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, 2018

 

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 every Interactive Data File required to be submitted 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 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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [  ] Accelerated filer [  ]
Non-accelerated filer [  ] Smaller reporting company [X]
    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.

 

$10,274,714.40 based on a price of $0.60 per share multiplied by 17,124,524 shares of common stock held by non-affiliates. The price of $0.60 per share is based on the private placements of an aggregate of 9,113,659 subscription receipts at a price of $0.60 per subscription receipt, which were completed on March 12 and 19, 2018. On May 31, 2018, each subscription receipt was automatically converted into one share of common stock, for no additional consideration.

 

(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 26, 2019, there were 21,579,474 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 12
ITEM 1B. U nresolved S taff C omments 20
ITEM 2. PROPERTIES 20
ITEM 3. LEGAL PROCEEDINGS 20
ITEM 4. MINE SAFETY DISCLOSURES 20
   
PART II 21
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 21
ITEM 6. SELECTED FINANCIAL DATA 24
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 24
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 27
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 27
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 28
ITEM 9A. CONTROLS AND PROCEDURES 28
ITEM 9B. OTHER INFORMATION 29
   
PART III 29
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 29
ITEM 11. EXECUTIVE COMPENSATION 35
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 40
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 41
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 43
   
PART IV 44
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 44
ITEM 16. FORM 10-K SUMMARY 47

 

  - 2 -  
 

 

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;
  our negative operating cash flow;
  our ability to obtain additional financing;
  our ability to collect outstanding loans;
  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.

 

  - 3 -  
 

 

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”, “the Company”, “our” and “ICOx” mean ICOx Innovations Inc. and its wholly-owned subsidiaries, ICOx USA, Inc. (formerly AppCoin Innovations (USA) Inc.), Cathio, Inc., and sBetOne, 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, ICOx USA, Inc. (formerly AppCoin Innovations (USA) Inc.) on August 1, 2017.

 

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 changed our name from “AppCoin Innovations Inc.” to “ICOx Innovations Inc.”.

 

On November 19, 2018, we incorporated a new Delaware subsidiary, GN Innovations, Inc., to provide blockchain technology opportunities to the sports and entertainment industry by working with large and well-established brands. Effective December 5, 2018, we changed the name of this subsidiary to “GN1, Inc.” and effective February 6, 2019, we changed the name of this subsidiary to “sBetOne, Inc.”.

 

On November 28, 2018, we incorporated a new Delaware subsidiary, Cathio, Inc., to provide blockchain technology opportunities to the Catholic community.

 

Recent Developments

 

On December 29, 2017, the Company signed a master service agreement with Ryde, 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 Ryde with the services in connection with Ryde’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 Ryde 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 Ryde’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 service fee of $500,000 during the year end December 31, 2017, paid in January 2018 by Ryde upon the completion of its first round of pre-ICO fundraising. Also, as a condition for entering into the loan agreement, Ryde entered into the amendment no. 2, dated as of July 9, 2018, to the business service agreement dated December 29, 2017 as amended as of March 15, 2018, with our company. Pursuant to the amendment no. 2, the Company and Ryde agreed that each party will be responsible for its respective expenses and agreed not to charge any out of pocket expenses to the other party unless expressly approved by the other party in advance in writing.

 

  - 4 -  
 

 

In consideration for the 2018-19 Services, Ryde agreed to pay a fixed fee of $1,100,000, which is deemed earned as of October 1, 2018, under the agreement, but is not due and payable until Ryde closes on the sale of Simple Agreements for Future Tokens (“SAFTs”), equity, or token financings, joint venture financings, or any of its affiliates, in a minimum aggregate amount of $12,000,000, including closings occurring prior to October 1, 2018. For financial reporting purposes, the work fee and additional fee are deemed earned on the date of the financing for a minimum aggregate amount of $12,000,000. In consideration for the 2020 Monthly Services fees, Ryde agreed to pay a monthly fee of $35,000 at the beginning of each month commencing January 1, 2020. All fees and other amounts paid to the Company with respect to the Company’s services provided prior to the amendment no. 3 have been earned in connection with the prior services and will not be credited against any of the above fees or other amounts due under the amendment no. 3.

 

In addition, the amendment no. 3 provides for additional fees for the 2018-19 Services relating to success of Ryde’s business, including the engagement of an investment banker and certain financing milestones and additional fees and milestone fees relating to the achievements of certain net revenues and creation of a business relationship that increases the value of Ryde. The Company will not provide any services related to any financings to be conducted by Ryde. The Company will also receive 20 million tokens based upon 100 million tokens issued, which number will be increased on a pro rata basis, if at any time, Ryde issues more than 100 million tokens (the “Token Fee”). The Token Fee has been previously earned and will be issued in connection with the first release of any tokens to any party.

 

However, if the business services agreement is terminated before December 31, 2019, (a) the fee for the 2018-19 Services will be immediately due in full (but only if the foregoing $12,000,000 financing is closed either before or after the termination date), (b) any additional fees and milestone fees earned will be immediately paid in full (if the condition precedent/milestones are achieved), (c) the Token Fee will be immediately transferred to the Company, and (d) any future adjustment in the number of tokens issued by Ryde, to over 100,000,000, will result in the immediately issuance to our company of 20% of such additional tokens.

 

The amendment no. 3 provides that the business services agreement will continue until December 31, 2020 unless earlier terminated by either party, provided, however, the term of the 2020 Monthly Services will automatically renew for successive one-year periods after December 31, 2020, which renewal term can be terminated by either party with 30 days advanced written notice. The amendment no. 3 also provides that the Company may terminate the business services agreement upon the provision of 30 days written notice to Ryde. Ryde may terminate the business services agreement after December 31, 2019, upon the provision of 30 days written notice to the Company. If the Company or Ryde provides such notice, the Company or Ryde, as applicable, 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 and other fees discussed above, which are due regardless of such early termination.

 

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

 

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 Ryde and he is also a director, officer and indirect shareholder of Blockchain Merchant Group, Inc. which owns 2.5% of the common stock of Ryde and the Company owns 7.5% of the common stock of Ryde. Mr. Chell is also a director, chairman, and officer of Ryde. Mr. Elliott is a former officer of Ryde. Our chief financial officer, Swapan Kakumanu, is also the chief financial officer of Ryde.

 

  - 5 -  
 

 

Our first client, Ryde, 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 Ryde.

 

On October 19, 2018, the Company, through its wholly-owned subsidiary, ICOx USA, Inc. (“ICOx USA”), entered into a master services agreement with BitRail, LLC (“BitRail”) to develop a blockchain-based payment processing application allowing the purchase and sale of cryptocurrencies (the “Payment Processing Application”) to be operated by BitRail Holdings, Inc. (“BitRail Holdings”), a company formed by BitRail.

 

Under the terms of the master services agreement, ICOx USA initially agreed to provide the services relating to the development of a web-based payment processing platform enabled by blockchain for the purchase and use of cryptocurrencies. The fee for these services will be provided at ICOx USA’s cost plus approved expenses, up to a maximum of $2,000,000. In addition, BitRail agreed that it will be responsible for paying all expenses charged by third parties to ICOx USA or BitRail relating to the master services agreement.

 

In addition, BitRail agreed to immediately form BitRail Holdings to conduct and operate the Payment Processing Application and the parties agreed that BitRail Holdings will initially have a board of five directors or managers, as applicable, three of which will be appointed by BilRail and two of which will be appointed by ICOx USA. In addition, the parties agreed that BitRail Holdings will issue warrants to ICOx USA allowing it to acquire up to 20% of ownership of BitRail Holdings for total consideration of $1, which warrants may be exercised by ICOx USA at any time in the future.

 

Either ICOx USA or BitRail may terminate the master services agreement or any statement of work to be negotiated by the parties upon the provision of 30 days written notice to the other party, upon receipt of which, the non-terminating party may elect to immediately terminate the master services agreement or applicable statement of work. Upon such termination, ICOx USA will be entitled to no further compensation except for (i) any fees earned and out-of-pocket expenses incurred prior to the termination and (ii) any other amounts or consideration as set forth in any statement of work which are to be paid upon or regardless of such termination.

 

On February 1, 2019, we, through our wholly-owned subsidiary, ICOx USA, entered into a master services agreement dated effective January 21, 2019 with FreedomCoin, LLC to develop a stable coin cryptocurrency named FreedomCoin to be used as a currency for purchasing goods and services.

 

Under the terms of the master services agreement, ICOx USA initially agreed to provide the services relating to the development of a stable coin cryptocurrency named FreedomCoin. The fee for these services will be provided at ICOx USA’s cost plus approved expenses, and delivered via approved vendors and within written quarterly budgets approved in advance by FreedomCoin, LLC, up to a maximum of $2,000,000. In addition, FreedomCoin, LLC agreed that it will be responsible for paying all expenses charged by third parties to ICOx USA or FreedomCoin, LLC relating to the master services agreement.

 

In addition, the parties agreed that FreedomCoin, LLC will initially have a board of five directors or managers, as applicable, three of which will be appointed by FreedomCoin, LLC and two of which will be appointed by ICOx USA. In addition, the parties agreed that FreedomCoin, LLC will issue warrants to ICOx USA allowing it to acquire up to 20% of ownership of FreedomCoin, LLC for total consideration of US$1, which warrants may be exercised by ICOx USA at any time in the future.

 

Either ICOx USA or FreedomCoin, LLC may terminate the master services agreement or any statement of work to be negotiated by the parties upon the provision of 30 days written notice to the other party, upon receipt of which, the non-terminating party may elect to immediately terminate the master services agreement or applicable statement of work. Upon such termination, ICOx USA will be entitled to no further compensation except for (i) any fees earned and out-of-pocket expenses incurred prior to the termination and (ii) any other amounts or consideration as set forth in any statement of work which are to be paid upon or regardless of such termination. ICOx USA will also retain the warrants held.

 

  - 6 -  
 

 

Description of Business

 

Overview

 

Our 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, technology licensing model and a reoccurring transaction revenue model. We may accept tokens, coins or equity in payment for our services to the extent permitted under applicable law.

 

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 record management activities, such as identity management, documenting provenance, digital asset registration and transaction processing.

 

Initial Coin Offerings and Cryptocurrency

 

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. For any cryptocurrencies received, 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.

 

  2. Blockchain and Technology Program Management

 

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

 

  - 7 -  
 

 

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;
  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.

 

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 and blockchain 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 26, 2019, we have three clients which have engaged us to build out their business models, technology strategy, market entry strategy, and capital structure, which includes a blockchain platform launch. However, we have several potential customers in our sales pipeline.

 

  - 8 -  
 

 

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.

 

  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.

 

  - 9 -  
 

 

  TokenMarket

 

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

 

  ICO Launchpad, a service for organizing a “crowdsale” with a high quality blockchain industry network, expertise and tools with tradeable digital tokens;
     
  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
     
  Storage and management of a client’s digital assets in a TokenMarket wallet, which is secured with two-factor authentication.

 

  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.

 

  IBM

 

With thousands of technical experts, IBM is moving quickly into enterprise blockchain and claims the leading blockchain for business platform. This is primarily B2B focused work.

 

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.

 

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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.

 

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.

 

Investment Company Act of 1940 Considerations

 

We intend to conduct our operations so that we do not fall within, or are excluded from the definition of an “investment company” under the Investment Company Act of 1940.

 

Under Section 3(a)(1)(A) of the Investment Company Act of 1940, a company is deemed to be an “investment company” if it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities. We believe that we will not be considered an investment company under Section 3(a)(1)(A) of the Investment Company Act of 1940 because we will not engage primarily or hold ourselves out as being engaged primarily in the business of investing, reinvesting or trading in securities. Rather, 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.

 

Under Section 3(a)(1)(C) of the Investment Company Act of 1940, a company is deemed to be an “investment company” if it is engaged, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire “investment securities” having a value exceeding 40% of the value of our company’s total assets (exclusive of U.S. Government securities and cash items) on an unconsolidated basis, which we refer to as the “40% test.” We intend to monitor our holdings and conduct operations so that on an unconsolidated basis we will comply with the 40% test. Nevertheless, because we may accept tokens, coins or equity in payment for our services, to the extent permitted under applicable law, we may acquire “investment securities” having a value exceeding 40% of the value of our company’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. In that case, we intend to rely on a safe harbor exemption from the Investment Company Act of 1940 for so-called “transient investment companies.”

 

Consistent with the “transient investment company” safe harbor, we will have to reduce our holdings of “investment securities to not more than 40% of our total assets as soon as is reasonably possible and in any event within one year from the earlier of (i) the date on which we own securities and/or cash having a value exceeding 50% of the value of our company’s total assets on either a consolidated or unconsolidated basis or (ii) the date on which we own or propose to acquire “investment securities” having a value exceeding 40% of the value of our company’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. This reduction could be attempted in a number of ways, including the disposition of securities and the acquisition of other assets that would not constitute investment securities for purposes of the Investment Company Act of 1940. If we are required to sell securities, we may sell them sooner than we otherwise would, the sales may be at depressed prices, and we may never realize anticipated benefits from, or may incur losses on, those investments. We may not be able to sell some investments due to contractual or legal restrictions or the inability to locate a suitable buyer. We may also incur tax liabilities when we sell our assets. If we decide to try to acquire additional assets that would not constitute investment securities, we may not be able to identify and acquire suitable assets. If these steps do not achieve a sufficient reduction in our holdings of investment securities within the prescribed period, we will be forced to liquidate some of our securities holdings and invest the proceeds in U.S. government securities and cash items, with a potential loss.

 

Because we can rely on the “transient investment company” safe harbor only once during any three-year period, we may not accept tokens, coins or equity in payment for our services during the period that this safe harbor is not available.

 

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If we become obligated to register our company as an investment company, we would have to comply with a variety of substantive requirements under the Investment Company Act of 1940 imposing, among other things:

 

  limitations on capital structure;
     
  restrictions on specified investments;
     
  prohibitions on transactions with affiliates; and
     
  compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly change our operations.

 

If we were required to register our company as an investment company but failed to do so, we would be prohibited from engaging in our business, and criminal and civil actions could be brought against us. In addition, our contracts would be unenforceable unless a court required enforcement, and a court could appoint a receiver to take control of us and liquidate our business, all of which would have a material adverse effect on us.

 

Employees

 

As at March 26, 2019, we have three executive officers, Bruce Elliott, who is our president, Michael Blum, who is our chief operating officer, secretary, and treasurer, and Swapan Kakumanu, who is our chief financial officer, 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 initial coin offering (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;
  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.

 

  - 13 -  
 

 

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.

 

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.

 

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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.

 

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.

 

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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.

 

The loss or potential loss of our exclusion from regulation pursuant to 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 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 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.

 

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.

 

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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 $898,142 and working capital of $2,945,058 as of December 31, 2018, and cash and cash equivalents 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 three clients.

 

We currently have three clients which have engaged us to build out their business models, technology strategies, market entry strategies and capital structures, 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 any of our clients discontinue their business with us, or if our clients modify the terms of their business with us on less favorable terms, the effect on our business, operating results and financial condition may become adverse.

 

Our board of directors is composed of an equal number of independent directors and non-independent directors and our board composition may afford less protection to our stockholders than if our board of directors were composed of a majority of independent directors.

 

Our board of directors is comprised of six directors, three of whom are not independent. As a result, there may be a low level of board oversight on our management and our board of directors may be influenced by the concerns, issues or objectives of management, including the compensation and governance issues, to a greater extent than would occur with a majority of independent directors. In addition, non-independent directors may make a decision on a merger, change of control or other transactions or actions affecting our company without the consent of an independent director, which may lead to a conflict with the interest of our stockholders. As a result, our board composition may afford less protection to our stockholders than if our board of directors were composed of a majority of independent directors.

 

Our chief financial officer devotes approximately up to 50% of his working time to our company.

 

Swapan Kakumanu, our chief financial officer, devotes approximately up to 50% of his working time, or approximately up to 20 hours per week, to our company. Because Mr. Kakumanu works only part-time, instances may occur where he may not be immediately available to provide solutions to problems or address concerns that arise in the course of us conducting our business and thus adversely affect our business. In addition, Mr. Kakumanu can become subject to conflicts of interest because he devotes part of his working time to other business endeavors, including consulting relationships with other entities, and have responsibilities to these other entities. Such conflicts include deciding how much time to devote to our affairs, as well as what business opportunities should be presented to us. Because of these relationships, Mr. Kakumanu could be subject to conflicts of interest.

