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As filed with the Securities and Exchange Commission on July 20, 2022

 

Registration Statement No. 333-261403

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

Amendment No. 7 to

 

FORM S-1

 

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 

HUMBL, INC.

(Exact name of Registrant as specified in its charter)

 

Delaware   5500   91-2048019
(State or other jurisdiction
of incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification No.)

 

600 B Street

Suite 300

San Diego, California 92101

(786) 738-9012

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

Brian Foote, CEO

600 B Street

Suite 300

San Diego, California 92101

(786) 738-9012

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

Copies to:

Ernest M. Stern, Esq.
Culhane Meadows PLLC

1701 Pennsylvania Avenue, N.W.
Suite 200

Washington, D.C. 20006

(301) 910-2030

 

Approximate Date of Proposed Sale to the Public: As soon as practicable after the effective date of this registration statement.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

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

 

Large accelerated filer Accelerated filer
       
Non-accelerated filer Smaller reporting company
       
    Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act.

 

This registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the commission, acting pursuant to said Section 8(a), may determine.

 

 

 

 
 

 

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

 

SUBJECT TO COMPLETION, DATED July 20, 2022

 

Prospectus

 

369,082,466 Shares of Common Stock

 

HUMBL, Inc.

 

This prospectus covers 369,082,466 shares of our common stock that may be offered for resale or otherwise disposed of by the selling stockholders listed on the Selling Stockholder table on page 28 (the “Selling Stockholders”).

 

We will not receive any proceeds from the sale or other disposition of the securities by the Selling Stockholders. However, we may receive up to approximately $37,162,500 in gross proceeds upon the cash exercise of the warrants by the Selling Stockholders. We will use such proceeds, if and when received, for acquisitions and working capital.

 

Brian Foote, our President and CEO, has the majority of the voting rights of holders of our capital stock through his ownership of all 7,000,000 authorized and outstanding shares of our Series A preferred stock which has 1,000 votes for each share, 243,421 shares of our Series B preferred stock which has the voting power of 10,000 shares for each Series B preferred share and 11,894,304 shares of our common stock, and after this offering will hold approximately 70% of the voting power of the issued and outstanding shares of our capital stock. Accordingly, Brian Foote will have voting control over all matters submitted to the holders of our common stock for approval, including the election of directors, amendments to our certificate of incorporation and major corporate transactions.

 

We have 10,000,000 shares of “blank check” preferred stock authorized of which we have designated 7,000,000 shares of Series A preferred stock and 570,000 shares of Series B preferred stock. Holders of our Series A preferred stock are entitled to 1,000 votes for each share held on all matters submitted to a vote of stockholders and holders of our Series B preferred stock are entitled to 10,000 votes for each share held on all matters submitted to a vote of our stockholders. Only our Series B preferred stock is convertible into common stock. Holders of Series B preferred stock may convert each share of Series B preferred stock into 10,000 shares of common stock. Holders of our common stock will be subject to dilution of their percentage ownership of our common stock upon the conversion by holders of our shares of Series B preferred stock. On October 29, 2021, we amended our Certificate of Incorporation to place limits on the number of shares of Series B preferred stock that can be converted into common stock each month in an effort to protect the common stockholders from dilution. Pursuant to that amendment, our Series B holders are only entitled to convert 3% of their Series B shares into common stock per month between now and May 2023. In addition, Brian Foote agreed not to convert or sell any of his Series B shares for at least all of calendar year 2022.

 

We are an “emerging growth company” under the federal securities laws and will be subject to reduced public company reporting requirements as set forth on page 9 of this prospectus. Our common stock is quoted under the symbol “HMBL” on the OTCQB (“OTCQB”). On July 18, 2022, the last reported sale price of our common stock was $0.07.

 

Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page 14 in this prospectus for a discussion of information that should be considered in connection with an investment in our securities.

 

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

The date of this prospectus is July 20, 2022

 

 
 

 

ADDITIONAL INFORMATION

 

You should rely only on the information contained or incorporated by reference in this prospectus and in any accompanying prospectus supplement. No one has been authorized to provide you with different information. The shares are not being offered in any jurisdiction where the offer is not permitted. You should not assume that the information in this prospectus or any prospectus supplement is accurate as of any date other than the date on the front of such documents.

 

TABLE OF CONTENTS

 

  Page No.
PROSPECTUS SUMMARY 4
   
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS 13
   
RISK FACTORS 14
   
USE OF PROCEEDS 26
   
MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 27
   
SELLING STOCKHOLDERS 28
   
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 32
   
BUSINESS 41
   
MANAGEMENT 48
   
EXECUTIVE COMPENSATION 52
   
PRINCIPAL SECURITYHOLDERS 55
   
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE 55
   
DESCRIPTION OF SECURITIES 56
   
INDEMNIFICATION OF OFFICERS AND DIRECTORS 58
   
SHARES ELIGIBLE FOR FUTURE SALE 58
   
PLAN OF DISTRIBUTION 60
   
LEGAL MATTERS 60
   
EXPERTS 60
   
WHERE YOU CAN FIND MORE INFORMATION 61
   
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS F-1

 

3

 

 

Trademarks

 

This prospectus contains references to our trademarks and service marks and to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent possible under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by any other companies.

 

PROSPECTUS SUMMARY

 

The following summary highlights information contained elsewhere in this prospectus. This summary may not contain all of the information that may be important to you. You should read this entire prospectus carefully, including the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical financial statements and related notes included elsewhere in this prospectus. In this prospectus, unless otherwise noted, the terms “the Company,” “HUMBL”, “we,” “us,” and “our” refer to HUMBL, Inc.

 

The Company

 

Overview

 

HUMBL is a Web 3, digital commerce platform that was built to connect consumers, businesses and governments in the digital economy. HUMBL provides simple tools and packaging for complex new technologies such as blockchain, in the same way that previous cycles of e-commerce and the cloud were more simply packaged by companies such as Facebook, Apple, Amazon and Netflix over the past several decades. The Company through its product offerings are looking to simplify and package the tokenized blockchain economy for consumers, corporations and government.

 

Our goal is to provide ready built tools and platforms for consumers and merchants to seamlessly participate in the digital economy. HUMBL is built on a patent-pending decentralized technology stack that utilizes both core and partner technologies, to provide faster connections to the digital economy and each other.

 

HUMBL’s core products and services are as follows:

 

HUMBL Mobile Wallet – A mobile app that allows peers, consumers and merchants to connect in the digital economy;

 

HUMBL Marketplace – A mobile marketplace that allows consumers and merchants to connect more seamlessly in the digital economy; and

 

HUMBL Financial – Financial products and services, targeted for simplified investing on the blockchain.

 

HUMBL Blockchain Services – Enterprise solutions for businesses and governments related primarily to credentialing and identity verification.

 

HUMBL Mobile Wallet (formerly HUMBL Pay)

 

HUMBL continues the development of a mobile application that allows customers to migrate to and participate in the digital economy. The Company has integrated a variety of useful functionality such as buying, selling, sending and receiving digital assets, storing personal digital credentials and supporting various digital forms of payment. The Company is also working rapidly to integrate the use of search, discovery, peer-to-peer cash and ticketing around the world, as these services migrate into digital and blockchain-based modalities. The mobile application is designed to provide functionality to the following groups:

 

Individuals - Consumers who want to participate in acquiring digital assets discover, pay, rate and review experiences digitally vs. paper bills and hardware point-of-sale (“POS”);

 

Freelancers - Service providers and gig workers that want to get paid from anywhere they work vs. paper bills and hardware POS; and

 

Merchants – Primarily brick and mortar vendors that want to get paid digitally vs. paper bills and hardware POS.

 

We can receive revenue from the mobile wallet in two ways. First, HUMBL can participate in any transactional fees generated from customers using the HUMBL Pay app. In these circumstances HUMBL can typically collect a percentage of the transaction for providing these services. Second, HUMBL can charge a monthly subscription fee for users such as merchants and freelancers that use the app. Currently, we are not receiving revenue in either of these ways. The Company is not charging fees (in addition to those charged by the third-party services providers) as a way to provide competitive pricing and incentivize customers to use the app. We could begin charging these fees at any time.

 

We engage the services of providers such as Stripe to process payments and Wyre and BitGo to act as custodians of the digital assets purchased by our customers using our HUMBL Pay app. The digital assets purchased on our platform are actually purchased through the Wyre and held by Wyre for our customers’ benefit. No digital assets are purchased through BitGo, but they do act as a custodian for certain of our digital assets.

 

4

 

 

HUMBL Marketplace

 

Through its online marketplace, HUMBL is developing the capability for merchants to list a wide range of soft goods and digital assets to mid-market audiences, that, where appropriate, incorporate the benefits of blockchain. HUMBL provides merchants with the ability to list and sell goods with greater levels of authentication, by using technologies such as the HUMBL Token Engine and HUMBL Origin Assurance, to improve the merchant’s ability to trade, track and pay for assets.

 

Through our online marketplace we also allow for the listing of non-fungible tokens (“NFTs”). NFTs allow entities and individuals such as athletes, celebrities, agencies, artists and companies to monetize their digital images, multimedia content and catalogues on the blockchain. HUMBL provides a marketplace for artists and athletes to connect online in the sale of digital collectibles to fans and collectors and provides a rigorous set of terms and conditions that govern what can and cannot be listed on the marketplace. We currently review all listings to screen for graphic content, potential intellectual property rights violations, and potential securities law violations. The NFT marketplace is operated through a third-party marketplace plug-in (OpenSea), electronic wallet extensions (such as MetaMask), and the Ethereum blockchain. Users participate in the NFT marketplace by linking their digital wallets to our platform and engaging (e.g., buying, selling, bidding) with the NFTs listed on our platform. The services provided by HUMBL are administrative. HUMBL is a platform and does not act as a broker, financial institution, or creditor. We facilitate transactions between the buyer and seller in the auction/sale process but we are not a party to any agreement between the buyer and seller or between any users.

 

We receive revenue from the NFT marketplace in two ways. First, for some clients HUMBL provides design services to help artists, athletes and entertainers create NFTs to be sold to their fans. In these circumstances HUMBL typically receives a flat fee for providing such services that is paid out of the sales price of the NFT. The size of the fee depends on the scope and complexity of the design services provided. Second, HUMBL receives a transaction fee each time an NFT sells on the NFT marketplace. 

 

The NFT marketplace allows creators to mint NFTs using their own intellectual property and list those NFTs for sale (primary sales) on the marketplace. The NFT marketplace also allows for NFTs to be resold (secondary sales) on the platform, but currently only NFTs that were originally minted on the Company’s NFT Marketplace or are otherwise approved by the Company may be listed for secondary sales on the Marketplace. The Company does not otherwise support or influence the market for the resale of NFTs sold on its platform. Other than requiring creators to attest they own the IP used to create their NFTs and monitoring for obvious copyright violations, the Company does not enforce any rights related to the primary or secondary sales of NFTs. Payment transactions for the purchase and sale of NFTs are made through the use of smart contracts on the Ethereum blockchain.

 

The Company does not handle separate, off-chain payments for NFTs. Tracking and payment of resale royalty fees are accomplished automatically through the use of smart contracts. The Company is not responsible for distributing or managing resale royalty fees.

 

In September of 2021, HUMBL launched HUMBL Tickets, initially focused on the offering of secondary (resale) tickets to thousands of live events across North America. The inventory listings and ticket fulfillment are provided by Ticket Evolution and HUMBL earns a commission for each sale. In addition to its subsidiary Tickeri, the Company will continue to work with clients to merge the realms of NFTs, event tickets and blockchain authentication.

 

HUMBL Financial

 

HUMBL Financial was developed to package step-function technologies such as blockchain into “several clicks” for the customer.

 

In 2021, HUMBL Financial created BLOCK ETX products to simplify digital asset investing for customers and institutions seeking exposure to a new, 24/7 digital asset class. We have launched this product in 100 countries outside the United States. HUMBL Financial has developed proprietary, multi-factor blockchain indexes, trading algorithms and financial services for the new digital asset trading markets to accommodate index, active and thematic investment strategies. BLOCK ETXs are completely non-custodial, algorithmically driven software services that allow customers to purchase and hold digital assets in pre-set allocations through their own digital asset exchange accounts. BLOCK ETXs are compatible for United States customers who have accounts with Coinbase Pro, Bittrex US or Binance US and for non-US customers who have accounts with Bittrex Global. BLOCK ETXs were served first on the desktop and web version of the HUMBL platform, with the goal of future applications inside the HUMBL mobile application. HUMBL Financial is open to the licensing of the BLOCK ETXs to institutions and exchanges. HUMBL Financial also plans to offer trusted, third-party financial services in areas such as payments, investments, credit card services and lending across the HUMBL platform over time.

 

In February 2022, the Company elected to suspend offering the BLOCK ETX products pending further legal analysis regarding how to offer the BLOCK ETXs in a fully compliant manner with the evolving laws and regulatory treatment of such novel products. The Company will continue to monitor the regulatory environment with respect to these products. In accordance with ASC 205-20-50-1(a), the timing of the disposal was February 28, 2022. The Company met the criteria for the BLOCK ETX operations to be classified as held for sale at that time.

 

5

 

 

HUMBL Blockchain Services

 

HUMBL Blockchain Services (“HBS”) was formed as part of the Company’s asset acquisition of BizSecure on February 12, 2022. Recognizing the opportunities for governments and commercial enterprises to incorporate Blockchain and Distributed Ledger Technologies (“DLT”), HBS is focused on working with clients to identify problems and develop solutions that build upon the various capabilities the Company has and continues to develop. The Company determined this was an acquisition of a business pursuant to the guidance provided in both ASC 805 and Rule 11-01(d) of Regulation S-X. BizSecure is not considered a significant subsidiary under Regulation S-X Rule 1-02(w).

 

Our solutions enable municipalities, government agencies, and other commercial entities the ability to offer mobile IDs and other credential verification services to their constituents. We continue to make significant investments to leverage our existing technologies and further expand both our DLT capabilities and are always exploring strategic alternatives intended to optimize the value of our Company.

 

Organizational History

 

We were formed under the name Ponca Acquisition Corporation in Nevada on May 3, 2000, as a “blank check” development stage company that indicated that our business plan was to engage in a merger or acquisition with an unidentified company or companies. Following a series of name changes and changes in the focus of our business, on November 18, 2008, we filed Form 15 with the SEC to terminate its registration with the SEC.

 

On March 12, 2009, we redomiciled to Oklahoma and on March 16, 2009, changed our name from IWT Tesoro Corporation to Tesoro Distributors, Inc. Tesoro Enterprises, Inc., an Oklahoma corporation, was incorporated on November 12, 2009, as a subsidiary of Tesoro Distributors, Inc.

 

On March 11, 2010, we changed our name to Tesoro Enterprises, Inc. and received a new symbol of TSNP following FINRA review of our name and symbol change request.

 

Effective November 4, 2020, we entered into a Stock Purchase Agreement with Henry J. Boucher, then President, CEO and Chairman of the Board of Directors, and Brian Foote under which Henry J. Boucher sold his controlling interest in the Company in the form of 7,000,000 shares of the Company’s Series A preferred stock to Brian Foote in return for Brian Foote assigning a $40,000 promissory note from HUMBL LLC to Henry J. Boucher. Our Board of Directors, following the change of control, appointed Brian Foote, Jeff Hinshaw and Michele Rivera to be the members of the Board following the resignation of Henry J. Boucher as our sole director.

 

On November 30, 2020, we changed our domicile to Delaware.

 

On December 3, 2020, we merged with HUMBL LLC to conduct the business of HUMBL LLC through a reverse merger. Under the terms of the merger, the members of HUMBL LLC exchanged their membership interests for 552,029 shares of our Series B Preferred Stock.

