid without exceeding the Maximum Percentage.

 

7.2 The Prepayment Notice shall set forth the date on which prepayment is to occur, such date being no earlier than ten calendar days after the date of the Prepayment Notice and no later than the Maturity Date (in any case, the “ Prepayment Date ”), and shall set forth that portion of the Principal Amount to be prepaid, along with the calculated accrued interest thereon, as through and including the Prepayment Date (the “ Prepayment Amount ”).

 

7.3 The Prepayment Amount (less any tax required to be withheld by the Company) shall be paid to the Holder by the Company by cheque, wire transfer or such other method as may be mutually agreed to by the Parties from time to time. The mailing of such cheque, or payment by other means, by the Company on or before the Prepayment Date shall be deemed to be payment on the Prepayment Date unless the cheque is not paid upon presentation, or payment by such other means as may be mutually agreed to by the Parties is not received prior to the Prepayment Date. If only a part of the Principal Amount is to be prepaid, a new certificate for the balance of the Principal Amount shall be issued at the expense of the Company and delivered to the Holder, together with the cheque representing the Prepayment as provided for in this Section 7.3.

 

     
  - 5 -  

 

7.4 At any time after a Prepayment Notice is given, the Company shall have the right to deliver to the Holder, or to such other Person as may be directed by the Holder, the Prepayment Amount. Upon the delivery of the Prepayment Amount to the Holder being made, or upon the Prepayment Date, whichever is later, the Note shall be, and be deemed to be, paid and the rights of the Holder shall be limited to receiving, without interest, the amount so deposited. Any interest allowed on such deposit shall accrue to the Company.

 

8. Event of Default

 

8.1 For the purposes of this Note, the Company shall be in default upon the occurrence of any one or more of the following events (each such event being, an “ Event of Default ”):

 

  (a) the Company defaults in the payment of any amounts owing under this Note when due and the Company fails to cure such default within ten (10) Business Days after written notice of default is sent by the Holder to the Company;
     
  (b) the Company fails to issue the Conversion Shares within ten (10) Business Days after a Conversion Notice is delivered to the Company;
     
  (c) the Company files a voluntary petition in bankruptcy or is adjudicated bankrupt or insolvent, or files any petition or answer seeking or acquiescing in any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief for itself under any present or future federal, state or other statute, law or regulation relating to bankruptcy, insolvency or other relief for debtors; or seeks, consents to, or acquiesces in, the appointment of any trustee, receiver or liquidator of the Company;
     
  (d) a court of competent jurisdiction enters an order, judgment or decree approving a petition filed against the Company seeking any reorganization, dissolution or similar relief under any present or future federal, state or other statute, law or regulation relating to bankruptcy, insolvency or other relief for debtors, and such order, judgment or decree remains unvacated and unstayed for an aggregate of 60 Business Days (whether or not consecutive) from the first date of entry thereof; or any trustee, receiver or liquidator of the Company is appointed without the consent or acquiescence of the Company and such appointment remains unvacated and unstayed for an aggregate of 60 Business Days (whether or not consecutive); or
     
  (e) the Company ceases or threatens to cease to carry on its business.

 

8.2 If any Event of Default occurs, subject to any cure period, the full Principal Amount, together with interest thereon accrued to the date of the Event of Default, shall become, at the Holder’s election, immediately due and payable in cash. Upon payment of the full Principal Amount, together with accrued interest and any other amounts owing under this Note, this Note shall promptly be surrendered to or as directed by the Company. The Holder need not provide and the Company hereby waives any presentment, demand, protest or other notice of any kind, and the Holder may immediately, subject to any cure period, enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such declaration may be rescinded and annulled by the Holder at any time prior to payment hereunder and the Holder shall have all rights as a Note holder until such time, if any, as the full payment of amounts owing under this Note shall have been received by it. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

 

     
  - 6 -  

 

9. Notices

 

9.1 Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation, any Conversion Notice, shall be in writing, addressed to the Company, and delivered personally or by facsimile, email or overnight courier service to: 3250 Oakland Hills Court, Fairfield, CA 94534; Email: jgeiskopf@aol.com, Attn: Jimmy Geiskopf, or such other email address or physical address as the Company may notify the Holder of from time to time in accordance with Section 9.2.

 

9.2 Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing, addressed to the Holder, and delivered personally or by facsimile, email or overnight courier service to the address of the Holder appearing on the first page of this Note, or such other address as the Holder may notify the Company of from time to time in accordance with Section 9.1.

 

9.3 Any notice or other communication or delivery hereunder shall be deemed given and effective on the earliest of: (a) the date of transmission, if such notice or communication is delivered by facsimile or email transmission prior to 5:30 p.m. (Pacific Standard Time) on a Business Day, (b) the second Business Day following the date of mailing, if sent by overnight courier service, or (c) upon actual receipt by the Party to whom such notice is required to be given.

 

10. Replacement of Note if Lost or Destroyed

 

If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the balance outstanding at such time with respect to the Principal Amount, but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, and indemnity, if requested, all reasonably satisfactory to the Company.

 

11. Governing Law

 

All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of Nevada, without regard to the principles of conflicts of law thereof.

 

12. Waivers

 

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

 

     
  - 7 -  

 

13. Usury

 

If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates applicable laws governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate of interest.

 

14. Next Business Day

 

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

 

15. Counterparts and Electronic Means

 

This Note may be executed in counterparts, each of which, when so executed and delivered, will constitute an original, and all of which together will constitute one instrument. Delivery of an executed copy of this Note by email transmission or other means of electronic communication capable of producing a printed copy, will be deemed to be execution and delivery of an original copy of this Note as of the Issue Date.

 

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

 

     
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IN WITNESS WHEREOF , the Parties have caused this Note to be duly executed as of the Issue Date.

 

APPCOIN INNOVATIONS INC.

 

Per: /s/ Michael Blum  
  Authorized Signatory  

 

Name: Michael Blum  

 

     
   

 

 

 

 

     
 

 

 

     
 

 

 

     
 

 

 

 

 

 

     
 

 

 

     
 

 

 

     
 

 

 

ICOX INNOVATIONS INC.
(the “ Company ”)

 

2017 EQUITY INCENTIVE PLAN

 

1. Purpose

 

1.1 Purpose . The purpose of this 2017 Equity Incentive Plan (this “ Plan ”) is to: (a) enable the Company and any Affiliate to attract and retain the types of Employees, Consultants and Directors who will contribute to the Company’s long range success; (b) provide incentives that align the interests of Employees, Consultants and Directors with those of the Shareholders; and (c) promote the success of the Company’s business.

 

2. Eligibility

 

2.1 Eligible Award Recipients . The persons eligible to receive Awards are the Employees, Consultants and Directors of the Company and its Affiliates and such other individuals designated by the Committee who are reasonably expected to become Employees, Consultants and Directors after the receipt of Awards.

 

3. Definitions

 

3.1 For the purposes of this Plan, the following terms shall have the following meanings, unless the context indicates otherwise:

 

Affiliate ” means a corporation or other entity that, directly or through one or more intermediaries, controls, is controlled by, or is under common control with, the Company.

 

Applicable Laws ” means the requirements related to, or implicated by, the administration of this Plan under applicable state corporate laws, United States federal and state securities laws, the Code, the rules or policies of any stock exchange or quotation system on which the Common Stock is then listed or quoted, and the applicable laws of any foreign country or jurisdiction where Awards are granted.

 

Award ” means any right granted to a Participant under this Plan, which may include the grant of Incentive Stock Options, Non-qualified Stock Options, Stock Appreciation Rights, Restricted Awards or Performance Compensation Awards.

 

Award Agreement ” means a written agreement, contract, certificate or other document evidencing the terms and conditions of an individual Award granted under this Plan, which may, in the discretion of the Company, be transmitted electronically to any Participant. Each Award Agreement shall be subject to the terms and conditions of this Plan.

 

Beneficial Owner ” has the meaning ascribed thereto in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that, in calculating the beneficial ownership of any particular “person” (as that term is used in Section 13(d)(3) of the Exchange Act), such “person” shall be deemed to have beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time.

 

 
- 2 -

 

Board ” means the board of directors of the Company, as constituted at an applicable time.

 

Cause ” means:

 

  (a) with respect to any Employee or Consultant:

 

  (i) if the Employee or Consultant is a party to an employment or service agreement with the Company or any Affiliate and such agreement provides for a definition of “cause” or other similar term, the definition contained therein, or
     
  (ii) if no such agreement exists, or if such agreement does not define “cause” or other similar term: (A) the commission of, or plea of guilty or no contest to, a felony or a crime involving moral turpitude or the commission of any other act involving willful malfeasance or material fiduciary breach with respect to the Company or an Affiliate, (B) conduct that results in, or is reasonably likely to result in, harm to the reputation or business of the Company or any Affiliate, (C) gross negligence or willful misconduct with respect to the Company or an Affiliate, or (D) material violation of any applicable securities laws;

 

  (b) with respect to any Director, a determination by a majority of the disinterested Board members that the Director has engaged in any of the following:

 

  (i) malfeasance in office with respect to the Company or an Affiliate,
     
  (ii) gross misconduct or neglect with respect to the Company or an Affiliate,
     
  (iii) any false or fraudulent misrepresentation that has induced the Company or any Shareholder to elect or appoint the Director,
     
  (iv) wilful conversion of funds of the Company or an Affiliate, or
     
  (v) repeated failure to participate in Board meetings on a regular basis, despite having received proper notice of the meetings in advance.

 

The Committee, in its absolute discretion, shall determine the effect of all matters and questions relating to whether a Participant has been discharged for Cause.

 

Change in Control ” means:

 

  (a) the direct or indirect sale, transfer, conveyance or other disposition (other than in a transaction contemplated by subsection (e)), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its subsidiaries, taken as a whole, to any Person that is not an Affiliate;

 

 
- 3 -

 

  (b) the Incumbent Directors ceasing for any reason to constitute at least a majority of the Board;
     
  (c) the date which is 10 business days prior to the consummation of a complete liquidation or dissolution of the Company;
     
  (d) the acquisition by any Person of Beneficial Ownership of 50% or more (on a fully diluted basis) of either (i) the then outstanding shares of Common Stock, taking into account as outstanding for this purpose such Common Stock issuable upon the exercise of options or warrants, the conversion of convertible stock or debt, and the exercise of any similar right to acquire such Common Stock (the “ Outstanding Common Stock ”); or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “ Outstanding Voting Securities ”); provided, however, that for purposes of this Plan, the following acquisitions shall not constitute a Change in Control: (A) any acquisition by the Company or any Affiliate, (B) any acquisition by any employee benefit plan sponsored or maintained by the Company or any Affiliate, (C) any acquisition which complies with clauses (i), (ii) and (iii) of subsection (e) of this definition, or (D) in respect of an Award held by a particular Participant, any acquisition by the Participant or any group of Persons including the Participant (or any entity controlled by the Participant or any group of persons including the Participant); or
     
  (e) the consummation of a reorganization, merger, consolidation, statutory share exchange, business combination or similar form of corporate transaction involving the Company that requires the approval of the Shareholders, whether for such transaction or the issuance of securities in connection with such transaction (in any case, a “ Business Combination ”), unless immediately following such Business Combination: (i) more than 50% of the total voting power of (A) the entity resulting from such Business Combination (the “ Surviving Company ”), or (B) if applicable, the ultimate parent entity that directly or indirectly has beneficial ownership of sufficient voting securities eligible to elect a majority of the members of the board of directors (or the analogous governing body) of the Surviving Company (the “ Parent Company ”), is represented by the Outstanding Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which the Outstanding Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of the Outstanding Voting Securities among the holders thereof immediately prior to the Business Combination; (ii) no Person (other than any employee benefit plan sponsored or maintained by the Surviving Company or the Parent Company) is or becomes the Beneficial Owner, directly or indirectly, of 50% or more of the total voting power of the outstanding voting securities eligible to elect members of the board of directors of the Parent Company (or the analogous governing body) (or, if there is no Parent Company, the Surviving Company); and (iii) at least a majority of the members of the board of directors (or the analogous governing body) of the Parent Company (or, if there is no Parent Company, the Surviving Company) following the consummation of the Business Combination were Board members at the time of the Board’s approval of the execution of the initial agreement providing for such Business Combination.

 

 
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Code ” means the Internal Revenue Code of 1986 , as it may be amended from time to time, and any reference to a section of the Code shall be deemed to include a reference to any regulations promulgated thereunder.

 

Committee ” means the Board or a committee of the Board appointed by the Board to administer this Plan in accordance with Section 4.3 and Section 4.4.

 

Common Stock ” means the common stock, $0.001 par value per share, of the Company or such other securities of the Company as may be designated by the Committee from time to time in substitution thereof.

 

Company ” means ICOX Innovations Inc., a Nevada corporation, and any successor thereto.

 

Consultant ” means any individual who is engaged by the Company or any Affiliate to render consulting or advisory services.

 

Continuous Service ” means that a Participant’s service with the Company or an Affiliate, whether as an Employee, Consultant or Director, is not interrupted or terminated. A Participant’s Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which such Participant renders service to the Company or an Affiliate as an Employee, Consultant or Director, or a change in the entity for which such Participant renders such service, provided that there is no interruption or termination of such Participant’s Continuous Service; and provided further that if any Award is subject to Section 409A of the Code, this sentence shall only be given effect to the extent consistent with Section 409A of the Code. For example, a change in status from an Employee of the Company to a Director of an Affiliate will not constitute an interruption of Continuous Service. The Committee, in its sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal or family leave of absence.

 

Covered Employee ” has the same meaning as set forth in Section 162(m)(3) of the Code, as interpreted by the Internal Revenue Service.

 

Director ” means a member of the Board or of the board of directors of any Affiliate.

 

Disability ” means that the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment; provided, however, that for the purposes of determining the term of an Incentive Stock Option pursuant to Section 7.1(i), “Disability” shall have the meaning ascribed to it under Section 22(e)(3) of the Code. The determination of whether a Participant has a Disability shall be determined under procedures established by the Committee. Except in situations where the Committee is determining whether a Participant has a Disability for purposes of the term of an Incentive Stock Option pursuant to Section 7.1(i) hereof within the meaning of Section 22(e)(3) of the Code, the Committee may rely on any determination that a Participant is disabled for purposes of benefits under any long-term disability plan maintained by the Company or any Affiliate in which a Participant participates.

 

 
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Disqualifying Disposition ” has the meaning set forth in Section 15.11.

 

Effective Date ” shall mean the date as of which this Plan is adopted by the Board.

 

Employee ” means any individual, including any Officer or Director, employed by the Company or an Affiliate; provided, that, for the purposes of determining eligibility to receive Incentive Stock Options, “Employee” shall mean an employee of the Company or an Affiliate within the meaning of Section 424 of the Code. Mere service as a Director or payment of a director’s fee to a Participant by the Company or an Affiliate shall not be sufficient to constitute “employment” by the Company or such Affiliate.

 

Exchange Act ” means the United States Securities Exchange Act of 1934 , as amended.

 

Fair Market Value ” means, as of any date: (a) if the Shares are listed or quoted on any established stock exchange or public market, including the New York Stock Exchange, the NASDAQ, the OTCQB, the OTCQX, the TSX Venture Exchange or the Canadian Securities Exchange, the closing price per Share (or if no sales were reported the closing price on the date immediately preceding such date) as quoted on such exchange or public market on the day of determination, as reported in such source as the Committee deems reliable, multiplied by the number of Shares underlying the applicable Award; or (b) if the Shares are not listed or quoted on any established stock exchange or public market, such value as is determined in good faith by the Committee in its sole discretion, which determination shall be conclusive and binding on all Persons.

 

Free Standing Rights ” has the meaning set forth in Section 8.1(a).

 

Good Reason ” means:

 

  (a) if an Employee or Consultant is a party to an employment or service agreement with the Company or an Affiliate and such agreement provides for a definition of “good reason” or other similar term, the definition contained therein; or
     
  (b) if no such agreement exists or if such agreement does not define “good reason”, the occurrence of one or more of the following without the Participant’s express written consent, if such circumstances are not remedied by the Company within 30 days of its receipt of a written notice from the Participant describing the applicable circumstances (which notice must be provided by the Participant within 90 days of the Participant’s knowledge of the applicable circumstances): (i) any material, adverse change in the Participant’s duties, responsibilities, authority, title, status or reporting structure, (ii) a material reduction in the Participant’s base salary or bonus opportunity, or (iii) a geographical relocation of the Participant’s principal office location by more than 50 miles.

 

 
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Grant Date ” means the date on which the Committee adopts a resolution, or takes other appropriate action, expressly granting an Award that specifies the key terms and conditions of the Award or, if a later date of grant for the Award is set forth in such resolution, then such date as is set forth in such resolution.

 

Incentive Stock Option ” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.

 

Incumbent Directors ” means individuals who, on the Effective Date, constitute the Board, provided that any individual becoming a Director subsequent to the Effective Date whose election or nomination for election to the Board was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such individual is named as a nominee for Director without objection to such nomination) shall be deemed to be an Incumbent Director. No individual initially elected or nominated as a Director as a result of an actual or threatened election contest with respect to the Incumbent Directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any Person other than the Incumbent Directors shall be an Incumbent Director.

 

Negative Discretion ” means the discretion authorized by this Plan to be applied by the Committee to eliminate or reduce the size of a Performance Compensation Award in accordance with Section 8.3(d)(iv); provided that the exercise of such discretion would not cause such Performance Compensation Award to fail to qualify as “performance-based compensation” under Section 162(m) of the Code.

 

Non-Employee Director ” means a Director who is a “non-employee director” within the meaning of Rule 16b-3.

 

Non-Qualified Stock Option ” means an Option that by its terms does not qualify as, or is not intended to qualify as, an Incentive Stock Option.

 

Officer ” means a Person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

 

Option ” means an Incentive Stock Option or a Non-Qualified Stock Option granted pursuant to this Plan.

 

Option Exercise Price ” means the price at which a Share may be purchased upon the exercise of an Option.

 

Optionholder ” means a Person to whom an Option is granted pursuant to this Plan or, if applicable, such other Person who holds an outstanding Option.

 

Outside Director ” means a Director who is an “outside director” within the meaning of Section 162(m) of the Code and Treasury Regulations Section 1.162-27(e)(3) or any successor to such statute and regulation.

 

 
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Participant ” means an eligible Person to whom an Award is granted pursuant to this Plan or, if applicable, such other Person who holds an outstanding Award.

 

Performance Compensation Award ” means any Award designated by the Committee as a Performance Compensation Award pursuant to Section 8.3.

 

Performance Criteria ” means the criterion or criteria that the Committee shall select for purposes of establishing the Performance Goal(s) for a Performance Period with respect to any Performance Compensation Award. The Performance Criteria that will be used to establish the Performance Goal(s) shall be based on the attainment of specific levels of performance of the Company (or an Affiliate, division, business unit or operational unit thereof), and shall be limited to:

 

  (a) net earnings or net income (before or after taxes);
     
  (b) basic or diluted earnings per Share (before or after taxes);
     
  (c) net revenue or net revenue growth;
     
  (d) gross revenue;
     
  (e) gross profit or gross profit growth;
     
  (f) net operating profit (before or after taxes);
     
  (g) return on assets, capital, invested capital, equity, or sales;
     
  (h) cash flow (including operating cash flow, free cash flow and cash flow return on capital);
     
  (i) earnings before or after taxes, interest, depreciation and/or amortization;
     
  (j) gross or operating margins;
     
  (k) improvements in capital structure;
     
  (l) budget and expense management;
     
  (m) productivity ratios;
     
  (n) economic value added or other value added measurements;
     
  (o) Share price (including growth measures and total Shareholder return);
     
  (p) expense targets;
     
  (q) margins;
     
  (r) operating efficiency;
     
  (s) working capital targets;
     
  (t) enterprise value;
     
  (u) safety record; and
     
  (v) completion of acquisitions or business expansion.

 

 
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Any one or more of the Performance Criteria may be used on an absolute or relative basis to measure the performance of the Company and/or an Affiliate as a whole, or any division, business unit or operational unit of the Company and/or an Affiliate, or any combination thereof, as the Committee may deem appropriate. The Committee may make comparisons to the performance of a group of comparable companies, or data set out in a published or special index that the Committee, in its sole discretion, deems appropriate, or the Committee may make comparisons of matters related to Share price as compared to various stock market indices. The Committee also has the authority to provide for accelerated vesting of any Award based on the achievement of Performance Goals pursuant to the Performance Criteria. To the extent required under Section 162 (m) of the Code, the Committee shall, within the first 90 days of a Performance Period (or, if longer or shorter, within the maximum period allowed under Section 162(m) of the Code), define in an objective fashion the manner of calculating the Performance Criteria it selects to use for such Performance Period. In the event that applicable tax and/or securities laws change to permit the Committee discretion to alter the governing Performance Criteria without obtaining Shareholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining Shareholder approval.

 

Performance Formula ” means, for a Performance Period, the one or more objective formulas applied against the relevant Performance Goal to determine, with regard to the Performance Compensation Award of a particular Participant, whether all, some portion but less than all, or none of the Performance Compensation Award has been earned for the Performance Period.

 

Performance Goals ” means, for a Performance Period, the one or more goals established by the Committee for the Performance Period based upon the Performance Criteria. The Committee is authorized at any time during the first 90 days of a Performance Period (or, if longer or shorter, within the maximum period allowed under Section 162(m) of the Code), or at any time thereafter (but only to the extent the exercise of such authority after such period would not cause the Performance Compensation Awards granted to any Participant for the Performance Period to fail to qualify as “performance-based compensation” under Section 162(m) of the Code), in its sole and absolute discretion, to adjust or modify the calculation of a Performance Goal for such Performance Period to the extent permitted under Section 162(m) of the Code in order to prevent the dilution or enlargement of the rights of a Participant in connection with any of the following:

 

  (a) asset write-downs;
     
  (b) litigation or claim judgments or settlements;
     
  (c) the effect of changes in tax laws, accounting principles, or other laws or regulatory rules affecting reported results;

 

 
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  (d) any reorganization and restructuring programs;
     
  (e) extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 (or any successor or pronouncement thereto) and/or in management’s discussion and analysis of financial condition and results of operations as filed with applicable securities regulators;
     
  (f) acquisitions or divestitures;
     
  (g) any other specific unusual or nonrecurring events, or objectively determinable category thereof;
     
  (h) foreign exchange gains and losses; or
     
  (i) a change in the Company’s fiscal year.

 

Performance Period ” means such one or more periods of time (in any case being not less than one fiscal quarter in duration) as the Committee may determine, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to, and the payment of, a Performance Compensation Award.

 

Permitted Transferee ” means:

 

  (a) a member of an Optionholder’s immediate family (child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships), any Person sharing the Optionholder’s household (other than a tenant or employee), a trust in which any of the foregoing Persons have more than 50% of the beneficial interest, a foundation in which any of the foregoing Persons (or the Optionholder) control the management of assets, or any other entity in which any of the foregoing Persons (or the Optionholder) own more than 50% of the voting interests;
     
  (b) any Person designated by the Committee in connection with a program established and approved by the Committee pursuant to which Participants may receive a cash payment or other consideration in consideration for the transfer of a Non-Qualified Stock Option; and
     
  (c) such other transferees as may be permitted by the Committee in its sole discretion.

 

Person ” is to be construed broadly and includes an individual, corporation, trust, partnership, governmental authority, or any administrator or executor of any of the foregoing.

 

Plan ” means this 2017 Equity Incentive Plan, as amended and/or amended and restated from time to time.

 

Preferred Stock ” means the preferred stock, $0.001 par value per share, of the Company.

 

 
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Related Entity ” means a person that controls or is controlled by the Company or that is controlled by the same person that controls the Company, if any.

 

Related Person ” means: (i) a director or executive officer of the Company or of a Related Entity of the Company; (ii) an associate of a director of executive officer of the Company or of a Related Entity of the Company; or (iii) a permitted assign of a director of executive officer of the Company or of a Related Entity of the Company.

 

Related Rights ” has the meaning set forth in Section 8.1(a).

 

Restricted Award ” means any Award granted pursuant to Section 8.2(a).

 

Restricted Period ” has the meaning set forth in Section 8.2(a).

 

Rule 16b-3 ” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.

 

Securities Act ” means the United States Securities Act of 1933 , as amended.

 

Share ” means a share of Common Stock.

 

Shareholder ” means a holder of Shares.

 

Stock Appreciation Right ” means the right, pursuant to an Award granted under Section 8.1, to receive, upon exercise, an amount payable in cash or Shares equal to the number of Shares subject to the Stock Appreciation Right that is being exercised multiplied by the excess of: (a) the Fair Market Value of one Share on the date the Award is exercised, over (b) the exercise price specified in the Stock Appreciation Right Award Agreement.

 

Stock for Stock Exchange ” has the meaning set forth in Section 7.1(c).

 

Ten Percent Shareholder ” means a Person who owns (or is deemed to own pursuant to Section 424(d) of the Code) shares possessing more than 10% of the total combined voting power of all classes of stock of the Company or of any of its Affiliates.

 

4. Administration

 

4.1 Authority of Committee . This Plan shall be administered initially by the Committee. Subject to the terms of this Plan, the Committee’s charter and Applicable Laws, and in addition to other express powers and authorization conferred by this Plan, the Committee shall have the authority:

 

  (a) to construe and interpret this Plan and apply its provisions;
     
  (b) to promulgate, amend, and rescind rules and regulations relating to the administration of this Plan;
     
  (c) to authorize any Person to execute, on behalf of the Company, any instrument required to carry out the purposes of this Plan;

 

 
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  (d) to delegate its authority to one or more Officers with respect to Awards that do not involve Covered Employees or “insiders” within the meaning of Section 16 of the Exchange Act;
     
  (e) to determine when Awards are to be granted and the applicable Grant Date;
     
  (f) from time to time to select, subject to the limitations set forth in this Plan, those Participants to whom Awards shall be granted;
     
  (g) to determine the number of Shares to be made subject to each Award;
     
  (h) to determine whether each Option is to be an Incentive Stock Option or a Non-qualified Stock Option;
     
  (i) to prescribe the terms and conditions of each Award, including the exercise price, medium of payment and vesting provisions, and to specify the provisions of the Award Agreement with respect thereto;
     
  (j) to designate an Award (including a cash bonus) as a Performance Compensation Award and to select the Performance Criteria that will be used to establish the Performance Goals;
     
  (k) to amend the terms of any outstanding Awards, including for the purpose of modifying the time or manner of vesting, or the term of any outstanding Award; provided, however, that if any such amendment impairs a Participant’s rights or increases a Participant’s obligations under an Award, or creates or increases a Participant’s federal income tax liability with respect to an Award, such amendment shall also be subject to the Participant’s consent;
     
  (l) to determine the duration and purpose of leaves of absences which may be granted to a Participant without constituting termination of their employment for purposes of this Plan, which periods shall be no shorter than the periods generally applicable to Employees under the Company’s employment policies;
     
  (m) to make decisions with respect to outstanding Awards that may become necessary upon a change in corporate control or an event that triggers anti-dilution adjustments;
     
  (n) to interpret, administer, reconcile any inconsistency in, correct any defect in and/or supply any omission in this Plan and any instrument or agreement relating to, or Award granted under, this Plan; and
     
  (o) to exercise discretion to make any and all other determinations which it determines to be necessary or advisable for the administration of this Plan.

 

The Committee also may modify the purchase price or the exercise price of any outstanding Award, provided that Shareholder approval shall be required before the repricing is effective if such Shareholder approval is necessary to satisfy any Applicable Laws.

 

 
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4.2 Committee Decisions Final . All decisions made by the Committee pursuant to the provisions of this Plan shall be final and binding on the Company and the Participants, unless such decisions are determined by a court having jurisdiction to be arbitrary and capricious.

 

4.3 Delegation . The Committee may delegate administration of the Plan to a committee or committees of one or more Directors, and the term “ Committee ” shall apply to any Person(s) to whom such authority has been delegated. The Board shall have the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Committee shall thereafter be to the committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan. The members of the Committee shall be appointed by and serve at the pleasure of the Board. From time to time, the Board may increase or decrease the size of the Committee, add additional members to, remove members (with or without cause) from, appoint new members, and fill vacancies, however caused, in the Committee. The Committee shall act pursuant to a vote of the majority of its members or, in the case of a Committee comprised of only two members, the unanimous consent of its members, whether present or not, or by the written consent of the majority of its members, and minutes shall be kept of all of its meetings and copies thereof shall be provided to the Board. Subject to the limitations prescribed by this Plan and the Board, the Committee may establish and follow such rules and regulations for the conduct of its business as it may determine to be advisable.

 

4.4 Committee Composition . If the Board establishes a committee to administer the Plan, except as otherwise determined by the Board, the Committee shall consist solely of two or more Non-Employee Directors who are also Outside Directors. The Board shall have discretion to determine whether or not it intends to comply with the exemption requirements of Rule 16b-3 and/or Section 162(m) of the Code. However, if the Board intends to satisfy such exemption requirements, with respect to Awards to any Covered Employee and with respect to any insider subject to Section 16 of the Exchange Act, the Committee shall be a compensation committee of the Board that at all times consists solely of two or more Non-Employee Directors who are also Outside Directors. Within the scope of such authority, the Board or the Committee may: (a) delegate to a committee of one or more members of the Board who are not Outside Directors the authority to grant Awards to eligible Persons who are either: (i) not then Covered Employees and are not expected to be Covered Employees at the time of recognition of income resulting from such Award, or (ii) not Persons with respect to whom the Company wishes to comply with Section 162(m) of the Code; or (b) delegate to a committee of one or more members of the Board who are not Non-Employee Directors the authority to grant Awards to eligible Persons who are not then subject to Section 16 of the Exchange Act. Nothing herein shall create an inference that an Award is not validly granted under the Plan in the event Awards are granted under the Plan by a compensation committee of the Board that does not at all times consist solely of two or more Non-Employee Directors who are also Outside Directors.

 

4.5 Indemnification . In addition to such other rights of indemnification as they may have as Directors or members of the Committee, and to the extent allowed by Applicable Laws, the Committee shall be indemnified by the Company against the reasonable expenses, including attorney’s fees, actually incurred in connection with any action, suit or proceeding or in connection with any appeal therein, to which the Committee may be party by reason of any action taken or failure to act under or in connection with the Plan or any Award granted under the Plan, and against all amounts paid by the Committee in settlement thereof (provided, however, that the settlement has been approved by the Company, which approval shall not be unreasonably withheld) or paid by the Committee in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that the Committee did not act in good faith and in a manner which such Person reasonably believed to be in the best interests of the Company, or in the case of a criminal proceeding, had no reason to believe that the conduct complained of was unlawful; provided, however, that within 60 days after institution of any such action, suit or proceeding, the Committee shall, in writing, offer the Company the opportunity at its own expense to handle and defend such action, suit or proceeding.

 

 
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5. Shares Subject to this Plan

 

5.1 Number of Shares Authorized . Subject to adjustment in accordance with Section 12, a total of 3,900,000 Shares shall be available for the grant of Awards. For so long as any Awards are outstanding, the Company shall keep available at all times such number of Shares as would be issuable on the due exercise of all of such Awards.

 

5.2 Limitations on Shares Available for Issuance.

 

  (a) the total number of Shares issuable to Related Persons under this Plan, at any time, shall not exceed ten (10%) percent of the issued and outstanding Shares;
     
  (b) the total number of Shares issuable to any Participant under this Plan, at any time, shall not exceed five (5%) percent of the issued and outstanding Shares;
     
  (c) the total number of Shares issued to Related Persons under this Plan, within any 12 month period, shall not exceed ten (10%) percent of the issued and outstanding Shares;
     
  (d) the total number of Shares issued to any Participant under this Plan, within any 12 month period, shall not exceed five (5%) percent of the issued and outstanding Shares;
     
  (e) the grant value of Shares reserved for issuance pursuant to Awards hereunder, plus the grant value of Options granted under this Plan to any one non-executive Director, shall not exceed $100,000 in any fiscal year, calculated by the Company as of the Grant Date.

 

5.3 Nature of Shares . Shares available for distribution under this Plan may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares reacquired by the Company in any manner.

 

5.4 Effect of Cancellation or Forfeiture of Award . Any Shares underlying an Award that is canceled, forfeited or expires prior to exercise or realization, either in full or in part, shall again become available for issuance under this Plan. Notwithstanding anything to the contrary contained herein, Shares underlying an Award shall not again be made available for issuance or delivery under this Plan if such Shares are: (a) Shares tendered in payment of an Option; (b) Shares delivered or withheld by the Company to satisfy any tax withholding obligation; or (c) Shares covered by a stock-settled Stock Appreciation Right or other Award that were not issued upon the settlement of the Award.

 

 
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6. Eligibility

 

6.1 Eligibility for Specific Awards . Incentive Stock Options may be granted only to Employees. Awards other than Incentive Stock Options may be granted to Employees, Consultants and Directors and those individuals whom the Committee determines are reasonably expected to become Employees, Consultants and Directors following the applicable Grant Date.

 

6.2 Ten Percent Shareholders . A Ten Percent Shareholder shall not be granted an Incentive Stock Option unless the Option Exercise Price is at least 110% of the Fair Market Value at the Grant Date and the Incentive Stock Option is not exercisable after the expiration of five years from the Grant Date.

 

7. Option Provisions

 

7.1 Each Option shall be evidenced by an Award Agreement, and shall be subject to the conditions set forth in this Section 7 and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. All Options shall be separately designated Incentive Stock Options or Non-Qualified Stock Options at the time of grant, and, if certificates are issued, separate certificates will be issued for Shares purchased on exercise of each type of Option. Notwithstanding the foregoing, the Company shall have no liability to any Participant or any other Person if an Option designated as an Incentive Stock Option fails to qualify as such at any time, or if an Option is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code and the terms of such Option do not satisfy the requirements of Section 409A of the Code. The terms of separate Options need not be identical, but each Award Agreement shall include (through incorporation by reference of provisions of this Plan in the Award Agreement or otherwise) the substance of each of the following provisions:

 

  (a) Term . Subject to the provisions of Section 6.2 regarding Ten Percent Shareholders: (i) no Option shall be exercisable after the expiration of 10 years from the Grant Date, and (ii) the term of an Option shall be determined by the Committee at the time of grant.
     
  (b) Exercise Price of an Incentive Stock Option . Subject to the provisions of Section 6.2 regarding Ten Percent Shareholders, the Option Exercise Price of each Incentive Stock Option shall be not less than 100% of the greater of (i) the Fair Market Value of the Shares underlying the Option on the Grant Date and (ii) the Fair Market Value of the Shares underlying the Option on the trading date immediately preceding the Grant Date. Notwithstanding the foregoing, an Incentive Stock Option may be granted with an Option Exercise Price lower than that set forth in the preceding sentence if such Incentive Stock Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code.

 

 
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  (c) Consideration . The Option Exercise Price shall be paid, to the extent permitted by applicable statutes and regulations, either: (a) in cash, certified check or by wire transfer at the time the Option is exercised; or (b) in the discretion of the Committee, upon such terms as the Committee shall approve: (i) by delivery to the Company of a certificate representing Shares, duly endorsed for transfer to the Company, having a Fair Market Value on the date of delivery equal to the Option Exercise Price (or portion thereof) due for the number of Shares being acquired, or by means of attestation whereby the Participant identifies for delivery specific Shares that have an aggregate Fair Market Value on the date of attestation equal to the Option Exercise Price (or portion thereof) and receives a number of Shares equal to the difference between the number of Shares thereby purchased and the number of identified attestation Shares (a “ Stock for Stock Exchange ”), (ii) pursuant to a “cashless” exercise program established with a broker, (iii) by reduction in the number of Shares otherwise deliverable upon exercise of such Option with a Fair Market Value equal to the aggregate Option Exercise Price at the time of exercise, (iv) by any combination of the foregoing methods, or (v) in any other form of legal consideration that may be acceptable to the Committee. Unless otherwise specifically provided in the Award Agreement, the exercise price of Shares acquired on exercise of an Option that is paid by delivery (or attestation) to the Company of other Shares acquired, directly or indirectly from the Company, shall be paid only by Shares that have been held for more than six months (or such longer or shorter period of time required to avoid a charge to earnings for financial accounting purposes). Notwithstanding the foregoing, during any period during which the Shares are publicly traded, an exercise by a Director or Officer that involves, or may involve, a direct or indirect extension of credit, or arrangement of an extension of credit, by the Company, directly or indirectly, in violation of Section 402(a) of the Sarbanes-Oxley Act of 2002 , shall be prohibited with respect to any Award.
     
  (d) Transferability of an Incentive Stock Option . An Incentive Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of an Optionholder only by such Optionholder. Notwithstanding the foregoing, an Optionholder may, by delivering written notice to the Company, in a form satisfactory to the Company, designate another Person who, in the event of the death of such Optionholder, shall thereafter be entitled to exercise such Optionholder’s Incentive Stock Option.
     
  (e) Transferability of a Non-Qualified Stock Option . A Non-Qualified Stock Option may, in the sole discretion of the Committee, be transferable to a Permitted Transferee, upon written approval by the Committee to the extent provided in the Award Agreement. If a Non-Qualified Stock Option does not provide for transferability, then such Non-Qualified Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of an Optionholder only by such Optionholder. Notwithstanding the foregoing, an Optionholder may, by delivering written notice to the Company, in a form satisfactory to the Company, designate another Person who, in the event of the death of such Optionholder, shall thereafter be entitled to exercise such Optionholder’s Non-Qualified Stock Option.

 

 
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  (f) Vesting of Options . Each Option may, but need not, vest and become exercisable in periodic installments that may, but need not, be equal, and may be subject to such other terms and conditions on the time or times when it may be exercised (which may be based on performance or other criteria) as the Committee may deem appropriate. The vesting provisions of individual Options may vary. No Option may be exercised for a fraction of a Share. The Committee may, but shall not be required to, provide for an acceleration of vesting and exercisability in the terms of any Award Agreement upon the occurrence of a specified event.
     
  (g) Termination of Continuous Service . Unless otherwise provided in an Award Agreement, or in an employment agreement the terms of which have been approved by the Board, in the event an Optionholder’s Continuous Service terminates (other than upon the Optionholder’s death or Disability), such Optionholder may exercise its Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination), but only within such period of time ending on the earlier of: (a) the date that is three months following the termination of such Optionholder’s Continuous Service; or (b) the expiration of the term of the Option as set forth in the Award Agreement; provided that, if the termination of the Optionholder’s Continuous Service is by the Company for Cause, all outstanding Options (whether or not vested) held by such Optionholder shall immediately terminate and cease to be exercisable. If, after termination, an Optionholder does not exercise its Option within the time specified in the Award Agreement, such Optionholder’s Option shall terminate.
     
  (h) Extension of Termination Date . An Award Agreement may provide that if the exercise of an Option following the termination of an Optionholder’s Continuous Service for any reason would be prohibited at any time because the issuance of Shares in connection therewith would violate the registration requirements under the Securities Act or any other state or federal securities laws, or the rules of any securities exchange or interdealer quotation system, then such Option shall terminate on the earlier of: (a) the expiration of the term of the Option in accordance with Section 7.1(a); or (b) the expiration of a period after termination of the Optionholder’s Continuous Service that is three months after the end of the period during which the exercise of such Optionholder’s Option would be in violation of such registration or other securities law requirements.
     
  (i) Disability of Optionholder . Unless otherwise provided in an Award Agreement, in the event that an Optionholder’s Continuous Service terminates as a result of such Optionholder’s Disability, such Optionholder may exercise its Option (to the extent that such Optionholder was entitled to exercise such Option as of the date of termination), but only within such period of time ending on the earlier of: (a) the date 12 months following such termination; or (b) the expiration of the term of the Option as set forth in the Award Agreement. If, after termination, an Optionholder does not exercise its Option within the time specified herein or in the Award Agreement, such Optionholder’s Option shall terminate.

 

 
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  (j) Death of Optionholder . Unless otherwise provided in an Award Agreement, in the event that an Optionholder’s Continuous Service terminates as a result of such Optionholder’s death, then such Optionholder’s Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder’s estate, by a Person who acquired the right to exercise the Option by bequest or inheritance or by a Person designated to exercise the Option upon the Optionholder’s death, but only within the period ending on the earlier of: (a) the date that is 12 months following the date of death; or (b) the expiration of the term of such Option as set forth in the Award Agreement. If, after an Optionholder’s death, such Optionholder’s Option is not exercised within the time specified herein or in the Award Agreement, such Option shall terminate.
     
  (k) Incentive Stock Option $100,000 Limitation . To the extent that the aggregate Fair Market Value (determined at the time of grant) of Shares underlying any Incentive Stock Options that are exercisable for the first time by any Optionholder during any calendar year (under all plans of the Company and its Affiliates) exceeds $100,000, the Options or portions thereof which exceed such limit (according to the order in which they were granted) shall be treated as Non-Qualified Stock Options.

 

8. Provisions of Awards Other Than Options

 

8.1 Stock Appreciation Rights .

 

  (a) General . Each Stock Appreciation Right shall be evidenced by an Award Agreement, and shall be subject to the conditions set forth in this Section 8.1 and to such other conditions not inconsistent with this Plan as may be determined by the Committee in its sole discretion and reflected in the applicable Award Agreement. A Stock Appreciation Right may be granted alone (a “ Free Standing Right ”) or in tandem with an Option (a “ Related Right ”).
     
  (b) Grant Requirements . Any Related Right that relates to a Non-Qualified Stock Option may be granted at the same time such Non-Qualified Stock Option is granted or at any time thereafter, but before the exercise or expiration of the Non-Qualified Stock Option. Any Related Right that relates to an Incentive Stock Option must be granted at the same time the Incentive Stock Option is granted.
     
  (c) Term of Stock Appreciation Rights . The term of a Stock Appreciation Right shall be determined by the Committee and set out in the Award Agreement; provided, however, that no Stock Appreciation Right shall be exercisable later than the tenth anniversary of the Grant Date.

 

 
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  (d) Vesting of Stock Appreciation Rights . Each Stock Appreciation Right may, but need not, vest and become exercisable in periodic installments that may, but need not, be equal, and may be subject to such other terms and conditions on the time or times when it may be exercised as the Committee may deem appropriate. The vesting provisions of individual Stock Appreciation Rights may vary. No Stock Appreciation Right may be exercised for a fraction of a Share. The Committee may, but shall not be required to, provide for an acceleration of vesting and exercisability of a Stock Appreciation Right in the terms of an applicable Award Agreement upon the occurrence of a specified event.
     
  (e) Exercise and Payment . Upon exercise of a Stock Appreciation Right, the holder shall be entitled to receive from the Company an amount equal to: (i) the number of Shares subject to the Stock Appreciation Right that is being exercised multiplied by (ii) the excess of (A) the Fair Market Value of a Share on the date such Stock Appreciation Right is exercised, over (B) the exercise price specified in the Stock Appreciation Right. Payment with respect to the exercise of a Stock Appreciation Right shall be made on the date of exercise. Payment shall be made in the form of Shares (with or without restrictions as to substantial risk of forfeiture and transferability, as determined by the Committee in its sole discretion), cash or a combination thereof, as determined by the Committee.
     
  (f) Exercise Price . The exercise price of a Free Standing Right shall be determined by the Committee, but shall be not less than 100% of the greater of (i) the Fair Market Value of the Shares underlying the Free Standing Right on the Grant Date and (ii) the Fair Market Value of the Shares underlying the Free Standing Right on the trading date immediately preceding the Grant Date. A Related Right granted simultaneously with, or subsequent to, the grant of an Option and in conjunction therewith or in the alternative thereto, shall have the same exercise price as the related Option, shall be transferable only upon the same terms and conditions as the related Option, and shall be exercisable only to the same extent as the related Option; provided, however, that a Stock Appreciation Right, by its terms, shall be exercisable only when the Fair Market Value per Share subject to the Stock Appreciation Right and related Option exceeds the exercise price per Share thereof and no Stock Appreciation Rights may be granted in tandem with an Option unless the Committee determines that the requirements of Section 8.1(b) are satisfied.
     
  (g) Reduction in Underlying Option Shares . Upon any exercise of a Related Right, the number of Shares for which any related Option shall be exercisable shall be reduced by the number of Shares for which the Stock Appreciation Right has been exercised. The number of Shares for which a Related Right shall be exercisable shall be reduced upon any exercise of any related Option by the number of Shares for which such Option has been exercised.

 

 
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8.2 Restricted Awards .

 

  (a) General . A Restricted Award is an Award of actual Shares (“ Restricted Stock ”) or hypothetical Share units (“ Restricted Stock Units ”) having a value equal to the Fair Market Value of an identical number of Shares, which may, but need not, provide that such Restricted Award may not be sold, assigned, transferred or otherwise disposed of, pledged or hypothecated as collateral for a loan or as security for the performance of any obligation or for any other purpose for such period (the “ Restricted Period ”) as the Committee shall determine. Each Restricted Award granted under this Plan shall be evidenced by an Award Agreement, and shall be subject to the conditions set forth in this Section 8.2 and to such other conditions not inconsistent with the Plan as may be determined by the Committee in its sole discretion and reflected in the applicable Award Agreement.

 

  (b) Restricted Stock and Restricted Stock Units .

 

  (i) Each Participant granted Restricted Stock shall execute and deliver to the Company an Award Agreement with respect to the Restricted Stock setting forth the restrictions and other terms and conditions applicable to such Restricted Stock. If the Committee determines that the Restricted Stock shall be held by the Company or in escrow rather than delivered to the Participant pending the release of the applicable restrictions, the Committee may require the Participant to additionally execute and deliver to the Company: (A) an escrow agreement satisfactory to the Committee, if applicable; and (B) the appropriate blank stock power with respect to the Restricted Stock covered by such agreement. If a Participant fails to execute an agreement evidencing an Award of Restricted Stock and, if applicable, an escrow agreement and stock power, the Award shall be null and void. Subject to the restrictions set forth in the Award, the Participant generally shall have the rights and privileges of a Shareholder as to such Restricted Stock, including the right to vote such Restricted Stock and the right to receive dividends; provided that, any cash dividends and stock dividends with respect to the Restricted Stock shall be withheld by the Company for the Participant’s account, and interest may be credited on the amount of the cash dividends withheld at a rate and subject to such terms as determined by the Committee. The cash dividends or stock dividends so withheld by the Committee and attributable to any particular share of Restricted Stock (and earnings thereon, if applicable) shall be distributed to the Participant in cash or, at the discretion of the Committee, in Shares having a Fair Market Value equal to the amount of such dividends, if applicable, upon the release of restrictions on such Share and, if such Share is forfeited, the Participant shall have no right to such dividends.
     
  (ii) The terms and conditions of a grant of Restricted Stock Units shall be reflected in an Award Agreement. No Shares shall be issued at the time a Restricted Stock Unit is granted, and the Company will not be required to set aside a fund for the payment of any such Award. A Participant shall have no voting rights with respect to any Restricted Stock Units granted hereunder. At the discretion of the Committee, each Restricted Stock Unit (representing one Share) may be credited with cash and stock dividends paid by the Company in respect of one Share (“ Dividend Equivalents ”). Dividend Equivalents shall be withheld by the Company for the Participant’s account, and interest may be credited on the amount of cash Dividend Equivalents withheld at a rate and subject to such terms as determined by the Committee. Dividend Equivalents credited to a Participant’s account and attributable to any particular Restricted Stock Unit (and earnings thereon, if applicable) shall be distributed in cash or, at the discretion of the Committee, in Shares having a Fair Market Value equal to the amount of such Dividend Equivalents and earnings, if applicable, to the Participant upon settlement of such Restricted Stock Unit and, if such Restricted Stock Unit is forfeited, the Participant shall have no right to such Dividend Equivalents.

 

 
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  (c) Restrictions

 

  (i) Restricted Stock awarded to a Participant shall be subject to the following restrictions until the expiration of the Restricted Period, and to such other terms and conditions as may be set forth in the applicable Award Agreement: (A) if an escrow arrangement is used, the Participant shall not be entitled to delivery of the Share certificate; (B) the Shares shall be subject to the restrictions on transferability set forth in the Award Agreement; (C) the Shares shall be subject to forfeiture to the extent provided in the applicable Award Agreement; and (D) to the extent such Shares are forfeited, the Share certificates shall be returned to the Company, and all rights of the Participant to such Shares and as a Shareholder shall terminate without further obligation on the part of the Company.
     
  (ii) Restricted Stock Units awarded to any Participant shall be subject to: (A) forfeiture until the expiration of the Restricted Period, and satisfaction of any applicable Performance Goals during such period, to the extent provided in the applicable Award Agreement, and to the extent such Restricted Stock Units are forfeited, all rights of the Participant to such Restricted Stock Units shall terminate without further obligation on the part of the Company; and (B) such other terms and conditions as may be set forth in the applicable Award Agreement.
     
  (iii) The Committee shall have the authority to remove any or all of the restrictions on the Restricted Stock and Restricted Stock Units whenever it may determine that, by reason of changes in Applicable Laws or other changes in circumstances arising after the date the Restricted Stock or Restricted Stock Units are granted, such action is appropriate.

 

  (d) Restricted Period . With respect to Restricted Awards, the Restricted Period shall commence on the Grant Date and end at the time or times set forth on a schedule established by the Committee in the applicable Award Agreement.

 

 
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  (e) Delivery of Restricted Stock and Settlement of Restricted Stock Units . No Restricted Award may be granted or settled for a fraction of a Share. The Committee may, but shall not be required to, provide for an acceleration of vesting in the terms of any Award Agreement upon the occurrence of a specified event. Upon the expiration of the Restricted Period with respect to any shares of Restricted Stock, the restrictions set forth in Section 8.2(c) and the applicable Award Agreement shall be of no further force or effect with respect to such shares, except as set forth in the applicable Award Agreement. If an escrow arrangement is used, upon such expiration, the Company shall deliver to the Participant, or his or her beneficiary, without charge, the stock certificate evidencing the shares of Restricted Stock which have not then been forfeited and with respect to which the Restricted Period has expired (to the nearest full share) and any cash dividends or stock dividends credited to the Participant’s account with respect to such Restricted Stock and the interest thereon, if any. Upon the expiration of the Restricted Period with respect to any outstanding Restricted Stock Units, the Company shall deliver to the Participant, or its beneficiary, without charge, one Share for each such outstanding Restricted Stock Unit (“ Vested Unit ”) and cash equal to any Dividend Equivalents credited with respect to each such Vested Unit in accordance with Section 8.2(b)(ii) hereof and the interest thereon or, at the discretion of the Committee, in Shares having a Fair Market Value equal to such Dividend Equivalents and the interest thereon, if any; provided, however, that, if explicitly provided in the applicable Award Agreement, the Committee may, in its sole discretion, elect to pay cash or part cash and part Shares in lieu of delivering only Shares for Vested Units. If a cash payment is made in lieu of delivering Shares, the amount of such payment shall be equal to the Fair Market Value of the Shares as of the date on which the Restricted Period lapsed with respect to each Vested Unit.
     
  (f) Share Restrictions . Each certificate representing Restricted Stock awarded under the Plan shall bear a legend in such form as the Company deems appropriate.

 

8.3 Performance Compensation Awards .

 

  (a) General . The Committee shall have the authority, at the time of grant of any Award (other than Options and Stock Appreciation Rights), to designate such Award as a Performance Compensation Award in order to qualify such Award as “performance-based compensation” under Section 162(m) of the Code. In addition, the Committee shall have the authority to make an Award of a cash bonus to any Participant and designate such Award as a Performance Compensation Award in order to qualify such Award as “performance-based compensation” under Section 162(m) of the Code.
     
  (b) Eligibility . The Committee will, in its sole discretion, designate within the first 90 days of a Performance Period (or, if longer or shorter, within the maximum period allowed under Section 162(m) of the Code), which Participants will be eligible to receive Performance Compensation Awards in respect of such Performance Period. However, designation of a Participant eligible to receive an Award hereunder for a Performance Period shall not in any manner entitle the Participant to receive payment in respect of any Performance Compensation Award for such Performance Period. The determination as to whether or not such Participant becomes entitled to payment in respect of any Performance Compensation Award shall be decided solely in accordance with the provisions of this Section 8.3. Moreover, designation of a Participant eligible to receive an Award hereunder for a particular Performance Period shall not require designation of such Participant eligible to receive an Award hereunder in any subsequent Performance Period and designation of one Person as a Participant eligible to receive an Award hereunder shall not require designation of any other Person as a Participant eligible to receive an Award hereunder in such period or in any other period.

 

 
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  (c) Discretion of Committee with Respect to Performance Compensation Awards . With regard to a particular Performance Period, the Committee shall have full discretion to select the length of such Performance Period (provided any such Performance Period shall be not less than one fiscal quarter in duration), the type(s) of Performance Compensation Awards to be issued, the Performance Criteria that will be used to establish the Performance Goal(s), the kind(s) and/or level(s) of the Performance Goal(s) that is (are) to apply to the Company and the Performance Formula. Within the first 90 days of a Performance Period (or, if longer or shorter, within the maximum period allowed under Section 162(m) of the Code), the Committee shall, with regard to the Performance Compensation Awards to be issued for such Performance Period, exercise its discretion with respect to each of the matters enumerated in the immediately preceding sentence of this Section 8.3(c) and record the same in writing.
     
  (d) Payment of Performance Compensation Awards

 

  (i) Condition to Receipt of Payment . Unless otherwise provided in the applicable Award Agreement, a Participant must be employed by the Company on the last day of a Performance Period to be eligible for payment in respect of a Performance Compensation Award for such Performance Period.
     
  (ii) Limitation . A Participant shall be eligible to receive payment in respect of a Performance Compensation Award only to the extent that: (A) the Performance Goals for such period are achieved; and (B) the Performance Formula as applied against such Performance Goals determines that all or some portion of such Participant’s Performance Compensation Award has been earned for the Performance Period.
     
  (iii) Certification . Following the completion of a Performance Period, the Committee shall review and certify in writing whether, and to what extent, the Performance Goals for the Performance Period have been achieved and, if so, calculate and certify in writing the amount of the Performance Compensation Awards earned for the period based upon the Performance Formula. The Committee shall then determine the actual size of each Participant’s Performance Compensation Award for the Performance Period and, in so doing, may apply Negative Discretion in accordance with Section 8.3(d)(iv) hereof, if and when it deems appropriate.

 

 
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  (iv) Use of Discretion . In determining the actual size of an individual Performance Compensation Award for a Performance Period, the Committee may reduce or eliminate the amount of the Performance Compensation Award earned under the Performance Formula in the Performance Period through the use of Negative Discretion if, in its sole judgment, such reduction or elimination is appropriate. The Committee shall not have the discretion to: (A) grant or provide payment in respect of Performance Compensation Awards for a Performance Period if the Performance Goals for such Performance Period have not been attained or (B) increase a Performance Compensation Award above the maximum amount payable under Section 8.3(d)(i) of the Plan.
     
  (v) Timing of Award Payments . Performance Compensation Awards granted for a Performance Period shall be paid to Participants as soon as administratively practicable following completion of the certifications required by this Section 8.3.

 

9. Compliance

 

9.1 Compliance with Applicable Laws . Each Award Agreement shall provide that no Shares shall be purchased or sold thereunder unless and until: (a) any then applicable requirements of Applicable Laws have been fully complied with to the satisfaction of the Company and its counsel; and (b) if required to do so by the Company, the Participant has executed and delivered to the Company a letter of investment intent in such form and containing such provisions as the Committee may require. The Company shall use reasonable efforts to seek to obtain from each regulatory commission or agency having jurisdiction over this Plan such authority as may be required to grant Awards and to issue and sell Shares upon exercise of the Awards; provided, however, that this undertaking shall not require the Company to register under the Securities Act the Plan, any Award or any Shares issued or issuable pursuant to any such Award. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of Shares under this Plan, the Company shall be relieved from any liability for failure to issue and sell Shares upon exercise of such Awards unless and until such authority is obtained.

 

10. Use of Proceeds

 

10.1 Proceeds from the sale of Shares issued pursuant to Awards, or upon exercise thereof, shall constitute general funds of the Company.

 

 
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11. Miscellaneous

 

11.1 Acceleration of Exercisability and Vesting . The Committee shall have the power to accelerate the time at which an Award may first be exercised or the time during which an Award or any part thereof will vest in accordance with this Plan, notwithstanding the provisions in the Award stating the time at which it may first be exercised or the time during which it will vest.

 

11.2 Shareholder Rights . Except as provided in this Plan or an Award Agreement, no Participant shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any Shares subject to such Award unless and until such Participant has satisfied all requirements for exercise of the Award pursuant to its terms and no adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions of other rights for which the record date is prior to the date such Share certificate is issued, except as provided in Section 12 hereof.

 

11.3 No Employment or Other Service Rights . Nothing in this Plan or any instrument executed or Award granted pursuant hereto shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Award was granted or shall affect the right of the Company or an Affiliate to terminate: (a) the employment of an Employee with or without notice and with or without Cause; or (b) the service of a Director pursuant to the by-laws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.

 

11.4 Transfer; Approved Leave of Absence . For purposes of this Plan, no termination of employment by an Employee shall be deemed to result from either: (a) a transfer to the employment of the Company from an Affiliate or from the Company to an Affiliate, or from one Affiliate to another; or (b) an approved leave of absence for military service or sickness, or for any other purpose approved by the Company, if the Employee’s right to reemployment is guaranteed either by a statute or by contract or under the policy pursuant to which the leave of absence was granted or if the Committee otherwise so provides in writing, in either case, except to the extent inconsistent with Section 409A of the Code if the applicable Award is subject thereto.

 

11.5 Withholding Obligations . To the extent provided by the terms of an Award Agreement and subject to the discretion of the Committee, the Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of Shares under an Award by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (a) tendering a cash payment; (b) authorizing the Company to withhold Shares from the Shares otherwise issuable to the Participant as a result of the exercise of, or acquisition of Shares under, the Award, provided, however, that no Shares are withheld with a value exceeding the minimum amount of tax required to be withheld by law; or (c) delivering to the Company previously owned and unencumbered Shares.

 

 
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12. Adjustments Upon Changes in Stock

 

In the event of changes in the outstanding Shares or in the capital structure of the Company by reason of any stock or extraordinary cash dividend, stock split, reverse stock split, an extraordinary corporate transaction such as any recapitalization, reorganization, merger, consolidation, combination, exchange, or other relevant change in capitalization occurring after the Grant Date of any Award, Awards granted under this Plan and any Award Agreements, the exercise price of Options and Stock Appreciation Rights, and the maximum number of Shares underlying all Awards stated in Section 5, will be equitably adjusted or substituted, as to the number, price or kind of a Share or other consideration subject to such Awards to the extent necessary to preserve the economic intent of such Award. In the case of adjustments made pursuant to this Section 12, unless the Committee specifically determines that such adjustment is in the best interests of the Company or any Affiliate, the Committee shall, in the case of Incentive Stock Options, ensure that any adjustments under this Section 12 will not constitute a modification, extension or renewal of the Incentive Stock Options within the meaning of Section 424(h)(3) of the Code, and in the case of Non-qualified Stock Options, ensure that any adjustments under this Section 12 will not constitute a modification of such Non-qualified Stock Options within the meaning of Section 409A of the Code. Any adjustments made under this Section 12 shall be made in a manner which does not adversely affect the exemption provided pursuant to Rule 16b-3 under the Exchange Act. Further, with respect to Awards intended to qualify as “performance-based compensation” under Section 162(m) of the Code, any adjustments or substitutions will not cause the Company to be denied a tax deduction on account of Section 162(m) of the Code. The Company shall give each Participant notice of an adjustment hereunder and, upon notice, such adjustment shall be conclusive and binding for all purposes.

 

13. Effect of Change in Control

 

13.1 Unless otherwise provided in an Award Agreement, notwithstanding any provision of this Plan to the contrary:

 

  (a) in the event of a Change in Control, all Options and Stock Appreciation Rights shall become immediately exercisable with respect to 100% of the Shares subject to such Options or Stock Appreciation Rights, and/or the Restricted Period shall expire immediately with respect to 100% of the Shares of Restricted Stock or Restricted Stock Unit; and
     
  (b) with respect to Performance Compensation Awards, in the event of a Change in Control, all Performance Goals or other vesting criteria will be deemed achieved at 100% of target levels and all other terms and conditions will be deemed met.

 

To the extent practicable, any actions taken by the Committee under subsections (a) and (b) shall occur in a manner and at a time which allows affected Participants the ability to participate in the Change in Control with respect to the Shares underlying their Awards.

 

13.2 In addition, in the event of a Change in Control, the Committee may, in its discretion and upon at least 10 days’ advance notice to the affected Persons, cancel any outstanding Awards and pay to the holders thereof, in cash or stock, or any combination thereof, the value of such Awards based upon the price per Share received or to be received by other Shareholders in connection therewith. In the case of any Option or Stock Appreciation Right with an exercise price (or SAR Exercise Price in the case of a Stock Appreciation Right) that equals or exceeds the price paid for a Share in connection with the Change in Control, the Committee may cancel the Option or Stock Appreciation Right without the payment of consideration therefor.

 

 
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13.3 The obligations of the Company under this Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to all or substantially all of the assets and business of the Company and its Affiliates, taken as a whole.

 

14. Amendment of Plan and Awards

 

14.1 Amendment of Plan . The Board at any time, and from time to time, may amend or terminate this Plan. However, except as provided in Section 12 relating to adjustments upon changes in Shares and Section 14.3, no amendment shall be effective unless approved by the Shareholders (to the extent Shareholder approval is necessary to satisfy any Applicable Laws). At the time of such amendment, the Board shall determine, upon advice from counsel, whether such amendment will be contingent on Shareholder approval.

 

14.2 Shareholder Approval . The Board may, in its sole discretion, submit any other amendment to this Plan for Shareholder approval, including, amendments to this Plan intended to satisfy the requirements of Section 162(m) of the Code and the regulations thereunder regarding the exclusion of performance-based compensation from the limit on corporate deductibility of compensation paid to certain executive officers.

 

14.3 Contemplated Amendments . It is expressly contemplated that the Board may amend this Plan in any respect the Board deems necessary or advisable to provide eligible Employees, Consultants and Directors with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder relating to Incentive Stock Options or to the nonqualified deferred compensation provisions of Section 409A of the Code and/or to bring the Plan and/or Awards granted under it into compliance therewith.

 

14.4 No Impairment of Rights . Rights under any Award granted before amendment of this Plan shall not be impaired by any amendment of this Plan unless: (a) the Company requests the consent of the Participant; and (b) the Participant consents in writing.

 

14.5 Amendment of Awards . The Committee at any time, and from time to time, may amend the terms of any one or more Awards; provided, however, that the Committee may not affect any amendment which would otherwise constitute an impairment of the rights under any Award unless: (a) the Company requests the consent of the Participant; and (b) the Participant consents in writing.

 

 
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15. General Provisions

 

15.1 Forfeiture Events . The Committee may specify in an Award Agreement that the Participant’s rights, payments and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain events, in addition to applicable vesting conditions of an Award. Such events may include, without limitation, breach of non-competition, non-solicitation, confidentiality, or other restrictive covenants that are contained in the Award Agreement or otherwise applicable to the Participant, a termination of the Participant’s Continuous Service for Cause, or other conduct by the Participant that is detrimental to the business or reputation of the Company and/or any Affiliate.

 

15.2 Clawback . Notwithstanding any other provisions in this Plan, any Award which is subject to recovery under any Applicable Laws will be subject to such deductions and clawback as may be required to be made pursuant to such Applicable Laws (or any policy adopted by the Company pursuant to any such Applicable Laws).

 

15.3 Other Compensation Arrangements . Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to Shareholder approval if such approval is required, and such arrangements may be either generally applicable or applicable only in specific cases.

 

15.4 Sub-plans . The Committee may from time to time establish sub-plans under the Plan for purposes of satisfying blue sky, securities, tax or other laws of various jurisdictions in which the Company intends to grant Awards. Any sub-plans shall contain such limitations and other terms and conditions as the Committee determines are necessary or desirable. All sub-plans shall be deemed a part of this Plan, but each sub-plan shall apply only to the Participants in the jurisdiction for which the sub-plan was designed.

 

15.5 Deferral of Awards . The Committee may establish one or more programs under this Plan to permit selected Participants the opportunity to elect to defer receipt of consideration upon exercise of an Award, satisfaction of performance criteria, or other event that absent the election would entitle the Participant to payment or receipt of Shares or other consideration under an Award. The Committee may establish the election procedures, the timing of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if any, on amounts, shares or other consideration so deferred, and such other terms, conditions, rules and procedures that the Committee deems advisable for the administration of any such deferral program.

 

15.6 Unfunded Plan . This Plan shall be unfunded. Neither the Company, the Board nor the Committee shall be required to establish any special or separate fund or to segregate any assets to assure the performance of its obligations under this Plan.

 

15.7 Delivery . Upon exercise of a right granted under this Plan, the Company shall issue Shares or pay any amounts due within a reasonable period of time thereafter. Subject to any statutory or regulatory obligations the Company may otherwise have, for purposes of this Plan, 30 days shall be considered a reasonable period of time.

 

15.8 No Fractional Shares . No fractional Shares shall be issued or delivered pursuant to this Plan. The Committee shall determine whether cash, additional Awards or other securities or property shall be issued or paid in lieu of fractional Shares or whether any fractional Shares should be rounded, forfeited or otherwise eliminated.

 

 
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15.9 Other Provisions . The Award Agreements authorized under this Plan may contain such other provisions not inconsistent with this Plan, including, without limitation, restrictions upon the exercise of the Awards, as the Committee may deem advisable.

 

15.10 Section 409A . This Plan is intended to comply with Section 409A of the Code to the extent subject thereto, and, accordingly, to the maximum extent permitted, this Plan shall be interpreted and administered to be in compliance therewith. Any payments described in this Plan that are due within the “short-term deferral period” as defined in Section 409A of the Code shall not be treated as deferred compensation unless Applicable Laws require otherwise. Notwithstanding anything to the contrary in this Plan, to the extent required to avoid accelerated taxation and tax penalties under Section 409A of the Code, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to the Plan during the six month period immediately following the Participant’s termination of Continuous Service shall instead be paid on the first payroll date after the six month anniversary of the Participant’s separation from service (or the Participant’s death, if earlier). Notwithstanding the foregoing, neither the Company nor the Committee shall have any obligation to take any action to prevent the assessment of any excise tax or penalty on any Participant under Section 409A of the Code, and neither the Company nor the Committee will have any liability to any Participant for such tax or penalty.

 

15.11 Disqualifying Dispositions . Any Participant who shall make a “disposition” (as defined in Section 424 of the Code) of all or any portion of the Shares acquired upon exercise of an Incentive Stock Option within two years from the Grant Date of such Incentive Stock Option or within one year after the issuance of the Shares acquired upon exercise of such Incentive Stock Option (a “ Disqualifying Disposition ”) shall be required to immediately advise the Company in writing as to the occurrence of the sale and the price realized upon the sale of such Shares.

 

15.12 Section 16 . It is the intent of the Company that this Plan satisfy, and be interpreted in a manner that satisfies, the applicable requirements of Rule 16b-3 as promulgated under Section 16 of the Exchange Act so that Participants will be entitled to the benefit of Rule 16b-3, or any other rule promulgated under Section 16 of the Exchange Act, and will not be subject to short-swing liability under Section 16 of the Exchange Act. Accordingly, if the operation of any provision of this Plan would conflict with the intent expressed in this Section 15.12, such provision to the extent possible shall be interpreted and/or deemed amended so as to avoid such conflict.

 

15.13 Section 162(m) . To the extent the Committee issues any Award that is intended to be exempt from the deduction limitation of Section 162(m) of the Code, the Committee may, without shareholder or grantee approval, amend this Plan or the relevant Award Agreement retroactively or prospectively to the extent it determines necessary in order to comply with any subsequent clarification of Section 162(m) of the Code required to preserve the Company’s federal income tax deduction for compensation paid pursuant to any such Award.

 

15.14 Beneficiary Designation . Each Participant may from time to time name any beneficiary or beneficiaries by whom any right under this Plan is to be exercised in case of such Participant’s death. Each designation will revoke all prior designations by the same Participant, shall be in a form reasonably prescribed by the Committee, and shall be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime.

 

 
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15.15 Expenses . The costs of administering this Plan shall be paid by the Company.

 

15.16 Severability . If any of the provisions of this Plan or any Award Agreement is held to be invalid, illegal or unenforceable, whether in whole or in part, such provision shall be deemed modified to the extent, but only to the extent, of such invalidity, illegality or unenforceability and the remaining provisions shall not be affected thereby.

 

15.17 Plan Headings . The headings in this Plan are for purposes of convenience only and are not intended to define or limit the construction of the provisions hereof.

 

15.18 Non-Uniform Treatment . The Committee’s determinations under this Plan need not be uniform and may be made by it selectively among persons who are eligible to receive, or actually receive, Awards. Without limiting the generality of the foregoing, the Committee shall be entitled to make non-uniform and selective determinations, amendments and adjustments, and to enter into non-uniform and selective Award Agreements.