 

The directors and officers of our company, including Mr. Kakumanu, are aware of the existence of laws governing the accountability of directors and officers for corporate opportunity and requiring disclosures by the directors and officers of conflicts of interest, and we will rely upon such laws in respect of any directors’ and officers’ conflicts of interest or in respect of any breaches of duty by any of our directors and officers. All such conflicts are to be disclosed by such directors or officers in accordance with applicable laws and the directors and officers are to govern themselves in respect thereof to the best of their ability in accordance with the obligations imposed upon them by law.

 

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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 22.80% 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 21,579,474 shares of common stock were issued and outstanding as of March 26, 2019. 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 or convertible notes 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.

 

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.

 

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.

 

  - 19 -  
 

 

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. Effective May 1, 2018, we entered into a facility services agreement with Business Instincts Group Inc., a company of which Cameron Chell is a director, officer and indirect shareholder, whereby we agreed to pay Business Instincts Group Inc. a basic monthly rent of $16,500 for the complete occupancy term commencing May 1, 2018 until February 28, 2020 to use our office premises for general office purposes. 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 subsidiaries is a party or of which any of our properties, or the properties of our subsidiaries, 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 subsidiaries or has a material interest adverse to our company or subsidiaries.

 

ITEM 4. MINE SAFETY DISCLOSUREs

 

Not applicable.

 

  - 20 -  
 

 

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. There is a limited public market for our common stock. Our common stock has been quoted on the OTCQB operated by the OTC Markets Group under the trading symbol since February 19, 2019. From November 28, 2017 to February 18, 2019, our common stock was quoted on the OTC Pink operated by the OTC Markets Group under the trading symbol “ICOX.” 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”.

 

Effective at the opening on December 4, 2018, shares of our common stock have been approved for trading on the TSX Venture Exchange in Canada under the symbol “ICOX.”

 

Trading in stocks quoted on the OTCQB or the TSX Venture Exchange 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 our common stock from the OTC Pink and high and low closing prices for our common stock from the TSX Venture Exchange for the periods indicated. The market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not necessarily represent actual transactions:

 

Quarter Ended   OTC Pink
(U.S. dollars)
    TSX Venture
Exchange
(Canadian dollars)
 
    High     Low     High     Low  
December 31, 2018   $ 0.40     $ 0.03     $ 0.65     $ 0.35  
September 30, 2018   $ 2.30     $ 0.30       N/A       N/A  
June 30, 2018   $ 2.30     $ 2.30       N/A       N/A  
March 31, 2018   $ 3.15     $ 2.30       N/A       N/A  
December 31, 2017   $ 2.60     $ 1.25       N/A       N/A  
September 30, 2017   $ 1.25     $ 0.05       N/A       N/A  
June 30, 2017     Nil       Nil       N/A       N/A  
March 31, 2017     Nil       Nil       N/A       N/A  

 

Holders of Common Stock

 

As of March 26, 2019, the 21,579,474 issued and outstanding shares of our common stock were held by a total of 120 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:

 

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.

 

  - 21 -  
 

 

Securities Authorized for Issuance under Equity Compensation Plans

 

The following table summarizes certain information regarding our equity compensation plans as at December 31, 2018:

 

Plan category   Number of securities to be issued upon exercise of
outstanding options, warrants
and rights
(a)
    Weighted-average exercise
price of outstanding
options, warrants and
rights
(b)
    Number of securities
remaining available for
future issuance under equity
compensation plans
(excluding securities
reflected in column (a))
(c)
 
Equity compensation plans approved by security holders   Nil             N/A     Nil  
Equity compensation plans not approved by security holders (2017 Equity Incentive Plan)     3,400,000     $         0.18       774,904  
Total     3,400,000     $ 0.18       774,904  

 

On October 15, 2017, as amended on January 22, 2018 and November 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.

 

On November 22, 2018, our board of directors amended our 2017 Equity Incentive Plan in connection with our application to list our common stock on the TSX Venture Exchange. The plan was amended to provide:

 

  that a total of 4,174,904 shares of our common stock will be available for the grant of stock options and no shares will be available for the grant of non-stock option awards;
  that any shares underlying an award that is cancelled, forfeited or expires prior to exercise or realization, either in full or in part, will become available for issuance under the plan;
  that while our common stock is listed on the TSX Venture Exchange:

 

  ○  a participant must either be a Director, Employee or Consultant (as defined by the policies of the TSX Venture Exchange) of our company or a subsidiary of our company at the time of grant of the awards, except as otherwise provided by the policies of the TSX Venture Exchange and, for awards granted to Employees, Consultants or Management Company Employees (as defined by the policies of the TSX Venture Exchange), we must ensure that the participant is a bona fide Employee, Consultant or Management Company Employee, as the case may be;
  ○  except in relation to Consultant Companies (as defined by the policies of the TSX Venture Exchange), the awards may be granted only to an individual or to a company that is wholly owned by individual eligible for a grant of an award;
  ○  the aggregate number shares of our common stock subject to stock options granted, within a 12 month period, to a participant who is a Consultant (as defined by the policies of the TSX Venture Exchange) is limited to an amount equal to 2% of the issued and outstanding shares of our common stock (on a non-diluted basis), calculated on the date a stock option is granted to the participant;
  ○  aggregate number of shares of our common stock subject to stock options granted, within a 12 month period, to all participants (as a group) who are employed to perform Investor Relations Activities (as defined by the policies of the TSXV) is limited to an amount equal to 2% of the issued and outstanding shares of our common stock (on a non-diluted basis), calculated on the date a stock option is granted to any participant, provided that such stock options must vest in stages over a 12 month period with no more than 1/4 of the stock options vesting in any 3 month period;
  ○  the exercise price of a stock option must be determined by the committee (currently our board of directors) and the exercise price must not be less than the price permitted by the TSX Venture Exchange or other regulatory body having jurisdiction and a minimum exercise price must not be established unless the stock options are allocated to particular persons and we must not grant stock options unless and until the stock options have been allocated to a particular person or persons;

 

  - 22 -  
 

 

  ○  the exercise price of a stock option must be paid in cash; and
  ○  stock options granted to participants engaged in Investor Relations Activities (as defined by the policies of the TSX Venture Exchange) on behalf of our company must expire 30 days after such participants cease to perform such Investor Relations Activities for our company;

 

  if shares of our common stock are listed on the TSX Venture Exchange, unless disinterested shareholder approval is obtained, under no circumstances will the plan, together with all of our other previously established and outstanding stock option or equity incentive plans or grants, result in:

 

  ○  the aggregate number of shares of our common stock reserved for issuance under awards granted to insiders (as a group) at any point in time exceeding 10% of the issued and outstanding shares of our common stock (on a non-diluted basis);
  ○  the grant to insiders (as a group), within a 12 month period, of stock options where an aggregate number of shares of our common stock subject to such stock options exceeds 10% of the issued and outstanding shares of our common stock (on a non-diluted basis), calculated on the date an award is granted to any insider;
  ○  the grant to insiders (as a group), within a 12 month period, of non-stock option awards where an aggregate number of shares of our common stock subject to such non-stock option awards exceeds 2% of the issued and outstanding shares of our common stock (on a non-diluted basis), calculated on the date a non-stock option award is granted to any insider;
  ○  the aggregate number of shares of our common stock subject to awards granted to any one participant within a 12 month period exceeding 5% of the issued and outstanding shares of our common stock (on a non-diluted basis), calculated on the date an award is granted to the participant;
  ○  the aggregate number of shares of our common stock subject to non-stock option awards granted to any one participant within a 12 month period exceeding 1% of the issued and outstanding shares of our common stock (on a non-diluted basis), calculated on the date a non-stock option award is granted to the participant;
  ○  the aggregate number of shares of our common stock subject to awards granted to any one participant who is a Consultant (as defined by the policies of the TSXV) within a 12 month period exceeding 2% of the issued and outstanding shares of our common stock (on a non-diluted basis), calculated on the date an award is granted to the participant; or
  ○  the aggregate number of shares of our common stock subject to awards granted to all participants (as a group) who are employed to perform Investor Relations Activities (as defined by the policies of the TSXV) within a 12 month period exceeding 2% of the issued and outstanding shares of our common stock (on a non-diluted basis), calculated on the date an award is granted to the participant; and

 

if the shares of our common stock are listed on the TSX Venture Exchange, we must obtain disinterested shareholder approval for any amendment to stock options held by insiders that would have the effect of decreasing the exercise price of the stock options.

 

Recent Sales of Unregistered Securities

 

Since the beginning of our fiscal year ended December 31, 2018, 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.

 

On January 8, 2019, we issued 750,000 shares of our common stock upon conversion of the principal amount of $75,000 of a convertible note. We issued the shares to one non-U.S. person (as that term is defined in Regulation S of the Securities Act of 1933 , as amended) in an offshore transaction in which we relied on the exemptions from the registration requirements provided for in Regulation S and/or Section 4(a)(2) of the Securities Act of 1933 , as amended.

 

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

 

None.

 

  - 23 -  
 

 

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.

 

Our 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, technology licensing model and reoccurring transactions revenue model. We may 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 RYDE Holding Inc. (“Ryde”), formerly WENN Digital Inc., on March 19, 2018, we entered into the amendment no. 1 to business services agreement dated as of March 15, 2018 with Ryde, and, on July 9, 2018, we entered into the amendment no. 2 to business services agreement dated as of July 9, 2018 with Ryde. On October 29, 2018, we entered into the amendment no. 3 to business services agreement dated as of October 29, 2018 with Ryde. Pursuant to the business services agreement, we agreed to provide Ryde with the services in connection with Ryde’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.

 

Ryde 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, July 9, 2018 and October 29, 2018 with Ryde.

 

On October 19, 2018, we, through our wholly-owned subsidiary, ICOx USA, entered into a master services agreement with BitRail, LLC (“BitRail”) to develop a blockchain-based payment processing application allowing the purchase and sale of cryptocurrencies.

 

On February 1, 2019, we, through our wholly-owned subsidiary, ICOx USA, entered into a master services agreement dated effective January 21, 2019 with FreedomCoin, LLC to develop a stable coin cryptocurrency named FreedomCoin to be used as a currency for purchasing goods and services.

 

Results of Operations

 

Revenue

 

We had revenues of $0 for the year ended December 31, 2018 compared to $500,000 in 2017.

 

The business services agreement dated December 29, 2017, as amended as of March 15, 2018, July 9, 2018, and October 29, 2018 with Ryde, 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 Ryde’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 Ryde paid in January 2018 upon the completion of its first round of pre-ICO fundraising.

 

  - 24 -  
 

 

Operating Expenses

 

We incurred operating expenses of $3,980,160 and $932,843 for the years ended December 31, 2018 and 2017, respectively, representing an increase of $3,047,319 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 $547,542 in 2017 to $1,449,681 in 2018 due to our company entering into a consulting agreement with Business Instincts Group Inc. and other individuals to provide strategic and project management services and the company operating under its new business for a full year, an increase in service costs from $199,920 in 2017 to $675,633 in 2018 due to services provided to our customers, an increase in professional fees from $87,014 in 2017 to $329,227 in 2018 due to additional legal and accounting costs incurred due to the change in business and the company operating under its new business for a full year, an increase in interest and bank charges from $1,896 in 2017 to $3,130 as bank fees has increased to higher level of activities in 2018, and an increase in other general and administrative expenses from $96,471 in 2017 to $1,340,645 in 2018 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 2018.

 

Net Loss from Operations

 

We incurred net losses from operations of $3,980,160 and $432,843 for the years ended December 31, 2018 and 2017, respectively, representing an increase of $3,547,317, primarily attributable to the factors discussed above under the heading “Operating Expenses”.

 

Other Income (Expense)

 

Other income includes $30,864 of interest earned on a loan receivable to a related party compared to $789 for the same period last year. Other expenses include, interest expense on convertible notes payable of $70,558 for the year ended December 31, 2018 compared to $35,004 for the same period last year.

 

Liquidity and Capital Resources

 

Working Capital

 

    As at
December 31, 2018
    As at
December 31, 2017
 
Current Assets   $ 3,170,861     $ 880,766  
Current Liabilities     286,457       182,919  
Working Capital   $ 2,884,404     $ 697,847  

 

Current Assets

 

Current assets of $3,170,861 as at December 31, 2018 and $880,766 as at December 31, 2017 were comprised of only cash and cash equivalents, accounts receivable, prepaid expenses, an outstanding loan receivable, and our capitalized service costs. The increase in current assets as at December 31, 2018 was due to our company receiving $5,907,454 for private placements in exchange for shares less issuance costs, the increase in our loan receivable and accrued interest of $1,179,914, the increase in our capitalized deferred service costs of $874,817, and the increase in our prepaid expenses of $32,215 partially offset by the decrease in our accounts receivable of $480,000 and operating costs.

 

  - 25 -  
 

 

Current Liabilities

 

Current liabilities as at December 31, 2018 were attributable to $239,026 in accounts payable and accrued expenses and $47,431 in accounts payable, related party compared to $131,303 in accounts payable and accrued expenses and $51,616 in accounts payable, related party as at December 31, 2017.

 

Cash Flow

 

Our cash flows for the year ended December 31, 2018 and December 31, 2017 are as follows:

 

    Year ended
December 31, 2018
    Year ended
December 31, 2017
 
Net cash (used in) operating activities   $ (4,074,305 )   $ (652,524 )
Net cash (used in) investing activities     (1,150,000 )     (100,000 )
Net cash provided by financing activities     5,907,454       911,467  
Net changes in cash and cash equivalents   $ 683,149     $ 158,943  

 

Operating Activities

 

Net cash used in operating activities was $4,074,305 for the year ended December 31, 2018, as compared to $652,524 for the year ended December 31, 2017, an increase of $3,421,781. The increase in net cash used in operating activities was primarily due to having a full year of the new business operations and higher deferred service costs.

 

Investing Activities

 

Net cash used in investing activities was $1,150,000 for the year ended December 31, 2018 was due to the outstanding loan to a related party, as compared to $100,000 for the year ended December 31, 2017.

 

Financing Activities

 

Financing activities provided cash of $5,907,454 for the year ended December 31, 2018 and $911,467 for the year ended December 31, 2017. On June 1, 2018, we issued an aggregate of 9,274,524 shares of common stock for total consideration of $5,468,195 and paid offering costs of $235,206. On November 27, 2018, we issued an aggregate of 674,950 share of common stock for total consideration of $674,950 and paid offering costs of $18,485.

 

Cash Requirements

 

We expect that we will require $5.066 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:

 

Estimated Working Capital Expenditures During the Next Twelve Months

 

Operating expenses   $ 2,015,000  
General and administrative expenses     3,051,000  
Total   $ 5,066,000  

 

For the next 12 months, we plan to enter into one or two additional business services agreements with other clients on terms similar to agreements entered with Ryde or BitRail. 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.

 

Our estimated operating expenses for the next 12 months are $2,015,000 and 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, all of which are included in the amounts between $500,000 and $1,000,000 we intend to spend on various expenses to assist client companies to develop and integrate blockchain and cryptocurrency technologies into their business operations.

 

  - 26 -  
 

 

Our estimated general and administrative expenses for the next 12 months are $3,051,000 and are comprised of: $1,488,000 for consulting fees, of which approximately $420,000 is allocated to Business Instincts Group Inc., $192,000 is allocated to our president, Bruce Elliott, $144,000 is allocated to our chief operating officer, Michael Blum, $120,000 is allocated to our lead director, James P. Geiskopf, $60,000 is allocated to our chief financial officer, Swapan Kakumanu, $120,000 is allocated for accounting services, $200,000 is allocated to our board of directors and our advisory board, $172,000 is allocated to our investor relations consultants, and $60,000 is allocated to our public relations and marketing consultants; $250,000 for legal and professional fees (including auditing fees); $462,000 for insurance; $180,000 for marketing and advertising expenses; $102,000 for trade shows; $250,000 for travel expenses; $198,000 for office rent and $121,000 for miscellaneous and office expenses.

 

We will require additional cash resources 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 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 $4,712,862 as at December 31, 2018 (December 31, 2017: $693,008). 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, 2018 and 2017, 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.

 

  - 27 -  
 

 

FINANCIAL STATEMENTS

 

Page
Financial Statements for the Years Ended December 31, 2018 and 2017  
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’ Equity 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 Consolidated Financial Statements

 

We have audited the accompanying consolidated balance sheets of ICOX Innovations, Inc. (the Company) as of December 31, 2018 and 2017, 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, 2018, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

 

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.