 

On December 23, 2020, we filed a Certificate of Amendment to our Certificate of Incorporation (“Amended Certificate”) to effect a 1:4 reverse split, change our name to HUMBL, Inc., increase our authorized common stock to 7,450,000,000 shares, reduce our authorized number of “blank check” preferred stock from 25 million to 10 million and designate a Series B and Series C Preferred Stock.

 

6

 

 

Recent Acquisitions

 

On June 3, 2021 we acquired Tickeri, Inc. (“Tickeri”) in a debt and stock transaction totaling $20,000,000 following which Tickeri became a subsidiary of HUMBL. Tickeri is a leading ticketing, live events and box office SaaS platform featuring Latin events and artists throughout the United States, Latin America, and the Caribbean corridor. The purchase price for the stock purchase was $20,000,000 of which we must pay $10,000,000 in our common stock and $10,000,000 was paid through two promissory notes. The shares had a deemed value equal to the volume weighted average price per share of HUMBL common stock on the OTC Markets for the ten consecutive trading days ending with the complete trading day ending two trading days prior to the closing. We issued the two shareholders of Tickeri, Juan Gonzalez and Javier Gonzalez, 4,672,897 shares of our common stock each and agreed to register those shares hereunder. We also issued to each of Juan and Javier Gonzalez a secured promissory note in the face amount of $5,000,000. The promissory notes are due and payable on or before December 31, 2022, bear interest at the rate of 5% per annum and are secured by the equity interests of Tickeri. In the event of an uncured default by HUMBL under the promissory note, Juan and Javier have the right to recover the ownership of Tickeri and re-commence the business and operations of Tickeri free and clear of any claims or encumbrances by HUMBL. We intend to limit the integration of Tickeri’s assets with our assets until the promissory notes are paid in full. We agreed to register on Form S-1 within three months from the closing the shares issued to Juan and Javier Gonzalez and have the registration statement declared effective within six months of the closing date. Following the closing, Juan Gonzalez and Javier Gonzalez entered into employment agreements having a term of 18 months, appointing them CEO of Tickeri and CTO of HUMBL, respectively. The Company has been negotiating with both Juan Luis and Javier Gonzalez regarding the registration rights effectiveness provision and has accrued $400,000 through March 31, 2022 as a result of the failure to have the registration statement originally filed in July 2021 declared effective. We evaluated whether this penalty would constitute a derivative liability, and we determined that there are sufficient funds to cover this fee and sufficient authorized common stock should we pay this fee in stock.

 

On June 30, 2021, we acquired Monster Creative, LLC (“Monster”). Monster is a Hollywood production studio that specializes in producing movie trailers and other related content. Monster was founded by Doug Brandt and Kevin Childress. Monster will collaborate with HUMBL in the production of NFTs and other digital content. The purchase price for all of the membership interests in Monster was paid through the issuance of one convertible note and one non-convertible note to each of Doug Brandt and Kevin Childress in the aggregate principal amount of $8,000,000. The convertible notes were issued to Doug Brandt (through an entity owned by him) and Kevin Childress in the aggregate principal amount of $7,500,000. The notes convert at the holder’s election at $1.20 per share, bear interest at 5% per annum and are due in 18 months from issuance. We also issued non-convertible notes to Doug Brandt and Kevin Childress in the aggregate amount of $500,000. These notes bear interest at the rate of 5% per annum and are due on April 1, 2022. Doug Brandt and Kevin Childress each entered into employment agreements with Monster having a term of three years. Doug Brandt was appointed as the CEO of Monster and Kevin Childress was appointed as its President and Creative Director. The Company and Doug Brandt and Kevin Childress agreed to an extension on March 30, 2022 of the notes that were due April 1, 2022 until the earlier of July 1, 2022 or 30 days after the effectiveness of the Company’s registration statement on Form S-1.

 

On February 12, 2022, the Company entered into an asset purchase agreement with BizSecure, Inc. (“BizSecure”). The Company determined this was an acquisition of a business pursuant to the guidance provided in both ASC 805 and Rule 11-01(d) of Regulation S-X. BizSecure is not considered a significant subsidiary under Regulation S-X Rule 1-02(w). The Company acquired a customer relationship with the US Air Force and BizSecure’s Mobile ID technology. The Company entered into employment agreements with two BizSecure employees as part of the agreement to help integrate the Mobile ID technology into the Company’s larger suite of products and help operate the blockchain services division. The assets acquired from BizSecure represented the majority of the operations of the entity and BizSecure post-acquisition has only conducted nominal operations and has no employees. The Company issued to BizSecure 13,200,000 common shares and 26,800,000 restricted stock units that vest quarterly commencing April 1, 2022 for a period of two years. The shares and restricted stock units have a value of $6,756,000. The Company has included the value of $4,526,520 which represents the value of the restricted stock units in contingent consideration pursuant to ASC 805-10-55-25. Management considered several factors when making the determination to treat the RSUs as contingent consideration and not post-combination compensation, including, but not limited to, the following: (a) the RSUs are not automatically forfeited upon termination of the two key employees as those RSUs would vest if the employees were terminated without cause or if the employees resigned with good reasons; (b) all selling shareholders of BizSecure receive the same pro rata compensation; (c) the BizSecure shareholders hired by the Company receive compensation commensurate with other employees in the Company at the same level; (d) there are no adjustments to the RSUs based on earnings and thus there is no profit-sharing component to the RSUs; and (e) the parties desired for the compensation to be paid over time and not all up front. Therefore, the Company determined that the restricted stock units should be treated as contingent consideration.

 

On March 3, 2022, we acquired Ixaya Business SA de CV (“Ixaya”) in exchange for 8,962,306 shares of our common stock and $150,000 in cash. Ixaya is a Mexico-based firm that develops software and IT solutions across various industries. The acquisition gives HUMBL access to Ixaya’s team of software developers as well as their suite of existing products. Ixaya will continue to operate as a standalone business servicing Latin American customers. The Company accounted for this acquisition as a business combination under ASC 805. Ixaya is not considered a significant subsidiary under Regulation S-X Rule 1-02(w).

 

Recent Financings and Material Agreements

 

Kevin and Judith Levine

 

On December 23, 2020, we entered into a Securities Purchase Agreement with each of Kevin Levine and Judith Levine under which we received a loan of $225,000.00 and for which we issued a convertible note to each of Kevin and Judith in the principal amount of $112,500.00 bearing interest at 8% per annum with a maturity date 24 months from the date of the note. The notes are convertible into shares of our common stock at $0.60 (post-reverse split) per share. The note is subject to customary default provisions. Under the terms of the Securities Purchase Agreement, we also issued a warrant to allow each of Kevin and Judith to purchase 112,500 (post-reverse split) shares of our common stock during a two-year period ending May 13, 2022 at an exercise price of $1.00 per share. On April 1, 2022, we issued each of Kevin and Judith 1,457,840 shares of common stock in exchange for their respective notes. The number of shares being registered hereunder for each of Kevin and Judith is 1,570,340 (1,457,840 exchange shares and 112,500 warrants shares).

 

Archumbl Pty Ltd

 

On December 23, 2020, we entered into a Securities Purchase Agreement with Tuigamala Group Pty Ltd under which we issued an option to purchase certain rights to sell our products and services in the Oceania region and issued a warrant to purchase 12,500,000 (post-reverse split) shares of common for a purchase price of $600,000. The option expired without being exercised. The warrant was subsequently transferred to Archumbl Pty Ltd. The 12,500,000 warrant shares are being registered hereunder.

 

Aurea Group

 

On March 15, 2021 we entered into a Securities Purchase Agreement with HUMBL CL SpA (“HUMBL CL”), an affiliate of Aurea Group Ventures (“Aurea Group”), a Chilean multi-family office, under which Aurea Group purchased shares of our common stock in return for exclusive country rights to Chile of our HUMBL products for a purchase price of up to $7,500,000.

 

Under the terms of the Securities Purchase Agreement, HUMBL CL agreed to purchase 437,500 shares of our common stock for $1,000,000. The payment for these shares was due on or before March 30, 2021 but as a result of restrictions imposed due to COVID-19 was paid in two tranches of $500,000 each on April 5, 2021 and April 6, 2021. In addition, HUMBL CL also received the right to purchase 1,562,500 shares of HUMBL common stock for $6,500,000 by December 31, 2021 and to receive a 35% equity interest in a Chilean subsidiary HUMBL intends to form to conduct its operations in Chile.

 

The Securities Purchase Agreement provides that if HUMBL CL exercises its right to purchase the subsidiary interest, it will receive 35% of the profits from operations of the HUMBL family of products in Chile. In addition, HUMBL CL also received a right of first refusal with respect to regional or country rights sales in Latin America.

 

On January 3, 2022, we entered into a Settlement Agreement with HUMBL CL whereby HUMBL agreed to issue HUMBL CL 4,000,000 shares of common stock and HUMBL CL agreed to waive its right to purchase the Latin America territory rights. The number of shares being registered for HUMBL CL hereunder is 4,437,500 (the original 437,500 purchase shares plus the 4,000,000 settlement shares).

 

We are still working with Aurea Group on Latin American business development opportunities for our products in key verticals such as: banking, merchant and financial services, real estate, hospitality, tourism, sports, festivals, entertainment and ticketing services in the region.

 

Brighton Capital Partners, LLC

 

On April 14, 2021 we received bridge financing in the form of a loan in the principal amount of $3,300,000 from Brighton Capital Partners, LLC (“Brighton Capital”) for which we issued them a convertible promissory note due 15 months after April 14, 2021. The note bears interest at 10% per annum and is convertible at Brighton Capital’s election at a fixed price of $3.15 per share.

 

Under the terms of the note, Brighton Capital has a right of redemption commencing on the earlier of the effective date of this Registration Statement and the 12-month anniversary of the note, to cause us to redeem all or any portion of the note in cash or shares of our common stock, at our election. Any redemption with shares of our common stock shall be at the “market price” which is defined as 80% of our lowest closing trade price for the 10 consecutive trading days prior to the date on which the market price is measured. On June 10, 2022, the Company and Brighton Capital agreed to amend the note to extend the maturity date to December 31, 2022 and reduce the floor price for redemption conversions to $0.05.

 

The Company and Brighton Capital also entered into an Equity Financing Agreement for the purchase of up to $50,000,000 of the Company’s common stock by Brighton Capital. The Company and Brighton Capital agreed to terminate the Equity Financing Agreement on October 26, 2021. The Company has agreed to pay a termination fee of 6,000,000 shares of its common stock to Brighton Capital. We are registering 80,000,000 shares hereunder for Brighton Capital should we elect to pay any redemption in common stock instead of cash or should Brighton Capital elect to convert any portion of the note at the fixed conversion price. The total number of shares being registered for Brighton Capital is 80,000,000 (74,000,000 for conversions and redemptions under the note and 6,000,000 for the termination fee).

 

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Next Generation Wealth Management LLC

 

On May 13, 2021, we entered into a Securities Purchase Agreement with Next Generation Wealth Management LLC (“Next Generation”) under which we received a loan of $382,500 for which we issued a convertible note to Next Generation. in the principal amount of $382,500 bearing interest at 8% per annum with a maturity date 22 months from the date of the note. The note is convertible into shares of our common stock at $1.00 per share. The note is subject to customary default provisions. Under the terms of the Securities Purchase Agreement, we also issued a warrant to allow Next Generation to purchase 750,000 shares of our common stock during a two-year period ending May 13, 2023 at an exercise price of $1.00 per share. On June 24, 2021, the note was split into two separate notes and warrants and assigned to The Strider Lir Trust and Scottish Isles Investing, LLC, the notes being in the principal amount of $336,600 and $45,900, respectively, and two separate warrants to purchase 660,000 and 90,000 shares of our common stock, respectively. On March 31, 2021, we issued 4,231,869 shares of common stock to The Strider Lir Trust in exchange for its note. The number of shares being registered hereunder for The Strider Lir Trust is 4,891,869 (4,231,869 exchange shares and 660,000 warrant shares). On March 31, 2021, we issued Scottish Isles Investing, LLC 578,036 shares of common stock in exchange for its note. The number of shares being registered for Scottish Isles Investing, LLC is 668,036 (578,036 exchange shares and 90,000 warrant shares).

 

9G Investments, LLC

 

On May 13, 2021, we entered into a Securities Purchase Agreement with 9G Investments, LLC (f/k/a Maize and Gray, LLC) (“9G Investments”) under which we received a loan of $402,750 for which we issued a convertible note to 9G Investments in the principal amount of $402,750 bearing interest at 8% per annum with a maturity date 22 months from the date of the note. The note is convertible into shares of our common stock at $1.00 per share. The note is subject to customary default provisions. Under the terms of the Securities Purchase Agreement, we also issued a warrant to allow 9G Investments to purchase 825,000 shares of our common stock during a two-year period ending May 13, 2023 at an exercise price of $1.00 per share. On March 31, 2022, we issued 9G Investments 5,298,660 shares of common stock in exchange for its note. The number of shares being registered hereunder for 9G Investments is 6,123,660 (5,298,660 exchange shares and 825,000 warrants shares).

 

Archura Capital Pty Ltd

 

On May 17, 2021, we entered into a Securities Purchase Agreement with Archura Capital Pty Ltd (“Archura”) under which we received a loan in the amount of $1,020,000 for which we issued a convertible note in the principal amount of $1,020,000 bearing interest at 8% per annum with a maturity date 22 months from the date of the note. The note is convertible into shares of our common stock at $1.00 per share. The note is subject to customary default provisions. The number of shares being registered for Archura hereunder is 1,200,000. The shares are for conversions under the note at the fixed conversion price. We are registering sufficient shares to include the entire original outstanding balance of the note plus accrued interest.

 

KWP 50, LLC

 

On May 19, 2021, we entered into a Securities Purchase Agreement with KWP 50, LLC (“KWP 50”) under which we received a loan of $497,250 for which we issued a convertible note to KWP 50 in the principal amount of $497,250 bearing interest at 8% per annum with a maturity date 22 months from the date of the note. The note is convertible into shares of our common stock at $1.00 per share. The note is subject to customary default provisions. The note may not be prepaid unless the lender consents or there is a change of control of the Company. Under the terms of the Securities Purchase Agreement, we also issued a warrant to allow KWP 50 to purchase 975,000 shares of our common stock during a two-year period ending May 19, 2023 at an exercise price of $1.00 per share. On March 31, 2022, we issued KWP 50 6,254,381 shares of common stock in exchange for the note. The number of shares being registered hereunder for KWP 50 is 7,229,381 (6,254,381 exchanges shares and 975,000 warrant shares).

 

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North Falls Investments, L.P

 

On May 19, 2021, we entered into a Securities Purchase Agreement with North Falls Investments, L.P. (“North Falls”) under which we received a loan of $153,000 for which we issued a convertible note to North Falls in the principal amount of $153,000 bearing interest at 8% per annum with a maturity date 22 months from the date of the note. The note is convertible into shares of our common stock at $1.00 per share. The note is subject to customary default provisions. The note may not be prepaid unless the lender consents or there is a change of control of the Company. Under the terms of the Securities Purchase Agreement, we also issued a warrant to allow North Falls to purchase 300,000 shares of our common stock during a two-year period ending May 19, 2023 at an exercise price of $1.00 per share. On March 31, 2022, we issued North Falls 1,924,425 shares of common stock in exchange for the note. The number of shares being registered hereunder for North Falls is 2,224,425 (1,924,425 exchanges shares and 300,000 warrant shares).