 

16. Effective Date of Plan

 

16.1 This Plan shall become effective as of the Effective Date, but no Award shall be exercised (or, in the case of a stock Award, shall be granted) unless and until this Plan has been approved by the Shareholders, which approval shall be within 12 months before or after the date this Plan is adopted by the Board.

 

17. Termination or Suspension of this Plan

 

17.1 This Plan shall terminate automatically on October 15, 2027. No Award shall be granted pursuant to this Plan after such date, but Awards granted before may extend beyond that date. The Board may suspend or terminate this Plan at any earlier date pursuant to Section 14.1 hereof. No Awards may be granted under this Plan while this Plan is suspended or after it is terminated. Unless the Company determines to submit Section 8.3 of this Plan and the definition of “Performance Goal” and “Performance Criteria” to the Shareholders at the first Shareholder meeting that occurs in the fifth year following the year in which this Plan was last approved by Shareholders (or any earlier meeting designated by the Board), in accordance with the requirements of Section 162(m) of the Code, and such Shareholder approval is obtained, then no further Performance Compensation Awards shall be made to Covered Employees under Section 8.3 after the date of such annual meeting, but this Plan may continue in effect for Awards to Participants not in accordance with Section 162(m) of the Code.

 

18. Choice of Law

 

18.1 The law of the State of Nevada shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to such state’s conflict of law rules.

 

As adopted by the Board of Directors of ICOX Innovations Inc. on October 15, 2017, as amended on January 22, 2018.

 

 
 

 

 

NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (AS DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT.

 

Unless permitted under securities legislation, the holder of this security must not trade the security before the date that is 4 months and a day after the later of (i) OCTOBER 15, 2017, and (ii) the date the issuer became a reporting issuer in any province or territory.

 

STOCK OPTION AGREEMENT

 

This AGREEMENT is entered into as of the October 15, 2017 (the “Date of Grant” ).

 

BETWEEN:

 

  APPCOIN INNOVATIONS INC. , a company incorporated pursuant to the laws of the State of Nevada, with an office at 561 Indiana Court, Venice Beach, CA 90291
   
  (the “Company” )

 

AND:

 

  JAMES GEISKOPF , a businessman with an address at 3250 Oakland Hills Court, Fairfield, CA 94534
   
  (the “Optionee” )

 

WHEREAS:

 

A. The Company’s board of directors (the “Board” ) has approved and adopted a 2017 Equity Incentive Plan (the “Plan” ), whereby the Board is authorized to grant stock options to purchase shares of common stock of the Company to the directors, officers, employees, and consultants of the Company or any Parent or Subsidiary of the Company (as defined herein);

 

B. The Optionee is a director, officer, employee or consultant of the Company, the Parent or a Subsidiary; and

 

C. The Company wishes to grant stock options to purchase a total of 400,000 Optioned Shares (as defined herein) to the Optionee, as follows:

 

    Incentive Stock Options (as defined herein)
  X Non-Qualified Stock Options (as defined herein)

 

     
  2  

 

NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

1. Definitions

 

1.1 In this Agreement, the following terms shall have the following meanings:

 

  (a) 1933 Act ” means the Securities Act of 1933, as amended;
     
  (b) Board ” means the board of directors of the Company;
     
  (c) Canadian Accredited Investor Questionnaire ” means a questionnaire substantially in the form of the Canadian Accredited Investor Questionnaire attached to this Agreement as Schedule B;
     
  (d) Code ” means the Internal Revenue Code of 1986;
     
  (e) Common Stock ” means the shares of common stock of the Company;
     
  (f) Exercise Price ” means $0.10 per share;
     
  (g) Expiry Date ” means October 15, 2027;
     
  (h) Incentive Stock Options ” means any Options that meet all the requirements under section 422 of the Code;
     
  (i) Non-Qualified Stock Options ” means any Options that do not qualify as Incentive Stock Options and, thus, do not meet the requirements under section 422 of the Code;
     
  (j) Notice of Exercise ” means a notice in writing addressed to the Company at its address first recited hereto (or such other address of which the Company may from time to time notify the Optionee in writing), substantially in the form attached as Schedule B hereto, which notice shall specify therein the number of Optioned Shares in respect of which the Options are being exercised;
     
  (k) Options ” means the right and option to purchase, from time to time, all, or any part of the Optioned Shares granted to the Optionee by the Company pursuant to Section 2.1 of this Agreement;
     
  (l) Optioned Shares ” means the shares of Common Stock that are issued pursuant to the exercise of the Options;
     
  (m) Parent ” means a company or other entity that owns at least fifty percent (50%) of the outstanding voting stock or voting power of the Company;
     
  (n) Plan ” has the meaning ascribed thereto in Recital A of this Agreement;
     
  (o) Securities ” means, collectively, the Options and the Optioned Shares;
     
  (p) Subsidiary ” means a company or other entity, at least fifty percent (50%) of the outstanding voting stock or voting power of which is beneficially owned, directly or indirectly, by the Company; and
     
  (q) Vested Options ” means the Options that have vested in accordance with Section 2.2 of this Agreement.

 

     
  3  

 

1.2 Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Plan.

 

2. The Options

 

2.1 The Company hereby grants to the Optionee, on the terms and conditions set out in this Agreement and in the Plan, Options to purchase a total of 400,000 Optioned Shares at the Exercise Price.

 

2.2 The Options will vest in accordance with Schedule A to this Agreement. The Options may be exercised immediately after vesting.

 

2.3 The Options shall, at 5:00 p.m. (Pacific time) on the Expiry Date, expire and be of no further force or effect whatsoever.

 

2.4 The Company shall not be obligated to cause the issuance, transfer or delivery of a certificate or certificates representing Optioned Shares to the Optionee, until provision has been made by the Optionee, to the satisfaction of the Company, for the payment of the aggregate Exercise Price for all Optioned Shares for which the Options shall have been exercised, and for satisfaction of any tax withholding obligations associated with such exercise.

 

2.5 Subject to the provisions of this Agreement and the Plan and subject to compliance with any applicable securities laws, the Options shall be exercisable, in full or in part, at any time after vesting, until termination. If less than all of the Optioned Shares included in the vested portion of any Options are purchased, the remainder may be purchased at any subsequent time prior to the Expiry Date. Only whole shares may be issued pursuant to the exercise of any Options, and to the extent that any Option covers less than one (1) share, it is not exercisable.

 

2.6 Each exercise of the Options shall be by means of delivery of a Notice of Exercise (which may be in the form attached hereto as Schedule C) to the Chief Financial Officer of the Company at its principal executive office, specifying the number of Optioned Shares to be purchased and accompanied by payment in cash or by certified check or cashier’s check in the amount of the full Exercise Price for the Common Stock to be purchased. In addition to payment in cash or by certified check or cashier’s check and if agreed to in advance by the Company, the Optionee or transferee of the Options may pay for all or any portion of the aggregate Exercise Price by complying with any other payment mechanism approved by the Board at the time of exercise.

 

2.7 Reference is made to the Plan for particulars of the rights and obligations of the Optionee and the Company in respect of:

 

  (a) the terms and conditions on which the Options are granted except to the extent set forth herein; and,
     
  (b) a consolidation or subdivision of the Company’s share capital or a corporate reorganization;

 

all to the same effect as if the provisions of the Plan were set out in this Agreement and to all of which the Optionee assents. A copy of the Plan is available to the Optionee at no charge, at the Company’s principal executive office. Any provision of this Agreement that is inconsistent with the Plan shall be considered void and replaced with the applicable provision of the Plan. The Company may modify, extend or renew this Agreement or the Options represented hereby or accept the surrender thereof (to the extent not previously exercised) and authorize the granting of a new option in substitution therefore (to the extent not previously exercised), subject at all times to the Plan, the applicable rules of any applicable regulatory authority or stock exchange, and any applicable laws. Notwithstanding the foregoing provisions of this Section 2.7, the Company shall not have the right to make any modification which would materially alter the terms of the Options to the Optionee’s detriment or materially impair any rights of the Optionee hereunder without the consent of the Optionee.

 

     
  4  

 

2.8 By accepting the Options, the Optionee represents and agrees that none of the Optioned Shares purchased upon exercise of the Options will be distributed in violation of applicable federal and state laws and regulations. The Optionee further represents and agrees to provide the Company with any other document reasonably requested by the Company or the Company’s Counsel.

 

3. Documents Required from Optionee

 

3.1 The Optionee must complete, sign and return to the Company:

 

  (a) a copy of this Agreement;
     
  (b) a copy of the Acknowledgements, and Representations and Warranties of the Optionee attached hereto as Schedule F;
     
  (c) if the Optionee is resident in Canada, a Canadian Questionnaire in the form attached hereto as Schedule C; and
     
  (d) if the Optionee is resident in the United States and if an exemption from the registration requirements imposed by the 1933 Act is necessary for entry into this Agreement, one of the two questionnaires in the forms attached hereto as Schedule D and Schedule E, whichever applies.

 

3.2 The Optionee shall complete, sign and return to the Company as soon as possible, on request by the Company, any documents, questionnaires, notices and undertakings as may be required by regulatory authorities, and applicable law.

 

4. Subject to Plan

 

The terms of the Options will be subject to the Plan, as may from time to time be amended, and any inconsistencies between this Agreement and the Plan, as the same may be from time to time amended, shall be governed by the provisions of the Plan. A copy of the Plan will be delivered to the Optionee, and will be available for inspection at the principal offices of the Company.

 

5. Acknowledgement and Waiver

 

The Optionee hereby waives, to the fullest extent permitted by law, any rights of withdrawal, rescission or compensation for damages to which the Optionee might be entitled in connection with the distribution of any of the Securities.

 

6. Professional Advice

 

The acceptance of the Options and the sale of Common Stock issued pursuant to the exercise of Options may have consequences under federal, state and provincial tax and securities laws which may vary depending upon the individual circumstances of the Optionee. Accordingly, the Optionee acknowledges that he or she has been advised to consult his or her personal legal and tax advisor in connection with this Agreement and his or her dealings with respect to Options. Without limiting other matters to be considered with the assistance of the Optionee’s professional advisors, the Optionee should consider: (a) the merits and risks of an investment in the underlying Optioned Shares; and (b) any resale restrictions that might apply under applicable securities laws.

 

     
  5  

 

7. Legending of Subject Securities

 

7.1 The Optionee hereby acknowledges that that upon the issuance thereof, and until such time as the same is no longer required under the applicable securities laws and regulations, the certificates representing any of the Optioned Shares may bear a legend in substantially the following form:

 

If the Optionee is not resident in the United States:

 

THE SECURITIES REPRESENTED HEREBY HAVE BEEN OFFERED IN AN OFFSHORE TRANSACTION TO A PERSON WHO IS NOT A U.S. PERSON (AS DEFINED HEREIN) PURSUANT TO REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”).

 

NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE 1933 ACT, OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (AS DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT.

 

Unless permitted under securities legislation, the holder of this security must not trade the security before the date that is 4 months and a day after THE later of (i) [ insert the distribution date ], and (ii) the date the issuer became a reporting issuer in any province or territory.

 

If the Option is resident in the United States:

 

NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (AS DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT.

 

Unless permitted under securities legislation, the holder of this security must not trade the security before the date that is 4 months and a day after THE later of (i) [ insert the distribution date ], and (ii) the date the issuer became a reporting issuer in any province or territory.

 

7.2 The Optionee hereby acknowledges and agrees to the Company making a notation on its records or giving instructions to the registrar and transfer agent of the Company in order to implement the restrictions on transfer set forth and described in this Agreement.

 

     
  6  

 

8. Resale restrictions

 

8.1 This Agreement and the Options represented hereby are not transferable. Optioned Shares received upon exercise of any Options will be subject to resale restrictions contained in the securities legislation applicable to the Company and the Optionee. The Optionee acknowledges and agrees that the Optionee is solely responsible (and the Company is not in any way responsible) for compliance with applicable resale restrictions.

 

8.2 The Optionee acknowledges that any resale of any of the Optioned Shares will be subject to resale restrictions contained in the securities legislation applicable to the Optionee or proposed transferee. The Optionee acknowledges that none of the Optioned Shares have been registered under the 1933 Act or the securities laws of any state of the United States. The Optioned Shares may not be offered or sold in the United States unless registered in accordance with federal securities laws and all other applicable securities laws or exemptions from such registration requirements are available. The Optionee acknowledges that the Optioned Shares are subject to resale restrictions in Canada and may not be traded in Canada except as permitted by the applicable provincial securities laws and the rules made thereunder.

 

9. No Employment Relationship

 

The grant of an Option shall in no way constitute any form of agreement or understanding binding on the Company or any related company, express or implied, that the Company or any related company will employ or contract with an Optionee, for any length of time, nor shall it interfere in any way with the Company’s or, where applicable, a related company’s right to terminate Optionee’s employment at any time, which right is hereby reserved.

 

10. Governing Law

 

This Agreement is governed by the laws of the State of Nevada and the federal laws of the United States of America as applicable therein. The Optionee irrevocably attorns to the jurisdiction of the courts of the State of Arizona.

 

11. Costs

 

The Optionee acknowledges and agrees that all costs and expenses incurred by the Optionee (including any fees and disbursements of any special counsel retained by the Optionee) relating to the acquisition of the Securities shall be borne by the Optionee.

 

12. Survival

 

This Agreement, including without limitation the representations, warranties and covenants contained herein, shall survive and continue in full force and effect and be binding upon the parties hereto notwithstanding the completion of the purchase of the shares underlying the Options by the Optionee pursuant hereto.

 

13. Assignment

 

This Agreement is not transferable or assignable.

 

14. Currency

 

Unless explicitly stated otherwise, all funds in this Agreement are stated in United States dollars.

 

15. Severability

 

The invalidity or unenforceability of any particular provision of this Agreement shall not affect or limit the validity or enforceability of the remaining provisions of this Agreement.

 

     
  7  

 

16. Counterparts and Electronic Means

 

This Agreement may be executed in several counterparts, each of which will be deemed to be an original and all of which will together constitute one and the same instrument. Delivery of an executed copy of this Agreement by electronic facsimile transmission or other means of electronic communication capable of producing a printed copy will be deemed to be execution and delivery of this Agreement as of the date first above written.

 

17. Entire Agreement

 

This Agreement is the only agreement between the Optionee and the Company with respect to the Options, and this Agreement and the Plan, once approved, supersede all prior and contemporaneous oral and written statements and representations and contain the entire agreement between the parties with respect to the Options.

 

IN WITNESS WHEREOF the parties hereto have duly executed this Agreement as of the date first above written.

 

APPCOIN INNOVATIONS INC.

 

Per: /s/ Michael Blum  
  Authorized Signatory  

 

       
WITNESSED BY:   )  
    )  
    )  
    )  
    )  
Name   ) /s/ James Geiskopf
    ) JAMES GEISKOPF
    )  
    )  
Address   )  
    )  
    )  
    )  
    )  
Occupation   )  

 

     
A- 1  

 

Schedule A

 

VESTING SCHEDULE

 

1/3 of the Options will vest on October 15, 2017, October 15, 2018 and October 15, 2019.

 

     
B- 1  

 

Schedule B

 

NOTICE OF EXERCISE

 

TO: AppCoin Innovations Inc.
  561 Indiana Court
  Venice Beach, CA 90291

 

This Notice of Exercise shall constitute a proper Notice of Exercise pursuant to section 2.6 of the Stock Option Agreement dated October 15, 2017 (the “ Agreement ”), between AppCoin Innovations Inc. (the “Company” ) and the undersigned. The undersigned hereby elects to exercise the Optionee’s options to purchase ____________________ shares of the common stock of the Company at a price of $0.10 per share on the terms and conditions set forth in the Agreement.

 

Payment of aggregate consideration of $____________in cash or by certified check or cashier’s check accompanies this notice.

 

The Optionee hereby represents and warrants to the Company that all representations and warranties set out in the Agreement (and the applicable schedules hereto) are true as of the date of the exercise of the Options under the Agreement. The Optionee hereby further represents and warrants to the Company that the shares are being purchased only for investment and without intention to sell or distribute such shares.

 

The Optionee hereby directs the Company to issue, register and deliver the certificates representing the shares as follows:

 

Registration Information:   Delivery Instructions:
     
Name to appear on certificates   Name
     
Address   Address
     
City, State, and Zip Code    
     
    Telephone Number

 

DATED at _____________________________, the day of______________, _______.

 

  X
  Signature
   
  (Name and, if applicable, Office)
   
  (Address)
   
  (City, State, and Zip Code)
   
  Fax Number or E-mail Address
   
  Social Security/Tax I.D. No.

 

     
C- 1  

 

Schedule C

 

CANADIAN QUESTIONNAIRE

 

TO: APPCOIN INNOVATIONS INC. (the “ Company ”)

 

RE: Stock options (the “ Options ”) of the Company

 

Capitalized terms used in this Canadian Questionnaire (this “ Questionnaire ”) and not specifically defined have the meaning ascribed to them in the Stock Option Agreement between the undersigned (the “ Optionee ”) and the Company to which this Schedule C is attached.

 

All dollar amounts referred to in this Questionnaire and Appendices A, B and C are in lawful money of Canada, unless otherwise indicated.

 

In connection with the grant to the Optionee of the Options, the Optionee hereby represents, warrants and certifies to the Company that the Optionee:

 

  (i) is acquiring the Options as principal (or deemed principal under the terms of National Instrument 45-106 – Prospectus Exemptions adopted by the Canadian Securities Administrators (“ NI 45-106 ”));
     
  (ii) (A)       is resident in or is subject to the laws of one of the following (check one):

 

  [   ] Alberta [   ] New Brunswick [   ] Prince Edward Island
       
  [   ] British Columbia [   ] Nova Scotia [   ] Quebec
       
  [   ] Manitoba [   ] Ontario [   ] Saskatchewan
       
  [   ] Newfoundland and Labrador [   ] Yukon
     
  [   ] Northwest Territories

or

 

    (B)    [   ] is resident in a country other than Canada or the United States; and
     
  (iii) has not been provided with any offering memorandum in connection with the acquisition of the Options.

 

In connection with the grant of the Options, the Optionee hereby represents, warrants, covenants and certifies that the Optionee meets one or more of the following criteria:

 

A. OPTIONEE QUALIFYING UNDER THE EMPLOYEE, DIRECTOR, OFFICER AND CONSULTANT EXEMPTION

 

In connection with the grant of the Options, the Optionee hereby represents, warrants, covenants and certifies that the Optionee meets one or more of the following criteria:

 

  [ ] (i) is an employee, officer or director of the Company; or
       
  [ ] (ii) is a consultant of the Company who provides services to the Company or a related entity of the Company and spends or will spend a significant amount of time and attention on the business and affairs of the Company or a related entity of the Company; and
       
  has voluntarily agreed to the grant of the Options.

 

     
C- 2  

 

B. OPTIONEES QUALIFYING UNDER THE ACCREDITED INVESTOR EXEMPTION

 

In connection with the grant of the Options, the Optionee hereby represents, warrants, covenants and certifies that the Optionee meets one or more of the following criteria:

 

(a) _____ the Optionee is an “accredited investor” within the meaning of NI 45-106, by virtue of satisfying the indicated criterion below (YOU MUST INITIAL OR PLACE A CHECK-MARK ON THE APPROPRIATE LINE(S)) ( see certain guidance with respect to accredited investors that starts on page C-5 below )

 

  [ ] (i) except in Ontario, a person registered under the securities legislation of a jurisdiction of Canada as an adviser or dealer,
       
  [ ] (ii) an individual registered under the securities legislation of a jurisdiction of Canada as a representative of a person referred to in paragraph (i),
       
  [ ] (iii) an individual formerly registered under the securities legislation of a jurisdiction of Canada, other than an individual formerly registered solely as a representative of a limited market dealer under one or both of the Securities Act (Ontario) or the Securities Act (Newfoundland and Labrador),
       
  [ ] (iv) an individual who, either alone or with a spouse, beneficially owns financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds $1,000,000 (YOU MUST ALSO COMPLETE AND SIGN APPENDIX “A” TO THIS QUESTIONNAIRE THAT STARTS ON PAGE C-9 ),
       
  [ ] (v) an individual who beneficially owns financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds $5,000,000,
       
  [ ] (vi) an individual whose net income before taxes exceeded $200,000 in each of the 2 most recent calendar years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of the 2 most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year (YOU MUST ALSO COMPLETE AND SIGN APPENDIX “A” TO THIS QUESTIONNAIRE THAT STARTS ON PAGE C-9 ), or
       
  [ ] (vii) an individual who, either alone or with a spouse, has net assets of at least $5,000,000 (YOU MUST ALSO COMPLETE AND SIGN APPENDIX “A” TO THIS QUESTIONNAIRE THAT STARTS ON PAGE C-9 ).

 

(b) if the Optionee is an “accredited investor” within the meaning of NI 45-106 by virtue of satisfying the indicated criterion as set out in paragraphs (iv), (vi) or (vii) above, the Optionee has provided the Company with the signed risk acknowledgment form set out in Appendix “A” to this Questionnaire;

 

     
C- 3  

 

C. OPTIONEES QUALIFYING UNDER THE FAMILY, FRIENDS AND BUSINESS ASSOCIATES EXEMPTION

 

In connection with the grant of the Options, the Optionee hereby represents, warrants, covenants and certifies that the Optionee meets one or more of the following criteria:

 

 

(a)

the Optionee is ( YOU MUST PLACE A CHECK-MARK ON THE APPROPRIATE LINE AND PROVIDE THE REQUESTED INFORMATION, AS APPLICABLE ):
   
  [ ] (i) a director, executive officer or control person of the Company, or of an affiliate of the Company,
       
  [ ] (ii) ______ a close personal friend ( see guidance on making this determination that starts on page C-6 below ) of ___________________________________ ( print name of person ), who is a director, executive officer, founder or control person of the Company, or of an affiliate of the Company, and has been for __________________________ years based on the following factors:_____________________________________________________________________________
___________________________________________________________________________________
( explain the nature of the close personal friendship ),
       
  [ ] (iii) a close business associate ( see guidance on making this determination that starts on page C-6 below ) of ___________________________________ ( print name of person ), who is a director, executive officer, founder or control person of the Company, or of an affiliate of the Company, and has been for __________________________ years based on the following factors: ___________________________________________________________________________________
_________________________________________________________________________ ( explain the nature of the close business association ),
       
(b) if the Optionee is resident in the Province of Ontario or is subject to the securities laws of the Province of Ontario, the Optionee has provided the Company with a signed risk acknowledgement form in the form attached as Appendix “B” to this Questionnaire (YOU MUST ALSO COMPLETE AND SIGN APPENDIX “B” TO THIS QUESTIONNAIRE THAT STARTS ON PAGE C-11) , or
   
(c) if the Optionee is resident in the Province of Saskatchewan or is subject to the securities laws of the Province of Saskatchewan, and the Optionee is relying on the indicated criterion as set out in subsections C(a)(ii) or C(a)(iii) if the distribution is based in whole or in part on a close personal friendship or a close business association, the Optionee has provided the Company with a signed risk acknowledgement form in the form attached as Appendix “C” to this Questionnaire (YOU MUST ALSO COMPLETE AND SIGN APPENDIX “C” TO THIS QUESTIONNAIRE THAT STARTS ON PAGE C-14 ); or

 

For the purposes of this Questionnaire and the appendices attached hereto:

 

  (a) an issuer is “ affiliated ” with another issuer if
       
    (i) one of them is the subsidiary of the other, or
       
    (ii) each of them is controlled by the same person;

 

     
C- 4  

  

  (b) control person ” means
       
    (i) a person who holds a sufficient number of the voting rights attached to all outstanding voting securities of an issuer to affect materially the control of the issuer, or
       
    (ii) each person in a combination of persons, acting in concert by virtue of an agreement, arrangement, commitment or understanding, which holds in total a sufficient number of the voting rights attached to all outstanding voting securities of an issuer to affect materially the control of the issuer,
       
    and, if a person or combination of persons holds more than 20% of the voting rights attached to all outstanding voting securities of an issuer, the person or combination of persons is deemed, in the absence of evidence to the contrary, to hold a sufficient number of the voting rights to affect materially the control of the issuer;

 

  (c) director ” means
       
    (i) a member of the board of directors of a company or an individual who performs similar functions for a company, and
       
    (ii) with respect to a person that is not a company, an individual who performs functions similar to those of a director of a company;

 

  (d) executive officer ” means, for an issuer, an individual who is
       
    (i) a chair, vice-chair or president,
       
    (ii) a vice-president in charge of a principal business unit, division or function including sales, finance or production, or
       
    (iii) performing a policy-making function in respect of the issuer;

 

 

  (e) financial assets ” means
       
    (i) cash,
       
    (ii) securities, or
       
    (iii) a contract of insurance, a deposit or an evidence of a deposit that is not a security for the purposes of securities legislation;

 

  (f) foreign jurisdiction ” means a country other than Canada or a political subdivision of a country other than Canada;
       
  (j) individual ” means a natural person, but does not include
       
    (i) a partnership, unincorporated association, unincorporated syndicate, unincorporated organization or trust, or
       
    (ii) a natural person in the person’s capacity as a trustee, executor, administrator or personal or other legal representative;

 

  (k) jurisdiction ” or “jurisdiction of Canada” means a province or territory of Canada except when used in the term foreign jurisdiction;
       
  (l) person ” includes
       
    (i) an individual;
       
    (ii) a corporation;
       
    (iii) a partnership, trust, fund and an association, syndicate, organization or other organized group of persons, whether incorporated or not; and
       
    (iv) an individual or other person in that person’s capacity as a trustee, executor, administrator or personal or other legal representative;

 

     
C- 5  

 

  (m) related liabilities ” means
       
    (i) liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets, or
       
    (ii) liabilities that are secured by financial assets; and

 

  (n) spouse ” means, an individual who,
       
    (i) is married to another individual and is not living separate and apart within the meaning of the Divorce Act (Canada), from the other individual,
       
    (ii) is living with another individual in a marriage-like relationship, including a marriage-like relationship between individuals of the same gender, or
       
    (iii) in Alberta, is an individual referred to in paragraph (i) or (ii), or is an adult interdependent partner within the meaning of the Adult Interdependent Relationships Act (Alberta).

 

Guidance On Accredited Investor Exemptions for Individuals

 

An individual accredited investor is an individual:

 

  (a) who, either alone or with a spouse, beneficially owns financial assets (please see the guidance below regarding what financial assets are) having an aggregate realizable value that. before taxes but net of any related liabilities (please see the guidance below regarding what related liabilities are), exceeds $1,000,000;
     
  (b) whose net income before taxes exceeded $200,000 in each of the 2 most recent calendar years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of the 2 most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year;
     
  (c) who, either alone or with a spouse, has net assets (please see the guidance below regarding calculating net assets) of at least $5,000,000; and
     
  (d) who beneficially owns financial assets (please see the guidance below regarding what financial assets are) having an aggregate realizable value that, before taxes but net of any related liabilities (please see the guidance below regarding what related liabilities are), exceeds $5,000,000.

 

The monetary thresholds above are intended to create bright-line standards. Optionees who do not satisfy these monetary thresholds do not qualify as accredited investors.

 

Spouses

 

Sections (a), (b) and (c) above are designed to treat spouses as a single investing unit, so that either spouse qualifies as an accredited investor if the combined financial assets of both spouses exceed $1,000,000, the combined net income of both spouses exceeds $300,000, or the combined net assets of both spouses exceed $5,000,000. Section (d) above does not treat spouses as a single investing unit.

 

If the combined net income of both spouses does not exceed $300,000, but the net income of one of the spouses exceeds $200,000, only the spouse whose net income exceeds $200,000 qualifies as an accredited investor.

 

     
C- 6  

 

Financial Assets and Related Liabilities

 

For the purposes of Sections (a) and (d) above, “ financial assets ” means: (1) cash, (2) securities, or (3) a contract of insurance, a deposit or an evidence of a deposit that is not a security for the purposes of securities legislation. These financial assets are generally liquid or relatively easy to liquidate. The value of a optionee’s personal residence is not included in a calculation of financial assets.

 

The calculation of financial assets must exclude “ related liabilities ”, meaning: (1) liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets, or (2) liabilities that are secured by financial assets.

 

As a general matter, it should not be difficult to determine whether financial assets are beneficially owned by an individual, an individual’s spouse, or both, in any particular instance. However, in the case where financial assets are held in a trust or in another type of investment vehicle for the benefit of an individual, there may be questions as to whether the individual beneficially owns the financial assets. The following factors are indicative of beneficial ownership of financial assets:

 

    physical or constructive possession of evidence of ownership of the financial asset;
     
    entitlement to receipt of any income generated by the financial asset;
     
    risk of loss of the value of the financial asset; and
     
    the ability to dispose of the financial asset or otherwise deal with it as the individual sees fit.

 

For example, securities held in a self-directed RRSP for the sole benefit of an individual are beneficially owned by that individual.

 

In general, financial assets in a spousal RRSP can be included for the purposes of the $1,000,000 financial asset test in Section (a) above because Section (a) takes into account financial assets owned beneficially by a spouse. However, financial assets in a spousal RRSP cannot be included for purposes of the $5,000,000 financial asset test in Section (d) above.

 

Financial assets held in a group RRSP under which the individual does not have the ability to acquire the financial assets and deal with them directly do not meet the beneficial ownership requirements in either Sections (a) or (d) above.

 

Guidance on Close Personal Friend and Close Business Associate Determination

 

A “ close personal friend ” of a director, executive officer, founder or control person of an issuer is an individual who knows the director, executive officer, founder or control person well enough and has known them for a sufficient period of time to be in a position to assess their capabilities and trustworthiness and to obtain information from them with respect to the investment.

 

The following factors are relevant to this determination:

 

  (a) the length of time the individual has known the director, executive officer, founder or control person,
     
  (b) the nature of the relationship between the individual and the director, executive officer, founder or control person including such matters as the frequency of contacts between them and the level of trust and reliance in the other circumstances, and
     
  (c) the number of “close personal friends” of the director, executive officer, founder or control person to whom securities have been distributed in reliance on the private issuer exemption or the family, friends and business associates exemption.

 

     
C- 7  

 

An individual is not a close personal friend solely because the individual is:

 

  (a) a relative,
     
  (b) a member of the same club, organization, association or religious group,
     
  (c) a co-worker, colleague or associate at the same workplace,
     
  (d) a client, customer, former client or former customer,
     
  (e) a mere acquaintance, or
     
  (f) connected through some form of social media, such as Facebook, Twitter or LinkedIn.

 

The relationship between the individual and the director, executive officer, founder or control person must be direct. For example, the exemption is not available to a close personal friend of a close personal friend of a director of the issuer. Further, a relationship that is primarily founded on participation in an internet forum is not considered to be that of a close personal friend.

 

A “ close business associate ” is an individual who has had sufficient prior business dealings with a director, executive officer, founder or control person of the issuer to be in a position to assess their capabilities and trustworthiness and to obtain information from them with respect to the investment.

 

The following factors are relevant to this determination:

 

  (a) the length of time the individual has known the director, executive officer, founder or control person,
     
  (b) the nature of any specific business relationships between the individual and the director, executive officer, founder or control person, including, for each relationship, when it began, the frequency of contact between them and when it terminated if it is not ongoing, and the level of trust and reliance in the other circumstances,
     
  (c) the nature and number of any business dealings between the individual and the director, executive officer, founder or control person, the length of the period during which they occurred, and the nature and date of the most recent business dealing, and
     
  (d) the number of “close business associates” of the director, executive officer, founder or control person to whom securities have been distributed in reliance on the private issuer exemption or the family, friends and business associates exemption.

 

An individual is not a close business associate solely because the individual is:

 

  (a) a member of the same club, organization, association or religious group,
     
  (b) a co-worker, colleague or associate at the same workplace,
     
  (c) a client, customer, former client or former customer,
     
  (d) a mere acquaintance, or
     
  (e) connected through some form of social media, such as Facebook, Twitter or LinkedIn.

 

The relationship between the individual and the director, executive officer, founder or control person must be direct. For example, the exemptions are not available for a close business associate of a close business associate of a director of the issuer. Further, a relationship that is primarily founded on participation in an internet forum is not considered to be that of a close business associate.

 

     
C- 8  

 

The Optionee acknowledges and agrees that, in addition to resale restrictions imposed under U.S. securities laws, there are additional restrictions on the Optionee’s ability to resell the Securities under Canadian securities laws and National Instrument 45-102 as adopted by the Canadian Securities Administrators.

 

The Optionee agrees that the above representations and warranties will be true and correct both as of the execution of this Questionnaire acknowledges that they will survive the completion of the issue of the Option.

 

The Optionee undertakes to immediately notify the Company of any change in any statement or other information relating to the Optionee set forth in the Agreement or in this Questionnaire which takes place prior to the issuance of the Options.

 

By completing this Questionnaire, the Optionee authorizes the indirect collection of this information by each applicable regulatory authority or regulator and acknowledges that such information is made available to the public under applicable laws.

 

DATED as of day of , 20____.

 

   
  Print Name of Optionee
   
   
  Signature

 

     
C- 9  

 

 

     
C- 10  

 

 

 

     
C- 11  

 

 

     
C- 12  

 

 

 

     
C- 13  

 

 

 

     
C- 14  

 

 

 

     
C- 15  

 

 

 

     
D- 1  

 

Schedule D

 

UNITED STATES ACCREDITED INVESTOR QUESTIONNAIRE

 

Capitalized terms used in this United States Accredited Investor Questionnaire (this “ Questionnaire ”) and not specifically defined have the meaning ascribed to them in the Stock Option Agreement between the undersigned (the “ Optionee ”) and AppCoin Innovations Inc. (the “ Company ”) to which this Schedule D is attached.

 

All dollar amounts referred to in this Questionnaire are in lawful money of the United States, unless otherwise indicated.

 

The Optionee covenants, represents and warrants to the Company that he or she satisfies one or more of the categories of “Accredited Investors”, as defined by Regulation D promulgated under the Securities Act of 1933 (the “Securities Act” ), as indicated below: (Please initial in the space provide those categories, if any, of an “Accredited Investor” which the Optionee satisfies)

 

  ______ Category 1 An organization described in Section 501(c)(3) of the United States Internal Revenue Code, a corporation, a Massachusetts or similar business trust or partnership, not formed for the specific purpose of acquiring the Securities, with total assets in excess of $5,000,000;
     
  ______ Category 2 A natural person whose individual net worth, or joint net worth with that person’s spouse, exceeds $1,000,000. For purposes of this Category 2, “net worth” means the excess of total assets at fair market value (including personal and real property, but excluding the estimated fair market value of a person’s primary home) over total liabilities. Total liabilities excludes any mortgage on the primary home in an amount of up to the home’s estimated fair market value as long as the mortgage was incurred more than 60 days before the Securities are acquired, but includes (i) any mortgage amount in excess of the home’s fair market value and (ii) any mortgage amount that was borrowed during the 60-day period before the date of the acquisition of Securities for the purpose of investing in the Securities;
     
  ______ Category 3 A natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year;
     
  ______ Category 4 A “bank” as defined under Section (3)(a)(2) of the Securities Act or savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act acting in its individual or fiduciary capacity; a broker dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934 (United States); an insurance company as defined in Section 2(13) of the Securities Act; an investment company registered under the Investment Company Act of 1940 (United States) or a business development company as defined in Section 2(a)(48) of such Act; a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958 (United States); a plan with total assets in excess of $5,000,000 established and maintained by a state, a political subdivision thereof, or an agency or instrumentality of a state or a political subdivision thereof, for the benefit of its employees; an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 (United States) whose investment decisions are made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000, or, if a self-directed plan, whose investment decisions are made solely by persons that are accredited investors;

 

     
D- 2  

 

 

  ______ Category 5 A private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940 (United States);
     
  ______ Category 6 A director or executive officer of the Company;
     
  ______ Category 7 A trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Securities, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) under the Securities Act;
     
  ______ Category 8 An entity in which all of the equity owners satisfy the requirements of one or more of the foregoing categories;

 

Note that the Optionee claiming to satisfy one of the above categories of Accredited Investor may be required to supply the Company with a balance sheet, prior years’ federal income tax returns or other appropriate documentation to verify and substantiate the Optionee’s status as an Accredited Investor.

 

If the Optionee is an entity which initialled the last category in reliance upon the Accredited Investor categories above, state the name, address, total personal income from all sources for the previous calendar year, and the net worth (exclusive of home, home furnishings and personal automobiles) for each equity owner of the said entity:

 

All information contained in this Questionnaire will be treated as confidential. However, by signing and returning this Questionnaire, the Optionee agrees that, if necessary, this Questionnaire may be presented to such parties as the Company deems appropriate to establish the availability, under the Securities Act or applicable state securities law, of exemption from registration in connection with the issuance of the Securities hereunder.

 

By completing this Questionnaire, the Optionee authorizes the indirect collection of this information by each applicable regulatory authority or regulator and acknowledges that such information is made available to the public under applicable laws.

 

DATED as of ______ day of _______________, 20____.

 

   
  Print Name of Optionee
   
   
  Signature
   
   
  Social Security/Tax I.D. No.

 

     
E- 1  

 

Schedule E

 

UNITED STATES NON-ACREDITED QUESTIONNAIRE

 

Capitalized terms used in this United States Non-Accredited Investor Questionnaire (this “ Questionnaire ”) and not specifically defined have the meaning ascribed to them in the Stock Option Agreement between the undersigned (the “ Optionee ”) and AppCoin Innovations Inc. (the “ Company ”) to which this Schedule D is attached.

 

All dollar amounts referred to in this Questionnaire are in lawful money of the United States, unless otherwise indicated.

 

The purpose of this Questionnaire is to assure the Company that the Optionee will meet the standards imposed by the Securities Act of 1933 (the “Securities Act” ) and the appropriate exemptions of applicable state securities laws. The Company will rely on the information contained in this Questionnaire for the purposes of such determination. The Option and the Optioned Shares (together, the “Securities” ) will not be registered under the Securities Act and has been issued in reliance upon the exemption from registration afforded by Section 3(b) and/or Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder. This Questionnaire is not an offer of any securities of the Company in any state other than those specifically authorized by the Company.

 

Please attach additional pages if necessary to answer any question fully.

 

REPRESENTATIONS OF OPTIONEE

 

This item is presented in alternative form. Please initial in the space provided the applicable alternative.

 

_____ ALTERNATIVE ONE: The Optionee covenants, represents and warrants to the Company that he or she has such knowledge and experience in financial and business matters that he or she is capable of evaluating the relative merits and risks of an investment in the Securities and Company and is not utilizing a purchaser representative in connection with evaluating such merits and risks. The Optionee is providing evidence of its knowledge and experience in these matters through the information requested below in this Questionnaire.
   
_____ ALTERNATIVE TWO: The Optionee covenants, represents and warrants to the Company that he or she has chosen to use the services of a purchaser representative acceptable to the Optionee in connection with the Optionee’s acquisition of the Securities. The Optionee hereby acknowledges that the person named below is his or her purchaser representative who will assist and advise the Optionee in evaluating the merits and risks of an investment in the Securities and the Company and affirms that such purchaser representative has previously disclosed in writing any material relationship that exists between the purchaser representative (or its affiliates) and the Company (or its affiliates) that is mutually understood to be contemplated, or that has existed at any time during the previous two years, and any compensation received or to be received as a result of such relationship.
   
   
  (name of Purchaser Representative)
   
   
  (address of Purchaser Representative)
  If the Optionee utilizes a purchaser representative, this Questionnaire must be accompanied by a completed and signed purchaser representative Questionnaire, a copy of which can be obtained from the Company upon request.

 

     
F- 2  

 

FOR INDIVIDUAL INVESTORS

 

1. Name:  
     
2. Residential Address & Telephone Number:  
     
     
     
     
     
3. Length of Residence in State of Residence:  

 

4. U.S. Citizen: _____ Yes _____ No

 

5. Social Security Number:      
           
6. Business Address & Telephone Number:        
           
           
           
           

 

7. Preferred Mailing Address: _____ Residence _____ Business
           
8. Date of Birth:        
           
9. Employer and Position:        
           
10. Name of Business:        

 

11. Business or Professional Education and Degrees:
           
  School Degree   Year Received
         
         
         
           
           
12. Prior Employment (last 5 years):        
           
  Employer Nature of Duties Dates of Employment
       
       
       
             

 

     
F- 3  

 

13. Relationship to the Company, if any:  

 

14. Is the Optionee an officer of director of a publicly-held company?

 

  ____ Yes _____ No

 

  If yes, specify company:  

 

15. Does the Optionee beneficially own 10% or more of the voting securities of a publicly-held company?

 

  ____ Yes _____ No

 

  If yes, specify company:  

 

16. Within the last 5 years, has the Optionee personally invested in investments sold by means of private placements in reliance on exemptions from registration under the Securities Act and state securities laws?

 

  ____ Yes _____ No

 

17. Prior investments by the Optionee which were purchased in reliance on exemptions from registration under the Securities Act and State securities laws (initial the highest number applicable):

 

Amount (Cumulative)

 

  Real Estate: Up to $50,000 to Over
  None: _____ $50,000 _____ $250,000 _____ $250,000 _____
         
  Securities: Up to $50,000 to Over
  None: _____ $50,000 _____ $250,000 _____ $250,000 _____
         
  Other: Up to $50,000 to Over
  None: _____ $50,000 _____ $250,000 _____ $250,000 _____

 

18. Does the Optionee consider itself to be an experienced and sophisticated investor? 

 

  ____ Yes _____ No

 

  If so, please provide evidence of investment sophistication and/or experience:
   
   
   
   

 

19. Does the Optionee, or any person authorized to execute this Questionnaire, consider itself to have such knowledge of the Company and its business and such experience in financial and business matters to enable it to evaluate the merits and risks of an investment in the Securities and the Company, should the Optionee be given an opportunity to so invest?

 

  ____ Yes _____ No

 

     
F- 4  

 

20. If the Optionee is an individual, please indicate the Optionee’s and his/her spouse’s combined gross income during the preceding two years (initial the highest number applicable):

 

               2016                2015
       
  _____  Less than $75,000   _____  Less than $75,000
       
  _____  $75,001 to $100,000   _____  $75,001 to $100,000
       
  _____  $100,001 to $200,000   _____  $100,001 to $200,000
       
  _____  $200,001 to $300,000   _____  $200,001 to $300,000
       
  _____  $Over $300,000   _____  $Over $300,000

 

21. If the Optionee is an individual, please indicate the Optionee’s and his/her spouse’s combined estimated net worth (exclusive of home, home furnishings and personal automobiles) (initial the highest number applicable):

 

  _____  Less than $100,000   _____  $300,0001 to $500,000
       
  _____  $100,001 to $200,000   _____  $500,001 to $1,000,000
       
  _____  $200,001 to $300,000   _____  Over $1,000,000

 

22. Regardless of the amount of the proposed investment:

 

  (a) Will the Optionee’s proposed investment exceed 10% of its individual net worth, or the Optionee’s joint net worth with its spouse as determined in paragraph 21 above?

 

  ____ Yes _____ No

 

  (b) Will the Optionee be able to bear the economic risk of its investment in this transaction?

 

  ____ Yes _____ No

 

23. Please provide answers to the following questions.

 

  (a) State total assets of the Optionee, including cash, stocks and bonds, automobiles, real estate, and any other assets:
     
    $
     
  (b) State total liabilities of the Optionee including real estate indebtedness, accounts payable, taxes payable and any other liabilities:
     
    $
     
  (c) State annual income of the Optionee including salary, securities income, rental income and any other income:
     
    $

 

     
F- 5  

 

  (d) State annual expenses of the Optionee, excluding ordinary living expenses, including real estate payments, rent, property taxes and other expenses:
     
    $
     
  (e) Does the Optionee expect the amount of its assets, liabilities, income and expenses, as stated above, to be subject to significant change in the future:

 

  ____ Yes _____ No

 

    If yes, explain:
     
     
     

 

All information contained in this Questionnaire will be treated as confidential. However, by signing and returning this Questionnaire, the Optionee agrees that, if necessary, this Questionnaire may be presented to such parties as the Company deems appropriate to establish the availability, under the Securities Act or applicable state securities law, of exemption from registration in connection with the issuance of the Securities hereunder.

 

By completing this Questionnaire, the Optionee authorizes the indirect collection of this information by each applicable regulatory authority or regulator and acknowledges that such information is made available to the public under applicable laws.

 

DATED as of day of _________________, 20____.

 

   
  Print Name of Optionee
   
   
  Signature
   
   
  Social Security/Tax I.D. No.

 

     
F- 1  

 

Schedule F

 

ACKNOWLEDGEMENTS and Representations and warranties OF THE OPTIONEE

 

Capitalized terms used in this Acknowledgements and Representations and Warranties of the Optionee and not specifically defined have the meaning ascribed to them in the Stock Option Agreement between the undersigned (the “ Optionee ”) and AppCoin Innovations Inc. (the “ Company ”) to which this Schedule F is attached.

 

The Optionee acknowledges and agrees that:

 

  (a) the Securities have not been registered under the 1933 Act or under any state securities or “blue sky” laws of any state of the United States, and are being offered only in a transaction not involving any public offering within the meaning of the 1933 Act, and, unless so registered, may not be offered or sold in the United States or to U.S. Persons, except pursuant to an effective registration statement under the 1933 Act, or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the 1933 Act, and in each case only in accordance with applicable state securities laws;
     
  (b) the Company will refuse to register any transfer of the Securities not made in accordance with the provisions of Regulation S, pursuant to an effective registration statement under the 1933 Act or pursuant to an available exemption from, or in a transaction not subject to, the registration requirements of the 1933 Act;
     
  (c) the decision to execute this Agreement and acquire the Securities hereunder has not been based upon any oral or written representation as to fact or otherwise made by or on behalf of the Company and such decision is based solely upon a review of publicly available information regarding the Company that is available on the website of the Securities and Exchange Commission (the “ SEC ”) at www.sec.gov (the “Company Information” );
     
  (d) there are risks associated with an investment in the Securities;
     
  (e) the Optionee and the Optionee’s advisor(s) (if applicable) have had a reasonable opportunity to ask questions of and receive answers from the Company in connection with the distribution of the Securities hereunder, and to obtain additional information, to the extent possessed or obtainable without unreasonable effort or expense, necessary to verify the accuracy of the information about the Company;
     
  (f) the books and records of the Company were available upon reasonable notice for inspection, subject to certain confidentiality restrictions, by the Optionee during reasonable business hours at its principal place of business, and all documents, records and books in connection with the distribution of the Securities hereunder have been made available for inspection by the Optionee, the Optionee’s attorney and/or advisor(s) (if applicable);

     
  (g) the Company, its officers, directors, counsel and agents are entitled to rely upon the truth and accuracy of the acknowledgements, representations, warranties, statements, answers, covenants and agreements contained in this Agreement and agrees that if any of such acknowledgements, representations, warranties, statements, answers, covenants, and agreements should become, by the passage of time after the date of this Agreement, no longer accurate or should be breached, the Optionee shall promptly notify the Company, and the Optionee will hold harmless the Company from any loss or damage it may suffer as a result of the Optionee’s failure to correctly complete or comply with the terms of this Agreement;

 

     
F- 2  

 

  (h) the Optionee has been advised to consult its own legal, tax and other advisors with respect to the merits and risks regarding the exercise of the Options and the issuance of the Optioned Shares and with respect to applicable resale restrictions and it is solely responsible (and the Company is in not any way responsible) for compliance with applicable resale restrictions;
     
  (i) the Company has advised the Optionee that the Company is relying on an exemption from the registration and prospectus requirements of applicable securities laws and, as a consequence of acquiring the Securities pursuant to this exemption, certain protections, rights and remedies provided by the applicable securities laws, including statutory rights of rescission or damages, will not be available to the Optionee;
     
  (j) the Optionee will indemnify and hold harmless the Company and, where applicable, its directors, officers, employees, agents, advisors and shareholders, from and against any and all loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all fees, costs and expenses whatsoever reasonably incurred in investigating, preparing or defending against any claim, lawsuit, administrative proceeding or investigation whether commenced or threatened) arising out of or based upon any representation or warranty of the Optionee contained herein or in any document furnished by the Optionee to the Company in connection herewith being untrue in any material respect or any breach or failure by the Optionee to comply with any covenant or agreement made by the Optionee to the Company in connection therewith;
     
  (k) the Securities are not listed on any stock exchange or automated dealer quotation system and no representation has been made to the Optionee that any of the Securities will become listed on any stock exchange or automated dealer quotation system, except that currently certain market makers make market in the shares of the Company’s common stock on the OTC Pink;
     
  (l) neither the SEC nor any other securities commission or similar regulatory authority has reviewed or passed on the merits of the Securities;
     
  (m) no documents in connection with this Agreement have been reviewed by the SEC or any state securities administrators;
     
  (n) there is no government or other insurance covering any of the Securities; and
     
  (o) this Agreement is not enforceable by the Optionee unless it has been accepted by the Company.

 

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPTIONEE

 

The Optionee hereby represents and warrants to and covenants with the Company (which representations, warranties and covenants shall survive the closing) that:

 

  (a) the Optionee is a bona fide director, officer, employee, independent contractor or consultant of the Company, Parent or Subsidiary;
     
  (b) unless the Optionee has completed Schedule D or E, the Optionee is not acquiring the Securities for the account or benefit of, directly or indirectly, any U.S. Person;
     
  (c) unless the Optionee has completed Schedule D or E, the Optionee is not a U.S. Person;
     
  (d) the acquisition of the Securities by the Optionee as contemplated in this Agreement complies with or is exempt from the applicable securities legislation of the jurisdiction of residence of the Optionee;
     
  (e) the Optionee has not acquired or is not acquiring the Securities as a result of, and will not itself engage in, any “directed selling efforts” (as defined in Regulation S under the 1933 Act) in the United States in respect of the Securities which would include any activities undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for the resale of the Securities; provided, however, that the Optionee may sell or otherwise dispose of the Securities pursuant to registration thereof under the 1933 Act and any applicable state and provincial securities laws or under an exemption from such registration requirements;
     
  (f) unless the Optionee has completed Schedule D or E, the Optionee is outside the United States when receiving and executing this Agreement and is acquiring the Securities as principal for the Optionee’s own account, for investment purposes only, and not with a view to, or for, resale, distribution or fractionalisation thereof, in whole or in part, and, in particular, it has no intention to distribute either directly or indirectly any of the Securities in the United States or to U.S. Persons, and no other person has a direct or indirect beneficial interest in such Securities;
     
  (g) if the Optionee is not resident in the United States or Canada, the Optionee:

 

     
F- 3  

 

    (i) is knowledgeable of, or has been independently advised as to, the applicable securities laws of the securities regulators having application in the jurisdiction in which the Optionee is resident (the “ International Jurisdiction ”) which would apply to the granting of the Option and the issue, sale or resale of the Optioned Shares;
       
    (ii) the Optionee is acquiring the Option or the Optioned Shares pursuant to exemptions from prospectus or equivalent requirements under applicable securities laws or, if such is not applicable, the Optionee is permitted to acquire the Option or the Optioned Shares under the applicable securities laws of the securities regulators in the International Jurisdiction without the need to rely on any exemptions;
       
    (iii) the applicable securities laws of the authorities in the International Jurisdiction do not require the Company to make any filings or seek any approvals of any kind whatsoever from any securities regulator of any kind whatsoever in the International Jurisdiction in connection with the granting of the Option or the issue, sale or resale of the Optioned Shares; and
       
    (iv) the granting of the Option or the issue, sale or resale of the Optioned Shares does not trigger:

 

    A. any obligation to prepare and file a prospectus or similar document, or any other report with respect to such purchase in the International Jurisdiction; or
       
    B. any continuous disclosure reporting obligation of the Optionee or the Company in the International Jurisdiction; and

 

  (v) the Optionee will, if requested by the Company, deliver to the Company a certificate or opinion of local counsel from the International Jurisdiction which will confirm the matters referred to in subparagraphs (ii), (iii) and (iv) above to the satisfaction of the Company, acting reasonably;

 

  (h) the Optionee has received and carefully read this Agreement and the Company Information;
     
  (i) the Optionee has received a brief description of the Securities and the Optionee understands that the proceeds from the exercise of the Options will be used by the Company as working capital for general corporate purposes;
     
  (j) the Optionee has duly executed and delivered this Agreement and it constitutes a valid and binding agreement of the Optionee enforceable against the Optionee in accordance with its terms;
     
  (k) the Optionee has the legal capacity and competence to enter into and execute this Agreement and to take all actions required pursuant hereto and, if the Optionee is a corporation, it is duly incorporated and validly subsisting under the laws of its jurisdiction of incorporation and all necessary approvals by its directors, shareholders and others have been obtained to authorize execution and performance of this Agreement on behalf of the Optionee;
     
  (l) the Optionee:

 

    (i) has adequate net worth and means of providing for its current financial needs and possible personal contingencies,
       
    (ii) has no need for liquidity in this investment, and
       
    (iii) is able to bear the economic risks of an investment in the Securities for an indefinite period of time, and can afford the complete loss of such investment;

 

  (m) the Optionee has the requisite knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of the investment in the Securities and the Company, and the Optionee is providing evidence of such knowledge and experience in these matters through the information requested in this Agreement;
     
  (n) the Optionee is aware that an investment in the Company is speculative and involves certain risks, including the possible loss of the investment, and the Optionee has carefully read and considered the matters set forth under the caption “Risk Factors” appearing in the Company’s various disclosure documents, filed with the SEC;
     
  (o) the entering into of this Agreement and the transactions contemplated hereby do not result in the violation of any of the terms and provisions of any law applicable to, or, if applicable, the constating documents of, the Optionee, or of any agreement, written or oral, to which the Optionee may be a party or by which the Optionee is or may be bound;
     
  (p) the Optionee is purchasing the Securities for its own account for investment purposes only and not for the account of any other person and not for distribution, assignment or resale to others, and no other person has a direct or indirect beneficial interest is such Securities, and the Optionee has not subdivided his interest in the Securities with any other person;
     
  (q) the Optionee is not an underwriter of, or dealer in, the shares of the Company’s common stock, nor is the Optionee participating, pursuant to a contractual agreement or otherwise, in the distribution of the Securities;
     
  (r) the Optionee understands and agrees that the Company and others will rely upon the truth and accuracy of the acknowledgements, representations, statements, answers and agreements contained in this Agreement, and agrees that if any of such acknowledgements, representations, statements, answers and agreements are no longer accurate or have been breached, the Optionee shall promptly notify the Company;

 

     
F- 4  

 

  (s) the Optionee has made an independent examination and investigation of an investment in the Securities and the Company and has depended on the advice of its legal and financial advisors and agrees that the Company will not be responsible in anyway whatsoever for the Optionee’s decision to acquire the Securities;
     
  (t) the Optionee is not aware of any advertisement of any of the Securities and is not acquiring the Securities as a result of any form of general solicitation or general advertising including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio or television, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising;
     
  (u) the Optionee has either (a) a pre-existing personal or business relationship with the Company or any of its partners, officers, directors, or controlling persons consisting of personal or business contacts of a nature and duration which enable the Optionee to be aware of the character, business acumen and general business and financial circumstances of the Company or any such partner, officer, director, or controlling person with whom such relationship exists or (b) such business or financial expertise as to be able to protect the Optionee’s own interests in connection with the acquisition of the Securities; and,
     
  (v) no person has made to the Optionee any written or oral representations:

 

    (i) that any person will resell or repurchase any of the Securities,
       
    (ii) that any person will refund the purchase price of any of the Securities,
       
    (iii) as to the future price or value of any of the Securities, or
       
    (iv) that any of the Securities will be listed and posted for trading on any stock exchange or automated dealer quotation system or that application has been made to list and post any of the Securities of the Company on any stock exchange or automated dealer quotation system, except that currently certain market makers make market in the shares of the Company’s common stock on the OTC Pink.

 

DATED as of _____day of __________________, 20____.

 

   
  Print Name of Optionee
   
   
  Signature
   
   
  Social Security/Tax I.D. No.

 

     
 

 

 

 

NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (AS DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT.

 

Unless permitted under securities legislation, the holder of this security must not trade the security before the date that is 4 months and a day after the later of (i) OCTOBER 15, 2017, and (ii) the date the issuer became a reporting issuer in any province or territory.

 

STOCK OPTION AGREEMENT

 

This AGREEMENT is entered into as of the October 15, 2017 (the “Date of Grant” ).

 

BETWEEN:

 

  APPCOIN INNOVATIONS INC. , a company incorporated pursuant to the laws of the State of Nevada, with an office at 561 Indiana Court, Venice Beach, CA 90291
   
  (the “Company” )

 

AND:

 

 

CAMERON CHELL , a businessman with an address at 561 Brooks Avenue, Venice Beach, CA 90291

   
  (the “Optionee” )

 

WHEREAS:

 

A. The Company’s board of directors (the “Board” ) has approved and adopted a 2017 Equity Incentive Plan (the “Plan” ), whereby the Board is authorized to grant stock options to purchase shares of common stock of the Company to the directors, officers, employees, and consultants of the Company or any Parent or Subsidiary of the Company (as defined herein);

 

B. The Optionee is a director, officer, employee or consultant of the Company, the Parent or a Subsidiary; and

 

C. The Company wishes to grant stock options to purchase a total of 400,000 Optioned Shares (as defined herein) to the Optionee, as follows:

 

    Incentive Stock Options (as defined herein)
  X Non-Qualified Stock Options (as defined herein)

 

     
  2  

 

NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

1. Definitions

 

1.1 In this Agreement, the following terms shall have the following meanings:

 

  (a) 1933 Act ” means the Securities Act of 1933, as amended;
     
  (b) Board ” means the board of directors of the Company;
     
  (c) Canadian Accredited Investor Questionnaire ” means a questionnaire substantially in the form of the Canadian Accredited Investor Questionnaire attached to this Agreement as Schedule B;
     
  (d) Code ” means the Internal Revenue Code of 1986;
     
  (e) Common Stock ” means the shares of common stock of the Company;
     
  (f) Exercise Price ” means $0.10 per share;
     
  (g) Expiry Date ” means October 15, 2027;
     
  (h) Incentive Stock Options ” means any Options that meet all the requirements under section 422 of the Code;
     
  (i) Non-Qualified Stock Options ” means any Options that do not qualify as Incentive Stock Options and, thus, do not meet the requirements under section 422 of the Code;
     
  (j) Notice of Exercise ” means a notice in writing addressed to the Company at its address first recited hereto (or such other address of which the Company may from time to time notify the Optionee in writing), substantially in the form attached as Schedule B hereto, which notice shall specify therein the number of Optioned Shares in respect of which the Options are being exercised;
     
  (k) Options ” means the right and option to purchase, from time to time, all, or any part of the Optioned Shares granted to the Optionee by the Company pursuant to Section 2.1 of this Agreement;
     
  (l) Optioned Shares ” means the shares of Common Stock that are issued pursuant to the exercise of the Options;
     
  (m) Parent ” means a company or other entity that owns at least fifty percent (50%) of the outstanding voting stock or voting power of the Company;
     
  (n) Plan ” has the meaning ascribed thereto in Recital A of this Agreement;
     
  (o) Securities ” means, collectively, the Options and the Optioned Shares;
     
  (p) Subsidiary ” means a company or other entity, at least fifty percent (50%) of the outstanding voting stock or voting power of which is beneficially owned, directly or indirectly, by the Company; and
     
  (q) Vested Options ” means the Options that have vested in accordance with Section 2.2 of this Agreement.

 

     
  3  

 

1.2 Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Plan.

 

2. The Options

 

2.1 The Company hereby grants to the Optionee, on the terms and conditions set out in this Agreement and in the Plan, Options to purchase a total of 400,000 Optioned Shares at the Exercise Price.

 

2.2 The Options will vest in accordance with Schedule A to this Agreement. The Options may be exercised immediately after vesting.

 

2.3 The Options shall, at 5:00 p.m. (Pacific time) on the Expiry Date, expire and be of no further force or effect whatsoever.

 

2.4 The Company shall not be obligated to cause the issuance, transfer or delivery of a certificate or certificates representing Optioned Shares to the Optionee, until provision has been made by the Optionee, to the satisfaction of the Company, for the payment of the aggregate Exercise Price for all Optioned Shares for which the Options shall have been exercised, and for satisfaction of any tax withholding obligations associated with such exercise.

 

2.5 Subject to the provisions of this Agreement and the Plan and subject to compliance with any applicable securities laws, the Options shall be exercisable, in full or in part, at any time after vesting, until termination. If less than all of the Optioned Shares included in the vested portion of any Options are purchased, the remainder may be purchased at any subsequent time prior to the Expiry Date. Only whole shares may be issued pursuant to the exercise of any Options, and to the extent that any Option covers less than one (1) share, it is not exercisable.

 

2.6 Each exercise of the Options shall be by means of delivery of a Notice of Exercise (which may be in the form attached hereto as Schedule C) to the Chief Financial Officer of the Company at its principal executive office, specifying the number of Optioned Shares to be purchased and accompanied by payment in cash or by certified check or cashier’s check in the amount of the full Exercise Price for the Common Stock to be purchased. In addition to payment in cash or by certified check or cashier’s check and if agreed to in advance by the Company, the Optionee or transferee of the Options may pay for all or any portion of the aggregate Exercise Price by complying with any other payment mechanism approved by the Board at the time of exercise.

 

2.7 Reference is made to the Plan for particulars of the rights and obligations of the Optionee and the Company in respect of:

 

  (a) the terms and conditions on which the Options are granted except to the extent set forth herein; and,
     
  (b) a consolidation or subdivision of the Company’s share capital or a corporate reorganization;

 

all to the same effect as if the provisions of the Plan were set out in this Agreement and to all of which the Optionee assents. A copy of the Plan is available to the Optionee at no charge, at the Company’s principal executive office. Any provision of this Agreement that is inconsistent with the Plan shall be considered void and replaced with the applicable provision of the Plan. The Company may modify, extend or renew this Agreement or the Options represented hereby or accept the surrender thereof (to the extent not previously exercised) and authorize the granting of a new option in substitution therefore (to the extent not previously exercised), subject at all times to the Plan, the applicable rules of any applicable regulatory authority or stock exchange, and any applicable laws. Notwithstanding the foregoing provisions of this Section 2.7, the Company shall not have the right to make any modification which would materially alter the terms of the Options to the Optionee’s detriment or materially impair any rights of the Optionee hereunder without the consent of the Optionee.

 

     
  4  

 

2.8 By accepting the Options, the Optionee represents and agrees that none of the Optioned Shares purchased upon exercise of the Options will be distributed in violation of applicable federal and state laws and regulations. The Optionee further represents and agrees to provide the Company with any other document reasonably requested by the Company or the Company’s Counsel.

 

3. Documents Required from Optionee

 

3.1 The Optionee must complete, sign and return to the Company:

 

  (a) a copy of this Agreement;
     
  (b) a copy of the Acknowledgements, and Representations and Warranties of the Optionee attached hereto as Schedule F;
     
  (c) if the Optionee is resident in Canada, a Canadian Questionnaire in the form attached hereto as Schedule C; and
     
  (d) if the Optionee is resident in the United States and if an exemption from the registration requirements imposed by the 1933 Act is necessary for entry into this Agreement, one of the two questionnaires in the forms attached hereto as Schedule D and Schedule E, whichever applies.

 

3.2 The Optionee shall complete, sign and return to the Company as soon as possible, on request by the Company, any documents, questionnaires, notices and undertakings as may be required by regulatory authorities, and applicable law.

 

4. Subject to Plan

 

The terms of the Options will be subject to the Plan, as may from time to time be amended, and any inconsistencies between this Agreement and the Plan, as the same may be from time to time amended, shall be governed by the provisions of the Plan. A copy of the Plan will be delivered to the Optionee, and will be available for inspection at the principal offices of the Company.

 

5. Acknowledgement and Waiver

 

The Optionee hereby waives, to the fullest extent permitted by law, any rights of withdrawal, rescission or compensation for damages to which the Optionee might be entitled in connection with the distribution of any of the Securities.

 

6. Professional Advice

 

The acceptance of the Options and the sale of Common Stock issued pursuant to the exercise of Options may have consequences under federal, state and provincial tax and securities laws which may vary depending upon the individual circumstances of the Optionee. Accordingly, the Optionee acknowledges that he or she has been advised to consult his or her personal legal and tax advisor in connection with this Agreement and his or her dealings with respect to Options. Without limiting other matters to be considered with the assistance of the Optionee’s professional advisors, the Optionee should consider: (a) the merits and risks of an investment in the underlying Optioned Shares; and (b) any resale restrictions that might apply under applicable securities laws.

 

     
  5  

 

7. Legending of Subject Securities

 

7.1 The Optionee hereby acknowledges that that upon the issuance thereof, and until such time as the same is no longer required under the applicable securities laws and regulations, the certificates representing any of the Optioned Shares may bear a legend in substantially the following form:

 

If the Optionee is not resident in the United States:

 

THE SECURITIES REPRESENTED HEREBY HAVE BEEN OFFERED IN AN OFFSHORE TRANSACTION TO A PERSON WHO IS NOT A U.S. PERSON (AS DEFINED HEREIN) PURSUANT TO REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”).

 

NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE 1933 ACT, OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (AS DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT.

 

Unless permitted under securities legislation, the holder of this security must not trade the security before the date that is 4 months and a day after THE later of (i) [ insert the distribution date ], and (ii) the date the issuer became a reporting issuer in any province or territory.

 

If the Option is resident in the United States:

 

NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (AS DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT.

 

Unless permitted under securities legislation, the holder of this security must not trade the security before the date that is 4 months and a day after THE later of (i) [ insert the distribution date ], and (ii) the date the issuer became a reporting issuer in any province or territory.

 

7.2 The Optionee hereby acknowledges and agrees to the Company making a notation on its records or giving instructions to the registrar and transfer agent of the Company in order to implement the restrictions on transfer set forth and described in this Agreement.

 

     
  6  

 

8. Resale restrictions

 

8.1 This Agreement and the Options represented hereby are not transferable. Optioned Shares received upon exercise of any Options will be subject to resale restrictions contained in the securities legislation applicable to the Company and the Optionee. The Optionee acknowledges and agrees that the Optionee is solely responsible (and the Company is not in any way responsible) for compliance with applicable resale restrictions.

 

8.2 The Optionee acknowledges that any resale of any of the Optioned Shares will be subject to resale restrictions contained in the securities legislation applicable to the Optionee or proposed transferee. The Optionee acknowledges that none of the Optioned Shares have been registered under the 1933 Act or the securities laws of any state of the United States. The Optioned Shares may not be offered or sold in the United States unless registered in accordance with federal securities laws and all other applicable securities laws or exemptions from such registration requirements are available. The Optionee acknowledges that the Optioned Shares are subject to resale restrictions in Canada and may not be traded in Canada except as permitted by the applicable provincial securities laws and the rules made thereunder.

 

9. No Employment Relationship

 

The grant of an Option shall in no way constitute any form of agreement or understanding binding on the Company or any related company, express or implied, that the Company or any related company will employ or contract with an Optionee, for any length of time, nor shall it interfere in any way with the Company’s or, where applicable, a related company’s right to terminate Optionee’s employment at any time, which right is hereby reserved.

 

10. Governing Law

 

This Agreement is governed by the laws of the State of Nevada and the federal laws of the United States of America as applicable therein. The Optionee irrevocably attorns to the jurisdiction of the courts of the State of Arizona.

 

11. Costs

 

The Optionee acknowledges and agrees that all costs and expenses incurred by the Optionee (including any fees and disbursements of any special counsel retained by the Optionee) relating to the acquisition of the Securities shall be borne by the Optionee.

 

12. Survival

 

This Agreement, including without limitation the representations, warranties and covenants contained herein, shall survive and continue in full force and effect and be binding upon the parties hereto notwithstanding the completion of the purchase of the shares underlying the Options by the Optionee pursuant hereto.

 

13. Assignment

 

This Agreement is not transferable or assignable.

 

14. Currency

 

Unless explicitly stated otherwise, all funds in this Agreement are stated in United States dollars.

 

15. Severability

 

The invalidity or unenforceability of any particular provision of this Agreement shall not affect or limit the validity or enforceability of the remaining provisions of this Agreement.

 

     
  7  

 

16. Counterparts and Electronic Means

 

This Agreement may be executed in several counterparts, each of which will be deemed to be an original and all of which will together constitute one and the same instrument. Delivery of an executed copy of this Agreement by electronic facsimile transmission or other means of electronic communication capable of producing a printed copy will be deemed to be execution and delivery of this Agreement as of the date first above written.

 

17. Entire Agreement

 

This Agreement is the only agreement between the Optionee and the Company with respect to the Options, and this Agreement and the Plan, once approved, supersede all prior and contemporaneous oral and written statements and representations and contain the entire agreement between the parties with respect to the Options.