 

Basis for Opinion

 

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

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of 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 consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Haynie & Company

Salt Lake City, Utah

March 26, 2019

 

We have served as the Company’s auditor since 2018.

 

 

  F- 2  
     

 

ICOx Innovations Inc.

(formerly AppCoin Innovations Inc.)

Consolidated Balance Sheets

 

    December 31, 2018     December 31, 2017  
Assets                
                 
Current Assets                
Cash and cash equivalents   $ 898,142     $ 214,993  
Accounts receivable, related party     20,000       500,000  
Prepaid expenses     82,215       30,000  
Prepaid expenses, related party     15,000       35,000  
Deferred service costs     874,838       21  
Related party loans receivable and related accrued interest     1,280,666       100,752  
Total Current Assets     3,170,861       880,766  
                 
Investment, related party     37       37  
Total Assets   $ 3,170,898     $ 880,803  
                 
Liabilities and Stockholders’ Equity                
                 
Current Liabilities                
Accounts payable and accrued expenses   $ 239,026     $ 131,303  
Accounts payable and accrued expenses, related party     47,431       51,616  
Total Current Liabilities     286,457       182,919  
                 
Convertible notes payable     500,325       500,325  
Accrued interest on convertible notes     115,518       52,949  
Total Liabilities     902,300       736,193  
                 
Commitments and Contingencies     -       -  
                 
Stockholders’ Equity                
Common stock, $0.001 par value, 75,000,000 shares authorized; 21,579,474 and 11,600,000 shares issued and outstanding as at December 31, 2018 and 2017, respectively     21,579       11,600  
Additional paid-in-capital     6,959,881       826,018  
Accumulated deficit     (4,712,862 )     (693,008 )
Total Stockholders’ Equity     2,268,598       144,610  
Total Liabilities and Stockholders’ Equity   $ 3,170,898     $ 880,803  

 

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, 2018
    Year Ended
December 31, 2017
 
Revenues                
Service revenue   $ -     $ 500,000  
Total revenues     -       500,000  
                 
Operating expenses                
General and administrative expense     2,744,527       452,923  
Consulting fees, related party     560,000       280,000  
Service costs     675,633       199,920  
Total operating expenses     3,980,160       932,843  
                 
Net loss from operations     (3,980,160 )     (432,843 )
                 
Other income (expense)                
Interest income, related party     30,864       789  
Note interest expense     (70,558 )     (35,004 )
Total other income (expense)     (39,694 )     (34,215 )
                 
Provision for taxes     -       -  
                 
Net loss   $ (4,019,854 )   $ (467,058 )
                 
Loss per common share – Basic and diluted   $ (0.24 )   $ (0.07 )
                 
Weighted average number of common shares outstanding, basic and diluted     17,077,348       6,934,795  

 

 

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, 2018
    Year Ended
December 31, 2017
 
Operating activities                
Net loss for the year   $ (4,019,854 )   $ (467,058 )
Adjustments to reconcile net loss to net cash used in operating activities                
Stock-based compensation     54,544       188,934  
Stock-based compensation, related party     181,844       22,500  
Changes in operating assets and liabilities                
Accounts receivable, related party     480,000       (500,000 )
Prepaid expense     (52,215 )     (30,000 )
Prepaid expense, related party     20,000       (35,000 )
Deferred service costs     (874,817 )     (21 )
Accrued interest receivable, related party     (29,914 )     (789 )
Accounts payable and accrued expenses     107,723       82,290  
Accounts payable and accrued expenses, related party     (4,185 )     51,616  
Accrued interest on notes payable     62,569       35,004  
Net cash (used in) operating activities     (4,074,305 )     (652,524 )
                 
Investing activities                
Repayment of loan issued to related party     100,000       -  
Loan issued to related party     (1,250,000 )     (100,000 )
Net cash (used in) investing activities     (1,150,000 )     (100,000 )
                 
Financing activities                
Proceeds from issuance of convertible notes payable     -       355,000  
Proceeds from issuance of loans payable     400,000       -  
Repayment of loans payable     (400,000 )     -  
Proceeds from share issuance     6,161,145       560,000  
Less share issue costs     (253,691 )     (3,533 )
Net cash provided by financing activities     5,907,454       911,467  
                 
Net changes in cash and equivalents     683,149       158,943  
                 
Cash and equivalents at beginning of the year     214,993       56,050  
                 
Cash and equivalents at end of the year   $ 898,142     $ 214,993  
                 
SUPPLEMENTAL CASH FLOW INFORMATION                
Cash paid in interest   $ 7,989     $ -  
Cash paid for income taxes   $ -     $ -  
                 
Non-cash share issue costs   $ 96,519     $ -  

 

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

Stockholders’

 
    Number of Shares     Amount     Paid-in
Capital
    Accumulated Deficit     Equity
(Deficit)
 
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  
Share issuance, net of offering costs of $350,210     9,979,474       9,979       5,897,475       -       5,907,454  
Stock-based compensation     -       -       54,544       -       54,544  
Stock-based compensation, related party     -       -       181,844       -       181,844  
Net loss for the year     -       -       -       (4,019,854 )     (4,019,854 )
Balance, December 31, 2018     21,579,474     $ 21,579     $ 6,959,881     $ (4,712,862 )   $ 2,268,598  

 

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, 2018 and 2017

 

1. NATURE AND CONTINUANCE OF OPERATIONS

 

ICOx Innovations Inc. (the “Company”) was incorporated under the laws of the State of Nevada 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 February 14, 2018, the Company changed its name from “AppCoin Innovations Inc.” to “ICOx Innovations Inc.”

 

On August 17, 2018, a subsidiary of the Company changed its name from “AppCoin Innovations (USA) Inc.” to “ICOx USA, Inc.”

 

On November 19, 2018, we incorporated a new Delaware subsidiary, GN Innovations, Inc., to provide blockchain technology opportunities to the sports and entertainment industry by working with large and well-established brands.

 

On November 28, 2018, we incorporated a new Delaware subsidiary, Cathio, Inc, to provide blockchain technology opportunities to the Catholic community.

 

Effective December 5, 2018, we effected a name change for our subsidiary from “GN Innovations, Inc.” to “GN1, Inc.”.

 

Effective February 6, 2019, we effected a name change for our subsidiary from “GN1, Inc.” to “sBetOne, Inc.”.

 

The Company’s business model is to provide 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 modeling, 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 $4,712,863 and $693,008 as of December 31, 2018 and December 31, 2017, respectively, 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, during the year ended December 31, 2018, the Company completed two private placements of an aggregate of 9,979,474 shares of common stock at an average price of $0.63 per share for aggregate gross proceeds of $6,161,145.

 

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, 2018 and 2017

 

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, 2018 and 2017, 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, 2018 and 2017

 

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 2018, 2017, and prior. Based on evaluation of the 2018 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, 2018 or 2017, and have not recognized interest and/or penalties in the consolidated statement of operations for the years ended December 31, 2018 or 2017.

 

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. At December 31, 2018, common shares from the conversion of debt (12,019,929 shares) (Note 4) and exercise of stock options (1,863,882 shares) (Note 10) have been excluded as their effect is anti-dilutive. At December 31, 2017, common shares from the conversion of debt (10,730,320 shares) and exercise of stock options (733,331 shares) 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, to be recognized in the income statement based on their fair values. The fair value of the options is calculated based off the Black Scholes valuation model (Note 10).

 

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.

 

  F- 9  
     

 

ICOx Innovations Inc.
(formerly AppCoin Innovations Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017

 

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

 

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, 2018 and December 31, 2017.

 

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.

 

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.

 

  F- 10  
     

 

ICOx Innovations Inc.
(formerly AppCoin Innovations Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017

 

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

 

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 2017 financial statements in order for them to conform to the 2018 presentation. Such reclassifications have no impact on the Company’s financial position or results or operations.

 

Recently Issued Accounting Pronouncements

 

In February 2016, the FASB issued ASU 2016-02, “Leases” which was issued to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The amendments in ASU 2016-02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are in the process of completing our assessment and anticipate that ASU 2016-02 will have a material impact on our consolidated Balance Sheets, as we will record significant asset and liability balances in connection with our leased property. The Company is currently assessing the impact of this pronouncement.

 

In June 2018, the FASB issued ASU 2018-07, “Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting”, which expands the scope of Topic 718 to include all share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 specifies that Topic 718 applies to all share-based payment transactions in which the grantor acquires goods and services to be used or consumed in its own operations by issuing share-based payment awards. ASU 2018-07 also clarifies that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under ASC 606. The amendments in ASU 2018-07 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently assessing the impact of this guidance on its consolidated financial statements.

 

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. The Company adopted this standard effective January 1, 2018. The adoption of this update had no material effect on our financial statements.

 

Statement of Cash Flows (ASU 2016-18)

 

The Company adopted ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force)” (ASU 2016-18), effective January 1, 2018. This update clarified that transfers between cash and restricted cash are not reported as cash flow activities in the statements of cash flows. As such, restricted cash amounts are included with cash and cash equivalents in the beginning-of-period and end-of-period total amounts on the statements of cash flows. The Company applied this update retrospectively, which resulted in an adjustment to the beginning-of-period and end-of-period total amounts on the condensed consolidated statement of cash flows for the year ended December 31, 2017 to include restricted cash balances from those periods. The adoption of this update had no material effect on our financial statements.

 

  F- 11  
     

 

ICOx Innovations Inc.

(formerly AppCoin Innovations Inc.)

Notes to Consolidated Financial Statements

December 31, 2018 and 2017

 

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

 

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. The Company adopted this standard effective January 1, 2018. The adoption of this update had no material effect on our financial statements.

 

3. ACCOUNTS RECEIVABLE

 

As at December 31, 2018, the Company had outstanding accounts receivable from a related party of $20,000 (2017 - $500,000).

 

4. NOTES PAYABLE

 

The Company has convertible notes outstanding as at December 31, 2018 and are as follows:

 

      Start Date   Maturity Date   Rate     Principal     Interest     Total  
Note 1 (1)     09-14-2015   09-14-2020     8 %   $ 73,825     $ 43,170     $ 116,995  
Note 2 (1)     12-30-2016   12-30-2021     8 %     50,000       17,600       67,600  
Note 3 (1)     12-30-2016   12-30-2021     8 %     21,500       7,568       29,068  
Note 4 (1)     03-02-2017   03-02-2022     8 %     20,000       6,428       26,428  
Note 5 (1)     06-08-2017   06-08-2022     8 %     10,000       2,731       12,731  
Note 6 (2)     10-30-2017   10-30-2020     10 %     250,000       29,247       279,247  
Note 7 (2)     10-30-2017   10-30-2020     10 %     75,000       8,774       83,774  
Total                     $ 500,325     $ 115,518     $ 615,843  

   

(1) The principal of the note, and the interest calculated up to November 30, 2018, may be converted into shares of common stock of the Company at a conversion price of $0.03 per share.
(2) The note may be converted into shares of common stock of the Company at a conversion price of $0.10 per share.

 

Notes 1 through 5 were initially entered into with an interest rate of 18% per annum. On November 5, 2018, amendment agreements were signed amending the interest rate to 8% per annum effective December 1, 2018. The amendments also state that the interest is payable only in cash on a quarterly basis commencing December 1, 2018 on March 31, June 30, September 30, and December 31 of each year until the Maturity Date or earlier on the date that all amounts owing under this Note are prepaid by the Company. The principal, and the interest calculated until November 30, 2018, may still be converted to shares.

 

The balances of the convertible notes outstanding as at December 31, 2017 are as follows:

 

      Start Date   Maturity Date   Rate     Principal     Interest     Total  
Note 1 (1)     09-14-2015   09-14-2020     18 %   $ 73,825     $ 30,509     $ 104,334  
Note 2 (1)     12-30-2016   12-30-2021     18 %     50,000       9,025       59,025  
Note 3 (1)     12-30-2016   12-30-2021     18 %     21,500       3,880       25,380  
Note 4 (1)     03-02-2017   03-02-2022     18 %     20,000       2,998       22,998  
Note 5 (1)     06-08-2017   06-08-2022     18 %     10,000       1,016       11,016  
Note 6 (2)     10-30-2017   10-30-2020     10 %     250,000       4,247       254,247  
Note 7 (2)     10-30-2017   10-30-2020     10 %     75,000       1,274       76,274  
Total                     $ 500,325     $ 52,949     $ 553,274  

   

(1) The note may be converted into shares of common stock of the Company at a conversion price of $0.03 per share.
(2) The note may be converted into shares of common stock of the Company at a conversion price of $0.10 per share.

 

F- 12
 

 

ICOx Innovations Inc.

(formerly AppCoin Innovations Inc.)

Notes to Consolidated Financial Statements

December 31, 2018 and 2017

 

4. NOTES PAYABLE (CONT’D)

 

Based upon the balances as of December 31, 2018, the convertible notes and the related interest will come due in the following years:

 

    Principal     Interest     Total  
2019   $ -     $ -     $ -  
2020     398,825       81,191       480,016  
2021     71,500       25,168       96,668  
2022     30,000       9,159       39,159  
2023     -       -       -  
Total   $ 500,325     $ 115,518     $ 615,843  

 

5. LOANS PAYABLE – RELATED PARTY

 

On March 13, 2018, the Company entered into a loan agreement with Michael Blum, our former Chief Financial Officer, whereby Mr. Blum advanced $100,000 to us. The principal amount of $100,000 was repayable on demand (but no longer than a term of six months) and bore simple interest at a rate of 12% per annum, which was payable upon repayment of the principal amount of $100,000. We were entitled to repay 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 repaid, 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. The loan was repaid on June 1, 2018 with interest of $2,630.

 

On March 27, 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 was repayable on demand (but no longer than a term of six months) and bore simple interest at a rate of 12% per annum, which was payable upon repayment of the principal amount of $100,000. We were entitled to repay 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 repaid, 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. The loan was repaid on June 4, 2018 with interest of $2,268.

 

On April 13, 2018, we entered into a loan agreement with a lender whereby the lender advanced $200,000 to us. The principal amount of $200,000 was repayable on demand (but no longer than a term of six months) and bore simple interest at a rate of 12% per annum, which was payable upon repayment of the principal amount of $200,000. We were entitled to repay the whole or any portion of the principal amount of $200,000, plus accrued interest on the portion of the principal amount of $200,000 being repaid, at any time. The loan was repaid on June 12, 2018 with interest of $3,090.

 

F- 13
 

 

ICOx Innovations Inc.

(formerly AppCoin Innovations Inc.)

Notes to Consolidated Financial Statements

December 31, 2018 and 2017

 

6. NOTES RECEIVABLE – RELATED PARTY

 

On July 9, 2018, we entered into a loan agreement with Ryde whereby we provided to Ryde a loan in the principal amount of $750,000. The principal amount of the loan bears interest at the rate of 2% per annum, provided, however, any amounts not paid when due will immediately commence accruing interest at the default rate of 10% per annum. The principal amount of the loan, any accrued and unpaid interest thereon, and any other amounts owing under the loan maters on the earlier of (i) March 9, 2019 and (ii) the closing by Ryde of a minimum of $3,000,000 in financings, in the aggregate, whether through the sale of KodakCoins, equity or otherwise. Ryde can prepay all outstanding amounts on 10 days’ notice to our company.

 

As a condition for entering into the loan agreement, Ryde GmbH, a subsidiary of Ryde, provided a corporate guarantee dated July 9, 2018 to our company, pursuant to which Ryde GmbH unconditionally guaranteed and promised to pay our company on demand all amounts that become due from Ryde under the loan agreement with Ryde and any other amounts that we may in the future loan or advance to Ryde.

 

Also, as a condition for entering into the loan agreement, Ryde entered into the amendment no. 2, dated as of July 9, 2018, to the business service agreement dated December 29, 2017 as amended as of March 15, 2018, with our company. Pursuant to the amendment no. 2, our company and Ryde agreed that each party will be responsible for its respective expenses and agreed not to charge any out of pocket expenses to the other party unless expressly approved by the other party in advance in writing. As of December 31, 2018, interest of $7,192 has been accrued and earned.

 

On July 27, 2018, we entered into a loan agreement with Ryde whereby we provided to Ryde a loan in the principal amount of $500,000. This loan is unsecured, will mature on the earlier of eight (8) months from the date of issuance or the closing by Ryde of a minimum of $4,250,000 in financings, in the aggregate, whether through the sale of KodakCoins, equity, or otherwise and will bear interest at the rate of 12% interest per annum. However, any amounts not paid when due shall immediately commence accruing interest at the default rate of 18% per annum. As of December 31, 2018, interest of $23,474 has been accrued and earned.