 

CMP76, LLC

 

On May 19, 2021, we entered into a Securities Purchase Agreement with CMP76, LLC (“CMP76”) under which we received a loan of $76,500 for which we issued a convertible note to CMP76 in the principal amount of $76,500 bearing interest at 8% per annum with a maturity date 22 months from the date of the note. The note is convertible into shares of our common stock at $1.00 per share. The note is subject to customary default provisions. The note may not be prepaid unless the lender consents or there is a change of control of the Company. Under the terms of the Securities Purchase Agreement, we also issued a warrant to allow CMP76 to purchase 150,000 shares of our common stock during a two-year period ending May 19, 2023 at an exercise price of $1.00 per share. On March 31, 2022, we issued CMP76 962,212 shares of common stock in exchange for the note. The number of shares being registered hereunder for CMP is 1,112,212 (962,212 exchanges shares and 150,000 warrant shares).

 

Murtaugh Group LLC

 

On June 21, 2021, we entered into a Securities Purchase Agreement with Murtaugh Group LLC (“Murtaugh”) under which we received a loan of $382,500 for which we issued a convertible note to Murtaugh in the principal amount of $82,500 bearing interest at 8% per annum with a maturity date 22 months from the date of the note. The note is convertible into shares of our common stock at $1.00 per share. The note is subject to customary default provisions. The note may not be prepaid unless the lender consents or there is a change of control of the Company. Under the terms of the Securities Purchase Agreement, we also issued a warrant to allow Murtaugh to purchase 750,000 shares of our common stock during a two-year period ending June 21, 2023 at an exercise price of $1.00 per share. On March 31, 2022, we issued Murtagh 4,778,603 shares of common stock in exchange for the note. The number of shares being registered hereunder for Murtaugh is 5,528,603 (4,778,603 exchanges shares and 750,000 warrant shares).

 

Infinity Block Investments, LLC

 

On June 21, 2021, we entered into a Securities Purchase Agreement with Infinity Block Investments LLC (“Infinity”) under which we received a loan of $382,500 for which we issued a convertible note to Infinity in the principal amount of $382,500 bearing interest at 8% per annum with a maturity date 22 months from the date of the note. The note is convertible into shares of our common stock at $1.00 per share. The note is subject to customary default provisions. The note may not be prepaid unless the lender consents or there is a change of control of the Company. Under the terms of the Securities Purchase Agreement, we also issued a warrant to allow Infinity to purchase 750,000 shares of our common stock during a two-year period ending June 21, 2023 at an exercise price of $1.00 per share. On March 31, 2022, we issued Infinity Block 4,778,603 shares of common stock in exchange for the note. The number of shares being registered hereunder for Infinity Block is 5,528,603 (4,778,603 exchanges shares and 750,000 warrant shares).

 

Hahanakai, LLC

 

On August 30, 2021, we entered into a Securities Purchase Agreement with Hahanakai, LLC (“Hahanakai”) under which we received a loan of $153,000 for which we issued a convertible note to Hahanakai in the principal amount of $153,000 bearing interest at 8% per annum with a maturity date 22 months from the date of the note. The note is convertible into shares of our common stock at $0.90 per share. The note is subject to customary default provisions. The note may not be prepaid unless the lender consents or there is a change of control of the Company. Under the terms of the Securities Purchase Agreement, we also issued a warrant to allow Hahanakai to purchase 375,000 shares of our common stock during a two-year period ending August 30, 2023 at an exercise price of $0.90 per share. On March 31, 2022, we issued Hahanakai 1,883,900 shares of common stock in exchange for the note. The number of shares being registered hereunder for Hahanakai is 2,258,900 (1,883,900 exchanges shares and 375,000 warrant shares).

 

Joy Corbin

 

On November 12, 2021, we entered into a Securities Purchase Agreement with Joy Corbin (“Ms. Corbin”) under which we received a loan of $306,000 for which we issued a convertible note to Ms. Corbin in the principal amount of $306,000 bearing interest at 8% per annum with a maturity date 22 months from the date of the note. The note is convertible into shares of our common stock at $0.60 per share. The note is subject to customary default provisions. The note may not be prepaid unless the lender consents or there is a change of control of the Company. Under the terms of the Securities Purchase Agreement, we also issued a warrant to allow Ms. Corbin to purchase 1,000,000 shares of our common stock during a two-year period ending November 12, 2023 at an exercise price of $0.60 per share. On March 31, 2022, we issued Ms. Corbin 3,767,801 shares of common stock in exchange for the note. The number of shares being registered hereunder for Ms. Corbin is 4,767,801 (3,767,801 exchanges shares and 1,000,000 warrant shares).

 

Sartorii, LLC

 

On February 22, 2022, the Company entered into a promissory note with Sartorii, LLC (“Sartorii”) in the principal amount of $3,000,000. The promissory note bears interest at the annual interest rate of four percent (4%) and matures on February 22, 2025. On March 30, 2022, the Company entered into a second promissory note with Sartorii in the principal amount of $1,500,000. The promissory note bears interest at the annual interest rate of four percent (4%) and matures on March 30, 2025. Sartorii is managed by a related party.

 

Red Rock Development Group, LLC; Hard Rock Suite Purchase

 

On July 29, 2021, we entered into a Development Services Agreement with Red Rock Development Group, LLC (“Red Rock”). We intend to purchase and/or develop a portfolio of real estate assets and then potentially tokenize the interest in the portfolio. We have engaged Red Rock to advise us with respect to that process. As part of the foregoing strategy, we purchased a suite at the Hard Rock Hotel in San Diego, California. HUMBL is the owner of this suite and entered into a long-term rental agreement with the hotel to manage the property. HUMBL has use of the suite for 28 calendar days a year and will receive their proportionate income for the other days the suite is being used. We issued 10,000,000 shares of our common stock to Red Rock as payment for its services, all of which are being registered hereunder.

 

George Sharp

 

On November 18, 2021, we entered into an Engagement Agreement for Advisory Services with George Sharp. Pursuant to the agreement, Mr. Sharp agreed to act as our capital markets advisor in exchange for $30,000 per month and 7,500,000 shares of common stock. 5,000,000 of those shares are being registered hereunder.

 

Note Exchange

 

On March 28, 2022, HUMBL entered into exchange agreements with various noteholders. Pursuant to such agreements, HUMBL exchanged promissory notes representing $3,176,804.61 in outstanding debt obligations for 37,374,172 shares of common stock. The note exchanges were effective as of March 31, 2022 and were done pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended, and not as conversions under the notes at the fixed conversion price. Upon completion of the exchanges, our debt obligations under the notes were deemed fully settled. The shares issued pursuant to the note exchange have been described previously and are being registered hereunder.

 

Name Change

 

On February 26, 2021, FINRA announced the change of our name from Tesoro Enterprise, Inc. to HUMBL, Inc. and the change of our trading symbol from TSNP to HMBL that became effective March 26, 2021.

 

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Corporate Strategy

 

Our objective is to provide more seamless digital pairing experiences for consumers and merchants in the global economy. The key elements of our growth strategy are:

 

● innovate and advance our platform;

 

● drive growth by acquiring new customers;

 

● drive increased usage within our existing customer base;

 

● expand our global footprint;

 

● expand data sharing across our global ecosystem;

 

● grow and invest in our partner network;

 

● expand our sales capabilities; and

 

● develop additional revenue streams.

 

Implications of Being an Emerging Growth Company

 

As a company with less than $1.0 billion in revenue during our most recently completed fiscal year, we qualify as an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended, which we refer to as the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable, in general, to public companies that are not emerging growth companies. These provisions include:

 

  Reduced disclosure about our executive compensation arrangements;
     
  No non-binding shareholder advisory votes on executive compensation or golden parachute arrangements;
     
  Exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting; and
     
  Reduced disclosure of financial information in this prospectus, limited to two years of audited financial information and two years of selected financial information.

 

As a smaller reporting company, each of the foregoing exemptions is currently available to us. We may take advantage of these exemptions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1.0 billion in annual revenues as of the end of a fiscal year, if we are deemed to be a large-accelerated filer under the rules of the Securities and Exchange Commission, or if we issue more than $1.0 billion of non- convertible debt over a three-year-period.

 

The JOBS Act permits an emerging growth company to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have elected the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the Act until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

 

Corporate Information

 

We were formed under the name Ponca Acquisition Corporation in Nevada on May 3, 2000, as a “blank check” development stage company We were incorporated in the State of Nevada on May 3, 2000. Our principal executive office is located at 600 B Street, Suite 300, San Diego, California 92101, and our telephone number is (786) 738-9012. Our internet website is www.humbl,com,. The information on, or that can be accessed through, our website is not part of this prospectus, and you should not rely on any such information in making the decision whether to purchase our common stock.

 

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The Offering

 

Common Stock to be Sold   Up to 369,082,466 shares of our common stock including (i) up to 76,200,000 shares underlying convertible notes we have issued to various persons, (ii) up to 114,275,000 shares of our common stock underlying warrants we have issued to various persons; (iii) 77,450,000 shares of our common stock underlying Series B Preferred Stock we have issued to individuals; and (iv) 101,157,466 shares of our common stock issued in connection with certain acquisition and financing activity. We will not receive any proceeds from the sale of common stock by the Selling Stockholders but would receive up to $37,162,500 upon exercise of warrants by the Selling Stockholders.
     
Common Stock Outstanding   1,586,394,389 as of July 18, 2022
     
Voting Control by Management   Our President and CEO, Brian Foote, has voting control over all matters submitted to our common stockholders, including amendments to our certificate of incorporation, election of members of our Board of Directors and major corporate transactions, principally through his ownership of shares of our Series A and Series B preferred stock.
     
Use of Proceeds   This is a resale prospectus to register shares of the Selling Stockholders but we may receive up to approximately $37,162,500 in gross proceeds upon the cash exercise of the warrants by the Selling Stockholders.
     
    We intend to use the net proceeds from the exercise of warrants by the Selling Stockholders for (i) potential mergers and acquisitions, (ii) technology costs, (iii) general working capital and (iv) debt repayment. The expected uses of the net proceeds from the sale of the offered shares represents our intentions based upon our current plans and business conditions. The precise uses, amounts and timing of the application of proceeds have yet to be determined by our management and may differ, in some or all respects, from those enumerated above. The amounts used for each purpose and timing of our actual expenditures may also vary significantly depending on numerous factors. See “Use of Proceeds.” We will not receive any of the proceeds from the sale or other disposition of the securities by the Selling Stockholders. See “Use of Proceeds”.
     
Dividend Policy   We have never declared any cash dividends on our common stock. We currently intend to retain all available funds and any future earnings for use in financing the growth of our business and do not anticipate paying any cash dividends for the foreseeable future. See “Dividend Policy”.
     
OTCQB Symbol   HMBL
     
Risk Factors   You should carefully consider the information set forth in this prospectus and, in particular, the specific factors set forth in the “Risk Factors” section beginning on page 14 of this prospectus before deciding whether or not to invest in our common stock.

 

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Summary Financial Information

 

The summary financial information set forth below is derived from the more detailed audited consolidated financial statements of the Company appearing elsewhere in this prospectus. You should read the summary consolidated financial information below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements, including the notes to such financial statements.

 

Statement of Operations Data:  Period Ended 
   Three Months Ended March 31,
2022
   Year Ended December 31,
2021
   Year Ended December 31,
2020
 
   (unaudited)         
Revenues, net  $1,147,134   $2,503,388   $- 
Cost of Revenues   520,970    1,104,959    - 
Gross Profit   626,164    1,398,429    - 
Total Operating Expenses   11,119,414    46,113,325    705,724 
Loss from Operations   (10,493,250)   (44,714,896)   (705,724)
Other income (expense)   (1,964,150)   (4,940,308)   (6,739)
Net (Loss) Before Income Taxes from Continuing Operations  $(12,457,400)  $(49,655,704)  $(712,463)
Basic and Diluted               
Net Loss Per Share  $(0.01)  $(0.05)   (0.0007)
Weighted Average Number of Shares Outstanding Basic and Diluted   1,176,805,694    942,331,830    982,108,478 

 

Balance Sheet Data:  March 31,
2022
   December 31,
2021
   December 31,
2020
 
   (unaudited)         
Cash and Restricted Cash  $5,901,460   $3,493,213   $1,720,979 
Other Current Assets   618,259    385,655    84,591 
Fixed assets, net of accumulated depreciation   359,106    356,447    - 
Goodwill   14,251,670    6,531,346    - 
Total Assets  $21,130,495   $10,766,661   $1,805,570 
                
Debt/Convertible and Non-convertible  $27,897,948   $24,761,075   $181,103 
Other Current Liabilities   7,375,760    2,464,086    63,635 
Preferred Stock   75    75    70 
Common Stock   13,170    10,230    9,742 
Additional Paid-In Capital/Accumulated Other Comprehensive Income   48,959,696    34,182,004    2,545,825 
Accumulated Deficit   (63,116,154)   (50,650,809)   (994,805)
Total Liabilities and Stockholders’ Equity  $21,130,495   $10,766,661   $1,805,570 

 

12

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus contains forward-looking statements. Such forward-looking statements include those that express plans, anticipation, intent, contingency, goals, targets or future development and/or otherwise are not statements of historical fact. These forward-looking statements are based on our current expectations and projections about future events and they are subject to risks and uncertainties known and unknown that could cause actual results and developments to differ materially from those expressed or implied in such statements.

 

In some cases, you can identify forward-looking statements by terminology, such as “expects”, “anticipates”, “intends”, “estimates”, “plans”, “potential”, “possible”, “probable”, “believes”, “seeks”, “may”, “will”, “should”, “vision,” “could” or the negative of such terms or other similar expressions. Accordingly, these statements involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed in them. Any forward-looking statements are qualified in their entirety by reference to the factors discussed throughout this prospectus.

 

You should read this prospectus and the documents that we reference herein and therein and have filed as exhibits to the registration statement, of which this prospectus is part, completely and with the understanding that our actual future results may be materially different from what we expect. You should assume that the information appearing in this prospectus is accurate as of the date on the front cover of this prospectus only. Because the risk factors referred to above could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us or on our behalf, you should not place undue reliance on any forward-looking statements. These risks and uncertainties, along with others, are described above under the heading “Risk Factors” beginning on page 14 of this prospectus. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as required by law. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of the information presented in this prospectus, and particularly our forward-looking statements, by these cautionary statements.

 

13

 

 

RISK FACTORS

 

Investing in our common stock involves a high degree of risk. Prospective investors should carefully consider the risks described below, together with all of the other information included or referred to in this prospectus, before purchasing shares of our common stock. There are numerous and varied risks that may prevent us from achieving our goals. If any of these risks actually occurs, our business, financial condition or results of operations may be materially adversely affected. In such case, the trading price of our common stock could decline and investors in our common stock could lose all or part of their investment.

 

Risks Related to Our Company and Our Business

 

Our operating losses and working capital deficiency raise substantial doubt about our ability to continue as a going concern. If we do not continue as a going concern, investors could lose their entire investment.

 

Our operating losses and working capital deficiency raise substantial doubt about our ability to continue as a going concern. We have an accumulated deficit of $(63,116,154) as of March 31, 2022 as well as a net loss of $12,465,345 for the three months ended March 31, 2022 and $49,656,004 and $713,263 for the years ended December 31, 2021 and 2020, respectively. We may never achieve profitability. If we do not generate sufficient revenues, do not achieve profitability and do not have other sources of financing for our business, we may have to curtail or cease our development plans and operations, which could cause investors to lose the entire amount of their investment.

 

We may not be able to raise capital when needed, if at all, which would force us to delay, reduce or eliminate our level of marketing efforts to expand the number of customers and merchants using our products and acquisition of suitable target companies and could cause our business plan to fail.