 

IN WITNESS WHEREOF the parties hereto have duly executed this Agreement as of the date first above written.

 

APPCOIN INNOVATIONS INC.

 

Per: /s/ Michael Blum  
  Authorized Signatory  

 

       
WITNESSED BY:   )  
    )  
    )  
    )  
    )  
Name   ) /s/ Cameron Chell
    ) CAMERON CHELL
    )  
    )  
Address   )  
    )  
    )  
    )  
    )  
Occupation   )  

 

     
A- 1  

 

Schedule A

 

VESTING SCHEDULE

 

1/3 of the Options will vest on October 15, 2017, October 15, 2018 and October 15, 2019.

 

     
B- 1  

 

Schedule B

 

NOTICE OF EXERCISE

 

TO: AppCoin Innovations Inc.
  561 Indiana Court
  Venice Beach, CA 90291

 

This Notice of Exercise shall constitute a proper Notice of Exercise pursuant to section 2.6 of the Stock Option Agreement dated October 15, 2017 (the “ Agreement ”), between AppCoin Innovations Inc. (the “Company” ) and the undersigned. The undersigned hereby elects to exercise the Optionee’s options to purchase ____________________ shares of the common stock of the Company at a price of $0.10 per share on the terms and conditions set forth in the Agreement.

 

Payment of aggregate consideration of $____________in cash or by certified check or cashier’s check accompanies this notice.

 

The Optionee hereby represents and warrants to the Company that all representations and warranties set out in the Agreement (and the applicable schedules hereto) are true as of the date of the exercise of the Options under the Agreement. The Optionee hereby further represents and warrants to the Company that the shares are being purchased only for investment and without intention to sell or distribute such shares.

 

The Optionee hereby directs the Company to issue, register and deliver the certificates representing the shares as follows:

 

Registration Information:   Delivery Instructions:
     
Name to appear on certificates   Name
     
Address   Address
     
City, State, and Zip Code    
     
    Telephone Number

 

DATED at _____________________________, the day of______________, _______.

 

  X
  Signature
   
  (Name and, if applicable, Office)
   
  (Address)
   
  (City, State, and Zip Code)
   
  Fax Number or E-mail Address
   
  Social Security/Tax I.D. No.

 

     
C- 1  

 

Schedule C

 

CANADIAN QUESTIONNAIRE

 

TO: APPCOIN INNOVATIONS INC. (the “ Company ”)

 

RE: Stock options (the “ Options ”) of the Company

 

Capitalized terms used in this Canadian Questionnaire (this “ Questionnaire ”) and not specifically defined have the meaning ascribed to them in the Stock Option Agreement between the undersigned (the “ Optionee ”) and the Company to which this Schedule C is attached.

 

All dollar amounts referred to in this Questionnaire and Appendices A, B and C are in lawful money of Canada, unless otherwise indicated.

 

In connection with the grant to the Optionee of the Options, the Optionee hereby represents, warrants and certifies to the Company that the Optionee:

 

  (i) is acquiring the Options as principal (or deemed principal under the terms of National Instrument 45-106 – Prospectus Exemptions adopted by the Canadian Securities Administrators (“ NI 45-106 ”));
     
  (ii) (A)       is resident in or is subject to the laws of one of the following (check one):

 

  [   ] Alberta [   ] New Brunswick [   ] Prince Edward Island
       
  [   ] British Columbia [   ] Nova Scotia [   ] Quebec
       
  [   ] Manitoba [   ] Ontario [   ] Saskatchewan
       
  [   ] Newfoundland and Labrador [   ] Yukon
     
  [   ] Northwest Territories

or

 

    (B)    [   ] is resident in a country other than Canada or the United States; and
     
  (iii) has not been provided with any offering memorandum in connection with the acquisition of the Options.

 

In connection with the grant of the Options, the Optionee hereby represents, warrants, covenants and certifies that the Optionee meets one or more of the following criteria:

 

A. OPTIONEE QUALIFYING UNDER THE EMPLOYEE, DIRECTOR, OFFICER AND CONSULTANT EXEMPTION

 

In connection with the grant of the Options, the Optionee hereby represents, warrants, covenants and certifies that the Optionee meets one or more of the following criteria:

 

  [ ] (i) is an employee, officer or director of the Company; or
       
  [ ] (ii) is a consultant of the Company who provides services to the Company or a related entity of the Company and spends or will spend a significant amount of time and attention on the business and affairs of the Company or a related entity of the Company; and
       
  has voluntarily agreed to the grant of the Options.

 

     
C- 2  

 

B. OPTIONEES QUALIFYING UNDER THE ACCREDITED INVESTOR EXEMPTION

 

In connection with the grant of the Options, the Optionee hereby represents, warrants, covenants and certifies that the Optionee meets one or more of the following criteria:

 

(a) _____ the Optionee is an “accredited investor” within the meaning of NI 45-106, by virtue of satisfying the indicated criterion below (YOU MUST INITIAL OR PLACE A CHECK-MARK ON THE APPROPRIATE LINE(S)) ( see certain guidance with respect to accredited investors that starts on page C-5 below )

 

  [ ] (i) except in Ontario, a person registered under the securities legislation of a jurisdiction of Canada as an adviser or dealer,
       
  [ ] (ii) an individual registered under the securities legislation of a jurisdiction of Canada as a representative of a person referred to in paragraph (i),
       
  [ ] (iii) an individual formerly registered under the securities legislation of a jurisdiction of Canada, other than an individual formerly registered solely as a representative of a limited market dealer under one or both of the Securities Act (Ontario) or the Securities Act (Newfoundland and Labrador),
       
  [ ] (iv) an individual who, either alone or with a spouse, beneficially owns financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds $1,000,000 (YOU MUST ALSO COMPLETE AND SIGN APPENDIX “A” TO THIS QUESTIONNAIRE THAT STARTS ON PAGE C-9 ),
       
  [ ] (v) an individual who beneficially owns financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds $5,000,000,
       
  [ ] (vi) an individual whose net income before taxes exceeded $200,000 in each of the 2 most recent calendar years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of the 2 most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year (YOU MUST ALSO COMPLETE AND SIGN APPENDIX “A” TO THIS QUESTIONNAIRE THAT STARTS ON PAGE C-9 ), or
       
  [ ] (vii) an individual who, either alone or with a spouse, has net assets of at least $5,000,000 (YOU MUST ALSO COMPLETE AND SIGN APPENDIX “A” TO THIS QUESTIONNAIRE THAT STARTS ON PAGE C-9 ).

 

(b) if the Optionee is an “accredited investor” within the meaning of NI 45-106 by virtue of satisfying the indicated criterion as set out in paragraphs (iv), (vi) or (vii) above, the Optionee has provided the Company with the signed risk acknowledgment form set out in Appendix “A” to this Questionnaire;

 

     
C- 3  

 

C. OPTIONEES QUALIFYING UNDER THE FAMILY, FRIENDS AND BUSINESS ASSOCIATES EXEMPTION

 

In connection with the grant of the Options, the Optionee hereby represents, warrants, covenants and certifies that the Optionee meets one or more of the following criteria:

 

 

(a)

the Optionee is ( YOU MUST PLACE A CHECK-MARK ON THE APPROPRIATE LINE AND PROVIDE THE REQUESTED INFORMATION, AS APPLICABLE ):
   
  [ ] (i) a director, executive officer or control person of the Company, or of an affiliate of the Company,
       
  [ ] (ii) ______ a close personal friend ( see guidance on making this determination that starts on page C-6 below ) of ___________________________________ ( print name of person ), who is a director, executive officer, founder or control person of the Company, or of an affiliate of the Company, and has been for __________________________ years based on the following factors:_____________________________________________________________________________
___________________________________________________________________________________
( explain the nature of the close personal friendship ),
       
  [ ] (iii) a close business associate ( see guidance on making this determination that starts on page C-6 below ) of ___________________________________ ( print name of person ), who is a director, executive officer, founder or control person of the Company, or of an affiliate of the Company, and has been for __________________________ years based on the following factors: ___________________________________________________________________________________
_________________________________________________________________________ ( explain the nature of the close business association ),
       
(b) if the Optionee is resident in the Province of Ontario or is subject to the securities laws of the Province of Ontario, the Optionee has provided the Company with a signed risk acknowledgement form in the form attached as Appendix “B” to this Questionnaire (YOU MUST ALSO COMPLETE AND SIGN APPENDIX “B” TO THIS QUESTIONNAIRE THAT STARTS ON PAGE C-11) , or
   
(c) if the Optionee is resident in the Province of Saskatchewan or is subject to the securities laws of the Province of Saskatchewan, and the Optionee is relying on the indicated criterion as set out in subsections C(a)(ii) or C(a)(iii) if the distribution is based in whole or in part on a close personal friendship or a close business association, the Optionee has provided the Company with a signed risk acknowledgement form in the form attached as Appendix “C” to this Questionnaire (YOU MUST ALSO COMPLETE AND SIGN APPENDIX “C” TO THIS QUESTIONNAIRE THAT STARTS ON PAGE C-14 ); or

 

For the purposes of this Questionnaire and the appendices attached hereto:

 

  (a) an issuer is “ affiliated ” with another issuer if
       
    (i) one of them is the subsidiary of the other, or
       
    (ii) each of them is controlled by the same person;

 

     
C- 4  

  

  (b) control person ” means
       
    (i) a person who holds a sufficient number of the voting rights attached to all outstanding voting securities of an issuer to affect materially the control of the issuer, or
       
    (ii) each person in a combination of persons, acting in concert by virtue of an agreement, arrangement, commitment or understanding, which holds in total a sufficient number of the voting rights attached to all outstanding voting securities of an issuer to affect materially the control of the issuer,
       
    and, if a person or combination of persons holds more than 20% of the voting rights attached to all outstanding voting securities of an issuer, the person or combination of persons is deemed, in the absence of evidence to the contrary, to hold a sufficient number of the voting rights to affect materially the control of the issuer;

 

  (c) director ” means
       
    (i) a member of the board of directors of a company or an individual who performs similar functions for a company, and
       
    (ii) with respect to a person that is not a company, an individual who performs functions similar to those of a director of a company;

 

  (d) executive officer ” means, for an issuer, an individual who is
       
    (i) a chair, vice-chair or president,
       
    (ii) a vice-president in charge of a principal business unit, division or function including sales, finance or production, or
       
    (iii) performing a policy-making function in respect of the issuer;

 

 

  (e) financial assets ” means
       
    (i) cash,
       
    (ii) securities, or
       
    (iii) a contract of insurance, a deposit or an evidence of a deposit that is not a security for the purposes of securities legislation;

 

  (f) foreign jurisdiction ” means a country other than Canada or a political subdivision of a country other than Canada;
       
  (j) individual ” means a natural person, but does not include
       
    (i) a partnership, unincorporated association, unincorporated syndicate, unincorporated organization or trust, or
       
    (ii) a natural person in the person’s capacity as a trustee, executor, administrator or personal or other legal representative;

 

  (k) jurisdiction ” or “jurisdiction of Canada” means a province or territory of Canada except when used in the term foreign jurisdiction;
       
  (l) person ” includes
       
    (i) an individual;
       
    (ii) a corporation;
       
    (iii) a partnership, trust, fund and an association, syndicate, organization or other organized group of persons, whether incorporated or not; and
       
    (iv) an individual or other person in that person’s capacity as a trustee, executor, administrator or personal or other legal representative;

 

     
C- 5  

 

  (m) related liabilities ” means
       
    (i) liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets, or
       
    (ii) liabilities that are secured by financial assets; and

 

  (n) spouse ” means, an individual who,
       
    (i) is married to another individual and is not living separate and apart within the meaning of the Divorce Act (Canada), from the other individual,
       
    (ii) is living with another individual in a marriage-like relationship, including a marriage-like relationship between individuals of the same gender, or
       
    (iii) in Alberta, is an individual referred to in paragraph (i) or (ii), or is an adult interdependent partner within the meaning of the Adult Interdependent Relationships Act (Alberta).

 

Guidance On Accredited Investor Exemptions for Individuals

 

An individual accredited investor is an individual:

 

  (a) who, either alone or with a spouse, beneficially owns financial assets (please see the guidance below regarding what financial assets are) having an aggregate realizable value that. before taxes but net of any related liabilities (please see the guidance below regarding what related liabilities are), exceeds $1,000,000;
     
  (b) whose net income before taxes exceeded $200,000 in each of the 2 most recent calendar years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of the 2 most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year;
     
  (c) who, either alone or with a spouse, has net assets (please see the guidance below regarding calculating net assets) of at least $5,000,000; and
     
  (d) who beneficially owns financial assets (please see the guidance below regarding what financial assets are) having an aggregate realizable value that, before taxes but net of any related liabilities (please see the guidance below regarding what related liabilities are), exceeds $5,000,000.

 

The monetary thresholds above are intended to create bright-line standards. Optionees who do not satisfy these monetary thresholds do not qualify as accredited investors.

 

Spouses

 

Sections (a), (b) and (c) above are designed to treat spouses as a single investing unit, so that either spouse qualifies as an accredited investor if the combined financial assets of both spouses exceed $1,000,000, the combined net income of both spouses exceeds $300,000, or the combined net assets of both spouses exceed $5,000,000. Section (d) above does not treat spouses as a single investing unit.

 

If the combined net income of both spouses does not exceed $300,000, but the net income of one of the spouses exceeds $200,000, only the spouse whose net income exceeds $200,000 qualifies as an accredited investor.

 

     
C- 6  

 

Financial Assets and Related Liabilities

 

For the purposes of Sections (a) and (d) above, “ financial assets ” means: (1) cash, (2) securities, or (3) a contract of insurance, a deposit or an evidence of a deposit that is not a security for the purposes of securities legislation. These financial assets are generally liquid or relatively easy to liquidate. The value of a optionee’s personal residence is not included in a calculation of financial assets.

 

The calculation of financial assets must exclude “ related liabilities ”, meaning: (1) liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets, or (2) liabilities that are secured by financial assets.

 

As a general matter, it should not be difficult to determine whether financial assets are beneficially owned by an individual, an individual’s spouse, or both, in any particular instance. However, in the case where financial assets are held in a trust or in another type of investment vehicle for the benefit of an individual, there may be questions as to whether the individual beneficially owns the financial assets. The following factors are indicative of beneficial ownership of financial assets:

 

    physical or constructive possession of evidence of ownership of the financial asset;
     
    entitlement to receipt of any income generated by the financial asset;
     
    risk of loss of the value of the financial asset; and
     
    the ability to dispose of the financial asset or otherwise deal with it as the individual sees fit.

 

For example, securities held in a self-directed RRSP for the sole benefit of an individual are beneficially owned by that individual.

 

In general, financial assets in a spousal RRSP can be included for the purposes of the $1,000,000 financial asset test in Section (a) above because Section (a) takes into account financial assets owned beneficially by a spouse. However, financial assets in a spousal RRSP cannot be included for purposes of the $5,000,000 financial asset test in Section (d) above.

 

Financial assets held in a group RRSP under which the individual does not have the ability to acquire the financial assets and deal with them directly do not meet the beneficial ownership requirements in either Sections (a) or (d) above.

 

Guidance on Close Personal Friend and Close Business Associate Determination

 

A “ close personal friend ” of a director, executive officer, founder or control person of an issuer is an individual who knows the director, executive officer, founder or control person well enough and has known them for a sufficient period of time to be in a position to assess their capabilities and trustworthiness and to obtain information from them with respect to the investment.

 

The following factors are relevant to this determination:

 

  (a) the length of time the individual has known the director, executive officer, founder or control person,
     
  (b) the nature of the relationship between the individual and the director, executive officer, founder or control person including such matters as the frequency of contacts between them and the level of trust and reliance in the other circumstances, and
     
  (c) the number of “close personal friends” of the director, executive officer, founder or control person to whom securities have been distributed in reliance on the private issuer exemption or the family, friends and business associates exemption.

 

     
C- 7  

 

An individual is not a close personal friend solely because the individual is:

 

  (a) a relative,
     
  (b) a member of the same club, organization, association or religious group,
     
  (c) a co-worker, colleague or associate at the same workplace,
     
  (d) a client, customer, former client or former customer,
     
  (e) a mere acquaintance, or
     
  (f) connected through some form of social media, such as Facebook, Twitter or LinkedIn.

 

The relationship between the individual and the director, executive officer, founder or control person must be direct. For example, the exemption is not available to a close personal friend of a close personal friend of a director of the issuer. Further, a relationship that is primarily founded on participation in an internet forum is not considered to be that of a close personal friend.

 

A “ close business associate ” is an individual who has had sufficient prior business dealings with a director, executive officer, founder or control person of the issuer to be in a position to assess their capabilities and trustworthiness and to obtain information from them with respect to the investment.

 

The following factors are relevant to this determination:

 

  (a) the length of time the individual has known the director, executive officer, founder or control person,
     
  (b) the nature of any specific business relationships between the individual and the director, executive officer, founder or control person, including, for each relationship, when it began, the frequency of contact between them and when it terminated if it is not ongoing, and the level of trust and reliance in the other circumstances,
     
  (c) the nature and number of any business dealings between the individual and the director, executive officer, founder or control person, the length of the period during which they occurred, and the nature and date of the most recent business dealing, and
     
  (d) the number of “close business associates” of the director, executive officer, founder or control person to whom securities have been distributed in reliance on the private issuer exemption or the family, friends and business associates exemption.

 

An individual is not a close business associate solely because the individual is:

 

  (a) a member of the same club, organization, association or religious group,
     
  (b) a co-worker, colleague or associate at the same workplace,
     
  (c) a client, customer, former client or former customer,
     
  (d) a mere acquaintance, or
     
  (e) connected through some form of social media, such as Facebook, Twitter or LinkedIn.

 

The relationship between the individual and the director, executive officer, founder or control person must be direct. For example, the exemptions are not available for a close business associate of a close business associate of a director of the issuer. Further, a relationship that is primarily founded on participation in an internet forum is not considered to be that of a close business associate.

 

     
C- 8  

 

The Optionee acknowledges and agrees that, in addition to resale restrictions imposed under U.S. securities laws, there are additional restrictions on the Optionee’s ability to resell the Securities under Canadian securities laws and National Instrument 45-102 as adopted by the Canadian Securities Administrators.

 

The Optionee agrees that the above representations and warranties will be true and correct both as of the execution of this Questionnaire acknowledges that they will survive the completion of the issue of the Option.

 

The Optionee acknowledges that the foregoing representations and warranties are made by the Optionee with the intent that they be relied upon in determining the suitability of the Optionee to acquire the Options and that this Questionnaire is incorporated into and forms part of the Agreement and the undersigned undertakes to immediately notify the Company of any change in any statement or other information relating to the Optionee set forth herein which takes place prior to the closing time of the grant of the Options.

 

The Optionee undertakes to immediately notify the Company of any change in any statement or other information relating to the Optionee set forth in the Agreement or in this Questionnaire which takes place prior to the issuance of the Options.

 

By completing this Questionnaire, the Optionee authorizes the indirect collection of this information by each applicable regulatory authority or regulator and acknowledges that such information is made available to the public under applicable laws.

 

DATED as of day of , 20____.

 

   
  Print Name of Optionee
   
   
  Signature

 

     
C- 9  

 

 

     
C- 10  

 

 

 

     
C- 11  

 

 

     
C- 12  

 

 

 

     
C- 13  

 

 

 

     
C- 14  

 

 

 

     
C- 15  

 

 

 

     
D- 1  

 

Schedule D

 

UNITED STATES ACCREDITED QUESTIONNAIRE

 

Capitalized terms used in this United States Accredited Investor Questionnaire (this “ Questionnaire ”) and not specifically defined have the meaning ascribed to them in the Stock Option Agreement between the undersigned (the “ Optionee ”) and AppCoin Innovations Inc. (the “ Company ”) to which this Schedule D is attached.

 

All dollar amounts referred to in this Questionnaire are in lawful money of the United States, unless otherwise indicated.

 

The Optionee covenants, represents and warrants to the Company that he or she satisfies one or more of the categories of “Accredited Investors”, as defined by Regulation D promulgated under the Securities Act of 1933 (the “Securities Act” ), as indicated below: (Please initial in the space provide those categories, if any, of an “Accredited Investor” which the Optionee satisfies)

 

  ______ Category 1 An organization described in Section 501(c)(3) of the United States Internal Revenue Code, a corporation, a Massachusetts or similar business trust or partnership, not formed for the specific purpose of acquiring the Securities, with total assets in excess of $5,000,000;
     
  ______ Category 2 A natural person whose individual net worth, or joint net worth with that person’s spouse, exceeds $1,000,000. For purposes of this Category 2, “net worth” means the excess of total assets at fair market value (including personal and real property, but excluding the estimated fair market value of a person’s primary home) over total liabilities. Total liabilities excludes any mortgage on the primary home in an amount of up to the home’s estimated fair market value as long as the mortgage was incurred more than 60 days before the Securities are acquired, but includes (i) any mortgage amount in excess of the home’s fair market value and (ii) any mortgage amount that was borrowed during the 60-day period before the date of the acquisition of Securities for the purpose of investing in the Securities;
     
  ______ Category 3 A natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year;
     
  ______ Category 4 A “bank” as defined under Section (3)(a)(2) of the Securities Act or savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act acting in its individual or fiduciary capacity; a broker dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934 (United States); an insurance company as defined in Section 2(13) of the Securities Act; an investment company registered under the Investment Company Act of 1940 (United States) or a business development company as defined in Section 2(a)(48) of such Act; a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958 (United States); a plan with total assets in excess of $5,000,000 established and maintained by a state, a political subdivision thereof, or an agency or instrumentality of a state or a political subdivision thereof, for the benefit of its employees; an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 (United States) whose investment decisions are made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000, or, if a self-directed plan, whose investment decisions are made solely by persons that are accredited investors;

 

     
D- 2  

 

 

  ______ Category 5 A private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940 (United States);
     
  ______ Category 6 A director or executive officer of the Company;
     
  ______ Category 7 A trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Securities, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) under the Securities Act;
     
  ______ Category 8 An entity in which all of the equity owners satisfy the requirements of one or more of the foregoing categories;

 

Note that the Optionee claiming to satisfy one of the above categories of Accredited Investor may be required to supply the Company with a balance sheet, prior years’ federal income tax returns or other appropriate documentation to verify and substantiate the Optionee’s status as an Accredited Investor.

 

If the Optionee is an entity which initialled the last category in reliance upon the Accredited Investor categories above, state the name, address, total personal income from all sources for the previous calendar year, and the net worth (exclusive of home, home furnishings and personal automobiles) for each equity owner of the said entity:

 

All information contained in this Questionnaire will be treated as confidential. However, by signing and returning this Questionnaire, the Optionee agrees that, if necessary, this Questionnaire may be presented to such parties as the Company deems appropriate to establish the availability, under the Securities Act or applicable state securities law, of exemption from registration in connection with the issuance of the Securities hereunder.

 

By completing this Questionnaire, the Optionee authorizes the indirect collection of this information by each applicable regulatory authority or regulator and acknowledges that such information is made available to the public under applicable laws.

 

DATED as of ______ day of _______________, 20____.

 

   
  Print Name of Optionee
   
   
  Signature
   
   
  Social Security/Tax I.D. No.

 

     
  E- 1  

 

Schedule E

 

UNITED STATES NON-ACREDITED QUESTIONNAIRE

 

Capitalized terms used in this United States Non-Accredited Investor Questionnaire (this “ Questionnaire ”) and not specifically defined have the meaning ascribed to them in the Stock Option Agreement between the undersigned (the “ Optionee ”) and AppCoin Innovations Inc. (the “ Company ”) to which this Schedule D is attached.

 

All dollar amounts referred to in this Questionnaire are in lawful money of the United States, unless otherwise indicated.

 

The purpose of this Questionnaire is to assure the Company that the Optionee will meet the standards imposed by the Securities Act of 1933 (the “Securities Act” ) and the appropriate exemptions of applicable state securities laws. The Company will rely on the information contained in this Questionnaire for the purposes of such determination. The Option and the Optioned Shares (together, the “Securities” ) will not be registered under the Securities Act and has been issued in reliance upon the exemption from registration afforded by Section 3(b) and/or Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder. This Questionnaire is not an offer of any securities of the Company in any state other than those specifically authorized by the Company.

 

Please attach additional pages if necessary to answer any question fully.

 

REPRESENTATIONS OF OPTIONEE

 

This item is presented in alternative form. Please initial in the space provided the applicable alternative.

 

_____ ALTERNATIVE ONE: The Optionee covenants, represents and warrants to the Company that he or she has such knowledge and experience in financial and business matters that he or she is capable of evaluating the relative merits and risks of an investment in the Securities and Company and is not utilizing a purchaser representative in connection with evaluating such merits and risks. The Optionee is providing evidence of its knowledge and experience in these matters through the information requested below in this Questionnaire.
   
_____ ALTERNATIVE TWO: The Optionee covenants, represents and warrants to the Company that he or she has chosen to use the services of a purchaser representative acceptable to the Optionee in connection with the Optionee’s acquisition of the Securities. The Optionee hereby acknowledges that the person named below is his or her purchaser representative who will assist and advise the Optionee in evaluating the merits and risks of an investment in the Securities and the Company and affirms that such purchaser representative has previously disclosed in writing any material relationship that exists between the purchaser representative (or its affiliates) and the Company (or its affiliates) that is mutually understood to be contemplated, or that has existed at any time during the previous two years, and any compensation received or to be received as a result of such relationship.
   
   
  (name of Purchaser Representative)
   
   
  (address of Purchaser Representative)
  If the Optionee utilizes a purchaser representative, this Questionnaire must be accompanied by a completed and signed purchaser representative Questionnaire, a copy of which can be obtained from the Company upon request.

 

     
  E- 2  

 

FOR INDIVIDUAL INVESTORS

 

1. Name:  
     
2. Residential Address & Telephone Number:  
     
     
     
     
     
3. Length of Residence in State of Residence:  

 

4. U.S. Citizen: _____ Yes _____ No

 

5. Social Security Number:      
           
6. Business Address & Telephone Number:        
           
           
           
           

 

7. Preferred Mailing Address: _____ Residence _____ Business
           
8. Date of Birth:        
           
9. Employer and Position:        
           
10. Name of Business:        

 

11. Business or Professional Education and Degrees:
           
  School Degree   Year Received
         
         
         
           
           
12. Prior Employment (last 5 years):        
           
  Employer Nature of Duties Dates of Employment
       
       
       
             

 

     
  E- 3  

 

13. Relationship to the Company, if any:  

 

14. Is the Optionee an officer of director of a publicly-held company?

 

  ____ Yes _____ No

 

  If yes, specify company:  

 

15. Does the Optionee beneficially own 10% or more of the voting securities of a publicly-held company?

 

  ____ Yes _____ No

 

  If yes, specify company:  

 

16. Within the last 5 years, has the Optionee personally invested in investments sold by means of private placements in reliance on exemptions from registration under the Securities Act and state securities laws?

 

  ____ Yes _____ No

 

17. Prior investments by the Optionee which were purchased in reliance on exemptions from registration under the Securities Act and State securities laws (initial the highest number applicable):

 

Amount (Cumulative)

 

  Real Estate: Up to $50,000 to Over
  None: _____ $50,000 _____ $250,000 _____ $250,000 _____
         
  Securities: Up to $50,000 to Over
  None: _____ $50,000 _____ $250,000 _____ $250,000 _____
         
  Other: Up to $50,000 to Over
  None: _____ $50,000 _____ $250,000 _____ $250,000 _____

 

18. Does the Optionee consider itself to be an experienced and sophisticated investor? 

 

  ____ Yes _____ No

 

  If so, please provide evidence of investment sophistication and/or experience:
   
   
   
   

 

19. Does the Optionee, or any person authorized to execute this Questionnaire, consider itself to have such knowledge of the Company and its business and such experience in financial and business matters to enable it to evaluate the merits and risks of an investment in the Securities and the Company, should the Optionee be given an opportunity to so invest?

 

  ____ Yes _____ No

 

     
  E- 4  

 

20. If the Optionee is an individual, please indicate the Optionee’s and his/her spouse’s combined gross income during the preceding two years (initial the highest number applicable):

 

               2016                2015
       
  _____  Less than $75,000   _____  Less than $75,000
       
  _____  $75,001 to $100,000   _____  $75,001 to $100,000
       
  _____  $100,001 to $200,000   _____  $100,001 to $200,000
       
  _____  $200,001 to $300,000   _____  $200,001 to $300,000
       
  _____  $Over $300,000   _____  $Over $300,000

 

21. If the Optionee is an individual, please indicate the Optionee’s and his/her spouse’s combined estimated net worth (exclusive of home, home furnishings and personal automobiles) (initial the highest number applicable):

 

  _____  Less than $100,000   _____  $300,0001 to $500,000
       
  _____  $100,001 to $200,000   _____  $500,001 to $1,000,000
       
  _____  $200,001 to $300,000   _____  Over $1,000,000

 

22. Regardless of the amount of the proposed investment:

 

  (a) Will the Optionee’s proposed investment exceed 10% of its individual net worth, or the Optionee’s joint net worth with its spouse as determined in paragraph 21 above?

 

  ____ Yes _____ No

 

  (b) Will the Optionee be able to bear the economic risk of its investment in this transaction?

 

  ____ Yes _____ No

 

23. Please provide answers to the following questions.

 

  (a) State total assets of the Optionee, including cash, stocks and bonds, automobiles, real estate, and any other assets:
     
    $
     
  (b) State total liabilities of the Optionee including real estate indebtedness, accounts payable, taxes payable and any other liabilities:
     
    $
     
  (c) State annual income of the Optionee including salary, securities income, rental income and any other income:
     
    $

 

     
  E- 5  

 

  (d) State annual expenses of the Optionee, excluding ordinary living expenses, including real estate payments, rent, property taxes and other expenses:
     
    $
     
  (e) Does the Optionee expect the amount of its assets, liabilities, income and expenses, as stated above, to be subject to significant change in the future:

 

  ____ Yes _____ No

 

    If yes, explain:
     
     
     

 

All information contained in this Questionnaire will be treated as confidential. However, by signing and returning this Questionnaire, the Optionee agrees that, if necessary, this Questionnaire may be presented to such parties as the Company deems appropriate to establish the availability, under the Securities Act or applicable state securities law, of exemption from registration in connection with the issuance of the Securities hereunder.

 

By completing this Questionnaire, the Optionee authorizes the indirect collection of this information by each applicable regulatory authority or regulator and acknowledges that such information is made available to the public under applicable laws.

 

DATED as of day of _________________, 20____.

 

   
  Print Name of Optionee
   
   
  Signature
   
   
  Social Security/Tax I.D. No.

 

     
F- 1  

 

Schedule F

 

ACKNOWLEDGEMENTS and Representations and warranties OF THE OPTIONEE

 

Capitalized terms used in this Acknowledgements and Representations and Warranties of the Optionee and not specifically defined have the meaning ascribed to them in the Stock Option Agreement between the undersigned (the “ Optionee ”) and AppCoin Innovations Inc. (the “ Company ”) to which this Schedule F is attached.

 

The Optionee acknowledges and agrees that:

 

  (a) the Securities have not been registered under the 1933 Act or under any state securities or “blue sky” laws of any state of the United States, and are being offered only in a transaction not involving any public offering within the meaning of the 1933 Act, and, unless so registered, may not be offered or sold in the United States or to U.S. Persons, except pursuant to an effective registration statement under the 1933 Act, or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the 1933 Act, and in each case only in accordance with applicable state securities laws;
     
  (b) the Company will refuse to register any transfer of the Securities not made in accordance with the provisions of Regulation S, pursuant to an effective registration statement under the 1933 Act or pursuant to an available exemption from, or in a transaction not subject to, the registration requirements of the 1933 Act;
     
  (c) the decision to execute this Agreement and acquire the Securities hereunder has not been based upon any oral or written representation as to fact or otherwise made by or on behalf of the Company and such decision is based solely upon a review of publicly available information regarding the Company that is available on the website of the Securities and Exchange Commission (the “ SEC ”) at www.sec.gov (the “Company Information” );
     
  (d) there are risks associated with an investment in the Securities;
     
  (e) the Optionee and the Optionee’s advisor(s) (if applicable) have had a reasonable opportunity to ask questions of and receive answers from the Company in connection with the distribution of the Securities hereunder, and to obtain additional information, to the extent possessed or obtainable without unreasonable effort or expense, necessary to verify the accuracy of the information about the Company;
     
  (f) the books and records of the Company were available upon reasonable notice for inspection, subject to certain confidentiality restrictions, by the Optionee during reasonable business hours at its principal place of business, and all documents, records and books in connection with the distribution of the Securities hereunder have been made available for inspection by the Optionee, the Optionee’s attorney and/or advisor(s) (if applicable);

     
  (g) the Company, its officers, directors, counsel and agents are entitled to rely upon the truth and accuracy of the acknowledgements, representations, warranties, statements, answers, covenants and agreements contained in this Agreement and agrees that if any of such acknowledgements, representations, warranties, statements, answers, covenants, and agreements should become, by the passage of time after the date of this Agreement, no longer accurate or should be breached, the Optionee shall promptly notify the Company, and the Optionee will hold harmless the Company from any loss or damage it may suffer as a result of the Optionee’s failure to correctly complete or comply with the terms of this Agreement;

 

     
F- 2  

 

  (h) the Optionee has been advised to consult its own legal, tax and other advisors with respect to the merits and risks regarding the exercise of the Options and the issuance of the Optioned Shares and with respect to applicable resale restrictions and it is solely responsible (and the Company is in not any way responsible) for compliance with applicable resale restrictions;
     
  (i) the Company has advised the Optionee that the Company is relying on an exemption from the registration and prospectus requirements of applicable securities laws and, as a consequence of acquiring the Securities pursuant to this exemption, certain protections, rights and remedies provided by the applicable securities laws, including statutory rights of rescission or damages, will not be available to the Optionee;
     
  (j) the Optionee will indemnify and hold harmless the Company and, where applicable, its directors, officers, employees, agents, advisors and shareholders, from and against any and all loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all fees, costs and expenses whatsoever reasonably incurred in investigating, preparing or defending against any claim, lawsuit, administrative proceeding or investigation whether commenced or threatened) arising out of or based upon any representation or warranty of the Optionee contained herein or in any document furnished by the Optionee to the Company in connection herewith being untrue in any material respect or any breach or failure by the Optionee to comply with any covenant or agreement made by the Optionee to the Company in connection therewith;
     
  (k) the Securities are not listed on any stock exchange or automated dealer quotation system and no representation has been made to the Optionee that any of the Securities will become listed on any stock exchange or automated dealer quotation system, except that currently certain market makers make market in the shares of the Company’s common stock on the OTC Pink;
     
  (l) neither the SEC nor any other securities commission or similar regulatory authority has reviewed or passed on the merits of the Securities;
     
  (m) no documents in connection with this Agreement have been reviewed by the SEC or any state securities administrators;
     
  (n) there is no government or other insurance covering any of the Securities; and
     
  (o) this Agreement is not enforceable by the Optionee unless it has been accepted by the Company.

 

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPTIONEE

 

The Optionee hereby represents and warrants to and covenants with the Company (which representations, warranties and covenants shall survive the closing) that:

 

  (a) the Optionee is a bona fide director, officer, employee, independent contractor or consultant of the Company, Parent or Subsidiary;
     
  (b) unless the Optionee has completed Schedule D or E, the Optionee is not acquiring the Securities for the account or benefit of, directly or indirectly, any U.S. Person;
     
  (c) unless the Optionee has completed Schedule D or E, the Optionee is not a U.S. Person;
     
  (d) the acquisition of the Securities by the Optionee as contemplated in this Agreement complies with or is exempt from the applicable securities legislation of the jurisdiction of residence of the Optionee;
     
  (e) the Optionee has not acquired or is not acquiring the Securities as a result of, and will not itself engage in, any “directed selling efforts” (as defined in Regulation S under the 1933 Act) in the United States in respect of the Securities which would include any activities undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for the resale of the Securities; provided, however, that the Optionee may sell or otherwise dispose of the Securities pursuant to registration thereof under the 1933 Act and any applicable state and provincial securities laws or under an exemption from such registration requirements;
     
  (f) unless the Optionee has completed Schedule D or E, the Optionee is outside the United States when receiving and executing this Agreement and is acquiring the Securities as principal for the Optionee’s own account, for investment purposes only, and not with a view to, or for, resale, distribution or fractionalisation thereof, in whole or in part, and, in particular, it has no intention to distribute either directly or indirectly any of the Securities in the United States or to U.S. Persons, and no other person has a direct or indirect beneficial interest in such Securities;
     
  (g) if the Optionee is not resident in the United States or Canada, the Optionee:

 

     
F- 3  

 

    (i) is knowledgeable of, or has been independently advised as to, the applicable securities laws of the securities regulators having application in the jurisdiction in which the Optionee is resident (the “ International Jurisdiction ”) which would apply to the granting of the Option and the issue, sale or resale of the Optioned Shares;
       
    (ii) the Optionee is acquiring the Option or the Optioned Shares pursuant to exemptions from prospectus or equivalent requirements under applicable securities laws or, if such is not applicable, the Optionee is permitted to acquire the Option or the Optioned Shares under the applicable securities laws of the securities regulators in the International Jurisdiction without the need to rely on any exemptions;
       
    (iii) the applicable securities laws of the authorities in the International Jurisdiction do not require the Company to make any filings or seek any approvals of any kind whatsoever from any securities regulator of any kind whatsoever in the International Jurisdiction in connection with the granting of the Option or the issue, sale or resale of the Optioned Shares; and
       
    (iv) the granting of the Option or the issue, sale or resale of the Optioned Shares does not trigger:

 

    A. any obligation to prepare and file a prospectus or similar document, or any other report with respect to such purchase in the International Jurisdiction; or
       
    B. any continuous disclosure reporting obligation of the Optionee or the Company in the International Jurisdiction; and

 

  (v) the Optionee will, if requested by the Company, deliver to the Company a certificate or opinion of local counsel from the International Jurisdiction which will confirm the matters referred to in subparagraphs (ii), (iii) and (iv) above to the satisfaction of the Company, acting reasonably;

 

  (h) the Optionee has received and carefully read this Agreement and the Company Information;
     
  (i) the Optionee has received a brief description of the Securities and the Optionee understands that the proceeds from the exercise of the Options will be used by the Company as working capital for general corporate purposes;
     
  (j) the Optionee has duly executed and delivered this Agreement and it constitutes a valid and binding agreement of the Optionee enforceable against the Optionee in accordance with its terms;
     
  (k) the Optionee has the legal capacity and competence to enter into and execute this Agreement and to take all actions required pursuant hereto and, if the Optionee is a corporation, it is duly incorporated and validly subsisting under the laws of its jurisdiction of incorporation and all necessary approvals by its directors, shareholders and others have been obtained to authorize execution and performance of this Agreement on behalf of the Optionee;
     
  (l) the Optionee:

 

    (i) has adequate net worth and means of providing for its current financial needs and possible personal contingencies,
       
    (ii) has no need for liquidity in this investment, and
       
    (iii) is able to bear the economic risks of an investment in the Securities for an indefinite period of time, and can afford the complete loss of such investment;

 

  (m) the Optionee has the requisite knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of the investment in the Securities and the Company, and the Optionee is providing evidence of such knowledge and experience in these matters through the information requested in this Agreement;
     
  (n) the Optionee is aware that an investment in the Company is speculative and involves certain risks, including the possible loss of the investment, and the Optionee has carefully read and considered the matters set forth under the caption “Risk Factors” appearing in the Company’s various disclosure documents, filed with the SEC;
     
  (o) the entering into of this Agreement and the transactions contemplated hereby do not result in the violation of any of the terms and provisions of any law applicable to, or, if applicable, the constating documents of, the Optionee, or of any agreement, written or oral, to which the Optionee may be a party or by which the Optionee is or may be bound;
     
  (p) the Optionee is purchasing the Securities for its own account for investment purposes only and not for the account of any other person and not for distribution, assignment or resale to others, and no other person has a direct or indirect beneficial interest is such Securities, and the Optionee has not subdivided his interest in the Securities with any other person;
     
  (q) the Optionee is not an underwriter of, or dealer in, the shares of the Company’s common stock, nor is the Optionee participating, pursuant to a contractual agreement or otherwise, in the distribution of the Securities;
     
  (r) the Optionee understands and agrees that the Company and others will rely upon the truth and accuracy of the acknowledgements, representations, statements, answers and agreements contained in this Agreement, and agrees that if any of such acknowledgements, representations, statements, answers and agreements are no longer accurate or have been breached, the Optionee shall promptly notify the Company;

 

     
F- 4  

 

  (s) the Optionee has made an independent examination and investigation of an investment in the Securities and the Company and has depended on the advice of its legal and financial advisors and agrees that the Company will not be responsible in anyway whatsoever for the Optionee’s decision to acquire the Securities;
     
  (t) the Optionee is not aware of any advertisement of any of the Securities and is not acquiring the Securities as a result of any form of general solicitation or general advertising including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio or television, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising;
     
  (u) the Optionee has either (a) a pre-existing personal or business relationship with the Company or any of its partners, officers, directors, or controlling persons consisting of personal or business contacts of a nature and duration which enable the Optionee to be aware of the character, business acumen and general business and financial circumstances of the Company or any such partner, officer, director, or controlling person with whom such relationship exists or (b) such business or financial expertise as to be able to protect the Optionee’s own interests in connection with the acquisition of the Securities; and,
     
  (v) no person has made to the Optionee any written or oral representations:

 

    (i) that any person will resell or repurchase any of the Securities,
       
    (ii) that any person will refund the purchase price of any of the Securities,
       
    (iii) as to the future price or value of any of the Securities, or
       
    (iv) that any of the Securities will be listed and posted for trading on any stock exchange or automated dealer quotation system or that application has been made to list and post any of the Securities of the Company on any stock exchange or automated dealer quotation system, except that currently certain market makers make market in the shares of the Company’s common stock on the OTC Pink.

 

DATED as of _____day of __________________, 20____.

 

   
  Print Name of Optionee
   
   
  Signature
   
   
  Social Security/Tax I.D. No.

 

     
 

 

 

 

NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (AS DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT.

 

Unless permitted under securities legislation, the holder of this security must not trade the security before the date that is 4 months and a day after the later of (i) OCTOBER 15, 2017, and (ii) the date the issuer became a reporting issuer in any province or territory.

 

STOCK OPTION AGREEMENT

 

This AGREEMENT is entered into as of the October 15, 2017 (the “Date of Grant” ).

 

BETWEEN:

 

  APPCOIN INNOVATIONS INC. , a company incorporated pursuant to the laws of the State of Nevada, with an office at 561 Indiana Court, Venice Beach, CA 90291
   
  (the “Company” )

 

AND:

 

 

MICHAEL BLUM , a businessman with an address at 2212 Glenbrook Way, Las Vegas, NV 89117

   
  (the “Optionee” )

 

WHEREAS:

 

A. The Company’s board of directors (the “Board” ) has approved and adopted a 2017 Equity Incentive Plan (the “Plan” ), whereby the Board is authorized to grant stock options to purchase shares of common stock of the Company to the directors, officers, employees, and consultants of the Company or any Parent or Subsidiary of the Company (as defined herein);

 

B. The Optionee is a director, officer, employee or consultant of the Company, the Parent or a Subsidiary; and

 

C. The Company wishes to grant stock options to purchase a total of 400,000 Optioned Shares (as defined herein) to the Optionee, as follows:

 

    Incentive Stock Options (as defined herein)
  X Non-Qualified Stock Options (as defined herein)

 

     
  2  

 

NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

1. Definitions

 

1.1 In this Agreement, the following terms shall have the following meanings:

 

  (a) 1933 Act ” means the Securities Act of 1933, as amended;
     
  (b) Board ” means the board of directors of the Company;
     
  (c) Canadian Accredited Investor Questionnaire ” means a questionnaire substantially in the form of the Canadian Accredited Investor Questionnaire attached to this Agreement as Schedule B;
     
  (d) Code ” means the Internal Revenue Code of 1986;
     
  (e) Common Stock ” means the shares of common stock of the Company;
     
  (f) Exercise Price ” means $0.10 per share;
     
  (g) Expiry Date ” means October 15, 2027;
     
  (h) Incentive Stock Options ” means any Options that meet all the requirements under section 422 of the Code;
     
  (i) Non-Qualified Stock Options ” means any Options that do not qualify as Incentive Stock Options and, thus, do not meet the requirements under section 422 of the Code;
     
  (j) Notice of Exercise ” means a notice in writing addressed to the Company at its address first recited hereto (or such other address of which the Company may from time to time notify the Optionee in writing), substantially in the form attached as Schedule B hereto, which notice shall specify therein the number of Optioned Shares in respect of which the Options are being exercised;
     
  (k) Options ” means the right and option to purchase, from time to time, all, or any part of the Optioned Shares granted to the Optionee by the Company pursuant to Section 2.1 of this Agreement;
     
  (l) Optioned Shares ” means the shares of Common Stock that are issued pursuant to the exercise of the Options;
     
  (m) Parent ” means a company or other entity that owns at least fifty percent (50%) of the outstanding voting stock or voting power of the Company;
     
  (n) Plan ” has the meaning ascribed thereto in Recital A of this Agreement;
     
  (o) Securities ” means, collectively, the Options and the Optioned Shares;
     
  (p) Subsidiary ” means a company or other entity, at least fifty percent (50%) of the outstanding voting stock or voting power of which is beneficially owned, directly or indirectly, by the Company; and
     
  (q) Vested Options ” means the Options that have vested in accordance with Section 2.2 of this Agreement.

 

     
  3  

 

1.2 Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Plan.

 

2. The Options

 

2.1 The Company hereby grants to the Optionee, on the terms and conditions set out in this Agreement and in the Plan, Options to purchase a total of 400,000 Optioned Shares at the Exercise Price.

 

2.2 The Options will vest in accordance with Schedule A to this Agreement. The Options may be exercised immediately after vesting.

 

2.3 The Options shall, at 5:00 p.m. (Pacific time) on the Expiry Date, expire and be of no further force or effect whatsoever.

 

2.4 The Company shall not be obligated to cause the issuance, transfer or delivery of a certificate or certificates representing Optioned Shares to the Optionee, until provision has been made by the Optionee, to the satisfaction of the Company, for the payment of the aggregate Exercise Price for all Optioned Shares for which the Options shall have been exercised, and for satisfaction of any tax withholding obligations associated with such exercise.

 

2.5 Subject to the provisions of this Agreement and the Plan and subject to compliance with any applicable securities laws, the Options shall be exercisable, in full or in part, at any time after vesting, until termination. If less than all of the Optioned Shares included in the vested portion of any Options are purchased, the remainder may be purchased at any subsequent time prior to the Expiry Date. Only whole shares may be issued pursuant to the exercise of any Options, and to the extent that any Option covers less than one (1) share, it is not exercisable.

 

2.6 Each exercise of the Options shall be by means of delivery of a Notice of Exercise (which may be in the form attached hereto as Schedule C) to the Chief Financial Officer of the Company at its principal executive office, specifying the number of Optioned Shares to be purchased and accompanied by payment in cash or by certified check or cashier’s check in the amount of the full Exercise Price for the Common Stock to be purchased. In addition to payment in cash or by certified check or cashier’s check and if agreed to in advance by the Company, the Optionee or transferee of the Options may pay for all or any portion of the aggregate Exercise Price by complying with any other payment mechanism approved by the Board at the time of exercise.

 

2.7 Reference is made to the Plan for particulars of the rights and obligations of the Optionee and the Company in respect of:

 

  (a) the terms and conditions on which the Options are granted except to the extent set forth herein; and,
     
  (b) a consolidation or subdivision of the Company’s share capital or a corporate reorganization;

 

all to the same effect as if the provisions of the Plan were set out in this Agreement and to all of which the Optionee assents. A copy of the Plan is available to the Optionee at no charge, at the Company’s principal executive office. Any provision of this Agreement that is inconsistent with the Plan shall be considered void and replaced with the applicable provision of the Plan. The Company may modify, extend or renew this Agreement or the Options represented hereby or accept the surrender thereof (to the extent not previously exercised) and authorize the granting of a new option in substitution therefore (to the extent not previously exercised), subject at all times to the Plan, the applicable rules of any applicable regulatory authority or stock exchange, and any applicable laws. Notwithstanding the foregoing provisions of this Section 2.7, the Company shall not have the right to make any modification which would materially alter the terms of the Options to the Optionee’s detriment or materially impair any rights of the Optionee hereunder without the consent of the Optionee.

 

     
  4  

 

2.8 By accepting the Options, the Optionee represents and agrees that none of the Optioned Shares purchased upon exercise of the Options will be distributed in violation of applicable federal and state laws and regulations. The Optionee further represents and agrees to provide the Company with any other document reasonably requested by the Company or the Company’s Counsel.

 

3. Documents Required from Optionee

 

3.1 The Optionee must complete, sign and return to the Company:

 

  (a) a copy of this Agreement;
     
  (b) a copy of the Acknowledgements, and Representations and Warranties of the Optionee attached hereto as Schedule F;
     
  (c) if the Optionee is resident in Canada, a Canadian Questionnaire in the form attached hereto as Schedule C; and
     
  (d) if the Optionee is resident in the United States and if an exemption from the registration requirements imposed by the 1933 Act is necessary for entry into this Agreement, one of the two questionnaires in the forms attached hereto as Schedule D and Schedule E, whichever applies.

 

3.2 The Optionee shall complete, sign and return to the Company as soon as possible, on request by the Company, any documents, questionnaires, notices and undertakings as may be required by regulatory authorities, and applicable law.

 

4. Subject to Plan

 

The terms of the Options will be subject to the Plan, as may from time to time be amended, and any inconsistencies between this Agreement and the Plan, as the same may be from time to time amended, shall be governed by the provisions of the Plan. A copy of the Plan will be delivered to the Optionee, and will be available for inspection at the principal offices of the Company.

 

5. Acknowledgement and Waiver

 

The Optionee hereby waives, to the fullest extent permitted by law, any rights of withdrawal, rescission or compensation for damages to which the Optionee might be entitled in connection with the distribution of any of the Securities.

 

6. Professional Advice

 

The acceptance of the Options and the sale of Common Stock issued pursuant to the exercise of Options may have consequences under federal, state and provincial tax and securities laws which may vary depending upon the individual circumstances of the Optionee. Accordingly, the Optionee acknowledges that he or she has been advised to consult his or her personal legal and tax advisor in connection with this Agreement and his or her dealings with respect to Options. Without limiting other matters to be considered with the assistance of the Optionee’s professional advisors, the Optionee should consider: (a) the merits and risks of an investment in the underlying Optioned Shares; and (b) any resale restrictions that might apply under applicable securities laws.

 

     
  5  

 

7. Legending of Subject Securities

 

7.1 The Optionee hereby acknowledges that that upon the issuance thereof, and until such time as the same is no longer required under the applicable securities laws and regulations, the certificates representing any of the Optioned Shares may bear a legend in substantially the following form:

 

If the Optionee is not resident in the United States:

 

THE SECURITIES REPRESENTED HEREBY HAVE BEEN OFFERED IN AN OFFSHORE TRANSACTION TO A PERSON WHO IS NOT A U.S. PERSON (AS DEFINED HEREIN) PURSUANT TO REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”).

 

NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE 1933 ACT, OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (AS DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT.

 

Unless permitted under securities legislation, the holder of this security must not trade the security before the date that is 4 months and a day after THE later of (i) [ insert the distribution date ], and (ii) the date the issuer became a reporting issuer in any province or territory.

 

If the Option is resident in the United States:

 

NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (AS DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT.

 

Unless permitted under securities legislation, the holder of this security must not trade the security before the date that is 4 months and a day after THE later of (i) [ insert the distribution date ], and (ii) the date the issuer became a reporting issuer in any province or territory.

 

7.2 The Optionee hereby acknowledges and agrees to the Company making a notation on its records or giving instructions to the registrar and transfer agent of the Company in order to implement the restrictions on transfer set forth and described in this Agreement.

 

     
  6  

 

8. Resale restrictions

 

8.1 This Agreement and the Options represented hereby are not transferable. Optioned Shares received upon exercise of any Options will be subject to resale restrictions contained in the securities legislation applicable to the Company and the Optionee. The Optionee acknowledges and agrees that the Optionee is solely responsible (and the Company is not in any way responsible) for compliance with applicable resale restrictions.

 

8.2 The Optionee acknowledges that any resale of any of the Optioned Shares will be subject to resale restrictions contained in the securities legislation applicable to the Optionee or proposed transferee. The Optionee acknowledges that none of the Optioned Shares have been registered under the 1933 Act or the securities laws of any state of the United States. The Optioned Shares may not be offered or sold in the United States unless registered in accordance with federal securities laws and all other applicable securities laws or exemptions from such registration requirements are available. The Optionee acknowledges that the Optioned Shares are subject to resale restrictions in Canada and may not be traded in Canada except as permitted by the applicable provincial securities laws and the rules made thereunder.

 

9. No Employment Relationship

 

The grant of an Option shall in no way constitute any form of agreement or understanding binding on the Company or any related company, express or implied, that the Company or any related company will employ or contract with an Optionee, for any length of time, nor shall it interfere in any way with the Company’s or, where applicable, a related company’s right to terminate Optionee’s employment at any time, which right is hereby reserved.

 

10. Governing Law

 

This Agreement is governed by the laws of the State of Nevada and the federal laws of the United States of America as applicable therein. The Optionee irrevocably attorns to the jurisdiction of the courts of the State of Arizona.

 

11. Costs

 

The Optionee acknowledges and agrees that all costs and expenses incurred by the Optionee (including any fees and disbursements of any special counsel retained by the Optionee) relating to the acquisition of the Securities shall be borne by the Optionee.

 

12. Survival

 

This Agreement, including without limitation the representations, warranties and covenants contained herein, shall survive and continue in full force and effect and be binding upon the parties hereto notwithstanding the completion of the purchase of the shares underlying the Options by the Optionee pursuant hereto.

 

13. Assignment

 

This Agreement is not transferable or assignable.

 

14. Currency

 

Unless explicitly stated otherwise, all funds in this Agreement are stated in United States dollars.

 

15. Severability

 

The invalidity or unenforceability of any particular provision of this Agreement shall not affect or limit the validity or enforceability of the remaining provisions of this Agreement.

 

     
  7  

 

16. Counterparts and Electronic Means

 

This Agreement may be executed in several counterparts, each of which will be deemed to be an original and all of which will together constitute one and the same instrument. Delivery of an executed copy of this Agreement by electronic facsimile transmission or other means of electronic communication capable of producing a printed copy will be deemed to be execution and delivery of this Agreement as of the date first above written.

 

17. Entire Agreement

 

This Agreement is the only agreement between the Optionee and the Company with respect to the Options, and this Agreement and the Plan, once approved, supersede all prior and contemporaneous oral and written statements and representations and contain the entire agreement between the parties with respect to the Options.

 

IN WITNESS WHEREOF the parties hereto have duly executed this Agreement as of the date first above written.

 

APPCOIN INNOVATIONS INC.

 

Per: /s/ James Geiskopf  
  Authorized Signatory  

 

       
WITNESSED BY:   )  
    )  
    )  
    )  
    )  
Name   ) /s/ Michael Blum
    ) MICHAEL BLUM
    )  
    )  
Address   )  
    )  
    )  
    )  
    )  
Occupation   )  

 

     
A- 1  

 

Schedule A

 

VESTING SCHEDULE

 

1/3 of the Options will vest on October 15, 2017, October 15, 2018 and October 15, 2019.

 

     
B- 1  

 

Schedule B

 

NOTICE OF EXERCISE

 

TO: AppCoin Innovations Inc.
  561 Indiana Court
  Venice Beach, CA 90291

 

This Notice of Exercise shall constitute a proper Notice of Exercise pursuant to section 2.6 of the Stock Option Agreement dated October 15, 2017 (the “ Agreement ”), between AppCoin Innovations Inc. (the “Company” ) and the undersigned. The undersigned hereby elects to exercise the Optionee’s options to purchase ____________________ shares of the common stock of the Company at a price of $0.10 per share on the terms and conditions set forth in the Agreement.

 

Payment of aggregate consideration of $____________in cash or by certified check or cashier’s check accompanies this notice.

 

The Optionee hereby represents and warrants to the Company that all representations and warranties set out in the Agreement (and the applicable schedules hereto) are true as of the date of the exercise of the Options under the Agreement. The Optionee hereby further represents and warrants to the Company that the shares are being purchased only for investment and without intention to sell or distribute such shares.

 

The Optionee hereby directs the Company to issue, register and deliver the certificates representing the shares as follows:

 

Registration Information:   Delivery Instructions:
     
Name to appear on certificates   Name
     
Address   Address
     
City, State, and Zip Code    
     
    Telephone Number

 

DATED at _____________________________, the day of______________, _______.

 

  X
  Signature
   
  (Name and, if applicable, Office)
   
  (Address)
   
  (City, State, and Zip Code)
   
  Fax Number or E-mail Address
   
  Social Security/Tax I.D. No.

 

     
C- 1  

 

Schedule C

 

CANADIAN QUESTIONNAIRE

 

TO: APPCOIN INNOVATIONS INC. (the “ Company ”)

 

RE: Stock options (the “ Options ”) of the Company

 

Capitalized terms used in this Canadian Questionnaire (this “ Questionnaire ”) and not specifically defined have the meaning ascribed to them in the Stock Option Agreement between the undersigned (the “ Optionee ”) and the Company to which this Schedule C is attached.

 

All dollar amounts referred to in this Questionnaire and Appendices A, B and C are in lawful money of Canada, unless otherwise indicated.

 

In connection with the grant to the Optionee of the Options, the Optionee hereby represents, warrants and certifies to the Company that the Optionee:

 

  (i) is acquiring the Options as principal (or deemed principal under the terms of National Instrument 45-106 – Prospectus Exemptions adopted by the Canadian Securities Administrators (“ NI 45-106 ”));
     
  (ii) (A)       is resident in or is subject to the laws of one of the following (check one):

 

  [   ] Alberta [   ] New Brunswick [   ] Prince Edward Island
       
  [   ] British Columbia [   ] Nova Scotia [   ] Quebec
       
  [   ] Manitoba [   ] Ontario [   ] Saskatchewan
       
  [   ] Newfoundland and Labrador [   ] Yukon
     
  [   ] Northwest Territories

or

 

    (B)    [   ] is resident in a country other than Canada or the United States; and
     
  (iii) has not been provided with any offering memorandum in connection with the acquisition of the Options.

 

In connection with the grant of the Options, the Optionee hereby represents, warrants, covenants and certifies that the Optionee meets one or more of the following criteria:

 

A. OPTIONEE QUALIFYING UNDER THE EMPLOYEE, DIRECTOR, OFFICER AND CONSULTANT EXEMPTION

 

In connection with the grant of the Options, the Optionee hereby represents, warrants, covenants and certifies that the Optionee meets one or more of the following criteria:

 

  [ ] (i) is an employee, officer or director of the Company; or
       
  [ ] (ii) is a consultant of the Company who provides services to the Company or a related entity of the Company and spends or will spend a significant amount of time and attention on the business and affairs of the Company or a related entity of the Company; and
       
  has voluntarily agreed to the grant of the Options.

 

     
C- 2  

 

B. OPTIONEES QUALIFYING UNDER THE ACCREDITED INVESTOR EXEMPTION

 

In connection with the grant of the Options, the Optionee hereby represents, warrants, covenants and certifies that the Optionee meets one or more of the following criteria:

 

(a) _____ the Optionee is an “accredited investor” within the meaning of NI 45-106, by virtue of satisfying the indicated criterion below (YOU MUST INITIAL OR PLACE A CHECK-MARK ON THE APPROPRIATE LINE(S)) ( see certain guidance with respect to accredited investors that starts on page C-5 below )

 

  [ ] (i) except in Ontario, a person registered under the securities legislation of a jurisdiction of Canada as an adviser or dealer,
       
  [ ] (ii) an individual registered under the securities legislation of a jurisdiction of Canada as a representative of a person referred to in paragraph (i),
       
  [ ] (iii) an individual formerly registered under the securities legislation of a jurisdiction of Canada, other than an individual formerly registered solely as a representative of a limited market dealer under one or both of the Securities Act (Ontario) or the Securities Act (Newfoundland and Labrador),
       
  [ ] (iv) an individual who, either alone or with a spouse, beneficially owns financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds $1,000,000 (YOU MUST ALSO COMPLETE AND SIGN APPENDIX “A” TO THIS QUESTIONNAIRE THAT STARTS ON PAGE C-9 ),
       
  [ ] (v) an individual who beneficially owns financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds $5,000,000,
       
  [ ] (vi) an individual whose net income before taxes exceeded $200,000 in each of the 2 most recent calendar years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of the 2 most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year (YOU MUST ALSO COMPLETE AND SIGN APPENDIX “A” TO THIS QUESTIONNAIRE THAT STARTS ON PAGE C-9 ), or
       
  [ ] (vii) an individual who, either alone or with a spouse, has net assets of at least $5,000,000 (YOU MUST ALSO COMPLETE AND SIGN APPENDIX “A” TO THIS QUESTIONNAIRE THAT STARTS ON PAGE C-9 ).

 

(b) if the Optionee is an “accredited investor” within the meaning of NI 45-106 by virtue of satisfying the indicated criterion as set out in paragraphs (iv), (vi) or (vii) above, the Optionee has provided the Company with the signed risk acknowledgment form set out in Appendix “A” to this Questionnaire;

 

     
C- 3  

 

C. OPTIONEES QUALIFYING UNDER THE FAMILY, FRIENDS AND BUSINESS ASSOCIATES EXEMPTION

 

In connection with the grant of the Options, the Optionee hereby represents, warrants, covenants and certifies that the Optionee meets one or more of the following criteria:

 

 

(a)

the Optionee is ( YOU MUST PLACE A CHECK-MARK ON THE APPROPRIATE LINE AND PROVIDE THE REQUESTED INFORMATION, AS APPLICABLE ):
   
  [ ] (i) a director, executive officer or control person of the Company, or of an affiliate of the Company,
       
  [ ] (ii) ______ a close personal friend ( see guidance on making this determination that starts on page C-6 below ) of ___________________________________ ( print name of person ), who is a director, executive officer, founder or control person of the Company, or of an affiliate of the Company, and has been for __________________________ years based on the following factors:_____________________________________________________________________________
___________________________________________________________________________________
( explain the nature of the close personal friendship ),
       
  [ ] (iii) a close business associate ( see guidance on making this determination that starts on page C-6 below ) of ___________________________________ ( print name of person ), who is a director, executive officer, founder or control person of the Company, or of an affiliate of the Company, and has been for __________________________ years based on the following factors: ___________________________________________________________________________________
_________________________________________________________________________ ( explain the nature of the close business association ),
       
(b) if the Optionee is resident in the Province of Ontario or is subject to the securities laws of the Province of Ontario, the Optionee has provided the Company with a signed risk acknowledgement form in the form attached as Appendix “B” to this Questionnaire (YOU MUST ALSO COMPLETE AND SIGN APPENDIX “B” TO THIS QUESTIONNAIRE THAT STARTS ON PAGE C-11) , or
   
(c) if the Optionee is resident in the Province of Saskatchewan or is subject to the securities laws of the Province of Saskatchewan, and the Optionee is relying on the indicated criterion as set out in subsections C(a)(ii) or C(a)(iii) if the distribution is based in whole or in part on a close personal friendship or a close business association, the Optionee has provided the Company with a signed risk acknowledgement form in the form attached as Appendix “C” to this Questionnaire (YOU MUST ALSO COMPLETE AND SIGN APPENDIX “C” TO THIS QUESTIONNAIRE THAT STARTS ON PAGE C-14 ); or

 

For the purposes of this Questionnaire and the appendices attached hereto:

 

  (a) an issuer is “ affiliated ” with another issuer if
       
    (i) one of them is the subsidiary of the other, or
       
    (ii) each of them is controlled by the same person;

 

     
C- 4  

  

  (b) control person ” means
       
    (i) a person who holds a sufficient number of the voting rights attached to all outstanding voting securities of an issuer to affect materially the control of the issuer, or
       
    (ii) each person in a combination of persons, acting in concert by virtue of an agreement, arrangement, commitment or understanding, which holds in total a sufficient number of the voting rights attached to all outstanding voting securities of an issuer to affect materially the control of the issuer,
       
    and, if a person or combination of persons holds more than 20% of the voting rights attached to all outstanding voting securities of an issuer, the person or combination of persons is deemed, in the absence of evidence to the contrary, to hold a sufficient number of the voting rights to affect materially the control of the issuer;

 

  (c) director ” means
       
    (i) a member of the board of directors of a company or an individual who performs similar functions for a company, and
       
    (ii) with respect to a person that is not a company, an individual who performs functions similar to those of a director of a company;

 

  (d) executive officer ” means, for an issuer, an individual who is
       
    (i) a chair, vice-chair or president,
       
    (ii) a vice-president in charge of a principal business unit, division or function including sales, finance or production, or
       
    (iii) performing a policy-making function in respect of the issuer;

 

 

  (e) financial assets ” means
       
    (i) cash,
       
    (ii) securities, or
       
    (iii) a contract of insurance, a deposit or an evidence of a deposit that is not a security for the purposes of securities legislation;

 

  (f) foreign jurisdiction ” means a country other than Canada or a political subdivision of a country other than Canada;
       
  (j) individual ” means a natural person, but does not include
       
    (i) a partnership, unincorporated association, unincorporated syndicate, unincorporated organization or trust, or
       
    (ii) a natural person in the person’s capacity as a trustee, executor, administrator or personal or other legal representative;

 

  (k) jurisdiction ” or “jurisdiction of Canada” means a province or territory of Canada except when used in the term foreign jurisdiction;
       
  (l) person ” includes
       
    (i) an individual;
       
    (ii) a corporation;
       
    (iii) a partnership, trust, fund and an association, syndicate, organization or other organized group of persons, whether incorporated or not; and
       
    (iv) an individual or other person in that person’s capacity as a trustee, executor, administrator or personal or other legal representative;

 

     
C- 5  

 

  (m) related liabilities ” means
       
    (i) liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets, or
       
    (ii) liabilities that are secured by financial assets; and

 

  (n) spouse ” means, an individual who,
       
    (i) is married to another individual and is not living separate and apart within the meaning of the Divorce Act (Canada), from the other individual,
       
    (ii) is living with another individual in a marriage-like relationship, including a marriage-like relationship between individuals of the same gender, or
       
    (iii) in Alberta, is an individual referred to in paragraph (i) or (ii), or is an adult interdependent partner within the meaning of the Adult Interdependent Relationships Act (Alberta).

 

Guidance On Accredited Investor Exemptions for Individuals

 

An individual accredited investor is an individual:

 

  (a) who, either alone or with a spouse, beneficially owns financial assets (please see the guidance below regarding what financial assets are) having an aggregate realizable value that. before taxes but net of any related liabilities (please see the guidance below regarding what related liabilities are), exceeds $1,000,000;
     
  (b) whose net income before taxes exceeded $200,000 in each of the 2 most recent calendar years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of the 2 most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year;
     
  (c) who, either alone or with a spouse, has net assets (please see the guidance below regarding calculating net assets) of at least $5,000,000; and
     
  (d) who beneficially owns financial assets (please see the guidance below regarding what financial assets are) having an aggregate realizable value that, before taxes but net of any related liabilities (please see the guidance below regarding what related liabilities are), exceeds $5,000,000.

 

The monetary thresholds above are intended to create bright-line standards. Optionees who do not satisfy these monetary thresholds do not qualify as accredited investors.

 

Spouses

 

Sections (a), (b) and (c) above are designed to treat spouses as a single investing unit, so that either spouse qualifies as an accredited investor if the combined financial assets of both spouses exceed $1,000,000, the combined net income of both spouses exceeds $300,000, or the combined net assets of both spouses exceed $5,000,000. Section (d) above does not treat spouses as a single investing unit.

 

If the combined net income of both spouses does not exceed $300,000, but the net income of one of the spouses exceeds $200,000, only the spouse whose net income exceeds $200,000 qualifies as an accredited investor.

 

     
C- 6  

 

Financial Assets and Related Liabilities

 

For the purposes of Sections (a) and (d) above, “ financial assets ” means: (1) cash, (2) securities, or (3) a contract of insurance, a deposit or an evidence of a deposit that is not a security for the purposes of securities legislation. These financial assets are generally liquid or relatively easy to liquidate. The value of a optionee’s personal residence is not included in a calculation of financial assets.

 

The calculation of financial assets must exclude “ related liabilities ”, meaning: (1) liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets, or (2) liabilities that are secured by financial assets.