 

   

Effective

Date

 

Maturity

Date

  Rate     Principal     Interest     Total  
Note 1   07-09-2018   03-09-2019     2 %   $ 750,000     $ 7,192     $ 757,192  
Note 2 (1)   07-27-2018   03-27-2019     12 %     500,000       23,474       523,474  
Total                   $ 1,250,000     $ 30,666     $ 1,280,666  

   

(1) The $500,000 was issued in four tranches and the interest is calculated based on the dates that those tranches were issued.

 

The Company is in discussions with Ryde to amend the agreements as one of the notes has already matured and the second note is nearing maturity.

 

7. COMMITMENTS

 

Starting May 1, 2018, the Company entered into a contract to lease its premises. The contract is effective until February 28, 2020 and is for $16,500 per month.

 

The following are the future minimum lease payments as at December 31, 2018:

 

    Total  
2019   $ 198,000  
2020     33,000  
Total   $ 231,000  

 

F- 14
 

 

ICOx Innovations Inc.

(formerly AppCoin Innovations Inc.)

Notes to Consolidated Financial Statements

December 31, 2018 and 2017

 

8. 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 until April 30, 2018. This director did not take any fees for serving as director during the year ended December 31, 2018.

 

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 Business Instincts Group Inc. (“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 can be terminated by either party, without cause, at any time upon the provision of 90 days written notice to the other party. 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 which were paid in 2017 and 2018. On June 26, 2018, the agreement was amended to pay $105,000 a month as of June 1, 2018 and pay a bonus of $280,000. $140,000 of the bonus has been paid with the remaining portion to be paid upon signing of two additional clients. As of December 31, 2018, the Company had trade and other payables owing to this related party of $20,458.

 

Future minimum payments per the agreement are:

 

2019   $ 1,050,000  
Total   $ 1,050,000  

 

On December 29, 2017, the Company signed a master service agreement with Ryde, 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 Ryde with the services in connection with Ryde’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 Ryde 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 Ryde’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 service fee of $500,000 during the year end December 31, 2017, paid in January by Ryde upon the completion of its first round of pre-ICO fundraising. Also, as a condition for entering into the loan agreement (Note 6), Ryde entered into the amendment no. 2, dated as of July 9, 2018, to the business service agreement dated December 29, 2017 as amended as of March 15, 2018, with our company. Pursuant to the amendment no. 2, the Company and Ryde agreed that each party will be responsible for its respective expenses and agreed not to charge any out of pocket expenses to the other party unless expressly approved by the other party in advance in writing.

 

On October 29, 2018, Ryde entered into amendment no. 3. Under the amendment no. 3, the Company agreed to provide to Ryde the services from October 1, 2018 to December 31, 2019 (the “2018-19 Services”) consisting of corporate development and governance, business development and technical services, business awareness services, financial and administrative services, and media management services. In addition, the Company agreed to provide to Ryde the monthly services from January 1, 2020 to December 31, 2020 (the “2020 Monthly Services”) consisting of board and corporate strategy management and board and corporate governance management.

 

F- 15
 

 

ICOx Innovations Inc.

(formerly AppCoin Innovations Inc.)

Notes to Consolidated Financial Statements

December 31, 2018 and 2017

 

8. RELATED PARTY TRANSACTIONS (CONT’D)

 

In consideration for the 2018-19 Services, Ryde agreed to pay a fixed fee of $1,100,000, which is deemed earned as of October 1, 2018, under the agreement, but not for financial reporting purposes and is not due and payable until Ryde closes on the sale of Simple Agreements for Future Tokens (“SAFTs”), equity, or token financings, joint venture financings, or any of its affiliates, in a minimum aggregate amount of $12,000,000, including closings occurring prior to October 1, 2018. In consideration for the 2020 Monthly Services fees, Ryde agreed to pay a monthly fee of $35,000 at the beginning of each month commencing January 1, 2020. All fees and other amounts paid to the Company with respect to the Company’s services provided prior to the amendment no. 3 have been earned in connection with the prior services and will not be credited against any of the above fees or other amounts due under the amendment no. 3.

 

In addition, the amendment no. 3 provides for additional fees for the 2018-19 Services relating to success of Ryde’s business, including the engagement of an investment banker and certain financing milestones and additional fees and milestone fees relating to the achievements of certain net revenues and creation of a business relationship that increases the value of Ryde. The Company will not provide any services related to any financings to be conducted by Ryde. The Company will also receive 20 million tokens based upon 100 million tokens issued, which number will be increased on a pro rata basis, if at any time, Ryde issues more than 100 million tokens (the “Token Fee”). The Token Fee has been previously earned and will be issued in connection with the first release of any tokens to any party.

 

However, if the business services agreement is terminated before December 31, 2019, (a) the fee for the 2018-19 Services will be immediately due in full (but only if the foregoing $12,000,000 financing is closed either before or after the termination date), (b) any additional fees and milestone fees earned will be immediately paid in full (if the condition precedent/milestones are achieved), (c) the Token Fee will be immediately transferred to the Company, and (d) any future adjustment in the number of tokens issued by Ryde, to over 100,000,000, will result in the immediately issuance to our company of 20% of such additional tokens.

 

The amendment no. 3 provides that the business services agreement will continue until December 31, 2020 unless earlier terminated by either party, provided, however, the term of the 2020 Monthly Services will automatically renew for successive one-year periods after December 31, 2020, which renewal term can be terminated by either party with 30 days advanced written notice. The amendment no. 3 also provides that the Company may terminate the business services agreement upon the provision of 30 days written notice to Ryde. Ryde may terminate the business services agreement after December 31, 2019, upon the provision of 30 days written notice to the Company. If the Company or Ryde provides such notice, the Company or Ryde, as applicable, 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 and other fees discussed above, which are due regardless of such early termination.

 

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

 

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 Ryde and he is also a director, officer, and indirect shareholder of Blockchain Merchant Group, Inc. which owns 2.5% of the common stock of Ryde and the Company owns 7.5% of the common stock of Ryde. Mr. Chell is also a director, chairman, and officer of Ryde. Mr. Elliott is a former officer of Ryde. The Company’s Chief Financial Officer, Swapan Kakumanu, is also the Chief Financial Officer of Ryde.

 

F- 16
 

 

ICOx Innovations Inc.

(formerly AppCoin Innovations Inc.)

Notes to Consolidated Financial Statements

December 31, 2018 and 2017

 

8. RELATED PARTY TRANSACTIONS (CONT’D)

 

On December 4, 2018, the Company appointed Swapan Kakumanu as Chief Financial Officer. Previously, on October 9, 2017, the Company had signed an agreement with a company owned by Swapan Kakumanu to complete the accounting functions of the Company. As of December 31, 2018, the Company had trade and other payables owing to this related party of $14,000.

 

9. SHARE CAPITAL

 

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. The escrow release condition (as defined below) was met, and each subscription receipt converted into one share of the Company’s common stock, for no additional consideration. The escrow release condition was the receipt by the Company of conditional approval for the listing of the shares of the Company’s common stock on a Canadian stock exchange. In connection with the closing of the private placements, the Company paid cash finder’s fees in the aggregate amount of $29,400 and the Company issued 160,865 shares of common stock at a deemed price of $0.60 per share as the finder’s fee.

 

In connection with this private placement, the Company agreed with each subscriber who purchased shares to prepare and file a registration statement with respect to 50% of the shares issued 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. These securities were registered under the United States Securities Act of 1933, as amended, effective November 16, 2018.

 

On November 27, 2018, we completed private placements of an aggregate of 674,950 shares of common stock at a price of $1.00 per share for aggregate gross proceeds of $674,950. In connection with the closing of the private placements, we paid share issue costs of $18,485.

 

Pursuant to the sponsorship agreement dated October 30, 2018 with Mackie Research Capital Corporation, on December 4, 2018, we issued 30,000 shares of our common stock to Mackie Research Capital Corporation at a deemed price of $0.60 per share, which were payable upon the listing of shares of our common stock on the TSX Venture Exchange in Canada. We issued these shares to one non-U.S. person (as that term is defined in Regulation S of the Securities Act of 1933, as amended) in an offshore transaction relying on Regulation S and/or Section 4(a)(2) of the Securities Act of 1933, as amended.

 

10. 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 our board of directors may grant options to acquire common shares of the Company at not less than 100% of the greater of: (i) the fair market value of the shares underlying the options on the grant date and (ii) the fair market value of the shares underlying the options on the date preceding the grant date at terms of up to ten years. No amounts are paid or payable by the recipient on receipt of the options. As of December 31, 2017, the maximum number of options available for grant was 3,000,000 shares. On January 22, 2018, the maximum number of options available for grant was increased to 3,900,000 shares. As of December 31, 2018, there are 3,400,000 stock options issued (December 31, 2017 – 2,900,000) and 500,000 stock options unissued (December 31, 2017 – 100,000).

 

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.

 

F- 17
 

 

ICOx Innovations Inc.

(formerly AppCoin Innovations Inc.)

Notes to Consolidated Financial Statements

December 31, 2018 and 2017

 

10. STOCK-BASED COMPENSATION (CONT’D)

 

The Company has also granted stock options to non-employees. 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.

 

On October 15, 2017, the Company granted a total of 1,325,000 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. 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.

 

On November 10, 2017, the Company granted a total of 175,000 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 on the first anniversary date;
  (ii) 1/3 on the second anniversary date; and
  (iii) 1/3 on the third anniversary date.

 

On February 9, 2018, the Company granted a total of 100,000 stock options to a director. The stock options are exercisable at the exercise price of $0.60 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 February 16, 2018, the Company granted a total of 75,000 stock options to two consultants. The stock options are exercisable at the exercise price of $0.60 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.

 

On May 17, 2018, the Company granted a total of 100,000 stock options to a director. The stock options are exercisable at the exercise price of $0.60 per share for a period of ten years from the date of grant. The stock options are exercisable as follows:

 

  (i) 2,778 upon the date of grant;
  (ii) 2,778 on the 17 th of each of the following 34 months; and
  (iii) 2,770 on April 17, 2021.

 

F- 18
 

 

ICOx Innovations Inc.

(formerly AppCoin Innovations Inc.)

Notes to Consolidated Financial Statements

December 31, 2018 and 2017

 

10. STOCK-BASED COMPENSATION (CONT’D)

 

On June 7, 2018, the Company granted a total of 100,000 stock options to a director. The stock options are exercisable at the exercise price of $0.60 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 June 8, 2018, the Company granted 75,000 stock options to one consultant. The stock options are exercisable at the exercise price of $0.60 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.

 

On August 15, 2018, the Company granted 50,000 stock options to one consultant. The stock options are exercisable at the exercise price of $1.00 per share for a period of two years from the date of grant. The stock options became exercisable upon the date of grant.

 

Stock-based compensation expense recognized for the years ended December 31, 2018 and 2017 were $236,388 and $211,434, respectively. 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:

 

    Years Ended December 31,  
    2018     2017  
Share price   $ 0.60     $ 0.10  
Exercise price   $ 0.60-1.00     $ 0.10  
Time to maturity (years)     2-10       10  
Risk-free interest rate     2.61%-3.11 %     2.28%-2.40 %
Expected volatility     50.48%-192.68 %     191.12%-191.75 %
Dividend per share   $ 0.00     $ 0.00  
Forfeiture rate     Nil       Nil  

 

    Number of Options     Weighted Average Grant-Date Fair Value ($)     Weighted Average Exercise Price ($)     Weighted Average Remaining Life (Yrs)  
Options outstanding, December 31, 2016     -       -       -       -  
Granted     2,900,000       0.10       0.10       8.8  
Exercised     -       -       -       -  
Forfeited     -       -       -       -  
Options outstanding, December 31, 2017     2,900,000       0.10       0.10       8.8  
Granted     500,000       0.55       0.64       8.5  
Exercised     -       -       -       -  
Forfeited     -       -       -       -  
Options outstanding, December 31, 2018     3,400,000       0.17       0.18       8.8  
Options exercisable, December 31, 2018     1,863,882       0.13       0.15       8.6  

 

F- 19
 

 

ICOx Innovations Inc.

(formerly AppCoin Innovations Inc.)

Notes to Consolidated Financial Statements

December 31, 2018 and 2017

 

11. INCOME TAXES

 

For the fiscal years 2018 and 2017, there was no provision for income taxes and deferred tax assets have been entirely offset by valuation allowances.

 

As of December 31, 2018 and 2017, the Company had net operating loss carry forwards of approximately $4,712,862 and $693,008, 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. We used 21% as an effective rate. 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 (2017 – 21%)), as follows:

 

    For the years ended December 31,  
    2018     2017  
Net operating loss before taxes   $ (4,019,854 )   $ (467,058 )
Federal income tax rate     21 %     21 %
Tax expense (benefit) at the statutory rate     (844,169 )     (98,082 )
Non-deductible items                
Tax effect of stock-based compensation (non-qualifying options)     49,641       44,401  
Change in valuation allowance     794,528       53,681  
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, 2018 and 2017, respectively, are as follows:

 

    2018     2017  
Deferred tax asset:                
Net operating loss carry forwards   $ 940,060     $ 101,110  
Total gross deferred tax assets     940,060       101,110  
Less: Deferred tax asset valuation allowance     (940,060 )     (101,110 )
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- 20
 

ICOx Innovations Inc.

(formerly AppCoin Innovations Inc.)

Notes to Consolidated Financial Statements

December 31, 2018 and 2017

 

12. 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.

 

 

o

Investment in related party

 

    As of December 31,  
    2018     2017  
Investment in related party   $ 37     $ 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.

 

13. SUBSEQUENT EVENTS

 

On January 8, 2019, the holder of our $75,000 convertible note exercised their option to convert. Per the agreement, 750,000 shares were issued at a conversion rate of $0.10 per share. The accrued interest will be paid in cash.

 

On January 29, 2019, the Company announced FreedomCoin, a new regulatory compliant corporate currency. FreedomCoin will allow the users of GunBroker.com, the world’s largest online marketplace for hunting, outdoor sports, and firearm products with over 4.7 million customers and $600,000,000 in yearly transactions, the ability to pay for purchases using an easy to use digital wallet. GunBroker.com users can purchase FreedomCoins with U.S. dollars and store them in a personal, secure blockchain wallet until needed. Buyers and sellers can choose to accept and use FreedomCoins for transactions leveraging blockchain technology to replace the need for other costly and time-consuming payment options.

 

ICOx through its subsidiary ICOx USA, Inc. has been contracted by FreedomCoin, LLC, to design and build the FreedomCoin for use by the GunBroker.com Network. The FredomCoin is a stable coin pegged to the U.S. dollar. Users can buy FreedomCoins with U.S. dollars and store them in personal, secure blockchain wallet until needed. Users can quickly convert funds though an easy-to-use app. The platform provides simple, trusted transactions and is designed to meet the demands of the current regulatory environment through KYC (know your client) and AML (anti-money laundering) compliance and money transmitter licensing.

 

ICOx USA, Inc. will charge up to $2,000,000 for the design and development of the FreedomCoin. In addition, the parties agreed that FreedomCoin, LLC will issue warrants to ICOx USA, Inc. allowing it to acquire up to 20% of ownership of FreedomCoin, LLC for total consideration of US$1, which warrants may be exercised by ICOx USA at any time in the future.

 

F- 21
 

 

ICOx Innovations Inc.

(formerly AppCoin Innovations Inc.)

Notes to Consolidated Financial Statements

December 31, 2018 and 2017

 

13. SUBSEQUENT EVENTS (CONT’D)

 

On February 1, 2019, we, through our wholly-owned subsidiary, ICOx USA, Inc. (“ICOx USA”), entered into a master services agreement dated effective January 21, 2019 with FreedomCoin, LLC to develop a stable coin cryptocurrency named FreedomCoin to be used as a currency for purchasing goods and services.

 

In addition, the parties agreed that FreedomCoin, LLC will initially have a board of five directors or managers, as applicable, three of which will be appointed by FreedomCoin, LLC and two of which will be appointed by ICOx USA. In addition, the parties agreed that FreedomCoin, LLC will issue warrants to ICOx USA allowing it to acquire up to 20% of ownership of FreedomCoin, LLC for total consideration of US$1, which warrants may be exercised by ICOx USA at any time in the future.