 

We will need substantial additional funding to increase our customer base and pursue our acquisition of companies and business units that meet our desired standards. There are no assurances that future funding will be available on favorable terms or at all. The failure to fund our operating and capital requirements could have a material adverse effect on our business, financial condition and results of operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to reduce our efforts to enlist more customers and merchants to use our technology and to delay, reduce or eliminate our acquisition strategy. Any of these events could significantly harm our business, financial condition and prospects.

 

We may acquire other assets or businesses, or form collaborations or make investments in other companies or technologies that could harm our operating results, dilute our stockholders’ ownership, increase our debt or cause us to incur significant expense.

 

As part of our business strategy, we may pursue acquisitions of businesses and assets or enter into strategic alliances and collaborations, to initiate and then expand our operations. We may not identify or complete these transactions in a timely manner, on a cost-effective basis, or at all, and we may not realize the anticipated benefits of any such transaction, any of which could have a detrimental effect on our financial condition, results of operations and cash flows. We have limited experience with acquiring other companies and assets and limited experience with forming strategic alliances and collaborations. We may not be able to find suitable acquisition candidates, and if we make any acquisitions, we may not be able to integrate these acquisitions successfully into our existing business and we may incur additional debt or assume unknown or contingent liabilities in connection therewith. Integration of an acquired company or assets may also disrupt ongoing operations, require the hiring of additional personnel and the implementation of additional internal systems and infrastructure, especially the acquisition of commercial assets, and require management resources that would otherwise focus on developing our existing business. We may not be able to find suitable strategic alliance or collaboration partners or identify other investment opportunities, and we may experience losses related to any such investments.

 

To finance any acquisitions or collaborations, we may choose to issue debt or equity securities as consideration. Any such issuance of securities would dilute the ownership of our stockholders. If the price of our common stock is low or volatile, we may not be able to acquire other assets or companies or fund a transaction using our stock as consideration. Alternatively, it may be necessary for us to raise additional funds for acquisitions through public or private financings. Additional funds may not be available on terms that are favorable to us, or at all.

 

Because we do not have an audit or compensation committee, shareholders will have to rely on the entire Board of Directors to perform these functions.

 

We do not have an audit or compensation committee comprised of independent directors. Indeed, we do not have any audit or compensation committee. These functions are performed by the Board of Directors as a whole. Thus, there is a potential conflict in that board members who are also part of management will participate in discussions concerning management compensation and audit issues that may affect management decisions.

 

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We expect to face intense competition, often from companies with greater resources and experience than we have.

 

To acquire qualified companies, we are likely to face competition from companies that have substantially greater financial, technological, managerial and research and development resources and experience than we have. In addition, if we are successful in closing our acquisition of one or more target companies, these acquired companies are likely to face competition for their service and product offerings from large and well-established companies that have greater marketing and sales experience and capabilities than we have. If we are unable to compete successfully, we may be unable to grow, sustain our revenue or be successful in achieving our business plan.

 

Current global financial conditions have been characterized by increased volatility which could negatively impact our business, prospects, liquidity and financial condition.

 

Current global financial conditions and recent market events have been characterized by increased volatility and the resulting tightening of the credit and capital markets has reduced the amount of available liquidity and overall economic activity. We cannot guaranty that debt or equity financing, the ability to borrow funds or cash generated by operations will be available or sufficient to meet or satisfy our initiatives, objectives or requirements. Our inability to access sufficient amounts of capital on terms acceptable to us for our operations will negatively impact our business, prospects, liquidity and financial condition.

 

We are growing the size of our organization, and we may experience difficulties in managing any growth we may achieve.

 

As of the date of this prospectus, we have 42 full-time employees. As our growth plans proceed and development and commercialization plans and strategies develop, we expect to need additional development, managerial, operational, sales, marketing, financial, accounting, legal, and other resources. Future growth would impose significant added responsibilities on members of management. Our management may not be able to accommodate those added responsibilities, and our failure to do so could prevent us from effectively managing future growth, if any, and successfully growing our Company.

 

Our potential for rapid growth and our entry into new markets make it difficult for us to evaluate our current and future business prospects, and we may be unable to effectively manage any growth associated with these new markets, which may increase the risk of your investment and could harm our business, financial condition, results of operations and cash flow.

 

Our entry into new markets as we seek to expand globally the adoption of our software services and seek to acquire complementary businesses may place a significant strain on our resources and increase demands on our executive management, personnel and systems, and our operational, administrative and financial resources may be inadequate. We may also not be able to effectively manage any expanded operations or achieve planned growth on a timely or profitable basis, particularly if the number of customers using our technology significantly increases or their demands and needs change as our business expands. If we are unable to manage expanded operations effectively, we may experience operating inefficiencies, the quality of our products and services could deteriorate, and our business and results of operations could be materially adversely affected.

 

If we are unable to develop and maintain our brand and reputation for our service and product offerings, our business and prospects could be materially harmed.

 

Our business and prospects depend, in part, on developing and then maintaining and strengthening our brand and reputation in the markets we will serve and for the companies we acquire. If problems arise with our future products or services, our brand and reputation could be diminished. If we fail to develop, promote and maintain our brand and reputation successfully, our business and prospects could be materially harmed.

 

Any failure to protect our future intellectual property rights could impair our ability to protect our technology and our brand.

 

Our success depends in part on our ability to enforce our intellectual property and other proprietary rights of the companies we expect to acquire. We expect to rely upon a combination of trademark and trade secret laws, as well as license and other contractual provisions, to protect our intellectual property and other proprietary rights. These laws, procedures and restrictions provide only limited protection and any of our intellectual property rights may be challenged, invalidated, circumvented, infringed or misappropriated. To the extent that our intellectual property and other proprietary rights are not adequately protected, third parties may gain access to our proprietary information, develop and market solutions similar to ours or use trademarks similar to ours, each of which could materially harm our business. The failure to adequately protect our intellectual property and other proprietary rights could have a material adverse effect on our business, financial condition and results of operations.

 

Our expansion into new products, services, technologies, and geographic regions subjects us to additional risks.

 

We may have limited or no experience in our newer markets, and our customers may not adopt our product or service offerings. These offerings, which can present new and difficult technology challenges, may subject us to claims if customers of these offerings experience service disruptions or failures or other quality issues. For example, the NFTs on which we have recently focused may prove to be speculative and not sustain the value they currently have to our clients. In addition, profitability, if any, in our newer activities may not meet our expectations, and we may not be successful enough in these newer activities to recoup our investments in them. Failure to realize the benefits of amounts we invest in new technologies, products, or services could result in the value of those investments being written down or written off.

 

15

 

 

The impact of epidemics or pandemics may limit our future business both from the demand and supply sides. Our sale people may not be able to effectively engage with customers due to restrictions on travel, conferences and in-person meetings. Our supply chain may be impacted by production and distribution delays. Due to these factors we may limit future operations to reduce expenses until events support and allow normal business procedures.

 

Our current business, specifically our ticketing vertical, and future acquired businesses and/or operations both domestic and abroad, and the businesses of our potential customers could be materially and adversely affected by the risks, or the public perception of the risks, related to a pandemic or other health crisis, such as the outbreak of the novel coronavirus (COVID-19) as well as the variants.

 

The growth of the businesses we acquire may, in part, be reliant on the willingness of customers to invest in their products and solutions. The risk, or public perception of the risk, of a pandemic or media coverage of infectious diseases could cause customers to avoid purchases which would delay sales of those products and solutions.

 

Our financial results fluctuate and may be difficult to forecast, and this may cause a decline in the trading price of our stock.

 

Our revenues, expenses and operating results are difficult to predict given our limited history of current operations. We expect that our operating results will continue to fluctuate in the future due to a number of factors, some of which are beyond our control. These factors include, but are not limited to:

 

  our ability to increase our brand awareness;
     
  our ability to attract new customers;
     
  our ability to increase our customer base;
     
  the amount and timing of costs relating to the expansion of our operations, including sales and marketing expenditures;
     
  our ability to introduce new mobile payment offerings or customer services in a competitive environment;
     
  technical difficulties consumers might encounter in using our mobile apps; and
     
  our ability to manage third-party outsourced operations;

 

Due to all of these factors, our operating results may fall below the expectations of investors, which could cause a decline in the trading price of our common stock.

 

We intend to make acquisitions that could disrupt our operations and adversely impact our business and operating results.

 

We intend to attempt to acquire complementary e-commerce businesses and to support the transition and integration of acquired operations with our ongoing business as a part of our growth strategy. Other than as disclosed herein, we currently have no binding commitments or agreements with respect to any such acquisitions and there can be no assurance that we will eventually consummate any acquisitions. The process of integrating acquired assets into our operations may result in unforeseen operating difficulties and expenditures and may absorb significant management attention that would otherwise be available for the ongoing development of our business. In addition, we have limited experience in performing acquisitions and managing growth. There can be no assurance that the anticipated benefits of any acquisition will be realized. In addition, future acquisitions could result in potentially dilutive issuances of equity securities, the incurrence of debt and contingent liabilities and amortization expenses related to goodwill and other intangible assets, any of which could materially and adversely affect our operating results and financial position. In addition, acquisitions also involve other risks, including risks inherent in entering markets in which we have no or limited prior experience and the potential loss of key employees.

 

Our plans for expansion cannot be implemented if we lose our key personnel or cannot recruit additional personnel.

 

We depend substantially on the continued services, specialized knowledge and performance of our senior management, particularly Brian Foote, our President and CEO, Jeffrey Hinshaw, our COO and CFO, Dennis Lee, our Mobile Pay Division Lead, Drew Foster, our Marketplace Division Lead, Javier Gonzalez, our Chief Technology Officer, and Michele Rivera, our Vice President, Global Partnerships. While we have employment agreements with all these executives, those employment agreements do not prevent such employees from terminating their employment with us at any time. As a result, these executives may elect to pursue other opportunities at any time. If one or more of these individuals choose to leave our company, we may lose a significant number of supplier relationships and operating expertise which they have developed over many years and which would be difficult to replace. The loss of the services of any executive officer or other key employee could hurt our business.

 

16

 

 

In addition, as our business expands, we will need to add new information technology and engineering personnel to maintain and expand our website and systems and customer support personnel to serve our growing customer base. If we are unable to hire and successfully train employees or contractors in these areas, users of our website may have negative experiences and we may lose customers, which would diminish the value of our brand and harm our business. The market for recruiting qualified information technology and other personnel is extremely competitive, and we may experience difficulties in attracting and retaining employees. Should we fail to retain or attract qualified personnel, we may not be able to compete successfully or implement our plans for expansion.

 

We have an evolving business model with still untested growth initiatives.

 

We have an evolving business model and intend to implement new strategies to grow our business in the future. Among other strategies for organic growth, we intend to recruit country partners to sell our mobile financial services. There can be no assurance that we will be successful in developing new product categories or in entering new specialty markets or in implementing any other growth strategies. Similarly, there can be no assurance that we already have or will be able to obtain or retain any employees, consultants or other resources with any specialized skills or relationships to successfully implement our strategies in the future.

 

We rely on third-party systems to conduct our business and relationships with payment processors, advertisers, third party sellers of our mobile apps, and our revenues and market share may decrease if these third-party relationship and systems are unavailable in the future or if they no longer offer quality performance.

 

We rely on third-party computer systems and third-party service providers, including payment services such as Stripe, and Wyre for credit card verifications and confirmations, to host our website and to advertise and deliver the products sold on our website to customers. We also rely on third-party licenses for components of the software underlying our technology platform. Any interruption in our ability to obtain the products or services of these or other third parties or deterioration in their performance could impair the timing and quality of our own service. If our service providers fail to deliver high-quality services in a timely manner to our customers, our services will not meet the expectations of our customers and our reputation and brand will be damaged. Furthermore, if our arrangements with any of these third parties are terminated, we may not find an alternate source of systems support on a timely basis or on terms as advantageous to us. In addition, our contracts or arrangements with suppliers do not provide for the continuation of particular pricing practices, for the availability of any specific services and generally may be terminated by either party. If we are unable to develop and maintain relationships with these third-party suppliers that will allow us to obtain sufficient levels of service on acceptable commercial terms, such inability could harm our business, prospects, financial condition and results of operations.

 

We are subject to cyber security risks and risks of data loss or other security breaches.

 

Our business involves the storage and transmission of users’ proprietary information, and security breaches could expose us to a risk of loss or misuse of this information, and to resulting claims, fines, and litigation. We have been subjected to a variety of cyber-attacks, which have increased in number and variety over time. We believe our systems are probed by potential hackers virtually 24/7, and we expect the problem will continue to grow worse over time. Cyber-attacks may target us, our customers, our suppliers, banks, credit card processors, delivery services, e-commerce in general or the communication infrastructure on which we depend. Any compromise of our security could result in a violation of applicable privacy and other laws, significant legal and financial exposure, damage to our reputation, and a loss of confidence in our security measures, any of which could have a material adverse effect on our financial results and business. Moreover, any insurance coverage we may carry may be inadequate to cover the expenses and other potential financial exposure we could face as a result of a cyber-attack or data breach.

 

We may not be able to compete successfully against existing or future competitors including larger, well-established and well-financed mobile app companies.

 

Many of our current and potential competitors have longer operating histories, larger customer bases, greater brand recognition and significantly greater financial, marketing and other resources than we do. In addition, some of our competitors may be able to devote greater resources to marketing and promotional campaigns, adopt more aggressive pricing and devote substantially more resources to systems development than we do. Increased competition may result in reduced operating margins, loss of market share and a diminished brand franchise. We cannot provide assurance that we will be able to compete successfully against existing or future competitors.

 

17

 

 

Our business depends on effective marketing, including marketing via email and social networking messaging, and we intend to increase our spending on marketing and branding, which may adversely affect our financial results.

 

We depend on effective marketing to attract customers and merchants. We depend on email and social networking messaging to promote our site and offerings and to generate a substantial portion of our revenues. If we are unable to develop, implement and maintain effective and efficient cost-effective advertising and marketing programs, it would have a material adverse effect on our financial results and business. Further, as part of our growth strategies, we intend to increase our spending on marketing and branding initiatives significantly, which may adversely affect our financial results. There is no assurance that any increase in our marketing or branding expenditures will result in increased market shares or will ultimately have a positive effect on our financial results.

 

If we do not respond to rapid technological changes, our services could become obsolete and we could lose customers.

 

To remain competitive, we must continue to enhance and improve the functionality and features of our e-commerce businesses. We may face material delays in introducing new services, products and enhancements. If this happens, our customers may forego the use of our websites and use those of our competitors. If competitors introduce new products and services using new technologies or if new industry standards and practices emerge, our existing technology and systems may become obsolete. Our failure to respond to technological change or to adequately maintain, upgrade and develop our computer network and the systems used to process customers’ orders and payments could harm our business, prospects, financial condition and results of operations.

 

Use of social media may adversely impact our reputation.

 

There has been a marked increase in the use of social media platforms and similar devices, including blogs, social media websites and other forms of internet-based communications that allow individuals access to a broad audience of consumers and other interested persons. Consumers value readily available information concerning retailers, manufacturers, and their goods and services and often act on such information without further investigation, authentication and without regard to its accuracy. The availability of information on social media platforms and devices is virtually immediate as is its impact. Social media platforms and devices immediately publish the content their subscribers and participants post, often without filters or checks on accuracy of the content posted. The opportunity for dissemination of information, including inaccurate information, is seemingly limitless and readily available. Information concerning our company may be posted on such platforms and devices at any time. Information posted may be adverse to our interests, may be inaccurate, and may harm our performance, prospects or business. The harm may be immediate without affording us an opportunity for redress or correction. Such platforms also could be used for the dissemination of trade secret information or otherwise compromise valuable company assets, all of which could harm our business, prospects, financial condition and results of operations.