 

As a general matter, it should not be difficult to determine whether financial assets are beneficially owned by an individual, an individual’s spouse, or both, in any particular instance. However, in the case where financial assets are held in a trust or in another type of investment vehicle for the benefit of an individual, there may be questions as to whether the individual beneficially owns the financial assets. The following factors are indicative of beneficial ownership of financial assets:

 

    physical or constructive possession of evidence of ownership of the financial asset;
     
    entitlement to receipt of any income generated by the financial asset;
     
    risk of loss of the value of the financial asset; and
     
    the ability to dispose of the financial asset or otherwise deal with it as the individual sees fit.

 

For example, securities held in a self-directed RRSP for the sole benefit of an individual are beneficially owned by that individual.

 

In general, financial assets in a spousal RRSP can be included for the purposes of the $1,000,000 financial asset test in Section (a) above because Section (a) takes into account financial assets owned beneficially by a spouse. However, financial assets in a spousal RRSP cannot be included for purposes of the $5,000,000 financial asset test in Section (d) above.

 

Financial assets held in a group RRSP under which the individual does not have the ability to acquire the financial assets and deal with them directly do not meet the beneficial ownership requirements in either Sections (a) or (d) above.

 

Guidance on Close Personal Friend and Close Business Associate Determination

 

A “ close personal friend ” of a director, executive officer, founder or control person of an issuer is an individual who knows the director, executive officer, founder or control person well enough and has known them for a sufficient period of time to be in a position to assess their capabilities and trustworthiness and to obtain information from them with respect to the investment.

 

The following factors are relevant to this determination:

 

  (a) the length of time the individual has known the director, executive officer, founder or control person,
     
  (b) the nature of the relationship between the individual and the director, executive officer, founder or control person including such matters as the frequency of contacts between them and the level of trust and reliance in the other circumstances, and
     
  (c) the number of “close personal friends” of the director, executive officer, founder or control person to whom securities have been distributed in reliance on the private issuer exemption or the family, friends and business associates exemption.

 

     
C- 7  

 

An individual is not a close personal friend solely because the individual is:

 

  (a) a relative,
     
  (b) a member of the same club, organization, association or religious group,
     
  (c) a co-worker, colleague or associate at the same workplace,
     
  (d) a client, customer, former client or former customer,
     
  (e) a mere acquaintance, or
     
  (f) connected through some form of social media, such as Facebook, Twitter or LinkedIn.

 

The relationship between the individual and the director, executive officer, founder or control person must be direct. For example, the exemption is not available to a close personal friend of a close personal friend of a director of the issuer. Further, a relationship that is primarily founded on participation in an internet forum is not considered to be that of a close personal friend.

 

A “ close business associate ” is an individual who has had sufficient prior business dealings with a director, executive officer, founder or control person of the issuer to be in a position to assess their capabilities and trustworthiness and to obtain information from them with respect to the investment.

 

The following factors are relevant to this determination:

 

  (a) the length of time the individual has known the director, executive officer, founder or control person,
     
  (b) the nature of any specific business relationships between the individual and the director, executive officer, founder or control person, including, for each relationship, when it began, the frequency of contact between them and when it terminated if it is not ongoing, and the level of trust and reliance in the other circumstances,
     
  (c) the nature and number of any business dealings between the individual and the director, executive officer, founder or control person, the length of the period during which they occurred, and the nature and date of the most recent business dealing, and
     
  (d) the number of “close business associates” of the director, executive officer, founder or control person to whom securities have been distributed in reliance on the private issuer exemption or the family, friends and business associates exemption.

 

An individual is not a close business associate solely because the individual is:

 

  (a) a member of the same club, organization, association or religious group,
     
  (b) a co-worker, colleague or associate at the same workplace,
     
  (c) a client, customer, former client or former customer,
     
  (d) a mere acquaintance, or
     
  (e) connected through some form of social media, such as Facebook, Twitter or LinkedIn.

 

The relationship between the individual and the director, executive officer, founder or control person must be direct. For example, the exemptions are not available for a close business associate of a close business associate of a director of the issuer. Further, a relationship that is primarily founded on participation in an internet forum is not considered to be that of a close business associate.

 

     
C- 8  

 

The Optionee acknowledges and agrees that, in addition to resale restrictions imposed under U.S. securities laws, there are additional restrictions on the Optionee’s ability to resell the Securities under Canadian securities laws and National Instrument 45-102 as adopted by the Canadian Securities Administrators;

 

The Optionee agrees that the above representations and warranties will be true and correct both as of the execution of this Questionnaire acknowledges that they will survive the completion of the issue of the Option.

 

The Optionee acknowledges that the foregoing representations and warranties are made by the Optionee with the intent that they be relied upon in determining the suitability of the Optionee to acquire the Options and that this Questionnaire is incorporated into and forms part of the Agreement and the undersigned undertakes to immediately notify the Company of any change in any statement or other information relating to the Optionee set forth herein which takes place prior to the closing time of the grant of the Options.

 

The Optionee undertakes to immediately notify the Company of any change in any statement or other information relating to the Optionee set forth in the Agreement or in this Questionnaire which takes place prior to the issuance of the Options.

 

By completing this Questionnaire, the Optionee authorizes the indirect collection of this information by each applicable regulatory authority or regulator and acknowledges that such information is made available to the public under applicable laws.

 

DATED as of day of , 20____.

 

   
  Print Name of Optionee
   
   
  Signature

 

     
C- 9  

 

 

     
C- 10  

 

 

 

     
C- 11  

 

 

     
C- 12  

 

 

 

     
C- 13  

 

 

 

     
C- 14  

 

 

 

     
C- 15  

 

 

 

     
D- 1  

 

Schedule D

 

UNITED STATES ACCREDITED INVESTOR QUESTIONNAIRE

 

Capitalized terms used in this United States Accredited Investor Questionnaire (this “ Questionnaire ”) and not specifically defined have the meaning ascribed to them in the Stock Option Agreement between the undersigned (the “ Optionee ”) and AppCoin Innovations Inc. (the “ Company ”) to which this Schedule D is attached.

 

All dollar amounts referred to in this Questionnaire are in lawful money of the United States, unless otherwise indicated.

 

The Optionee covenants, represents and warrants to the Company that he or she satisfies one or more of the categories of “Accredited Investors”, as defined by Regulation D promulgated under the Securities Act of 1933 (the “Securities Act” ), as indicated below: (Please initial in the space provide those categories, if any, of an “Accredited Investor” which the Optionee satisfies)

 

  ______ Category 1 An organization described in Section 501(c)(3) of the United States Internal Revenue Code, a corporation, a Massachusetts or similar business trust or partnership, not formed for the specific purpose of acquiring the Securities, with total assets in excess of $5,000,000;
     
  ______ Category 2 A natural person whose individual net worth, or joint net worth with that person’s spouse, exceeds $1,000,000. For purposes of this Category 2, “net worth” means the excess of total assets at fair market value (including personal and real property, but excluding the estimated fair market value of a person’s primary home) over total liabilities. Total liabilities excludes any mortgage on the primary home in an amount of up to the home’s estimated fair market value as long as the mortgage was incurred more than 60 days before the Securities are acquired, but includes (i) any mortgage amount in excess of the home’s fair market value and (ii) any mortgage amount that was borrowed during the 60-day period before the date of the acquisition of Securities for the purpose of investing in the Securities;
     
  ______ Category 3 A natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year;
     
  ______ Category 4 A “bank” as defined under Section (3)(a)(2) of the Securities Act or savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act acting in its individual or fiduciary capacity; a broker dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934 (United States); an insurance company as defined in Section 2(13) of the Securities Act; an investment company registered under the Investment Company Act of 1940 (United States) or a business development company as defined in Section 2(a)(48) of such Act; a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958 (United States); a plan with total assets in excess of $5,000,000 established and maintained by a state, a political subdivision thereof, or an agency or instrumentality of a state or a political subdivision thereof, for the benefit of its employees; an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 (United States) whose investment decisions are made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000, or, if a self-directed plan, whose investment decisions are made solely by persons that are accredited investors;

 

     
D- 2  

 

 

  ______ Category 5 A private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940 (United States);
     
  ______ Category 6 A director or executive officer of the Company;
     
  ______ Category 7 A trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Securities, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) under the Securities Act;
     
  ______ Category 8 An entity in which all of the equity owners satisfy the requirements of one or more of the foregoing categories;

 

Note that the Optionee claiming to satisfy one of the above categories of Accredited Investor may be required to supply the Company with a balance sheet, prior years’ federal income tax returns or other appropriate documentation to verify and substantiate the Optionee’s status as an Accredited Investor.

 

If the Optionee is an entity which initialled the last category in reliance upon the Accredited Investor categories above, state the name, address, total personal income from all sources for the previous calendar year, and the net worth (exclusive of home, home furnishings and personal automobiles) for each equity owner of the said entity:

 

All information contained in this Questionnaire will be treated as confidential. However, by signing and returning this Questionnaire, the Optionee agrees that, if necessary, this Questionnaire may be presented to such parties as the Company deems appropriate to establish the availability, under the Securities Act or applicable state securities law, of exemption from registration in connection with the issuance of the Securities hereunder.

 

By completing this Questionnaire, the Optionee authorizes the indirect collection of this information by each applicable regulatory authority or regulator and acknowledges that such information is made available to the public under applicable laws.

 

DATED as of ______ day of _______________, 20____.

 

   
  Print Name of Optionee
   
   
  Signature
   
   
  Social Security/Tax I.D. No.

 

     
  E- 1  

 

Schedule E

 

UNITED STATES NON-ACREDITED INVESTOR QUESTIONNAIRE

 

Capitalized terms used in this United States Non-Accredited Investor Questionnaire (this “ Questionnaire ”) and not specifically defined have the meaning ascribed to them in the Stock Option Agreement between the undersigned (the “ Optionee ”) and AppCoin Innovations Inc. (the “ Company ”) to which this Schedule E is attached.

 

All dollar amounts referred to in this Questionnaire are in lawful money of the United States, unless otherwise indicated.

 

The purpose of this Questionnaire is to assure the Company that the Optionee will meet the standards imposed by the Securities Act of 1933 (the “Securities Act” ) and the appropriate exemptions of applicable state securities laws. The Company will rely on the information contained in this Questionnaire for the purposes of such determination. The Option and the Optioned Shares (together, the “Securities” ) will not be registered under the Securities Act and has been issued in reliance upon the exemption from registration afforded by Section 3(b) and/or Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder. This Questionnaire is not an offer of any securities of the Company in any state other than those specifically authorized by the Company.

 

Please attach additional pages if necessary to answer any question fully.

 

REPRESENTATIONS OF OPTIONEE

 

This item is presented in alternative form. Please initial in the space provided the applicable alternative.

 

_____ ALTERNATIVE ONE: The Optionee covenants, represents and warrants to the Company that he or she has such knowledge and experience in financial and business matters that he or she is capable of evaluating the relative merits and risks of an investment in the Securities and Company and is not utilizing a purchaser representative in connection with evaluating such merits and risks. The Optionee is providing evidence of its knowledge and experience in these matters through the information requested below in this Questionnaire.
   
_____ ALTERNATIVE TWO: The Optionee covenants, represents and warrants to the Company that he or she has chosen to use the services of a purchaser representative acceptable to the Optionee in connection with the Optionee’s acquisition of the Securities. The Optionee hereby acknowledges that the person named below is his or her purchaser representative who will assist and advise the Optionee in evaluating the merits and risks of an investment in the Securities and the Company and affirms that such purchaser representative has previously disclosed in writing any material relationship that exists between the purchaser representative (or its affiliates) and the Company (or its affiliates) that is mutually understood to be contemplated, or that has existed at any time during the previous two years, and any compensation received or to be received as a result of such relationship.
   
   
  (name of Purchaser Representative)
   
   
  (address of Purchaser Representative)
  If the Optionee utilizes a purchaser representative, this Questionnaire must be accompanied by a completed and signed purchaser representative Questionnaire, a copy of which can be obtained from the Company upon request.

 

     
  E- 2  

 

FOR INDIVIDUAL INVESTORS

 

1. Name:  
     
2. Residential Address & Telephone Number:  
     
     
     
     
     
3. Length of Residence in State of Residence:  

 

4. U.S. Citizen: _____ Yes _____ No

 

5. Social Security Number:      
           
6. Business Address & Telephone Number:        
           
           
           
           

 

7. Preferred Mailing Address: _____ Residence _____ Business
           
8. Date of Birth:        
           
9. Employer and Position:        
           
10. Name of Business:        

 

11. Business or Professional Education and Degrees:
           
  School Degree   Year Received
         
         
         
           
           
12. Prior Employment (last 5 years):        
           
  Employer Nature of Duties Dates of Employment
       
       
       
             

 

     
  E- 3  

 

13. Relationship to the Company, if any:  

 

14. Is the Optionee an officer of director of a publicly-held company?

 

  ____ Yes _____ No

 

  If yes, specify company:  

 

15. Does the Optionee beneficially own 10% or more of the voting securities of a publicly-held company?

 

  ____ Yes _____ No

 

  If yes, specify company:  

 

16. Within the last 5 years, has the Optionee personally invested in investments sold by means of private placements in reliance on exemptions from registration under the Securities Act and state securities laws?

 

  ____ Yes _____ No

 

17. Prior investments by the Optionee which were purchased in reliance on exemptions from registration under the Securities Act and State securities laws (initial the highest number applicable):

 

Amount (Cumulative)

 

  Real Estate: Up to $50,000 to Over
  None: _____ $50,000 _____ $250,000 _____ $250,000 _____
         
  Securities: Up to $50,000 to Over
  None: _____ $50,000 _____ $250,000 _____ $250,000 _____
         
  Other: Up to $50,000 to Over
  None: _____ $50,000 _____ $250,000 _____ $250,000 _____

 

18. Does the Optionee consider itself to be an experienced and sophisticated investor? 

 

  ____ Yes _____ No

 

  If so, please provide evidence of investment sophistication and/or experience:
   
   
   
   

 

19. Does the Optionee, or any person authorized to execute this Questionnaire, consider itself to have such knowledge of the Company and its business and such experience in financial and business matters to enable it to evaluate the merits and risks of an investment in the Securities and the Company, should the Optionee be given an opportunity to so invest?

 

  ____ Yes _____ No

 

     
  E- 4  

 

20. If the Optionee is an individual, please indicate the Optionee’s and his/her spouse’s combined gross income during the preceding two years (initial the highest number applicable):

 

               2016                2015
       
  _____  Less than $75,000   _____  Less than $75,000
       
  _____  $75,001 to $100,000   _____  $75,001 to $100,000
       
  _____  $100,001 to $200,000   _____  $100,001 to $200,000
       
  _____  $200,001 to $300,000   _____  $200,001 to $300,000
       
  _____  $Over $300,000   _____  $Over $300,000

 

21. If the Optionee is an individual, please indicate the Optionee’s and his/her spouse’s combined estimated net worth (exclusive of home, home furnishings and personal automobiles) (initial the highest number applicable):

 

  _____  Less than $100,000   _____  $300,0001 to $500,000
       
  _____  $100,001 to $200,000   _____  $500,001 to $1,000,000
       
  _____  $200,001 to $300,000   _____  Over $1,000,000

 

22. Regardless of the amount of the proposed investment:

 

  (a) Will the Optionee’s proposed investment exceed 10% of its individual net worth, or the Optionee’s joint net worth with its spouse as determined in paragraph 21 above?

 

  ____ Yes _____ No

 

  (b) Will the Optionee be able to bear the economic risk of its investment in this transaction?

 

  ____ Yes _____ No

 

23. Please provide answers to the following questions.

 

  (a) State total assets of the Optionee, including cash, stocks and bonds, automobiles, real estate, and any other assets:
     
    $
     
  (b) State total liabilities of the Optionee including real estate indebtedness, accounts payable, taxes payable and any other liabilities:
     
    $
     
  (c) State annual income of the Optionee including salary, securities income, rental income and any other income:
     
    $

 

     
  E- 5  

 

  (d) State annual expenses of the Optionee, excluding ordinary living expenses, including real estate payments, rent, property taxes and other expenses:
     
    $
     
  (e) Does the Optionee expect the amount of its assets, liabilities, income and expenses, as stated above, to be subject to significant change in the future:

 

  ____ Yes _____ No

 

    If yes, explain:
     
     
     

 

All information contained in this Questionnaire will be treated as confidential. However, by signing and returning this Questionnaire, the Optionee agrees that, if necessary, this Questionnaire may be presented to such parties as the Company deems appropriate to establish the availability, under the Securities Act or applicable state securities law, of exemption from registration in connection with the issuance of the Securities hereunder.

 

By completing this Questionnaire, the Optionee authorizes the indirect collection of this information by each applicable regulatory authority or regulator and acknowledges that such information is made available to the public under applicable laws.

 

DATED as of day of _________________, 20____.

 

   
  Print Name of Optionee
   
   
  Signature
   
   
  Social Security/Tax I.D. No.

 

     
F- 1  

 

Schedule F

 

ACKNOWLEDGEMENTS and Representations and warranties OF THE OPTIONEE

 

Capitalized terms used in this Acknowledgements and Representations and Warranties of the Optionee and not specifically defined have the meaning ascribed to them in the Stock Option Agreement between the undersigned (the “ Optionee ”) and AppCoin Innovations Inc. (the “ Company ”) to which this Schedule F is attached.

 

The Optionee acknowledges and agrees that:

 

  (a) the Securities have not been registered under the 1933 Act or under any state securities or “blue sky” laws of any state of the United States, and are being offered only in a transaction not involving any public offering within the meaning of the 1933 Act, and, unless so registered, may not be offered or sold in the United States or to U.S. Persons, except pursuant to an effective registration statement under the 1933 Act, or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the 1933 Act, and in each case only in accordance with applicable state securities laws;
     
  (b) the Company will refuse to register any transfer of the Securities not made in accordance with the provisions of Regulation S, pursuant to an effective registration statement under the 1933 Act or pursuant to an available exemption from, or in a transaction not subject to, the registration requirements of the 1933 Act;
     
  (c) the decision to execute this Agreement and acquire the Securities hereunder has not been based upon any oral or written representation as to fact or otherwise made by or on behalf of the Company and such decision is based solely upon a review of publicly available information regarding the Company that is available on the website of the United States Securities and Exchange Commission (the “ SEC ”) at www.sec.gov (the “Company Information” );
     
  (d) there are risks associated with an investment in the Securities;
     
  (e) the Optionee and the Optionee’s advisor(s) (if applicable) have had a reasonable opportunity to ask questions of and receive answers from the Company in connection with the distribution of the Securities hereunder, and to obtain additional information, to the extent possessed or obtainable without unreasonable effort or expense, necessary to verify the accuracy of the information about the Company;
     
  (f) the books and records of the Company were available upon reasonable notice for inspection, subject to certain confidentiality restrictions, by the Optionee during reasonable business hours at its principal place of business, and all documents, records and books in connection with the distribution of the Securities hereunder have been made available for inspection by the Optionee, the Optionee’s attorney and/or advisor(s) (if applicable);

     
  (g) the Company, its officers, directors, counsel and agents are entitled to rely upon the truth and accuracy of the acknowledgements, representations, warranties, statements, answers, covenants and agreements contained in this Agreement and agrees that if any of such acknowledgements, representations, warranties, statements, answers, covenants, and agreements should become, by the passage of time after the date of this Agreement, no longer accurate or should be breached, the Optionee shall promptly notify the Company, and the Optionee will hold harmless the Company from any loss or damage it may suffer as a result of the Optionee’s failure to correctly complete or comply with the terms of this Agreement;

 

     
F- 2  

 

  (h) the Optionee has been advised to consult its own legal, tax and other advisors with respect to the merits and risks regarding the exercise of the Options and the issuance of the Optioned Shares and with respect to applicable resale restrictions and it is solely responsible (and the Company is in not any way responsible) for compliance with applicable resale restrictions;
     
  (i) the Company has advised the Optionee that the Company is relying on an exemption from the registration and prospectus requirements of applicable securities laws and, as a consequence of acquiring the Securities pursuant to this exemption, certain protections, rights and remedies provided by the applicable securities laws, including statutory rights of rescission or damages, will not be available to the Optionee;
     
  (j) the Optionee will indemnify and hold harmless the Company and, where applicable, its directors, officers, employees, agents, advisors and shareholders, from and against any and all loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all fees, costs and expenses whatsoever reasonably incurred in investigating, preparing or defending against any claim, lawsuit, administrative proceeding or investigation whether commenced or threatened) arising out of or based upon any representation or warranty of the Optionee contained herein or in any document furnished by the Optionee to the Company in connection herewith being untrue in any material respect or any breach or failure by the Optionee to comply with any covenant or agreement made by the Optionee to the Company in connection therewith;
     
  (k) the Securities are not listed on any stock exchange or automated dealer quotation system and no representation has been made to the Optionee that any of the Securities will become listed on any stock exchange or automated dealer quotation system, except that currently certain market makers make market in the shares of the Company’s common stock on the OTC Pink;
     
  (l) neither the SEC nor any other securities commission or similar regulatory authority has reviewed or passed on the merits of the Securities;
     
  (m) no documents in connection with this Agreement have been reviewed by the SEC or any state securities administrators;
     
  (n) there is no government or other insurance covering any of the Securities; and
     
  (o) this Agreement is not enforceable by the Optionee unless it has been accepted by the Company.

 

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPTIONEE

 

The Optionee hereby represents and warrants to and covenants with the Company (which representations, warranties and covenants shall survive the closing) that:

 

  (a) the Optionee is a bona fide director, officer, employee, independent contractor or consultant of the Company, Parent or Subsidiary;
     
  (b) unless the Optionee has completed Schedule D or E, the Optionee is not acquiring the Securities for the account or benefit of, directly or indirectly, any U.S. Person;
     
  (c) unless the Optionee has completed Schedule D or E, the Optionee is not a U.S. Person;
     
  (d) the acquisition of the Securities by the Optionee as contemplated in this Agreement complies with or is exempt from the applicable securities legislation of the jurisdiction of residence of the Optionee;
     
  (e) the Optionee has not acquired or is not acquiring the Securities as a result of, and will not itself engage in, any “directed selling efforts” (as defined in Regulation S under the 1933 Act) in the United States in respect of the Securities which would include any activities undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for the resale of the Securities; provided, however, that the Optionee may sell or otherwise dispose of the Securities pursuant to registration thereof under the 1933 Act and any applicable state and provincial securities laws or under an exemption from such registration requirements;
     
  (f) unless the Optionee has completed Schedule D or E, the Optionee is outside the United States when receiving and executing this Agreement and is acquiring the Securities as principal for the Optionee’s own account, for investment purposes only, and not with a view to, or for, resale, distribution or fractionalisation thereof, in whole or in part, and, in particular, it has no intention to distribute either directly or indirectly any of the Securities in the United States or to U.S. Persons, and no other person has a direct or indirect beneficial interest in such Securities;
     
  (g) if the Optionee is not resident in the United States or Canada, the Optionee:

 

     
F- 3  

 

    (i) is knowledgeable of, or has been independently advised as to, the applicable securities laws of the securities regulators having application in the jurisdiction in which the Optionee is resident (the “ International Jurisdiction ”) which would apply to the granting of the Option and the issue, sale or resale of the Optioned Shares;
       
    (ii) the Optionee is acquiring the Option or the Optioned Shares pursuant to exemptions from prospectus or equivalent requirements under applicable securities laws or, if such is not applicable, the Optionee is permitted to acquire the Option or the Optioned Shares under the applicable securities laws of the securities regulators in the International Jurisdiction without the need to rely on any exemptions;
       
    (iii) the applicable securities laws of the authorities in the International Jurisdiction do not require the Company to make any filings or seek any approvals of any kind whatsoever from any securities regulator of any kind whatsoever in the International Jurisdiction in connection with the granting of the Option or the issue, sale or resale of the Optioned Shares; and
       
    (iv) the granting of the Option or the issue, sale or resale of the Optioned Shares does not trigger:

 

    A. any obligation to prepare and file a prospectus or similar document, or any other report with respect to such purchase in the International Jurisdiction; or
       
    B. any continuous disclosure reporting obligation of the Optionee or the Company in the International Jurisdiction; and

 

  (v) the Optionee will, if requested by the Company, deliver to the Company a certificate or opinion of local counsel from the International Jurisdiction which will confirm the matters referred to in subparagraphs (ii), (iii) and (iv) above to the satisfaction of the Company, acting reasonably;

 

  (h) the Optionee has received and carefully read this Agreement and the Company Information;
     
  (i) the Optionee has received a brief description of the Securities and the Optionee understands that the proceeds from the exercise of the Options will be used by the Company as working capital for general corporate purposes;
     
  (j) the Optionee has duly executed and delivered this Agreement and it constitutes a valid and binding agreement of the Optionee enforceable against the Optionee in accordance with its terms;
     
  (k) the Optionee has the legal capacity and competence to enter into and execute this Agreement and to take all actions required pursuant hereto and, if the Optionee is a corporation, it is duly incorporated and validly subsisting under the laws of its jurisdiction of incorporation and all necessary approvals by its directors, shareholders and others have been obtained to authorize execution and performance of this Agreement on behalf of the Optionee;
     
  (l) the Optionee:

 

    (i) has adequate net worth and means of providing for its current financial needs and possible personal contingencies,
       
    (ii) has no need for liquidity in this investment, and
       
    (iii) is able to bear the economic risks of an investment in the Securities for an indefinite period of time, and can afford the complete loss of such investment;

 

  (m) the Optionee has the requisite knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of the investment in the Securities and the Company, and the Optionee is providing evidence of such knowledge and experience in these matters through the information requested in this Agreement;
     
  (n) the Optionee is aware that an investment in the Company is speculative and involves certain risks, including the possible loss of the investment, and the Optionee has carefully read and considered the matters set forth under the caption “Risk Factors” appearing in the Company’s various disclosure documents, filed with the SEC;
     
  (o) the entering into of this Agreement and the transactions contemplated hereby do not result in the violation of any of the terms and provisions of any law applicable to, or, if applicable, the constating documents of, the Optionee, or of any agreement, written or oral, to which the Optionee may be a party or by which the Optionee is or may be bound;
     
  (p) the Optionee is purchasing the Securities for its own account for investment purposes only and not for the account of any other person and not for distribution, assignment or resale to others, and no other person has a direct or indirect beneficial interest is such Securities, and the Optionee has not subdivided his interest in the Securities with any other person;
     
  (q) the Optionee is not an underwriter of, or dealer in, the shares of the Company’s common stock, nor is the Optionee participating, pursuant to a contractual agreement or otherwise, in the distribution of the Securities;
     
  (r) the Optionee understands and agrees that the Company and others will rely upon the truth and accuracy of the acknowledgements, representations, statements, answers and agreements contained in this Agreement, and agrees that if any of such acknowledgements, representations, statements, answers and agreements are no longer accurate or have been breached, the Optionee shall promptly notify the Company;

 

     
F- 4  

 

  (s) the Optionee has made an independent examination and investigation of an investment in the Securities and the Company and has depended on the advice of its legal and financial advisors and agrees that the Company will not be responsible in anyway whatsoever for the Optionee’s decision to acquire the Securities;
     
  (t) the Optionee is not aware of any advertisement of any of the Securities and is not acquiring the Securities as a result of any form of general solicitation or general advertising including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio or television, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising; and
     
  (u) the Optionee has either (a) a pre-existing personal or business relationship with the Company or any of its partners, officers, directors, or controlling persons consisting of personal or business contacts of a nature and duration which enable the Optionee to be aware of the character, business acumen and general business and financial circumstances of the Company or any such partner, officer, director, or controlling person with whom such relationship exists or (b) such business or financial expertise as to be able to protect the Otpionee’s own interests in connection with the acquisition of the Securities;
     
  (v) no person has made to the Optionee any written or oral representations:

 

    (i) that any person will resell or repurchase any of the Securities,
       
    (ii) that any person will refund the purchase price of any of the Securities,
       
    (iii) as to the future price or value of any of the Securities, or
       
    (iv) that any of the Securities will be listed and posted for trading on any stock exchange or automated dealer quotation system or that application has been made to list and post any of the Securities of the Company on any stock exchange or automated dealer quotation system, except that currently certain market makers make market in the shares of the Company’s common stock on the OTC Pink.

 

DATED as of _____day of __________________, 20____.

 

   
  Print Name of Optionee
   
   
  Signature
   
   
  Social Security/Tax I.D. No.

 

     
 

 

 

 

NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (AS DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT.

 

Unless permitted under securities legislation, the holder of this security must not trade the security before the date that is 4 months and a day after the later of (i) OCTOBER 15, 2017, and (ii) the date the issuer became a reporting issuer in any province or territory.

 

STOCK OPTION AGREEMENT

 

This AGREEMENT is entered into as of the October 15, 2017 (the “Date of Grant” ).

 

BETWEEN:

 

  APPCOIN INNOVATIONS INC. , a company incorporated pursuant to the laws of the State of Nevada, with an office at 561 Indiana Court, Venice Beach, CA 90291
   
  (the “Company” )

 

AND:

 

  BRUCE ELLIOTT , a businessman with an address at 6 Kermode Road, Crosby, Isle of Man IM4 4BZ
   
  (the “Optionee” )

 

WHEREAS:

 

A. The Company’s board of directors (the “Board” ) has approved and adopted a 2017 Equity Incentive Plan (the “Plan” ), whereby the Board is authorized to grant stock options to purchase shares of common stock of the Company to the directors, officers, employees, and consultants of the Company or any Parent or Subsidiary of the Company (as defined herein);

 

B. The Optionee is a director, officer, employee or consultant of the Company, the Parent or a Subsidiary; and

 

C. The Company wishes to grant stock options to purchase a total of 200,000 Optioned Shares (as defined herein) to the Optionee, as follows:

 

    Incentive Stock Options (as defined herein)
  X Non-Qualified Stock Options (as defined herein)

 

     
  2  

 

NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

1. Definitions

 

1.1 In this Agreement, the following terms shall have the following meanings:

 

  (a) 1933 Act ” means the Securities Act of 1933, as amended;
     
  (b) Board ” means the board of directors of the Company;
     
  (c) Canadian Accredited Investor Questionnaire ” means a questionnaire substantially in the form of the Canadian Accredited Investor Questionnaire attached to this Agreement as Schedule B;
     
  (d) Code ” means the Internal Revenue Code of 1986;
     
  (e) Common Stock ” means the shares of common stock of the Company;
     
  (f) Exercise Price ” means $0.10 per share;
     
  (g) Expiry Date ” means October 15, 2027;
     
  (h) Incentive Stock Options ” means any Options that meet all the requirements under section 422 of the Code;
     
  (i) Non-Qualified Stock Options ” means any Options that do not qualify as Incentive Stock Options and, thus, do not meet the requirements under section 422 of the Code;
     
  (j) Notice of Exercise ” means a notice in writing addressed to the Company at its address first recited hereto (or such other address of which the Company may from time to time notify the Optionee in writing), substantially in the form attached as Schedule B hereto, which notice shall specify therein the number of Optioned Shares in respect of which the Options are being exercised;
     
  (k) Options ” means the right and option to purchase, from time to time, all, or any part of the Optioned Shares granted to the Optionee by the Company pursuant to Section 2.1 of this Agreement;
     
  (l) Optioned Shares ” means the shares of Common Stock that are issued pursuant to the exercise of the Options;
     
  (m) Parent ” means a company or other entity that owns at least fifty percent (50%) of the outstanding voting stock or voting power of the Company;
     
  (n) Plan ” has the meaning ascribed thereto in Recital A of this Agreement;
     
  (o) Securities ” means, collectively, the Options and the Optioned Shares;
     
  (p) Subsidiary ” means a company or other entity, at least fifty percent (50%) of the outstanding voting stock or voting power of which is beneficially owned, directly or indirectly, by the Company; and
     
  (q) Vested Options ” means the Options that have vested in accordance with Section 2.2 of this Agreement.

 

     
  3  

 

1.2 Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Plan.

 

2. The Options

 

2.1 The Company hereby grants to the Optionee, on the terms and conditions set out in this Agreement and in the Plan, Options to purchase a total of 200,000 Optioned Shares at the Exercise Price.

 

2.2 The Options will vest in accordance with Schedule A to this Agreement. The Options may be exercised immediately after vesting.

 

2.3 The Options shall, at 5:00 p.m. (Pacific time) on the Expiry Date, expire and be of no further force or effect whatsoever.

 

2.4 The Company shall not be obligated to cause the issuance, transfer or delivery of a certificate or certificates representing Optioned Shares to the Optionee, until provision has been made by the Optionee, to the satisfaction of the Company, for the payment of the aggregate Exercise Price for all Optioned Shares for which the Options shall have been exercised, and for satisfaction of any tax withholding obligations associated with such exercise.

 

2.5 Subject to the provisions of this Agreement and the Plan and subject to compliance with any applicable securities laws, the Options shall be exercisable, in full or in part, at any time after vesting, until termination. If less than all of the Optioned Shares included in the vested portion of any Options are purchased, the remainder may be purchased at any subsequent time prior to the Expiry Date. Only whole shares may be issued pursuant to the exercise of any Options, and to the extent that any Option covers less than one (1) share, it is not exercisable.

 

2.6 Each exercise of the Options shall be by means of delivery of a Notice of Exercise (which may be in the form attached hereto as Schedule C) to the Chief Financial Officer of the Company at its principal executive office, specifying the number of Optioned Shares to be purchased and accompanied by payment in cash or by certified check or cashier’s check in the amount of the full Exercise Price for the Common Stock to be purchased. In addition to payment in cash or by certified check or cashier’s check and if agreed to in advance by the Company, the Optionee or transferee of the Options may pay for all or any portion of the aggregate Exercise Price by complying with any other payment mechanism approved by the Board at the time of exercise.

 

2.7 Reference is made to the Plan for particulars of the rights and obligations of the Optionee and the Company in respect of:

 

  (a) the terms and conditions on which the Options are granted except to the extent set forth herein; and,
     
  (b) a consolidation or subdivision of the Company’s share capital or a corporate reorganization;

 

all to the same effect as if the provisions of the Plan were set out in this Agreement and to all of which the Optionee assents. A copy of the Plan is available to the Optionee at no charge, at the Company’s principal executive office. Any provision of this Agreement that is inconsistent with the Plan shall be considered void and replaced with the applicable provision of the Plan. The Company may modify, extend or renew this Agreement or the Options represented hereby or accept the surrender thereof (to the extent not previously exercised) and authorize the granting of a new option in substitution therefore (to the extent not previously exercised), subject at all times to the Plan, the applicable rules of any applicable regulatory authority or stock exchange, and any applicable laws. Notwithstanding the foregoing provisions of this Section 2.7, the Company shall not have the right to make any modification which would materially alter the terms of the Options to the Optionee’s detriment or materially impair any rights of the Optionee hereunder without the consent of the Optionee.

 

     
  4  

 

2.8 By accepting the Options, the Optionee represents and agrees that none of the Optioned Shares purchased upon exercise of the Options will be distributed in violation of applicable federal and state laws and regulations. The Optionee further represents and agrees to provide the Company with any other document reasonably requested by the Company or the Company’s Counsel.

 

3. Documents Required from Optionee

 

3.1 The Optionee must complete, sign and return to the Company:

 

  (a) a copy of this Agreement;
     
  (b) a copy of the Acknowledgements, and Representations and Warranties of the Optionee attached hereto as Schedule F;
     
  (c) if the Optionee is resident in Canada, a Canadian Questionnaire in the form attached hereto as Schedule C; and
     
  (d) if the Optionee is resident in the United States and if an exemption from the registration requirements imposed by the 1933 Act is necessary for entry into this Agreement, one of the two questionnaires in the forms attached hereto as Schedule D and Schedule E, whichever applies.

 

3.2 The Optionee shall complete, sign and return to the Company as soon as possible, on request by the Company, any documents, questionnaires, notices and undertakings as may be required by regulatory authorities, and applicable law.

 

4. Subject to Plan

 

The terms of the Options will be subject to the Plan, as may from time to time be amended, and any inconsistencies between this Agreement and the Plan, as the same may be from time to time amended, shall be governed by the provisions of the Plan. A copy of the Plan will be delivered to the Optionee, and will be available for inspection at the principal offices of the Company.

 

5. Acknowledgement and Waiver

 

The Optionee hereby waives, to the fullest extent permitted by law, any rights of withdrawal, rescission or compensation for damages to which the Optionee might be entitled in connection with the distribution of any of the Securities.

 

6. Professional Advice

 

The acceptance of the Options and the sale of Common Stock issued pursuant to the exercise of Options may have consequences under federal, state and provincial tax and securities laws which may vary depending upon the individual circumstances of the Optionee. Accordingly, the Optionee acknowledges that he or she has been advised to consult his or her personal legal and tax advisor in connection with this Agreement and his or her dealings with respect to Options. Without limiting other matters to be considered with the assistance of the Optionee’s professional advisors, the Optionee should consider: (a) the merits and risks of an investment in the underlying Optioned Shares; and (b) any resale restrictions that might apply under applicable securities laws.

 

     
  5  

 

7. Legending of Subject Securities

 

7.1 The Optionee hereby acknowledges that that upon the issuance thereof, and until such time as the same is no longer required under the applicable securities laws and regulations, the certificates representing any of the Optioned Shares may bear a legend in substantially the following form:

 

If the Optionee is not resident in the United States:

 

THE SECURITIES REPRESENTED HEREBY HAVE BEEN OFFERED IN AN OFFSHORE TRANSACTION TO A PERSON WHO IS NOT A U.S. PERSON (AS DEFINED HEREIN) PURSUANT TO REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”).

 

NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE 1933 ACT, OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (AS DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT.

 

Unless permitted under securities legislation, the holder of this security must not trade the security before the date that is 4 months and a day after THE later of (i) [ insert the distribution date ], and (ii) the date the issuer became a reporting issuer in any province or territory.

 

If the Option is resident in the United States:

 

NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (AS DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT.

 

Unless permitted under securities legislation, the holder of this security must not trade the security before the date that is 4 months and a day after THE later of (i) [ insert the distribution date ], and (ii) the date the issuer became a reporting issuer in any province or territory.

 

7.2 The Optionee hereby acknowledges and agrees to the Company making a notation on its records or giving instructions to the registrar and transfer agent of the Company in order to implement the restrictions on transfer set forth and described in this Agreement.

 

     
  6  

 

8. Resale restrictions

 

8.1 This Agreement and the Options represented hereby are not transferable. Optioned Shares received upon exercise of any Options will be subject to resale restrictions contained in the securities legislation applicable to the Company and the Optionee. The Optionee acknowledges and agrees that the Optionee is solely responsible (and the Company is not in any way responsible) for compliance with applicable resale restrictions.

 

8.2 The Optionee acknowledges that any resale of any of the Optioned Shares will be subject to resale restrictions contained in the securities legislation applicable to the Optionee or proposed transferee. The Optionee acknowledges that none of the Optioned Shares have been registered under the 1933 Act or the securities laws of any state of the United States. The Optioned Shares may not be offered or sold in the United States unless registered in accordance with federal securities laws and all other applicable securities laws or exemptions from such registration requirements are available. The Optionee acknowledges that the Optioned Shares are subject to resale restrictions in Canada and may not be traded in Canada except as permitted by the applicable provincial securities laws and the rules made thereunder.

 

9. No Employment Relationship

 

The grant of an Option shall in no way constitute any form of agreement or understanding binding on the Company or any related company, express or implied, that the Company or any related company will employ or contract with an Optionee, for any length of time, nor shall it interfere in any way with the Company’s or, where applicable, a related company’s right to terminate Optionee’s employment at any time, which right is hereby reserved.

 

10. Governing Law

 

This Agreement is governed by the laws of the State of Nevada and the federal laws of the United States of America as applicable therein. The Optionee irrevocably attorns to the jurisdiction of the courts of the State of Arizona.

 

11. Costs

 

The Optionee acknowledges and agrees that all costs and expenses incurred by the Optionee (including any fees and disbursements of any special counsel retained by the Optionee) relating to the acquisition of the Securities shall be borne by the Optionee.

 

12. Survival

 

This Agreement, including without limitation the representations, warranties and covenants contained herein, shall survive and continue in full force and effect and be binding upon the parties hereto notwithstanding the completion of the purchase of the shares underlying the Options by the Optionee pursuant hereto.

 

13. Assignment

 

This Agreement is not transferable or assignable.

 

14. Currency

 

Unless explicitly stated otherwise, all funds in this Agreement are stated in United States dollars.

 

15. Severability

 

The invalidity or unenforceability of any particular provision of this Agreement shall not affect or limit the validity or enforceability of the remaining provisions of this Agreement.

 

     
  7  

 

16. Counterparts and Electronic Means

 

This Agreement may be executed in several counterparts, each of which will be deemed to be an original and all of which will together constitute one and the same instrument. Delivery of an executed copy of this Agreement by electronic facsimile transmission or other means of electronic communication capable of producing a printed copy will be deemed to be execution and delivery of this Agreement as of the date first above written.

 

17. Entire Agreement

 

This Agreement is the only agreement between the Optionee and the Company with respect to the Options, and this Agreement and the Plan, once approved, supersede all prior and contemporaneous oral and written statements and representations and contain the entire agreement between the parties with respect to the Options.

 

IN WITNESS WHEREOF the parties hereto have duly executed this Agreement as of the date first above written.

 

APPCOIN INNOVATIONS INC.

 

Per: /s/ Michael Blum  
  Authorized Signatory  

 

       
WITNESSED BY:   )  
    )  
    )  
    )  
    )  
Name   ) /s/ Bruce Elliott
    ) BRUCE ELLIOTT
    )  
    )  
Address   )  
    )  
    )  
    )  
    )  
Occupation   )  

 

     
A- 1  

 

Schedule A

 

VESTING SCHEDULE

 

1/3 of the Options will vest on October 15, 2017, October 15, 2018 and October 15, 2019.

 

     
B- 1  

 

Schedule B

 

NOTICE OF EXERCISE

 

TO: AppCoin Innovations Inc.
  561 Indiana Court
  Venice Beach, CA 90291

 

This Notice of Exercise shall constitute a proper Notice of Exercise pursuant to section 2.6 of the Stock Option Agreement dated October 15, 2017 (the “ Agreement ”), between AppCoin Innovations Inc. (the “Company” ) and the undersigned. The undersigned hereby elects to exercise the Optionee’s options to purchase ____________________ shares of the common stock of the Company at a price of $0.10 per share on the terms and conditions set forth in the Agreement.

 

Payment of aggregate consideration of $____________in cash or by certified check or cashier’s check accompanies this notice.

 

The Optionee hereby represents and warrants to the Company that all representations and warranties set out in the Agreement (and the applicable schedules hereto) are true as of the date of the exercise of the Options under the Agreement. The Optionee hereby further represents and warrants to the Company that the shares are being purchased only for investment and without intention to sell or distribute such shares.

 

The Optionee hereby directs the Company to issue, register and deliver the certificates representing the shares as follows:

 

Registration Information:   Delivery Instructions:
     
Name to appear on certificates   Name
     
Address   Address
     
City, State, and Zip Code    
     
    Telephone Number

 

DATED at _____________________________, the day of______________, _______.

 

  X
  Signature
   
  (Name and, if applicable, Office)
   
  (Address)
   
  (City, State, and Zip Code)
   
  Fax Number or E-mail Address
   
  Social Security/Tax I.D. No.

 

     
C- 1  

 

Schedule C

 

CANADIAN QUESTIONNAIRE

 

TO: APPCOIN INNOVATIONS INC. (the “ Company ”)

 

RE: Stock options (the “ Options ”) of the Company

 

Capitalized terms used in this Canadian Questionnaire (this “ Questionnaire ”) and not specifically defined have the meaning ascribed to them in the Stock Option Agreement between the undersigned (the “ Optionee ”) and the Company to which this Schedule C is attached.

 

All dollar amounts referred to in this Questionnaire and Appendices A, B and C are in lawful money of Canada, unless otherwise indicated.

 

In connection with the grant to the Optionee of the Options, the Optionee hereby represents, warrants and certifies to the Company that the Optionee:

 

  (i) is acquiring the Options as principal (or deemed principal under the terms of National Instrument 45-106 – Prospectus Exemptions adopted by the Canadian Securities Administrators (“ NI 45-106 ”));
     
  (ii) (A)       is resident in or is subject to the laws of one of the following (check one):

 

  [   ] Alberta [   ] New Brunswick [   ] Prince Edward Island
       
  [   ] British Columbia [   ] Nova Scotia [   ] Quebec
       
  [   ] Manitoba [   ] Ontario [   ] Saskatchewan
       
  [   ] Newfoundland and Labrador [   ] Yukon
     
  [   ] Northwest Territories

or

 

    (B)    [   ] is resident in a country other than Canada or the United States; and
     
  (iii) has not been provided with any offering memorandum in connection with the acquisition of the Options.

 

In connection with the grant of the Options, the Optionee hereby represents, warrants, covenants and certifies that the Optionee meets one or more of the following criteria:

 

A. OPTIONEE QUALIFYING UNDER THE EMPLOYEE, DIRECTOR, OFFICER AND CONSULTANT EXEMPTION

 

In connection with the grant of the Options, the Optionee hereby represents, warrants, covenants and certifies that the Optionee meets one or more of the following criteria:

 

  [ ] (i) is an employee, officer or director of the Company; or
       
  [ ] (ii) is a consultant of the Company who provides services to the Company or a related entity of the Company and spends or will spend a significant amount of time and attention on the business and affairs of the Company or a related entity of the Company; and
       
  has voluntarily agreed to the grant of the Options.

 

     
C- 2  

 

B. OPTIONEES QUALIFYING UNDER THE ACCREDITED INVESTOR EXEMPTION

 

In connection with the grant of the Options, the Optionee hereby represents, warrants, covenants and certifies that the Optionee meets one or more of the following criteria:

 

(a) _____ the Optionee is an “accredited investor” within the meaning of NI 45-106, by virtue of satisfying the indicated criterion below (YOU MUST INITIAL OR PLACE A CHECK-MARK ON THE APPROPRIATE LINE(S)) ( see certain guidance with respect to accredited investors that starts on page C-5 below )

 

  [ ] (i) except in Ontario, a person registered under the securities legislation of a jurisdiction of Canada as an adviser or dealer,
       
  [ ] (ii) an individual registered under the securities legislation of a jurisdiction of Canada as a representative of a person referred to in paragraph (i),
       
  [ ] (iii) an individual formerly registered under the securities legislation of a jurisdiction of Canada, other than an individual formerly registered solely as a representative of a limited market dealer under one or both of the Securities Act (Ontario) or the Securities Act (Newfoundland and Labrador),
       
  [ ] (iv) an individual who, either alone or with a spouse, beneficially owns financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds $1,000,000 (YOU MUST ALSO COMPLETE AND SIGN APPENDIX “A” TO THIS QUESTIONNAIRE THAT STARTS ON PAGE C-9 ),
       
  [ ] (v) an individual who beneficially owns financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds $5,000,000,
       
  [ ] (vi) an individual whose net income before taxes exceeded $200,000 in each of the 2 most recent calendar years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of the 2 most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year (YOU MUST ALSO COMPLETE AND SIGN APPENDIX “A” TO THIS QUESTIONNAIRE THAT STARTS ON PAGE C-9 ), or
       
  [ ] (vii) an individual who, either alone or with a spouse, has net assets of at least $5,000,000 (YOU MUST ALSO COMPLETE AND SIGN APPENDIX “A” TO THIS QUESTIONNAIRE THAT STARTS ON PAGE C-9 ).

 

(b) if the Optionee is an “accredited investor” within the meaning of NI 45-106 by virtue of satisfying the indicated criterion as set out in paragraphs (iv), (vi) or (vii) above, the Optionee has provided the Company with the signed risk acknowledgment form set out in Appendix “A” to this Questionnaire;

 

     
C- 3  

 

C. OPTIONEES QUALIFYING UNDER THE FAMILY, FRIENDS AND BUSINESS ASSOCIATES EXEMPTION

 

In connection with the grant of the Options, the Optionee hereby represents, warrants, covenants and certifies that the Optionee meets one or more of the following criteria:

 

 

(a)

the Optionee is ( YOU MUST PLACE A CHECK-MARK ON THE APPROPRIATE LINE AND PROVIDE THE REQUESTED INFORMATION, AS APPLICABLE ):
   
  [ ] (i) a director, executive officer or control person of the Company, or of an affiliate of the Company,
       
  [ ] (ii) ______ a close personal friend ( see guidance on making this determination that starts on page C-6 below ) of ___________________________________ ( print name of person ), who is a director, executive officer, founder or control person of the Company, or of an affiliate of the Company, and has been for __________________________ years based on the following factors:_____________________________________________________________________________
___________________________________________________________________________________
( explain the nature of the close personal friendship ),
       
  [ ] (iii) a close business associate ( see guidance on making this determination that starts on page C-6 below ) of ___________________________________ ( print name of person ), who is a director, executive officer, founder or control person of the Company, or of an affiliate of the Company, and has been for __________________________ years based on the following factors: ___________________________________________________________________________________
_________________________________________________________________________ ( explain the nature of the close business association ),
       
(b) if the Optionee is resident in the Province of Ontario or is subject to the securities laws of the Province of Ontario, the Optionee has provided the Company with a signed risk acknowledgement form in the form attached as Appendix “B” to this Questionnaire (YOU MUST ALSO COMPLETE AND SIGN APPENDIX “B” TO THIS QUESTIONNAIRE THAT STARTS ON PAGE C-11) , or
   
(c) if the Optionee is resident in the Province of Saskatchewan or is subject to the securities laws of the Province of Saskatchewan, and the Optionee is relying on the indicated criterion as set out in subsections C(a)(ii) or C(a)(iii) if the distribution is based in whole or in part on a close personal friendship or a close business association, the Optionee has provided the Company with a signed risk acknowledgement form in the form attached as Appendix “C” to this Questionnaire (YOU MUST ALSO COMPLETE AND SIGN APPENDIX “C” TO THIS QUESTIONNAIRE THAT STARTS ON PAGE C-14 ); or

 

For the purposes of this Questionnaire and the appendices attached hereto:

 

  (a) an issuer is “ affiliated ” with another issuer if
       
    (i) one of them is the subsidiary of the other, or
       
    (ii) each of them is controlled by the same person;

 

     
C- 4  

  

  (b) control person ” means
       
    (i) a person who holds a sufficient number of the voting rights attached to all outstanding voting securities of an issuer to affect materially the control of the issuer, or
       
    (ii) each person in a combination of persons, acting in concert by virtue of an agreement, arrangement, commitment or understanding, which holds in total a sufficient number of the voting rights attached to all outstanding voting securities of an issuer to affect materially the control of the issuer,
       
    and, if a person or combination of persons holds more than 20% of the voting rights attached to all outstanding voting securities of an issuer, the person or combination of persons is deemed, in the absence of evidence to the contrary, to hold a sufficient number of the voting rights to affect materially the control of the issuer;

 

  (c) director ” means
       
    (i) a member of the board of directors of a company or an individual who performs similar functions for a company, and
       
    (ii) with respect to a person that is not a company, an individual who performs functions similar to those of a director of a company;

 

  (d) executive officer ” means, for an issuer, an individual who is
       
    (i) a chair, vice-chair or president,
       
    (ii) a vice-president in charge of a principal business unit, division or function including sales, finance or production, or
       
    (iii) performing a policy-making function in respect of the issuer;

 

 

  (e) financial assets ” means
       
    (i) cash,
       
    (ii) securities, or
       
    (iii) a contract of insurance, a deposit or an evidence of a deposit that is not a security for the purposes of securities legislation;

 

  (f) foreign jurisdiction ” means a country other than Canada or a political subdivision of a country other than Canada;
       
  (j) individual ” means a natural person, but does not include
       
    (i) a partnership, unincorporated association, unincorporated syndicate, unincorporated organization or trust, or
       
    (ii) a natural person in the person’s capacity as a trustee, executor, administrator or personal or other legal representative;

 

  (k) jurisdiction ” or “jurisdiction of Canada” means a province or territory of Canada except when used in the term foreign jurisdiction;
       
  (l) person ” includes
       
    (i) an individual;
       
    (ii) a corporation;
       
    (iii) a partnership, trust, fund and an association, syndicate, organization or other organized group of persons, whether incorporated or not; and
       
    (iv) an individual or other person in that person’s capacity as a trustee, executor, administrator or personal or other legal representative;

 

     
C- 5  

 

  (m) related liabilities ” means
       
    (i) liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets, or
       
    (ii) liabilities that are secured by financial assets; and

 

  (n) spouse ” means, an individual who,
       
    (i) is married to another individual and is not living separate and apart within the meaning of the Divorce Act (Canada), from the other individual,
       
    (ii) is living with another individual in a marriage-like relationship, including a marriage-like relationship between individuals of the same gender, or
       
    (iii) in Alberta, is an individual referred to in paragraph (i) or (ii), or is an adult interdependent partner within the meaning of the Adult Interdependent Relationships Act (Alberta).

 

Guidance On Accredited Investor Exemptions for Individuals

 

An individual accredited investor is an individual:

 

  (a) who, either alone or with a spouse, beneficially owns financial assets (please see the guidance below regarding what financial assets are) having an aggregate realizable value that. before taxes but net of any related liabilities (please see the guidance below regarding what related liabilities are), exceeds $1,000,000;
     
  (b) whose net income before taxes exceeded $200,000 in each of the 2 most recent calendar years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of the 2 most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year;
     
  (c) who, either alone or with a spouse, has net assets (please see the guidance below regarding calculating net assets) of at least $5,000,000; and
     
  (d) who beneficially owns financial assets (please see the guidance below regarding what financial assets are) having an aggregate realizable value that, before taxes but net of any related liabilities (please see the guidance below regarding what related liabilities are), exceeds $5,000,000.

 

The monetary thresholds above are intended to create bright-line standards. Optionees who do not satisfy these monetary thresholds do not qualify as accredited investors.

 

Spouses

 

Sections (a), (b) and (c) above are designed to treat spouses as a single investing unit, so that either spouse qualifies as an accredited investor if the combined financial assets of both spouses exceed $1,000,000, the combined net income of both spouses exceeds $300,000, or the combined net assets of both spouses exceed $5,000,000. Section (d) above does not treat spouses as a single investing unit.

 

If the combined net income of both spouses does not exceed $300,000, but the net income of one of the spouses exceeds $200,000, only the spouse whose net income exceeds $200,000 qualifies as an accredited investor.

 

     
C- 6  

 

Financial Assets and Related Liabilities

 

For the purposes of Sections (a) and (d) above, “ financial assets ” means: (1) cash, (2) securities, or (3) a contract of insurance, a deposit or an evidence of a deposit that is not a security for the purposes of securities legislation. These financial assets are generally liquid or relatively easy to liquidate. The value of a optionee’s personal residence is not included in a calculation of financial assets.

 

The calculation of financial assets must exclude “ related liabilities ”, meaning: (1) liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets, or (2) liabilities that are secured by financial assets.

 

As a general matter, it should not be difficult to determine whether financial assets are beneficially owned by an individual, an individual’s spouse, or both, in any particular instance. However, in the case where financial assets are held in a trust or in another type of investment vehicle for the benefit of an individual, there may be questions as to whether the individual beneficially owns the financial assets. The following factors are indicative of beneficial ownership of financial assets:

 

    physical or constructive possession of evidence of ownership of the financial asset;
     
    entitlement to receipt of any income generated by the financial asset;
     
    risk of loss of the value of the financial asset; and
     
    the ability to dispose of the financial asset or otherwise deal with it as the individual sees fit.

 

For example, securities held in a self-directed RRSP for the sole benefit of an individual are beneficially owned by that individual.

 

In general, financial assets in a spousal RRSP can be included for the purposes of the $1,000,000 financial asset test in Section (a) above because Section (a) takes into account financial assets owned beneficially by a spouse. However, financial assets in a spousal RRSP cannot be included for purposes of the $5,000,000 financial asset test in Section (d) above.

 

Financial assets held in a group RRSP under which the individual does not have the ability to acquire the financial assets and deal with them directly do not meet the beneficial ownership requirements in either Sections (a) or (d) above.

 

Guidance on Close Personal Friend and Close Business Associate Determination

 

A “ close personal friend ” of a director, executive officer, founder or control person of an issuer is an individual who knows the director, executive officer, founder or control person well enough and has known them for a sufficient period of time to be in a position to assess their capabilities and trustworthiness and to obtain information from them with respect to the investment.

 

The following factors are relevant to this determination:

 

  (a) the length of time the individual has known the director, executive officer, founder or control person,
     
  (b) the nature of the relationship between the individual and the director, executive officer, founder or control person including such matters as the frequency of contacts between them and the level of trust and reliance in the other circumstances, and
     
  (c) the number of “close personal friends” of the director, executive officer, founder or control person to whom securities have been distributed in reliance on the private issuer exemption or the family, friends and business associates exemption.

 

     
C- 7  

 

An individual is not a close personal friend solely because the individual is:

 

  (a) a relative,
     
  (b) a member of the same club, organization, association or religious group,
     
  (c) a co-worker, colleague or associate at the same workplace,
     
  (d) a client, customer, former client or former customer,
     
  (e) a mere acquaintance, or
     
  (f) connected through some form of social media, such as Facebook, Twitter or LinkedIn.

 

The relationship between the individual and the director, executive officer, founder or control person must be direct. For example, the exemption is not available to a close personal friend of a close personal friend of a director of the issuer. Further, a relationship that is primarily founded on participation in an internet forum is not considered to be that of a close personal friend.

 

The Optionee acknowledges and agrees that, in addition to resale restrictions imposed under U.S. securities laws, there are additional restrictions on the Optionee’s ability to resell the Securities under Canadian securities laws and National Instrument 45-102 as adopted by the Canadian Securities Administrators.

 

A “ close business associate ” is an individual who has had sufficient prior business dealings with a director, executive officer, founder or control person of the issuer to be in a position to assess their capabilities and trustworthiness and to obtain information from them with respect to the investment.

 

The following factors are relevant to this determination:

 

  (a) the length of time the individual has known the director, executive officer, founder or control person,
     
  (b) the nature of any specific business relationships between the individual and the director, executive officer, founder or control person, including, for each relationship, when it began, the frequency of contact between them and when it terminated if it is not ongoing, and the level of trust and reliance in the other circumstances,
     
  (c) the nature and number of any business dealings between the individual and the director, executive officer, founder or control person, the length of the period during which they occurred, and the nature and date of the most recent business dealing, and
     
  (d) the number of “close business associates” of the director, executive officer, founder or control person to whom securities have been distributed in reliance on the private issuer exemption or the family, friends and business associates exemption.

 

An individual is not a close business associate solely because the individual is:

 

  (a) a member of the same club, organization, association or religious group,
     
  (b) a co-worker, colleague or associate at the same workplace,
     
  (c) a client, customer, former client or former customer,
     
  (d) a mere acquaintance, or
     
  (e) connected through some form of social media, such as Facebook, Twitter or LinkedIn.

 

The relationship between the individual and the director, executive officer, founder or control person must be direct. For example, the exemptions are not available for a close business associate of a close business associate of a director of the issuer. Further, a relationship that is primarily founded on participation in an internet forum is not considered to be that of a close business associate.

 

     
C- 8  

 

The Optionee agrees that the above representations and warranties will be true and correct both as of the execution of this Questionnaire acknowledges that they will survive the completion of the issue of the Option.

 

The Optionee acknowledges that the foregoing representations and warranties are made by the Optionee with the intent that they be relied upon in determining the suitability of the Optionee to acquire the Options and that this Questionnaire is incorporated into and forms part of the Agreement and the undersigned undertakes to immediately notify the Company of any change in any statement or other information relating to the Optionee set forth herein which takes place prior to the closing time of the grant of the Options.

 

The Optionee undertakes to immediately notify the Company of any change in any statement or other information relating to the Optionee set forth in the Agreement or in this Questionnaire which takes place prior to the issuance of the Options.

 

By completing this Questionnaire, the Optionee authorizes the indirect collection of this information by each applicable regulatory authority or regulator and acknowledges that such information is made available to the public under applicable laws.

 

DATED as of day of , 20____.

 

   
  Print Name of Optionee
   
   
  Signature

 

     
C- 9  

 

 

     
C- 10  

 

 

 

     
C- 11  

 

 

     
C- 12  

 

 

 

     
C- 13  

 

 

 

     
C- 14  

 

 

 

     
C- 15  

 

 

 

     
D- 1  

 

Schedule D

 

UNITED STATES ACCREDITED QUESTIONNAIRE

 

Capitalized terms used in this United States Accredited Investor Questionnaire (this “ Questionnaire ”) and not specifically defined have the meaning ascribed to them in the Stock Option Agreement between the undersigned (the “ Optionee ”) and AppCoin Innovations Inc. (the “ Company ”) to which this Schedule D is attached.

 

All dollar amounts referred to in this Questionnaire are in lawful money of the United States, unless otherwise indicated.

 

The Optionee covenants, represents and warrants to the Company that he or she satisfies one or more of the categories of “Accredited Investors”, as defined by Regulation D promulgated under the Securities Act of 1933 (the “Securities Act” ), as indicated below: (Please initial in the space provide those categories, if any, of an “Accredited Investor” which the Optionee satisfies)

 

  ______ Category 1 An organization described in Section 501(c)(3) of the United States Internal Revenue Code, a corporation, a Massachusetts or similar business trust or partnership, not formed for the specific purpose of acquiring the Securities, with total assets in excess of $5,000,000;
     
  ______ Category 2 A natural person whose individual net worth, or joint net worth with that person’s spouse, exceeds $1,000,000. For purposes of this Category 2, “net worth” means the excess of total assets at fair market value (including personal and real property, but excluding the estimated fair market value of a person’s primary home) over total liabilities. Total liabilities excludes any mortgage on the primary home in an amount of up to the home’s estimated fair market value as long as the mortgage was incurred more than 60 days before the Securities are acquired, but includes (i) any mortgage amount in excess of the home’s fair market value and (ii) any mortgage amount that was borrowed during the 60-day period before the date of the acquisition of Securities for the purpose of investing in the Securities;
     
  ______ Category 3 A natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year;
     
  ______ Category 4 A “bank” as defined under Section (3)(a)(2) of the Securities Act or savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act acting in its individual or fiduciary capacity; a broker dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934 (United States); an insurance company as defined in Section 2(13) of the Securities Act; an investment company registered under the Investment Company Act of 1940 (United States) or a business development company as defined in Section 2(a)(48) of such Act; a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958 (United States); a plan with total assets in excess of $5,000,000 established and maintained by a state, a political subdivision thereof, or an agency or instrumentality of a state or a political subdivision thereof, for the benefit of its employees; an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 (United States) whose investment decisions are made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000, or, if a self-directed plan, whose investment decisions are made solely by persons that are accredited investors;

 

     
D- 2  

 

 

  ______ Category 5 A private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940 (United States);
     
  ______ Category 6 A director or executive officer of the Company;
     
  ______ Category 7 A trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Securities, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) under the Securities Act;
     
  ______ Category 8 An entity in which all of the equity owners satisfy the requirements of one or more of the foregoing categories;

 

Note that the Optionee claiming to satisfy one of the above categories of Accredited Investor may be required to supply the Company with a balance sheet, prior years’ federal income tax returns or other appropriate documentation to verify and substantiate the Optionee’s status as an Accredited Investor.

 

If the Optionee is an entity which initialled the last category in reliance upon the Accredited Investor categories above, state the name, address, total personal income from all sources for the previous calendar year, and the net worth (exclusive of home, home furnishings and personal automobiles) for each equity owner of the said entity:

 

All information contained in this Questionnaire will be treated as confidential. However, by signing and returning this Questionnaire, the Optionee agrees that, if necessary, this Questionnaire may be presented to such parties as the Company deems appropriate to establish the availability, under the Securities Act or applicable state securities law, of exemption from registration in connection with the issuance of the Securities hereunder.

 

By completing this Questionnaire, the Optionee authorizes the indirect collection of this information by each applicable regulatory authority or regulator and acknowledges that such information is made available to the public under applicable laws.

 

DATED as of ______ day of _______________, 20____.

 

   
  Print Name of Optionee
   
   
  Signature
   
   
  Social Security/Tax I.D. No.

 

     
  E- 1  

 

Schedule E

 

UNITED STATES NON-ACREDITED QUESTIONNAIRE

 

Capitalized terms used in this United States Non-Accredited Investor Questionnaire (this “ Questionnaire ”) and not specifically defined have the meaning ascribed to them in the Stock Option Agreement between the undersigned (the “ Optionee ”) and AppCoin Innovations Inc. (the “ Company ”) to which this Schedule D is attached.

 

All dollar amounts referred to in this Questionnaire are in lawful money of the United States, unless otherwise indicated.

 

The purpose of this Questionnaire is to assure the Company that the Optionee will meet the standards imposed by the Securities Act of 1933 (the “Securities Act” ) and the appropriate exemptions of applicable state securities laws. The Company will rely on the information contained in this Questionnaire for the purposes of such determination. The Option and the Optioned Shares (together, the “Securities” ) will not be registered under the Securities Act and has been issued in reliance upon the exemption from registration afforded by Section 3(b) and/or Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder. This Questionnaire is not an offer of any securities of the Company in any state other than those specifically authorized by the Company.

 

Please attach additional pages if necessary to answer any question fully.

 

REPRESENTATIONS OF OPTIONEE

 

This item is presented in alternative form. Please initial in the space provided the applicable alternative.

 

_____ ALTERNATIVE ONE: The Optionee covenants, represents and warrants to the Company that he or she has such knowledge and experience in financial and business matters that he or she is capable of evaluating the relative merits and risks of an investment in the Securities and Company and is not utilizing a purchaser representative in connection with evaluating such merits and risks. The Optionee is providing evidence of its knowledge and experience in these matters through the information requested below in this Questionnaire.
   
_____ ALTERNATIVE TWO: The Optionee covenants, represents and warrants to the Company that he or she has chosen to use the services of a purchaser representative acceptable to the Optionee in connection with the Optionee’s acquisition of the Securities. The Optionee hereby acknowledges that the person named below is his or her purchaser representative who will assist and advise the Optionee in evaluating the merits and risks of an investment in the Securities and the Company and affirms that such purchaser representative has previously disclosed in writing any material relationship that exists between the purchaser representative (or its affiliates) and the Company (or its affiliates) that is mutually understood to be contemplated, or that has existed at any time during the previous two years, and any compensation received or to be received as a result of such relationship.
   
   
  (name of Purchaser Representative)
   
   
  (address of Purchaser Representative)
  If the Optionee utilizes a purchaser representative, this Questionnaire must be accompanied by a completed and signed purchaser representative Questionnaire, a copy of which can be obtained from the Company upon request.

 

     
  E- 2  

 

FOR INDIVIDUAL INVESTORS

 

1. Name:  
     
2. Residential Address & Telephone Number:  
     
     
     
     
     
3. Length of Residence in State of Residence:  

 

4. U.S. Citizen: _____ Yes _____ No

 

5. Social Security Number:      
           
6. Business Address & Telephone Number:        
           
           
           
           

 

7. Preferred Mailing Address: _____ Residence _____ Business
           
8. Date of Birth:        
           
9. Employer and Position:        
           
10. Name of Business:        

 

11. Business or Professional Education and Degrees:
           
  School Degree   Year Received
         
         
         
           
           
12. Prior Employment (last 5 years):        
           
  Employer Nature of Duties Dates of Employment
       
       
       
             

 

     
  E- 3  

 

13. Relationship to the Company, if any:  

 

14. Is the Optionee an officer of director of a publicly-held company?

 

  ____ Yes _____ No

 

  If yes, specify company:  

 

15. Does the Optionee beneficially own 10% or more of the voting securities of a publicly-held company?

 

  ____ Yes _____ No

 

  If yes, specify company:  

 

16. Within the last 5 years, has the Optionee personally invested in investments sold by means of private placements in reliance on exemptions from registration under the Securities Act and state securities laws?

 

  ____ Yes _____ No

 

17. Prior investments by the Optionee which were purchased in reliance on exemptions from registration under the Securities Act and State securities laws (initial the highest number applicable):

 

Amount (Cumulative)

 

  Real Estate: Up to $50,000 to Over
  None: _____ $50,000 _____ $250,000 _____ $250,000 _____
         
  Securities: Up to $50,000 to Over
  None: _____ $50,000 _____ $250,000 _____ $250,000 _____
         
  Other: Up to $50,000 to Over
  None: _____ $50,000 _____ $250,000 _____ $250,000 _____

 

18. Does the Optionee consider itself to be an experienced and sophisticated investor? 

 

  ____ Yes _____ No

 

  If so, please provide evidence of investment sophistication and/or experience:
   
   
   
   

 

19. Does the Optionee, or any person authorized to execute this Questionnaire, consider itself to have such knowledge of the Company and its business and such experience in financial and business matters to enable it to evaluate the merits and risks of an investment in the Securities and the Company, should the Optionee be given an opportunity to so invest?