 

Either ICOx USA or FreedomCoin, LLC may terminate the master services agreement or any statement of work to be negotiated by the parties upon the provision of 30 days written notice to the other party, upon receipt of which, the non-terminating party may elect to immediately terminate the master services agreement or applicable statement of work. Upon such termination, ICOx USA will be entitled to no further compensation except for (i) any fees earned and out-of-pocket expenses incurred prior to the termination and (ii) any other amounts or consideration as set forth in any statement of work which are to be paid upon or regardless of such termination.

 

On November 19, 2018, we incorporated a fully owned subsidiary sBetOne Inc. (“sBetOne”). sBetOne’s goal is to provide blockchain technology opportunities to the sports and entertainment industry by working with large and well established brands. During February 2019, sBetOne initiated a private placement offering (“Financing”) to issue Convertible Promissory Notes (“Notes”) The terms of the Notes are as follows – 1) 15% simple interest per annum, 2) up to $1.5 million of Financing 3) Closing – in one or more closings 4) Principle and interest payable in 18 months 5) Conversion – If sBetOne issues equity securities in a transaction or series of transactions resulting in aggregate gross proceeds of $2.5 million including the conversion of the Notes and any other indebtedness (a “Qualified Financing”), then the Notes and any accrued but unpaid interest thereon, will automatically convert into the equity securities issued in such financings, at a conversion price equal to 70% of the lowest per share price paid by the purchasers of such equity securities in such financings for the first $0.5 million Notes issued and to 75% of the lowest per share price for Notes issued over the first $0.5 million. To date sBetOne has received $325,000 through this Financing.

 

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, 2018.

 

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 assessed 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, 2018:

 

  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.

 

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.

 

  - 28 -  
 

 

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.

 

Changes in Internal Control over Financial Reporting during the Fourth Quarter of 2018

 

Except as disclosed below, during the fourth quarter ended December 31, 2018, there were no changes to our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

 

On December 4, 2018, we appointed Swapan Kakumanu as our chief financial officer in connection with our application to list our common stock on the TSX Venture Exchange. In order to accommodate the appointment of Swapan Kakumanu as our chief financial officer, we removed Michael Blum as our chief financial officer on December 4, 2018. On the same date, we appointed Michael Blum as our chief operating officer.

 

ITEM 9B. OTHER INFORMATION

 

None.

 

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   55   October 15, 2017
Michael Blum   Chief Operating Officer, Secretary, Treasurer and Director   42   October 9, 2017
Swapan Kakumanu   Chief Financial Officer   49   December 4, 2018
Cameron Chell   Chairman and Director   50   August 21, 2017
James P. Geiskopf   Lead Director   59   August 28, 2014
Edmund C. Moy   Director   61   February 9, 2018
James M. Carter   Director   73   May 17, 2018
Alphonso Jackson   Director   73   June 22, 2018

 

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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 Ryde.

 

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.

 

Michael Blum

 

On October 9, 2017, Michael Blum was appointed as the chief financial officer, secretary, treasurer and a director of our company. On December 4, 2018, we removed Michael Blum as our chief financial officer in order to accommodate the appointment of Swapan Kakumanu as our chief financial officer in connection with our application to list our common stock on the TSX Venture Exchange.

 

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.

 

Swapan Kakumanu

 

On December 4, 2018, Swapan Kakumanu was appointed as the chief financial officer of our company. Mr. Kakumanu had been the controller of our company since October 2017.

 

Mr. Kakumanu has been a partner, controller and chief financial officer for Red to Black Inc., a financial services firm offering chief financial officer, controller and strategic consulting services to both public and private companies, since November 2012. Mr. Kakumanu has been the chief financial officer of RYDE Holding Inc. since October 2018, the chief financial officer and a director of BLOCKStrain Technology Corp. since September 2018, and the chief financial officer of Pounce Technologies Inc. since July 2016. Mr. Kakumanu was also the chief financial officer of Intercept Energy Services Inc. from June 2014 to September 2018, the chief financial officer of Vogogo Inc. from August 2017 to April 2018, the controller of Vogogo Inc. from November 2013 to April 2018, the chief financial officer of Oral4D Systems Inc. from February 2015 to April 2017, the chief financial officer of Decisive Farming Corp. from December 2014 to November 2016 and the chief financial officer of Silver Gold Bull Inc. from March 2013 to December 2013.

 

  - 30 -  
 

 

Mr. Kakumanu has over 20 years of senior finance and operations experience. He has served at the executive levels in both public and private companies including senior roles as president, chief executive officer, chief financial officer and company secretary, as well as director roles on boards. Mr. Kakumanu has extensive experience in public company reporting, investor relations, ERP implementations, mergers and acquisitions, internal controls and general overall financial, strategic and operations management. His diverse industry experience spans commercializing technologies and launching software solutions, blockchain, manufacturing, distribution, oilfield services, healthcare technologies and multi-jurisdictional operations. He holds CPA.CGA, ACA (Chartered Accountant, India) and ACMA (Certified Management Accountant, India) designations.

 

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 Inc. 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 Ryde from December 2017 and chairman of Ryde 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.

 

Mr. Geiskopf currently serves on the board of directors of Verb Technology Company, Inc., formerly nFusz, 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.

 

  - 31 -  
 

 

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.

 

James M. Carter

 

On May 17, 2018, we appointed James M. Carter as a director of our company.

 

Mr. Carter is a Chartered Professional Accountant with over 45 years’ experience in both the private and public business sectors, and was Vice President of MFC Bancorp Ltd., an NYSE listed company focused on merchant banking activities from January 1998 to February 2017. He specialized in conducting corporate evaluations, due diligence reviews, analysis and related negotiations for corporate acquisitions, as well as designing, negotiating, managing and implementing corporate and debt restructurings and risk management programs.

 

He was based in Europe from 1998 to 2005, and has extensive domestic and international experience encompassing both North American and European capital markets with particular expertise gained in emerging markets and the natural resources sector.

 

Mr. Carter currently services on the board of directors of Aloro Mining Corp. (since April 2, 2018). During his career, he has served as an officer and director of a number of private and publicly traded companies in various industries in both North America and Europe.

 

We believe that Mr. Carter 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.

 

Alphonso Jackson

 

On June 22, 2018, we appointed Alphonso Jackson as a director of our company. Mr. Jackson has been a member of our advisory board since June 7, 2018.

 

Mr. Jackson is the chief executive officer of A.R. Jackson Advisors, LLC since June 2017. Mr. Jackson has decades of experience in housing and community development. His expertise includes development of affordable and market rate housing, handling complex urban development issues and housing finance.

 

  - 32 -  
 

 

Mr. Jackson worked for First Data Corporation as its Senior Advisor from January 2015 to June 2017. Based out of the Washington, DC office, his primary focus was to strengthen First Data Corporation’s relationships with government entities, public policy initiatives, and maximizing business opportunities in the sector. In addition, Mr. Jackson helped expand and support First Data Corporation’s many diversity efforts.

 

From May 2012 to July 2014, Mr. Jackson served as Vice Chairman of Consumer & Community Banking at JP Morgan Chase in New York City. From August 2008 to May 2012, he served as the distinguished university professor and Director of the Center for Public Policy and Leadership at Hampton University in Hampton, Virginia.

 

Mr. Jackson was appointed the 13th Secretary of the US Department of Housing and Urban Development in March 2004. Nominated by President George W. Bush, he was unanimously confirmed by the United States Senate. Mr. Jackson served as the Secretary until April 2008.

 

Mr. Jackson holds a Bachelor of Arts degree in political science and a Master’s in education administration from Truman State University. He also received a Juris Doctor degree from Washington University School of Law in St. Louis, Missouri.

 

We believe that Mr. Jackson 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:

 

  (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.

 

  - 33 -  
 

 

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.

 

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, 2018 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   Nil       1       1  
Edmund C. Moy   Nil     2       1  

 

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 M. Carter, 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 James M. Carter, 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, and is “independent” as the term is used by NASDAQ Marketplace Rule 5605(a)(2).

 

  - 34 -  
 

 

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.

 

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, 2018;
  (b) each of two most highly compensated executive officers other than our principal executive officer who were serving as executive officers at December 31, 2018; 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, 2018,

 

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, 2018 and 2017 are set out in the following summary compensation table:

 

Summary Compensation Table – Years Ended December 31, 2018 and 2017

 

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   2018     170,000      

-

      -       8,594       -       -       -       178,594  
President (1)   2017     27,500       7,500          -       8,776 (7)            -            -            -       43,776  
Michael Blum Chief Operating Officer, Secretary, Treasurer   2018     121,806       -       -       17,187       -       -       -       138,993  
and Director (2)   2017     27,500       25,000       -       17,553 (4)      -       -       -       70,053  
Swapan Kakumanu Chief Financial   2018     4,516       -       -       27,619       -       -       -       32,135  
Officer (3)   2017     N/A       -       -       10,000       -       -       -       10,000  

 

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. On December 4, 2018, Mr. Blum resigned as our chief financial officer in order to accommodate the appointment of Swapan Kakumanu as our chief financial officer. On the same day, Mr. Blum was appointed as chief operating officer.
   
(3) On December 4, 2018, Mr. Kakumanu was appointed as the chief financial officer of our company.
   
(4) 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, 2018 and 2017 for a description of the assumptions made in the valuation of these stock options.

 

  - 35 -  
 

 

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. On June 1, 2018, his consulting fee increased to $16,000 per month 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.

 

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 December 4, 2018, we removed Michael Blum as our chief financial officer in order to accommodate the appointment of Swapan Kakumanu as our chief financial officer in connection with our application to list our common stock on the TSX Venture Exchange. In connection with the appointment of Michael Blum as chief operating officer, on December 4, 2018, we have entered into an amendment to the independent consultant agreement dated October 9, 2017 with Mr. Blum whereby the parties (i) modified the services to be provided by Mr. Blum to reflect his new position with our company as chief operating officer and (ii) increased his consulting fee to $12,000 per month commencing December 4, 2018.

 

  - 36 -  
 

 

Since October 1, 2017, we have paid Red to Black Inc., a company controlled by Swapan Kakumanu $4,000 per month which was amended to $10,000 per month from February 1, 2018 for providing accounting and controller services. On December 4, 2018, we removed Michael Blum as our chief financial officer in order to accommodate the appointment of Swapan Kakumanu as our chief financial officer in connection with our application to list our common stock on the TSX Venture Exchange. In connection with the appointment of Swapan Kakumanu as chief financial officer, we have entered into an independent consultant agreement dated December 4, 2018 with Swapan Kakumanu whereby we agreed to pay a consulting fee of $5,000 per month. The agreement continues for a twelve month term, 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. Kakumanu 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. Kakumanu: (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. Kakumanu 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. Kakumanu 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 and November 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. On November 22, 2018, our board of directors amended our 2017 Equity Incentive Plan in connection with our application to list our common stock on the TSX Venture Exchange. The plan was amended to provide that a total of 4,174,904 shares of our common stock will be available for the grant of stock options and no shares will be available for the grant of non-stock option 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. The grant also included 100,000 stock options to Swapan Kakumanu. These stock options become 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.

 

Effective October 15, 2017, we granted 100,000 stock options to Red to Black Inc., a company controlled by Swapan Kakumanu. 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 on the first anniversary of the grant date; (ii) 1/3 on the second anniversary of the grant date and (iii) 1/3 on the third anniversary of the grant date.

 

Effective June 8, 2018, we granted 75,000 stock options to Red to Black Inc. The stock options are exercisable at the exercise price of $0.60 per share for a period of ten years from the date of grant. The stock options become exercisable as follows: (i) 1/3 on the first anniversary of the grant date; (ii) 1/3 on the second anniversary of the grant date and (iii) 1/3 on the third anniversary of the grant 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.

 

  - 37 -  
 

 

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.

 

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, 2018:

 

    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     133,333 (1)     66,667 (1)           -       0.10       October 15, 2027           -          -             -           -  
Michael Blum     266,666 (1)     133,334 (1)     -       0.10       October 15, 2027       -       -       -       -  
Swapan Kakumanu     33,333 (2) (4)     66,667 (2) (4)     -       0.10       October 15, 2027       -       -       -       -  
Swapan Kakumanu     25,000 (3) (4)     50,000 (3) (4)     -       0.60       June 8, 2028       -       -       -       -  

 

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.
   
(2) The stock options become exercisable as follows: (i) 1/3 on the first anniversary date of grant (October 15, 2018); (ii) 1/3 on the second anniversary date and (iii) 1/3 on the third anniversary date.
   
(3) The stock options become exercisable as follows: (i) 1/3 upon the date of grant (June 8, 2018); (ii) 1/3 on the first anniversary date and (iii) 1/3 on the second anniversary date.
   
(4) These stock options are held by Red to Black Inc., a company controlled by Swapan Kakumanu

 

  - 38 -  
 

 

Compensation of Directors

 

During the year ended December 31, 2018, compensation to directors who were not our named executive officers is set out in the director compensation table below:

 

Director Compensation

 

Name   Fees earned or paid in cash
($)
    Stock
Awards
($)
    Option
Awards
($)
    Non-Equity
Incentive
Plan
Compensation
($)
    Nonqualified
Deferred
Compensa-tion
Earnings
($)
    All
Other
Compensa-tion
($)
    Total
($)
 
Cameron Chell (1)     -           -       17,187 (7)             -            -               -       17,187 (2)
James P. Geiskopf (3)     120,000       -       17,187 (7)     -       -       -       137,187  
Edmund C. Moy (4)     44,495       -       46,556 (7)     -       -       -       91,051  
James M. Carter (5)     31,183       -       32,591 (7)     -       -       -       63,774  
Alphonso Jackson (6)     28,333       -       36,882 (7)     -       -       -       65,215  

 

(1) 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.
   
(2) 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.
   
(3) 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.
   
(4) On February 9, 2018, Mr. Moy was appointed as a director of our company.
   
(5) On May 17, 2018, Mr. Carter was appointed as a director of our company.
   
(6) On June 22, 2018, Mr. Jackson was appointed as a director of our company.
   
(7) 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, 2018 and 2017 for a description of the assumptions made in the valuation of these stock options.

 

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.

 

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.

 

  - 39 -  
 

 

In connection with the appointment of James Carter as a director on May 17, 2018, we entered into an offer letter dated May 17, 2018 with Mr. Carter, pursuant to which, among other things, we agreed to pay Mr. Carter $50,000 in annual cash compensation and grant 100,000 stock options. Effective May 17, 2018, we granted to Mr. Carter 100,000 stock options, which are exercisable at an exercise price of $0.60 per share until May 17, 2028. The stock options become exercisable monthly over 36 months as follows: 1/36 of the stock options vesting each month commencing on May 17, 2018.

 

In connection with the appointment of Alphonso Jackson as a director on June 22, 2018, we entered into an offer letter dated June 22, 2018 with Mr. Jackson, pursuant to which, among other things, we agreed to pay Mr. Jackson $50,000 in annual cash compensation and grant 100,000 stock options, which stock options were previously granted on June 7, 2018 in connection with his appointment as a member of our advisory board. The stock options are exercisable at the exercise price of $0.60 per share until June 7, 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 26, 2019, 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     133,333 (3)     *  
Michael Blum
2212 Glenbrook Way, Las Vegas, NV 89117
  Common Stock     516,666 (4)     2.37 %
Swapan Kakumanu
193 Simcoe Circle SW, Calgary, AB T3H 4S3
  Common Stock     108,333 (5)     *  
Cameron Chell
561 Indiana Court, Venice Beach, CA 90291
  Common Stock     2,516,666 (6)     11.52 %
James P. Geiskopf
3250 Oakland Hills Court, Fairfield, CA 94534
  Common Stock     1,766,666 (7)     8.09 %
Edmund C. Moy
4251 Campbell Avenue, Suite 313,
Arlington, VA 22206
  Common Stock     66,666 (8)     *  

James M. Carter

12532 23 rd Ave, Surrey, BC V4A 2C4, Canada

  Common Stock     36,111 (9)     *  
Alphonso Jackson
1411 Key Blvd, Unit 601, Arlington, VA 22209
  Common Stock     33,333 (10)     *  
All executive officers and directors as a group
(8 persons)
  Common Stock     5,177,774       22.80 %

 

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.

 

  - 40 -  
 

 

(2) Percentage of ownership is based on 21,579,474 shares of our common stock issued and outstanding as of March 26, 2019.
   
(3) Comprised of 133,333 options to purchase shares of our common stock exercisable within 60 days.
   
(4) Includes 266,666 options to purchase shares of our common stock exercisable within 60 days.
   
(5) Includes 58,333 options to purchase shares of our common stock exercisable within 60 days, held by Red to Black Inc., a company controlled by Mr. Kakumanu.
   