 

We are subject to payments-related risks.

 

We accept payments using a variety of methods, including credit card, and debit card, credit accounts (including promotional financing), gift cards, direct debit from a customer’s bank account, consumer invoicing, physical bank check, and payment upon delivery. For existing and future payment options we offer to our customers, we may become subject to additional regulations and compliance requirements (including obligations to implement enhanced authentication processes that could result in significant costs and reduce the ease of use of our payments products), as well as fraud. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our operating costs and lower profitability. We rely on third parties to provide certain Amazon-branded payment methods and payment processing services, including the processing of credit cards, and debit cards., electronic checks, and promotional financing. In each case, it could disrupt our business if these companies become unwilling or unable to provide these services to us. We are also subject to payment card association operating rules, including data security rules, certification requirements, and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with these rules or requirements, or if our data security systems are breached or compromised, we may be liable for card issuing banks’ costs, subject to fines and higher transaction fees, and lose our ability to accept credit and debit card payments from our customers, process electronic funds transfers, or facilitate other types of online payments, and our business and operating results could be adversely affected.

 

In addition, we provide regulated services in certain jurisdictions because we enable customers to keep account balances with us and transfer money to third parties, and because we provide services to third parties to facilitate payments on their behalf. In these jurisdictions, we may be subject to requirements for licensing, regulatory inspection, bonding and capital maintenance, the use, handling, and segregation of transferred funds, consumer disclosures, and authentication. We are also subject to or voluntarily comply with a number of other laws and regulations relating to payments, money laundering, international money transfers, privacy and information security, and electronic fund transfers. If we were found to be in violation of applicable laws or regulations, we could be subject to additional requirements and civil and criminal penalties or forced to cease providing certain services.

 

18

 

 

We could be liable for fraudulent or unlawful activities of sellers.

 

The law relating to the liability of providers of online payment services is currently unsettled. In addition, governmental agencies could require changes in the way this business is conducted. Under our seller programs, we may be unable to prevent sellers from collecting payments, fraudulently or otherwise, when buyers never receive the products they ordered or when the products received are materially different from the sellers’ descriptions. We reimburse buyers for payments up to certain limits in these situations, and as our third-party seller sales grow, the cost of this program will increase and could negatively affect our operating results. We also may be unable to prevent sellers on our sites or through other seller sites from selling unlawful goods, selling goods in an unlawful manner, or violating the proprietary rights of others, and could face civil or criminal liability for unlawful activities by our sellers.

 

If we do not begin to generate significant revenues, we will still need to raise additional capital to meet our long-term business requirements. Any such capital raising may be costly or difficult to obtain and would likely dilute current stockholders’ ownership interests. If we are unable to secure additional financing in the future, we will not be able to continue as a going concern.

 

If we do not begin to generate significant revenues from our operations we will need additional capital, which may not be available on reasonable terms or at all. The raising of additional capital will dilute current stockholders’ ownership interests. We may need to raise additional funds through public or private debt or equity financings to meet various objectives including, but not limited to:

 

  maintaining enough working capital to run our business;
     
  pursuing growth opportunities, including more rapid expansion;
     
  acquiring complementary businesses and technologies;
     
  making capital improvements to improve our infrastructure;
     
  responding to competitive pressures;
     
  complying with regulatory requirements for advertising or taxation; and
     
  maintaining compliance with applicable laws.

 

Any additional capital raised through the sale of equity or equity-linked securities may dilute current stockholders’ ownership percentages and could also result in a decrease in the fair market value of our equity securities because our assets would be owned by a larger pool of outstanding equity. The terms of those securities issued by us in future capital transactions may be more favorable to new investors, and may include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect that is different from or in addition to that reflected in the capitalization described in this report.

 

Further, any additional debt or equity financing that we may need may not be available on terms favorable to us, or at all. If we are unable to obtain required additional capital, we may have to curtail our growth plans or cut back on existing business and we may not be able to continue operating if we do not generate sufficient revenues from operations needed to stay in business.

 

We may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we issue, such as convertible notes and warrants, which may adversely impact our financial condition.

 

Any failure to protect our future intellectual property rights could impair our ability to protect our technology and our brand.

 

Our success depends in part on our ability to enforce our intellectual property and other proprietary rights of the companies we expect to acquire. We expect to rely upon a combination of trademark and trade secret laws, as well as license and other contractual provisions, to protect our intellectual property and other proprietary rights. These laws, procedures and restrictions provide only limited protection and any of our intellectual property rights may be challenged, invalidated, circumvented, infringed or misappropriated. To the extent that our intellectual property and other proprietary rights are not adequately protected, third parties may gain access to our proprietary information, develop and market solutions similar to ours or use trademarks similar to ours, each of which could materially harm our business. The failure to adequately protect our intellectual property and other proprietary rights could have a material adverse effect on our business, financial condition and results of operations.

 

Our international operations expose us to a number of risks.

 

We expect that our current limited international activities will grow significantly. In certain international market segments, we have relatively little operating experience and may not benefit from any first-to-market advantages or otherwise succeed. It can be costly to establish, develop, and maintain international operations and promote our brand internationally. Our international operations may not become profitable on a sustained basis.

 

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In addition to risks described elsewhere in this section, our international sales and operations are subject to a number of risks, including:

 

● local economic and political conditions;

 

● government regulation (such as regulation of our product and service offerings and of competition); restrictive governmental actions (such as trade protection measures, including export duties and quotas and custom duties and tariffs); nationalization; and restrictions on foreign ownership;

 

● restrictions on sales or distribution of certain products or services and uncertainty regarding liability for products, services, and content, including uncertainty as a result of less Internet-friendly legal systems, local laws, lack of legal precedent, and varying rules, regulations, and practices regarding the physical and digital distribution of media products and enforcement of intellectual property rights;

 

● business licensing or certification requirements, such as for imports, exports, web services, and electronic devices;

 

● limitations on the repatriation and investment of funds and foreign currency exchange restrictions;

 

● limited fulfillment and technology infrastructure;

 

● shorter payable and longer receivable cycles and the resultant negative impact on cash flow;

 

● laws and regulations regarding privacy, data protection, data security, network security, consumer protection, payments, advertising, and restrictions on pricing or discounts;

 

● lower levels of use of the Internet;

 

● lower levels of consumer spending and fewer opportunities for growth compared to the United States;

 

● lower levels of credit card usage and increased payment risk;

 

● difficulty in staffing, developing, and managing foreign operations as a result of distance, language, and cultural differences;

 

● compliance with the U.S. Foreign Corrupt Practices Act and other applicable U.S. and foreign laws prohibiting corrupt payments to government officials and other third parties;

 

● laws and policies of the United States and other jurisdictions affecting trade, foreign investment, loans, and taxes; and

 

● geopolitical events, including war and terrorism.

 

The impact of epidemics or pandemics may limit our future business both from the demand and supply sides.

 

Our current business and future acquired businesses and/or operations both domestic and abroad, and the businesses of our potential customers and merchants could be materially and adversely affected by the risks, or the public perception of the risks, related to a pandemic or other health crisis, such as the outbreak of the novel coronavirus (COVID-19).

 

The growth of our ticketing business in particular and the businesses we acquire may, in part, be reliant on the willingness of customers to invest in their products and solutions. The risk, or public perception of the risk, of a pandemic or media coverage of infectious diseases could cause customers to avoid purchases which would delay sales of those products and solutions.

 

Whether a particular non-fungible token (NFT) or other crypto assets is a “security” in any relevant jurisdiction is subject to a high degree of uncertainty, and if we are unable to properly characterize an NFT or other crypto asset, we may be subject to regulatory scrutiny, inquiries, investigations, fines, and other penalties, which may adversely affect our business, operating results, and financial condition.

 

The SEC and its staff have taken the position that certain crypto assets (which includes NFTs) fall within the definition of a “security” under the U.S. federal securities laws. The legal test for determining whether any given crypto asset is a security is a highly complex, fact-driven analysis that evolves over time, and the outcome is difficult to predict. The SEC generally does not provide advance guidance or confirmation on the status of any particular crypto asset as a security. Furthermore, the SEC’s views in this area have evolved over time and it is difficult to predict the direction or timing of any continuing evolution. It is also possible that a change in the governing administration or the appointment of new SEC commissioners could substantially impact the views of the SEC and its staff. For example, Chair Gary Gensler has repeatedly remarked on the need for further regulatory oversight on crypto assets, crypto trading, and lending platforms by the SEC. Public statements by senior officials at the SEC indicate that the SEC does not intend to take the position that Bitcoin or Ethereum are securities (in their current form). Bitcoin and Ethereum are the only crypto assets as to which senior officials at the SEC have publicly expressed such a view. Moreover, such statements are not official policy statements by the SEC and reflect only the speakers’ views, which are not binding on the SEC or any other agency or court and cannot be generalized to any other crypto asset. With respect to all other crypto assets, there is currently no certainty under the applicable legal test that such assets are not securities, notwithstanding the conclusions we may draw based on our risk-based assessment regarding the likelihood that a particular crypto asset could be deemed a “security” under applicable laws. Similarly, though the SEC’s Strategic Hub for Innovation and Financial Technology published a framework for analyzing whether any given crypto asset is a security in April 2019, this framework is also not a rule, regulation or statement of the SEC and is not binding on the SEC.

 

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Several foreign jurisdictions have taken a broad-based approach to classifying crypto assets as “securities,” while other foreign jurisdictions, such as Switzerland, Malta, and Singapore, have adopted a narrower approach. As a result, certain crypto assets may be deemed to be a “security” under the laws of some jurisdictions but not others. Various foreign jurisdictions may, in the future, adopt additional laws, regulations, or directives that affect the characterization of crypto assets as “securities.”

 

The classification of a crypto asset as a security under applicable law has wide-ranging implications for the regulatory obligations that flow from the offer and sale of such assets. For example, a crypto asset that is a security in the United States may generally only be offered or sold in the United States pursuant to a registration statement filed with the SEC or in an offering that qualifies for an exemption from registration. Persons that effect transactions in crypto assets that are securities in the United States may be subject to registration with the SEC as a “broker” or “dealer.” Platforms that bring together purchasers and sellers to trade crypto assets that are securities in the United States are generally subject to registration as national securities exchanges, or must qualify for an exemption, such as by being operated by a registered broker-dealer as an ATS in compliance with rules for ATSs. Persons facilitating clearing and settlement of securities may be subject to registration with the SEC as a clearing agency. Foreign jurisdictions may have similar licensing, registration, and qualification requirements.

 

We have policies and procedures to analyze whether each NFT that we seek to facilitate listing and sale on our platform could be deemed to be a “security” under applicable laws. Our policies and procedures do not constitute a legal standard but rather represent our company-developed model, which permits us to make a risk-based assessment regarding the likelihood that a particular NFT could be deemed a “security” under applicable laws. Regardless of our conclusions, we could be subject to legal or regulatory action in the event the SEC, a state or foreign regulatory authority, or a court were to determine that an NFT listed and sold on our platform is a “security” under applicable laws. Because our platform is not registered or licensed with the SEC or foreign authorities as a broker-dealer, national securities exchange, or ATS (or foreign equivalents), and we do not seek to register or rely on an exemption from such registration or license to facilitate the offer and sale of NFTs on our platform, we only permit listing on our platform of those NFTs for which we determine there are reasonably strong arguments to conclude that the NFT is not a security. We believe that our process reflects a comprehensive and thoughtful analysis and is reasonably designed to facilitate consistent application of available legal guidance to crypto assets to facilitate informed risk-based business judgment. However, we recognize that the application of securities laws to the specific facts and circumstances of crypto assets may be complex and subject to change, and that a listing determination does not guarantee any conclusion under the U.S. federal securities laws. We expect our risk assessment policies and procedures to continuously evolve to take into account case law, facts, and developments in technology.

 

There can be no assurances that we will properly characterize any given NFT as a security or non-security for purposes of determining whether our platform will allow the listing of such NFT, or that the SEC, foreign regulatory authority, or a court, if the question was presented to it, would agree with our assessment. If the SEC, state or foreign regulatory authority, or a court were to determine that NFTs offered or sold on our platform are securities, we would not be able to offer such NFTs until we are able to do so in a compliant manner. A determination by the SEC, a state or foreign regulatory authority, or a court that an NFT listed and sold on our platform was a security may also result in us determining that it is advisable to remove NFTs from our platform that have similar characteristics to the NFT that was determined to be a security. In addition, we could be subject to judicial or administrative sanctions for failing to offer or sell the NFT in compliance with the registration requirements, or for acting as a broker, dealer, or national securities exchange without appropriate registration. Such an action could result in injunctions, cease and desist orders, as well as civil monetary penalties, fines, and disgorgement, criminal liability, and reputational harm. Customers that purchased such NFTs on our platform and suffered losses could also seek to rescind a transaction that we facilitated as the basis that it was conducted in violation of applicable law, which could subject us to significant liability. We may also be required to cease facilitating transactions in other similar NFTs, which could negatively impact our business, operating results, and financial condition.

 

We rely on third party platforms to operate our NFT Marketplace.

 

We rely on third-party platforms and software providers such as MetaMask and OpenSea to operate our NFT marketplace and perform auctions of NFTs. If we are unable to maintain a good relationship with such platform providers; if the terms and conditions or pricing of such platform providers change; if we violate or cannot comply with the terms and conditions of such platforms; or if any such platform loses market share or falls out of favor or is unavailable for a prolonged period of time, access to and use of our NFT marketplace will suffer.

 

There are risks associated with operating a marketplace for NFTs.

 

The regulatory regime governing blockchain technologies, cryptocurrencies, and tokens is uncertain, and new regulations or policies may materially affect our NFT marketplace and our business generally. There are risks associated with marketplaces for NFTs that sell user generated content, including but not limited to, counterfeit assets, intellectual property violations, unregistered sales of securities, assets on smart contracts with bugs, and assets that may become untransferable. These risks could create liability and have an adverse effect on the Company.

 

Our sales of NFTs in connection with the services that we provide to the NFT creators as well as the BLOCK ETX products that uses an algorithm to control the trading of those digital assets might be considered securities in which case we may have violated section 5 of the Securities Act and certain state securities laws that could allow purchasers of these products the right to rescind and demand the return of their purchase price equaling approximately $259,894.

 

Our sales of both NFTs to purchasers of the NFTs and our BLOCK ETX products may be considered a public offering in violation of the federal securities laws. These issuances might also have been in violation of certain state securities laws. If these issuances were public offerings under federal securities laws or in violation of certain state securities laws, purchasers of these products might be granted the right to rescind the sale of these products and demand that we return the purchase price of these products. Section 5 of the 1933 Securities Act states that it is unlawful to sell securities unless a registration statement is effective or an exemption from registration can be relied upon. Assuming that we are in violation of Section 5 of the 1933 Act regarding our offerings of our NFT and BLOCK ETX products on the basis that we sold unregistered securities, we are in violation of Section 5 of the Act and Section 12(1) of the 1933 Act would apply. Pursuant to Section 12(1) of the 1933 Act, the statute of limitations for this type of claim is one year after the date of the alleged violation and, if successful, would entitle the purchasers of these products to rescind their purchase of these products and demand a return to them of the purchase price of those products. Thus, the limitation period began to toll as soon as the violation of Section 5 has occurred, regardless of whether a purchaser of such products was aware of the violation. In this case, the potential Section 5 violation was the sale by us of unregistered securities from March 2021 to February 18, 2022.  The gross purchase price for sale of all the NFTs through December 31, 2021 was 31.1 ETH (approximately $97,000 based on the December 2021 price of ETH) and the total sales of our BLOCK ETX subscriptions to US customers through February 18, 2022 was $162,894. All ETX subscription fees for January and February were refunded to customers.