 

  ____ Yes _____ No

 

     
  E- 4  

 

20. If the Optionee is an individual, please indicate the Optionee’s and his/her spouse’s combined gross income during the preceding two years (initial the highest number applicable):

 

               2016                2015
       
  _____  Less than $75,000   _____  Less than $75,000
       
  _____  $75,001 to $100,000   _____  $75,001 to $100,000
       
  _____  $100,001 to $200,000   _____  $100,001 to $200,000
       
  _____  $200,001 to $300,000   _____  $200,001 to $300,000
       
  _____  $Over $300,000   _____  $Over $300,000

 

21. If the Optionee is an individual, please indicate the Optionee’s and his/her spouse’s combined estimated net worth (exclusive of home, home furnishings and personal automobiles) (initial the highest number applicable):

 

  _____  Less than $100,000   _____  $300,0001 to $500,000
       
  _____  $100,001 to $200,000   _____  $500,001 to $1,000,000
       
  _____  $200,001 to $300,000   _____  Over $1,000,000

 

22. Regardless of the amount of the proposed investment:

 

  (a) Will the Optionee’s proposed investment exceed 10% of its individual net worth, or the Optionee’s joint net worth with its spouse as determined in paragraph 21 above?

 

  ____ Yes _____ No

 

  (b) Will the Optionee be able to bear the economic risk of its investment in this transaction?

 

  ____ Yes _____ No

 

23. Please provide answers to the following questions.

 

  (a) State total assets of the Optionee, including cash, stocks and bonds, automobiles, real estate, and any other assets:
     
    $
     
  (b) State total liabilities of the Optionee including real estate indebtedness, accounts payable, taxes payable and any other liabilities:
     
    $
     
  (c) State annual income of the Optionee including salary, securities income, rental income and any other income:
     
    $

 

     
  E- 5  

 

  (d) State annual expenses of the Optionee, excluding ordinary living expenses, including real estate payments, rent, property taxes and other expenses:
     
    $
     
  (e) Does the Optionee expect the amount of its assets, liabilities, income and expenses, as stated above, to be subject to significant change in the future:

 

  ____ Yes _____ No

 

    If yes, explain:
     
     
     

 

All information contained in this Questionnaire will be treated as confidential. However, by signing and returning this Questionnaire, the Optionee agrees that, if necessary, this Questionnaire may be presented to such parties as the Company deems appropriate to establish the availability, under the Securities Act or applicable state securities law, of exemption from registration in connection with the issuance of the Securities hereunder.

 

By completing this Questionnaire, the Optionee authorizes the indirect collection of this information by each applicable regulatory authority or regulator and acknowledges that such information is made available to the public under applicable laws.

 

DATED as of day of _________________, 20____.

 

   
  Print Name of Optionee
   
   
  Signature
   
   
  Social Security/Tax I.D. No.

 

     
F- 1  

 

Schedule F

 

ACKNOWLEDGEMENTS and Representations and warranties OF THE OPTIONEE

 

Capitalized terms used in this Acknowledgements and Representations and Warranties of the Optionee and not specifically defined have the meaning ascribed to them in the Stock Option Agreement between the undersigned (the “ Optionee ”) and AppCoin Innovations Inc. (the “ Company ”) to which this Schedule F is attached.

 

The Optionee acknowledges and agrees that:

 

  (a) the Securities have not been registered under the 1933 Act or under any state securities or “blue sky” laws of any state of the United States, and are being offered only in a transaction not involving any public offering within the meaning of the 1933 Act, and, unless so registered, may not be offered or sold in the United States or to U.S. Persons, except pursuant to an effective registration statement under the 1933 Act, or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the 1933 Act, and in each case only in accordance with applicable state securities laws;
     
  (b) the Company will refuse to register any transfer of the Securities not made in accordance with the provisions of Regulation S, pursuant to an effective registration statement under the 1933 Act or pursuant to an available exemption from, or in a transaction not subject to, the registration requirements of the 1933 Act;
     
  (c) the decision to execute this Agreement and acquire the Securities hereunder has not been based upon any oral or written representation as to fact or otherwise made by or on behalf of the Company and such decision is based solely upon a review of publicly available information regarding the Company that is available on the website of the Securities and Exchange Commission (the “ SEC ”) at www.sec.gov (the “Company Information” );
     
  (d) there are risks associated with an investment in the Securities;
     
  (e) the Optionee and the Optionee’s advisor(s) (if applicable) have had a reasonable opportunity to ask questions of and receive answers from the Company in connection with the distribution of the Securities hereunder, and to obtain additional information, to the extent possessed or obtainable without unreasonable effort or expense, necessary to verify the accuracy of the information about the Company;
     
  (f) the books and records of the Company were available upon reasonable notice for inspection, subject to certain confidentiality restrictions, by the Optionee during reasonable business hours at its principal place of business, and all documents, records and books in connection with the distribution of the Securities hereunder have been made available for inspection by the Optionee, the Optionee’s attorney and/or advisor(s) (if applicable);

     
  (g) the Company, its officers, directors, counsel and agents are entitled to rely upon the truth and accuracy of the acknowledgements, representations, warranties, statements, answers, covenants and agreements contained in this Agreement and agrees that if any of such acknowledgements, representations, warranties, statements, answers, covenants, and agreements should become, by the passage of time after the date of this Agreement, no longer accurate or should be breached, the Optionee shall promptly notify the Company, and the Optionee will hold harmless the Company from any loss or damage it may suffer as a result of the Optionee’s failure to correctly complete or comply with the terms of this Agreement;

 

     
F- 2  

 

  (h) the Optionee has been advised to consult its own legal, tax and other advisors with respect to the merits and risks regarding the exercise of the Options and the issuance of the Optioned Shares and with respect to applicable resale restrictions and it is solely responsible (and the Company is in not any way responsible) for compliance with applicable resale restrictions;
     
  (i) the Company has advised the Optionee that the Company is relying on an exemption from the registration and prospectus requirements of applicable securities laws and, as a consequence of acquiring the Securities pursuant to this exemption, certain protections, rights and remedies provided by the applicable securities laws, including statutory rights of rescission or damages, will not be available to the Optionee;
     
  (j) the Optionee will indemnify and hold harmless the Company and, where applicable, its directors, officers, employees, agents, advisors and shareholders, from and against any and all loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all fees, costs and expenses whatsoever reasonably incurred in investigating, preparing or defending against any claim, lawsuit, administrative proceeding or investigation whether commenced or threatened) arising out of or based upon any representation or warranty of the Optionee contained herein or in any document furnished by the Optionee to the Company in connection herewith being untrue in any material respect or any breach or failure by the Optionee to comply with any covenant or agreement made by the Optionee to the Company in connection therewith;
     
  (k) the Securities are not listed on any stock exchange or automated dealer quotation system and no representation has been made to the Optionee that any of the Securities will become listed on any stock exchange or automated dealer quotation system, except that currently certain market makers make market in the shares of the Company’s common stock on the OTC Pink;
     
  (l) neither the SEC nor any other securities commission or similar regulatory authority has reviewed or passed on the merits of the Securities;
     
  (m) no documents in connection with this Agreement have been reviewed by the SEC or any state securities administrators;
     
  (n) there is no government or other insurance covering any of the Securities; and
     
  (o) this Agreement is not enforceable by the Optionee unless it has been accepted by the Company.

 

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPTIONEE

 

The Optionee hereby represents and warrants to and covenants with the Company (which representations, warranties and covenants shall survive the closing) that:

 

  (a) the Optionee is a bona fide director, officer, employee, independent contractor or consultant of the Company, Parent or Subsidiary;
     
  (b) unless the Optionee has completed Schedule D or E, the Optionee is not acquiring the Securities for the account or benefit of, directly or indirectly, any U.S. Person;
     
  (c) unless the Optionee has completed Schedule D or E, the Optionee is not a U.S. Person;
     
  (d) the acquisition of the Securities by the Optionee as contemplated in this Agreement complies with or is exempt from the applicable securities legislation of the jurisdiction of residence of the Optionee;
     
  (e) the Optionee has not acquired or is not acquiring the Securities as a result of, and will not itself engage in, any “directed selling efforts” (as defined in Regulation S under the 1933 Act) in the United States in respect of the Securities which would include any activities undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for the resale of the Securities; provided, however, that the Optionee may sell or otherwise dispose of the Securities pursuant to registration thereof under the 1933 Act and any applicable state and provincial securities laws or under an exemption from such registration requirements;
     
  (f) unless the Optionee has completed Schedule D or E, the Optionee is outside the United States when receiving and executing this Agreement and is acquiring the Securities as principal for the Optionee’s own account, for investment purposes only, and not with a view to, or for, resale, distribution or fractionalisation thereof, in whole or in part, and, in particular, it has no intention to distribute either directly or indirectly any of the Securities in the United States or to U.S. Persons, and no other person has a direct or indirect beneficial interest in such Securities;
     
  (g) if the Optionee is not resident in the United States or Canada, the Optionee:

 

     
F- 3  

 

    (i) is knowledgeable of, or has been independently advised as to, the applicable securities laws of the securities regulators having application in the jurisdiction in which the Optionee is resident (the “ International Jurisdiction ”) which would apply to the granting of the Option and the issue, sale or resale of the Optioned Shares;
       
    (ii) the Optionee is acquiring the Option or the Optioned Shares pursuant to exemptions from prospectus or equivalent requirements under applicable securities laws or, if such is not applicable, the Optionee is permitted to acquire the Option or the Optioned Shares under the applicable securities laws of the securities regulators in the International Jurisdiction without the need to rely on any exemptions;
       
    (iii) the applicable securities laws of the authorities in the International Jurisdiction do not require the Company to make any filings or seek any approvals of any kind whatsoever from any securities regulator of any kind whatsoever in the International Jurisdiction in connection with the granting of the Option or the issue, sale or resale of the Optioned Shares; and
       
    (iv) the granting of the Option or the issue, sale or resale of the Optioned Shares does not trigger:

 

    A. any obligation to prepare and file a prospectus or similar document, or any other report with respect to such purchase in the International Jurisdiction; or
       
    B. any continuous disclosure reporting obligation of the Optionee or the Company in the International Jurisdiction; and

 

  (v) the Optionee will, if requested by the Company, deliver to the Company a certificate or opinion of local counsel from the International Jurisdiction which will confirm the matters referred to in subparagraphs (ii), (iii) and (iv) above to the satisfaction of the Company, acting reasonably;

 

  (h) the Optionee has received and carefully read this Agreement and the Company Information;
     
  (i) the Optionee has received a brief description of the Securities and the Optionee understands that the proceeds from the exercise of the Options will be used by the Company as working capital for general corporate purposes;
     
  (j) the Optionee has duly executed and delivered this Agreement and it constitutes a valid and binding agreement of the Optionee enforceable against the Optionee in accordance with its terms;
     
  (k) the Optionee has the legal capacity and competence to enter into and execute this Agreement and to take all actions required pursuant hereto and, if the Optionee is a corporation, it is duly incorporated and validly subsisting under the laws of its jurisdiction of incorporation and all necessary approvals by its directors, shareholders and others have been obtained to authorize execution and performance of this Agreement on behalf of the Optionee;
     
  (l) the Optionee:

 

    (i) has adequate net worth and means of providing for its current financial needs and possible personal contingencies,
       
    (ii) has no need for liquidity in this investment, and
       
    (iii) is able to bear the economic risks of an investment in the Securities for an indefinite period of time, and can afford the complete loss of such investment;

 

  (m) the Optionee has the requisite knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of the investment in the Securities and the Company, and the Optionee is providing evidence of such knowledge and experience in these matters through the information requested in this Agreement;
     
  (n) the Optionee is aware that an investment in the Company is speculative and involves certain risks, including the possible loss of the investment, and the Optionee has carefully read and considered the matters set forth under the caption “Risk Factors” appearing in the Company’s various disclosure documents, filed with the SEC;
     
  (o) the entering into of this Agreement and the transactions contemplated hereby do not result in the violation of any of the terms and provisions of any law applicable to, or, if applicable, the constating documents of, the Optionee, or of any agreement, written or oral, to which the Optionee may be a party or by which the Optionee is or may be bound;
     
  (p) the Optionee is purchasing the Securities for its own account for investment purposes only and not for the account of any other person and not for distribution, assignment or resale to others, and no other person has a direct or indirect beneficial interest is such Securities, and the Optionee has not subdivided his interest in the Securities with any other person;
     
  (q) the Optionee is not an underwriter of, or dealer in, the shares of the Company’s common stock, nor is the Optionee participating, pursuant to a contractual agreement or otherwise, in the distribution of the Securities;
     
  (r) the Optionee understands and agrees that the Company and others will rely upon the truth and accuracy of the acknowledgements, representations, statements, answers and agreements contained in this Agreement, and agrees that if any of such acknowledgements, representations, statements, answers and agreements are no longer accurate or have been breached, the Optionee shall promptly notify the Company;

 

     
F- 4  

 

  (s) the Optionee has made an independent examination and investigation of an investment in the Securities and the Company and has depended on the advice of its legal and financial advisors and agrees that the Company will not be responsible in anyway whatsoever for the Optionee’s decision to acquire the Securities;
     
  (t) the Optionee is not aware of any advertisement of any of the Securities and is not acquiring the Securities as a result of any form of general solicitation or general advertising including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio or television, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising;
     
  (u) the Optionee has either (a) a pre-existing personal or business relationship with the Company or any of its partners, officers, directors, or controlling persons consisting of personal or business contacts of a nature and duration which enable the Optionee to be aware of the character, business acumen and general business and financial circumstances of the Company or any such partner, officer, director, or controlling person with whom such relationship exists or (b) such business or financial expertise as to be able to protect the Optionee’s own interests in connection with the acquisition of the Securities; and,
     
  (v) no person has made to the Optionee any written or oral representations:

 

    (i) that any person will resell or repurchase any of the Securities,
       
    (ii) that any person will refund the purchase price of any of the Securities,
       
    (iii) as to the future price or value of any of the Securities, or
       
    (iv) that any of the Securities will be listed and posted for trading on any stock exchange or automated dealer quotation system or that application has been made to list and post any of the Securities of the Company on any stock exchange or automated dealer quotation system, except that currently certain market makers make market in the shares of the Company’s common stock on the OTC Pink.

 

DATED as of _____day of __________________, 20____.

 

   
  Print Name of Optionee
   
   
  Signature
   
   
  Social Security/Tax I.D. No.

 

     
 

 

 

 

NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (AS DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT.

 

Unless permitted under securities legislation, the holder of this security must not trade the security before the date that is 4 months and a day after the later of (i) OCTOBER 15, 2017, and (ii) the date the issuer became a reporting issuer in any province or territory.

 

STOCK OPTION AGREEMENT

 

This AGREEMENT is entered into as of the October 15, 2017 (the “Date of Grant” ).

 

BETWEEN:

 

  APPCOIN INNOVATIONS INC. , a company incorporated pursuant to the laws of the State of Nevada, with an office at 561 Indiana Court, Venice Beach, CA 90291
   
  (the “Company” )

 

AND:

 

  BUSINESS INSTINCTS GROUP , a company incorporated pursuant to the laws of ♦, with an office at L120, 2303 - 4 Street SW, Calgary, AB T2S 2S7
   
  (the “Optionee” )

 

WHEREAS:

 

A. The Company’s board of directors (the “Board” ) has approved and adopted a 2017 Equity Incentive Plan (the “Plan” ), whereby the Board is authorized to grant stock options to purchase shares of common stock of the Company to the directors, officers, employees, and consultants of the Company or any Parent or Subsidiary of the Company (as defined herein);

 

B. The Optionee is a director, officer, employee or consultant of the Company, the Parent or a Subsidiary; and

 

C. The Company wishes to grant stock options to purchase a total of 225,000 Optioned Shares (as defined herein) to the Optionee, as follows:

 

    Incentive Stock Options (as defined herein)
  X Non-Qualified Stock Options (as defined herein)

 

     
  2  

 

NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

1. Definitions

 

1.1 In this Agreement, the following terms shall have the following meanings:

 

  (a) 1933 Act ” means the Securities Act of 1933, as amended;
     
  (b) Board ” means the board of directors of the Company;
     
  (c) Canadian Accredited Investor Questionnaire ” means a questionnaire substantially in the form of the Canadian Accredited Investor Questionnaire attached to this Agreement as Schedule B;
     
  (d) Code ” means the Internal Revenue Code of 1986;
     
  (e) Common Stock ” means the shares of common stock of the Company;
     
  (f) Exercise Price ” means $0.10 per share;
     
  (g) Expiry Date ” means October 15, 2027;
     
  (h) Incentive Stock Options ” means any Options that meet all the requirements under section 422 of the Code;
     
  (i) Non-Qualified Stock Options ” means any Options that do not qualify as Incentive Stock Options and, thus, do not meet the requirements under section 422 of the Code;
     
  (j) Notice of Exercise ” means a notice in writing addressed to the Company at its address first recited hereto (or such other address of which the Company may from time to time notify the Optionee in writing), substantially in the form attached as Schedule B hereto, which notice shall specify therein the number of Optioned Shares in respect of which the Options are being exercised;
     
  (k) Options ” means the right and option to purchase, from time to time, all, or any part of the Optioned Shares granted to the Optionee by the Company pursuant to Section 2.1 of this Agreement;
     
  (l) Optioned Shares ” means the shares of Common Stock that are issued pursuant to the exercise of the Options;
     
  (m) Parent ” means a company or other entity that owns at least fifty percent (50%) of the outstanding voting stock or voting power of the Company;
     
  (n) Plan ” has the meaning ascribed thereto in Recital A of this Agreement;
     
  (o) Securities ” means, collectively, the Options and the Optioned Shares;
     
  (p) Subsidiary ” means a company or other entity, at least fifty percent (50%) of the outstanding voting stock or voting power of which is beneficially owned, directly or indirectly, by the Company; and
     
  (q) Vested Options ” means the Options that have vested in accordance with Section 2.2 of this Agreement.

 

     
  3  

 

1.2 Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Plan.

 

2. The Options

 

2.1 The Company hereby grants to the Optionee, on the terms and conditions set out in this Agreement and in the Plan, Options to purchase a total of 225,000 Optioned Shares at the Exercise Price.

 

2.2 The Options will vest in accordance with Schedule A to this Agreement. The Options may be exercised immediately after vesting.

 

2.3 The Options shall, at 5:00 p.m. (Pacific time) on the Expiry Date, expire and be of no further force or effect whatsoever.

 

2.4 The Company shall not be obligated to cause the issuance, transfer or delivery of a certificate or certificates representing Optioned Shares to the Optionee, until provision has been made by the Optionee, to the satisfaction of the Company, for the payment of the aggregate Exercise Price for all Optioned Shares for which the Options shall have been exercised, and for satisfaction of any tax withholding obligations associated with such exercise.

 

2.5 Subject to the provisions of this Agreement and the Plan and subject to compliance with any applicable securities laws, the Options shall be exercisable, in full or in part, at any time after vesting, until termination. If less than all of the Optioned Shares included in the vested portion of any Options are purchased, the remainder may be purchased at any subsequent time prior to the Expiry Date. Only whole shares may be issued pursuant to the exercise of any Options, and to the extent that any Option covers less than one (1) share, it is not exercisable.

 

2.6 Each exercise of the Options shall be by means of delivery of a Notice of Exercise (which may be in the form attached hereto as Schedule C) to the Chief Financial Officer of the Company at its principal executive office, specifying the number of Optioned Shares to be purchased and accompanied by payment in cash or by certified check or cashier’s check in the amount of the full Exercise Price for the Common Stock to be purchased. In addition to payment in cash or by certified check or cashier’s check and if agreed to in advance by the Company, the Optionee or transferee of the Options may pay for all or any portion of the aggregate Exercise Price by complying with any other payment mechanism approved by the Board at the time of exercise.

 

2.7 Reference is made to the Plan for particulars of the rights and obligations of the Optionee and the Company in respect of:

 

  (a) the terms and conditions on which the Options are granted except to the extent set forth herein; and,
     
  (b) a consolidation or subdivision of the Company’s share capital or a corporate reorganization;

 

all to the same effect as if the provisions of the Plan were set out in this Agreement and to all of which the Optionee assents. A copy of the Plan is available to the Optionee at no charge, at the Company’s principal executive office. Any provision of this Agreement that is inconsistent with the Plan shall be considered void and replaced with the applicable provision of the Plan. The Company may modify, extend or renew this Agreement or the Options represented hereby or accept the surrender thereof (to the extent not previously exercised) and authorize the granting of a new option in substitution therefore (to the extent not previously exercised), subject at all times to the Plan, the applicable rules of any applicable regulatory authority or stock exchange, and any applicable laws. Notwithstanding the foregoing provisions of this Section 2.7, the Company shall not have the right to make any modification which would materially alter the terms of the Options to the Optionee’s detriment or materially impair any rights of the Optionee hereunder without the consent of the Optionee.

 

     
  4  

 

2.8 By accepting the Options, the Optionee represents and agrees that none of the Optioned Shares purchased upon exercise of the Options will be distributed in violation of applicable federal and state laws and regulations. The Optionee further represents and agrees to provide the Company with any other document reasonably requested by the Company or the Company’s Counsel.

 

3. Documents Required from Optionee

 

3.1 The Optionee must complete, sign and return to the Company:

 

  (a) a copy of this Agreement;
     
  (b) a copy of the Acknowledgements, and Representations and Warranties of the Optionee attached hereto as Schedule F;
     
  (c) if the Optionee is resident in Canada, a Canadian Questionnaire in the form attached hereto as Schedule C; and
     
  (d) if the Optionee is resident in the United States and if an exemption from the registration requirements imposed by the 1933 Act is necessary for entry into this Agreement, one of the two questionnaires in the forms attached hereto as Schedule D and Schedule E, whichever applies.

 

3.2 The Optionee shall complete, sign and return to the Company as soon as possible, on request by the Company, any documents, questionnaires, notices and undertakings as may be required by regulatory authorities, and applicable law.

 

4. Subject to Plan

 

The terms of the Options will be subject to the Plan, as may from time to time be amended, and any inconsistencies between this Agreement and the Plan, as the same may be from time to time amended, shall be governed by the provisions of the Plan. A copy of the Plan will be delivered to the Optionee, and will be available for inspection at the principal offices of the Company.

 

5. Acknowledgement and Waiver

 

The Optionee hereby waives, to the fullest extent permitted by law, any rights of withdrawal, rescission or compensation for damages to which the Optionee might be entitled in connection with the distribution of any of the Securities.

 

6. Professional Advice

 

The acceptance of the Options and the sale of Common Stock issued pursuant to the exercise of Options may have consequences under federal, state and provincial tax and securities laws which may vary depending upon the individual circumstances of the Optionee. Accordingly, the Optionee acknowledges that he or she has been advised to consult his or her personal legal and tax advisor in connection with this Agreement and his or her dealings with respect to Options. Without limiting other matters to be considered with the assistance of the Optionee’s professional advisors, the Optionee should consider: (a) the merits and risks of an investment in the underlying Optioned Shares; and (b) any resale restrictions that might apply under applicable securities laws.

 

     
  5  

 

7. Legending of Subject Securities

 

7.1 The Optionee hereby acknowledges that that upon the issuance thereof, and until such time as the same is no longer required under the applicable securities laws and regulations, the certificates representing any of the Optioned Shares may bear a legend in substantially the following form:

 

If the Optionee is not resident in the United States:

 

THE SECURITIES REPRESENTED HEREBY HAVE BEEN OFFERED IN AN OFFSHORE TRANSACTION TO A PERSON WHO IS NOT A U.S. PERSON (AS DEFINED HEREIN) PURSUANT TO REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”).

 

NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE 1933 ACT, OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (AS DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT.

 

Unless permitted under securities legislation, the holder of this security must not trade the security before the date that is 4 months and a day after THE later of (i) [ insert the distribution date ], and (ii) the date the issuer became a reporting issuer in any province or territory.

 

If the Option is resident in the United States:

 

NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (AS DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT.

 

Unless permitted under securities legislation, the holder of this security must not trade the security before the date that is 4 months and a day after THE later of (i) [ insert the distribution date ], and (ii) the date the issuer became a reporting issuer in any province or territory.

 

7.2 The Optionee hereby acknowledges and agrees to the Company making a notation on its records or giving instructions to the registrar and transfer agent of the Company in order to implement the restrictions on transfer set forth and described in this Agreement.

 

     
  6  

 

8. Resale restrictions

 

8.1 This Agreement and the Options represented hereby are not transferable. Optioned Shares received upon exercise of any Options will be subject to resale restrictions contained in the securities legislation applicable to the Company and the Optionee. The Optionee acknowledges and agrees that the Optionee is solely responsible (and the Company is not in any way responsible) for compliance with applicable resale restrictions.

 

8.2 The Optionee acknowledges that any resale of any of the Optioned Shares will be subject to resale restrictions contained in the securities legislation applicable to the Optionee or proposed transferee. The Optionee acknowledges that none of the Optioned Shares have been registered under the 1933 Act or the securities laws of any state of the United States. The Optioned Shares may not be offered or sold in the United States unless registered in accordance with federal securities laws and all other applicable securities laws or exemptions from such registration requirements are available. The Optionee acknowledges that the Optioned Shares are subject to resale restrictions in Canada and may not be traded in Canada except as permitted by the applicable provincial securities laws and the rules made thereunder.

 

9. No Employment Relationship

 

The grant of an Option shall in no way constitute any form of agreement or understanding binding on the Company or any related company, express or implied, that the Company or any related company will employ or contract with an Optionee, for any length of time, nor shall it interfere in any way with the Company’s or, where applicable, a related company’s right to terminate Optionee’s employment at any time, which right is hereby reserved.

 

10. Governing Law

 

This Agreement is governed by the laws of the State of Nevada and the federal laws of the United States of America as applicable therein. The Optionee irrevocably attorns to the jurisdiction of the courts of the State of Arizona.

 

11. Costs

 

The Optionee acknowledges and agrees that all costs and expenses incurred by the Optionee (including any fees and disbursements of any special counsel retained by the Optionee) relating to the acquisition of the Securities shall be borne by the Optionee.

 

12. Survival

 

This Agreement, including without limitation the representations, warranties and covenants contained herein, shall survive and continue in full force and effect and be binding upon the parties hereto notwithstanding the completion of the purchase of the shares underlying the Options by the Optionee pursuant hereto.

 

13. Assignment

 

This Agreement is not transferable or assignable.

 

14. Currency

 

Unless explicitly stated otherwise, all funds in this Agreement are stated in United States dollars.

 

15. Severability

 

The invalidity or unenforceability of any particular provision of this Agreement shall not affect or limit the validity or enforceability of the remaining provisions of this Agreement.

 

     
  7  

 

16. Counterparts and Electronic Means

 

This Agreement may be executed in several counterparts, each of which will be deemed to be an original and all of which will together constitute one and the same instrument. Delivery of an executed copy of this Agreement by electronic facsimile transmission or other means of electronic communication capable of producing a printed copy will be deemed to be execution and delivery of this Agreement as of the date first above written.

 

17. Entire Agreement

 

This Agreement is the only agreement between the Optionee and the Company with respect to the Options, and this Agreement and the Plan, once approved, supersede all prior and contemporaneous oral and written statements and representations and contain the entire agreement between the parties with respect to the Options.

 

IN WITNESS WHEREOF the parties hereto have duly executed this Agreement as of the date first above written.

 

APPCOIN INNOVATIONS INC.

 

Per:   /s/ Michael Blum  
  Authorized Signatory  

 

BUSINESS INSTINCTS GROUP  
     
Per:  /s/ Cameron Chell  
  Authorized Signatory  

 

     
A- 1  

 

Schedule A

 

VESTING SCHEDULE

 

1/3 of the Options will vest on October 15, 2018, October 15, 2019 and October 15, 2020.

 

     
B- 1  

 

Schedule B

 

NOTICE OF EXERCISE

 

TO: AppCoin Innovations Inc.
  561 Indiana Court
  Venice Beach, CA 90291

 

This Notice of Exercise shall constitute a proper Notice of Exercise pursuant to section 2.6 of the Stock Option Agreement dated October 15, 2017 (the “ Agreement ”), between AppCoin Innovations Inc. (the “Company” ) and the undersigned. The undersigned hereby elects to exercise the Optionee’s options to purchase ____________________ shares of the common stock of the Company at a price of $0.10 per share on the terms and conditions set forth in the Agreement.

 

Payment of aggregate consideration of $____________in cash or by certified check or cashier’s check accompanies this notice.

 

The Optionee hereby represents and warrants to the Company that all representations and warranties set out in the Agreement (and the applicable schedules hereto) are true as of the date of the exercise of the Options under the Agreement. The Optionee hereby further represents and warrants to the Company that the shares are being purchased only for investment and without intention to sell or distribute such shares.

 

The Optionee hereby directs the Company to issue, register and deliver the certificates representing the shares as follows:

 

Registration Information:   Delivery Instructions:
     
Name to appear on certificates   Name
     
Address   Address
     
City, State, and Zip Code    
     
    Telephone Number

 

DATED at _____________________________, the day of______________, _______.

 

  X
  Signature
   
  (Name and, if applicable, Office)
   
  (Address)
   
  (City, State, and Zip Code)
   
  Fax Number or E-mail Address
   
  Social Security/Tax I.D. No.

 

     
C- 1  

 

Schedule C

 

CANADIAN QUESTIONNAIRE

 

TO: APPCOIN INNOVATIONS INC. (the “ Company ”)

 

RE: Stock options (the “ Options ”) of the Company

 

Capitalized terms used in this Canadian Questionnaire (this “ Questionnaire ”) and not specifically defined have the meaning ascribed to them in the Stock Option Agreement between the undersigned (the “ Optionee ”) and the Company to which this Schedule C is attached.

 

All dollar amounts referred to in this Questionnaire and Appendices A, B and C are in lawful money of Canada, unless otherwise indicated.

 

In connection with the grant to the Optionee of the Options, the Optionee hereby represents, warrants and certifies to the Company that the Optionee:

 

  (i) is acquiring the Options as principal (or deemed principal under the terms of National Instrument 45-106 – Prospectus Exemptions adopted by the Canadian Securities Administrators (“ NI 45-106 ”));
     
  (ii) (A)       is resident in or is subject to the laws of one of the following (check one):

 

  [   ] Alberta [   ] New Brunswick [   ] Prince Edward Island
       
  [   ] British Columbia [   ] Nova Scotia [   ] Quebec
       
  [   ] Manitoba [   ] Ontario [   ] Saskatchewan
       
  [   ] Newfoundland and Labrador [   ] Yukon
     
  [   ] Northwest Territories

or

 

    (B)    [   ] is resident in a country other than Canada or the United States; and
     
  (iii) has not been provided with any offering memorandum in connection with the acquisition of the Options.

 

In connection with the grant of the Options, the Optionee hereby represents, warrants, covenants and certifies that the Optionee meets one or more of the following criteria:

 

A. OPTIONEE QUALIFYING UNDER THE EMPLOYEE, DIRECTOR, OFFICER AND CONSULTANT EXEMPTION

 

In connection with the grant of the Options, the Optionee hereby represents, warrants, covenants and certifies that the Optionee meets one or more of the following criteria:

 

  [ ] (i) is an employee, officer or director of the Company; or
       
  [ ] (ii) is a consultant of the Company who provides services to the Company or a related entity of the Company and spends or will spend a significant amount of time and attention on the business and affairs of the Company or a related entity of the Company; and
       
  has voluntarily agreed to the grant of the Options.

 

     
C- 2  

 

B. OPTIONEES QUALIFYING UNDER THE ACCREDITED INVESTOR EXEMPTION

 

In connection with the grant of the Options, the Optionee hereby represents, warrants, covenants and certifies that the Optionee meets one or more of the following criteria:

 

(a) _____ the Optionee is an “accredited investor” within the meaning of NI 45-106, by virtue of satisfying the indicated criterion below (YOU MUST INITIAL OR PLACE A CHECK-MARK ON THE APPROPRIATE LINE(S)) ( see certain guidance with respect to accredited investors that starts on page C-5 below )

 

  [ ] (i) except in Ontario, a person registered under the securities legislation of a jurisdiction of Canada as an adviser or dealer,
       
  [ ] (ii) an individual registered under the securities legislation of a jurisdiction of Canada as a representative of a person referred to in paragraph (i),
       
  [ ] (iii) an individual formerly registered under the securities legislation of a jurisdiction of Canada, other than an individual formerly registered solely as a representative of a limited market dealer under one or both of the Securities Act (Ontario) or the Securities Act (Newfoundland and Labrador),
       
  [ ] (iv) an individual who, either alone or with a spouse, beneficially owns financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds $1,000,000 (YOU MUST ALSO COMPLETE AND SIGN APPENDIX “A” TO THIS QUESTIONNAIRE THAT STARTS ON PAGE C-9 ),
       
  [ ] (v) an individual who beneficially owns financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds $5,000,000,
       
  [ ] (vi) an individual whose net income before taxes exceeded $200,000 in each of the 2 most recent calendar years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of the 2 most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year (YOU MUST ALSO COMPLETE AND SIGN APPENDIX “A” TO THIS QUESTIONNAIRE THAT STARTS ON PAGE C-9 ), or
       
  [ ] (vii) an individual who, either alone or with a spouse, has net assets of at least $5,000,000 (YOU MUST ALSO COMPLETE AND SIGN APPENDIX “A” TO THIS QUESTIONNAIRE THAT STARTS ON PAGE C-9 ).

 

(b) if the Optionee is an “accredited investor” within the meaning of NI 45-106 by virtue of satisfying the indicated criterion as set out in paragraphs (iv), (vi) or (vii) above, the Optionee has provided the Company with the signed risk acknowledgment form set out in Appendix “A” to this Questionnaire;

 

     
C- 3  

 

C. OPTIONEES QUALIFYING UNDER THE FAMILY, FRIENDS AND BUSINESS ASSOCIATES EXEMPTION

 

In connection with the grant of the Options, the Optionee hereby represents, warrants, covenants and certifies that the Optionee meets one or more of the following criteria:

 

 

(a)

the Optionee is ( YOU MUST PLACE A CHECK-MARK ON THE APPROPRIATE LINE AND PROVIDE THE REQUESTED INFORMATION, AS APPLICABLE ):
   
  [ ] (i) a director, executive officer or control person of the Company, or of an affiliate of the Company,
       
  [ ] (ii) ______ a close personal friend ( see guidance on making this determination that starts on page C-6 below ) of ___________________________________ ( print name of person ), who is a director, executive officer, founder or control person of the Company, or of an affiliate of the Company, and has been for __________________________ years based on the following factors:_____________________________________________________________________________
___________________________________________________________________________________
( explain the nature of the close personal friendship ),
       
  [ ] (iii) a close business associate ( see guidance on making this determination that starts on page C-6 below ) of ___________________________________ ( print name of person ), who is a director, executive officer, founder or control person of the Company, or of an affiliate of the Company, and has been for __________________________ years based on the following factors: ___________________________________________________________________________________
_________________________________________________________________________ ( explain the nature of the close business association ),
       
(b) if the Optionee is resident in the Province of Ontario or is subject to the securities laws of the Province of Ontario, the Optionee has provided the Company with a signed risk acknowledgement form in the form attached as Appendix “B” to this Questionnaire (YOU MUST ALSO COMPLETE AND SIGN APPENDIX “B” TO THIS QUESTIONNAIRE THAT STARTS ON PAGE C-11) , or
   
(c) if the Optionee is resident in the Province of Saskatchewan or is subject to the securities laws of the Province of Saskatchewan, and the Optionee is relying on the indicated criterion as set out in subsections II(a)(ii) or II(a)(iii) if the distribution is based in whole or in part on a close personal friendship or a close business association, the Optionee has provided the Company with a signed risk acknowledgement form in the form attached as Appendix “C” to this Questionnaire (YOU MUST ALSO COMPLETE AND SIGN APPENDIX “C” TO THIS QUESTIONNAIRE THAT STARTS ON PAGE C-14 ); or

 

For the purposes of this Questionnaire and the appendices attached hereto:

 

  (a) an issuer is “ affiliated ” with another issuer if
       
    (i) one of them is the subsidiary of the other, or
       
    (ii) each of them is controlled by the same person;

 

     
C- 4  

  

  (b) control person ” means
       
    (i) a person who holds a sufficient number of the voting rights attached to all outstanding voting securities of an issuer to affect materially the control of the issuer, or
       
    (ii) each person in a combination of persons, acting in concert by virtue of an agreement, arrangement, commitment or understanding, which holds in total a sufficient number of the voting rights attached to all outstanding voting securities of an issuer to affect materially the control of the issuer,
       
    and, if a person or combination of persons holds more than 20% of the voting rights attached to all outstanding voting securities of an issuer, the person or combination of persons is deemed, in the absence of evidence to the contrary, to hold a sufficient number of the voting rights to affect materially the control of the issuer;

 

  (c) director ” means
       
    (i) a member of the board of directors of a company or an individual who performs similar functions for a company, and
       
    (ii) with respect to a person that is not a company, an individual who performs functions similar to those of a director of a company;

 

  (d) executive officer ” means, for an issuer, an individual who is
       
    (i) a chair, vice-chair or president,
       
    (ii) a vice-president in charge of a principal business unit, division or function including sales, finance or production, or
       
    (iii) performing a policy-making function in respect of the issuer;

 

 

  (e) financial assets ” means
       
    (i) cash,
       
    (ii) securities, or
       
    (iii) a contract of insurance, a deposit or an evidence of a deposit that is not a security for the purposes of securities legislation;

 

  (f) foreign jurisdiction ” means a country other than Canada or a political subdivision of a country other than Canada;
       
  (j) individual ” means a natural person, but does not include
       
    (i) a partnership, unincorporated association, unincorporated syndicate, unincorporated organization or trust, or
       
    (ii) a natural person in the person’s capacity as a trustee, executor, administrator or personal or other legal representative;

 

  (k) jurisdiction ” or “jurisdiction of Canada” means a province or territory of Canada except when used in the term foreign jurisdiction;
       
  (l) person ” includes
       
    (i) an individual;
       
    (ii) a corporation;
       
    (iii) a partnership, trust, fund and an association, syndicate, organization or other organized group of persons, whether incorporated or not; and
       
    (iv) an individual or other person in that person’s capacity as a trustee, executor, administrator or personal or other legal representative;

 

     
C- 5  

 

  (m) related liabilities ” means
       
    (i) liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets, or
       
    (ii) liabilities that are secured by financial assets; and

 

  (n) spouse ” means, an individual who,
       
    (i) is married to another individual and is not living separate and apart within the meaning of the Divorce Act (Canada), from the other individual,
       
    (ii) is living with another individual in a marriage-like relationship, including a marriage-like relationship between individuals of the same gender, or
       
    (iii) in Alberta, is an individual referred to in paragraph (i) or (ii), or is an adult interdependent partner within the meaning of the Adult Interdependent Relationships Act (Alberta).

 

Guidance On Accredited Investor Exemptions for Individuals

 

An individual accredited investor is an individual:

 

  (a) who, either alone or with a spouse, beneficially owns financial assets (please see the guidance below regarding what financial assets are) having an aggregate realizable value that. before taxes but net of any related liabilities (please see the guidance below regarding what related liabilities are), exceeds $1,000,000;
     
  (b) whose net income before taxes exceeded $200,000 in each of the 2 most recent calendar years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of the 2 most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year;
     
  (c) who, either alone or with a spouse, has net assets (please see the guidance below regarding calculating net assets) of at least $5,000,000; and
     
  (d) who beneficially owns financial assets (please see the guidance below regarding what financial assets are) having an aggregate realizable value that, before taxes but net of any related liabilities (please see the guidance below regarding what related liabilities are), exceeds $5,000,000.

 

The monetary thresholds above are intended to create bright-line standards. Optionees who do not satisfy these monetary thresholds do not qualify as accredited investors.

 

Spouses

 

Sections (a), (b) and (c) above are designed to treat spouses as a single investing unit, so that either spouse qualifies as an accredited investor if the combined financial assets of both spouses exceed $1,000,000, the combined net income of both spouses exceeds $300,000, or the combined net assets of both spouses exceed $5,000,000. Section (d) above does not treat spouses as a single investing unit.

 

If the combined net income of both spouses does not exceed $300,000, but the net income of one of the spouses exceeds $200,000, only the spouse whose net income exceeds $200,000 qualifies as an accredited investor.

 

     
C- 6  

 

Financial Assets and Related Liabilities

 

For the purposes of Sections (a) and (d) above, “ financial assets ” means: (1) cash, (2) securities, or (3) a contract of insurance, a deposit or an evidence of a deposit that is not a security for the purposes of securities legislation. These financial assets are generally liquid or relatively easy to liquidate. The value of a optionee’s personal residence is not included in a calculation of financial assets.

 

The calculation of financial assets must exclude “ related liabilities ”, meaning: (1) liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets, or (2) liabilities that are secured by financial assets.

 

As a general matter, it should not be difficult to determine whether financial assets are beneficially owned by an individual, an individual’s spouse, or both, in any particular instance. However, in the case where financial assets are held in a trust or in another type of investment vehicle for the benefit of an individual, there may be questions as to whether the individual beneficially owns the financial assets. The following factors are indicative of beneficial ownership of financial assets:

 

    physical or constructive possession of evidence of ownership of the financial asset;
     
    entitlement to receipt of any income generated by the financial asset;
     
    risk of loss of the value of the financial asset; and
     
    the ability to dispose of the financial asset or otherwise deal with it as the individual sees fit.

 

For example, securities held in a self-directed RRSP for the sole benefit of an individual are beneficially owned by that individual.

 

In general, financial assets in a spousal RRSP can be included for the purposes of the $1,000,000 financial asset test in Section (a) above because Section (a) takes into account financial assets owned beneficially by a spouse. However, financial assets in a spousal RRSP cannot be included for purposes of the $5,000,000 financial asset test in Section (d) above.

 

Financial assets held in a group RRSP under which the individual does not have the ability to acquire the financial assets and deal with them directly do not meet the beneficial ownership requirements in either Sections (a) or (d) above.

 

Guidance on Close Personal Friend and Close Business Associate Determination

 

A “ close personal friend ” of a director, executive officer, founder or control person of an issuer is an individual who knows the director, executive officer, founder or control person well enough and has known them for a sufficient period of time to be in a position to assess their capabilities and trustworthiness and to obtain information from them with respect to the investment.

 

The following factors are relevant to this determination:

 

  (a) the length of time the individual has known the director, executive officer, founder or control person,
     
  (b) the nature of the relationship between the individual and the director, executive officer, founder or control person including such matters as the frequency of contacts between them and the level of trust and reliance in the other circumstances, and
     
  (c) the number of “close personal friends” of the director, executive officer, founder or control person to whom securities have been distributed in reliance on the private issuer exemption or the family, friends and business associates exemption.

 

     
C- 7  

 

An individual is not a close personal friend solely because the individual is:

 

  (a) a relative,
     
  (b) a member of the same club, organization, association or religious group,
     
  (c) a co-worker, colleague or associate at the same workplace,
     
  (d) a client, customer, former client or former customer,
     
  (e) a mere acquaintance, or
     
  (f) connected through some form of social media, such as Facebook, Twitter or LinkedIn.

 

The relationship between the individual and the director, executive officer, founder or control person must be direct. For example, the exemption is not available to a close personal friend of a close personal friend of a director of the issuer. Further, a relationship that is primarily founded on participation in an internet forum is not considered to be that of a close personal friend.

 

The Optionee acknowledges and agrees that, in addition to resale restrictions imposed under U.S. securities laws, there are additional restrictions on the Optionee’s ability to resell the Securities under Canadian securities laws and National Instrument 45-102 as adopted by the Canadian Securities Administrators.

 

A “ close business associate ” is an individual who has had sufficient prior business dealings with a director, executive officer, founder or control person of the issuer to be in a position to assess their capabilities and trustworthiness and to obtain information from them with respect to the investment.

 

The following factors are relevant to this determination:

 

  (a) the length of time the individual has known the director, executive officer, founder or control person,
     
  (b) the nature of any specific business relationships between the individual and the director, executive officer, founder or control person, including, for each relationship, when it began, the frequency of contact between them and when it terminated if it is not ongoing, and the level of trust and reliance in the other circumstances,
     
  (c) the nature and number of any business dealings between the individual and the director, executive officer, founder or control person, the length of the period during which they occurred, and the nature and date of the most recent business dealing, and
     
  (d) the number of “close business associates” of the director, executive officer, founder or control person to whom securities have been distributed in reliance on the private issuer exemption or the family, friends and business associates exemption.

 

An individual is not a close business associate solely because the individual is:

 

  (a) a member of the same club, organization, association or religious group,
     
  (b) a co-worker, colleague or associate at the same workplace,
     
  (c) a client, customer, former client or former customer,
     
  (d) a mere acquaintance, or
     
  (e) connected through some form of social media, such as Facebook, Twitter or LinkedIn.

 

The relationship between the individual and the director, executive officer, founder or control person must be direct. For example, the exemptions are not available for a close business associate of a close business associate of a director of the issuer. Further, a relationship that is primarily founded on participation in an internet forum is not considered to be that of a close business associate.

 

     
C- 8  

 

The Optionee agrees that the above representations and warranties will be true and correct both as of the execution of this Questionnaire acknowledges that they will survive the completion of the issue of the Option.

 

The Optionee acknowledges that the foregoing representations and warranties are made by the Optionee with the intent that they be relied upon in determining the suitability of the Optionee to acquire the Options and that this Questionnaire is incorporated into and forms part of the Agreement and the undersigned undertakes to immediately notify the Company of any change in any statement or other information relating to the Optionee set forth herein which takes place prior to the closing time of the grant of the Options.

 

The Optionee undertakes to immediately notify the Company of any change in any statement or other information relating to the Optionee set forth in the Agreement or in this Questionnaire which takes place prior to the issuance of the Options.

 

By completing this Questionnaire, the Optionee authorizes the indirect collection of this information by each applicable regulatory authority or regulator and acknowledges that such information is made available to the public under applicable laws.

 

DATED as of day of , 20____.

 

   
  Print Name of Optionee
   
   
  Signature

 

     
C- 9  

 

 

     
C- 10  

 

 

 

     
C- 11  

 

 

     
C- 12  

 

 

 

     
C- 13  

 

 

 

     
C- 14  

 

 

 

     
C- 15  

 

 

 

     
D- 1  

 

Schedule D

 

UNITED STATES ACCREDITED QUESTIONNAIRE

 

Capitalized terms used in this United States Accredited Investor Questionnaire (this “ Questionnaire ”) and not specifically defined have the meaning ascribed to them in the Stock Option Agreement between the undersigned (the “ Optionee ”) and AppCoin Innovations Inc. (the “ Company ”) to which this Schedule D is attached.

 

All dollar amounts referred to in this Questionnaire are in lawful money of the United States, unless otherwise indicated.

 

The Optionee covenants, represents and warrants to the Company that he or she satisfies one or more of the categories of “Accredited Investors”, as defined by Regulation D promulgated under the Securities Act of 1933 (the “Securities Act” ), as indicated below: (Please initial in the space provide those categories, if any, of an “Accredited Investor” which the Optionee satisfies)

 

  ______ Category 1 An organization described in Section 501(c)(3) of the United States Internal Revenue Code, a corporation, a Massachusetts or similar business trust or partnership, not formed for the specific purpose of acquiring the Securities, with total assets in excess of $5,000,000;
     
  ______ Category 2 A natural person whose individual net worth, or joint net worth with that person’s spouse, exceeds $1,000,000. For purposes of this Category 2, “net worth” means the excess of total assets at fair market value (including personal and real property, but excluding the estimated fair market value of a person’s primary home) over total liabilities. Total liabilities excludes any mortgage on the primary home in an amount of up to the home’s estimated fair market value as long as the mortgage was incurred more than 60 days before the Securities are acquired, but includes (i) any mortgage amount in excess of the home’s fair market value and (ii) any mortgage amount that was borrowed during the 60-day period before the date of the acquisition of Securities for the purpose of investing in the Securities;
     
  ______ Category 3 A natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year;
     
  ______ Category 4 A “bank” as defined under Section (3)(a)(2) of the Securities Act or savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act acting in its individual or fiduciary capacity; a broker dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934 (United States); an insurance company as defined in Section 2(13) of the Securities Act; an investment company registered under the Investment Company Act of 1940 (United States) or a business development company as defined in Section 2(a)(48) of such Act; a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958 (United States); a plan with total assets in excess of $5,000,000 established and maintained by a state, a political subdivision thereof, or an agency or instrumentality of a state or a political subdivision thereof, for the benefit of its employees; an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 (United States) whose investment decisions are made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000, or, if a self-directed plan, whose investment decisions are made solely by persons that are accredited investors;

 

     
D- 2  

 

 

  ______ Category 5 A private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940 (United States);
     
  ______ Category 6 A director or executive officer of the Company;
     
  ______ Category 7 A trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Securities, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) under the Securities Act;
     
  ______ Category 8 An entity in which all of the equity owners satisfy the requirements of one or more of the foregoing categories;

 

Note that the Optionee claiming to satisfy one of the above categories of Accredited Investor may be required to supply the Company with a balance sheet, prior years’ federal income tax returns or other appropriate documentation to verify and substantiate the Optionee’s status as an Accredited Investor.

 

If the Optionee is an entity which initialled the last category in reliance upon the Accredited Investor categories above, state the name, address, total personal income from all sources for the previous calendar year, and the net worth (exclusive of home, home furnishings and personal automobiles) for each equity owner of the said entity:

 

All information contained in this Questionnaire will be treated as confidential. However, by signing and returning this Questionnaire, the Optionee agrees that, if necessary, this Questionnaire may be presented to such parties as the Company deems appropriate to establish the availability, under the Securities Act or applicable state securities law, of exemption from registration in connection with the issuance of the Securities hereunder.

 

By completing this Questionnaire, the Optionee authorizes the indirect collection of this information by each applicable regulatory authority or regulator and acknowledges that such information is made available to the public under applicable laws.

 

DATED as of ______ day of _______________, 20____.

 

   
  Print Name of Optionee
   
   
  Signature
   
   
  Social Security/Tax I.D. No.

 

     
  E- 1  

 

Schedule E

 

UNITED STATES NON-ACREDITED QUESTIONNAIRE

 

Capitalized terms used in this United States Non-Accredited Investor Questionnaire (this “ Questionnaire ”) and not specifically defined have the meaning ascribed to them in the Stock Option Agreement between the undersigned (the “ Optionee ”) and AppCoin Innovations Inc. (the “ Company ”) to which this Schedule D is attached.

 

All dollar amounts referred to in this Questionnaire are in lawful money of the United States, unless otherwise indicated.

 

The purpose of this Questionnaire is to assure the Company that the Optionee will meet the standards imposed by the Securities Act of 1933 (the “Securities Act” ) and the appropriate exemptions of applicable state securities laws. The Company will rely on the information contained in this Questionnaire for the purposes of such determination. The Option and the Optioned Shares (together, the “Securities” ) will not be registered under the Securities Act and has been issued in reliance upon the exemption from registration afforded by Section 3(b) and/or Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder. This Questionnaire is not an offer of any securities of the Company in any state other than those specifically authorized by the Company.

 

Please attach additional pages if necessary to answer any question fully.

 

REPRESENTATIONS OF OPTIONEE

 

This item is presented in alternative form. Please initial in the space provided the applicable alternative.

 

_____ ALTERNATIVE ONE: The Optionee covenants, represents and warrants to the Company that he or she has such knowledge and experience in financial and business matters that he or she is capable of evaluating the relative merits and risks of an investment in the Securities and Company and is not utilizing a purchaser representative in connection with evaluating such merits and risks. The Optionee is providing evidence of its knowledge and experience in these matters through the information requested below in this Questionnaire.
   
_____ ALTERNATIVE TWO: The Optionee covenants, represents and warrants to the Company that he or she has chosen to use the services of a purchaser representative acceptable to the Optionee in connection with the Optionee’s acquisition of the Securities. The Optionee hereby acknowledges that the person named below is his or her purchaser representative who will assist and advise the Optionee in evaluating the merits and risks of an investment in the Securities and the Company and affirms that such purchaser representative has previously disclosed in writing any material relationship that exists between the purchaser representative (or its affiliates) and the Company (or its affiliates) that is mutually understood to be contemplated, or that has existed at any time during the previous two years, and any compensation received or to be received as a result of such relationship.
   
   
  (name of Purchaser Representative)
   
   
  (address of Purchaser Representative)
  If the Optionee utilizes a purchaser representative, this Questionnaire must be accompanied by a completed and signed purchaser representative Questionnaire, a copy of which can be obtained from the Company upon request.

 

     
  E- 2  

 

FOR INDIVIDUAL INVESTORS

 

1. Name:  
     
2. Residential Address & Telephone Number:  
     
     
     
     
     
3. Length of Residence in State of Residence:  

 

4. U.S. Citizen: _____ Yes _____ No

 

5. Social Security Number:      
           
6. Business Address & Telephone Number:        
           
           
           
           

 

7. Preferred Mailing Address: _____ Residence _____ Business
           
8. Date of Birth:        
           
9. Employer and Position:        
           
10. Name of Business:        

 

11. Business or Professional Education and Degrees:
           
  School Degree   Year Received
         
         
         
           
           
12. Prior Employment (last 5 years):        
           
  Employer Nature of Duties Dates of Employment
       
       
       
             

 

     
  E- 3  

 

13. Relationship to the Company, if any:  

 

14. Is the Optionee an officer of director of a publicly-held company?

 

  ____ Yes _____ No

 

  If yes, specify company:  

 

15. Does the Optionee beneficially own 10% or more of the voting securities of a publicly-held company?

 

  ____ Yes _____ No

 

  If yes, specify company:  

 

16. Within the last 5 years, has the Optionee personally invested in investments sold by means of private placements in reliance on exemptions from registration under the Securities Act and state securities laws?

 

  ____ Yes _____ No

 

17. Prior investments by the Optionee which were purchased in reliance on exemptions from registration under the Securities Act and State securities laws (initial the highest number applicable):

 

Amount (Cumulative)

 

  Real Estate: Up to $50,000 to Over
  None: _____ $50,000 _____ $250,000 _____ $250,000 _____
         
  Securities: Up to $50,000 to Over
  None: _____ $50,000 _____ $250,000 _____ $250,000 _____
         
  Other: Up to $50,000 to Over
  None: _____ $50,000 _____ $250,000 _____ $250,000 _____

 

18. Does the Optionee consider itself to be an experienced and sophisticated investor? 

 

  ____ Yes _____ No

 

  If so, please provide evidence of investment sophistication and/or experience:
   
   
   
   

 

19. Does the Optionee, or any person authorized to execute this Questionnaire, consider itself to have such knowledge of the Company and its business and such experience in financial and business matters to enable it to evaluate the merits and risks of an investment in the Securities and the Company, should the Optionee be given an opportunity to so invest?

 

  ____ Yes _____ No

 

     
  E- 4  

 

20. If the Optionee is an individual, please indicate the Optionee’s and his/her spouse’s combined gross income during the preceding two years (initial the highest number applicable):

 

               2016                2015
       
  _____  Less than $75,000   _____  Less than $75,000
       
  _____  $75,001 to $100,000   _____  $75,001 to $100,000
       
  _____  $100,001 to $200,000   _____  $100,001 to $200,000
       
  _____  $200,001 to $300,000   _____  $200,001 to $300,000
       
  _____  $Over $300,000   _____  $Over $300,000

 

21. If the Optionee is an individual, please indicate the Optionee’s and his/her spouse’s combined estimated net worth (exclusive of home, home furnishings and personal automobiles) (initial the highest number applicable):

 

  _____  Less than $100,000   _____  $300,0001 to $500,000
       
  _____  $100,001 to $200,000   _____  $500,001 to $1,000,000
       
  _____  $200,001 to $300,000   _____  Over $1,000,000

 

22. Regardless of the amount of the proposed investment:

 

  (a) Will the Optionee’s proposed investment exceed 10% of its individual net worth, or the Optionee’s joint net worth with its spouse as determined in paragraph 21 above?

 

  ____ Yes _____ No

 

  (b) Will the Optionee be able to bear the economic risk of its investment in this transaction?

 

  ____ Yes _____ No

 

23. Please provide answers to the following questions.

 

  (a) State total assets of the Optionee, including cash, stocks and bonds, automobiles, real estate, and any other assets:
     
    $
     
  (b) State total liabilities of the Optionee including real estate indebtedness, accounts payable, taxes payable and any other liabilities:
     
    $
     
  (c) State annual income of the Optionee including salary, securities income, rental income and any other income:
     
    $

 

     
  E- 5  

 

  (d) State annual expenses of the Optionee, excluding ordinary living expenses, including real estate payments, rent, property taxes and other expenses:
     
    $
     
  (e) Does the Optionee expect the amount of its assets, liabilities, income and expenses, as stated above, to be subject to significant change in the future:

 

  ____ Yes _____ No

 

    If yes, explain:
     
     
     

 

All information contained in this Questionnaire will be treated as confidential. However, by signing and returning this Questionnaire, the Optionee agrees that, if necessary, this Questionnaire may be presented to such parties as the Company deems appropriate to establish the availability, under the Securities Act or applicable state securities law, of exemption from registration in connection with the issuance of the Securities hereunder.

 

By completing this Questionnaire, the Optionee authorizes the indirect collection of this information by each applicable regulatory authority or regulator and acknowledges that such information is made available to the public under applicable laws.

 

DATED as of day of _________________, 20____.

 

   
  Print Name of Optionee
   
   
  Signature
   
   
  Social Security/Tax I.D. No.

 

     
F- 1  

 

Schedule F

 

ACKNOWLEDGEMENTS and Representations and warranties OF THE OPTIONEE

 

Capitalized terms used in this Acknowledgements and Representations and Warranties of the Optionee and not specifically defined have the meaning ascribed to them in the Stock Option Agreement between the undersigned (the “ Optionee ”) and AppCoin Innovations Inc. (the “ Company ”) to which this Schedule F is attached.

 

The Optionee acknowledges and agrees that:

 

  (a) the Securities have not been registered under the 1933 Act or under any state securities or “blue sky” laws of any state of the United States, and are being offered only in a transaction not involving any public offering within the meaning of the 1933 Act, and, unless so registered, may not be offered or sold in the United States or to U.S. Persons, except pursuant to an effective registration statement under the 1933 Act, or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the 1933 Act, and in each case only in accordance with applicable state securities laws;
     
  (b) the Company will refuse to register any transfer of the Securities not made in accordance with the provisions of Regulation S, pursuant to an effective registration statement under the 1933 Act or pursuant to an available exemption from, or in a transaction not subject to, the registration requirements of the 1933 Act;
     
  (c) the decision to execute this Agreement and acquire the Securities hereunder has not been based upon any oral or written representation as to fact or otherwise made by or on behalf of the Company and such decision is based solely upon a review of publicly available information regarding the Company that is available on the website of the Securities and Exchange Commission (the “ SEC ”) at www.sec.gov (the “Company Information” );
     
  (d) there are risks associated with an investment in the Securities;
     
  (e) the Optionee and the Optionee’s advisor(s) (if applicable) have had a reasonable opportunity to ask questions of and receive answers from the Company in connection with the distribution of the Securities hereunder, and to obtain additional information, to the extent possessed or obtainable without unreasonable effort or expense, necessary to verify the accuracy of the information about the Company;
     
  (f) the books and records of the Company were available upon reasonable notice for inspection, subject to certain confidentiality restrictions, by the Optionee during reasonable business hours at its principal place of business, and all documents, records and books in connection with the distribution of the Securities hereunder have been made available for inspection by the Optionee, the Optionee’s attorney and/or advisor(s) (if applicable);

     
  (g) the Company, its officers, directors, counsel and agents are entitled to rely upon the truth and accuracy of the acknowledgements, representations, warranties, statements, answers, covenants and agreements contained in this Agreement and agrees that if any of such acknowledgements, representations, warranties, statements, answers, covenants, and agreements should become, by the passage of time after the date of this Agreement, no longer accurate or should be breached, the Optionee shall promptly notify the Company, and the Optionee will hold harmless the Company from any loss or damage it may suffer as a result of the Optionee’s failure to correctly complete or comply with the terms of this Agreement;

 

     
F- 2  

 

  (h) the Optionee has been advised to consult its own legal, tax and other advisors with respect to the merits and risks regarding the exercise of the Options and the issuance of the Optioned Shares and with respect to applicable resale restrictions and it is solely responsible (and the Company is in not any way responsible) for compliance with applicable resale restrictions;
     
  (i) the Company has advised the Optionee that the Company is relying on an exemption from the registration and prospectus requirements of applicable securities laws and, as a consequence of acquiring the Securities pursuant to this exemption, certain protections, rights and remedies provided by the applicable securities laws, including statutory rights of rescission or damages, will not be available to the Optionee;
     
  (j) the Optionee will indemnify and hold harmless the Company and, where applicable, its directors, officers, employees, agents, advisors and shareholders, from and against any and all loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all fees, costs and expenses whatsoever reasonably incurred in investigating, preparing or defending against any claim, lawsuit, administrative proceeding or investigation whether commenced or threatened) arising out of or based upon any representation or warranty of the Optionee contained herein or in any document furnished by the Optionee to the Company in connection herewith being untrue in any material respect or any breach or failure by the Optionee to comply with any covenant or agreement made by the Optionee to the Company in connection therewith;
     
  (k) the Securities are not listed on any stock exchange or automated dealer quotation system and no representation has been made to the Optionee that any of the Securities will become listed on any stock exchange or automated dealer quotation system, except that currently certain market makers make market in the shares of the Company’s common stock on the OTC Pink;
     
  (l) neither the SEC nor any other securities commission or similar regulatory authority has reviewed or passed on the merits of the Securities;
     
  (m) no documents in connection with this Agreement have been reviewed by the SEC or any state securities administrators;
     
  (n) there is no government or other insurance covering any of the Securities; and
     
  (o) this Agreement is not enforceable by the Optionee unless it has been accepted by the Company.

 

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPTIONEE

 

The Optionee hereby represents and warrants to and covenants with the Company (which representations, warranties and covenants shall survive the closing) that:

 

  (a) the Optionee is a bona fide director, officer, employee, independent contractor or consultant of the Company, Parent or Subsidiary;
     
  (b) unless the Optionee has completed Schedule D or E, the Optionee is not acquiring the Securities for the account or benefit of, directly or indirectly, any U.S. Person;
     
  (c) unless the Optionee has completed Schedule D or E, the Optionee is not a U.S. Person;
     
  (d) the acquisition of the Securities by the Optionee as contemplated in this Agreement complies with or is exempt from the applicable securities legislation of the jurisdiction of residence of the Optionee;
     
  (e) the Optionee has not acquired or is not acquiring the Securities as a result of, and will not itself engage in, any “directed selling efforts” (as defined in Regulation S under the 1933 Act) in the United States in respect of the Securities which would include any activities undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for the resale of the Securities; provided, however, that the Optionee may sell or otherwise dispose of the Securities pursuant to registration thereof under the 1933 Act and any applicable state and provincial securities laws or under an exemption from such registration requirements;
     
  (f) unless the Optionee has completed Schedule D or E, the Optionee is outside the United States when receiving and executing this Agreement and is acquiring the Securities as principal for the Optionee’s own account, for investment purposes only, and not with a view to, or for, resale, distribution or fractionalisation thereof, in whole or in part, and, in particular, it has no intention to distribute either directly or indirectly any of the Securities in the United States or to U.S. Persons, and no other person has a direct or indirect beneficial interest in such Securities;
     
  (g) if the Optionee is not resident in the United States or Canada, the Optionee:

 

     
F- 3  

 

    (i) is knowledgeable of, or has been independently advised as to, the applicable securities laws of the securities regulators having application in the jurisdiction in which the Optionee is resident (the “ International Jurisdiction ”) which would apply to the granting of the Option and the issue, sale or resale of the Optioned Shares;
       
    (ii) the Optionee is acquiring the Option or the Optioned Shares pursuant to exemptions from prospectus or equivalent requirements under applicable securities laws or, if such is not applicable, the Optionee is permitted to acquire the Option or the Optioned Shares under the applicable securities laws of the securities regulators in the International Jurisdiction without the need to rely on any exemptions;
       
    (iii) the applicable securities laws of the authorities in the International Jurisdiction do not require the Company to make any filings or seek any approvals of any kind whatsoever from any securities regulator of any kind whatsoever in the International Jurisdiction in connection with the granting of the Option or the issue, sale or resale of the Optioned Shares; and
       
    (iv) the granting of the Option or the issue, sale or resale of the Optioned Shares does not trigger:

 

    A. any obligation to prepare and file a prospectus or similar document, or any other report with respect to such purchase in the International Jurisdiction; or
       
    B. any continuous disclosure reporting obligation of the Optionee or the Company in the International Jurisdiction; and

 

  (v) the Optionee will, if requested by the Company, deliver to the Company a certificate or opinion of local counsel from the International Jurisdiction which will confirm the matters referred to in subparagraphs (ii), (iii) and (iv) above to the satisfaction of the Company, acting reasonably;

 

  (h) the Optionee has received and carefully read this Agreement and the Company Information;
     
  (i) the Optionee has received a brief description of the Securities and the Optionee understands that the proceeds from the exercise of the Options will be used by the Company as working capital for general corporate purposes;
     
  (j) the Optionee has duly executed and delivered this Agreement and it constitutes a valid and binding agreement of the Optionee enforceable against the Optionee in accordance with its terms;
     
  (k) the Optionee has the legal capacity and competence to enter into and execute this Agreement and to take all actions required pursuant hereto and, if the Optionee is a corporation, it is duly incorporated and validly subsisting under the laws of its jurisdiction of incorporation and all necessary approvals by its directors, shareholders and others have been obtained to authorize execution and performance of this Agreement on behalf of the Optionee;
     
  (l) the Optionee:

 

    (i) has adequate net worth and means of providing for its current financial needs and possible personal contingencies,
       
    (ii) has no need for liquidity in this investment, and
       
    (iii) is able to bear the economic risks of an investment in the Securities for an indefinite period of time, and can afford the complete loss of such investment;

 

  (m) the Optionee has the requisite knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of the investment in the Securities and the Company, and the Optionee is providing evidence of such knowledge and experience in these matters through the information requested in this Agreement;
     
  (n) the Optionee is aware that an investment in the Company is speculative and involves certain risks, including the possible loss of the investment, and the Optionee has carefully read and considered the matters set forth under the caption “Risk Factors” appearing in the Company’s various disclosure documents, filed with the SEC;
     
  (o) the entering into of this Agreement and the transactions contemplated hereby do not result in the violation of any of the terms and provisions of any law applicable to, or, if applicable, the constating documents of, the Optionee, or of any agreement, written or oral, to which the Optionee may be a party or by which the Optionee is or may be bound;
     
  (p) the Optionee is purchasing the Securities for its own account for investment purposes only and not for the account of any other person and not for distribution, assignment or resale to others, and no other person has a direct or indirect beneficial interest is such Securities, and the Optionee has not subdivided his interest in the Securities with any other person;
     
  (q) the Optionee is not an underwriter of, or dealer in, the shares of the Company’s common stock, nor is the Optionee participating, pursuant to a contractual agreement or otherwise, in the distribution of the Securities;
     
  (r) the Optionee understands and agrees that the Company and others will rely upon the truth and accuracy of the acknowledgements, representations, statements, answers and agreements contained in this Agreement, and agrees that if any of such acknowledgements, representations, statements, answers and agreements are no longer accurate or have been breached, the Optionee shall promptly notify the Company;

 

     
F- 4  

 

  (s) the Optionee has made an independent examination and investigation of an investment in the Securities and the Company and has depended on the advice of its legal and financial advisors and agrees that the Company will not be responsible in anyway whatsoever for the Optionee’s decision to acquire the Securities;
     
  (t) the Optionee is not aware of any advertisement of any of the Securities and is not acquiring the Securities as a result of any form of general solicitation or general advertising including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio or television, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising;
     
  (u) the Optionee has either (a) a pre-existing personal or business relationship with the Company or any of its partners, officers, directors, or controlling persons consisting of personal or business contacts of a nature and duration which enable the Optionee to be aware of the character, business acumen and general business and financial circumstances of the Company or any such partner, officer, director, or controlling person with whom such relationship exists or (b) such business or financial expertise as to be able to protect the Optionee’s own interests in connection with the acquisition of the Securities; and,
     
  (v) no person has made to the Optionee any written or oral representations:

 

    (i) that any person will resell or repurchase any of the Securities,
       
    (ii) that any person will refund the purchase price of any of the Securities,
       
    (iii) as to the future price or value of any of the Securities, or
       
    (iv) that any of the Securities will be listed and posted for trading on any stock exchange or automated dealer quotation system or that application has been made to list and post any of the Securities of the Company on any stock exchange or automated dealer quotation system, except that currently certain market makers make market in the shares of the Company’s common stock on the OTC Pink.

 

DATED as of _____day of __________________, 20____.