(6) Comprised of 50,000 shares of our common stock held directly, 2,000,000 shares of our common stock held indirectly through Blockchain Fund GP Inc., 200,000 shares of our common stock held indirectly through 1373024 Alberta Inc. and 266,666 options to purchase shares of our common stock exercisable within 60 days, held by Mr. Chell. Mr. Chell 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. and 1373024 Alberta Inc.
   
(7) Includes 266,666 options to purchase shares of our common stock exercisable within 60 days.
   
(8) Includes 66,666 options to purchase shares of our common stock exercisable within 60 days.
   
(9) Includes 36,111 options to purchase shares of our common stock exercisable within 60 days.
   
(10) Includes 33,333 options to purchase shares of our common stock exercisable within 60 days.

 

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, 2017, or currently proposed transaction, in which we were or are to be a participant and the amount involved exceeds $20,258.50, 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, chief operating officer and director of our company, 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 RYDE Holding Inc. (“Ryde”), formerly WENN Digital Inc., and, on December 29, 2017, as amended as of March 15, 2018, July 9, 2018, and October 29, 2018, we entered into a business services agreement with Ryde. 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 Ryde and he is also a director, officer and indirect shareholder of Blockchain Merchant Group, Inc. which owns 2.5% of the common stock of Ryde. Mr. Chell has also been a director and secretary of Ryde from December 2017 and chairman of Ryde from February 2018. From December 2017 to February 2018, our president, Bruce Elliott, served as the chief marketing officer of Ryde. Our chief financial officer, Swapan Kakumanu has also been the chief financial officer of Ryde from October 2018. See Business – Recent Developments for additional information.

 

  - 41 -  
 

 

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

 

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 was repayable on demand (but no longer than a term of six month) and bore simple interest at a rate of 12% per annum, which was payable upon repayment of the principal amount of $100,000. We were 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 provided 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 provided 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. The loan was repaid on June 1, 2018 with interest of $2,630.

 

On July 9, 2018, we entered into a loan agreement with Ryde whereby we provided to Ryde a loan in the principal amount of $750,000. The principal amount of the loan bears interest at the rate of 2% per annum, provided, however, any amounts not paid when due will immediately commence accruing interest at the default rate of 10% per annum. The principal amount of the loan, any accrued and unpaid interest thereon, and any other amounts owing under the loan maters on the earlier of (i) March 9, 2019 and (ii) the closing by Ryde of a minimum of $3,000,000 in financings, in the aggregate, whether through the sale of KodakCoins, equity or otherwise. Ryde can prepay all outstanding amounts on 10 days’ notice to our company.

 

As a condition for entering into the loan agreement, Ryde GmbH, a subsidiary of Ryde, provided a corporate guarantee dated July 9, 2018 to our company, pursuant to which Ryde GmbH unconditionally guaranteed and promised to pay our company on demand all amounts that become due from Ryde under the loan agreement with Ryde and any other amounts that we may in the future loan or advance to Ryde.

 

Also, as a condition for entering into the loan agreement, Ryde entered into the amendment no. 2, dated as of July 9, 2018, to the business service agreement dated December 29, 2017 as amended as of March 15, 2018, with our company. Pursuant to the amendment no. 2, our company and Ryde agreed that each party will be responsible for its respective expenses and agreed not to charge any out of pocket expenses to the other party unless expressly approved by the other party in advance in writing. As of December 31, 2018, interest of $7,192 has been accrued and earned.

 

On July 27, 2018, we entered into a loan agreement with Ryde whereby we provided to Ryde a loan in the principal amount of $500,000. This loan is unsecured, will mature on the earlier of eight (8) months from the date of issuance or the closing by Ryde of a minimum of $4,250,000 in financings, in the aggregate, whether through the sale of KodakCoins, equity, or otherwise and will bear interest at the rate of 12% interest per annum. However, any amounts not paid when due shall immediately commence accruing interest at the default rate of 18% per annum. As of December 31, 2018, interest of $23,474 has been accrued and earned.

 

The Company is in discussions with Ryde to amend the agreements as one of the notes has already matured and the second note is nearing maturity.

 

On November 27, 2018, we issued 200,000 shares of our common stock to 1373024 Alberta Inc., a company wholly-owned by Cameron Chell, our chairman and director, at a price of $1.00 per share for aggregate gross proceeds of $200,000.

 

Effective May 1, 2018, we entered into a facility services agreement with Business Instincts Group Inc., a company of which Cameron Chell is a director, officer and indirect shareholder, whereby we agreed to pay Business Instincts Group Inc. a basic monthly rent of $16,500 for the complete occupancy term commencing May 1, 2018 until February 28, 2020 to use the premises located at 4101 Redwood Ave, Building F. Los Angeles, California 90066 for general office purposes.

 

  - 42 -  
 

 

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 six directors consisting of Michael Blum, Cameron Chell, James P. Geiskopf, Edmund C. Moy, James M. Carter, and Alphonso Jackson. 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 three independent directors, Edmund C. Moy, James M. Carter, and Alphonso Jackson.

 

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, 2018 and December 31, 2017 for professional services rendered by Haynie & Company, our independent registered public accounting firm:

 

Fees   2018     2017  
Audit Fees   $ 41,000 *   $ 15,000  
Audit Related Fees     -       -  
Tax Fees     -       -  
Other Fees     -       -  
Total Fees   $ 41,000     $ 15,000  

 

*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.

 

  - 43 -  
 

 

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   Amended and Restated Bylaws (incorporated by reference from our Current Report on Form 8-K, filed on November 23, 2018)
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)
10.13   Private Placement Subscription Agreement with Oceanside Strategies Inc. dated October 30, 2017 (incorporated by reference from our Annual Report on Form 10-K filed on April 2, 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 (incorporated by reference from our Annual Report on Form 10-K filed on April 2, 2017)
10.15   Private Placement Subscription Agreement with Hospitality Investors Special Situation Group Pvt. Ltd. dated October 30, 2017 (incorporated by reference from our Annual Report on Form 10-K filed on April 2, 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 (incorporated by reference from our Annual Report on Form 10-K filed on April 2, 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)

 

  - 44 -  
 

 

Exhibit Number   Description
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 (incorporated by reference from our Annual Report on Form 10-K filed on April 2, 2017)
10.25   Offer Letter dated February 9, 2018 with Edmund C. Moy (incorporated by reference from our Annual Report on Form 10-K filed on April 2, 2017)
10.26   2017 Equity Incentive Plan (incorporated by reference from our Annual Report on Form 10-K filed on April 2, 2017)
10.27   Stock Option Agreement dated October 15, 2017 with James P. Geiskopf (incorporated by reference from our Annual Report on Form 10-K filed on April 2, 2017)
10.28   Stock Option Agreement dated October 15, 2017 with Cameron Chell (incorporated by reference from our Annual Report on Form 10-K filed on April 2, 2017)
10.29   Stock Option Agreement dated October 15, 2017 with Michael Blum (incorporated by reference from our Annual Report on Form 10-K filed on April 2, 2017)
10.30   Stock Option Agreement dated October 15, 2017 with Bruce Elliott (incorporated by reference from our Annual Report on Form 10-K filed on April 2, 2017)
10.31   Stock Option Agreement dated October 15, 2017 with Business Instincts Group Inc. (incorporated by reference from our Annual Report on Form 10-K filed on April 2, 2017)
10.32   Stock Option Agreement dated February 9, 2018 with Edmund C. Moy (incorporated by reference from our Annual Report on Form 10-K filed on April 2, 2017)
10.33   Indemnification Agreement dated December 20, 2017 with James P. Geiskopf (incorporated by reference from our Annual Report on Form 10-K filed on April 2, 2017)
10.34   Indemnification Agreement dated December 20, 2017 with Cameron Chell (incorporated by reference from our Annual Report on Form 10-K filed on April 2, 2017)
10.35   Indemnification Agreement dated December 20, 2017 with Michael Blum (incorporated by reference from our Annual Report on Form 10-K filed on April 2, 2017)
10.36   Indemnification Agreement dated December 20, 2017 with Bruce Elliott (incorporated by reference from our Annual Report on Form 10-K filed on April 2, 2017)
10.37   Indemnification Agreement dated February 9, 2018 with Edmund C. Moy (incorporated by reference from our Annual Report on Form 10-K filed on April 2, 2017)
10.38   Offer Letter dated May 17, 2018 with James Carter (incorporated by reference from our Registration Statement on Form S-1/A filed on July 17, 2018)
10.39   Stock Option Agreement dated May 17, 2018 with James Carter (incorporated by reference from our Registration Statement on Form S-1/A filed on July 17, 2018)
10.40   Indemnification Agreement dated May 17, 2018 with James Carter (incorporated by reference from our Registration Statement on Form S-1/A filed on July 17, 2018)
10.41   Offer Letter dated June 22, 2018 with Alphonso Jackson (incorporated by reference from our Registration Statement on Form S-1/A filed on July 17, 2018)
10.42   Stock Option Agreement dated June 7, 2018 with Alphonso Jackson (incorporated by reference from our Registration Statement on Form S-1/A filed on July 17, 2018)
10.43   Indemnification Agreement June 22, 2018 with Alphonso Jackson (incorporated by reference from our Registration Statement on Form S-1/A filed on July 17, 2018)

 

  - 45 -  
 

 

Exhibit Number   Description
10.44   Amendment Agreement dated effective as of June 25, 2018 to Business Services Agreement dated October 18, 2017 with Business Instincts Group Inc. (incorporated by reference from our Current Report on Form 8-K, filed on June 29, 2018)
10.45   Loan Agreement dated July 9, 2018 with Ryde Holding Inc. (formerly WENN Digital Inc.) (incorporated by reference from our Current Report on Form 8-K, filed on July 11, 2018)
10.46   Corporate Guaranty dated July 9, 2018 by Ryde GmbH (incorporated by reference from our Current Report on Form 8-K, filed on July 11, 2018)
10.47   Amendment No. 2 to Business Services Agreement dated as of July 9, 2018 with Ryde Holding Inc. (formerly WENN Digital Inc.) (incorporated by reference from our Current Report on Form 8-K, filed on July 11, 2018)
10.48   Loan Agreement entered into as of August 29, 2018 with Ryde GmbH (incorporated by reference from our Current Report on Form 8-K, filed on August 31, 2018)  
10.49   Corporate Guaranty entered into as of August 29, 2018 by Ryde Holding Inc. (formerly WENN Digital Inc.) (incorporated by reference from our Current Report on Form 8-K, filed on August 31, 2018)
10.50   Security Agreement entered into as of August 29, 2018 with Ryde Holding Inc. (formerly WENN Digital Inc.) (incorporated by reference from our Current Report on Form 8-K, filed on August 31, 2018)
10.51   Security Assignment Agreement entered into as of August 29, 2018 with Ryde GmbH (incorporated by reference from our Current Report on Form 8-K, filed on August 31, 2018)
10.52   Master Services Agreement dated effective October 19, 2018 between ICOx USA, Inc. and BitRail, LLC (incorporated by reference from our Current Report on Form 8-K, filed on October 24, 2018)
10.53   Software Services Statement of Work dated effective October 19, 2018 between ICOx USA, Inc. and BitRail, LLC (incorporated by reference from our Current Report on Form 8-K, filed on October 24, 2018)
10.54   Amendment No. 3 to Business Services Agreement dated as of October 29, 2018 with Ryde Holding Inc. (incorporated by reference from our Current Report on Form 8-K, filed on October 31, 2018)
10.55   Amendment Agreement dated November 5, 2018 with Oceanside Strategies Inc. (incorporated by reference from our Current Report on Form 8-K, filed on November 7, 2018)
10.56   Amendment Agreement dated November 5, 2018 with Oceanside Strategies Inc. (incorporated by reference from our Current Report on Form 8-K, filed on November 7, 2018)
10.57   Amendment Agreement dated November 5, 2018 with Oceanside Strategies Inc. (incorporated by reference from our Current Report on Form 8-K, filed on November 7, 2018)
10.58   Amendment Agreement dated November 5, 2018 with Oceanside Strategies Inc. (incorporated by reference from our Current Report on Form 8-K, filed on November 7, 2018)
10.59   Amendment Agreement dated November 5, 2018 with Oceanside Strategies Inc. (incorporated by reference from our Current Report on Form 8-K, filed on November 7, 2018)
10.60   2017 Equity Incentive Plan (incorporated by reference from our Current Report on Form 8-K, filed on November 23, 2018)
10.61   Form of Private Placement Subscription Agreement (incorporated by reference from our Current Report on Form 8-K, filed on November 29, 2018)
10.62   Amendment to Independent Consultant Agreement dated December 4, 2018 with Michael Blum (incorporated by reference from our Current Report on Form 8-K, filed on December 4, 2018)
10.62   Master Services Agreement dated effective January 21, 2019 between ICOx USA, Inc. and FreedomCoin, LLC (incorporated by reference from our Current Report on Form 8-K, filed on February 4, 2019)
10.63   Software Services Statement of Work dated effective January 21, 2019 between ICOx USA, Inc. and FreedomCoin, LLC (incorporated by reference from our Current Report on Form 8-K, filed on February 4, 2019)
10.64*   Stock Option Agreement dated October 15, 2017 with Red to Black Inc.
10.65*   Stock Option Agreement dated June 8, 2018 with Red to Black Inc.
10.66*   Independent Consultant Agreement dated effective December 4, 2018 with Swapan Kakumanu
10.67*   Indemnification Agreement with Swapan Kakumanu

 

  - 46 -  
 

 

Exhibit Number   Description
(14)   Code of Ethics
14.1   Code of Ethics and Business Conduct (incorporated by reference from our Annual Report on Form 10-K, filed on April 2, 2018)
(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.

ICOx USA, Inc., Nevada corporation

Cathio, Inc., Delaware corporation

sBetOne, Inc., Delaware 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: March 26, 2019  

 

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: March 26, 2019  

 

/s/ Swapan Kakumanu  
Swapan Kakumanu  
Chief Financial Officer  
(Principal Financial Officer and Principal Accounting Officer)  
Date: March 26, 2019  

 

/s/ Michael Blum  
Michael Blum  
Chief Operating Officer, Secretary, Treasurer, and Director  
Date: March 26, 2019  

 

/s/ Cameron Chell  
Cameron Chell  
Director  
Date: March 26, 2019  
   
/s/ James P. Geiskopf  
James P. Geiskopf  
Director  
Date: March 26, 2019  
   
/s/ Edmund C. Moy  
Edmund C. Moy  
Director  
Date: March 26, 2019  
   
/s/ James M. Carter  
James M. Carter  
Director  
Date: March 26, 2019  
   
/s/ Alphonso Jackson  
Alphonso Jackson  
Director  
Date: March 26, 2019  

 

  - 48 -  
 

 

 

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:

 

RED TO BLACK INC., , a company incorporated pursuant to the laws of Alberta, Canada, with an office at 193 Simcoe Circle SW, Calgary, AB T3H 4S3

 

(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 $0.10 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/ Swapan Kakumanu
  ) RED TO BLACK INC.
  )  
Address )  
  )  
  )  
  )  
  )  
Occupation )  

 

 
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):

 

  o Alberta o New Brunswick o Prince Edward Island
       
  o    British Columbia o    Nova Scotia o    Quebec
       
  o    Manitoba o    Ontario o    Saskatchewan
       
  o Newfoundland and Labrador o    Yukon
     
  o Northwest Territories

 

or

 

    (B) o 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:
 
  o (i) is an employee, officer or director of the Company; or
       
  o (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 )
   
(a) o (i) except in Ontario, a person registered under the securities legislation of a jurisdiction of Canada as an adviser or dealer,
       
o (ii) an individual registered under the securities legislation of a jurisdiction of Canada as a representative of a person referred to in paragraph (i),
       
o (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),
       
o (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 ),
       
o (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,
       
o (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
       
o (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 ):
   
  o (i) a director, executive officer or control person of the Company, or of an affiliate of the Company,
       
  o (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 ),
       
  o (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

 

 
C- 4

 

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;

 

  (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;
     
  (b) unless the Optionee has completed Schedule D or E, the Optionee is not a U.S. Person;
     
  (c) 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;

 

 
F- 3

 

  (d) 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;
     
  (e) 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;
     
  (f) if the Optionee is not resident in the United States or Canada, the Optionee:

 

    (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;

 

  (g) the Optionee has received and carefully read this Agreement and the Company Information;

 

 
F- 4

 

  (h) 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;
     
  (i) 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;
     
  (j) 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;
     
  (k) 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;

 

  (l) 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;
     
  (m) 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;
     
  (n) 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;
     
  (o) 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;
     
  (p) 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;
     
  (q) 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;
     
  (r) 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;

 

 
F- 5

 

  (s) 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,
     
  (t) 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;
     
  (u) 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.