 

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Our failure to safeguard and manage our customers’ fiat currencies and crypto assets could adversely impact our business, operating results, and financial condition. 

As of March 31, 2022, third parties (Wyre and BitGo) held approximately $1,000,000 in custodial fiat currencies and cryptocurrencies on behalf of our customers. Supported crypto assets are not insured or guaranteed by any government or government agency. These third parties receive and hold funds for the benefit of our customers. Our and our partners’ abilities to manage and accurately safeguard these customer assets requires a high level of internal controls. As our business continues to grow and we expand our product and service offerings, we must continue to strengthen our associated internal controls and ensure that our partners do the same. Our success and the success of our offerings requires significant public confidence in our and our partners’ ability to properly manage customers’ balances and handle large and growing transaction volumes and amounts of customer funds. In addition, we are dependent on our partners’ operations, liquidity, and financial condition for the proper maintenance, use, and safekeeping of these customer assets. Any failure by us or our partners to maintain the necessary controls or to manage customer crypto assets and funds appropriately and in compliance with applicable regulatory requirements could result in reputational harm, litigation, regulatory enforcement actions, significant financial losses, lead customers to discontinue or reduce their use of our and our partners’ products, and result in significant penalties and fines and additional restrictions, which could adversely impact our business, operating results, and financial condition. Moreover, because custodially held crypto assets may be considered to be the property of a bankruptcy estate, in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors. This may result in customers finding our custodial services more risky and less attractive and any failure to increase our customer base, discontinuation or reduction in use of our platform and products by existing customers as a result could adversely impact our business, operating results, and financial condition.

 

Risks Related to Our Common Stock

 

Our securities are “Penny Stock” and subject to specific rules governing their sale to investors.

 

Under SEC Rule 15g-9 we are a “penny stock,” which is defined as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require that a broker or dealer approve a person’s account for transactions in penny stocks; and the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

 

To approve a person’s account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience objectives of the person; and make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

 

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form sets forth the basis on which the broker or dealer made the suitability determination; and that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

 

Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for Company’s shareholders to sell shares of our common stock.

 

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

 

Investors will experience dilution of their ownership interests because of the shares to be sold in this offering and future issuances of additional shares of our common stock.

 

You will incur substantial dilution as a result of this offering after giving effect to the sale by our Selling Stockholders.

 

In the future, we may issue additional authorized but previously unissued equity securities, such as we expect to do through this offering or through issuance of additional shares of our Series B preferred stock, resulting in the dilution of the ownership interests of our present stockholders. We have authorized 570,000 shares of Series B preferred stock of which 490,882 are issued and outstanding. Holders of our Series B preferred stock are entitled to 10,000 votes for each share held on all matters submitted to a vote of our stockholders and each share of Series B preferred stock converts into 10,000 shares of common stock. We may also issue additional shares of common stock or other securities that are convertible into or exercisable for common stock in connection with hiring or retaining employees, future acquisitions, future sales of our securities for capital raising purposes, or for other business purposes. There can be no assurance that we will not be required to issue additional shares, warrants or other convertible securities in the future in conjunction with any capital raising efforts, including at a price (or exercise prices) below the price at which shares of our common stock is currently traded.

 

Because we became public by means of a merger, we may not be able to attract the attention of major brokerage firms.

 

Additional risks may exist since we became public through a merger with a publicly traded company. Securities analysts of major brokerage firms may not provide coverage of us since there is little incentive to brokerage firms to recommend the purchase of our common stock. No assurance can be given that brokerage firms will want to conduct any secondary offerings on behalf in the future.

 

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Compliance with the reporting requirements of federal securities laws can be expensive.

 

We will become a fully reporting company upon effectiveness of this offering and will be subject to the information and reporting requirements of the Exchange Act and other federal securities laws and the compliance obligations of the Sarbanes-Oxley Act. The costs of preparing and filing annual and quarterly reports and other information with the SEC and furnishing audited reports to stockholders are substantial.

 

Applicable regulatory requirements, including those contained in and issued under the Sarbanes-Oxley Act of 2002, may make it difficult for us to retain or attract qualified officers and directors, which could adversely affect the management of our business and our ability to obtain or retain listing of our common stock.

 

As a fully reporting company under Section 13 of the Exchange Act, we may be unable to attract and retain those qualified officers, directors and members of board committees required to provide for effective management because of the rules and regulations that govern publicly held companies, including, but not limited to, certifications by principal executive officers. The enactment of the Sarbanes-Oxley Act has resulted in the issuance of a series of related rules and regulations and the strengthening of existing rules and regulations by the SEC, as well as the adoption of new and more stringent rules by the stock exchanges. The perceived increased personal risk associated with these changes may deter qualified individuals from accepting roles as directors and executive officers.

 

Further, some of these changes heighten the requirements for board or committee membership, particularly with respect to an individual’s independence from the corporation and level of experience in finance and accounting matters. We may have difficulty attracting and retaining directors with the requisite qualifications. If we are unable to attract and retain qualified officers and directors, the management of our business and its ability to obtain or retain listing of our shares of common stock on any stock exchange (assuming we elect to seek and are successful in obtaining such listing) could be adversely affected.

 

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or detect fraud. Consequently, investors could lose confidence in our financial reporting and this may decrease the trading price of our stock.

 

We must maintain effective internal controls to provide reliable financial reports and detect fraud. We have been assessing our internal controls to identify areas that need improvement. Failure to identify and thereafter implement required changes to our internal controls or any others that we identify as necessary to maintain an effective system of internal controls, if any, could harm our operating results and cause investors to lose confidence in our reported financial information. Any such loss of confidence would have a negative effect on the trading price of our stock.

 

The price of our common stock may become volatile, which could lead to losses by investors and costly securities litigation.

 

The trading price of our common stock is likely to be highly volatile and could fluctuate in response to factors such as:

 

  actual or anticipated variations in our operating results;
     
  announcements of developments by us or our competitors;
     
  regulatory actions regarding our products;
     
  announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
     
  adoption of new accounting standards affecting our industry;
     
  additions or departures of key personnel;
     
  introduction of new products by us or our competitors;
     
  sales of our common stock or other securities in the open market; and
     
  other events or factors, many of which are beyond our control such as the continuation of disruptions due to COVID-19.

 

The stock market is subject to significant price and volume fluctuations. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been initiated against such a company. Litigation initiated against us, whether or not successful, could result in substantial costs and diversion of its management’s attention and resources, which could harm our business and financial condition.

 

Our common stock is controlled by insiders.

 

Our officers and directors beneficially own approximately 80% of our outstanding shares of common stock through their ownership of Series B preferred shares. Such concentrated control may adversely affect the price of our common stock. Investors who acquire common stock may have no effective voice in our management. Sales by our insiders or affiliates along with any other market transactions, could negatively affect the market price of our common stock.

 

23

 

 

Our President and CEO, Brian Foote, has voting control of the Company’s capital stock and, as a result, owners of our common stock may be unable to influence management and exercise control over our business.

 

Following the consummation of this offering, our largest stockholder, Brian Foote, our President and CEO, will control approximately 70% of the voting power of our capital stock principally through his ownership of Series A and Series B preferred stock. Brian Foote owns 7,000,000 shares of Series A preferred stock which has the voting power of 1,000 shares of our common stock for each share of Series A preferred stock and 243,421 shares of Series B preferred stock, each such share having the voting power of 10,000 shares of our common stock. As a result, he is able to: elect or defeat the election of our directors, amend or prevent amendment to our certificates of incorporation or bylaws, effect or prevent a merger, sale of assets or other corporate transaction, and control the outcome of any other matter submitted to the stockholders for vote. Accordingly, other stockholders may be unable to influence management and exercise control over our business.

 

Our bylaws include a forum selection clause, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us, remove current management or to be acquired by a third party.

 

Our bylaws require that, unless we consent in writing to the selection of an alternative forum, either (i) the Court of Chancery of the State of Delaware is to be the sole and exclusive forum for (a) any derivative action or proceeding brought on our behalf, (b) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (c) any action asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware or our bylaws or (d) any action or proceeding asserting a claim governed by the internal affairs doctrine or (ii) the federal district court in the State of Delaware will be the exclusive forum for a cause of action arising under the Securities Act and the Exchange Act. In addition, our bylaws could make it more difficult for a third party to acquire us or to remove current management through provisions that preclude cumulative voting in the election of directors and that allow our bylaws to be adopted, amended or repealed by our board of directors.

 

This exclusive forum provision will apply to other state and federal law claims including actions arising under the Securities Act (although our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder). Section 22 of the Securities Act, however, creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Accordingly, there is uncertainty as to whether a court would enforce such a forum selection provision as written in connection with claims arising under the Securities Act. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have notice of and consented to the foregoing provisions. This forum selection provision in our bylaws may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us. It is also possible that, notwithstanding the forum selection clause included in our bylaws, a court could rule that such a provision is inapplicable or unenforceable.

 

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

 

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, as amended, or the JOBS Act, and we intend to take advantage of some of the exemptions from reporting requirements that are applicable to other public companies that are not emerging growth companies, including:

 

● being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;

 

● not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;

 

● not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;

 

● reduced disclosure obligations regarding executive compensation; and

 

● not being required to hold a non-binding advisory vote on executive compensation or obtain stockholder approval of any golden parachute payments not previously approved.

 

Further, the JOBS Act permits an “emerging growth company” such as us to take advantage of an extended transition time to comply with new or revised accounting standards as applicable to public companies. We are choosing to elect the extended transition period for complying with new or revised accounting standards applicable to public companies. We have elected the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

 

We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We may take advantage of these reporting exemptions until we are no longer an emerging growth company. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non- affiliates exceeds $700 million as of the prior June 30 and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

 

If we do not meet the listing standards of a national securities exchange our investors’ ability to make transactions in our securities will be limited, and we will be subject to additional trading restrictions.

 

Our securities currently are traded over-the-counter on the OTCQB and are not qualified to be listed on a national securities exchange, such as NASDAQ. Accordingly, we face significant material adverse consequences, including:

 

● a limited availability of market quotations for our securities;

 

● reduced liquidity with respect to our securities;

 

● our shares of common stock are currently classified as “penny stock” which requires brokers trading in our shares of common stock to adhere to more stringent rules, resulting in a reduced level of trading activity in the secondary trading market for our shares of common stock;

 

● a limited amount of news and analyst coverage for our company; and

 

● a decreased ability to issue additional securities or obtain additional financing in the future.

 

The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Since our Common Stock is traded on OTCQB, our common stock is a covered security. Although the states are preempted from regulating the sale of our securities, the federal statute allows the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. Further, if we were no longer traded over-the-counter, our common stock would not be a covered security and we would be subject to regulation in each state in which we offer our securities.

 

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Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.

 

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. In addition, the terms of any future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our securities will be your sole source of gain for the foreseeable future.

 

Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders and may prevent attempts by our stockholders to replace or remove our current management.

 

Provisions in our certificate of incorporation and bylaws, as well as provisions of Delaware law, could make it more difficult for a third party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders, or remove our current management. These include provisions that:

 

● permit our Board of Directors to issue up to 10,000,000 shares of preferred stock, with any rights, preferences and privileges as it may designate, of which we have designated 7,000,000 Series A preferred stock with 1,000 votes per share, all of which are held by Brian Foote, our CEO; issue 570,000 Series B preferred stock with 10,000 votes per share 490,882 of which are issued and outstanding;

 

● provide that all vacancies on our Board of Directors, including as a result of newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum;

 

● not provide for cumulative voting rights, thereby allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election;

 

● provide that special meetings of our stockholders may be called by a majority of the Board of Directors; and

 

● provide that our Board of Directors is expressly authorized to make, alter or repeal the bylaws.

 

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our Board of Directors, who are responsible for appointing the members of our management. Any provision of our articles of incorporation or bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.

 

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USE OF PROCEEDS

 

This prospectus relates to shares of our common stock that may be offered and sold from time to time by the Selling Stockholders. We will receive no proceeds from the sale of shares of Common Stock by the Selling Stockholders in this offering. We may receive proceeds from warrants exercised by the Selling Stockholders. We may receive up to $37,162,500 from the exercise of warrants by the Selling Stockholders. See “Plan of Distribution” elsewhere in this prospectus for more information.

 

We expect to use the net proceeds from the exercise of warrants from the Selling Stockholders for acquisitions, joint ventures, technology costs and general corporate purposes.

 

The aggregate proceeds to the Selling Stockholders from the sale of the securities offered by them will be the purchase price of the securities less discounts or commissions, if any. Each of the Selling Stockholders reserves the right to accept and, together with their agents from time to time, to reject, in whole or in part, any proposed purchase of securities to be made directly or through agents. We will not receive any of the proceeds from the sale or other disposition of the securities by the Selling Stockholders. However, we would receive up to approximately $37,162,500 in gross proceeds upon the cash exercise of the warrants issued to the Selling Stockholders if they were exercised in full. The exercise price of our warrants ranges from $0.20 to $1.00, which is above the current trading price of our common stock. In order to receive the proceeds from the exercise of the warrants, our stock price would need to increase significantly. Our two largest warrants are for 125,000,000 shares each, 30,000,000 of which have already been exercised. In order for the remaining 220,000,000 shares to be exercised under the warrants, our stock price would likely need to be $0.25 or greater. These two warrant holders have an exercise price of $0.20 per share, and this price is currently higher than our stock price. 

 

The following table illustrates the amount of net proceeds we will receive on the exercise of warrants by the Selling Stockholders totaling $37,162,500. It is possible that we may not raise the entire $37,162,500 through this prospectus. In such case, we will reallocate our use of proceeds as the Board of Directors deems to be in the best interests of the Company to effectuate our business plan. The intended use of proceeds are as follows:

 

   100%  75%  50%  25%
Gross Offering Proceeds  $37,162,500   $27,871,875   $18,581,250   $9,290,625 
Offering Costs(1)  $200,000   $200,000   $200,000   $200,000 
Use of Net Proceeds:                    
Acquisitions  $16,462,500   $10,671,875   $7,881,250   $3,690,625 
Technology Costs(2)  $13,000,000   $10,000,000   $7,000,000   $3,500,000 
Working Capital(3)  $4,000,000   $4,000,000   $2,000,000   $1,100,000 
Debt Reduction  $3,500,000   $3,000,000   $1,500,000   $800,000 

 

(1) We expect to spend approximately $200,000 in expenses relating to this offering, including legal, accounting, travel, printing and other miscellaneous costs.
   
(2) Technology costs include the costs or hiring additional developers to further the development of our suite of products.
   
(3) We use working capital to pay for miscellaneous and general operating expenses, as well as legal and accounting fees.

 

The allocation of the use of proceeds among the categories of anticipated expenditures represents management’s best estimates based on the current status of our proposed operations, plans, investment objectives, capital requirements, and financial conditions. Future events, including changes in economic or competitive conditions of our business plan or the completion of less than the total offering, may cause us to modify the above-described allocation of proceeds. Our use of proceeds may vary significantly in the event any of our assumptions prove inaccurate. We reserve the right to change the allocation of net proceeds from the offering as unanticipated events or opportunities arise.

 

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MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

 

Our common stock as of July 18, 2022 is quoted on the OTCQB under the symbol HMBL. As of March 31, 2022, there were 369 holders of record of our common stock.

 

The last reported sales price of our common stock on the OTCQB on July 18, 2022 was $0.07 per share.