 

   
  Print Name of Optionee
   
   
  Signature
   
   
  Social Security/Tax I.D. No.

 

     
 

 

 

 

NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (AS DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT.

 

Unless permitted under securities legislation, the holder of this security must not trade the security before the date that is 4 months and a day after the later of (i) FEBRUARY 9, 2018, and (ii) the date the issuer became a reporting issuer in any province or territory.

 

STOCK OPTION AGREEMENT

 

This AGREEMENT is entered into as of the February 9, 2018 (the “Date of Grant” ).

 

BETWEEN:

 

  APPCOIN INNOVATIONS INC. , a company incorporated pursuant to the laws of the State of Nevada, with an office at 561 Indiana Court, Venice Beach, CA 90291
   
  (the “Company” )

 

AND:

 

  EDMUND C. MOY , a businessman with an address at 4251 Campbell Avenue, Suite 313, Arlington, Virginia 22206
   
  (the “Optionee” )

 

WHEREAS:

 

A. The Company’s board of directors (the “Board” ) has approved and adopted a 2017 Equity Incentive Plan (the “Plan” ), whereby the Board is authorized to grant stock options to purchase shares of common stock of the Company to the directors, officers, employees, and consultants of the Company or any Parent or Subsidiary of the Company (as defined herein);

 

B. The Optionee is a director, officer, employee or consultant of the Company, the Parent or a Subsidiary; and

 

C. The Company wishes to grant stock options to purchase a total of 100,000 Optioned Shares (as defined herein) to the Optionee, as follows:

 

    Incentive Stock Options (as defined herein)
  X Non-Qualified Stock Options (as defined herein)

 

     
  2  

 

NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

1. Definitions

 

1.1 In this Agreement, the following terms shall have the following meanings:

 

  (a) 1933 Act ” means the Securities Act of 1933, as amended;
     
  (b) Board ” means the board of directors of the Company;
     
  (c) Canadian Accredited Investor Questionnaire ” means a questionnaire substantially in the form of the Canadian Accredited Investor Questionnaire attached to this Agreement as Schedule B;
     
  (d) Code ” means the Internal Revenue Code of 1986;
     
  (e) Common Stock ” means the shares of common stock of the Company;
     
  (f)

Exercise Price ” means $0.60 per share;

     
  (g)

Expiry Date ” means February 9, 2028;

     
  (h) Incentive Stock Options ” means any Options that meet all the requirements under section 422 of the Code;
     
  (i) Non-Qualified Stock Options ” means any Options that do not qualify as Incentive Stock Options and, thus, do not meet the requirements under section 422 of the Code;
     
  (j) Notice of Exercise ” means a notice in writing addressed to the Company at its address first recited hereto (or such other address of which the Company may from time to time notify the Optionee in writing), substantially in the form attached as Schedule B hereto, which notice shall specify therein the number of Optioned Shares in respect of which the Options are being exercised;
     
  (k) Options ” means the right and option to purchase, from time to time, all, or any part of the Optioned Shares granted to the Optionee by the Company pursuant to Section 2.1 of this Agreement;
     
  (l) Optioned Shares ” means the shares of Common Stock that are issued pursuant to the exercise of the Options;
     
  (m) Parent ” means a company or other entity that owns at least fifty percent (50%) of the outstanding voting stock or voting power of the Company;
     
  (n) Plan ” has the meaning ascribed thereto in Recital A of this Agreement;
     
  (o) Securities ” means, collectively, the Options and the Optioned Shares;
     
  (p) Subsidiary ” means a company or other entity, at least fifty percent (50%) of the outstanding voting stock or voting power of which is beneficially owned, directly or indirectly, by the Company; and
     
  (q) Vested Options ” means the Options that have vested in accordance with Section 2.2 of this Agreement.

 

     
  3  

 

1.2 Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Plan.

 

2. The Options

 

2.1 The Company hereby grants to the Optionee, on the terms and conditions set out in this Agreement and in the Plan, Options to purchase a total of 100,000 Optioned Shares at the Exercise Price.

 

2.2 The Options will vest in accordance with Schedule A to this Agreement. The Options may be exercised immediately after vesting.

 

2.3 The Options shall, at 5:00 p.m. (Pacific time) on the Expiry Date, expire and be of no further force or effect whatsoever.

 

2.4 The Company shall not be obligated to cause the issuance, transfer or delivery of a certificate or certificates representing Optioned Shares to the Optionee, until provision has been made by the Optionee, to the satisfaction of the Company, for the payment of the aggregate Exercise Price for all Optioned Shares for which the Options shall have been exercised, and for satisfaction of any tax withholding obligations associated with such exercise.

 

2.5 Subject to the provisions of this Agreement and the Plan and subject to compliance with any applicable securities laws, the Options shall be exercisable, in full or in part, at any time after vesting, until termination. If less than all of the Optioned Shares included in the vested portion of any Options are purchased, the remainder may be purchased at any subsequent time prior to the Expiry Date. Only whole shares may be issued pursuant to the exercise of any Options, and to the extent that any Option covers less than one (1) share, it is not exercisable.

 

2.6 Each exercise of the Options shall be by means of delivery of a Notice of Exercise (which may be in the form attached hereto as Schedule C) to the Chief Financial Officer of the Company at its principal executive office, specifying the number of Optioned Shares to be purchased and accompanied by payment in cash or by certified check or cashier’s check in the amount of the full Exercise Price for the Common Stock to be purchased. In addition to payment in cash or by certified check or cashier’s check and if agreed to in advance by the Company, the Optionee or transferee of the Options may pay for all or any portion of the aggregate Exercise Price by complying with any other payment mechanism approved by the Board at the time of exercise.

 

2.7 Reference is made to the Plan for particulars of the rights and obligations of the Optionee and the Company in respect of:

 

  (a) the terms and conditions on which the Options are granted except to the extent set forth herein; and,
     
  (b) a consolidation or subdivision of the Company’s share capital or a corporate reorganization;

 

all to the same effect as if the provisions of the Plan were set out in this Agreement and to all of which the Optionee assents. A copy of the Plan is available to the Optionee at no charge, at the Company’s principal executive office. Any provision of this Agreement that is inconsistent with the Plan shall be considered void and replaced with the applicable provision of the Plan. The Company may modify, extend or renew this Agreement or the Options represented hereby or accept the surrender thereof (to the extent not previously exercised) and authorize the granting of a new option in substitution therefore (to the extent not previously exercised), subject at all times to the Plan, the applicable rules of any applicable regulatory authority or stock exchange, and any applicable laws. Notwithstanding the foregoing provisions of this Section 2.7, the Company shall not have the right to make any modification which would materially alter the terms of the Options to the Optionee’s detriment or materially impair any rights of the Optionee hereunder without the consent of the Optionee.

 

     
  4  

 

2.8 By accepting the Options, the Optionee represents and agrees that none of the Optioned Shares purchased upon exercise of the Options will be distributed in violation of applicable federal and state laws and regulations. The Optionee further represents and agrees to provide the Company with any other document reasonably requested by the Company or the Company’s Counsel.

 

3. Documents Required from Optionee

 

3.1 The Optionee must complete, sign and return to the Company:

 

  (a) a copy of this Agreement;
     
  (b) a copy of the Acknowledgements, and Representations and Warranties of the Optionee attached hereto as Schedule F;
     
  (c) if the Optionee is resident in Canada, a Canadian Questionnaire in the form attached hereto as Schedule C; and
     
  (d) if the Optionee is resident in the United States and if an exemption from the registration requirements imposed by the 1933 Act is necessary for entry into this Agreement, one of the two questionnaires in the forms attached hereto as Schedule D and Schedule E, whichever applies.

 

3.2 The Optionee shall complete, sign and return to the Company as soon as possible, on request by the Company, any documents, questionnaires, notices and undertakings as may be required by regulatory authorities, and applicable law.

 

4. Subject to Plan

 

The terms of the Options will be subject to the Plan, as may from time to time be amended, and any inconsistencies between this Agreement and the Plan, as the same may be from time to time amended, shall be governed by the provisions of the Plan. A copy of the Plan will be delivered to the Optionee, and will be available for inspection at the principal offices of the Company.

 

5. Acknowledgement and Waiver

 

The Optionee hereby waives, to the fullest extent permitted by law, any rights of withdrawal, rescission or compensation for damages to which the Optionee might be entitled in connection with the distribution of any of the Securities.

 

6. Professional Advice

 

The acceptance of the Options and the sale of Common Stock issued pursuant to the exercise of Options may have consequences under federal, state and provincial tax and securities laws which may vary depending upon the individual circumstances of the Optionee. Accordingly, the Optionee acknowledges that he or she has been advised to consult his or her personal legal and tax advisor in connection with this Agreement and his or her dealings with respect to Options. Without limiting other matters to be considered with the assistance of the Optionee’s professional advisors, the Optionee should consider: (a) the merits and risks of an investment in the underlying Optioned Shares; and (b) any resale restrictions that might apply under applicable securities laws.

 

     
  5  

 

7. Legending of Subject Securities

 

7.1 The Optionee hereby acknowledges that that upon the issuance thereof, and until such time as the same is no longer required under the applicable securities laws and regulations, the certificates representing any of the Optioned Shares may bear a legend in substantially the following form:

 

If the Optionee is not resident in the United States:

 

THE SECURITIES REPRESENTED HEREBY HAVE BEEN OFFERED IN AN OFFSHORE TRANSACTION TO A PERSON WHO IS NOT A U.S. PERSON (AS DEFINED HEREIN) PURSUANT TO REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”).

 

NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE 1933 ACT, OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (AS DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT.

 

Unless permitted under securities legislation, the holder of this security must not trade the security before the date that is 4 months and a day after THE later of (i) [ insert the distribution date ], and (ii) the date the issuer became a reporting issuer in any province or territory.

 

If the Option is resident in the United States:

 

NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (AS DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT.

 

Unless permitted under securities legislation, the holder of this security must not trade the security before the date that is 4 months and a day after THE later of (i) [ insert the distribution date ], and (ii) the date the issuer became a reporting issuer in any province or territory.

 

7.2 The Optionee hereby acknowledges and agrees to the Company making a notation on its records or giving instructions to the registrar and transfer agent of the Company in order to implement the restrictions on transfer set forth and described in this Agreement.

 

     
  6  

 

8. Resale restrictions

 

8.1 This Agreement and the Options represented hereby are not transferable. Optioned Shares received upon exercise of any Options will be subject to resale restrictions contained in the securities legislation applicable to the Company and the Optionee. The Optionee acknowledges and agrees that the Optionee is solely responsible (and the Company is not in any way responsible) for compliance with applicable resale restrictions.

 

8.2 The Optionee acknowledges that any resale of any of the Optioned Shares will be subject to resale restrictions contained in the securities legislation applicable to the Optionee or proposed transferee. The Optionee acknowledges that none of the Optioned Shares have been registered under the 1933 Act or the securities laws of any state of the United States. The Optioned Shares may not be offered or sold in the United States unless registered in accordance with federal securities laws and all other applicable securities laws or exemptions from such registration requirements are available. The Optionee acknowledges that the Optioned Shares are subject to resale restrictions in Canada and may not be traded in Canada except as permitted by the applicable provincial securities laws and the rules made thereunder.

 

9. No Employment Relationship

 

The grant of an Option shall in no way constitute any form of agreement or understanding binding on the Company or any related company, express or implied, that the Company or any related company will employ or contract with an Optionee, for any length of time, nor shall it interfere in any way with the Company’s or, where applicable, a related company’s right to terminate Optionee’s employment at any time, which right is hereby reserved.

 

10. Governing Law

 

This Agreement is governed by the laws of the State of Nevada and the federal laws of the United States of America as applicable therein. The Optionee irrevocably attorns to the jurisdiction of the courts of the State of Arizona.

 

11. Costs

 

The Optionee acknowledges and agrees that all costs and expenses incurred by the Optionee (including any fees and disbursements of any special counsel retained by the Optionee) relating to the acquisition of the Securities shall be borne by the Optionee.

 

12. Survival

 

This Agreement, including without limitation the representations, warranties and covenants contained herein, shall survive and continue in full force and effect and be binding upon the parties hereto notwithstanding the completion of the purchase of the shares underlying the Options by the Optionee pursuant hereto.

 

13. Assignment

 

This Agreement is not transferable or assignable.

 

14. Currency

 

Unless explicitly stated otherwise, all funds in this Agreement are stated in United States dollars.

 

15. Severability

 

The invalidity or unenforceability of any particular provision of this Agreement shall not affect or limit the validity or enforceability of the remaining provisions of this Agreement.

 

     
  7  

 

16. Counterparts and Electronic Means

 

This Agreement may be executed in several counterparts, each of which will be deemed to be an original and all of which will together constitute one and the same instrument. Delivery of an executed copy of this Agreement by electronic facsimile transmission or other means of electronic communication capable of producing a printed copy will be deemed to be execution and delivery of this Agreement as of the date first above written.

 

17. Entire Agreement

 

This Agreement is the only agreement between the Optionee and the Company with respect to the Options, and this Agreement and the Plan, once approved, supersede all prior and contemporaneous oral and written statements and representations and contain the entire agreement between the parties with respect to the Options.

 

IN WITNESS WHEREOF the parties hereto have duly executed this Agreement as of the date first above written.

 

APPCOIN INNOVATIONS INC.

 

Per: /s/ Michael Blum  
  Authorized Signatory  

 

       
WITNESSED BY:   )  
    )  
    )  
    )  
    )  
Name   ) /s/ Edmund C. Moy
    ) EDMUND C. MOY
    )  
    )  
Address   )  
    )  
    )  
    )  
    )  
Occupation   )  

 

     
A- 1  

 

Schedule A

 

VESTING SCHEDULE

 

1/3 of the Options will vest on February 9, 2018, February 9, 2019 and February 9, 2020.

 

     
B- 1  

 

Schedule B

 

NOTICE OF EXERCISE

 

TO: AppCoin Innovations Inc.
  561 Indiana Court
  Venice Beach, CA 90291

 

This Notice of Exercise shall constitute a proper Notice of Exercise pursuant to section 2.6 of the Stock Option Agreement dated February 9, 2018 (the “ Agreement ”), between AppCoin Innovations Inc. (the “Company” ) and the undersigned. The undersigned hereby elects to exercise the Optionee’s options to purchase ____________________ shares of the common stock of the Company at a price of $0.60 per share on the terms and conditions set forth in the Agreement.

 

Payment of aggregate consideration of $____________in cash or by certified check or cashier’s check accompanies this notice.

 

The Optionee hereby represents and warrants to the Company that all representations and warranties set out in the Agreement (and the applicable schedules hereto) are true as of the date of the exercise of the Options under the Agreement. The Optionee hereby further represents and warrants to the Company that the shares are being purchased only for investment and without intention to sell or distribute such shares.

 

The Optionee hereby directs the Company to issue, register and deliver the certificates representing the shares as follows:

 

Registration Information:   Delivery Instructions:
     
Name to appear on certificates   Name
     
Address   Address
     
City, State, and Zip Code    
     
    Telephone Number

 

DATED at _____________________________, the day of______________, _______.

 

  X
  Signature
   
  (Name and, if applicable, Office)
   
  (Address)
   
  (City, State, and Zip Code)
   
  Fax Number or E-mail Address
   
  Social Security/Tax I.D. No.

 

     
C- 1  

 

Schedule C

 

CANADIAN QUESTIONNAIRE

 

TO: APPCOIN INNOVATIONS INC. (the “ Company ”)

 

RE: Stock options (the “ Options ”) of the Company

 

Capitalized terms used in this Canadian Questionnaire (this “ Questionnaire ”) and not specifically defined have the meaning ascribed to them in the Stock Option Agreement between the undersigned (the “ Optionee ”) and the Company to which this Schedule C is attached.

 

All dollar amounts referred to in this Questionnaire and Appendices A, B and C are in lawful money of Canada, unless otherwise indicated.

 

In connection with the grant to the Optionee of the Options, the Optionee hereby represents, warrants and certifies to the Company that the Optionee:

 

  (i) is acquiring the Options as principal (or deemed principal under the terms of National Instrument 45-106 – Prospectus Exemptions adopted by the Canadian Securities Administrators (“ NI 45-106 ”));
     
  (ii) (A)       is resident in or is subject to the laws of one of the following (check one):

 

  [   ] Alberta [   ] New Brunswick [   ] Prince Edward Island
       
  [   ] British Columbia [   ] Nova Scotia [   ] Quebec
       
  [   ] Manitoba [   ] Ontario [   ] Saskatchewan
       
  [   ] Newfoundland and Labrador [   ] Yukon
     
  [   ] Northwest Territories

or

 

    (B)    [   ] is resident in a country other than Canada or the United States; and
     
  (iii) has not been provided with any offering memorandum in connection with the acquisition of the Options.

 

In connection with the grant of the Options, the Optionee hereby represents, warrants, covenants and certifies that the Optionee meets one or more of the following criteria:

 

A. OPTIONEE QUALIFYING UNDER THE EMPLOYEE, DIRECTOR, OFFICER AND CONSULTANT EXEMPTION

 

In connection with the grant of the Options, the Optionee hereby represents, warrants, covenants and certifies that the Optionee meets one or more of the following criteria:

 

  [ ] (i) is an employee, officer or director of the Company; or
       
  [ ] (ii) is a consultant of the Company who provides services to the Company or a related entity of the Company and spends or will spend a significant amount of time and attention on the business and affairs of the Company or a related entity of the Company; and
       
  has voluntarily agreed to the grant of the Options.

 

     
C- 2  

 

B. OPTIONEES QUALIFYING UNDER THE ACCREDITED INVESTOR EXEMPTION

 

In connection with the grant of the Options, the Optionee hereby represents, warrants, covenants and certifies that the Optionee meets one or more of the following criteria:

 

(a) _____ the Optionee is an “accredited investor” within the meaning of NI 45-106, by virtue of satisfying the indicated criterion below (YOU MUST INITIAL OR PLACE A CHECK-MARK ON THE APPROPRIATE LINE(S)) ( see certain guidance with respect to accredited investors that starts on page C-5 below )

 

  [ ] (i) except in Ontario, a person registered under the securities legislation of a jurisdiction of Canada as an adviser or dealer,
       
  [ ] (ii) an individual registered under the securities legislation of a jurisdiction of Canada as a representative of a person referred to in paragraph (i),
       
  [ ] (iii) an individual formerly registered under the securities legislation of a jurisdiction of Canada, other than an individual formerly registered solely as a representative of a limited market dealer under one or both of the Securities Act (Ontario) or the Securities Act (Newfoundland and Labrador),
       
  [ ] (iv) an individual who, either alone or with a spouse, beneficially owns financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds $1,000,000 (YOU MUST ALSO COMPLETE AND SIGN APPENDIX “A” TO THIS QUESTIONNAIRE THAT STARTS ON PAGE C-9 ),
       
  [ ] (v) an individual who beneficially owns financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds $5,000,000,
       
  [ ] (vi) an individual whose net income before taxes exceeded $200,000 in each of the 2 most recent calendar years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of the 2 most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year (YOU MUST ALSO COMPLETE AND SIGN APPENDIX “A” TO THIS QUESTIONNAIRE THAT STARTS ON PAGE C-9 ), or
       
  [ ] (vii) an individual who, either alone or with a spouse, has net assets of at least $5,000,000 (YOU MUST ALSO COMPLETE AND SIGN APPENDIX “A” TO THIS QUESTIONNAIRE THAT STARTS ON PAGE C-9 ).

 

(b) if the Optionee is an “accredited investor” within the meaning of NI 45-106 by virtue of satisfying the indicated criterion as set out in paragraphs (iv), (vi) or (vii) above, the Optionee has provided the Company with the signed risk acknowledgment form set out in Appendix “A” to this Questionnaire;

 

     
C- 3  

 

C. OPTIONEES QUALIFYING UNDER THE FAMILY, FRIENDS AND BUSINESS ASSOCIATES EXEMPTION

 

In connection with the grant of the Options, the Optionee hereby represents, warrants, covenants and certifies that the Optionee meets one or more of the following criteria:

 

 

(a)

the Optionee is ( YOU MUST PLACE A CHECK-MARK ON THE APPROPRIATE LINE AND PROVIDE THE REQUESTED INFORMATION, AS APPLICABLE ):
   
  [ ] (i) a director, executive officer or control person of the Company, or of an affiliate of the Company,
       
  [ ] (ii) ______ a close personal friend ( see guidance on making this determination that starts on page C-6 below ) of ___________________________________ ( print name of person ), who is a director, executive officer, founder or control person of the Company, or of an affiliate of the Company, and has been for __________________________ years based on the following factors:_____________________________________________________________________________
___________________________________________________________________________________
( explain the nature of the close personal friendship ),
       
  [ ] (iii) a close business associate ( see guidance on making this determination that starts on page C-6 below ) of ___________________________________ ( print name of person ), who is a director, executive officer, founder or control person of the Company, or of an affiliate of the Company, and has been for __________________________ years based on the following factors: ___________________________________________________________________________________
_________________________________________________________________________ ( explain the nature of the close business association ),
       
(b) if the Optionee is resident in the Province of Ontario or is subject to the securities laws of the Province of Ontario, the Optionee has provided the Company with a signed risk acknowledgement form in the form attached as Appendix “B” to this Questionnaire (YOU MUST ALSO COMPLETE AND SIGN APPENDIX “B” TO THIS QUESTIONNAIRE THAT STARTS ON PAGE C-11) , or
   
(c) if the Optionee is resident in the Province of Saskatchewan or is subject to the securities laws of the Province of Saskatchewan, and the Optionee is relying on the indicated criterion as set out in subsections C(a)(ii) or C(a)(iii) if the distribution is based in whole or in part on a close personal friendship or a close business association, the Optionee has provided the Company with a signed risk acknowledgement form in the form attached as Appendix “C” to this Questionnaire (YOU MUST ALSO COMPLETE AND SIGN APPENDIX “C” TO THIS QUESTIONNAIRE THAT STARTS ON PAGE C-14 ); or

 

For the purposes of this Questionnaire and the appendices attached hereto:

 

  (a) an issuer is “ affiliated ” with another issuer if
       
    (i) one of them is the subsidiary of the other, or
       
    (ii) each of them is controlled by the same person;

 

     
C- 4  

  

  (b) control person ” means
       
    (i) a person who holds a sufficient number of the voting rights attached to all outstanding voting securities of an issuer to affect materially the control of the issuer, or
       
    (ii) each person in a combination of persons, acting in concert by virtue of an agreement, arrangement, commitment or understanding, which holds in total a sufficient number of the voting rights attached to all outstanding voting securities of an issuer to affect materially the control of the issuer,
       
    and, if a person or combination of persons holds more than 20% of the voting rights attached to all outstanding voting securities of an issuer, the person or combination of persons is deemed, in the absence of evidence to the contrary, to hold a sufficient number of the voting rights to affect materially the control of the issuer;

 

  (c) director ” means
       
    (i) a member of the board of directors of a company or an individual who performs similar functions for a company, and
       
    (ii) with respect to a person that is not a company, an individual who performs functions similar to those of a director of a company;

 

  (d) executive officer ” means, for an issuer, an individual who is
       
    (i) a chair, vice-chair or president,
       
    (ii) a vice-president in charge of a principal business unit, division or function including sales, finance or production, or
       
    (iii) performing a policy-making function in respect of the issuer;

 

 

  (e) financial assets ” means
       
    (i) cash,
       
    (ii) securities, or
       
    (iii) a contract of insurance, a deposit or an evidence of a deposit that is not a security for the purposes of securities legislation;

 

  (f) foreign jurisdiction ” means a country other than Canada or a political subdivision of a country other than Canada;
       
  (j) individual ” means a natural person, but does not include
       
    (i) a partnership, unincorporated association, unincorporated syndicate, unincorporated organization or trust, or
       
    (ii) a natural person in the person’s capacity as a trustee, executor, administrator or personal or other legal representative;

 

  (k) jurisdiction ” or “jurisdiction of Canada” means a province or territory of Canada except when used in the term foreign jurisdiction;
       
  (l) person ” includes
       
    (i) an individual;
       
    (ii) a corporation;
       
    (iii) a partnership, trust, fund and an association, syndicate, organization or other organized group of persons, whether incorporated or not; and
       
    (iv) an individual or other person in that person’s capacity as a trustee, executor, administrator or personal or other legal representative;

 

     
C- 5  

 

  (m) related liabilities ” means
       
    (i) liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets, or
       
    (ii) liabilities that are secured by financial assets; and

 

  (n) spouse ” means, an individual who,
       
    (i) is married to another individual and is not living separate and apart within the meaning of the Divorce Act (Canada), from the other individual,
       
    (ii) is living with another individual in a marriage-like relationship, including a marriage-like relationship between individuals of the same gender, or
       
    (iii) in Alberta, is an individual referred to in paragraph (i) or (ii), or is an adult interdependent partner within the meaning of the Adult Interdependent Relationships Act (Alberta).

 

Guidance On Accredited Investor Exemptions for Individuals

 

An individual accredited investor is an individual:

 

  (a) who, either alone or with a spouse, beneficially owns financial assets (please see the guidance below regarding what financial assets are) having an aggregate realizable value that. before taxes but net of any related liabilities (please see the guidance below regarding what related liabilities are), exceeds $1,000,000;
     
  (b) whose net income before taxes exceeded $200,000 in each of the 2 most recent calendar years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of the 2 most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year;
     
  (c) who, either alone or with a spouse, has net assets (please see the guidance below regarding calculating net assets) of at least $5,000,000; and
     
  (d) who beneficially owns financial assets (please see the guidance below regarding what financial assets are) having an aggregate realizable value that, before taxes but net of any related liabilities (please see the guidance below regarding what related liabilities are), exceeds $5,000,000.

 

The monetary thresholds above are intended to create bright-line standards. Optionees who do not satisfy these monetary thresholds do not qualify as accredited investors.

 

Spouses

 

Sections (a), (b) and (c) above are designed to treat spouses as a single investing unit, so that either spouse qualifies as an accredited investor if the combined financial assets of both spouses exceed $1,000,000, the combined net income of both spouses exceeds $300,000, or the combined net assets of both spouses exceed $5,000,000. Section (d) above does not treat spouses as a single investing unit.

 

If the combined net income of both spouses does not exceed $300,000, but the net income of one of the spouses exceeds $200,000, only the spouse whose net income exceeds $200,000 qualifies as an accredited investor.

 

     
C- 6  

 

Financial Assets and Related Liabilities

 

For the purposes of Sections (a) and (d) above, “ financial assets ” means: (1) cash, (2) securities, or (3) a contract of insurance, a deposit or an evidence of a deposit that is not a security for the purposes of securities legislation. These financial assets are generally liquid or relatively easy to liquidate. The value of a optionee’s personal residence is not included in a calculation of financial assets.

 

The calculation of financial assets must exclude “ related liabilities ”, meaning: (1) liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets, or (2) liabilities that are secured by financial assets.

 

As a general matter, it should not be difficult to determine whether financial assets are beneficially owned by an individual, an individual’s spouse, or both, in any particular instance. However, in the case where financial assets are held in a trust or in another type of investment vehicle for the benefit of an individual, there may be questions as to whether the individual beneficially owns the financial assets. The following factors are indicative of beneficial ownership of financial assets:

 

    physical or constructive possession of evidence of ownership of the financial asset;
     
    entitlement to receipt of any income generated by the financial asset;
     
    risk of loss of the value of the financial asset; and
     
    the ability to dispose of the financial asset or otherwise deal with it as the individual sees fit.

 

For example, securities held in a self-directed RRSP for the sole benefit of an individual are beneficially owned by that individual.

 

In general, financial assets in a spousal RRSP can be included for the purposes of the $1,000,000 financial asset test in Section (a) above because Section (a) takes into account financial assets owned beneficially by a spouse. However, financial assets in a spousal RRSP cannot be included for purposes of the $5,000,000 financial asset test in Section (d) above.

 

Financial assets held in a group RRSP under which the individual does not have the ability to acquire the financial assets and deal with them directly do not meet the beneficial ownership requirements in either Sections (a) or (d) above.

 

Guidance on Close Personal Friend and Close Business Associate Determination

 

A “ close personal friend ” of a director, executive officer, founder or control person of an issuer is an individual who knows the director, executive officer, founder or control person well enough and has known them for a sufficient period of time to be in a position to assess their capabilities and trustworthiness and to obtain information from them with respect to the investment.

 

The following factors are relevant to this determination:

 

  (a) the length of time the individual has known the director, executive officer, founder or control person,
     
  (b) the nature of the relationship between the individual and the director, executive officer, founder or control person including such matters as the frequency of contacts between them and the level of trust and reliance in the other circumstances, and
     
  (c) the number of “close personal friends” of the director, executive officer, founder or control person to whom securities have been distributed in reliance on the private issuer exemption or the family, friends and business associates exemption.

 

     
C- 7  

 

An individual is not a close personal friend solely because the individual is:

 

  (a) a relative,
     
  (b) a member of the same club, organization, association or religious group,
     
  (c) a co-worker, colleague or associate at the same workplace,
     
  (d) a client, customer, former client or former customer,
     
  (e) a mere acquaintance, or
     
  (f) connected through some form of social media, such as Facebook, Twitter or LinkedIn.

 

The relationship between the individual and the director, executive officer, founder or control person must be direct. For example, the exemption is not available to a close personal friend of a close personal friend of a director of the issuer. Further, a relationship that is primarily founded on participation in an internet forum is not considered to be that of a close personal friend.

 

A “ close business associate ” is an individual who has had sufficient prior business dealings with a director, executive officer, founder or control person of the issuer to be in a position to assess their capabilities and trustworthiness and to obtain information from them with respect to the investment.

 

The following factors are relevant to this determination:

 

  (a) the length of time the individual has known the director, executive officer, founder or control person,
     
  (b) the nature of any specific business relationships between the individual and the director, executive officer, founder or control person, including, for each relationship, when it began, the frequency of contact between them and when it terminated if it is not ongoing, and the level of trust and reliance in the other circumstances,
     
  (c) the nature and number of any business dealings between the individual and the director, executive officer, founder or control person, the length of the period during which they occurred, and the nature and date of the most recent business dealing, and
     
  (d) the number of “close business associates” of the director, executive officer, founder or control person to whom securities have been distributed in reliance on the private issuer exemption or the family, friends and business associates exemption.

 

An individual is not a close business associate solely because the individual is:

 

  (a) a member of the same club, organization, association or religious group,
     
  (b) a co-worker, colleague or associate at the same workplace,
     
  (c) a client, customer, former client or former customer,
     
  (d) a mere acquaintance, or
     
  (e) connected through some form of social media, such as Facebook, Twitter or LinkedIn.

 

The relationship between the individual and the director, executive officer, founder or control person must be direct. For example, the exemptions are not available for a close business associate of a close business associate of a director of the issuer. Further, a relationship that is primarily founded on participation in an internet forum is not considered to be that of a close business associate.

 

     
C- 8  

 

The Optionee acknowledges and agrees that, in addition to resale restrictions imposed under U.S. securities laws, there are additional restrictions on the Optionee’s ability to resell the Securities under Canadian securities laws and National Instrument 45-102 as adopted by the Canadian Securities Administrators.

 

The Optionee agrees that the above representations and warranties will be true and correct both as of the execution of this Questionnaire acknowledges that they will survive the completion of the issue of the Option.

 

The Optionee acknowledges that the foregoing representations and warranties are made by the Optionee with the intent that they be relied upon in determining the suitability of the Optionee to acquire the Options and that this Questionnaire is incorporated into and forms part of the Agreement and the undersigned undertakes to immediately notify the Company of any change in any statement or other information relating to the Optionee set forth herein which takes place prior to the closing time of the grant of the Options.

 

The Optionee undertakes to immediately notify the Company of any change in any statement or other information relating to the Optionee set forth in the Agreement or in this Questionnaire which takes place prior to the issuance of the Options.

 

By completing this Questionnaire, the Optionee authorizes the indirect collection of this information by each applicable regulatory authority or regulator and acknowledges that such information is made available to the public under applicable laws.

 

DATED as of day of , 20____.

 

   
  Print Name of Optionee
   
   
  Signature

 

     
C- 9  

 

 

     
C- 10  

 

 

 

     
C- 11  

 

 

     
C- 12  

 

 

 

     
C- 13  

 

 

 

     
C- 14  

 

 

 

     
C- 15  

 

 

 

     
D- 1  

 

Schedule D

 

UNITED STATES ACCREDITED INVESTOR QUESTIONNAIRE

 

Capitalized terms used in this United States Accredited Investor Questionnaire (this “ Questionnaire ”) and not specifically defined have the meaning ascribed to them in the Stock Option Agreement between the undersigned (the “ Optionee ”) and AppCoin Innovations Inc. (the “ Company ”) to which this Schedule D is attached.

 

All dollar amounts referred to in this Questionnaire are in lawful money of the United States, unless otherwise indicated.

 

The Optionee covenants, represents and warrants to the Company that he or she satisfies one or more of the categories of “Accredited Investors”, as defined by Regulation D promulgated under the Securities Act of 1933 (the “Securities Act” ), as indicated below: (Please initial in the space provide those categories, if any, of an “Accredited Investor” which the Optionee satisfies)

 

  ______ Category 1 An organization described in Section 501(c)(3) of the United States Internal Revenue Code, a corporation, a Massachusetts or similar business trust or partnership, not formed for the specific purpose of acquiring the Securities, with total assets in excess of $5,000,000;
     
  ______ Category 2 A natural person whose individual net worth, or joint net worth with that person’s spouse, exceeds $1,000,000. For purposes of this Category 2, “net worth” means the excess of total assets at fair market value (including personal and real property, but excluding the estimated fair market value of a person’s primary home) over total liabilities. Total liabilities excludes any mortgage on the primary home in an amount of up to the home’s estimated fair market value as long as the mortgage was incurred more than 60 days before the Securities are acquired, but includes (i) any mortgage amount in excess of the home’s fair market value and (ii) any mortgage amount that was borrowed during the 60-day period before the date of the acquisition of Securities for the purpose of investing in the Securities;
     
  ______ Category 3 A natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year;
     
  ______ Category 4 A “bank” as defined under Section (3)(a)(2) of the Securities Act or savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act acting in its individual or fiduciary capacity; a broker dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934 (United States); an insurance company as defined in Section 2(13) of the Securities Act; an investment company registered under the Investment Company Act of 1940 (United States) or a business development company as defined in Section 2(a)(48) of such Act; a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958 (United States); a plan with total assets in excess of $5,000,000 established and maintained by a state, a political subdivision thereof, or an agency or instrumentality of a state or a political subdivision thereof, for the benefit of its employees; an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 (United States) whose investment decisions are made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000, or, if a self-directed plan, whose investment decisions are made solely by persons that are accredited investors;

 

     
D- 2  

 

 

  ______ Category 5 A private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940 (United States);
     
  ______ Category 6 A director or executive officer of the Company;
     
  ______ Category 7 A trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Securities, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) under the Securities Act;
     
  ______ Category 8 An entity in which all of the equity owners satisfy the requirements of one or more of the foregoing categories;

 

Note that the Optionee claiming to satisfy one of the above categories of Accredited Investor may be required to supply the Company with a balance sheet, prior years’ federal income tax returns or other appropriate documentation to verify and substantiate the Optionee’s status as an Accredited Investor.

 

If the Optionee is an entity which initialled the last category in reliance upon the Accredited Investor categories above, state the name, address, total personal income from all sources for the previous calendar year, and the net worth (exclusive of home, home furnishings and personal automobiles) for each equity owner of the said entity:

 

All information contained in this Questionnaire will be treated as confidential. However, by signing and returning this Questionnaire, the Optionee agrees that, if necessary, this Questionnaire may be presented to such parties as the Company deems appropriate to establish the availability, under the Securities Act or applicable state securities law, of exemption from registration in connection with the issuance of the Securities hereunder.

 

By completing this Questionnaire, the Optionee authorizes the indirect collection of this information by each applicable regulatory authority or regulator and acknowledges that such information is made available to the public under applicable laws.

 

DATED as of ______ day of _______________, 20____.

 

   
  Print Name of Optionee
   
   
  Signature
   
   
  Social Security/Tax I.D. No.

 

     
E- 1  

 

Schedule E

 

UNITED STATES NON-ACREDITED INVESTOR QUESTIONNAIRE

 

Capitalized terms used in this United States Non-Accredited Investor Questionnaire (this “ Questionnaire ”) and not specifically defined have the meaning ascribed to them in the Stock Option Agreement between the undersigned (the “ Optionee ”) and AppCoin Innovations Inc. (the “ Company ”) to which this Schedule E is attached.

 

All dollar amounts referred to in this Questionnaire are in lawful money of the United States, unless otherwise indicated.

 

The purpose of this Questionnaire is to assure the Company that the Optionee will meet the standards imposed by the Securities Act of 1933 (the “Securities Act” ) and the appropriate exemptions of applicable state securities laws. The Company will rely on the information contained in this Questionnaire for the purposes of such determination. The Option and the Optioned Shares (together, the “Securities” ) will not be registered under the Securities Act and has been issued in reliance upon the exemption from registration afforded by Section 3(b) and/or Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder. This Questionnaire is not an offer of any securities of the Company in any state other than those specifically authorized by the Company.

 

Please attach additional pages if necessary to answer any question fully.

 

REPRESENTATIONS OF OPTIONEE

 

This item is presented in alternative form. Please initial in the space provided the applicable alternative.

 

_____ ALTERNATIVE ONE: The Optionee covenants, represents and warrants to the Company that he or she has such knowledge and experience in financial and business matters that he or she is capable of evaluating the relative merits and risks of an investment in the Securities and Company and is not utilizing a purchaser representative in connection with evaluating such merits and risks. The Optionee is providing evidence of its knowledge and experience in these matters through the information requested below in this Questionnaire.
   
_____ ALTERNATIVE TWO: The Optionee covenants, represents and warrants to the Company that he or she has chosen to use the services of a purchaser representative acceptable to the Optionee in connection with the Optionee’s acquisition of the Securities. The Optionee hereby acknowledges that the person named below is his or her purchaser representative who will assist and advise the Optionee in evaluating the merits and risks of an investment in the Securities and the Company and affirms that such purchaser representative has previously disclosed in writing any material relationship that exists between the purchaser representative (or its affiliates) and the Company (or its affiliates) that is mutually understood to be contemplated, or that has existed at any time during the previous two years, and any compensation received or to be received as a result of such relationship.
   
   
  (name of Purchaser Representative)
   
   
  (address of Purchaser Representative)
  If the Optionee utilizes a purchaser representative, this Questionnaire must be accompanied by a completed and signed purchaser representative Questionnaire, a copy of which can be obtained from the Company upon request.

 

     
E- 2  

 

FOR INDIVIDUAL INVESTORS

 

1. Name:  
     
2. Residential Address & Telephone Number:  
     
     
     
     
     
3. Length of Residence in State of Residence:  

 

4. U.S. Citizen: _____ Yes _____ No

 

5. Social Security Number:      
           
6. Business Address & Telephone Number:        
           
           
           
           

 

7. Preferred Mailing Address: _____ Residence _____ Business
           
8. Date of Birth:        
           
9. Employer and Position:        
           
10. Name of Business:        

 

11. Business or Professional Education and Degrees:
           
  School Degree   Year Received
         
         
         
           
           
12. Prior Employment (last 5 years):        
           
  Employer Nature of Duties Dates of Employment
       
       
       
             

 

     
E- 3  

 

13. Relationship to the Company, if any:  

 

14. Is the Optionee an officer of director of a publicly-held company?

 

  ____ Yes _____ No

 

  If yes, specify company:  

 

15. Does the Optionee beneficially own 10% or more of the voting securities of a publicly-held company?

 

  ____ Yes _____ No

 

  If yes, specify company:  

 

16. Within the last 5 years, has the Optionee personally invested in investments sold by means of private placements in reliance on exemptions from registration under the Securities Act and state securities laws?

 

  ____ Yes _____ No

 

17. Prior investments by the Optionee which were purchased in reliance on exemptions from registration under the Securities Act and State securities laws (initial the highest number applicable):

 

Amount (Cumulative)

 

  Real Estate: Up to $50,000 to Over
  None: _____ $50,000 _____ $250,000 _____ $250,000 _____
         
  Securities: Up to $50,000 to Over
  None: _____ $50,000 _____ $250,000 _____ $250,000 _____
         
  Other: Up to $50,000 to Over
  None: _____ $50,000 _____ $250,000 _____ $250,000 _____

 

18. Does the Optionee consider itself to be an experienced and sophisticated investor? 

 

  ____ Yes _____ No

 

  If so, please provide evidence of investment sophistication and/or experience:
   
   
   
   

 

19. Does the Optionee, or any person authorized to execute this Questionnaire, consider itself to have such knowledge of the Company and its business and such experience in financial and business matters to enable it to evaluate the merits and risks of an investment in the Securities and the Company, should the Optionee be given an opportunity to so invest?

 

  ____ Yes _____ No

 

     
E- 4  

 

20. If the Optionee is an individual, please indicate the Optionee’s and his/her spouse’s combined gross income during the preceding two years (initial the highest number applicable):

 

               2017                2015
       
  _____  Less than $75,000   _____  Less than $75,000
       
  _____  $75,001 to $100,000   _____  $75,001 to $100,000
       
  _____  $100,001 to $200,000   _____  $100,001 to $200,000
       
  _____  $200,001 to $300,000   _____  $200,001 to $300,000
       
  _____  $Over $300,000   _____  $Over $300,000

 

21. If the Optionee is an individual, please indicate the Optionee’s and his/her spouse’s combined estimated net worth (exclusive of home, home furnishings and personal automobiles) (initial the highest number applicable):

 

  _____  Less than $100,000   _____  $300,0001 to $500,000
       
  _____  $100,001 to $200,000   _____  $500,001 to $1,000,000
       
  _____  $200,001 to $300,000   _____  Over $1,000,000

 

22. Regardless of the amount of the proposed investment:

 

  (a) Will the Optionee’s proposed investment exceed 10% of its individual net worth, or the Optionee’s joint net worth with its spouse as determined in paragraph 21 above?

 

  ____ Yes _____ No

 

  (b) Will the Optionee be able to bear the economic risk of its investment in this transaction?

 

  ____ Yes _____ No

 

23. Please provide answers to the following questions.

 

  (a) State total assets of the Optionee, including cash, stocks and bonds, automobiles, real estate, and any other assets:
     
    $
     
  (b) State total liabilities of the Optionee including real estate indebtedness, accounts payable, taxes payable and any other liabilities:
     
    $
     
  (c) State annual income of the Optionee including salary, securities income, rental income and any other income:
     
    $

 

     
E- 5  

 

  (d) State annual expenses of the Optionee, excluding ordinary living expenses, including real estate payments, rent, property taxes and other expenses:
     
    $
     
  (e) Does the Optionee expect the amount of its assets, liabilities, income and expenses, as stated above, to be subject to significant change in the future:

 

  ____ Yes _____ No

 

    If yes, explain:
     
     
     

 

All information contained in this Questionnaire will be treated as confidential. However, by signing and returning this Questionnaire, the Optionee agrees that, if necessary, this Questionnaire may be presented to such parties as the Company deems appropriate to establish the availability, under the Securities Act or applicable state securities law, of exemption from registration in connection with the issuance of the Securities hereunder.

 

By completing this Questionnaire, the Optionee authorizes the indirect collection of this information by each applicable regulatory authority or regulator and acknowledges that such information is made available to the public under applicable laws.

 

DATED as of day of _________________, 20____.

 

   
  Print Name of Optionee
   
   
  Signature
   
   
  Social Security/Tax I.D. No.

 

     
F- 1  

 

Schedule F

 

ACKNOWLEDGEMENTS and Representations and warranties OF THE OPTIONEE

 

Capitalized terms used in this Acknowledgements and Representations and Warranties of the Optionee and not specifically defined have the meaning ascribed to them in the Stock Option Agreement between the undersigned (the “ Optionee ”) and AppCoin Innovations Inc. (the “ Company ”) to which this Schedule F is attached.

 

The Optionee acknowledges and agrees that:

 

  (a) the Securities have not been registered under the 1933 Act or under any state securities or “blue sky” laws of any state of the United States, and are being offered only in a transaction not involving any public offering within the meaning of the 1933 Act, and, unless so registered, may not be offered or sold in the United States or to U.S. Persons, except pursuant to an effective registration statement under the 1933 Act, or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the 1933 Act, and in each case only in accordance with applicable state securities laws;
     
  (b) the Company will refuse to register any transfer of the Securities not made in accordance with the provisions of Regulation S, pursuant to an effective registration statement under the 1933 Act or pursuant to an available exemption from, or in a transaction not subject to, the registration requirements of the 1933 Act;
     
  (c) the decision to execute this Agreement and acquire the Securities hereunder has not been based upon any oral or written representation as to fact or otherwise made by or on behalf of the Company and such decision is based solely upon a review of publicly available information regarding the Company that is available on the website of the United States Securities and Exchange Commission (the “ SEC ”) at www.sec.gov (the “Company Information” );
     
  (d) there are risks associated with an investment in the Securities;
     
  (e) the Optionee and the Optionee’s advisor(s) (if applicable) have had a reasonable opportunity to ask questions of and receive answers from the Company in connection with the distribution of the Securities hereunder, and to obtain additional information, to the extent possessed or obtainable without unreasonable effort or expense, necessary to verify the accuracy of the information about the Company;
     
  (f) the books and records of the Company were available upon reasonable notice for inspection, subject to certain confidentiality restrictions, by the Optionee during reasonable business hours at its principal place of business, and all documents, records and books in connection with the distribution of the Securities hereunder have been made available for inspection by the Optionee, the Optionee’s attorney and/or advisor(s) (if applicable);

     
  (g) the Company, its officers, directors, counsel and agents are entitled to rely upon the truth and accuracy of the acknowledgements, representations, warranties, statements, answers, covenants and agreements contained in this Agreement and agrees that if any of such acknowledgements, representations, warranties, statements, answers, covenants, and agreements should become, by the passage of time after the date of this Agreement, no longer accurate or should be breached, the Optionee shall promptly notify the Company, and the Optionee will hold harmless the Company from any loss or damage it may suffer as a result of the Optionee’s failure to correctly complete or comply with the terms of this Agreement;

 

     
F- 2  

 

  (h) the Optionee has been advised to consult its own legal, tax and other advisors with respect to the merits and risks regarding the exercise of the Options and the issuance of the Optioned Shares and with respect to applicable resale restrictions and it is solely responsible (and the Company is in not any way responsible) for compliance with applicable resale restrictions;
     
  (i) the Company has advised the Optionee that the Company is relying on an exemption from the registration and prospectus requirements of applicable securities laws and, as a consequence of acquiring the Securities pursuant to this exemption, certain protections, rights and remedies provided by the applicable securities laws, including statutory rights of rescission or damages, will not be available to the Optionee;
     
  (j) the Optionee will indemnify and hold harmless the Company and, where applicable, its directors, officers, employees, agents, advisors and shareholders, from and against any and all loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all fees, costs and expenses whatsoever reasonably incurred in investigating, preparing or defending against any claim, lawsuit, administrative proceeding or investigation whether commenced or threatened) arising out of or based upon any representation or warranty of the Optionee contained herein or in any document furnished by the Optionee to the Company in connection herewith being untrue in any material respect or any breach or failure by the Optionee to comply with any covenant or agreement made by the Optionee to the Company in connection therewith;
     
  (k) the Securities are not listed on any stock exchange or automated dealer quotation system and no representation has been made to the Optionee that any of the Securities will become listed on any stock exchange or automated dealer quotation system, except that currently certain market makers make market in the shares of the Company’s common stock on the OTC Pink;
     
  (l) neither the SEC nor any other securities commission or similar regulatory authority has reviewed or passed on the merits of the Securities;
     
  (m) no documents in connection with this Agreement have been reviewed by the SEC or any state securities administrators;
     
  (n) there is no government or other insurance covering any of the Securities; and
     
  (o) this Agreement is not enforceable by the Optionee unless it has been accepted by the Company.

 

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPTIONEE

 

The Optionee hereby represents and warrants to and covenants with the Company (which representations, warranties and covenants shall survive the closing) that:

 

  (a) the Optionee is a bona fide director, officer, employee, independent contractor or consultant of the Company, Parent or Subsidiary;
     
  (b) unless the Optionee has completed Schedule D or E, the Optionee is not acquiring the Securities for the account or benefit of, directly or indirectly, any U.S. Person;
     
  (c) unless the Optionee has completed Schedule D or E, the Optionee is not a U.S. Person;
     
  (d) the acquisition of the Securities by the Optionee as contemplated in this Agreement complies with or is exempt from the applicable securities legislation of the jurisdiction of residence of the Optionee;
     
  (e) the Optionee has not acquired or is not acquiring the Securities as a result of, and will not itself engage in, any “directed selling efforts” (as defined in Regulation S under the 1933 Act) in the United States in respect of the Securities which would include any activities undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for the resale of the Securities; provided, however, that the Optionee may sell or otherwise dispose of the Securities pursuant to registration thereof under the 1933 Act and any applicable state and provincial securities laws or under an exemption from such registration requirements;
     
  (f) unless the Optionee has completed Schedule D or E, the Optionee is outside the United States when receiving and executing this Agreement and is acquiring the Securities as principal for the Optionee’s own account, for investment purposes only, and not with a view to, or for, resale, distribution or fractionalisation thereof, in whole or in part, and, in particular, it has no intention to distribute either directly or indirectly any of the Securities in the United States or to U.S. Persons, and no other person has a direct or indirect beneficial interest in such Securities;
     
  (g) if the Optionee is not resident in the United States or Canada, the Optionee:

 

     
F- 3  

 

    (i) is knowledgeable of, or has been independently advised as to, the applicable securities laws of the securities regulators having application in the jurisdiction in which the Optionee is resident (the “ International Jurisdiction ”) which would apply to the granting of the Option and the issue, sale or resale of the Optioned Shares;
       
    (ii) the Optionee is acquiring the Option or the Optioned Shares pursuant to exemptions from prospectus or equivalent requirements under applicable securities laws or, if such is not applicable, the Optionee is permitted to acquire the Option or the Optioned Shares under the applicable securities laws of the securities regulators in the International Jurisdiction without the need to rely on any exemptions;
       
    (iii) the applicable securities laws of the authorities in the International Jurisdiction do not require the Company to make any filings or seek any approvals of any kind whatsoever from any securities regulator of any kind whatsoever in the International Jurisdiction in connection with the granting of the Option or the issue, sale or resale of the Optioned Shares; and
       
    (iv) the granting of the Option or the issue, sale or resale of the Optioned Shares does not trigger:

 

    A. any obligation to prepare and file a prospectus or similar document, or any other report with respect to such purchase in the International Jurisdiction; or
       
    B. any continuous disclosure reporting obligation of the Optionee or the Company in the International Jurisdiction; and

 

  (v) the Optionee will, if requested by the Company, deliver to the Company a certificate or opinion of local counsel from the International Jurisdiction which will confirm the matters referred to in subparagraphs (ii), (iii) and (iv) above to the satisfaction of the Company, acting reasonably;

 

  (h) the Optionee has received and carefully read this Agreement and the Company Information;
     
  (i) the Optionee has received a brief description of the Securities and the Optionee understands that the proceeds from the exercise of the Options will be used by the Company as working capital for general corporate purposes;
     
  (j) the Optionee has duly executed and delivered this Agreement and it constitutes a valid and binding agreement of the Optionee enforceable against the Optionee in accordance with its terms;
     
  (k) the Optionee has the legal capacity and competence to enter into and execute this Agreement and to take all actions required pursuant hereto and, if the Optionee is a corporation, it is duly incorporated and validly subsisting under the laws of its jurisdiction of incorporation and all necessary approvals by its directors, shareholders and others have been obtained to authorize execution and performance of this Agreement on behalf of the Optionee;
     
  (l) the Optionee:

 

    (i) has adequate net worth and means of providing for its current financial needs and possible personal contingencies,
       
    (ii) has no need for liquidity in this investment, and
       
    (iii) is able to bear the economic risks of an investment in the Securities for an indefinite period of time, and can afford the complete loss of such investment;

 

  (m) the Optionee has the requisite knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of the investment in the Securities and the Company, and the Optionee is providing evidence of such knowledge and experience in these matters through the information requested in this Agreement;
     
  (n) the Optionee is aware that an investment in the Company is speculative and involves certain risks, including the possible loss of the investment, and the Optionee has carefully read and considered the matters set forth under the caption “Risk Factors” appearing in the Company’s various disclosure documents, filed with the SEC;
     
  (o) the entering into of this Agreement and the transactions contemplated hereby do not result in the violation of any of the terms and provisions of any law applicable to, or, if applicable, the constating documents of, the Optionee, or of any agreement, written or oral, to which the Optionee may be a party or by which the Optionee is or may be bound;
     
  (p) the Optionee is purchasing the Securities for its own account for investment purposes only and not for the account of any other person and not for distribution, assignment or resale to others, and no other person has a direct or indirect beneficial interest is such Securities, and the Optionee has not subdivided his interest in the Securities with any other person;
     
  (q) the Optionee is not an underwriter of, or dealer in, the shares of the Company’s common stock, nor is the Optionee participating, pursuant to a contractual agreement or otherwise, in the distribution of the Securities;
     
  (r) the Optionee understands and agrees that the Company and others will rely upon the truth and accuracy of the acknowledgements, representations, statements, answers and agreements contained in this Agreement, and agrees that if any of such acknowledgements, representations, statements, answers and agreements are no longer accurate or have been breached, the Optionee shall promptly notify the Company;

 

     
F- 4  

 

  (s) the Optionee has made an independent examination and investigation of an investment in the Securities and the Company and has depended on the advice of its legal and financial advisors and agrees that the Company will not be responsible in anyway whatsoever for the Optionee’s decision to acquire the Securities;
     
  (t) the Optionee is not aware of any advertisement of any of the Securities and is not acquiring the Securities as a result of any form of general solicitation or general advertising including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio or television, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising;
     
  (u) the Optionee has either (a) a pre-existing personal or business relationship with the Company or any of its partners, officers, directors, or controlling persons consisting of personal or business contacts of a nature and duration which enable the Optionee to be aware of the character, business acumen and general business and financial circumstances of the Company or any such partner, officer, director, or controlling person with whom such relationship exists or (b) such business or financial expertise as to be able to protect the Optionee’s own interests in connection with the acquisition of the Securities; and,
     
  (v) no person has made to the Optionee any written or oral representations:

 

    (i) that any person will resell or repurchase any of the Securities,
       
    (ii) that any person will refund the purchase price of any of the Securities,
       
    (iii) as to the future price or value of any of the Securities, or
       
    (iv) that any of the Securities will be listed and posted for trading on any stock exchange or automated dealer quotation system or that application has been made to list and post any of the Securities of the Company on any stock exchange or automated dealer quotation system, except that currently certain market makers make market in the shares of the Company’s common stock on the OTC Pink.

 

DATED as of _____day of __________________, 20____.

 

   
  Print Name of Optionee
   
   
  Signature
   
   
  Social Security/Tax I.D. No.

 

     
 

 

 

 

INDEMNIFICATION AGREEMENT

 

This Indemnification Agreement (“ Agreement ”), dated as of December 20, 2017, is by and between APPCOIN INNOVATIONS INC. , a Nevada corporation (the “ Company ”) and James Geiskopf (the “ Indemnitee ”).

 

WHEREAS:

 

A. The Indemnitee is a director and/or an officer of the Company;

 

B. Both the Company and the Indemnitee recognize the increased risk of litigation and other claims being asserted against directors and officers of public companies;

 

C. The board of directors of the Company (the “ Board ”) has determined that enhancing the ability of the Company to retain and attract as directors and officers the most capable persons is in the best interests of the Company and that the Company therefore should seek to assure such persons that indemnification and insurance coverage is available; and

 

D. In recognition of the need to provide the Indemnitee with substantial protection against personal liability, in order to procure the Indemnitee’s continued service as a director and/or officer of the Company and to enhance the Indemnitee’s ability to serve the Company in an effective manner, and in order to provide such protection pursuant to express contract rights (intended to be enforceable irrespective of, among other things, any amendment to the Company’s certificate of incorporation or bylaws (collectively, the “ Constituent Documents ”), any change in the composition of the Board or any change in control or business combination transaction relating to the Company), the Company wishes to provide in this Agreement for the indemnification of, and the advancement of Expenses (as defined in Section 0 below) to, Indemnitee as set forth in this Agreement and to the extent insurance is maintained for the continued coverage of Indemnitee under the Company’s directors’ and officers’ liability insurance policies.

 

NOW, THEREFORE, in consideration of the foregoing and the Indemnitee’s agreement to continue to provide services to the Company, the parties agree as follows:

 

1. Definitions . For purposes of this Agreement, the following terms shall have the following meanings:
       
  (a) Beneficial Owner ” has the meaning given to the term “beneficial owner” in Rule 13d-3 under the Securities Exchange Act of 1934 , as amended (the “ Exchange Act ”).
     
  (b) Change in Control ” means the occurrence after the date of this Agreement of any of the following events:
       
    (i) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 20% or more of the Company’s then outstanding Voting Securities unless the change in relative Beneficial Ownership of the Company’s securities by any Person results solely from a reduction in the aggregate number of outstanding shares of securities entitled to vote generally in the election of directors;

 

 
- 2 -

 

    (ii) the consummation of a reorganization, merger or consolidation, unless immediately following such reorganization, merger or consolidation, all of the Beneficial Owners of the Voting Securities of the Company immediately prior to such transaction beneficially own, directly or indirectly, more than 50% of the combined voting power of the outstanding Voting Securities of the entity resulting from such transaction;
       
    (iii) during any period of two consecutive years, not including any period prior to the execution of this Agreement, individuals who at the beginning of such period constituted the Board (including for this purpose any new directors whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved) cease for any reason to constitute at least a majority of the Board; or
       
    (iv) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets.
       
  (c) Claim ” means:
       
    (i) any threatened, pending or completed action, suit, proceeding or alternative dispute resolution mechanism, whether civil, criminal, administrative, arbitrative, investigative or other, and whether made pursuant to federal, state or other law; or
       
    (ii) any inquiry, hearing or investigation that the Indemnitee determines might lead to the institution of any such action, suit, proceeding or alternative dispute resolution mechanism.
       
  (d) Court ” shall have the meaning ascribed to it in Section 0 below.

 

  (e) Disinterested Director ” means a director of the Company who is not and was not a party to the Claim in respect of which indemnification is sought by Indemnitee.
     
  (f) Expenses ” means any and all expenses, including reasonable attorneys’ and experts’ fees, court costs, transcript costs, travel expenses, duplicating, printing and binding costs, telephone charges, and all other costs and expenses incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness or participate in, any Claim. Expenses also shall include (i) Expenses incurred in connection with any appeal resulting from any Claim, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent, and (ii) for purposes of Section 0 only, Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement, by litigation or otherwise. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.

 

 
- 3 -

 

  (g) Expense Advance ” means any payment of Expenses advanced to Indemnitee by the Company pursuant to Section 0 or Section 0 hereof.
     
  (h) Indemnifiable Event ” means any event or occurrence, whether occurring before, on or after the date of this Agreement, related to the fact that Indemnitee is or was a director, officer, employee or agent of the Company or any subsidiary of the Company, or is or was serving at the request of the Company as a director, officer, employee, member, manager, trustee or agent of any other corporation, limited liability company, partnership, joint venture, trust or other entity or enterprise (collectively with the Company, “ Enterprise ”) or by reason of an action or inaction by Indemnitee in any such capacity (whether or not serving in such capacity at the time any Loss is incurred for which indemnification can be provided under this Agreement).
     
  (i) Independent Counsel ” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently performs, nor in the past two (2) years has performed, services for either: (i) the Company or Indemnitee (other than in connection with matters concerning Indemnitee under this Agreement or of other indemnitees under similar agreements) or (ii) any other party to the Claim giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or the Indemnitee in an action to determine the Indemnitee’s rights under this Agreement.
     
  (j) Losses ” means any and all Expenses, damages, losses, liabilities, judgments, fines, penalties (whether civil, criminal or other), ERISA excise taxes, amounts paid or payable in settlement, including any interest, assessments, any federal, state, local or foreign taxes imposed as a result of the actual or deemed receipt of any payments under this Agreement and all other charges paid or payable in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness or participate in, any Claim.
     
  (k) Person ” means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity or other entity and includes the meaning set forth in Sections 13(d) and 14(d) of the Exchange Act.
     
  (l) Standard of Conduct Determination ” shall have the meaning ascribed to it in Section 0 below.
     
  (m) Voting Securities ” means any securities of the Company that vote generally in the election of directors.

 

2. Services to the Company . The Indemnitee agrees to continue to serve as a director or officer of the Company for so long as the Indemnitee is duly elected or appointed or until the Indemnitee tenders his resignation or is no longer serving in such capacity. This Agreement shall not be deemed an employment agreement between the Company (or any of its subsidiaries or Enterprise) and the Indemnitee. The Indemnitee specifically acknowledges that his employment with or service to the Company or any of its subsidiaries or Enterprise, as applicable, is at will and the Indemnitee may be discharged at any time for any reason, with or without cause, except as may be otherwise provided in any written employment agreement between the Indemnitee and the Company (or any of its subsidiaries or Enterprise), other applicable formal severance policies duly adopted by the Board or, with respect to service as a director or officer of the Company, by the Company’s Constituent Documents or Nevada law. This Agreement shall continue in force after the Indemnitee has ceased to serve as a director or officer of the Company or, at the request of the Company, of any of its subsidiaries or Enterprise, as provided in Section 0 hereof.
   
3. Indemnification . Subject to Section 0 and Section 0 of this Agreement, the Company shall indemnify the Indemnitee, to the fullest extent permitted by the laws of the State of Nevada in effect on the date hereof, or as such laws may from time to time hereafter be amended to increase the scope of such permitted indemnification, against any and all Losses if the Indemnitee was or is or becomes a party to or participant in, or is threatened to be made a party to or participant in, any Claim by reason of or arising in part out of an Indemnifiable Event, including, without limitation, Claims brought by or in the right of the Company, Claims brought by third parties, and Claims in which the Indemnitee is solely a witness.
   
4. Advancement of Expenses . The Indemnitee shall have the right to advancement by the Company, prior to the final disposition of any Claim by final adjudication to which there are no further rights of appeal, of any and all Expenses actually and reasonably paid or incurred by the Indemnitee in connection with any Claim arising out of an Indemnifiable Event. The Indemnitee’s right to such advancement is not subject to the satisfaction of any standard of conduct. Without limiting the generality or effect of the foregoing, within 60 days after any request by the Indemnitee, the Company shall, in accordance with such request, (a) pay such Expenses on behalf of the Indemnitee, (b) advance to the Indemnitee funds in an amount sufficient to pay such Expenses, or (c) reimburse the Indemnitee for such Expenses. In connection with any request for Expense Advances, the Indemnitee shall not be required to provide any documentation or information to the extent that the provision thereof would undermine or otherwise jeopardize attorney-client privilege. In connection with any request for Expense Advances, the Indemnitee shall execute and deliver to the Company an undertaking (which shall be accepted without reference to the Indemnitee’s ability to repay the Expense Advances) to repay any amounts paid, advanced, or reimbursed by the Company for such Expenses to the extent that it is ultimately determined, following the final disposition of such Claim, that the Indemnitee is not entitled to indemnification hereunder. The Indemnitee’s obligation to reimburse the Company for Expense Advances shall be unsecured and no interest shall be charged thereon.

 

 
- 4 -

 

5. Indemnification for Expenses in Enforcing Rights . To the fullest extent allowable under applicable law, the Company shall also indemnify against, and, if requested by the Indemnitee, shall advance to the Indemnitee subject to and in accordance with Section 0, any Expenses actually and reasonably paid or incurred by the Indemnitee in connection with any action or proceeding by the Indemnitee for (a) indemnification or reimbursement or advance payment of Expenses by the Company under any provision of this Agreement, or under any other agreement or provision of the Constituent Documents now or hereafter in effect relating to Claims relating to Indemnifiable Events, and/or (b) recovery under any directors’ and officers’ liability insurance policies maintained by the Company. However, in the event that the Indemnitee is ultimately determined not to be entitled to such indemnification or insurance recovery, as the case may be, then all amounts advanced under this Section 0 shall be repaid. The Indemnitee shall be required to reimburse the Company in the event that a final judicial determination is made that such action brought by the Indemnitee was frivolous or not made in good faith.
   
6. Partial Indemnity . If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for a portion of any Losses in respect of a Claim related to an Indemnifiable Event but not for the total amount thereof, the Company shall nevertheless indemnify the Indemnitee for the portion thereof to which the Indemnitee is entitled.
   
7. Notification and Defense of Claims .

 

  (a) Notification of Claims . The Indemnitee shall notify the Company in writing as soon as practicable of any Claim which could relate to an Indemnifiable Event or for which the Indemnitee could seek Expense Advances, including a brief description (based upon information then available to the Indemnitee) of the nature of, and the facts underlying, such Claim. The failure by the Indemnitee to timely notify the Company hereunder shall not relieve the Company from any liability hereunder unless the Company’s ability to participate in the defense of such claim was materially and adversely affected by such failure/except that the Company shall not be liable to indemnify the Indemnitee under this Agreement with respect to any judicial award in a Claim related to an Indemnifiable Event if the Company was not given a reasonable and timely opportunity to participate at its expense in the defense of such action. If at the time of the receipt of such notice, the Company has directors’ and officers’ liability insurance in effect under which coverage for Claims related to Indemnifiable Events is potentially available, the Company shall give prompt written notice to the applicable insurers in accordance with the procedures set forth in the applicable policies. The Company shall provide to the Indemnitee a copy of such notice delivered to the applicable insurers, and copies of all subsequent correspondence between the Company and such insurers regarding the Claim, in each case substantially concurrently with the delivery or receipt thereof by the Company.

 

 
- 5 -

 

  (b) Defense of Claims . The Company shall be entitled to participate in the defense of any Claim relating to an Indemnifiable Event at its own expense and, except as otherwise provided below, to the extent the Company so wishes, it may assume the defense thereof with counsel reasonably satisfactory to the Indemnitee. After notice from the Company to the Indemnitee of its election to assume the defense of any such Claim, the Company shall not be liable to the Indemnitee under this Agreement or otherwise for any Expenses subsequently directly incurred by the Indemnitee in connection with the Indemnitee’s defense of such Claim other than reasonable costs of investigation or as otherwise provided below. The Indemnitee shall have the right to employ its own legal counsel in such Claim, but all Expenses related to such counsel incurred after notice from the Company of its assumption of the defense shall be at the Indemnitee’s own expense; provided, however, that if (i) the Indemnitee’s employment of its own legal counsel has been authorized by the Company, (ii) the Indemnitee has reasonably determined that there may be a conflict of interest between the Indemnitee and the Company in the defense of such Claim, (iii) after a Change in Control, the Indemnitee’s employment of its own counsel has been approved by the Independent Counsel or (iv) the Company shall not in fact have employed counsel to assume the defense of such Claim, then the Indemnitee shall be entitled to retain its own separate counsel (but not more than one law firm plus, if applicable, local counsel in respect of any such Claim) and all Expenses related to such separate counsel shall be borne by the Company.
     
8. Procedure upon Application for Indemnification . In order to obtain indemnification pursuant to this Agreement, the Indemnitee shall submit to the Company a written request therefor, including in such request such documentation and information as is reasonably available to the Indemnitee and is reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification following the final disposition of the Claim, provided that documentation and information need not be so provided to the extent that the provision thereof would undermine or otherwise jeopardize attorney-client privilege. Indemnification shall be made insofar as the Company determines the Indemnitee is entitled to indemnification in accordance with Section 0 below.
     
9. Determination of Right to Indemnification .

 

  (a) Mandatory Indemnification; Indemnification as a Witness .
       
    (i) To the extent that the Indemnitee shall have been successful on the merits or otherwise in defense of any Claim relating to an Indemnifiable Event or any portion thereof or in defense of any issue or matter therein, including without limitation dismissal without prejudice, the Indemnitee shall be indemnified against all Losses relating to such Claim in accordance with Section 0 to the fullest extent allowable by law, and no Standard of Conduct Determination (as defined in Section 0) shall be required.

 

 
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    (ii) To the extent that the Indemnitee’s involvement in a Claim relating to an Indemnifiable Event is to prepare to serve and serve as a witness, and not as a party, the Indemnitee shall be indemnified against all Losses incurred in connection therewith to the fullest extent allowable by law
and no Standard of Conduct Determination (as defined in Section 9(b)) shall be required.
       