 

 
 

 

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 OCTOBER 9, 2018.

 

STOCK OPTION AGREEMENT

 

This AGREEMENT is entered into as of the June 8, 2018 (the “Date of Grant” ).

 

BETWEEN:

 

ICOX INNOVATIONS INC. , a company incorporated pursuant to the laws of the State of Nevada, with an office at 4101 Redwood Avenue, Building F, Los Angeles, CA 90066

 

(the “Company” )

 

AND:

 

RED TO BLACK INC. , a company incorporated pursuant to the laws of Alberta, with an office at 193 Simcoe Circle SW, Calgary, AB T3H 4S3

 

(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 75,000 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 June 8, 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 75,000 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 [ insert the date that is 4 months and a day after the distribution date ].

 

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 [ insert the date that is 4 months and a day after the distribution date ].

 

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.

 

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.

 

 
6

 

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.

 

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.

 

 
7

 

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.

 

ICOX INNOVATIONS INC.  
     
Per: /s/ James Geiskopf  
  Authorized Signatory  

 

WITNESSED BY: )
  )  
  )  
  )  
  )  
Name ) /s/ Swapan Kakumanu
  ) RED TO BLACK INC.
  )  
Address )  
  )  
  )  
  )  
  )  
Occupation )  

 

 
A- 1

 

Schedule A

 

VESTING SCHEDULE

 

1/3 of the Options will vest on June 8, 2018, June 8, 2019 and June 8, 2020.

 

 
B- 1

 

Schedule B

 

NOTICE OF EXERCISE

 

TO: ICOX Innovations Inc.
   
  4101 Redwood Avenue
  Building F
  Los Angeles, CA 90066

 

This Notice of Exercise shall constitute a proper Notice of Exercise pursuant to section 2.6 of the Stock Option Agreement dated June 8, 2018 (the “ Agreement ”), between ICOX 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: ICOX 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):

 

  o Alberta o New Brunswick o Prince Edward Island
       
  o    British Columbia o    Nova Scotia o    Quebec
       
  o    Manitoba o    Ontario o    Saskatchewan
       
  o Newfoundland and Labrador o    Yukon
     
  o Northwest Territories

 

or

 

    (B) o 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:

 

  o (i) is an employee, officer or director of the Company; or
       
  o (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 )
   
o (i) except in Ontario, a person registered under the securities legislation of a jurisdiction of Canada as an adviser or dealer,
       
o (ii) an individual registered under the securities legislation of a jurisdiction of Canada as a representative of a person referred to in paragraph (i),
       
o (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),
       
o (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 ),
       
o (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,
       
o (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
       
o (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 ):
   
  o (i) a director, executive officer or control person of the Company, or of an affiliate of the Company,
       
  o (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 ),

       
  o (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;

 

  (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,

 

 
C- 4

 

  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;

 

  (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

 

 
C- 5

 

  (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.

 

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.

 

 
C- 6

 

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.

 

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.

 

 
C- 7

 

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.

 

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.

 

 
C- 8

 

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 ICOX 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 ICOX 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   2016
         
  _____ 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 ICOX 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;
     
  (b) unless the Optionee has completed Schedule D or E, the Optionee is not a U.S. Person;
     
  (c) 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;

 

 
F- 3

 

  (d) 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;
     
  (e) 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;
     
  (f) if the Optionee is not resident in the United States or Canada, the Optionee:

 

  (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;

 

  (g) the Optionee has received and carefully read this Agreement and the Company Information;

 

 
F- 4

 

  (h) 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;
     
  (i) 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;
     
  (j) 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;
     
  (k) 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;

 

  (l) 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;
     
  (m) 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;
     
  (n) 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;
     
  (o) 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;
     
  (p) 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;
     
  (q) 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;
     
  (r) 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;

 

 
F- 5

 

  (s) 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;
     
  (t) 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; and
     
  (u) 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.

 

 
 

 

INDEPENDENT CONSULTANT AGREEMENT

 

This Independent Consultant Agreement (this “ Agreement ”) is dated effective as of the 4 th day of December, 2018 (the “ Effective Date ”).

 

BETWEEN:

 

ICOx INNOVATIONS INC., a corporation duly incorporated under the laws of the state of Nevada with a business address at 4101 Redwood Avenue, Building F, Los Angeles, CA 90066

 

(email: jimmy.geiskopf@icoxinnovations.com)

 

(the “ Company ”)

 

AND :

 

SWAPAN KAKUMANU , an individual having an address at 193 Simcoe Circle SW, Calgary, Alberta T3H 4S3, Canada

 

(email: swapan.kakumanu@icoxinnovations.com)

 

(the “ Consultant ”)

 

WHEREAS :

 

A.       The Company is engaged in the business providing services to entities and persons who wish to conduct crypto currency offerings;

 

B.       The Consultant has considerable expertise in the general management of start-ups, financial and business matters; and

 

C.       The Company wishes to obtain, and the Consultant wishes to provide, certain services to the Company on the terms and conditions set out in this Agreement;

 

NOW THEREFORE , in consideration of the mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Consultant (each, a “ Party ” and, together, the “ Parties ”) covenant and agree as follows:

 

1. Services to be Provided

 

1.1 Commencing on the Effective Date, the Consultant will hold the position of Chief Financial Officer and provide such services to the Company as are described in Schedule A to this Agreement (the “ Services ”). The Consultant will also provide any other services not specifically mentioned in Schedule A, but which, by reason of the Consultant’s capability, he knows or ought to know are necessary to ensure that the best interests of the Company are maintained. The Consultant shall be reasonably available to perform the Services required under this Agreement.

 

- 2
 

 

1.2 The Consultant will report to the Board of Directors of the Company (the “ Board ”) and will keep the Board informed of all matters concerning the Services as requested by the Board from time to time.

 

1.3 The Consultant will perform the Services to the level of competence and skill one would reasonably expect from someone who has skills and experience similar to that of the Consultant. The Consultant shall devote sufficient working time, attention and ability in a timely manner to the Business of the Company (as defined herein), and to any associated company, as is reasonably necessary for the proper performance of the Services pursuant to this Agreement.

 

1.4 The Consultant will not have any right or authority, express or implied, to commit or otherwise obligate the Company in any manner whatsoever, except to the extent specifically authorized by the Board. The Consultant is not authorized to make any representation, contract or commitment on behalf of the Company unless, prior to such time, he is specifically authorized in writing to do so by the Board.

 

1.5 The Consultant will faithfully, honestly and diligently serve the Company, use his best efforts to promote the best interests of the Company and co-operate with the Company, and utilize maximum professional skill and care to ensure that the Services are rendered to the satisfaction of the Company.

 

1.6 The Consultant will comply with all applicable rules, laws and regulations, and all applicable Company policies (to the extent they have been provided to Consultant by the Company), having application to the carrying out and performance of his obligations under this Agreement.

 

1.7 At all times while on the Company’s premises or representing the Company in any other location in connection with the provision of the Services, the Consultant will observe the Company’s rules and regulations with respect to conduct, health, safety and protection of persons and property.

 

2. Independent Consultant Relationship

 

2.1 It is expressly agreed that the Consultant’s relationship with the Company is that of an independent contractor in performing the Services under this Agreement, and nothing in this Agreement is intended to, or shall be construed to, create a partnership, agency, joint venture, employment or similar relationship between the Consultant and the Company.

 

2.2 The Consultant will not be entitled to any of the benefits that the Company may make available to its employees from time to time, including, but not limited to, group health or life insurance, profit-sharing or retirement benefits. The Company will not pay any contribution to any pension plan, employment insurance or withholding taxes, nor provide any other contributions or benefits, which might be expected in an employer-employee relationship on behalf of the Consultant.

 

- 3
 

 

2.3 The Consultant is solely responsible for, and will file on a timely basis, all tax returns and payments required to be filed with or made to any federal, state or local tax authority with respect to the performance of the Services and the consideration therefor under this Agreement.

 

2.4 The Consultant is solely responsible for, and must maintain adequate records of, expenses incurred in the course of performing the Services.

 

2.5 The Consultant represents and warrants that the Consultant has the right to provide the Services to the Company without violation of obligations to others and that any advice, information and documents given by the Consultant to the Company under this Agreement may be used fully and freely by the Company, unless otherwise so designated orally or in writing by the Consultant at the time of communication of such information.

 

3. CONSIDERATION FOR SERVICES

 

3.1 As compensation for carrying out the Services during the term of this Agreement, the Company agrees to pay to the Consultant a consulting fee in the amount of $5,000 per month, to be paid on a monthly basis at the end of each month.

 

3.2 Unless otherwise waived by the Company, the Consultant will submit monthly reports to the Company showing the amount of hours worked by the Consultant on behalf of the Company during that period.

 

3.3 The Consultant may incur expenses in the name of the Company, provided such expenses relate solely to the carrying out of the Services pursuant to this Agreement. The Consultant will, as soon as practicable, forward all invoices for expenses incurred on behalf of the Company and the Company agrees to pay said invoices within 30 days of receipt. Any expenses of $500 or greater incurred by the Consultant in connection with the carrying out of the Consultant’s duties pursuant to this Agreement must be approved by the Company in writing prior to the incurring of such expenses by the Consultant, unless pre-approval is impractical or impossible.

 

4. Term and Termination

 

4.1 This Agreement will commence on the Effective Date and will continue for twelve (12) months (the “ Term ”), unless terminated in accordance with Section 4.3 or renewed in accordance with Section 4.2.

 

4.2 Notwithstanding Section 4.1, this Agreement will automatically be renewed for subsequent terms of twelve (12) months unless the Company provides written notice to the Consultant by no later than 30 days prior to the last day of the applicable Term of its intention to not renew this Agreement. If this Agreement is renewed, the Board will perform an annual review of compensation paid to the Consultant, at the time such renewal is offered to the Consultant.

 

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4.3 Notwithstanding Section 4.1, this Agreement may be terminated at any time by:

 

(a) the Consultant giving at least 30 days advance notice in writing to the Company;

 

(b) the Company by giving at least 30 days advance notice in writing to the Consultant; or

 

(c) the Company without notice in the event that the Consultant: (i) breaches any term of this Agreement, (ii) neglects the Services or any other duty to be performed by the Consultant under this Agreement, (iii) engages in any conduct which is dishonest, or damages the reputation or standing of the Company, (iv) is convicted of any criminal act, (v) engages in any act of moral turpitude, (vi) files a voluntary petition in bankruptcy, or (vii) is adjudicated as bankrupt or insolvent.

 

4.4 Upon termination of this Agreement for any reason, the Consultant shall promptly deliver the following in accordance with the directions of the Company:

 

(a) a final accounting, reflecting the balance of expenses incurred on behalf of the Company as of the date of termination;

 

(b) all documents pertaining to the Company or this Agreement, including, but not limited to, all Confidential Information, books of account, correspondence and contracts; and

 

(c) all equipment and any other property belonging to the Company.

 

4.5 If this Agreement is terminated for any reason set forth in Section 4, then the Consultant will be entitled to the fees earned to the effective date of termination and any expenses incurred on behalf of the Company prior to the effective date of termination which are otherwise reimbursable by the Consultant pursuant to the terms of this Agreement.

 

4.6 The definitions contained in this Agreement and the rights and obligations contained in this Section 4 and in Sections 5, 6, 7 and 8 will survive any termination or expiration of this Agreement.

 

4.7 Upon the termination of this Agreement for whatever reason, the Consultant shall upon the request of the Company, immediately resign, without claim for compensation or severance of any kind whatsoever, from all offices and directorships held by him in the Company or any affiliated company and in the event of their respective failure to do so the Company is hereby irrevocably authorized to appoint its designated person in their respective names and on their behalf to execute any documents and to do all things requisite to give effect thereto.

 

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4.8 The Consultant shall not, at any time after the termination of this Agreement, represent himself as being in any way connected with or interested in the business of the Company.

 

5. Confidentiality

 

5.1 For the purposes of this Agreement, “ Confidential Information ” means information, whether or not originated by the Consultant, that relates to the business or affairs of the Company, its affiliates, clients, sales personnel or suppliers and is confidential or proprietary to, about or created by the Company, its affiliates, clients or suppliers (whether or not reduced to writing or designated or marked as confidential), including, but not limited to, the following:

 

(a) any technical and non-technical information related to the Company’s business and current, future and proposed products and services of the Company, including, without limitation, Company Innovations (as defined herein), Company Property (as defined herein) and the Company’s information concerning research, development, design and product details and specifications, financial information, procurement requirements, engineering and manufacturing information, and business plans;

 

(b) information relating to strategies, research, communications, business plans and financial data of the Company;

 

(c) any information of or regarding the Company and its business which is not readily publicly available;

 

(d) work product resulting from or related to work or projects performed, or to be performed, for the Company or its affiliates, including, but not limited to, the methods, processes, procedures, analysis, techniques and audits used in connection therewith;

 

(e) any intellectual property contributed to the Company, and any other technical and business information of the Company and its affiliates which is of a confidential, trade secret and/or proprietary character;

 

(f) marketing and development plans, price and cost data, price and fee amounts, pricing and billing policies, quoting procedures, marketing techniques, methods of obtaining business, forecasts and forecast assumptions and volumes, current and prospective client lists, and future plans and potential strategies of the Company that have been or are being discussed;

 

(g) information belonging to third parties or which is claimed by third parties to be confidential or proprietary and which the Company has agreed to keep confidential; and

 

(h) any other information that becomes known to the Consultant as a result of this Agreement or the services performed hereunder, including information received by the Company from others, that the Consultant, acting reasonably, believes is confidential information or that the Company takes measures to protect.

 

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5.2 The Consultant’s obligations under this Section 5 do not apply to any Confidential Information that the Consultant can demonstrate: (a) was in the public domain at or subsequent to the time the Confidential Information was communicated to the Consultant by the Company through no fault of the Consultant; (b) was rightfully in the Consultant’s possession free of any obligation of confidence at or subsequent to the time the Confidential Information was communicated to the Consultant by the Company; or (c) was independently developed by the Consultant without use of, or reference to, any Confidential Information communicated to the Consultant by the Company. A disclosure of any Confidential Information by Consultant in response to a valid order by a court or other governmental body or as otherwise required by law will not be considered to be a breach of this Agreement or a waiver of confidentiality for other purposes, provided, however, that the Consultant provides prompt prior written notice thereof to the Company to enable the Company to seek a protective order or otherwise prevent the disclosure

 

5.3 The Consultant acknowledges that the Confidential Information is a valuable and unique asset of the Company and that the Confidential Information is and will remain the exclusive property of the Company. The Consultant agrees to maintain securely and hold in strict confidence all Confidential Information received, acquired or developed by the Consultant or disclosed to the Consultant as a result of or in connection with the Services. The Consultant agrees that, both during and after the termination of this Agreement, the Consultant will not, directly or indirectly, divulge, communicate, use, copy or disclose or permit others to use, copy or disclose, any Confidential Information to any person, except as such disclosure may be consented to by prior written authorization of the board of directors of the Company.

 

5.4 The Consultant may use the Confidential Information solely to perform the Services for the benefit of Company. The Consultant shall treat all Confidential Information with the same degree of care as the Consultant accords to the Consultant’s own confidential information, but in no case shall the Consultant use less than reasonable care. The Consultant shall immediately give notice to the Company of any unauthorized use or disclosure of the Confidential Information. The Consultant shall assist the Company in remedying any unauthorized use or disclosure of the Confidential Information.

 

5.5 All Confidential Information and any materials and items (including, without limitation, software, equipment, tools, artwork, documents, drawings, papers, diskettes, tapes, models, apparatus, sketches, designs and lists) that the Company furnishes to the Consultant, whether delivered to the Consultant by the Company or made by the Consultant in the performance of the Services, and whether or not they contain or disclose Confidential Information (collectively, the “ Company Property ”), are the sole and exclusive property of the Company or the Company’s affiliates, suppliers or customers. The Consultant agrees to treat the Company Property with the same degree of care as the Consultant treats its own property, but in no case shall the Consultant use less than reasonable care. Within five (5) days after any request by the Company, the Consultant shall destroy or deliver to the Company, at the Company’s option: (a) all Company Property and (b) all materials and items in the Consultant’s possession or control that contain or disclose any Confidential Information. The Consultant will provide the Company a written certification of the Consultant’s compliance with the Consultant’s obligations under this Section 5.5.