 

Dividend Policy

 

We have not declared nor paid any cash dividend on our common stock, and we currently intend to retain future earnings, if any, to finance the expansion of our business, and we do not expect to pay any cash dividends in the foreseeable future. The decision whether to pay cash dividends on our common stock will be made by our board of directors, in their discretion, and will depend on our financial condition, results of operations, capital requirements and other factors that our board of directors considers significant.

 

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SELLING STOCKHOLDERS

 

This prospectus relates to the possible resale by the Selling Stockholders. We do not know how long the selling stockholder will hold the shares of our common stock before selling them, and we currently have no agreements, arrangements or understandings with the Selling Stockholders regarding the sale of any of the shares of our common stock. See “Plan of Distribution.”

 

The table below sets forth, to our knowledge, information concerning the beneficial ownership of shares of our common stock by the Selling Stockholders as of July 18, 2022. The percentages of shares owned before and after the offering are based on 1,586,394,389 shares of common stock outstanding and 1,854,819,389 shares of common stock, respectively, which includes the 1,586,394,389 shares of common stock outstanding as of July 18, 2022 and 268,425,000 of the 369,082,466 shares of common stock offered by this prospectus. Included in the 1,586,394,389 is 100,657,466 shares being offered by this prospectus. The information in the table below with respect to the Selling Stockholders has been obtained from the Selling Stockholders. solely on information supplied to us by the Selling Stockholders and assumes the sale of all the shares offered hereby. Other than as described in the footnotes below, the Selling Stockholders have not, within the past three years, had any position, office or other material relationship with us or any of our predecessors or affiliates other than as a holder of our securities, or are broker-dealers or affiliates of a broker-dealer. Information concerning the Selling Stockholders may change from time to time and, if necessary and required, we will amend or supplement this prospectus accordingly.

 

Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to shares. Unless otherwise indicated below, to our knowledge, all persons named in the table have sole voting and investment power with respect to their shares of common stock. The inclusion of any shares in this table does not constitute an admission of beneficial ownership for the person named below.

 

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Selling Stockholder  Number of Shares of Common Stock Beneficially Owned Prior to Offering(1)(2)(3)   Maximum Number of Shares of Common Stock to be Sold Pursuant to this Prospectus  

 

Number of Shares of Common Stock Beneficially Owned After Offering(4)

  

 

Percentage of Common Stock Owned After the Offering(4)

 
                 
Juan Luis Gonzalez   4,672,897    4,672,897    -    * 
Javier Gonzalez   4,672,897    4,672,897    -    * 
Forwardly, Inc.(5)   125,000,000    62,500,000    62,500,000    4.0%
Charger Corporation(6)   114,000,000    51,500,000    62,500,000    4.0%
Konop Enterprises, Inc.(7)   5,000,000    5,000,000    -    * 
Adel Wakil   4,000,000    4,000,000    -    * 
Antonio Dutra   2,000,000    2,000,000    -    * 
Kevin Levine   1,570,340    1,570,340    -    * 
Judith Levine   1,570,340    1,570,340    -    * 
Archumbl Pty Ltd(8)   12,500,000    12,500,000    -    * 
The Strider Lir Trust(9)   4,891,869    4,891,869    -    * 
Scottish Isles Investing, LLC(10)   668,036    668,036    -    * 
9G Investments, LLC(11)   6,123,660    6,123,660    -    * 
KWP 50, LLC(12)   7,229,381    7,229,381    -    * 
North Falls Investments, L.P.(13)   2,224,425    2,224,425    -    * 
CMP76, LLC(14)   1,112,212    1,112,212    -    * 
Murtaugh Group LLC(15)   5,528,603    5,528,603    -    * 
Infinity Block Investments LLC(16)   5,528,603    5,528,603    -    * 
Hahanakai, LLC(17)   2,258,900    2,258,900    -    * 
Joy Corbin   4,767,801    4,767,801    -    * 
Archura Capital Pty Ltd(18)   1,020,000    1,200,000    -    * 
Brighton Capital Partners, LLC(19)   8,547,619    80,000,000    -    * 
HUMBL CL SpA(20)   4,437,500    4,437,500    -    * 
George Sharp   7,500,000    5,000,000    -    * 
Red Rock Development Group, LLC(21)   10,000,000    10,000,000    -    * 
Alan Gunn(24) (25)   8,450,000    11,830,000    -    * 
Michael Temple(24) (25)   9,050,000    13,140,000    -    * 
Webb Ellinger(24) (25)   9,050,000    13,140,000    -    * 
Nancy Angell(24) (25)   4,840,000    7,390,000    -    * 
Zach Stevens(24) (26)   7,480,000    3,740,000    -    * 
Kurt Kimmel(24) (25)   1,410,000    3,150,000    -    * 
Jose Colchao(24) (25)   2,260,000    3,520,000    -    * 
Mark Turner(24) (26)   7,480,000    3,740,000    3,740,000    * 
Bryce Dixon(24) (26)   6,370,242    3,185,000    3,185,000    * 
Cyberbeat Pte Ltd(22)(24) (26)   5,310,000    2,655,000    2,655,000    * 
Rajan Narayan(24) (26)   5,310,000    2,655,000    2,655,000    * 
Dinh Thi Thong Hanh(24) (26)   5,310,000    2,655,000    2,655,000    * 
Roberta Wyn(24) (26)   5,840,000    2,920,000    2,920,000    * 
HinCamp, LLC(23)(24) (26)   4,820,000    2,410,000    2,410,000    * 
Stephanie Nhim(24) (26)   1,320,000    660,000    660,000    * 
Carmen Baldwin(24) (26)   1,320,000    660,000    660,000    * 

 

*Denotes less than 1%

 

29

 

 

(1)

Under applicable SEC rules, a person is deemed to beneficially own securities which the person has the right to acquire within 60 days through the exercise of any option or warrant or through the conversion of a convertible security. Also under applicable SEC rules, a person is deemed to be the “beneficial owner” of a security with regard to which the person directly or indirectly, has or shares (a) voting power, which includes the power to vote or direct the voting of the security, or (b) investment power, which includes the power to dispose, or direct the disposition, of the security, in each case, irrespective of the person’s economic interest in the security. Each listed selling stockholder has the sole investment and voting power with respect to all shares of Common Stock shown as beneficially owned by such selling stockholder, except as otherwise indicated in these footnotes.

 

(2) Beneficial ownership of shares of common stock that could be obtained pursuant to convertible notes is calculated as the original principal balance of the note divided by the conversion price.
   
(3)

Beneficial ownership of the Series B Preferred Stock is limited by conversion limitations in our Certificate of Incorporation. For Series B Preferred shareholders holding greater than 750 shares of Series B Preferred Stock, for the calendar months of December 2021 and January 2022, Series B Preferred shareholders did not have the right, whether by election, operation of law, or otherwise, to convert into Common Stock shares of Series B Preferred stock constituting more than 5% of the total number of Series B Preferred shares held by them; and for each of the calendar months from February 2022 to May 2023, the percentage that the Series B Preferred shareholder may convert is 3% of the total number of Series B Preferred shares held by them.

 

(4)

Represents the amount and percentage of shares in the event all of the registered securities are sold during the offering.

 

(5) George Sharp is the President and CEO of Forwardly, Inc. and may be deemed to have voting and investment power over the shares. The address of Forwardly, Inc. is 3535 Executive Terminal Drive, Henderson, Nevada 89052.
   
(6) Louis Sapi is the President of Charger Corporation and may be deemed to have voting and investment power over the shares. The address of Charger Corporation is 5025 Orbitor Drive, Building 4, Suite 400, Mississaugua, Ontario L4W 4YS, Canada.
   
(7) Thad Konop is the President of Konop Enterprises Inc. and may be deemed to have voting and investment power over the shares. The address of Konop Enterprises Inc. is 39 Mountainview Avenue, Toronto, Ontario M6P 2L5, Canada.

 

30

 

 

(8) Alev Dover is the Director of Archumbl Pty Ltd and may be deemed to have voting and investment power over the shares. The address of Archura Capital Pty Ltd. is Archumbl Pty Ltd is 337 Claremont St., Kellyville Ridge, NSW 2155, Australia.
   
(9) Brian Kirchoff and Tirsa Hackshaw are the Trustee of the Strider Lir Trust and may be deemed to have voting and investment power over the shares. The address of Strider Lir Trust: c/o The Library, 435 South Spring Street, Suite 332, Los Angeles, CA 90013
   
(10)

Becky Moore is the Manager of Scottish Isles Investing, LLC and may be deemed to have voting and investment power over the shares. The address of Scottish Isles Investing, LLC is PO Box 44, Bishop, GA 30621-9998.

 

(11) Richard Shebib II is the Manager of 9G Investments, LLC (f/k/a Maize and Gray, LLC) and may be deemed to have voting and investment power over the shares. The address of Maize and Gray, LLC is 30800 Telegraph Road, Suite 2800, Bingham Farms, MI 48025.
   
(12) Kendall Prince is the Manager of KWP50, LLC and may be deemed to have voting and investment power over the shares. The address of KWP 50, LLC: 7135 E. Lakeview Ave., Mesa, AZ 85209.
   
(13) Kendal Madsen is the Manager of the General Partner of North Falls Investments, L.P. and may be deemed to have voting and investment power over the shares. The address of North Falls Investments, L.P. is 1550 W. Gordon Avenue, Suite 1, Layton, Utah 84041.
   
(14) Christina Pelz is the Manager of CMP76, LLC and may be deemed to have voting and investment power over the shares. The address of CMP76, LLC: 375 S. Curson Avenue, Los Angeles, CA 90036.
   
(15) Chris Williams is the Manager of Murtaugh Group, LLC and may be deemed to have voting and investment power over the shares. The address of Murtaugh Group, LLC is PO Box 246, Great Barrington, MA 01230.
   
(16) Jordan Smith is the Manager of Infinity Block Investments, LLC and may be deemed to have voting and investment power over the shares. The address of Infinity Block Investments LLC is P.O. Box 2728, Lebanon, Virginia 24266.
   
(17) Cathleen Peters and Blayne Takemoto are the Member-Managers of Hahanakai, LLC and may be deemed to have voting and investment power over the shares. The address of Hahanakai is 98-023 Hekaka St. 603, Aiea, Hawaii 96701.
   
(18) Alev Dover is the Director of Archura Capital Pty Ltd and may be deemed to have voting and investment power over the shares. The address of Archura Capital Pty Ltd. is Archumbl Pty Ltd is 337 Claremont St., Kellyville Ridge, NSW 2155, Australia.
   

(19)

 

Lucas Hales is the Manager of Brighton Capital Partners, LLC (“Brighton Capital”) and may be deemed to have voting and investment power over the shares. The address of Brighton Capital is 3500 San Mateo Court, Austin, Texas 78738, Attention: Lucas Hales, Manager. Brighton Capital is not a licensed broker dealer or an affiliate of a licensed broker dealer. Brighton Capital’s beneficial ownership is calculated as the termination fee shares plus the principal balance of the Note divided by the fixed conversion price under the Note of $3.15. The right to make redemption payments based on the market price of the common stock is wholly at the Company’s election. Brighton Capital has no right to receive shares other than at the fixed conversion price. The number of shares being registered for Brighton Capital is calculated based on the floor price in the note of $0.05.
   
(20) Juan Pablo Morales is the General Manager of HUMBL CL SpA and may be deemed to have voting and investment power over the shares. The address of HUMBL CL SpA is San Pio X 2455, Oficina 1008, Providencia, Santiago, Chile.
   
(21) Brian Innes is the Manager of Red Rock Development Group, LLC and may be deemed to have voting and investment power over the shares. The address of Red Rock Development Group, LLC is 1785 W. State Route 89A, Suite 2A, Sedona, AZ 86336.
   
(22) Rajan Narayan is the CEO of Cyberbeat Pte Ltd and may be deemed to have voting and investment power over the shares. The address of Cyberbeat Pte Ltd is 1 Fullerton Road #02-0, One Fullerton, Singapore 049213.
   
(23) Steven Hinshaw is the Manager of HinCamp, LLC and may be deemed to have voting and investment power over the shares. The address of HinCamp, LLC is 850 New Burton Road Suite 201, Dover, DE 19904.
   
(24) These shares being registered are issuable pursuant to the conversions of Series B preferred stock held by the applicable shareholder.
   
(25)

The number of shares being registered for these shareholders exceeds their beneficial ownership amounts because we are registering shares that may be issued pursuant to conversions of Series B shares in the future as well as the shares already beneficially owned by these shareholders. These shareholders all own more than 750 Series B shares and thus are subject to conversion limitations which affect their beneficials ownership amounts.

   
(26) The number of shares being registered for these shareholders is less than their beneficial ownership because we are only registering a percentage of the Series B conversion shares for all the Series B holders included in herein and not the total number of shares of common stock they could convert into upon full conversion of their Series B shares. These shareholders own less than 750 Series B shares and are not subject to conversion limitations so their beneficial ownership numbers include the total amount of common shares owned on an as-converted basis.

 

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

 

The following discussion should be read in conjunction with the consolidated financial statements and the related notes contained elsewhere in this prospectus. In addition to historical information, the following discussion contains forward looking statements based upon current expectations that are subject to risks and uncertainties. Actual results may differ substantially from those referred to herein due to a number of factors, including, but not limited to, risks described in the section entitled “Risk Factors” and elsewhere in this prospectus.

 

General

 

Our executive offices are located at 600 B Street, Suite 300, San Diego, California 92101 telephone (786) 738-9012. Our corporate website address is www.humbl.com.

 

Overview

 

Following our merger with HUMBL LLC on December 3, 2020, we changed our name from Tesoro Enterprises, Inc. to HUMBL, Inc. and adopted the business of HUMBL to deliver a more seamless digital pairing experiences for consumers and merchants in the global economy.

 

Comparison of Results of Operations for the Three Months Ended March 31, 2022 and 2021

 

The following table sets forth the summary operations for the three months ended March 31, 2022 and 2021:

 

   For the Three Months Ended 
   March 31, 2022   March 31, 2021 
         
Revenues  $1,147,134   $154,104 
Cost of Revenues  $520,970   $104,743 
Gross Profit  $626,164   $49,361 
Development Costs  $1,263,992   $102,303 
Professional Fees  $981,138   $714,878 
Settlement  $1,120,400   $- 
Stock-based compensation  $4,101,329   $- 
Impairment - goodwill  $1,008,642   $- 
Impairment – digital assets  $45,318   $- 
General and Administrative Expenses  $2,598,595   $390,413 
Interest Expense  $(402,804)  $(5,228)
Amortization of Debt Discounts  $(1,590,897)  $(15,432)
Gain on Sale of Digital Assets  $29,551   $- 
Provision for Income Taxes  $-   $- 
Net Loss from Continuing Operations  $(12,457,400)  $(1,178,893)

 

Revenues

 

Revenues for the three months ended March 31, 2022 were $1,147,134 as compared to $154,104 for the three months ended March 31, 2021, an increase of $993,030. The increase was due to the ticketing revenue and merchant fees recognized of $295,239 as well as from services rendered from Monster Creative of $826,552. In 2021, our revenue was from sales of merchandise.

 

32

 

 

Cost of Revenues and Gross Profit

 

Cost of revenues for the three months ended March 31, 2022 were $520,970 as compared to $104,743 for the three months ended March 31, 2022, an increase of $416,227. The increase was primarily due to the direct labor attributable to ticketing and production services. Our gross profit grew by 1169% from 2021 to 2022 as a result of the production services and ticketing aspects of the business.