  (b) Standard of Conduct . To the extent that the provisions of Section 0 are inapplicable to a Claim related to an Indemnifiable Event that shall have been finally disposed of, any determination of whether the Indemnitee has satisfied any applicable standard of conduct under Nevada law that is a legally required condition to indemnification of the Indemnitee hereunder against Losses relating to such Claim and any determination that Expense Advances must be repaid to the Company (a “ Standard of Conduct Determination ”) shall be made as follows:
       
    (i) if no Change in Control has occurred, (A) by a majority vote of the Disinterested Directors, even if less than a quorum of the Board, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum or (C) if there are no such Disinterested Directors, by Independent Counsel in a written opinion addressed to the Board, a copy of which shall be delivered to the Indemnitee; and
       
    (ii) if a Change in Control shall have occurred, (A) if the Indemnitee so requests in writing, by a majority vote of the Disinterested Directors, even if less than a quorum of the Board or (B) otherwise, by Independent Counsel in a written opinion addressed to the Board, a copy of which shall be delivered to the Indemnitee.
       
    The Company shall indemnify and hold harmless the Indemnitee against and, if requested by the Indemnitee, shall reimburse the Indemnitee for, or advance to the Indemnitee, within 60 days of such request, any and all Expenses incurred by the Indemnitee in cooperating with the person or persons making such Standard of Conduct Determination.
       
  (c) Making the Standard of Conduct Determination . The Company shall use its reasonable best efforts to cause any Standard of Conduct Determination required under Section 0 to be made as promptly as practicable. If the person or persons designated to make the Standard of Conduct Determination under Section 0 shall not have made a determination within 30 days after the later of (A) receipt by the Company of a written request from the Indemnitee for indemnification pursuant to Section 0 (the date of such receipt being the “ Notification Date ”) and (B) the selection of an Independent Counsel, if such determination is to be made by Independent Counsel, then the Indemnitee shall be deemed to have satisfied the applicable standard of conduct; provided that such 30-day period may be extended for a reasonable time, not to exceed an additional 30 days, if the person or persons making such determination in good faith requires such additional time to obtain or evaluate information relating thereto. Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement of the Indemnitee to indemnification under this Agreement shall be required to be made prior to the final disposition of any Claim.

 

 
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  (d) Payment of Indemnification . If, in regard to any Losses:
       
    (i) the Indemnitee shall be entitled to indemnification pursuant to Section 0;
       
    (ii) no Standard Conduct Determination is legally required as a condition to indemnification of the Indemnitee hereunder; or
       
    (iii) the Indemnitee has been determined or deemed pursuant to Section 0 or Section 0 to have satisfied the Standard of Conduct Determination,
       
    then the Company shall pay to the Indemnitee, within ten days after the later of (A) the Notification Date or (B) the earliest date on which the applicable criterion specified in clause (i), (ii) or (iii) is satisfied, an amount equal to such Losses.
       
  (e) Selection of Independent Counsel for Standard of Conduct Determination . If a Standard of Conduct Determination is to be made by Independent Counsel pursuant to Section 0, the Independent Counsel shall be selected by the Board of Directors, and the Company shall give written notice to the Indemnitee advising him of the identity of the Independent Counsel so selected. If a Standard of Conduct Determination is to be made by Independent Counsel pursuant to Section 0, the Independent Counsel shall be selected by the Indemnitee, and the Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either case, the Indemnitee or the Company, as applicable, may, within five days after receiving written notice of selection from the other, deliver to the other a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not satisfy the criteria set forth in the definition of “ Independent Counsel ” in Section 0, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person or firm so selected shall act as Independent Counsel. If such written objection is properly and timely made and substantiated, (i) the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit; and (ii) the non-objecting party may, at its option, select an alternative Independent Counsel and give written notice to the other party advising such other party of the identity of the alternative Independent Counsel so selected, in which case the provisions of the two immediately preceding sentences, the introductory clause of this sentence and numbered clause (i) of this sentence shall apply to such subsequent selection and notice. If applicable, the provisions of clause (ii) of the immediately preceding sentence shall apply to successive alternative selections. If no Independent Counsel that is permitted under the foregoing provisions of this Section 0 to make the Standard of Conduct Determination shall have been selected within 20 days after the Company gives its initial notice pursuant to the first sentence of this Section 0 or the Indemnitee gives its initial notice pursuant to the second sentence of this Section 0, as the case may be, either the Company or the Indemnitee may petition a court in Nevada (the “ Court ”) to resolve any objection which shall have been made by the Company or the Indemnitee to the other’s selection of Independent Counsel and/or to appoint as Independent Counsel a person to be selected by the Court or such other person as the Court shall designate, and the person or firm with respect to whom all objections are so resolved or the person or firm so appointed will act as Independent Counsel. In all events, the Company shall pay all of the reasonable fees and expenses of the Independent Counsel incurred in connection with the Independent Counsel’s determination pursuant to Section 0.

 

 
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  (f) Presumptions and Defenses .
       
    (i) Indemnitee’s Entitlement to Indemnification . In making any Standard of Conduct Determination, the person or persons making such determination shall presume that the Indemnitee has satisfied the applicable standard of conduct and is entitled to indemnification, and the Company shall have the burden of proof to overcome that presumption and establish that the Indemnitee is not so entitled. Any Standard of Conduct Determination that is adverse to the Indemnitee may be challenged by the Indemnitee in the Court. No determination by the Company (including by its directors or any Independent Counsel) that the Indemnitee has not satisfied any applicable standard of conduct may be used as a defense to any legal proceedings brought by the Indemnitee to secure indemnification or reimbursement or advance payment of Expenses by the Company hereunder or create a presumption that the Indemnitee has not met any applicable standard of conduct.
       
    (ii) Reliance as a Safe Harbor . For purposes of this Agreement, and without creating any presumption as to a lack of good faith if the following circumstances do not exist, the Indemnitee shall be deemed to have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company if the Indemnitee’s actions or omissions to act are taken in good faith reliance upon the records of the Company, including its financial statements, or upon information, opinions, reports or statements furnished to the Indemnitee by the officers or employees of the Company or any of its subsidiaries in the course of their duties, or by committees of the Board or by any other Person (including legal counsel, accountants and financial advisors) as to matters the Indemnitee reasonably believes are within such other Person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Company. In addition, the knowledge and/or actions, or failures to act, of any director, officer, agent or employee of the Company shall not be imputed to the Indemnitee for purposes of determining the right to indemnity hereunder.

 

 
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    (iii) No Other Presumptions . For purposes of this Agreement, the termination of any Claim by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere or its equivalent, will not create a presumption that the Indemnitee did not meet any applicable standard of conduct or have any particular belief, or that indemnification hereunder is otherwise not permitted.
       
    (iv) Defense to Indemnification and Burden of Proof . It shall be a defense to any action brought by the Indemnitee against the Company to enforce this Agreement (other than an action brought to enforce a claim for Losses incurred in defending against a Claim related to an Indemnifiable Event in advance of its final disposition) that it is not permissible under applicable law for the Company to indemnify the Indemnitee for the amount claimed. In connection with any such action or any related Standard of Conduct Determination, the burden of proving such a defense or that the Indemnitee did not satisfy the applicable standard of conduct shall be on the Company.
       
    (v) Resolution of Claims . The Company acknowledges that a settlement or other disposition short of final judgment may be successful on the merits or otherwise for purposes of Section 0 if it permits a party to avoid expense, delay, distraction, disruption and uncertainty. In the event that any Claim relating to an Indemnifiable Event to which the Indemnitee is a party is resolved in any manner other than by adverse judgment against the Indemnitee (including, without limitation, settlement of such action, claim or proceeding with our without payment of money or other consideration) it shall be presumed that the Indemnitee has been successful on the merits or otherwise for purposes of Section 0. The Company shall have the burden of proof to overcome this presumption.

 

10. Exclusions from Indemnification . Notwithstanding anything in this Agreement to the contrary, the Company shall not be obligated to:
       
  (a) indemnify or advance funds to the Indemnitee for Expenses or Losses with respect to proceedings initiated by the Indemnitee, including any proceedings against the Company or its directors, officers, employees or other indemnitees and not by way of defense, except:
       
    (i) proceedings referenced in Section 0 above (unless a court of competent jurisdiction determines that each of the material assertions made by the Indemnitee in such proceeding was not made in good faith or was frivolous); or

 

 
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    (ii) where the Company has joined in or the Board has consented to the initiation of such proceedings;
       
  (b) indemnify the Indemnitee if a final decision by a court of competent jurisdiction determines that such indemnification is prohibited by applicable law;
       
  (c) indemnify the Indemnitee for the disgorgement of profits arising from the purchase or sale by the Indemnitee of securities of the Company in violation of Section 16(b) of the Exchange Act, or any similar successor statute; and
     
  (d) indemnify or advance funds to the Indemnitee for the Indemnitee’s reimbursement to the Company of any bonus or other incentive-based or equity-based compensation previously received by the Indemnitee or payment of any profits realized by the Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements under Section 304 of the Sarbanes-Oxley Act of 2002 in connection with an accounting restatement of the Company or the payment to the Company of profits arising from the purchase or sale by the Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act ).

 

11. Settlement of Claims . The Company shall not be liable to the Indemnitee under this Agreement for any amounts paid in settlement of any threatened or pending Claim related to an Indemnifiable Event effected without the Company’s prior written consent, which shall not be unreasonably withheld; provided, however, that if a Change in Control has occurred, the Company shall be liable for indemnification of the Indemnitee for amounts paid in settlement if an Independent Counsel has approved the settlement. The Company shall not settle any Claim related to an Indemnifiable Event in any manner that would impose any Losses on the Indemnitee without the Indemnitee’s prior written consent.
   
12. Duration . All agreements and obligations of the Company contained herein shall continue during the period that the Indemnitee is a director or officer of the Company (or is serving at the request of the Company as a director, officer, employee, member, trustee or agent of another Enterprise) and shall continue thereafter (i) so long as the Indemnitee may be subject to any possible Claim relating to an Indemnifiable Event (including any rights of appeal thereto) and (ii) throughout the pendency of any proceeding (including any rights of appeal thereto) commenced by the Indemnitee to enforce or interpret his or her rights under this Agreement, even if, in either case, he or she may have ceased to serve in such capacity at the time of any such Claim or proceeding.
   
13. Non-Exclusivity . The rights of the Indemnitee hereunder will be in addition to any other rights the Indemnitee may have under the Constituent Documents, the general corporate law of the State of Nevada, any other contract or otherwise (collectively, “ Other Indemnity Provisions ”); provided, however, that (a) to the extent that the Indemnitee otherwise would have any greater right to indemnification under any Other Indemnity Provision, the Indemnitee will be deemed to have such greater right hereunder and (b) to the extent that any change is made to any Other Indemnity Provision which permits any greater right to indemnification than that provided under this Agreement as of the date hereof, the Indemnitee will be deemed to have such greater right hereunder. The Company will not adopt any amendment to any of the Constituent Documents the effect of which would be to deny, diminish or encumber the Indemnitee’s right to indemnification under this Agreement or any Other Indemnity Provision.

 

 
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14. Liability Insurance . For the duration of the Indemnitee’s service as a director and/or officer of the Company, and thereafter for so long as the Indemnitee shall be subject to any pending Claim relating to an Indemnifiable Event, the Company shall use commercially reasonable efforts (taking into account the scope and amount of coverage available relative to the cost thereof) to continue to maintain in effect policies of directors’ and officers’ liability insurance providing coverage that is at least substantially comparable in scope and amount to that provided by the Company’s current policies of directors’ and officers’ liability insurance. In all policies of directors’ and officers’ liability insurance maintained by the Company, the Indemnitee shall be named as an insured in such a manner as to provide the Indemnitee the same rights and benefits as are provided to the most favorably insured of the Company’s directors, if the Indemnitee is a director, or of the Company’s officers, if the Indemnitee is an officer (and not a director) by such policy. Upon request, the Company will provide to the Indemnitee copies of all directors’ and officers’ liability insurance applications, binders, policies, declarations, endorsements and other related materials.
   
15. No Duplication of Payments . The Company shall not be liable under this Agreement to make any payment to the Indemnitee in respect of any Losses to the extent the Indemnitee has otherwise received payment under any insurance policy, the Constituent Documents, Other Indemnity Provisions or otherwise of the amounts otherwise indemnifiable by the Company hereunder.
   
16. Subrogation . In the event of payment to the Indemnitee under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee. The Indemnitee shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.
   
17. Amendments . No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be binding unless in the form of a writing signed by the party against whom enforcement of the waiver is sought, and no such waiver shall operate as a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver. Except as specifically provided herein, no failure to exercise or any delay in exercising any right or remedy hereunder shall constitute a waiver thereof.
   
18. Binding Effect . This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company), assigns, spouses, heirs and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part of the business and/or assets of the Company, by written agreement in form and substances satisfactory to the Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

 

 
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19. Severability . The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any portion thereof) are held by a court of competent jurisdiction to be invalid, illegal, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.
   
20. Notices . All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand, against receipt, or mailed, by postage prepaid, certified or registered mail:

 

  (a) if to the Indemnitee, to the address set forth on the signature page hereto.
     
  (b) if to the Company, to:

 

AppCoin Innovations Inc.
561 Indiana Court
Venice Beach, CA 90291

Attention: Michael Blum
Email: Michael.blum@appcoininnovations.com

 

Notice of change of address shall be effective only when given in accordance with this Section. All notices complying with this Section shall be deemed to have been received on the date of hand delivery or on the third business day after mailing.

 

21. Governing Law and Forum . This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Nevada applicable to contracts made and to be performed in such state without giving effect to its principles of conflicts of laws.
   
22. Headings . The headings of the sections and paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction or interpretation thereof.
   
23. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original, but all of which together shall constitute one and the same Agreement.

 

 
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

APPCOIN INNOVATIONS INC.

Per: /s/Michael Blum  
Name: Michael Blum  
Title: CFO  

 

INDEMNITEE

 

  /s/ James Geiskopf  
Name: James Geiskopf  
     
Address: 3250 Oakland Hills Court  
  Fairfield, California 94534  
     

 

 
 

 

 

INDEMNIFICATION AGREEMENT

 

This Indemnification Agreement (“ Agreement ”), dated as of December 20, 2017, is by and between APPCOIN INNOVATIONS INC. , a Nevada corporation (the “ Company ”) and Cameron Chell (the “ Indemnitee ”).

 

WHEREAS:

 

A. The Indemnitee is a director and/or an officer of the Company;

 

B. Both the Company and the Indemnitee recognize the increased risk of litigation and other claims being asserted against directors and officers of public companies;

 

C. The board of directors of the Company (the “ Board ”) has determined that enhancing the ability of the Company to retain and attract as directors and officers the most capable persons is in the best interests of the Company and that the Company therefore should seek to assure such persons that indemnification and insurance coverage is available; and

 

D. In recognition of the need to provide the Indemnitee with substantial protection against personal liability, in order to procure the Indemnitee’s continued service as a director and/or officer of the Company and to enhance the Indemnitee’s ability to serve the Company in an effective manner, and in order to provide such protection pursuant to express contract rights (intended to be enforceable irrespective of, among other things, any amendment to the Company’s certificate of incorporation or bylaws (collectively, the “ Constituent Documents ”), any change in the composition of the Board or any change in control or business combination transaction relating to the Company), the Company wishes to provide in this Agreement for the indemnification of, and the advancement of Expenses (as defined in Section 0 below) to, Indemnitee as set forth in this Agreement and to the extent insurance is maintained for the continued coverage of Indemnitee under the Company’s directors’ and officers’ liability insurance policies.

 

NOW, THEREFORE, in consideration of the foregoing and the Indemnitee’s agreement to continue to provide services to the Company, the parties agree as follows:

 

1. Definitions . For purposes of this Agreement, the following terms shall have the following meanings:
       
  (a) Beneficial Owner ” has the meaning given to the term “beneficial owner” in Rule 13d-3 under the Securities Exchange Act of 1934 , as amended (the “ Exchange Act ”).
     
  (b) Change in Control ” means the occurrence after the date of this Agreement of any of the following events:
       
    (i) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 20% or more of the Company’s then outstanding Voting Securities unless the change in relative Beneficial Ownership of the Company’s securities by any Person results solely from a reduction in the aggregate number of outstanding shares of securities entitled to vote generally in the election of directors;

 

 
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    (ii) the consummation of a reorganization, merger or consolidation, unless immediately following such reorganization, merger or consolidation, all of the Beneficial Owners of the Voting Securities of the Company immediately prior to such transaction beneficially own, directly or indirectly, more than 50% of the combined voting power of the outstanding Voting Securities of the entity resulting from such transaction;
       
    (iii) during any period of two consecutive years, not including any period prior to the execution of this Agreement, individuals who at the beginning of such period constituted the Board (including for this purpose any new directors whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved) cease for any reason to constitute at least a majority of the Board; or
       
    (iv) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets.
       
  (c) Claim ” means:
       
    (i) any threatened, pending or completed action, suit, proceeding or alternative dispute resolution mechanism, whether civil, criminal, administrative, arbitrative, investigative or other, and whether made pursuant to federal, state or other law; or
       
    (ii) any inquiry, hearing or investigation that the Indemnitee determines might lead to the institution of any such action, suit, proceeding or alternative dispute resolution mechanism.
       
  (d) Court ” shall have the meaning ascribed to it in Section 0 below.
     
  (e) Disinterested Director ” means a director of the Company who is not and was not a party to the Claim in respect of which indemnification is sought by Indemnitee.
     
  (f) Expenses ” means any and all expenses, including reasonable attorneys’ and experts’ fees, court costs, transcript costs, travel expenses, duplicating, printing and binding costs, telephone charges, and all other costs and expenses incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness or participate in, any Claim. Expenses also shall include (i) Expenses incurred in connection with any appeal resulting from any Claim, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent, and (ii) for purposes of Section 0 only, Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement, by litigation or otherwise. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.

 

 
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  (g) Expense Advance ” means any payment of Expenses advanced to Indemnitee by the Company pursuant to Section 0 or Section 0 hereof.
     
  (h) Indemnifiable Event ” means any event or occurrence, whether occurring before, on or after the date of this Agreement, related to the fact that Indemnitee is or was a director, officer, employee or agent of the Company or any subsidiary of the Company, or is or was serving at the request of the Company as a director, officer, employee, member, manager, trustee or agent of any other corporation, limited liability company, partnership, joint venture, trust or other entity or enterprise (collectively with the Company, “ Enterprise ”) or by reason of an action or inaction by Indemnitee in any such capacity (whether or not serving in such capacity at the time any Loss is incurred for which indemnification can be provided under this Agreement).
     
  (i) Independent Counsel ” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently performs, nor in the past two (2) years has performed, services for either: (i) the Company or Indemnitee (other than in connection with matters concerning Indemnitee under this Agreement or of other indemnitees under similar agreements) or (ii) any other party to the Claim giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or the Indemnitee in an action to determine the Indemnitee’s rights under this Agreement.
     
  (j) Losses ” means any and all Expenses, damages, losses, liabilities, judgments, fines, penalties (whether civil, criminal or other), ERISA excise taxes, amounts paid or payable in settlement, including any interest, assessments, any federal, state, local or foreign taxes imposed as a result of the actual or deemed receipt of any payments under this Agreement and all other charges paid or payable in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness or participate in, any Claim.
     
  (k) Person ” means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity or other entity and includes the meaning set forth in Sections 13(d) and 14(d) of the Exchange Act.

 

 
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  (l) Standard of Conduct Determination ” shall have the meaning ascribed to it in Section 0 below.
     
  (m) Voting Securities ” means any securities of the Company that vote generally in the election of directors.

 

2. Services to the Company . The Indemnitee agrees to continue to serve as a director or officer of the Company for so long as the Indemnitee is duly elected or appointed or until the Indemnitee tenders his resignation or is no longer serving in such capacity. This Agreement shall not be deemed an employment agreement between the Company (or any of its subsidiaries or Enterprise) and the Indemnitee. The Indemnitee specifically acknowledges that his employment with or service to the Company or any of its subsidiaries or Enterprise, as applicable, is at will and the Indemnitee may be discharged at any time for any reason, with or without cause, except as may be otherwise provided in any written employment agreement between the Indemnitee and the Company (or any of its subsidiaries or Enterprise), other applicable formal severance policies duly adopted by the Board or, with respect to service as a director or officer of the Company, by the Company’s Constituent Documents or Nevada law. This Agreement shall continue in force after the Indemnitee has ceased to serve as a director or officer of the Company or, at the request of the Company, of any of its subsidiaries or Enterprise, as provided in Section 0 hereof.
   
3. Indemnification . Subject to Section 0 and Section 0 of this Agreement, the Company shall indemnify the Indemnitee, to the fullest extent permitted by the laws of the State of Nevada in effect on the date hereof, or as such laws may from time to time hereafter be amended to increase the scope of such permitted indemnification, against any and all Losses if the Indemnitee was or is or becomes a party to or participant in, or is threatened to be made a party to or participant in, any Claim by reason of or arising in part out of an Indemnifiable Event, including, without limitation, Claims brought by or in the right of the Company, Claims brought by third parties, and Claims in which the Indemnitee is solely a witness.
   
4. Advancement of Expenses . The Indemnitee shall have the right to advancement by the Company, prior to the final disposition of any Claim by final adjudication to which there are no further rights of appeal, of any and all Expenses actually and reasonably paid or incurred by the Indemnitee in connection with any Claim arising out of an Indemnifiable Event. The Indemnitee’s right to such advancement is not subject to the satisfaction of any standard of conduct. Without limiting the generality or effect of the foregoing, within 60 days after any request by the Indemnitee, the Company shall, in accordance with such request, (a) pay such Expenses on behalf of the Indemnitee, (b) advance to the Indemnitee funds in an amount sufficient to pay such Expenses, or (c) reimburse the Indemnitee for such Expenses. In connection with any request for Expense Advances, the Indemnitee shall not be required to provide any documentation or information to the extent that the provision thereof would undermine or otherwise jeopardize attorney-client privilege. In connection with any request for Expense Advances, the Indemnitee shall execute and deliver to the Company an undertaking (which shall be accepted without reference to the Indemnitee’s ability to repay the Expense Advances) to repay any amounts paid, advanced, or reimbursed by the Company for such Expenses to the extent that it is ultimately determined, following the final disposition of such Claim, that the Indemnitee is not entitled to indemnification hereunder. The Indemnitee’s obligation to reimburse the Company for Expense Advances shall be unsecured and no interest shall be charged thereon.

 

 
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5. Indemnification for Expenses in Enforcing Rights . To the fullest extent allowable under applicable law, the Company shall also indemnify against, and, if requested by the Indemnitee, shall advance to the Indemnitee subject to and in accordance with Section 0, any Expenses actually and reasonably paid or incurred by the Indemnitee in connection with any action or proceeding by the Indemnitee for (a) indemnification or reimbursement or advance payment of Expenses by the Company under any provision of this Agreement, or under any other agreement or provision of the Constituent Documents now or hereafter in effect relating to Claims relating to Indemnifiable Events, and/or (b) recovery under any directors’ and officers’ liability insurance policies maintained by the Company. However, in the event that the Indemnitee is ultimately determined not to be entitled to such indemnification or insurance recovery, as the case may be, then all amounts advanced under this Section 0 shall be repaid. The Indemnitee shall be required to reimburse the Company in the event that a final judicial determination is made that such action brought by the Indemnitee was frivolous or not made in good faith.
   
6. Partial Indemnity . If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for a portion of any Losses in respect of a Claim related to an Indemnifiable Event but not for the total amount thereof, the Company shall nevertheless indemnify the Indemnitee for the portion thereof to which the Indemnitee is entitled.
   
7. Notification and Defense of Claims .

 

  (a) Notification of Claims . The Indemnitee shall notify the Company in writing as soon as practicable of any Claim which could relate to an Indemnifiable Event or for which the Indemnitee could seek Expense Advances, including a brief description (based upon information then available to the Indemnitee) of the nature of, and the facts underlying, such Claim. The failure by the Indemnitee to timely notify the Company hereunder shall not relieve the Company from any liability hereunder unless the Company’s ability to participate in the defense of such claim was materially and adversely affected by such failure/except that the Company shall not be liable to indemnify the Indemnitee under this Agreement with respect to any judicial award in a Claim related to an Indemnifiable Event if the Company was not given a reasonable and timely opportunity to participate at its expense in the defense of such action. If at the time of the receipt of such notice, the Company has directors’ and officers’ liability insurance in effect under which coverage for Claims related to Indemnifiable Events is potentially available, the Company shall give prompt written notice to the applicable insurers in accordance with the procedures set forth in the applicable policies. The Company shall provide to the Indemnitee a copy of such notice delivered to the applicable insurers, and copies of all subsequent correspondence between the Company and such insurers regarding the Claim, in each case substantially concurrently with the delivery or receipt thereof by the Company.

 

 
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  (b) Defense of Claims . The Company shall be entitled to participate in the defense of any Claim relating to an Indemnifiable Event at its own expense and, except as otherwise provided below, to the extent the Company so wishes, it may assume the defense thereof with counsel reasonably satisfactory to the Indemnitee. After notice from the Company to the Indemnitee of its election to assume the defense of any such Claim, the Company shall not be liable to the Indemnitee under this Agreement or otherwise for any Expenses subsequently directly incurred by the Indemnitee in connection with the Indemnitee’s defense of such Claim other than reasonable costs of investigation or as otherwise provided below. The Indemnitee shall have the right to employ its own legal counsel in such Claim, but all Expenses related to such counsel incurred after notice from the Company of its assumption of the defense shall be at the Indemnitee’s own expense; provided, however, that if (i) the Indemnitee’s employment of its own legal counsel has been authorized by the Company, (ii) the Indemnitee has reasonably determined that there may be a conflict of interest between the Indemnitee and the Company in the defense of such Claim, (iii) after a Change in Control, the Indemnitee’s employment of its own counsel has been approved by the Independent Counsel or (iv) the Company shall not in fact have employed counsel to assume the defense of such Claim, then the Indemnitee shall be entitled to retain its own separate counsel (but not more than one law firm plus, if applicable, local counsel in respect of any such Claim) and all Expenses related to such separate counsel shall be borne by the Company.
     
8. Procedure upon Application for Indemnification . In order to obtain indemnification pursuant to this Agreement, the Indemnitee shall submit to the Company a written request therefor, including in such request such documentation and information as is reasonably available to the Indemnitee and is reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification following the final disposition of the Claim, provided that documentation and information need not be so provided to the extent that the provision thereof would undermine or otherwise jeopardize attorney-client privilege. Indemnification shall be made insofar as the Company determines the Indemnitee is entitled to indemnification in accordance with Section 0 below.
   
9. Determination of Right to Indemnification .

 

  (a) Mandatory Indemnification; Indemnification as a Witness .
       
    (i) To the extent that the Indemnitee shall have been successful on the merits or otherwise in defense of any Claim relating to an Indemnifiable Event or any portion thereof or in defense of any issue or matter therein, including without limitation dismissal without prejudice, the Indemnitee shall be indemnified against all Losses relating to such Claim in accordance with Section 0 to the fullest extent allowable by law, and no Standard of Conduct Determination (as defined in Section 0) shall be required.

 

 
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    (ii) To the extent that the Indemnitee’s involvement in a Claim relating to an Indemnifiable Event is to prepare to serve and serve as a witness, and not as a party, the Indemnitee shall be indemnified against all Losses incurred in connection therewith to the fullest extent allowable by law and no Standard of Conduct Determination (as defined in Section 0) shall be required.
       
  (b) Standard of Conduct . To the extent that the provisions of Section 0 are inapplicable to a Claim related to an Indemnifiable Event that shall have been finally disposed of, any determination of whether the Indemnitee has satisfied any applicable standard of conduct under Nevada law that is a legally required condition to indemnification of the Indemnitee hereunder against Losses relating to such Claim and any determination that Expense Advances must be repaid to the Company (a “ Standard of Conduct Determination ”) shall be made as follows:
       
    (i) if no Change in Control has occurred, (A) by a majority vote of the Disinterested Directors, even if less than a quorum of the Board, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum or (C) if there are no such Disinterested Directors, by Independent Counsel in a written opinion addressed to the Board, a copy of which shall be delivered to the Indemnitee; and
       
    (ii) if a Change in Control shall have occurred, (A) if the Indemnitee so requests in writing, by a majority vote of the Disinterested Directors, even if less than a quorum of the Board or (B) otherwise, by Independent Counsel in a written opinion addressed to the Board, a copy of which shall be delivered to the Indemnitee.

 

The Company shall indemnify and hold harmless the Indemnitee against and, if requested by the Indemnitee, shall reimburse the Indemnitee for, or advance to the Indemnitee, within 60 days of such request, any and all Expenses incurred by the Indemnitee in cooperating with the person or persons making such Standard of Conduct Determination.

 

  (c) Making the Standard of Conduct Determination . The Company shall use its reasonable best efforts to cause any Standard of Conduct Determination required under Section 0 to be made as promptly as practicable. If the person or persons designated to make the Standard of Conduct Determination under Section 0 shall not have made a determination within 30 days after the later of (A) receipt by the Company of a written request from the Indemnitee for indemnification pursuant to Section 0 (the date of such receipt being the “ Notification Date ”) and (B) the selection of an Independent Counsel, if such determination is to be made by Independent Counsel, then the Indemnitee shall be deemed to have satisfied the applicable standard of conduct; provided that such 30-day period may be extended for a reasonable time, not to exceed an additional 30 days, if the person or persons making such determination in good faith requires such additional time to obtain or evaluate information relating thereto. Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement of the Indemnitee to indemnification under this Agreement shall be required to be made prior to the final disposition of any Claim.

 

 
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  (d) Payment of Indemnification . If, in regard to any Losses:

 

  (i) the Indemnitee shall be entitled to indemnification pursuant to Section 0;
     
  (ii) no Standard Conduct Determination is legally required as a condition to indemnification of the Indemnitee hereunder; or
     
  (iii) the Indemnitee has been determined or deemed pursuant to Section 0 or Section 0 to have satisfied the Standard of Conduct Determination,

 

then the Company shall pay to the Indemnitee, within ten days after the later of (A) the Notification Date or (B) the earliest date on which the applicable criterion specified in clause (i), (ii) or (iii) is satisfied, an amount equal to such Losses.

 

  (e) Selection of Independent Counsel for Standard of Conduct Determination . If a Standard of Conduct Determination is to be made by Independent Counsel pursuant to Section 0, the Independent Counsel shall be selected by the Board of Directors, and the Company shall give written notice to the Indemnitee advising him of the identity of the Independent Counsel so selected. If a Standard of Conduct Determination is to be made by Independent Counsel pursuant to Section 0, the Independent Counsel shall be selected by the Indemnitee, and the Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either case, the Indemnitee or the Company, as applicable, may, within five days after receiving written notice of selection from the other, deliver to the other a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not satisfy the criteria set forth in the definition of “ Independent Counsel ” in Section 0, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person or firm so selected shall act as Independent Counsel. If such written objection is properly and timely made and substantiated, (i) the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit; and (ii) the non-objecting party may, at its option, select an alternative Independent Counsel and give written notice to the other party advising such other party of the identity of the alternative Independent Counsel so selected, in which case the provisions of the two immediately preceding sentences, the introductory clause of this sentence and numbered clause (i) of this sentence shall apply to such subsequent selection and notice. If applicable, the provisions of clause (ii) of the immediately preceding sentence shall apply to successive alternative selections. If no Independent Counsel that is permitted under the foregoing provisions of this Section 0 to make the Standard of Conduct Determination shall have been selected within 20 days after the Company gives its initial notice pursuant to the first sentence of this Section 0 or the Indemnitee gives its initial notice pursuant to the second sentence of this Section 0, as the case may be, either the Company or the Indemnitee may petition a court in Nevada (the “ Court ”) to resolve any objection which shall have been made by the Company or the Indemnitee to the other’s selection of Independent Counsel and/or to appoint as Independent Counsel a person to be selected by the Court or such other person as the Court shall designate, and the person or firm with respect to whom all objections are so resolved or the person or firm so appointed will act as Independent Counsel. In all events, the Company shall pay all of the reasonable fees and expenses of the Independent Counsel incurred in connection with the Independent Counsel’s determination pursuant to Section 0.
     
  (f) Presumptions and Defenses .

 

  (i) Indemnitee’s Entitlement to Indemnification . In making any Standard of Conduct Determination, the person or persons making such determination shall presume that the Indemnitee has satisfied the applicable standard of conduct and is entitled to indemnification, and the Company shall have the burden of proof to overcome that presumption and establish that the Indemnitee is not so entitled. Any Standard of Conduct Determination that is adverse to the Indemnitee may be challenged by the Indemnitee in the Court. No determination by the Company (including by its directors or any Independent Counsel) that the Indemnitee has not satisfied any applicable standard of conduct may be used as a defense to any legal proceedings brought by the Indemnitee to secure indemnification or reimbursement or advance payment of Expenses by the Company hereunder or create a presumption that the Indemnitee has not met any applicable standard of conduct.
     
  (ii) Reliance as a Safe Harbor . For purposes of this Agreement, and without creating any presumption as to a lack of good faith if the following circumstances do not exist, the Indemnitee shall be deemed to have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company if the Indemnitee’s actions or omissions to act are taken in good faith reliance upon the records of the Company, including its financial statements, or upon information, opinions, reports or statements furnished to the Indemnitee by the officers or employees of the Company or any of its subsidiaries in the course of their duties, or by committees of the Board or by any other Person (including legal counsel, accountants and financial advisors) as to matters the Indemnitee reasonably believes are within such other Person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Company. In addition, the knowledge and/or actions, or failures to act, of any director, officer, agent or employee of the Company shall not be imputed to the Indemnitee for purposes of determining the right to indemnity hereunder.

 

 
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  (iii) No Other Presumptions . For purposes of this Agreement, the termination of any Claim by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere or its equivalent, will not create a presumption that the Indemnitee did not meet any applicable standard of conduct or have any particular belief, or that indemnification hereunder is otherwise not permitted.
     
  (iv) Defense to Indemnification and Burden of Proof . It shall be a defense to any action brought by the Indemnitee against the Company to enforce this Agreement (other than an action brought to enforce a claim for Losses incurred in defending against a Claim related to an Indemnifiable Event in advance of its final disposition) that it is not permissible under applicable law for the Company to indemnify the Indemnitee for the amount claimed. In connection with any such action or any related Standard of Conduct Determination, the burden of proving such a defense or that the Indemnitee did not satisfy the applicable standard of conduct shall be on the Company.
     
  (v) Resolution of Claims . The Company acknowledges that a settlement or other disposition short of final judgment may be successful on the merits or otherwise for purposes of Section 0 if it permits a party to avoid expense, delay, distraction, disruption and uncertainty. In the event that any Claim relating to an Indemnifiable Event to which the Indemnitee is a party is resolved in any manner other than by adverse judgment against the Indemnitee (including, without limitation, settlement of such action, claim or proceeding with our without payment of money or other consideration) it shall be presumed that the Indemnitee has been successful on the merits or otherwise for purposes of Section 0. The Company shall have the burden of proof to overcome this presumption.

 

10. Exclusions from Indemnification . Notwithstanding anything in this Agreement to the contrary, the Company shall not be obligated to:
       
  (a) indemnify or advance funds to the Indemnitee for Expenses or Losses with respect to proceedings initiated by the Indemnitee, including any proceedings against the Company or its directors, officers, employees or other indemnitees and not by way of defense, except:
       
    (i) proceedings referenced in Section 0 above (unless a court of competent jurisdiction determines that each of the material assertions made by the Indemnitee in such proceeding was not made in good faith or was frivolous); or

 

 
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    (ii) where the Company has joined in or the Board has consented to the initiation of such proceedings;
       
  (b) indemnify the Indemnitee if a final decision by a court of competent jurisdiction determines that such indemnification is prohibited by applicable law;
     
  (c) indemnify the Indemnitee for the disgorgement of profits arising from the purchase or sale by the Indemnitee of securities of the Company in violation of Section 16(b) of the Exchange Act, or any similar successor statute; and
     
  (d) indemnify or advance funds to the Indemnitee for the Indemnitee’s reimbursement to the Company of any bonus or other incentive-based or equity-based compensation previously received by the Indemnitee or payment of any profits realized by the Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements under Section 304 of the Sarbanes-Oxley Act of 2002 in connection with an accounting restatement of the Company or the payment to the Company of profits arising from the purchase or sale by the Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act ).

 

11. Settlement of Claims . The Company shall not be liable to the Indemnitee under this Agreement for any amounts paid in settlement of any threatened or pending Claim related to an Indemnifiable Event effected without the Company’s prior written consent, which shall not be unreasonably withheld; provided, however, that if a Change in Control has occurred, the Company shall be liable for indemnification of the Indemnitee for amounts paid in settlement if an Independent Counsel has approved the settlement. The Company shall not settle any Claim related to an Indemnifiable Event in any manner that would impose any Losses on the Indemnitee without the Indemnitee’s prior written consent.
   
12. Duration . All agreements and obligations of the Company contained herein shall continue during the period that the Indemnitee is a director or officer of the Company (or is serving at the request of the Company as a director, officer, employee, member, trustee or agent of another Enterprise) and shall continue thereafter (i) so long as the Indemnitee may be subject to any possible Claim relating to an Indemnifiable Event (including any rights of appeal thereto) and (ii) throughout the pendency of any proceeding (including any rights of appeal thereto) commenced by the Indemnitee to enforce or interpret his or her rights under this Agreement, even if, in either case, he or she may have ceased to serve in such capacity at the time of any such Claim or proceeding.
   
13. Non-Exclusivity . The rights of the Indemnitee hereunder will be in addition to any other rights the Indemnitee may have under the Constituent Documents, the general corporate law of the State of Nevada, any other contract or otherwise (collectively, “ Other Indemnity Provisions ”); provided, however, that (a) to the extent that the Indemnitee otherwise would have any greater right to indemnification under any Other Indemnity Provision, the Indemnitee will be deemed to have such greater right hereunder and (b) to the extent that any change is made to any Other Indemnity Provision which permits any greater right to indemnification than that provided under this Agreement as of the date hereof, the Indemnitee will be deemed to have such greater right hereunder. The Company will not adopt any amendment to any of the Constituent Documents the effect of which would be to deny, diminish or encumber the Indemnitee’s right to indemnification under this Agreement or any Other Indemnity Provision.

 

 
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14. Liability Insurance . For the duration of the Indemnitee’s service as a director and/or officer of the Company, and thereafter for so long as the Indemnitee shall be subject to any pending Claim relating to an Indemnifiable Event, the Company shall use commercially reasonable efforts (taking into account the scope and amount of coverage available relative to the cost thereof) to continue to maintain in effect policies of directors’ and officers’ liability insurance providing coverage that is at least substantially comparable in scope and amount to that provided by the Company’s current policies of directors’ and officers’ liability insurance. In all policies of directors’ and officers’ liability insurance maintained by the Company, the Indemnitee shall be named as an insured in such a manner as to provide the Indemnitee the same rights and benefits as are provided to the most favorably insured of the Company’s directors, if the Indemnitee is a director, or of the Company’s officers, if the Indemnitee is an officer (and not a director) by such policy. Upon request, the Company will provide to the Indemnitee copies of all directors’ and officers’ liability insurance applications, binders, policies, declarations, endorsements and other related materials.
   
15. No Duplication of Payments . The Company shall not be liable under this Agreement to make any payment to the Indemnitee in respect of any Losses to the extent the Indemnitee has otherwise received payment under any insurance policy, the Constituent Documents, Other Indemnity Provisions or otherwise of the amounts otherwise indemnifiable by the Company hereunder.
   
16. Subrogation . In the event of payment to the Indemnitee under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee. The Indemnitee shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.
   
17. Amendments . No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be binding unless in the form of a writing signed by the party against whom enforcement of the waiver is sought, and no such waiver shall operate as a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver. Except as specifically provided herein, no failure to exercise or any delay in exercising any right or remedy hereunder shall constitute a waiver thereof.

 

 
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18. Binding Effect . This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company), assigns, spouses, heirs and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part of the business and/or assets of the Company, by written agreement in form and substances satisfactory to the Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.
   
19. Severability . The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any portion thereof) are held by a court of competent jurisdiction to be invalid, illegal, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.
   
20. Notices . All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand, against receipt, or mailed, by postage prepaid, certified or registered mail:

 

  (a) if to the Indemnitee, to the address set forth on the signature page hereto.
     
  (b) if to the Company, to:

 

AppCoin Innovations Inc.
561 Indiana Court
Venice Beach, CA 90291

Attention: Michael Blum
Email: Michael.blum@appcoininnovations.com

 

Notice of change of address shall be effective only when given in accordance with this Section. All notices complying with this Section shall be deemed to have been received on the date of hand delivery or on the third business day after mailing.

 

21. Governing Law and Forum . This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Nevada applicable to contracts made and to be performed in such state without giving effect to its principles of conflicts of laws.
   
22. Headings . The headings of the sections and paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction or interpretation thereof.
   
23. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original, but all of which together shall constitute one and the same Agreement.

 

 
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

APPCOIN INNOVATIONS INC.

Per: /s/Michael Blum  
Name: Michael Blum  
Title: CFO  

 

INDEMNITEE

 

  /s/ Cameron Chel  
Name: Cameron Chell  
     
Address: 561 Brooks Avenue  
  Venice Beach, California 90291  

 

 
 

 

 

 

 

INDEMNIFICATION AGREEMENT

 

This Indemnification Agreement (“ Agreement ”), dated as of December 20, 2017, is by and between APPCOIN INNOVATIONS INC. , a Nevada corporation (the “ Company ”) and Michael Blum (the “ Indemnitee ”).

 

WHEREAS:

 

A. The Indemnitee is a director and/or an officer of the Company;

 

B. Both the Company and the Indemnitee recognize the increased risk of litigation and other claims being asserted against directors and officers of public companies;

 

C.    The board of directors of the Company (the “ Board ”) has determined that enhancing the ability of the Company to retain and attract as directors and officers the most capable persons is in the best interests of the Company and that the Company therefore should seek to assure such persons that indemnification and insurance coverage is available; and

 

D. In recognition of the need to provide the Indemnitee with substantial protection against personal liability, in order to procure the Indemnitee’s continued service as a director and/or officer of the Company and to enhance the Indemnitee’s ability to serve the Company in an effective manner, and in order to provide such protection pursuant to express contract rights (intended to be enforceable irrespective of, among other things, any amendment to the Company’s certificate of incorporation or bylaws (collectively, the “ Constituent Documents ”), any change in the composition of the Board or any change in control or business combination transaction relating to the Company), the Company wishes to provide in this Agreement for the indemnification of, and the advancement of Expenses (as defined in Section 1(f) below) to, Indemnitee as set forth in this Agreement and to the extent insurance is maintained for the continued coverage of Indemnitee under the Company’s directors’ and officers’ liability insurance policies.

 

NOW, THEREFORE, in consideration of the foregoing and the Indemnitee’s agreement to continue to provide services to the Company, the parties agree as follows:

 

1. Definitions . For purposes of this Agreement, the following terms shall have the following meanings:

 

  (a) Beneficial Owner ” has the meaning given to the term “beneficial owner” in Rule 13d-3 under the Securities Exchange Act of 1934 , as amended (the “ Exchange Act ”).
     
  (b) Change in Control ” means the occurrence after the date of this Agreement of any of the following events:

 

  (i) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 20% or more of the Company’s then outstanding Voting Securities unless the change in relative Beneficial Ownership of the Company’s securities by any Person results solely from a reduction in the aggregate number of outstanding shares of securities entitled to vote generally in the election of directors;

 

 
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  (ii) the consummation of a reorganization, merger or consolidation, unless immediately following such reorganization, merger or consolidation, all of the Beneficial Owners of the Voting Securities of the Company immediately prior to such transaction beneficially own, directly or indirectly, more than 50% of the combined voting power of the outstanding Voting Securities of the entity resulting from such transaction;
     
  (iii) during any period of two consecutive years, not including any period prior to the execution of this Agreement, individuals who at the beginning of such period constituted the Board (including for this purpose any new directors whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved) cease for any reason to constitute at least a majority of the Board; or
     
  (iv) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets.

 

  (c) Claim ” means:

 

  (i) any threatened, pending or completed action, suit, proceeding or alternative dispute resolution mechanism, whether civil, criminal, administrative, arbitrative, investigative or other, and whether made pursuant to federal, state or other law; or
     
  (ii) any inquiry, hearing or investigation that the Indemnitee determines might lead to the institution of any such action, suit, proceeding or alternative dispute resolution mechanism.

  

  (d) Court ” shall have the meaning ascribed to it in Section 9(e) below.
     
  (e) Disinterested Director ” means a director of the Company who is not and was not a party to the Claim in respect of which indemnification is sought by Indemnitee.
     
  (f) Expenses ” means any and all expenses, including reasonable attorneys’ and experts’ fees, court costs, transcript costs, travel expenses, duplicating, printing and binding costs, telephone charges, and all other costs and expenses incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness or participate in, any Claim. Expenses also shall include (i) Expenses incurred in connection with any appeal resulting from any Claim, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent, and (ii) for purposes of Section 5 only, Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement, by litigation or otherwise. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.

 

 
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  (g) Expense Advance ” means any payment of Expenses advanced to Indemnitee by the Company pursuant to Section 4 or Section 5 hereof.
     
  (h) Indemnifiable Event ” means any event or occurrence, whether occurring before, on or after the date of this Agreement, related to the fact that Indemnitee is or was a director, officer, employee or agent of the Company or any subsidiary of the Company, or is or was serving at the request of the Company as a director, officer, employee, member, manager, trustee or agent of any other corporation, limited liability company, partnership, joint venture, trust or other entity or enterprise (collectively with the Company, “ Enterprise ”) or by reason of an action or inaction by Indemnitee in any such capacity (whether or not serving in such capacity at the time any Loss is incurred for which indemnification can be provided under this Agreement).
     
  (i) Independent Counsel ” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently performs, nor in the past two (2) years has performed, services for either: (i) the Company or Indemnitee (other than in connection with matters concerning Indemnitee under this Agreement or of other indemnitees under similar agreements) or (ii) any other party to the Claim giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or the Indemnitee in an action to determine the Indemnitee’s rights under this Agreement.
     
  (j) Losses ” means any and all Expenses, damages, losses, liabilities, judgments, fines, penalties (whether civil, criminal or other), ERISA excise taxes, amounts paid or payable in settlement, including any interest, assessments, any federal, state, local or foreign taxes imposed as a result of the actual or deemed receipt of any payments under this Agreement and all other charges paid or payable in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness or participate in, any Claim.
     
  (k) Person ” means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity or other entity and includes the meaning set forth in Sections 13(d) and 14(d) of the Exchange Act.

 

 
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  (l) Standard of Conduct Determination ” shall have the meaning ascribed to it in Section 9(b) below.
     
  (m) Voting Securities ” means any securities of the Company that vote generally in the election of directors.

 

2. Services to the Company . The Indemnitee agrees to continue to serve as a director or officer of the Company for so long as the Indemnitee is duly elected or appointed or until the Indemnitee tenders his resignation or is no longer serving in such capacity. This Agreement shall not be deemed an employment agreement between the Company (or any of its subsidiaries or Enterprise) and the Indemnitee. The Indemnitee specifically acknowledges that his employment with or service to the Company or any of its subsidiaries or Enterprise, as applicable, is at will and the Indemnitee may be discharged at any time for any reason, with or without cause, except as may be otherwise provided in any written employment agreement between the Indemnitee and the Company (or any of its subsidiaries or Enterprise), other applicable formal severance policies duly adopted by the Board or, with respect to service as a director or officer of the Company, by the Company’s Constituent Documents or Nevada law. This Agreement shall continue in force after the Indemnitee has ceased to serve as a director or officer of the Company or, at the request of the Company, of any of its subsidiaries or Enterprise, as provided in Section 12 hereof.
   
3. Indemnification . Subject to Section 9 and Section 10 of this Agreement, the Company shall indemnify the Indemnitee, to the fullest extent permitted by the laws of the State of Nevada in effect on the date hereof, or as such laws may from time to time hereafter be amended to increase the scope of such permitted indemnification, against any and all Losses if the Indemnitee was or is or becomes a party to or participant in, or is threatened to be made a party to or participant in, any Claim by reason of or arising in part out of an Indemnifiable Event, including, without limitation, Claims brought by or in the right of the Company, Claims brought by third parties, and Claims in which the Indemnitee is solely a witness.
   
4. Advancement of Expenses . The Indemnitee shall have the right to advancement by the Company, prior to the final disposition of any Claim by final adjudication to which there are no further rights of appeal, of any and all Expenses actually and reasonably paid or incurred by the Indemnitee in connection with any Claim arising out of an Indemnifiable Event. The Indemnitee’s right to such advancement is not subject to the satisfaction of any standard of conduct. Without limiting the generality or effect of the foregoing, within 60 days after any request by the Indemnitee, the Company shall, in accordance with such request, (a) pay such Expenses on behalf of the Indemnitee, (b) advance to the Indemnitee funds in an amount sufficient to pay such Expenses, or (c) reimburse the Indemnitee for such Expenses. In connection with any request for Expense Advances, the Indemnitee shall not be required to provide any documentation or information to the extent that the provision thereof would undermine or otherwise jeopardize attorney-client privilege. In connection with any request for Expense Advances, the Indemnitee shall execute and deliver to the Company an undertaking (which shall be accepted without reference to the Indemnitee’s ability to repay the Expense Advances) to repay any amounts paid, advanced, or reimbursed by the Company for such Expenses to the extent that it is ultimately determined, following the final disposition of such Claim, that the Indemnitee is not entitled to indemnification hereunder. The Indemnitee’s obligation to reimburse the Company for Expense Advances shall be unsecured and no interest shall be charged thereon.

 

 
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5. Indemnification for Expenses in Enforcing Rights . To the fullest extent allowable under applicable law, the Company shall also indemnify against, and, if requested by the Indemnitee, shall advance to the Indemnitee subject to and in accordance with Section 4, any Expenses actually and reasonably paid or incurred by the Indemnitee in connection with any action or proceeding by the Indemnitee for (a) indemnification or reimbursement or advance payment of Expenses by the Company under any provision of this Agreement, or under any other agreement or provision of the Constituent Documents now or hereafter in effect relating to Claims relating to Indemnifiable Events, and/or (b) recovery under any directors’ and officers’ liability insurance policies maintained by the Company. However, in the event that the Indemnitee is ultimately determined not to be entitled to such indemnification or insurance recovery, as the case may be, then all amounts advanced under this Section 5 shall be repaid. The Indemnitee shall be required to reimburse the Company in the event that a final judicial determination is made that such action brought by the Indemnitee was frivolous or not made in good faith.
   
6. Partial Indemnity . If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for a portion of any Losses in respect of a Claim related to an Indemnifiable Event but not for the total amount thereof, the Company shall nevertheless indemnify the Indemnitee for the portion thereof to which the Indemnitee is entitled.
   
7. Notification and Defense of Claims .

 

  (a) Notification of Claims . The Indemnitee shall notify the Company in writing as soon as practicable of any Claim which could relate to an Indemnifiable Event or for which the Indemnitee could seek Expense Advances, including a brief description (based upon information then available to the Indemnitee) of the nature of, and the facts underlying, such Claim. The failure by the Indemnitee to timely notify the Company hereunder shall not relieve the Company from any liability hereunder unless the Company’s ability to participate in the defense of such claim was materially and adversely affected by such failure/except that the Company shall not be liable to indemnify the Indemnitee under this Agreement with respect to any judicial award in a Claim related to an Indemnifiable Event if the Company was not given a reasonable and timely opportunity to participate at its expense in the defense of such action. If at the time of the receipt of such notice, the Company has directors’ and officers’ liability insurance in effect under which coverage for Claims related to Indemnifiable Events is potentially available, the Company shall give prompt written notice to the applicable insurers in accordance with the procedures set forth in the applicable policies. The Company shall provide to the Indemnitee a copy of such notice delivered to the applicable insurers, and copies of all subsequent correspondence between the Company and such insurers regarding the Claim, in each case substantially concurrently with the delivery or receipt thereof by the Company.

 

 
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  (b) Defense of Claims . The Company shall be entitled to participate in the defense of any Claim relating to an Indemnifiable Event at its own expense and, except as otherwise provided below, to the extent the Company so wishes, it may assume the defense thereof with counsel reasonably satisfactory to the Indemnitee. After notice from the Company to the Indemnitee of its election to assume the defense of any such Claim, the Company shall not be liable to the Indemnitee under this Agreement or otherwise for any Expenses subsequently directly incurred by the Indemnitee in connection with the Indemnitee’s defense of such Claim other than reasonable costs of investigation or as otherwise provided below. The Indemnitee shall have the right to employ its own legal counsel in such Claim, but all Expenses related to such counsel incurred after notice from the Company of its assumption of the defense shall be at the Indemnitee’s own expense; provided, however, that if (i) the Indemnitee’s employment of its own legal counsel has been authorized by the Company, (ii) the Indemnitee has reasonably determined that there may be a conflict of interest between the Indemnitee and the Company in the defense of such Claim, (iii) after a Change in Control, the Indemnitee’s employment of its own counsel has been approved by the Independent Counsel or (iv) the Company shall not in fact have employed counsel to assume the defense of such Claim, then the Indemnitee shall be entitled to retain its own separate counsel (but not more than one law firm plus, if applicable, local counsel in respect of any such Claim) and all Expenses related to such separate counsel shall be borne by the Company.

 

8. Procedure upon Application for Indemnification . In order to obtain indemnification pursuant to this Agreement, the Indemnitee shall submit to the Company a written request therefor, including in such request such documentation and information as is reasonably available to the Indemnitee and is reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification following the final disposition of the Claim, provided that documentation and information need not be so provided to the extent that the provision thereof would undermine or otherwise jeopardize attorney-client privilege. Indemnification shall be made insofar as the Company determines the Indemnitee is entitled to indemnification in accordance with Section 9 below.
   
9. Determination of Right to Indemnification .

 

  (a) Mandatory Indemnification; Indemnification as a Witness .

 

  (i) To the extent that the Indemnitee shall have been successful on the merits or otherwise in defense of any Claim relating to an Indemnifiable Event or any portion thereof or in defense of any issue or matter therein, including without limitation dismissal without prejudice, the Indemnitee shall be indemnified against all Losses relating to such Claim in accordance with Section 3 to the fullest extent allowable by law, and no Standard of Conduct Determination (as defined in Section 9(b)) shall be required.

 

 
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  (ii) To the extent that the Indemnitee’s involvement in a Claim relating to an Indemnifiable Event is to prepare to serve and serve as a witness, and not as a party, the Indemnitee shall be indemnified against all Losses incurred in connection therewith to the fullest extent allowable by law and no Standard of Conduct Determination (as defined in Section 9(b)) shall be required.

 

  (b) Standard of Conduct . To the extent that the provisions of Section 9(a) are inapplicable to a Claim related to an Indemnifiable Event that shall have been finally disposed of, any determination of whether the Indemnitee has satisfied any applicable standard of conduct under Nevada law that is a legally required condition to indemnification of the Indemnitee hereunder against Losses relating to such Claim and any determination that Expense Advances must be repaid to the Company (a “ Standard of Conduct Determination ”) shall be made as follows:

 

  (i) if no Change in Control has occurred, (A) by a majority vote of the Disinterested Directors, even if less than a quorum of the Board, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum or (C) if there are no such Disinterested Directors, by Independent Counsel in a written opinion addressed to the Board, a copy of which shall be delivered to the Indemnitee; and
     
  (ii) if a Change in Control shall have occurred, (A) if the Indemnitee so requests in writing, by a majority vote of the Disinterested Directors, even if less than a quorum of the Board or (B) otherwise, by Independent Counsel in a written opinion addressed to the Board, a copy of which shall be delivered to the Indemnitee.

 

The Company shall indemnify and hold harmless the Indemnitee against and, if requested by the Indemnitee, shall reimburse the Indemnitee for, or advance to the Indemnitee, within 60 days of such request, any and all Expenses incurred by the Indemnitee in cooperating with the person or persons making such Standard of Conduct Determination.

 

  (c) Making the Standard of Conduct Determination . The Company shall use its reasonable best efforts to cause any Standard of Conduct Determination required under Section 9(b) to be made as promptly as practicable. If the person or persons designated to make the Standard of Conduct Determination under Section 9(b) shall not have made a determination within 30 days after the later of (A) receipt by the Company of a written request from the Indemnitee for indemnification pursuant to Section 8 (the date of such receipt being the “ Notification Date ”) and (B) the selection of an Independent Counsel, if such determination is to be made by Independent Counsel, then the Indemnitee shall be deemed to have satisfied the applicable standard of conduct; provided that such 30-day period may be extended for a reasonable time, not to exceed an additional 30 days, if the person or persons making such determination in good faith requires such additional time to obtain or evaluate information relating thereto. Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement of the Indemnitee to indemnification under this Agreement shall be required to be made prior to the final disposition of any Claim.

 

 
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  (d) Payment of Indemnification . If, in regard to any Losses:

 

  (i) the Indemnitee shall be entitled to indemnification pursuant to Section 9(a);
     
  (ii) no Standard Conduct Determination is legally required as a condition to indemnification of the Indemnitee hereunder; or
     
  (iii) the Indemnitee has been determined or deemed pursuant to Section 9(b) or Section 9(c) to have satisfied the Standard of Conduct Determination,

 

then the Company shall pay to the Indemnitee, within ten days after the later of (A) the Notification Date or (B) the earliest date on which the applicable criterion specified in clause (i), (ii) or (iii) is satisfied, an amount equal to such Losses.

 

  (e) Selection of Independent Counsel for Standard of Conduct Determination . If a Standard of Conduct Determination is to be made by Independent Counsel pursuant to Section 9(b)(i), the Independent Counsel shall be selected by the Board of Directors, and the Company shall give written notice to the Indemnitee advising him of the identity of the Independent Counsel so selected. If a Standard of Conduct Determination is to be made by Independent Counsel pursuant to Section 9(b)(ii), the Independent Counsel shall be selected by the Indemnitee, and the Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either case, the Indemnitee or the Company, as applicable, may, within five days after receiving written notice of selection from the other, deliver to the other a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not satisfy the criteria set forth in the definition of “ Independent Counsel ” in Section 1(i), and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person or firm so selected shall act as Independent Counsel. If such written objection is properly and timely made and substantiated, (i) the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit; and (ii) the non-objecting party may, at its option, select an alternative Independent Counsel and give written notice to the other party advising such other party of the identity of the alternative Independent Counsel so selected, in which case the provisions of the two immediately preceding sentences, the introductory clause of this sentence and numbered clause (i) of this sentence shall apply to such subsequent selection and notice. If applicable, the provisions of clause (ii) of the immediately preceding sentence shall apply to successive alternative selections. If no Independent Counsel that is permitted under the foregoing provisions of this Section 9(e) to make the Standard of Conduct Determination shall have been selected within 20 days after the Company gives its initial notice pursuant to the first sentence of this Section 9(e) or the Indemnitee gives its initial notice pursuant to the second sentence of this Section 9(e), as the case may be, either the Company or the Indemnitee may petition a court in Nevada (the “ Court ”) to resolve any objection which shall have been made by the Company or the Indemnitee to the other’s selection of Independent Counsel and/or to appoint as Independent Counsel a person to be selected by the Court or such other person as the Court shall designate, and the person or firm with respect to whom all objections are so resolved or the person or firm so appointed will act as Independent Counsel. In all events, the Company shall pay all of the reasonable fees and expenses of the Independent Counsel incurred in connection with the Independent Counsel’s determination pursuant to Section 9(b).

 

 
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  (f) Presumptions and Defenses .

 

  (i) Indemnitee’s Entitlement to Indemnification . In making any Standard of Conduct Determination, the person or persons making such determination shall presume that the Indemnitee has satisfied the applicable standard of conduct and is entitled to indemnification, and the Company shall have the burden of proof to overcome that presumption and establish that the Indemnitee is not so entitled. Any Standard of Conduct Determination that is adverse to the Indemnitee may be challenged by the Indemnitee in the Court. No determination by the Company (including by its directors or any Independent Counsel) that the Indemnitee has not satisfied any applicable standard of conduct may be used as a defense to any legal proceedings brought by the Indemnitee to secure indemnification or reimbursement or advance payment of Expenses by the Company hereunder or create a presumption that the Indemnitee has not met any applicable standard of conduct.
     
  (ii) Reliance as a Safe Harbor . For purposes of this Agreement, and without creating any presumption as to a lack of good faith if the following circumstances do not exist, the Indemnitee shall be deemed to have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company if the Indemnitee’s actions or omissions to act are taken in good faith reliance upon the records of the Company, including its financial statements, or upon information, opinions, reports or statements furnished to the Indemnitee by the officers or employees of the Company or any of its subsidiaries in the course of their duties, or by committees of the Board or by any other Person (including legal counsel, accountants and financial advisors) as to matters the Indemnitee reasonably believes are within such other Person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Company. In addition, the knowledge and/or actions, or failures to act, of any director, officer, agent or employee of the Company shall not be imputed to the Indemnitee for purposes of determining the right to indemnity hereunder.

 

 
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  (iii) No Other Presumptions . For purposes of this Agreement, the termination of any Claim by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere or its equivalent, will not create a presumption that the Indemnitee did not meet any applicable standard of conduct or have any particular belief, or that indemnification hereunder is otherwise not permitted.
     
  (iv) Defense to Indemnification and Burden of Proof . It shall be a defense to any action brought by the Indemnitee against the Company to enforce this Agreement (other than an action brought to enforce a claim for Losses incurred in defending against a Claim related to an Indemnifiable Event in advance of its final disposition) that it is not permissible under applicable law for the Company to indemnify the Indemnitee for the amount claimed. In connection with any such action or any related Standard of Conduct Determination, the burden of proving such a defense or that the Indemnitee did not satisfy the applicable standard of conduct shall be on the Company.
     
  (v) Resolution of Claims . The Company acknowledges that a settlement or other disposition short of final judgment may be successful on the merits or otherwise for purposes of Section 9(a)(i) if it permits a party to avoid expense, delay, distraction, disruption and uncertainty. In the event that any Claim relating to an Indemnifiable Event to which the Indemnitee is a party is resolved in any manner other than by adverse judgment against the Indemnitee (including, without limitation, settlement of such action, claim or proceeding with our without payment of money or other consideration) it shall be presumed that the Indemnitee has been successful on the merits or otherwise for purposes of Section 9(a)(i). The Company shall have the burden of proof to overcome this presumption.

 

10. Exclusions from Indemnification . Notwithstanding anything in this Agreement to the contrary, the Company shall not be obligated to:

 

  (a) indemnify or advance funds to the Indemnitee for Expenses or Losses with respect to proceedings initiated by the Indemnitee, including any proceedings against the Company or its directors, officers, employees or other indemnitees and not by way of defense, except:

 

  (i) proceedings referenced in Section 5 above (unless a court of competent jurisdiction determines that each of the material assertions made by the Indemnitee in such proceeding was not made in good faith or was frivolous); or

 

 
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  (ii) where the Company has joined in or the Board has consented to the initiation of such proceedings;

 

  (b) indemnify the Indemnitee if a final decision by a court of competent jurisdiction determines that such indemnification is prohibited by applicable law;
     
  (c) indemnify the Indemnitee for the disgorgement of profits arising from the purchase or sale by the Indemnitee of securities of the Company in violation of Section 16(b) of the Exchange Act, or any similar successor statute; and
     
  (d) indemnify or advance funds to the Indemnitee for the Indemnitee’s reimbursement to the Company of any bonus or other incentive-based or equity-based compensation previously received by the Indemnitee or payment of any profits realized by the Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements under Section 304 of the Sarbanes-Oxley Act of 2002 in connection with an accounting restatement of the Company or the payment to the Company of profits arising from the purchase or sale by the Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act ).

 

11. Settlement of Claims . The Company shall not be liable to the Indemnitee under this Agreement for any amounts paid in settlement of any threatened or pending Claim related to an Indemnifiable Event effected without the Company’s prior written consent, which shall not be unreasonably withheld; provided, however, that if a Change in Control has occurred, the Company shall be liable for indemnification of the Indemnitee for amounts paid in settlement if an Independent Counsel has approved the settlement. The Company shall not settle any Claim related to an Indemnifiable Event in any manner that would impose any Losses on the Indemnitee without the Indemnitee’s prior written consent.
   
12. Duration . All agreements and obligations of the Company contained herein shall continue during the period that the Indemnitee is a director or officer of the Company (or is serving at the request of the Company as a director, officer, employee, member, trustee or agent of another Enterprise) and shall continue thereafter (i) so long as the Indemnitee may be subject to any possible Claim relating to an Indemnifiable Event (including any rights of appeal thereto) and (ii) throughout the pendency of any proceeding (including any rights of appeal thereto) commenced by the Indemnitee to enforce or interpret his or her rights under this Agreement, even if, in either case, he or she may have ceased to serve in such capacity at the time of any such Claim or proceeding.
   
13. Non-Exclusivity . The rights of the Indemnitee hereunder will be in addition to any other rights the Indemnitee may have under the Constituent Documents, the general corporate law of the State of Nevada, any other contract or otherwise (collectively, “ Other Indemnity Provisions ”); provided, however, that (a) to the extent that the Indemnitee otherwise would have any greater right to indemnification under any Other Indemnity Provision, the Indemnitee will be deemed to have such greater right hereunder and (b) to the extent that any change is made to any Other Indemnity Provision which permits any greater right to indemnification than that provided under this Agreement as of the date hereof, the Indemnitee will be deemed to have such greater right hereunder. The Company will not adopt any amendment to any of the Constituent Documents the effect of which would be to deny, diminish or encumber the Indemnitee’s right to indemnification under this Agreement or any Other Indemnity Provision.

 

 
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14. Liability Insurance . For the duration of the Indemnitee’s service as a director and/or officer of the Company, and thereafter for so long as the Indemnitee shall be subject to any pending Claim relating to an Indemnifiable Event, the Company shall use commercially reasonable efforts (taking into account the scope and amount of coverage available relative to the cost thereof) to continue to maintain in effect policies of directors’ and officers’ liability insurance providing coverage that is at least substantially comparable in scope and amount to that provided by the Company’s current policies of directors’ and officers’ liability insurance. In all policies of directors’ and officers’ liability insurance maintained by the Company, the Indemnitee shall be named as an insured in such a manner as to provide the Indemnitee the same rights and benefits as are provided to the most favorably insured of the Company’s directors, if the Indemnitee is a director, or of the Company’s officers, if the Indemnitee is an officer (and not a director) by such policy. Upon request, the Company will provide to the Indemnitee copies of all directors’ and officers’ liability insurance applications, binders, policies, declarations, endorsements and other related materials.
   
15. No Duplication of Payments . The Company shall not be liable under this Agreement to make any payment to the Indemnitee in respect of any Losses to the extent the Indemnitee has otherwise received payment under any insurance policy, the Constituent Documents, Other Indemnity Provisions or otherwise of the amounts otherwise indemnifiable by the Company hereunder.
   
16. Subrogation . In the event of payment to the Indemnitee under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee. The Indemnitee shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.
   
17. Amendments . No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be binding unless in the form of a writing signed by the party against whom enforcement of the waiver is sought, and no such waiver shall operate as a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver. Except as specifically provided herein, no failure to exercise or any delay in exercising any right or remedy hereunder shall constitute a waiver thereof.

 

 
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18. Binding Effect . This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company), assigns, spouses, heirs and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part of the business and/or assets of the Company, by written agreement in form and substances satisfactory to the Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.
   
19. Severability . The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any portion thereof) are held by a court of competent jurisdiction to be invalid, illegal, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.
   
20. Notices . All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand, against receipt, or mailed, by postage prepaid, certified or registered mail:

 

  (a) if to the Indemnitee, to the address set forth on the signature page hereto.
     
  (b) if to the Company, to:

 

AppCoin Innovations Inc.

561 Indiana Court

Venice Beach, CA 90291

 

  Attention: James Geiskopf
  Email: jimmy.geiskopf@appcoininnovations.com

 

Notice of change of address shall be effective only when given in accordance with this Section. All notices complying with this Section shall be deemed to have been received on the date of hand delivery or on the third business day after mailing.

 

21. Governing Law and Forum . This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Nevada applicable to contracts made and to be performed in such state without giving effect to its principles of conflicts of laws.
   
22. Headings . The headings of the sections and paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction or interpretation thereof.
   
23. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original, but all of which together shall constitute one and the same Agreement.

 

 
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

APPCOIN INNOVATIONS INC.

 

Per: /s/ James Geiskopf  
Name : James Geiskopf  
Title: Director  

 

INDEMNITEE  
     
  /s/ Michael Blum  
Name: Michael Blum  
     
Address: 2212 Glenbrook Way  
  Las Vegas, Nevada 89117  

 

 
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INDEMNIFICATION AGREEMENT

 

This Indemnification Agreement (“ Agreement ”), dated as of December 20, 2017, is by and between APPCOIN INNOVATIONS INC. , a Nevada corporation (the “ Company ”) and Bruce Elliott (the “ Indemnitee ”).