 

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5.6 During the term of this Agreement, the Consultant will not accept work, enter into a contract or accept an obligation in breach of the Consultant’s obligations under Section 7 of this Agreement, or the scope of the Services to be rendered for Company, under this Agreement. The Consultant warrants that, to the best of the Consultant’s knowledge, there is no other existing contract or duty on the Consultant’s part that conflicts with or is inconsistent with this Agreement.

 

5.7 The Consultant represents and warrants that the Consultant has not used and will not use, while performing the Services, any materials or documents of another company which the Consultant is under a duty not to disclose. The Consultant understands that, while performing the Services, the Consultant shall not breach any obligation or confidence or duty the Consultant may have to any current or former client or employer. The Consultant represents and warrants that it will not, to the best of its knowledge and belief, use or cause to be incorporated in any of the Consultant’s work product, any data software, information, designs, techniques or know-how which the Consultant or the Company does not have the right to use.

 

5.8 The Consultant will indemnify and hold harmless the Company from and against any and all third party claims, suits, actions, demands and proceedings against the Company and all losses, costs, damages, expenses, fees and liabilities related thereto arising out of or related to: (a) an allegation that any item, material or other deliverable delivered by the Consultant under this Agreement infringes any intellectual property rights or publicity rights of a third party, (ii) an alleged breach by the Consultant of any agreement between the Consultant and any third party, or (ii) any negligence by the Consultant or any other act or omission of the Consultant, including, without limitation, any breach of this Agreement by the Consultant.

 

6. DISCLOSURE AND ASSIGNMENT OF WORK RESULTING FROM PROVISION OF SERVICES.

 

6.1 In this Agreement, “ Innovations ” means all discoveries, designs, developments, improvements, inventions (whether or not protectable under patent laws), works of authorship, information fixed in any tangible medium of expression (whether or not protectable under copyright laws), trade secrets, know-how, ideas (whether or not protectable under trade secret laws), mask works, trademarks, service marks, trade names and trade dress. “ Company Innovations ” means Innovations that: (a) result or derive from the provision of the Services or from the Consultant’s knowledge or use of Confidential Information; (b) are conceived or made by the Consultant (individually or in collaboration with others) in the course of provision of the Services; (c) result from or derive from the use or application of the resources of the Company, its affiliates or suppliers; (d) relate to the Business of the Company or to actual or demonstrably anticipated research and development by the Company or its affiliates; or (e) the Consultant, solely or jointly with others, creates, derives, conceives, develops, makes or reduces to practice during the Term.

 

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6.2 All Company Innovations shall be the exclusive property of the Company and the Company shall have sole discretion to deal with Company Innovations. The Consultant agrees that no intellectual property rights in the Company Innovations are or shall be retained by him. For greater certainty, all work done during the Term by the Consultant for the Company or its affiliates is the sole property of the Company or its affiliates, as the case may be, as the first author for copyright purposes and in respect of which all copyright shall vest in the Company or the relevant affiliate, as the case may be.

 

6.3 The Consultant agrees to maintain adequate and current records of all Company Innovations, which records shall be and remain the property of the Company. The Consultant agrees to promptly disclose and describe to the Company all Company Innovations. The Consultant hereby does and will irrevocably assign to the Company or the Company’s designee all of the Consultant’s right, title and interest in and to any and all Company Innovations and all associated records.

 

6.4 In consideration of the benefits to be received by the Consultant under the terms of this Agreement, the Consultant hereby irrevocably sells, assigns and transfers, and agrees in the future to sell, assign and transfer all right, title and interest in and to the Company Innovations and intellectual property rights therein, including, without limitation, all patents, copyright, industrial design, circuit topography and trademarks, and any goodwill associated therewith in Canada, the United States and worldwide to the Company and the Consultant shall hold all the benefits of the rights, title and interest mentioned above in trust for the Company prior to the assignment to the Company, save and except for any moral rights which the Consultant shall waive. To the extent any of the rights, title and interest in and to Company Innovations cannot be assigned by the Consultant to the Company, the Consultant hereby grants to the Company an exclusive, royalty-free, transferable, irrevocable, worldwide, fully paid-up license (with rights to sublicense through multiple tiers of sublicensees) to fully use, practice and exploit those non-assignable rights, title and interest, including, but not limited to, the right to make, use, sell, offer for sale, import, have made, and have sold, the Company Innovations. To the extent any of the rights, title and interest in and to the Company Innovations can neither be assigned nor licensed by the Consultant to the Company, the Consultant hereby irrevocably waives and agrees never to assert the non-assignable and non-licensable rights, title and interest against the Company, any of the Company’s successors in interest, or any of the Company’s customers.

 

6.5 The Consultant agrees to perform, during and after the Term, all acts that the Company deems necessary or desirable to permit and assist the Company, at its expense, in obtaining, perfecting and enforcing the full benefits, enjoyment, rights and title throughout the world in the Company Innovations as provided to the Company under this Agreement. If the Company is unable for any reason to secure the Consultant’s signature to any document required to file, prosecute, register or memorialize the assignment of any rights under any Company Innovations as provided under this Agreement, the Consultant hereby irrevocably designates and appoints the Company and the Company’s duly authorized officers and agents as the Consultant’s agents and attorneys-in-fact to act for and on the Consultant’s behalf and instead of the Consultant to take all lawfully permitted acts to further the filing, prosecution, registration, memorialization of assignment, issuance and enforcement of rights in, to and under the Company Innovations, all with the same legal force and effect as if executed by the Consultant. The foregoing is deemed a power coupled with an interest and is irrevocable.

 

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6.6 If the Consultant incorporates or permits to be incorporated any Innovations relating in any way, at the time of conception, reduction to practice, creation, derivation, development or making of the Innovation, to the Company’s business or actual or demonstrably anticipated research or development but which were conceived, reduced to practice, created, derived, developed or made by the Consultant (solely or jointly) either unrelated to the Consultant’s work for Company under this Agreement or prior to the Effective Date (collectively, the “ Out-of-Scope Innovations ”) into any of the Company Innovations, then the Consultant hereby grants to the Company and the Company’s designees a royalty-free, transferable, irrevocable, worldwide, fully paid-up license (with rights to sublicense through multiple tiers of sublicensees) to fully use, practice and exploit all patent, copyright, moral right, mask work, trade secret and other intellectual property rights relating to the Out-of-Scope Innovations. Notwithstanding the foregoing, the Consultant agrees that the Consultant shall not incorporate, or permit to be incorporated, any Innovations conceived, reduced to practice, created, derived, developed or made by others or any Out-of-Scope Innovations into any Company Innovations without the Company’s prior written consent.

 

7. NON-INTERFERENCE WITH BUSINESS

 

7.1 In this Agreement, “ Business of the Company ” means the business of providing services for blockchain initial coin offerings.

 

7.2 The Consultant agrees that, during the Term, he will not, on his own behalf or on behalf of or in connection with any third party, directly or indirectly, in any capacity whatsoever, including, without limitation, as an employer, employee, principal, agent, director, officer, joint venturer, partner, shareholder or other equity holder, lender or other debt holder, independent contractor, licensor, licensee, franchisor, franchisee, distributor, consultant, financier, supplier or trustee, or by or through any company, cooperative, partnership, trust, unincorporated association or otherwise, anywhere in North America:

 

(a) carry on, be engaged in, have any financial or other interest in or be otherwise commercially involved in any endeavour, activity or business which is in competition with the Business of the Company;

 

(b) canvass or solicit the business of (or procure or assist the canvassing or soliciting of the business of) any customer, prospective customer or supplier of the Company to supply or purchase any goods or services that are substantially the same as or in competition with goods or services supplied in the Business of the Company;

 

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(c) accept (or procure or assist the acceptance of) any business from any customer, prospective customer, sales personnel or supplier that is substantially the same as or in competition with the Business of the Company; or

 

(d) supply (or procure or assist the supply of) any goods or services to any customer, prospective customer, sales personnel or supplier that are substantially the same as or in competition with the goods or services supplied in the Business of the Company.

 

7.3 During the Term, and for a period of one (1) year immediately following the termination or expiration of this Agreement, the Consultant agrees not to solicit or induce any customer, prospective customer, supplier, sales personnel, employee or independent contractor involved with the Company to terminate or breach any employment, contractual or other relationship with Company, or to otherwise discontinue or alter such third party’s relationship with the Company.

 

7.4 During the Term, and for a period of six (6) months immediately following the termination or expiration of this Agreement, the Consultant agrees not to, on his own behalf or on behalf of or in connection with any third party, directly or indirectly, in any capacity whatsoever, engage in any pattern of conduct that involves the making or publishing of written or oral statements or remarks (including without limitation the repetition or distribution of derogatory rumours, allegations, negative reports or comments) which are disparaging, deleterious or damaging to the integrity, reputation or goodwill of the Company or any of its affiliates, officers, directors, employees, consultants or advisors.

 

8. General

 

8.1 This Agreement contains the entire Agreement and obligation between the Parties with respect to its subject matter. No amendment to this Agreement will be valid or effective unless in writing and signed by both Parties.

 

8.2 The Parties agree that the Consultant’s obligations under this Agreement are of a unique character that gives them particular value, and that the Consultant’s breach of any of these obligations will cause irreparable and continuing damage to the Company for which money damages are insufficient. The Company is entitled to injunctive relief, a decree for specific performance, and all other relief as may be proper (including money damages if appropriate), without the need to post a bond.

 

8.3 The Consultant acknowledges that the restrictions contained in Section 5, 6 and 7 are, in view of the nature of the Business of the Company, reasonable and necessary to protect the legitimate interests of the Company, that the Company would not have entered into this Agreement in the absence of such restrictions and that any violation of any provision of those Sections could result in irreparable injury to the Company. The Consultant agrees that, in the event it violates any of the restrictions referred to in Section 5, 6 and 7, the Company shall be entitled to such injunctive relief or other remedies at law or in equity which the Court deems fit.

 

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8.4 The Consultant expressly acknowledges that this Agreement is reasonable and valid in all respects and irrevocably waives (and irrevocably agrees not to raise) as a defence any issue of reasonableness in any proceeding to enforce any provision of this Agreement, the intention of the Parties being to provide for the legitimate and reasonable protection of the interests of the Company by providing, without limitation, for the broadest scope, the longest duration and the widest territory allowable by law.

 

8.5 The Consultant agrees to indemnify the Company from all losses, claims, actions, damages, assessments or demands (including reasonable legal fees and expenses) which result from negligent acts or omissions of the Consultant in providing the Services. Notwithstanding the foregoing, the Company agrees that the Consultant will be covered by the Company’s Directors & Officers and Employment Practices Liability Insurance, once such insurance is obtained by the Company.

 

8.6 Any notice, request, demand or other communication hereunder shall be in writing and shall be delivered as follows, with notice deemed given as indicated: (a) by personal delivery, when actually delivered; (b) by overnight courier, upon written verification of receipt; (c) by facsimile or email, when sent, if sent during normal business hours of the recipient, and if not sent during normal business hours, then on the recipient’s next business day; or (e) by certified or registered mail, return receipt requested, upon verification of receipt. Notice shall be sent to the addresses set forth on the first page of this Agreement or to such other address as either Party may advise the other in writing from time to time in accordance with this Section 8.6.

 

8.7 Each Party will be responsible for all of its own expenses, legal and other professional fees, disbursements, and all other costs incurred in connection with the negotiation, preparation, execution and delivery of this Agreement and all documents and instruments relating hereto. The Parties agree that they have had adequate opportunity to seek independent legal advice with respect to the subject matter of this Agreement, and have either obtained such advice or consciously chosen not to do so with full knowledge of the risks associated with not obtaining such legal advice.

 

8.8 If any provision of this Agreement, including as to term or geographical area, is held to be illegal, invalid or unenforceable under present or future laws by any court of competent jurisdiction, such illegality, invalidity or unenforceability shall not affect the legality, enforceability or validity of any other provisions of this Agreement or of the same provision as applied to any other fact or circumstance, and such illegal, unenforceable or invalid provision shall be modified to the minimum extent necessary to make such provision legal, valid or enforceable.

 

8.9 Time shall be of the essence of this Agreement.

 

8.10 The Consultant may not sell, assign or transfer any rights or interests created under this Agreement or delegate any of the Consultant’s duties without the prior written consent of the Company.

 

8.11 The headings in this Agreement are inserted for convenience of reference only and shall not affect the construction or interpretation of this Agreement. Wherever the singular or masculine or neuter is used in this Agreement, the same shall be construed as meaning the plural or feminine or a body politic or corporate and vice versa where the context so requires.

 

8.12 This Agreement will be governed by and construed in accordance with the laws of the Province of British Columbia, and the federal laws of Canada applicable therein, and each Party irrevocably submits to the exclusive jurisdiction of courts of competent jurisdiction in the Province of British Columbia.

 

8.13 This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which taken together shall be deemed to constitute one and the same instrument. Counterparts may be executed either in original or electronic form and the Parties agree that any signature delivered by electronic transmission will be deemed to be the original signature of the delivering Party.

 

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

 

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IN WITNESS WHEREOF , the Parties have signed this Agreement as of the day and year first written above.

 

ICOx INNOVATIONS INC.

 

Per: /s/ James Geiskopf  

 

SIGNED, SEALED AND DELIVERED BY SWAPAN KAKUMANU IN THE PRESENCE OF:

)
)
SWAPAN KAKUMANU
  )  
  )  
Witness Signature )  
  ) /s/ Swapan Kakuamnu
Witness Name ) SWAPAN KAKUMANU
  )  
Witness Address )  
  )  
  )  
  )  
Witness Occupation )  

 

 
 

 

SCHEDULE A

 

SERVICES

 

Defined terms used but not otherwise defined in this Schedule A have the meaning ascribed thereto in the Independent Consultant Agreement dated effective December 4, 2017 (the “ Agreement ”) between Swapan Kakumanu (the “ Consultant ”) and ICOx Innovations Inc. (the “ Company ”) of which this Schedule A forms part.

 

The Services to be provided by the Consultant under the Agreement are as follows:

 

(a) financial reporting, including oversight of preparation of financial statements, reports and disclosure documents, coordination with any outside accountant or auditor in the preparation of any regulatory disclosure documents, and certifying required regulatory filings with applicable securities commissions and stock exchanges;

 

(b) economic strategy and forecasting, including studying, analyzing and reporting on trends and opportunities for expansion and projection of Company growth and acquisitions or research;

 

(c) preparation for and analyzing of, or preparing budgets for, the Company’s business activities;

 

(d) undertaking financing activities and supervising the Company’s investments;

 

(e) overseeing the Company’s accounting, which will include reviewing and payment of expense reports and all other Company expenses, and monitoring income of the Company and its affiliates;

 

(f) reviewing communications Company personnel have with outside parties that may affect any existing and future investments of, or funding for, the Company;

 

(g) contributing to establishing and managing the Company’s legal and compliance infrastructure; and

 

(h) such other activities as are reasonably directed by the Board.

 

 
 

 

INDEMNIFICATION AGREEMENT

 

This Indemnification Agreement (“ Agreement ”), dated as of December 4, 2018, is by and between ICOx INNOVATIONS INC. , a Nevada corporation (the “ Company ”) and Swapan Kakumanu (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.

 

 
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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:

 

ICOx Innovations Inc.
4101 Redwood Avenue
Building F, Los Angeles CA, 90066
 
Attention: James Geiskopf
Email: jimmy.geiskopf@icoxinnovations.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.

 

 
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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.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

ICOx INNOVATIONS INC.  
   
Per: /s/ James Geiskopf  
Name: James Geiskopf  
Title: Director  

 

INDEMNITEE  
     
  /s/ Swapan Kakuamnu  
Name: Swapan Kakumanu  
Address: 193 Simcoe Circle SW  
  Calgary, Alberta, T3H 4S3  

 

 
 

 

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.

 

March 26, 2019  
   
/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, Swapan Kakumanu, 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.

 

March 26, 2019  
   
/s/ Swapan Kakumanu  
Swapan Kakumanu  
Chief Financial Officer  
(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, 2018 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.

 

March 26, 2019

 

  /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, Swapan Kakumanu, 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, 2018 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.

 

March 26, 2019

 

  /s/ Swapan Kakumanu
  Swapan Kakumanu
  Chief Financial Officer
  (Principal Financial Officer and Principal Accounting Officer)