 

WHEREAS:

 

A. The Indemnitee is a director and/or an officer of the Company;

 

B. Both the Company and the Indemnitee recognize the increased risk of litigation and other claims being asserted against directors and officers of public companies;

 

C. The board of directors of the Company (the “ Board ”) has determined that enhancing the ability of the Company to retain and attract as directors and officers the most capable persons is in the best interests of the Company and that the Company therefore should seek to assure such persons that indemnification and insurance coverage is available; and

 

D. In recognition of the need to provide the Indemnitee with substantial protection against personal liability, in order to procure the Indemnitee’s continued service as a director and/or officer of the Company and to enhance the Indemnitee’s ability to serve the Company in an effective manner, and in order to provide such protection pursuant to express contract rights (intended to be enforceable irrespective of, among other things, any amendment to the Company’s certificate of incorporation or bylaws (collectively, the “ Constituent Documents ”), any change in the composition of the Board or any change in control or business combination transaction relating to the Company), the Company wishes to provide in this Agreement for the indemnification of, and the advancement of Expenses (as defined in Section 1(f) below) to, Indemnitee as set forth in this Agreement and to the extent insurance is maintained for the continued coverage of Indemnitee under the Company’s directors’ and officers’ liability insurance policies.

 

NOW, THEREFORE, in consideration of the foregoing and the Indemnitee’s agreement to continue to provide services to the Company, the parties agree as follows:

 

1. Definitions . For purposes of this Agreement, the following terms shall have the following meanings:
     
  (a) Beneficial Owner ” has the meaning given to the term “beneficial owner” in Rule 13d-3 under the Securities Exchange Act of 1934 , as amended (the “ Exchange Act ”).
       
  (b) Change in Control ” means the occurrence after the date of this Agreement of any of the following events:
       
    (i) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 20% or more of the Company’s then outstanding Voting Securities unless the change in relative Beneficial Ownership of the Company’s securities by any Person results solely from a reduction in the aggregate number of outstanding shares of securities entitled to vote generally in the election of directors;

 

 
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    (ii) the consummation of a reorganization, merger or consolidation, unless immediately following such reorganization, merger or consolidation, all of the Beneficial Owners of the Voting Securities of the Company immediately prior to such transaction beneficially own, directly or indirectly, more than 50% of the combined voting power of the outstanding Voting Securities of the entity resulting from such transaction;
       
    (iii) during any period of two consecutive years, not including any period prior to the execution of this Agreement, individuals who at the beginning of such period constituted the Board (including for this purpose any new directors whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved) cease for any reason to constitute at least a majority of the Board; or
       
    (iv) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets.

 

  (c) Claim ” means:
       
    (i) any threatened, pending or completed action, suit, proceeding or alternative dispute resolution mechanism, whether civil, criminal, administrative, arbitrative, investigative or other, and whether made pursuant to federal, state or other law; or
       
    (ii) any inquiry, hearing or investigation that the Indemnitee determines might lead to the institution of any such action, suit, proceeding or alternative dispute resolution mechanism.

 

  (d) Court ” shall have the meaning ascribed to it in Section 9(e) below.
     
  (e) Disinterested Director ” means a director of the Company who is not and was not a party to the Claim in respect of which indemnification is sought by Indemnitee.

 

 
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  (f) Expenses ” means any and all expenses, including reasonable attorneys’ and experts’ fees, court costs, transcript costs, travel expenses, duplicating, printing and binding costs, telephone charges, and all other costs and expenses incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness or participate in, any Claim. Expenses also shall include (i) Expenses incurred in connection with any appeal resulting from any Claim, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent, and (ii) for purposes of Section 5 only, Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement, by litigation or otherwise. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.
     
  (g) Expense Advance ” means any payment of Expenses advanced to Indemnitee by the Company pursuant to Section 4 or Section 5 hereof.
     
  (h) Indemnifiable Event ” means any event or occurrence, whether occurring before, on or after the date of this Agreement, related to the fact that Indemnitee is or was a director, officer, employee or agent of the Company or any subsidiary of the Company, or is or was serving at the request of the Company as a director, officer, employee, member, manager, trustee or agent of any other corporation, limited liability company, partnership, joint venture, trust or other entity or enterprise (collectively with the Company, “ Enterprise ”) or by reason of an action or inaction by Indemnitee in any such capacity (whether or not serving in such capacity at the time any Loss is incurred for which indemnification can be provided under this Agreement).
     
  (i) Independent Counsel ” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently performs, nor in the past two (2) years has performed, services for either: (i) the Company or Indemnitee (other than in connection with matters concerning Indemnitee under this Agreement or of other indemnitees under similar agreements) or (ii) any other party to the Claim giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or the Indemnitee in an action to determine the Indemnitee’s rights under this Agreement.
     
  (j) Losses ” means any and all Expenses, damages, losses, liabilities, judgments, fines, penalties (whether civil, criminal or other), ERISA excise taxes, amounts paid or payable in settlement, including any interest, assessments, any federal, state, local or foreign taxes imposed as a result of the actual or deemed receipt of any payments under this Agreement and all other charges paid or payable in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness or participate in, any Claim.
     
  (k) Person ” means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity or other entity and includes the meaning set forth in Sections 13(d) and 14(d) of the Exchange Act.

 

 
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  (l) Standard of Conduct Determination ” shall have the meaning ascribed to it in Section 9(b) below.
     
  (m) Voting Securities ” means any securities of the Company that vote generally in the election of directors.

 

2. Services to the Company . The Indemnitee agrees to continue to serve as a director or officer of the Company for so long as the Indemnitee is duly elected or appointed or until the Indemnitee tenders his resignation or is no longer serving in such capacity. This Agreement shall not be deemed an employment agreement between the Company (or any of its subsidiaries or Enterprise) and the Indemnitee. The Indemnitee specifically acknowledges that his employment with or service to the Company or any of its subsidiaries or Enterprise, as applicable, is at will and the Indemnitee may be discharged at any time for any reason, with or without cause, except as may be otherwise provided in any written employment agreement between the Indemnitee and the Company (or any of its subsidiaries or Enterprise), other applicable formal severance policies duly adopted by the Board or, with respect to service as a director or officer of the Company, by the Company’s Constituent Documents or Nevada law. This Agreement shall continue in force after the Indemnitee has ceased to serve as a director or officer of the Company or, at the request of the Company, of any of its subsidiaries or Enterprise, as provided in Section 12 hereof.
   
3. Indemnification . Subject to Section 9 and Section 10 of this Agreement, the Company shall indemnify the Indemnitee, to the fullest extent permitted by the laws of the State of Nevada in effect on the date hereof, or as such laws may from time to time hereafter be amended to increase the scope of such permitted indemnification, against any and all Losses if the Indemnitee was or is or becomes a party to or participant in, or is threatened to be made a party to or participant in, any Claim by reason of or arising in part out of an Indemnifiable Event, including, without limitation, Claims brought by or in the right of the Company, Claims brought by third parties, and Claims in which the Indemnitee is solely a witness.
   
4. Advancement of Expenses . The Indemnitee shall have the right to advancement by the Company, prior to the final disposition of any Claim by final adjudication to which there are no further rights of appeal, of any and all Expenses actually and reasonably paid or incurred by the Indemnitee in connection with any Claim arising out of an Indemnifiable Event. The Indemnitee’s right to such advancement is not subject to the satisfaction of any standard of conduct. Without limiting the generality or effect of the foregoing, within 60 days after any request by the Indemnitee, the Company shall, in accordance with such request, (a) pay such Expenses on behalf of the Indemnitee, (b) advance to the Indemnitee funds in an amount sufficient to pay such Expenses, or (c) reimburse the Indemnitee for such Expenses. In connection with any request for Expense Advances, the Indemnitee shall not be required to provide any documentation or information to the extent that the provision thereof would undermine or otherwise jeopardize attorney-client privilege. In connection with any request for Expense Advances, the Indemnitee shall execute and deliver to the Company an undertaking (which shall be accepted without reference to the Indemnitee’s ability to repay the Expense Advances) to repay any amounts paid, advanced, or reimbursed by the Company for such Expenses to the extent that it is ultimately determined, following the final disposition of such Claim, that the Indemnitee is not entitled to indemnification hereunder. The Indemnitee’s obligation to reimburse the Company for Expense Advances shall be unsecured and no interest shall be charged thereon.

 

 
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5. Indemnification for Expenses in Enforcing Rights . To the fullest extent allowable under applicable law, the Company shall also indemnify against, and, if requested by the Indemnitee, shall advance to the Indemnitee subject to and in accordance with Section 4, any Expenses actually and reasonably paid or incurred by the Indemnitee in connection with any action or proceeding by the Indemnitee for (a) indemnification or reimbursement or advance payment of Expenses by the Company under any provision of this Agreement, or under any other agreement or provision of the Constituent Documents now or hereafter in effect relating to Claims relating to Indemnifiable Events, and/or (b) recovery under any directors’ and officers’ liability insurance policies maintained by the Company. However, in the event that the Indemnitee is ultimately determined not to be entitled to such indemnification or insurance recovery, as the case may be, then all amounts advanced under this Section 5 shall be repaid. The Indemnitee shall be required to reimburse the Company in the event that a final judicial determination is made that such action brought by the Indemnitee was frivolous or not made in good faith.
   
6. Partial Indemnity . If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for a portion of any Losses in respect of a Claim related to an Indemnifiable Event but not for the total amount thereof, the Company shall nevertheless indemnify the Indemnitee for the portion thereof to which the Indemnitee is entitled.
   
7. Notification and Defense of Claims .

 

  (a) Notification of Claims . The Indemnitee shall notify the Company in writing as soon as practicable of any Claim which could relate to an Indemnifiable Event or for which the Indemnitee could seek Expense Advances, including a brief description (based upon information then available to the Indemnitee) of the nature of, and the facts underlying, such Claim. The failure by the Indemnitee to timely notify the Company hereunder shall not relieve the Company from any liability hereunder unless the Company’s ability to participate in the defense of such claim was materially and adversely affected by such failure/except that the Company shall not be liable to indemnify the Indemnitee under this Agreement with respect to any judicial award in a Claim related to an Indemnifiable Event if the Company was not given a reasonable and timely opportunity to participate at its expense in the defense of such action. If at the time of the receipt of such notice, the Company has directors’ and officers’ liability insurance in effect under which coverage for Claims related to Indemnifiable Events is potentially available, the Company shall give prompt written notice to the applicable insurers in accordance with the procedures set forth in the applicable policies. The Company shall provide to the Indemnitee a copy of such notice delivered to the applicable insurers, and copies of all subsequent correspondence between the Company and such insurers regarding the Claim, in each case substantially concurrently with the delivery or receipt thereof by the Company.

 

 
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  (b) Defense of Claims . The Company shall be entitled to participate in the defense of any Claim relating to an Indemnifiable Event at its own expense and, except as otherwise provided below, to the extent the Company so wishes, it may assume the defense thereof with counsel reasonably satisfactory to the Indemnitee. After notice from the Company to the Indemnitee of its election to assume the defense of any such Claim, the Company shall not be liable to the Indemnitee under this Agreement or otherwise for any Expenses subsequently directly incurred by the Indemnitee in connection with the Indemnitee’s defense of such Claim other than reasonable costs of investigation or as otherwise provided below. The Indemnitee shall have the right to employ its own legal counsel in such Claim, but all Expenses related to such counsel incurred after notice from the Company of its assumption of the defense shall be at the Indemnitee’s own expense; provided, however, that if (i) the Indemnitee’s employment of its own legal counsel has been authorized by the Company, (ii) the Indemnitee has reasonably determined that there may be a conflict of interest between the Indemnitee and the Company in the defense of such Claim, (iii) after a Change in Control, the Indemnitee’s employment of its own counsel has been approved by the Independent Counsel or (iv) the Company shall not in fact have employed counsel to assume the defense of such Claim, then the Indemnitee shall be entitled to retain its own separate counsel (but not more than one law firm plus, if applicable, local counsel in respect of any such Claim) and all Expenses related to such separate counsel shall be borne by the Company.

 

8. Procedure upon Application for Indemnification . In order to obtain indemnification pursuant to this Agreement, the Indemnitee shall submit to the Company a written request therefor, including in such request such documentation and information as is reasonably available to the Indemnitee and is reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification following the final disposition of the Claim, provided that documentation and information need not be so provided to the extent that the provision thereof would undermine or otherwise jeopardize attorney-client privilege. Indemnification shall be made insofar as the Company determines the Indemnitee is entitled to indemnification in accordance with Section 9 below.
   
9. Determination of Right to Indemnification .

 

  (a) Mandatory Indemnification; Indemnification as a Witness .
       
    (i) To the extent that the Indemnitee shall have been successful on the merits or otherwise in defense of any Claim relating to an Indemnifiable Event or any portion thereof or in defense of any issue or matter therein, including without limitation dismissal without prejudice, the Indemnitee shall be indemnified against all Losses relating to such Claim in accordance with Section 3 to the fullest extent allowable by law, and no Standard of Conduct Determination (as defined in Section 9(b)) shall be required.
       
    (ii) To the extent that the Indemnitee’s involvement in a Claim relating to an Indemnifiable Event is to prepare to serve and serve as a witness, and not as a party, the Indemnitee shall be indemnified against all Losses incurred in connection therewith to the fullest extent allowable by law and no Standard of Conduct Determination (as defined in Section 9(b)) shall be required.
       
  (b) Standard of Conduct . To the extent that the provisions of Section 9(a) are inapplicable to a Claim related to an Indemnifiable Event that shall have been finally disposed of, any determination of whether the Indemnitee has satisfied any applicable standard of conduct under Nevada law that is a legally required condition to indemnification of the Indemnitee hereunder against Losses relating to such Claim and any determination that Expense Advances must be repaid to the Company (a “ Standard of Conduct Determination ”) shall be made as follows:
       
    (i) if no Change in Control has occurred, (A) by a majority vote of the Disinterested Directors, even if less than a quorum of the Board, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum or (C) if there are no such Disinterested Directors, by Independent Counsel in a written opinion addressed to the Board, a copy of which shall be delivered to the Indemnitee; and
       
    (ii) if a Change in Control shall have occurred, (A) if the Indemnitee so requests in writing, by a majority vote of the Disinterested Directors, even if less than a quorum of the Board or (B) otherwise, by Independent Counsel in a written opinion addressed to the Board, a copy of which shall be delivered to the Indemnitee.

 

The Company shall indemnify and hold harmless the Indemnitee against and, if requested by the Indemnitee, shall reimburse the Indemnitee for, or advance to the Indemnitee, within 60 days of such request, any and all Expenses incurred by the Indemnitee in cooperating with the person or persons making such Standard of Conduct Determination.

 

  (c) Making the Standard of Conduct Determination . The Company shall use its reasonable best efforts to cause any Standard of Conduct Determination required under Section 9(b) to be made as promptly as practicable. If the person or persons designated to make the Standard of Conduct Determination under Section 9(b) shall not have made a determination within 30 days after the later of (A) receipt by the Company of a written request from the Indemnitee for indemnification pursuant to Section 8 (the date of such receipt being the “ Notification Date ”) and (B) the selection of an Independent Counsel, if such determination is to be made by Independent Counsel, then the Indemnitee shall be deemed to have satisfied the applicable standard of conduct; provided that such 30-day period may be extended for a reasonable time, not to exceed an additional 30 days, if the person or persons making such determination in good faith requires such additional time to obtain or evaluate information relating thereto. Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement of the Indemnitee to indemnification under this Agreement shall be required to be made prior to the final disposition of any Claim.

 

 
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  (d) Payment of Indemnification . If, in regard to any Losses:

 

  (i)  the Indemnitee shall be entitled to indemnification pursuant to Section 9(a);
     
  (ii) no Standard Conduct Determination is legally required as a condition to indemnification of the Indemnitee hereunder; or
     
  (iii) the Indemnitee has been determined or deemed pursuant to Section 9(b) or Section 9(c) to have satisfied the Standard of Conduct Determination,

 

then the Company shall pay to the Indemnitee, within ten days after the later of (A) the Notification Date or (B) the earliest date on which the applicable criterion specified in clause (i), (ii) or (iii) is satisfied, an amount equal to such Losses.

 

  (e) Selection of Independent Counsel for Standard of Conduct Determination . If a Standard of Conduct Determination is to be made by Independent Counsel pursuant to Section 9(b)(i), the Independent Counsel shall be selected by the Board of Directors, and the Company shall give written notice to the Indemnitee advising him of the identity of the Independent Counsel so selected. If a Standard of Conduct Determination is to be made by Independent Counsel pursuant to Section 9(b)(ii), the Independent Counsel shall be selected by the Indemnitee, and the Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either case, the Indemnitee or the Company, as applicable, may, within five days after receiving written notice of selection from the other, deliver to the other a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not satisfy the criteria set forth in the definition of “ Independent Counsel ” in Section 1(i), and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person or firm so selected shall act as Independent Counsel. If such written objection is properly and timely made and substantiated, (i) the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit; and (ii) the non-objecting party may, at its option, select an alternative Independent Counsel and give written notice to the other party advising such other party of the identity of the alternative Independent Counsel so selected, in which case the provisions of the two immediately preceding sentences, the introductory clause of this sentence and numbered clause (i) of this sentence shall apply to such subsequent selection and notice. If applicable, the provisions of clause (ii) of the immediately preceding sentence shall apply to successive alternative selections. If no Independent Counsel that is permitted under the foregoing provisions of this Section 9(e) to make the Standard of Conduct Determination shall have been selected within 20 days after the Company gives its initial notice pursuant to the first sentence of this Section 9(e) or the Indemnitee gives its initial notice pursuant to the second sentence of this Section 9(e), as the case may be, either the Company or the Indemnitee may petition a court in Nevada (the “ Court ”) to resolve any objection which shall have been made by the Company or the Indemnitee to the other’s selection of Independent Counsel and/or to appoint as Independent Counsel a person to be selected by the Court or such other person as the Court shall designate, and the person or firm with respect to whom all objections are so resolved or the person or firm so appointed will act as Independent Counsel. In all events, the Company shall pay all of the reasonable fees and expenses of the Independent Counsel incurred in connection with the Independent Counsel’s determination pursuant to Section 9(b).

 

 
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  (f) Presumptions and Defenses .

 

  (i) Indemnitee’s Entitlement to Indemnification . In making any Standard of Conduct Determination, the person or persons making such determination shall presume that the Indemnitee has satisfied the applicable standard of conduct and is entitled to indemnification, and the Company shall have the burden of proof to overcome that presumption and establish that the Indemnitee is not so entitled. Any Standard of Conduct Determination that is adverse to the Indemnitee may be challenged by the Indemnitee in the Court. No determination by the Company (including by its directors or any Independent Counsel) that the Indemnitee has not satisfied any applicable standard of conduct may be used as a defense to any legal proceedings brought by the Indemnitee to secure indemnification or reimbursement or advance payment of Expenses by the Company hereunder or create a presumption that the Indemnitee has not met any applicable standard of conduct.
     
  (ii) Reliance as a Safe Harbor . For purposes of this Agreement, and without creating any presumption as to a lack of good faith if the following circumstances do not exist, the Indemnitee shall be deemed to have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company if the Indemnitee’s actions or omissions to act are taken in good faith reliance upon the records of the Company, including its financial statements, or upon information, opinions, reports or statements furnished to the Indemnitee by the officers or employees of the Company or any of its subsidiaries in the course of their duties, or by committees of the Board or by any other Person (including legal counsel, accountants and financial advisors) as to matters the Indemnitee reasonably believes are within such other Person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Company. In addition, the knowledge and/or actions, or failures to act, of any director, officer, agent or employee of the Company shall not be imputed to the Indemnitee for purposes of determining the right to indemnity hereunder.

 

 
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  (iii) No Other Presumptions . For purposes of this Agreement, the termination of any Claim by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere or its equivalent, will not create a presumption that the Indemnitee did not meet any applicable standard of conduct or have any particular belief, or that indemnification hereunder is otherwise not permitted.
     
  (iv) Defense to Indemnification and Burden of Proof . It shall be a defense to any action brought by the Indemnitee against the Company to enforce this Agreement (other than an action brought to enforce a claim for Losses incurred in defending against a Claim related to an Indemnifiable Event in advance of its final disposition) that it is not permissible under applicable law for the Company to indemnify the Indemnitee for the amount claimed. In connection with any such action or any related Standard of Conduct Determination, the burden of proving such a defense or that the Indemnitee did not satisfy the applicable standard of conduct shall be on the Company.
     
  (v) Resolution of Claims . The Company acknowledges that a settlement or other disposition short of final judgment may be successful on the merits or otherwise for purposes of Section 9(a)(i) if it permits a party to avoid expense, delay, distraction, disruption and uncertainty. In the event that any Claim relating to an Indemnifiable Event to which the Indemnitee is a party is resolved in any manner other than by adverse judgment against the Indemnitee (including, without limitation, settlement of such action, claim or proceeding with our without payment of money or other consideration) it shall be presumed that the Indemnitee has been successful on the merits or otherwise for purposes of Section 9(a)(i). The Company shall have the burden of proof to overcome this presumption.

 

10. Exclusions from Indemnification . Notwithstanding anything in this Agreement to the contrary, the Company shall not be obligated to:

 

  (a) indemnify or advance funds to the Indemnitee for Expenses or Losses with respect to proceedings initiated by the Indemnitee, including any proceedings against the Company or its directors, officers, employees or other indemnitees and not by way of defense, except:
       
    (i) proceedings referenced in Section 5 above (unless a court of competent jurisdiction determines that each of the material assertions made by the Indemnitee in such proceeding was not made in good faith or was frivolous); or

 

 
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    (ii) where the Company has joined in or the Board has consented to the initiation of such proceedings;
       
  (b)  indemnify the Indemnitee if a final decision by a court of competent jurisdiction determines that such indemnification is prohibited by applicable law;
     
  (c) indemnify the Indemnitee for the disgorgement of profits arising from the purchase or sale by the Indemnitee of securities of the Company in violation of Section 16(b) of the Exchange Act, or any similar successor statute; and
     
  (d) indemnify or advance funds to the Indemnitee for the Indemnitee’s reimbursement to the Company of any bonus or other incentive-based or equity-based compensation previously received by the Indemnitee or payment of any profits realized by the Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements under Section 304 of the Sarbanes-Oxley Act of 2002 in connection with an accounting restatement of the Company or the payment to the Company of profits arising from the purchase or sale by the Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act ).

 

11. Settlement of Claims . The Company shall not be liable to the Indemnitee under this Agreement for any amounts paid in settlement of any threatened or pending Claim related to an Indemnifiable Event effected without the Company’s prior written consent, which shall not be unreasonably withheld; provided, however, that if a Change in Control has occurred, the Company shall be liable for indemnification of the Indemnitee for amounts paid in settlement if an Independent Counsel has approved the settlement. The Company shall not settle any Claim related to an Indemnifiable Event in any manner that would impose any Losses on the Indemnitee without the Indemnitee’s prior written consent.
   
12. Duration . All agreements and obligations of the Company contained herein shall continue during the period that the Indemnitee is a director or officer of the Company (or is serving at the request of the Company as a director, officer, employee, member, trustee or agent of another Enterprise) and shall continue thereafter (i) so long as the Indemnitee may be subject to any possible Claim relating to an Indemnifiable Event (including any rights of appeal thereto) and (ii) throughout the pendency of any proceeding (including any rights of appeal thereto) commenced by the Indemnitee to enforce or interpret his or her rights under this Agreement, even if, in either case, he or she may have ceased to serve in such capacity at the time of any such Claim or proceeding.

 

 
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13. Non-Exclusivity . The rights of the Indemnitee hereunder will be in addition to any other rights the Indemnitee may have under the Constituent Documents, the general corporate law of the State of Nevada, any other contract or otherwise (collectively, “ Other Indemnity Provisions ”); provided, however, that (a) to the extent that the Indemnitee otherwise would have any greater right to indemnification under any Other Indemnity Provision, the Indemnitee will be deemed to have such greater right hereunder and (b) to the extent that any change is made to any Other Indemnity Provision which permits any greater right to indemnification than that provided under this Agreement as of the date hereof, the Indemnitee will be deemed to have such greater right hereunder. The Company will not adopt any amendment to any of the Constituent Documents the effect of which would be to deny, diminish or encumber the Indemnitee’s right to indemnification under this Agreement or any Other Indemnity Provision.
   
14. Liability Insurance . For the duration of the Indemnitee’s service as a director and/or officer of the Company, and thereafter for so long as the Indemnitee shall be subject to any pending Claim relating to an Indemnifiable Event, the Company shall use commercially reasonable efforts (taking into account the scope and amount of coverage available relative to the cost thereof) to continue to maintain in effect policies of directors’ and officers’ liability insurance providing coverage that is at least substantially comparable in scope and amount to that provided by the Company’s current policies of directors’ and officers’ liability insurance. In all policies of directors’ and officers’ liability insurance maintained by the Company, the Indemnitee shall be named as an insured in such a manner as to provide the Indemnitee the same rights and benefits as are provided to the most favorably insured of the Company’s directors, if the Indemnitee is a director, or of the Company’s officers, if the Indemnitee is an officer (and not a director) by such policy. Upon request, the Company will provide to the Indemnitee copies of all directors’ and officers’ liability insurance applications, binders, policies, declarations, endorsements and other related materials.
   
15. No Duplication of Payments . The Company shall not be liable under this Agreement to make any payment to the Indemnitee in respect of any Losses to the extent the Indemnitee has otherwise received payment under any insurance policy, the Constituent Documents, Other Indemnity Provisions or otherwise of the amounts otherwise indemnifiable by the Company hereunder.
   
16. Subrogation . In the event of payment to the Indemnitee under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee. The Indemnitee shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.
   
17. Amendments . No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be binding unless in the form of a writing signed by the party against whom enforcement of the waiver is sought, and no such waiver shall operate as a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver. Except as specifically provided herein, no failure to exercise or any delay in exercising any right or remedy hereunder shall constitute a waiver thereof.

 

 
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18. Binding Effect . This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company), assigns, spouses, heirs and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part of the business and/or assets of the Company, by written agreement in form and substances satisfactory to the Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.
   
19. Severability . The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any portion thereof) are held by a court of competent jurisdiction to be invalid, illegal, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.
   
20. Notices . All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand, against receipt, or mailed, by postage prepaid, certified or registered mail:

 

  (a) if to the Indemnitee, to the address set forth on the signature page hereto.
     
  (b) if to the Company, to:

 

AppCoin Innovations Inc.
561 Indiana Court
Venice Beach, CA 90291

Attention: Michael Blum
Email: Michael.blum@appcoininnovations.com

 

Notice of change of address shall be effective only when given in accordance with this Section. All notices complying with this Section shall be deemed to have been received on the date of hand delivery or on the third business day after mailing.

 

21. Governing Law and Forum . This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Nevada applicable to contracts made and to be performed in such state without giving effect to its principles of conflicts of laws.
   
22. Headings . The headings of the sections and paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction or interpretation thereof.
   
23. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original, but all of which together shall constitute one and the same Agreement.

 

 
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

APPCOIN INNOVATIONS INC.

Per: /s/Michael Blum  
Name: Michael Blum  
Title: CFO  

 

INDEMNITEE

 

  /s/ Bruce Elliott  
Name: Bruce Elliott  
     
Address: 6 Kermode Road  
  Crosby, Isle of Man 1M4 4BZ  

 

 

 

 

 

 

INDEMNIFICATION AGREEMENT

 

This Indemnification Agreement (“ Agreement ”), dated as of February 9, 2018, is by and between APPCOIN INNOVATIONS INC. , a Nevada corporation (the “ Company ”) and Edmund Moy (the “ Indemnitee ”).

 

WHEREAS:

 

A. The Indemnitee is a director and/or an officer of the Company;

 

B. Both the Company and the Indemnitee recognize the increased risk of litigation and other claims being asserted against directors and officers of public companies;

 

C. The board of directors of the Company (the “ Board ”) has determined that enhancing the ability of the Company to retain and attract as directors and officers the most capable persons is in the best interests of the Company and that the Company therefore should seek to assure such persons that indemnification and insurance coverage is available; and

 

D. In recognition of the need to provide the Indemnitee with substantial protection against personal liability, in order to procure the Indemnitee’s continued service as a director and/or officer of the Company and to enhance the Indemnitee’s ability to serve the Company in an effective manner, and in order to provide such protection pursuant to express contract rights (intended to be enforceable irrespective of, among other things, any amendment to the Company’s certificate of incorporation or bylaws (collectively, the “ Constituent Documents ”), any change in the composition of the Board or any change in control or business combination transaction relating to the Company), the Company wishes to provide in this Agreement for the indemnification of, and the advancement of Expenses (as defined in Section 1(f) below) to, Indemnitee as set forth in this Agreement and to the extent insurance is maintained for the continued coverage of Indemnitee under the Company’s directors’ and officers’ liability insurance policies.

 

NOW, THEREFORE, in consideration of the foregoing and the Indemnitee’s agreement to continue to provide services to the Company, the parties agree as follows:

 

1. Definitions . For purposes of this Agreement, the following terms shall have the following meanings:

 

  (a) Beneficial Owner ” has the meaning given to the term “beneficial owner” in Rule 13d-3 under the Securities Exchange Act of 1934 , as amended (the “ Exchange Act ”).
     
  (b) Change in Control ” means the occurrence after the date of this Agreement of any of the following events:

 

  (i) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 20% or more of the Company’s then outstanding Voting Securities unless the change in relative Beneficial Ownership of the Company’s securities by any Person results solely from a reduction in the aggregate number of outstanding shares of securities entitled to vote generally in the election of directors;

 

 
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  (ii) the consummation of a reorganization, merger or consolidation, unless immediately following such reorganization, merger or consolidation, all of the Beneficial Owners of the Voting Securities of the Company immediately prior to such transaction beneficially own, directly or indirectly, more than 50% of the combined voting power of the outstanding Voting Securities of the entity resulting from such transaction;
     
  (iii) during any period of two consecutive years, not including any period prior to the execution of this Agreement, individuals who at the beginning of such period constituted the Board (including for this purpose any new directors whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved) cease for any reason to constitute at least a majority of the Board; or
     
  (iv) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets.

 

  (c) Claim ” means:

 

  (i) any threatened, pending or completed action, suit, proceeding or alternative dispute resolution mechanism, whether civil, criminal, administrative, arbitrative, investigative or other, and whether made pursuant to federal, state or other law; or
     
  (ii) any inquiry, hearing or investigation that the Indemnitee determines might lead to the institution of any such action, suit, proceeding or alternative dispute resolution mechanism.

 

  (d) Court ” shall have the meaning ascribed to it in Section 9(e) below.
     
  (e) Disinterested Director ” means a director of the Company who is not and was not a party to the Claim in respect of which indemnification is sought by Indemnitee.
     
  (f) Expenses ” means any and all expenses, including reasonable attorneys’ and experts’ fees, court costs, transcript costs, travel expenses, duplicating, printing and binding costs, telephone charges, and all other costs and expenses incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness or participate in, any Claim. Expenses also shall include (i) Expenses incurred in connection with any appeal resulting from any Claim, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent, and (ii) for purposes of Section 5 only, Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement, by litigation or otherwise. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.

 

 
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  (g) Expense Advance ” means any payment of Expenses advanced to Indemnitee by the Company pursuant to Section 4 or Section 5 hereof.
     
  (h) Indemnifiable Event ” means any event or occurrence, whether occurring before, on or after the date of this Agreement, related to the fact that Indemnitee is or was a director, officer, employee or agent of the Company or any subsidiary of the Company, or is or was serving at the request of the Company as a director, officer, employee, member, manager, trustee or agent of any other corporation, limited liability company, partnership, joint venture, trust or other entity or enterprise (collectively with the Company, “ Enterprise ”) or by reason of an action or inaction by Indemnitee in any such capacity (whether or not serving in such capacity at the time any Loss is incurred for which indemnification can be provided under this Agreement).
     
  (i) Independent Counsel ” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently performs, nor in the past two (2) years has performed, services for either: (i) the Company or Indemnitee (other than in connection with matters concerning Indemnitee under this Agreement or of other indemnitees under similar agreements) or (ii) any other party to the Claim giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or the Indemnitee in an action to determine the Indemnitee’s rights under this Agreement.
     
  (j) Losses ” means any and all Expenses, damages, losses, liabilities, judgments, fines, penalties (whether civil, criminal or other), ERISA excise taxes, amounts paid or payable in settlement, including any interest, assessments, any federal, state, local or foreign taxes imposed as a result of the actual or deemed receipt of any payments under this Agreement and all other charges paid or payable in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness or participate in, any Claim.
     
  (k) Person ” means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity or other entity and includes the meaning set forth in Sections 13(d) and 14(d) of the Exchange Act.

 

 
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  (l) Standard of Conduct Determination ” shall have the meaning ascribed to it in Section 9(b) below.
     
  (m) Voting Securities ” means any securities of the Company that vote generally in the election of directors.

 

2. Services to the Company . The Indemnitee agrees to continue to serve as a director or officer of the Company for so long as the Indemnitee is duly elected or appointed or until the Indemnitee tenders his resignation or is no longer serving in such capacity. This Agreement shall not be deemed an employment agreement between the Company (or any of its subsidiaries or Enterprise) and the Indemnitee. The Indemnitee specifically acknowledges that his employment with or service to the Company or any of its subsidiaries or Enterprise, as applicable, is at will and the Indemnitee may be discharged at any time for any reason, with or without cause, except as may be otherwise provided in any written employment agreement between the Indemnitee and the Company (or any of its subsidiaries or Enterprise), other applicable formal severance policies duly adopted by the Board or, with respect to service as a director or officer of the Company, by the Company’s Constituent Documents or Nevada law. This Agreement shall continue in force after the Indemnitee has ceased to serve as a director or officer of the Company or, at the request of the Company, of any of its subsidiaries or Enterprise, as provided in Section 12 hereof.
   
3. Indemnification . Subject to Section 9 and Section 10 of this Agreement, the Company shall indemnify the Indemnitee, to the fullest extent permitted by the laws of the State of Nevada in effect on the date hereof, or as such laws may from time to time hereafter be amended to increase the scope of such permitted indemnification, against any and all Losses if the Indemnitee was or is or becomes a party to or participant in, or is threatened to be made a party to or participant in, any Claim by reason of or arising in part out of an Indemnifiable Event, including, without limitation, Claims brought by or in the right of the Company, Claims brought by third parties, and Claims in which the Indemnitee is solely a witness.
   
4. Advancement of Expenses . The Indemnitee shall have the right to advancement by the Company, prior to the final disposition of any Claim by final adjudication to which there are no further rights of appeal, of any and all Expenses actually and reasonably paid or incurred by the Indemnitee in connection with any Claim arising out of an Indemnifiable Event. The Indemnitee’s right to such advancement is not subject to the satisfaction of any standard of conduct. Without limiting the generality or effect of the foregoing, within 60 days after any request by the Indemnitee, the Company shall, in accordance with such request, (a) pay such Expenses on behalf of the Indemnitee, (b) advance to the Indemnitee funds in an amount sufficient to pay such Expenses, or (c) reimburse the Indemnitee for such Expenses. In connection with any request for Expense Advances, the Indemnitee shall not be required to provide any documentation or information to the extent that the provision thereof would undermine or otherwise jeopardize attorney-client privilege. In connection with any request for Expense Advances, the Indemnitee shall execute and deliver to the Company an undertaking (which shall be accepted without reference to the Indemnitee’s ability to repay the Expense Advances) to repay any amounts paid, advanced, or reimbursed by the Company for such Expenses to the extent that it is ultimately determined, following the final disposition of such Claim, that the Indemnitee is not entitled to indemnification hereunder. The Indemnitee’s obligation to reimburse the Company for Expense Advances shall be unsecured and no interest shall be charged thereon.

 

 
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5. Indemnification for Expenses in Enforcing Rights . To the fullest extent allowable under applicable law, the Company shall also indemnify against, and, if requested by the Indemnitee, shall advance to the Indemnitee subject to and in accordance with Section 4, any Expenses actually and reasonably paid or incurred by the Indemnitee in connection with any action or proceeding by the Indemnitee for (a) indemnification or reimbursement or advance payment of Expenses by the Company under any provision of this Agreement, or under any other agreement or provision of the Constituent Documents now or hereafter in effect relating to Claims relating to Indemnifiable Events, and/or (b) recovery under any directors’ and officers’ liability insurance policies maintained by the Company. However, in the event that the Indemnitee is ultimately determined not to be entitled to such indemnification or insurance recovery, as the case may be, then all amounts advanced under this Section 5 shall be repaid. The Indemnitee shall be required to reimburse the Company in the event that a final judicial determination is made that such action brought by the Indemnitee was frivolous or not made in good faith.
   
6. Partial Indemnity . If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for a portion of any Losses in respect of a Claim related to an Indemnifiable Event but not for the total amount thereof, the Company shall nevertheless indemnify the Indemnitee for the portion thereof to which the Indemnitee is entitled.
   
7. Notification and Defense of Claims .

 

  (a) Notification of Claims . The Indemnitee shall notify the Company in writing as soon as practicable of any Claim which could relate to an Indemnifiable Event or for which the Indemnitee could seek Expense Advances, including a brief description (based upon information then available to the Indemnitee) of the nature of, and the facts underlying, such Claim. The failure by the Indemnitee to timely notify the Company hereunder shall not relieve the Company from any liability hereunder unless the Company’s ability to participate in the defense of such claim was materially and adversely affected by such failure/except that the Company shall not be liable to indemnify the Indemnitee under this Agreement with respect to any judicial award in a Claim related to an Indemnifiable Event if the Company was not given a reasonable and timely opportunity to participate at its expense in the defense of such action. If at the time of the receipt of such notice, the Company has directors’ and officers’ liability insurance in effect under which coverage for Claims related to Indemnifiable Events is potentially available, the Company shall give prompt written notice to the applicable insurers in accordance with the procedures set forth in the applicable policies. The Company shall provide to the Indemnitee a copy of such notice delivered to the applicable insurers, and copies of all subsequent correspondence between the Company and such insurers regarding the Claim, in each case substantially concurrently with the delivery or receipt thereof by the Company.

 

 
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  (b) Defense of Claims . The Company shall be entitled to participate in the defense of any Claim relating to an Indemnifiable Event at its own expense and, except as otherwise provided below, to the extent the Company so wishes, it may assume the defense thereof with counsel reasonably satisfactory to the Indemnitee. After notice from the Company to the Indemnitee of its election to assume the defense of any such Claim, the Company shall not be liable to the Indemnitee under this Agreement or otherwise for any Expenses subsequently directly incurred by the Indemnitee in connection with the Indemnitee’s defense of such Claim other than reasonable costs of investigation or as otherwise provided below. The Indemnitee shall have the right to employ its own legal counsel in such Claim, but all Expenses related to such counsel incurred after notice from the Company of its assumption of the defense shall be at the Indemnitee’s own expense; provided, however, that if (i) the Indemnitee’s employment of its own legal counsel has been authorized by the Company, (ii) the Indemnitee has reasonably determined that there may be a conflict of interest between the Indemnitee and the Company in the defense of such Claim, (iii) after a Change in Control, the Indemnitee’s employment of its own counsel has been approved by the Independent Counsel or (iv) the Company shall not in fact have employed counsel to assume the defense of such Claim, then the Indemnitee shall be entitled to retain its own separate counsel (but not more than one law firm plus, if applicable, local counsel in respect of any such Claim) and all Expenses related to such separate counsel shall be borne by the Company.

 

8. Procedure upon Application for Indemnification . In order to obtain indemnification pursuant to this Agreement, the Indemnitee shall submit to the Company a written request therefor, including in such request such documentation and information as is reasonably available to the Indemnitee and is reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification following the final disposition of the Claim, provided that documentation and information need not be so provided to the extent that the provision thereof would undermine or otherwise jeopardize attorney-client privilege. Indemnification shall be made insofar as the Company determines the Indemnitee is entitled to indemnification in accordance with Section 9 below.
   
9. Determination of Right to Indemnification .

 

  (a) Mandatory Indemnification; Indemnification as a Witness .

 

  (i) To the extent that the Indemnitee shall have been successful on the merits or otherwise in defense of any Claim relating to an Indemnifiable Event or any portion thereof or in defense of any issue or matter therein, including without limitation dismissal without prejudice, the Indemnitee shall be indemnified against all Losses relating to such Claim in accordance with Section 3 to the fullest extent allowable by law, and no Standard of Conduct Determination (as defined in Section 9(b)) shall be required.

 

 
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  (ii) To the extent that the Indemnitee’s involvement in a Claim relating to an Indemnifiable Event is to prepare to serve and serve as a witness, and not as a party, the Indemnitee shall be indemnified against all Losses incurred in connection therewith to the fullest extent allowable by law and no Standard of Conduct Determination (as defined in Section 9(b)) shall be required.

 

  (b) Standard of Conduct . To the extent that the provisions of Section 9(a) are inapplicable to a Claim related to an Indemnifiable Event that shall have been finally disposed of, any determination of whether the Indemnitee has satisfied any applicable standard of conduct under Nevada law that is a legally required condition to indemnification of the Indemnitee hereunder against Losses relating to such Claim and any determination that Expense Advances must be repaid to the Company (a “ Standard of Conduct Determination ”) shall be made as follows:

 

  (i) if no Change in Control has occurred, (A) by a majority vote of the Disinterested Directors, even if less than a quorum of the Board, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum or (C) if there are no such Disinterested Directors, by Independent Counsel in a written opinion addressed to the Board, a copy of which shall be delivered to the Indemnitee; and
     
  (ii) if a Change in Control shall have occurred, (A) if the Indemnitee so requests in writing, by a majority vote of the Disinterested Directors, even if less than a quorum of the Board or (B) otherwise, by Independent Counsel in a written opinion addressed to the Board, a copy of which shall be delivered to the Indemnitee.

 

The Company shall indemnify and hold harmless the Indemnitee against and, if requested by the Indemnitee, shall reimburse the Indemnitee for, or advance to the Indemnitee, within 60 days of such request, any and all Expenses incurred by the Indemnitee in cooperating with the person or persons making such Standard of Conduct Determination.

 

  (c) Making the Standard of Conduct Determination . The Company shall use its reasonable best efforts to cause any Standard of Conduct Determination required under Section 9(b) to be made as promptly as practicable. If the person or persons designated to make the Standard of Conduct Determination under Section 9(b) shall not have made a determination within 30 days after the later of (A) receipt by the Company of a written request from the Indemnitee for indemnification pursuant to Section 8 (the date of such receipt being the “ Notification Date ”) and (B) the selection of an Independent Counsel, if such determination is to be made by Independent Counsel, then the Indemnitee shall be deemed to have satisfied the applicable standard of conduct; provided that such 30-day period may be extended for a reasonable time, not to exceed an additional 30 days, if the person or persons making such determination in good faith requires such additional time to obtain or evaluate information relating thereto. Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement of the Indemnitee to indemnification under this Agreement shall be required to be made prior to the final disposition of any Claim.

 

 
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  (d) Payment of Indemnification . If, in regard to any Losses:

 

  (i) the Indemnitee shall be entitled to indemnification pursuant to Section 9(a);
     
  (ii) no Standard Conduct Determination is legally required as a condition to indemnification of the Indemnitee hereunder; or
     
  (iii) the Indemnitee has been determined or deemed pursuant to Section 9(b) or Section 9(c) to have satisfied the Standard of Conduct Determination, then the Company shall pay to the Indemnitee, within ten days after the later of (A) the Notification Date or (B) the earliest date on which the applicable criterion specified in clause (i), (ii) or (iii) is satisfied, an amount equal to such Losses.

 

  (e) Selection of Independent Counsel for Standard of Conduct Determination . If a Standard of Conduct Determination is to be made by Independent Counsel pursuant to Section 9(b)(i), the Independent Counsel shall be selected by the Board of Directors, and the Company shall give written notice to the Indemnitee advising him of the identity of the Independent Counsel so selected. If a Standard of Conduct Determination is to be made by Independent Counsel pursuant to Section 9(b)(ii), the Independent Counsel shall be selected by the Indemnitee, and the Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either case, the Indemnitee or the Company, as applicable, may, within five days after receiving written notice of selection from the other, deliver to the other a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not satisfy the criteria set forth in the definition of “ Independent Counsel ” in Section 1(i), and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person or firm so selected shall act as Independent Counsel. If such written objection is properly and timely made and substantiated, (i) the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit; and (ii) the non-objecting party may, at its option, select an alternative Independent Counsel and give written notice to the other party advising such other party of the identity of the alternative Independent Counsel so selected, in which case the provisions of the two immediately preceding sentences, the introductory clause of this sentence and numbered clause (i) of this sentence shall apply to such subsequent selection and notice. If applicable, the provisions of clause (ii) of the immediately preceding sentence shall apply to successive alternative selections. If no Independent Counsel that is permitted under the foregoing provisions of this Section 9(e) to make the Standard of Conduct Determination shall have been selected within 20 days after the Company gives its initial notice pursuant to the first sentence of this Section 9(e) or the Indemnitee gives its initial notice pursuant to the second sentence of this Section 9(e), as the case may be, either the Company or the Indemnitee may petition a court in Nevada (the “ Court ”) to resolve any objection which shall have been made by the Company or the Indemnitee to the other’s selection of Independent Counsel and/or to appoint as Independent Counsel a person to be selected by the Court or such other person as the Court shall designate, and the person or firm with respect to whom all objections are so resolved or the person or firm so appointed will act as Independent Counsel. In all events, the Company shall pay all of the reasonable fees and expenses of the Independent Counsel incurred in connection with the Independent Counsel’s determination pursuant to Section 9(b).

 

 
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  (f) Presumptions and Defenses .

 

  (i) Indemnitee’s Entitlement to Indemnification . In making any Standard of Conduct Determination, the person or persons making such determination shall presume that the Indemnitee has satisfied the applicable standard of conduct and is entitled to indemnification, and the Company shall have the burden of proof to overcome that presumption and establish that the Indemnitee is not so entitled. Any Standard of Conduct Determination that is adverse to the Indemnitee may be challenged by the Indemnitee in the Court. No determination by the Company (including by its directors or any Independent Counsel) that the Indemnitee has not satisfied any applicable standard of conduct may be used as a defense to any legal proceedings brought by the Indemnitee to secure indemnification or reimbursement or advance payment of Expenses by the Company hereunder or create a presumption that the Indemnitee has not met any applicable standard of conduct.
     
  (ii) Reliance as a Safe Harbor . For purposes of this Agreement, and without creating any presumption as to a lack of good faith if the following circumstances do not exist, the Indemnitee shall be deemed to have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company if the Indemnitee’s actions or omissions to act are taken in good faith reliance upon the records of the Company, including its financial statements, or upon information, opinions, reports or statements furnished to the Indemnitee by the officers or employees of the Company or any of its subsidiaries in the course of their duties, or by committees of the Board or by any other Person (including legal counsel, accountants and financial advisors) as to matters the Indemnitee reasonably believes are within such other Person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Company. In addition, the knowledge and/or actions, or failures to act, of any director, officer, agent or employee of the Company shall not be imputed to the Indemnitee for purposes of determining the right to indemnity hereunder.

 

 
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  (iii) No Other Presumptions . For purposes of this Agreement, the termination of any Claim by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere or its equivalent, will not create a presumption that the Indemnitee did not meet any applicable standard of conduct or have any particular belief, or that indemnification hereunder is otherwise not permitted.
     
  (iv) Defense to Indemnification and Burden of Proof . It shall be a defense to any action brought by the Indemnitee against the Company to enforce this Agreement (other than an action brought to enforce a claim for Losses incurred in defending against a Claim related to an Indemnifiable Event in advance of its final disposition) that it is not permissible under applicable law for the Company to indemnify the Indemnitee for the amount claimed. In connection with any such action or any related Standard of Conduct Determination, the burden of proving such a defense or that the Indemnitee did not satisfy the applicable standard of conduct shall be on the Company.
     
  (v) Resolution of Claims . The Company acknowledges that a settlement or other disposition short of final judgment may be successful on the merits or otherwise for purposes of Section 9(a)(i) if it permits a party to avoid expense, delay, distraction, disruption and uncertainty. In the event that any Claim relating to an Indemnifiable Event to which the Indemnitee is a party is resolved in any manner other than by adverse judgment against the Indemnitee (including, without limitation, settlement of such action, claim or proceeding with our without payment of money or other consideration) it shall be presumed that the Indemnitee has been successful on the merits or otherwise for purposes of Section 9(a)(i). The Company shall have the burden of proof to overcome this presumption.

 

10. Exclusions from Indemnification . Notwithstanding anything in this Agreement to the contrary, the Company shall not be obligated to:

 

  (a) indemnify or advance funds to the Indemnitee for Expenses or Losses with respect to proceedings initiated by the Indemnitee, including any proceedings against the Company or its directors, officers, employees or other indemnitees and not by way of defense, except:

 

  (i) proceedings referenced in Section 5 above (unless a court of competent jurisdiction determines that each of the material assertions made by the Indemnitee in such proceeding was not made in good faith or was frivolous); or

 

 
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  (ii) where the Company has joined in or the Board has consented to the initiation of such proceedings;

 

  (b) indemnify the Indemnitee if a final decision by a court of competent jurisdiction determines that such indemnification is prohibited by applicable law;
     
  (c) indemnify the Indemnitee for the disgorgement of profits arising from the purchase or sale by the Indemnitee of securities of the Company in violation of Section 16(b) of the Exchange Act, or any similar successor statute; and
     
  (d) indemnify or advance funds to the Indemnitee for the Indemnitee’s reimbursement to the Company of any bonus or other incentive-based or equity-based compensation previously received by the Indemnitee or payment of any profits realized by the Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements under Section 304 of the Sarbanes-Oxley Act of 2002 in connection with an accounting restatement of the Company or the payment to the Company of profits arising from the purchase or sale by the Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act ).

 

11. Settlement of Claims . The Company shall not be liable to the Indemnitee under this Agreement for any amounts paid in settlement of any threatened or pending Claim related to an Indemnifiable Event effected without the Company’s prior written consent, which shall not be unreasonably withheld; provided, however, that if a Change in Control has occurred, the Company shall be liable for indemnification of the Indemnitee for amounts paid in settlement if an Independent Counsel has approved the settlement. The Company shall not settle any Claim related to an Indemnifiable Event in any manner that would impose any Losses on the Indemnitee without the Indemnitee’s prior written consent.
   
12. Duration . All agreements and obligations of the Company contained herein shall continue during the period that the Indemnitee is a director or officer of the Company (or is serving at the request of the Company as a director, officer, employee, member, trustee or agent of another Enterprise) and shall continue thereafter (i) so long as the Indemnitee may be subject to any possible Claim relating to an Indemnifiable Event (including any rights of appeal thereto) and (ii) throughout the pendency of any proceeding (including any rights of appeal thereto) commenced by the Indemnitee to enforce or interpret his or her rights under this Agreement, even if, in either case, he or she may have ceased to serve in such capacity at the time of any such Claim or proceeding.
   
13. Non-Exclusivity . The rights of the Indemnitee hereunder will be in addition to any other rights the Indemnitee may have under the Constituent Documents, the general corporate law of the State of Nevada, any other contract or otherwise (collectively, “ Other Indemnity Provisions ”); provided, however, that (a) to the extent that the Indemnitee otherwise would have any greater right to indemnification under any Other Indemnity Provision, the Indemnitee will be deemed to have such greater right hereunder and (b) to the extent that any change is made to any Other Indemnity Provision which permits any greater right to indemnification than that provided under this Agreement as of the date hereof, the Indemnitee will be deemed to have such greater right hereunder. The Company will not adopt any amendment to any of the Constituent Documents the effect of which would be to deny, diminish or encumber the Indemnitee’s right to indemnification under this Agreement or any Other Indemnity Provision.

 

 
- 12 -

 

14. Liability Insurance . For the duration of the Indemnitee’s service as a director and/or officer of the Company, and thereafter for so long as the Indemnitee shall be subject to any pending Claim relating to an Indemnifiable Event, the Company shall use commercially reasonable efforts (taking into account the scope and amount of coverage available relative to the cost thereof) to continue to maintain in effect policies of directors’ and officers’ liability insurance providing coverage that is at least substantially comparable in scope and amount to that provided by the Company’s current policies of directors’ and officers’ liability insurance. In all policies of directors’ and officers’ liability insurance maintained by the Company, the Indemnitee shall be named as an insured in such a manner as to provide the Indemnitee the same rights and benefits as are provided to the most favorably insured of the Company’s directors, if the Indemnitee is a director, or of the Company’s officers, if the Indemnitee is an officer (and not a director) by such policy. Upon request, the Company will provide to the Indemnitee copies of all directors’ and officers’ liability insurance applications, binders, policies, declarations, endorsements and other related materials.
   
15. No Duplication of Payments . The Company shall not be liable under this Agreement to make any payment to the Indemnitee in respect of any Losses to the extent the Indemnitee has otherwise received payment under any insurance policy, the Constituent Documents, Other Indemnity Provisions or otherwise of the amounts otherwise indemnifiable by the Company hereunder.
   
16. Subrogation . In the event of payment to the Indemnitee under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee. The Indemnitee shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.
   
17. Amendments . No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be binding unless in the form of a writing signed by the party against whom enforcement of the waiver is sought, and no such waiver shall operate as a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver. Except as specifically provided herein, no failure to exercise or any delay in exercising any right or remedy hereunder shall constitute a waiver thereof.

 

 
- 13 -

 

18. Binding Effect . This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company), assigns, spouses, heirs and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part of the business and/or assets of the Company, by written agreement in form and substances satisfactory to the Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.
   
19. Severability . The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any portion thereof) are held by a court of competent jurisdiction to be invalid, illegal, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.
   
20. Notices . All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand, against receipt, or mailed, by postage prepaid, certified or registered mail:

 

  (a) if to the Indemnitee, to the address set forth on the signature page hereto.
     
  (b) if to the Company, to:

 

  AppCoin Innovations Inc.
  561 Indiana Court
  Venice Beach, CA 90291
   
  Attention: Michael Blum
  Email: Michael.blum@appcoininnovations.com

 

Notice of change of address shall be effective only when given in accordance with this Section. All notices complying with this Section shall be deemed to have been received on the date of hand delivery or on the third business day after mailing.

 

21. Governing Law and Forum . This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Nevada applicable to contracts made and to be performed in such state without giving effect to its principles of conflicts of laws.
   
22. Headings . The headings of the sections and paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction or interpretation thereof.
   
23. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original, but all of which together shall constitute one and the same Agreement.

 

 
- 14 -

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

APPCOIN INNOVATIONS INC.  
     
Per: /s/Michael Blum  
  Name: Michael Blum  
  Title: CFO  

 

INDEMNITEE  
   
/s/ Edmund Moy  
   
Name: Edmund Moy  
   
Address: 4251 Campbell Avenue, Suite 313  
Arlington, Virginia 22206  
   

 

 
 

 

 

ICOX innovations inc.
(the “ Corporation ”)

 

Code of Ethics and Business Conduct
For DIRECTORS, SENIOR OFFICERS AND EMPLOYEES OF THE CORPORATION
(the “ Code ”)

 

This Code applies to the Chief Executive Officer, President, Chief Financial Officer, Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, Controller, any Presidents of business units/divisions, any Vice-Presidents, any Executive Vice-Presidents, and persons performing similar functions (collectively, the “ Senior Officers ”) along with all directors and employees within the Corporation and its subsidiaries (the Senior Officers, directors and employees are hereinafter collectively referred to as the “ Employees ”). This Code covers a wide range of business practices and procedures. It does not cover every issue that may arise, but it sets out basic principles to guide all Employees of the Corporation. All Employees should conduct themselves accordingly and seek to avoid the appearance of improper behaviour in any way relating to the Corporation.

 

Any Employee who has any questions about the Code should consult with the Chief Executive Officer, the President, the Corporation’s board of directors (the “ Board ”) or the Corporation’s audit committee (the “ Audit Committee ”).

 

The Corporation has adopted the Code for the purpose of promoting:

 

  honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest;
     
  full, fair, accurate, timely and understandable disclosure in all reports and documents that the Corporation files with, or submits to, the Securities and Exchange Commission (“ SEC ”) and in other public communications made by the Corporation;
   
  compliance with applicable governmental laws, rules and regulations;
   
  the protection of Corporation assets, including corporate opportunities and confidential information;
   
  fair dealing practices;
   
  the prompt internal reporting of violations of the Code; and
   
  accountability for adherence to the Code.

 

All Employees are required to be familiar with the Code, comply with its provisions and report any suspected violations as described below.

 

honest and ethical conduct

 

The Corporation’s policy is to promote high standards of integrity by conducting its affairs honestly and ethically.

 

Each Employee must act with integrity and observe the highest ethical standards of business conduct in his or her dealings with the Corporation’s customers, suppliers, partners, service providers, competitors, employees and anyone else with whom he or she has contact in the course of performing his or her job.

 

     
  - 2 -  

 

A conflict of interest occurs when an individual’s private interest (or the interest of a member of his or her family) interferes, or even appears to interfere, with the interests of the Corporation as a whole. A conflict of interest can arise when an Employee (or a member of his or her family) takes actions or has interests that may make it difficult to perform his or her work for the Corporation objectively and effectively. Conflicts of interest also arise when an Employee (or a member of his or her family) receives improper personal benefits as a result of his or her position in the Corporation.

 

Loans by the Corporation to, or guarantees by the Corporation of obligations of, Employees or their family members are of special concern and could constitute improper personal benefits to the recipients of such loans or guarantees, depending on the facts and circumstances. Loans by the Corporation to, or guarantees by the Corporation of obligations of, any Senior Officer or their family members are expressly prohibited.

 

Whether or not a conflict of interest exists or will exist can be unclear. Conflicts of interest should be avoided.

 

Specifically, each Employee must:

 

  act with integrity, including being honest and candid while still maintaining the confidentiality of information when required or consistent with the Corporation’s policies;
     
  avoid violations of the Code, including actual or apparent conflicts of interest with the Corporation in personal and professional relationships;
     
  disclose to the Board or the Audit Committee any material transaction or relationship that could reasonably be expected to give rise to a breach of the Code, including actual or apparent conflicts of interest with the Corporation;
     
  obtain approval from the Board or Audit Committee before making any decisions or taking any action that could reasonably be expected to involve a conflict of interest or the appearance of a conflict of interest;
     
  observe both the form and spirit of laws and governmental rules and regulations, accounting standards and Corporation policies;
     
  maintain a high standard of accuracy and completeness in the Corporation’s financial records;
     
  ensure full, fair, timely, accurate and understandable disclosure in the Corporation’s periodic reports;
     
  report any violations of the Code to the Board or Audit Committee;
     
  proactively promote ethical behaviour among peers in his or her work environment; and
     
  maintain the skills appropriate and necessary for the performance of his or her duties.

 

     
  - 3 -  

 

Disclosure of Corporation information

 

As a result of the Corporation’s status as a public company, it is required to file periodic and other reports with the SEC. The Corporation takes its public disclosure responsibility seriously to ensure that these reports furnish the marketplace with full, fair, accurate, timely and understandable disclosure regarding the financial and business condition of the Corporation. All disclosures contained in reports and documents filed with or submitted to the SEC, or other government agencies, on behalf of the Corporation or contained in other public communications made by the Corporation must comply with all applicable securities laws and SEC rules and must be complete and correct in all material respects and understandable to the intended recipient.

 

The Senior Officers, in relation to his or her area of responsibility, must be committed to providing timely, consistent and accurate information, in compliance with all legal and regulatory requirements. It is imperative that this disclosure be accomplished consistently during both good times and bad and that all parties in the marketplace have equal or similar access to this information.

 

All of the Corporation’s books, records, accounts and financial statements must be maintained in reasonable detail, must appropriately reflect the Corporation’s transactions, and must conform both to applicable legal requirements and to the Corporation’s system of internal controls. Unrecorded or “off the book” funds, assets or liabilities should not be maintained unless permitted by applicable law or regulation. Senior Officers involved in the preparation of the Corporation’s financial statements must prepare those statements in accordance with generally accepted accounting principles, consistently applied, and any other applicable accounting standards and rules so that the financial statements materially, fairly and completely reflect the business transactions and financial statements and related condition of the Corporation. Further, it is important that financial statements and related disclosures be free of material errors. All Employees must cooperate fully with the Corporation’s accounting and internal audit personnel as well as the Corporation’s independent public accountants and legal counsel.

 

Specifically, each Senior Officer must:

 

  be familiar and comply with the disclosure requirements generally applicable to the Corporation and the Corporation’s disclosure controls and procedures and its internal control over financial reporting;
     
  take all necessary steps to ensure that all filings with the SEC and all other public communications about the financial and business condition of the Corporation provide full, fair, accurate, timely and understandable disclosure;
     
  not knowingly misrepresent, or cause others to misrepresent, facts about the Corporation to others, including the Corporation’s independent auditors, governmental regulators, self-regulating organizations and other governmental officials;
     
  to the extent that he or she participates in the creation of the Corporation’s books and records, promote the accuracy, fairness and timeliness of those records; and
     
  in relation to his or her area of responsibility, properly review and critically analyse proposed disclosure for accuracy and completeness.

 

PROTECTION AND PROPER USE OF COMPANY ASSETS

 

All Employees should protect the Corporation’s assets and ensure their efficient use. Theft, carelessness and waste have a direct impact on the Corporation’s profitability and are prohibited.

 

All Corporation assets should be used only for legitimate business purposes. Any suspected incident of fraud or theft should be reported for investigation immediately. The obligation to protect Corporation assets includes the Corporation’s proprietary information. Proprietary information includes intellectual property such as trade secrets, patents, trademarks, and copyrights, as well as business and marketing plans, engineering and manufacturing ideas, designs, databases, records and any non-public financial data or reports. Unauthorized use or distribution of this information is prohibited and could also be illegal and result in civil or criminal penalties.

 

     
  - 4 -  

 

All Employees owe a duty to the Corporation to advance its interests when the opportunity arises. Employees are prohibited from taking for themselves personally (or for the benefit of friends or family members) opportunities that are discovered through the use of Corporation assets, property, information or position. Employees may not use Corporation assets, property, information or position for personal gain (including gain of friends or family members). In addition, no director, officer or employee may compete with the Corporation.

 

CONFIDENTIAL INFORMATION

 

Employees must maintain the confidentiality of confidential information entrusted to them by the Corporation of its customers, suppliers, joint venture partners, or others with whom the Corporation is considering a business or other transaction except when disclosure is authorized by an executive officer or required or mandated by laws or regulations. Confidential information includes all non-public information that might be useful or helpful to competitors or harmful to the Corporation or its customers or suppliers, if disclosed. It also includes information that suppliers, customers and other parties have entrusted to the Corporation. The obligation to preserve confidential information continues even after employment ends.

 

Records containing personal data about employees or private information about customers and their employees are confidential. They are to be carefully safeguarded, kept current, relevant and accurate. They should be disclosed only to authorized personnel or as required by law.

 

All inquiries regarding the Corporation from non-employees, such as financial analysts and journalists, should be directed to the Board or the Audit Committee. The Corporation’s policy is to cooperate with every reasonable request of government investigators for information. At the same time, the Corporation is entitled to all the safeguards provided by law for the benefit of persons under investigation or accused of wrongdoing, including legal representation. If a representative of any government or government agency seeks an interview or requests access to data or documents for the purposes of an investigation, the Employee should refer the representative to the Board or the Audit Committee. Employees also should preserve all materials, including documents and e-mails that might relate to any pending or reasonably possible investigation.

 

FAIR DEALING

 

Each Employee must deal fairly with the Corporation’s customers, suppliers, partners, service providers, competitors, employees and anyone else with whom he or she has contact in the course of performing his or her job. No director, officer or employee may take unfair advantage of anyone through manipulation, concealment, abuse or privileged information, misrepresentation of facts or any other unfair dealing practice.

 

Compliance with laws

 

The Employees must respect, obey and comply with all applicable foreign, federal, state and local laws, rules and regulations applicable to the business and operations of the Corporation.

 

     
  - 5 -  

 

Employees who have access to, or knowledge of, material nonpublic information from or about the Corporation are prohibited from buying, selling or otherwise trading in the Corporation’s stock or other securities. “Material nonpublic” information includes any information, positive or negative, that has not yet been made available or disclosed to the public and that might be of significance to an investor, as part of the total mix of information, in deciding whether to buy or sell stock or other securities.

 

Employees also are prohibited from giving “tips” on material nonpublic information, that is directly or indirectly disclosing such information to any other person, including family members, other relatives and friends, so that they may trade in the Corporation’s stock or other securities.

 

Furthermore, if, during the course of an Employee’s service with the Corporation, he or she acquires material nonpublic information about another company, such as one of the Corporation’s customers or suppliers, or the Employee learns that the Corporation is planning a major transaction with another company (such as an acquisition), the Employee is restricted from trading in the securities of the other company.

 

Reporting actual and potential violations of the code and Accountability for compliance with the code

 

The Corporation, through the Board or the Audit Committee, is responsible for applying this Code to specific situations in which questions may arise and has the authority to interpret this Code in any particular situation. This Code is not intended to provide a comprehensive guideline for Senior Officers in relation to their business activities with the Corporation. Any Employee may seek clarification on the application of this Code from the Board or the Audit Committee.

 

Each Employee must:

 

  notify the Corporation of any existing or potential violation of this Code, and failure to do so is itself a breach of the Code; and
     
  not retaliate, directly or indirectly, or encourage others to do so, against any Employee for reports, made in good faith, of any misconduct or violations of the Code solely because that Employee raised a legitimate ethical issue.

 

The Board or the Audit Committee will take all action it considers appropriate to investigate any breach of the Code reported to it. All Employees are required to cooperate fully with any such investigations and to provide truthful and accurate information. If the Board or the Audit Committee determines that a breach has occurred, it will take or authorize disciplinary or preventative action as it deems appropriate, after consultation with the Corporation’s counsel if warranted, up to and including termination of employment. Where appropriate, the Corporation will not limit itself to disciplinary action but may pursue legal action against the offending Employee involved. In some cases, the Corporation may have a legal or ethical obligation to call violations to the attention of appropriate enforcement authorities.

 

Compliance with the Code may be monitored by audits performed by the Board, Audit Committee, the Corporation’s counsel and/or by the Corporation’s outside auditors. All Employees are required to cooperate fully with any such audits and to provide truthful and accurate information.

 

Any waiver of this Code for any Employee may be made only by the Board or the Audit Committee and will be promptly disclosed to stockholders and others, as required by applicable law. The Corporation must disclose changes to and waivers of the Code in accordance with applicable law.

 

     
  - 6 -  

 

Acknowledgment of Receipt and Review

 

To be signed and returned to the Chief Financial Officer.

 

I, _______________________, acknowledge that I have received and read a copy of the ICOX Innovations Inc.’s Code of Ethics and Business Conduct. I understand the contents of the Code and I agree to comply with the policies and procedures set out in the Code.

 

I understand that I should approach the Chief Financial Officer if I have any questions about the Code generally or any questions about reporting a suspected conflict of interest or other violation of the Code.

 

   
  [NAME]
   
   
  [PRINTED NAME]
   
   
  [DATE]

 

     

 

 

 

Exhibit 31.1

 

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Bruce Elliott, certify that:

 

1. I have reviewed this annual report on Form 10-K of ICOX Innovations 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 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; and
   
5. The registrant’s other certifying officer 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.

 

April 2, 2018  
   
/s/ Bruce Elliott  
Bruce Elliott  
President  
(Principal Executive Officer)  

 

     
 

 

 

Exhibit 31.2

 

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Michael Blum, certify that:

 

1. I have reviewed this annual report on Form 10-K of ICOX Innovations 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 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; and
   
5. The registrant’s other certifying officer 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.

 

April 2, 2018  
   
/s/ Michael Blum  
Michael Blum  
Chief Financial Officer, Secretary, Treasurer and Director  
(Principal Financial Officer and Principal Accounting Officer)  

 

     
 

 

 

Exhibit 32.1

 

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

The undersigned, Bruce Elliott, hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that

 

1. the annual report on Form 10-K of ICOX Innovations Inc. for the year ended December 31, 2017 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 Form 10-K fairly presents, in all material respects, the financial condition and results of operations of ICOX Innovations Inc.

 

 

April 2, 2018  
  /s/ Bruce Elliott
  Bruce Elliott
  President
  (Principal Executive Officer)

 

     
 

 

 

Exhibit 32.2

 

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

The undersigned, Michael Blum, hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that

 

1. the annual report on Form 10-K of ICOX Innovations Inc. for the year ended December 31, 2017 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 Form 10-K fairly presents, in all material respects, the financial condition and results of operations of ICOX Innovations Inc.

 

April 2, 2018  
  /s/ Michael Blum
  Michael Blum
  Chief Financial Officer, Secretary, Treasurer and Director
  (Principal Financial Officer and Principal Accounting Officer)