 

Operating Expenses

 

Operating expenses for the three months ended March 31, 2022 were $11,280,225 as compared to $1,207,594 for the three months ended March 31, 2021, an increase of $10,072,631. Operating expenses consists of development costs, professional fees and general and administrative expenses and non-cash charges for impairment expenses and stock-based compensation as fully described below. We expect our development costs and professional fees to continue to increase in our next 12 months as we continue to roll out new services for the remainder of 2022 and 2023. Approximately 60% of our operating expenses relate to non-cash charges in 2022 and these charges comprise of over $6,675,000. We do expect that our non-cash charges will remain the same in the next few quarters as out stock-based compensation completes the vesting terms.

 

Development Costs

 

Development costs which consist of salaried and outsourced technical consultants for the three months ended March 31, 2022 were $1,263,992 compared with $102,303 for the three months ended March 31, 2021. The increase of development costs related to the roll out of various projects such as the HUMBL Wallet, Search3 and Verified by BLOCKS that are in development as well as enhancements in the HUMBL Pay app for 2022. In 2021, a majority of the development costs went towards the HUMBL Pay app.

 

Professional Fees

 

Professional fees which consist of contracted individuals and companies, legal, audit and accounting costs for the three months ended March 31, 2022 were $981,138 compared to $714,878 for the three months ended March 31, 2021. The increase in professional fees related to the professional fees incurred in regulatory filings including OTC compliance and reporting as well as increases in consultant costs. We expect that these costs will stabilize during the remainder of 2022 into 2023.

 

Settlement

 

The Company incurred $1,120,000 in settlement expenses which are included in our operating expenses for the three months ended March 31, 2022 related to agreements with individuals for liabilities incurred. We incurred none of these charges for the three months ended March 31, 2021.

 

Stock-Based Compensation

 

The Company incurred $4,101,329 in stock-based compensation expenses for the three months ended March 31, 2022 related to agreements with consultants, advisors, and directors for services rendered. We incurred none of these charges for the three months ended March 31, 2021. We expect our stock-based compensation expenses to decline in the next 12 months as many stock issuances were the result of the start-up of our operations. The awards provided were valued in accordance with ASC 718 at fair value.

 

Impairment of Goodwill and Digital Assets and Stock-Based Compensation

 

The Company incurred $1,008,642 in non-cash charges related to impairment of goodwill, and $45,318 in impairment of our digital assets in the three months ended March 31, 2022. The goodwill impairment related to the impairment of the goodwill in the Ixaya acquisition. This impairment was part of our Commercial segment. The impairment of the digital assets was based on the valuation changes in the digital assets we hold. We incurred none of these charges for the three months ended March 31, 2021.

 

General and Administrative

 

General and administrative expenses for the three months ended March 31, 2022 were $2,598,595 compared with $390,413 for the three months ended March 31, 2021. The increase in general and administrative expenses of $2,208,182 is related to the operations of Tickeri ($73,940), operations of Monster advertising and business development ($258,921), advertising expenses ($184,257), travel ($191,411), general office expenses (approximately $80,000), insurance (approximately $27,500), amortization and depreciation expenses ($97,567), penalties ($400,000) and the addition of management and employees to grow our business (approximately $800,000). The general and administrative expenses related to the three months ended March 31, 2021 related to mostly operating expenses to complete the merger with Tesoro.

 

There were no significant operations prior to the completion of the merger in February 2021. We expect our general and administrative expenses to be consistent in the next 12 months, unless we acquire other businesses that will add expenses to the Company.

 

33

 

 

Other Income (Expense)

 

In the three months ended March 31, 2022 we incurred $1,964,150 in other expenses, compared to $20,660 in other expenses in the three months ended March 31, 2021, an increase of $1,943,490. The other expenses relate to amortization of discounts of $1,590,897 and $15,432, respectively for the 2022 and 2021 periods, as well as interest expense of $402,804 and $5,228, respectively. In addition, in 2022 there was a gain on sale of digital assets of $29,551. We expect to incur additional other income (expense) in the next 12 months related to our convertible notes.

 

Provision for Income Taxes

 

We incurred no provision for state income taxes in the three months ended March 31, 2022 and 2021.

 

Net Loss from Continuing Operations

 

Net loss from operations from continuing operations for the three months ended March 31, 2022 was ($12,618,211) as compared to a net loss of ($1,178,893) for the three months ended March 31, 2021. The $11,439,318 increase in the net loss was due to the changes noted herein.

 

Discontinued Operations

 

Net loss from operations from discontinued operations for the three months ended March 31, 2022 was ($7,945) as compared to a net loss of ($257,969) for the three months ended March 31, 2021. The discontinued operations relate to the suspension of operations related to the Company’s ETX products that occurred in February 2022.

 

Segment Reporting

 

The Company follows the provisions of ASC 280-10 Disclosures about Segments of an Enterprise and Related Information. This standard requires that companies disclose operating segments based on the manner in which management disaggregates the Company in making operating decisions.

 

For 2021, the Company established three distinct operating segments: HUMBL Marketplace; HUMBL Pay; and HUMBL Financial. Most of the operations for the year ended December 31, 2021 were conducted in North America. Commencing January 1, 2022, the Company simplified their business model to segment their business into two distinct divisions: Consumer and Commercial. The 2021 segments were all considered part of the consumer division.

 

Less than 3-4% of the Company’s sales are from outside of North America, therefore the Company has determined that segment reporting by geographic location was not necessary. In the future, the Company will continue to monitor their activity by region to determine if it is feasible to report segment information by location.

 

Three Months Ended March 31, 2022  Consumer   Commercial   Total 
Segmented operating revenues  $1,128,750   $18,384   $1,147,134 
Cost of revenues   506,135    14,835    520,970 
Gross profit   622,615    3,549    626,164 
Total operating expenses net of depreciation, amortization and impairment   9,517,771    458,059    9,975,830 
Depreciation, amortization and impairment   46,053    1,105,476    1,151,529 
Other expenses (income)   1,966,758    (2,608)   1,964,150 
(Loss) from continuing operations  $(10,907,967)  $(1,557,378)  $(12,465,345)

 

Segmented assets as of March 31, 2022             
Property and equipment, net   $359,106   $-   $359,106 
Intangible assets   $-   $7,153,473   $7,153,473 
Intangible assets – digital assets   $32,064   $406,040   $438,104 
Goodwill   $-   $6,531,346   $6,531,346 
Capital expenditures   $8,510   $-   $8,510 

 

34

 

 

Three Months Ended March 31, 2021  HUMBL Pay   HUMBL Marketplace   HUMBL Financial   Total 
Segmented operating revenues  $-   $154,104   $-   $154,104 
Cost of revenues   -    104,743    -    104,743 
Gross profit   -    49,361    -    49,361 
Total operating expenses net of depreciation and amortization   841,719    365,875    -    1,207,594 
Depreciation and amortization   -    -    -    - 
Other (income) expense   12,912    7,748    -    20,660 
Income (loss) from continuing operations  $(854,631)  $(324,262)  $-   $(1,436,862)

 

Segmented assets as of March 31, 2021                    
Property and equipment, net  $-   $-   $-   $- 
Intangible assets, net  $-   $-   $-   $- 
Capital expenditures  $-   $-   $-   $- 

 

The HUMBL Financial sector is reflected in discontinued operations on the consolidated statement of operations for the three months ended March 31, 2021.

 

Comparison of Results of Operations for the Years Ended December 31, 2021 and 2020

 

The following table sets forth the summary operations for the years ended December 31, 2021 and 2020:

 

   For the Years Ended 
   December 31, 2021   December 31, 2020 
         
Revenues  $2,503,388   $- 
Cost of Revenues  $1,104,959   $- 
Gross Profit  $1,398,429   $- 
Development Costs  $2,117,683   $96,567 
Professional Fees  $3,905,699   $539,568 
Settlement  $1,870,000   $- 
Stock-based compensation  $10,734,833   $- 
Impairment - goodwill  $22,203,422   $- 
Impairment – digital assets  $34,570   $- 
General and Administrative Expenses  $5,247,118   $69,589 
Interest Expense  $(943,559)  $(6,739)
Beneficial Conversion Feature  $(3,300,000)  $- 
Amortization of Debt Discounts  $(838,941)  $- 
Gain on Sale of Digital Assets  $47,875   $- 
Forgiveness of Debt  $66,117   $- 
Other Income (Expense)  $28,200   $- 
Provision for Income Taxes  $800   $800 
Net Loss  $(49,656,004)  $(713,263)

 

Revenues

 

Revenues for the year ended December 31, 2021 were $2,503,388 as compared to $0 for the year ended December 31, 2020, an increase of $2,503,388. The increase was due to the sales of merchandise related to the HUMBL Marketplace segment of $192,003, ticketing revenue and merchant fees recognized from our acquisition of Tickeri, Inc. as well the launch of HUMBL Tickets of $$902,678, services rendered from Monster Creative of $1,104,322 and subscription revenue of $265,025 from HUMBL Financial. There were no revenues recognized in the year ended December 31, 2020 as we just commenced our operations in 2021.

 

Cost of Revenues and Gross Profit

 

Cost of revenues for the year ended December 31, 2021 were $1,104,959 as compared to $0 for the year ended December 31, 2020, an increase of $1,104,959. The increase was primarily due to the sales of merchandise related to the HUMBL Marketplace segment as well as the ticketing costs incurred for Tickeri, Inc. Our gross profit of $1,398,429 is the result of the recognition of our revenue and grew in the last two fiscal quarters due to full reporting of the two acquisition companies that were completed in June 2021.

 

35

 

 

Operating Expenses

 

Operating expenses for the year ended December 31, 2021 were $46,113,325 as compared to $705,724 for the year ended December 31, 2020, an increase of $45,407,601. Operating expenses consists of development costs, professional fees and general and administrative expenses and non-cash charges for impairment expenses and stock-based compensation as fully described below. We expect our development costs and professional fees to continue to increase in our next 12 months as we continue to roll out new services in 2022. Over 70% of our operating expenses relate to non-cash charges in 2021 and these charges comprise of over $34 million. We do not expect that our non-cash charges will increase in 2022.

 

Development Costs

 

Development costs which consist of salaried and outsourced technical consultants for the year ended December 31, 2021 were $2,117,683 compared with $96,567 for the year ended December 31, 2020. The increase of development costs related to the roll out of HUMBL Marketplace which include development of our NFT Gallery and the launch of HUMBL Tickets as well as the HUMBL Financial platform. In addition, the Company continued the development of HUMBL Pay which was started in 2020, and represented a majority of the development costs in 2020.

 

Professional Fees

 

Professional fees which consist of contracted individuals and companies, legal, audit and accounting costs for the year ended December 31, 2021 were $3,905,699 compared with $539,568 for the year ended December 31, 2020. The increase in professional fees related to the roll out of HUMBL Marketplace and HUMBL Financial of $1,300,000, and professional fees in regulatory filings including OTC compliance and reporting of approximately $1,600,000, as well as increases in consultant costs of $400,000. We expect that these costs will not increase during the fiscal year ending December 31, 2022.

 

Settlement

 

The Company incurred $1,870,000 in settlement expenses which are included in our operating expenses for the year ended December 31, 2021 related to agreements with individuals for liabilities incurred. We incurred none of these charges for the year ended December 31, 2020.

 

Stock-Based Compensation

 

The Company incurred $10,734,833 in stock-based compensation expenses for the year ended December 31, 2021 related to agreements with consultants, advisors, and directors for services rendered. We incurred none of these charges for the year ended December 31, 2020. We expect our stock-based compensation expenses to decline in the next 12 months as many stock issuances were the result of the start-up of our operations. The awards provided were valued in accordance with ASC 718 at fair value.

 

Impairment of Goodwill and Digital Assets and Stock-Based Compensation

 

The Company incurred $22,203,422 in non-cash charges related to impairment of goodwill, and $34,570 in impairment of our digital assets in the year ended December 31, 2021. The goodwill impairment related to the impairment of the goodwill in the Tickeri and Monster acquisitions. Both of these impairments were part of our Marketplace segment. The impairment of the digital assets was based on the valuation changes in the digital assets we hold. We incurred none of these charges for the year ended December 31, 2020.

 

General and Administrative

 

General and administrative expenses for the year ended December 31, 2021 were $5,247,118 compared with $69,589 for the year ended December 31, 2020. The increase in general and administrative expenses is related to the start-up of operations and included increases in travel ($570,000), advertising and business development ($895,000), rent ($165,000), general office expenses ($196,000), insurance ($58,000), and the addition of management and employees to grow our Pay, Marketplace and Financial segments ($1,950,000). The increase also includes the operating expenses related to the operations including the general and administrative costs associated with our subsidiaries Tickeri, Inc. and Monster Creative, LLC. The general and administrative expenses relate to nominal expenses of the Company related to the merger with Tesoro.

 

There were no significant operations prior to the completion of the merger in February 2021. We expect our general and administrative expenses to be consistent in the next 12 months, unless we acquire other businesses that will add expenses to the Company.

 

36

 

 

Other Income (Expense)

 

In the year ended December 31, 2021 we incurred $4,940,308 in other expenses, compared to $6,739 in other expenses in the year ended December 31, 2020, and increase of $4,933,569. The 2021 other expenses related to $943,559 of interest expense on debt incurred during the year, $3,300,000 in a non-cash beneficial conversion feature on a convertible note, and $838,941 in amortization of discounts related to certain convertible notes. In addition, we had other income of $94,317 on PPP forgiveness and other income and $47,875 in gains on the sale of digital assets. There were no such expenses in 2020 other than interest expense on convertible debt of $6,739. We expect to incur additional other income (expense) in the next 12 months related to our convertible notes, however, we do not expect to incur any charges related to beneficial conversion features in the next 12 months.

  

Provision for Income Taxes

 

We incurred $800 in the provision for state income taxes in 2021 and 2020.

 

Net Loss

 

Net loss from operations for the year ended December 31, 2021 was ($49,948,504) as compared to a net loss of ($713,263) for the year ended December 31, 2020. The $49,235,241 increase in the net loss was due to the changes noted herein.

 

Segment Reporting

 

The Company follows the provisions of ASC 280-10 Disclosures about Segments of an Enterprise and Related Information. This standard requires that companies disclose operating segments based on the manner in which management disaggregates the Company in making operating decisions. As of December 31, 2021 and for the year ended December 31, 2021, the Company operated in three segments. The segments are HUMBL Marketplace, HUMBL Pay, and HUMBL Financial. For the year ended December 31, 2020, the Company operated in one segment.

 

Year Ended December 31, 2021  HUMBL Pay   HUMBL Marketplace   HUMBL Financial   Total 
Segmented operating revenues  $15,114   $2,224,506   $263,768   $2,503,388 
Cost of revenues   -    1,104,959    -    1,104,959 
Gross profit   15,114    1,119,547    263,768    1,398,429 
Total operating expenses net of depreciation, amortization and impairment   11,201,593    10,555,028    2,108,383    23,865,004 
Depreciation, amortization and impairment   22,850    22,221,701    4,570    22,249,121 
Other expenses   2,531,630    1,902,352    506,326    4,940,308 
(Loss) from operations  $(13,740,959)  $(33,559,534)  $(2,355,511)  $(49,656,004)
                     
Segmented assets as of December 31, 2021                    
Property and equipment, net  $9,794   $344,694   $1,959   $356,447 
Intangible assets – digital assets  $-   $2,695   $-   $2,695 
Goodwill  $-   $6,531,346   $-   $6,531,346 
Capital expenditures  $11,040   $354,328   $2,208   $367,576 

 

Comparison of Results of Operations for the year ended December 31, 2020 and period May 13, 2019 (Inception) through December 31, 2019

 

The following table sets forth the summary income statement for the year ended December 31, 2020 and period May 13, 2019 (Inception) through December 31, 2019:

 

   For the Periods Ended 
   December 31,
2020
   December 31,
2019
 
         
Revenues  $-   $- 
Operating Expenses  $705,724   $280,742 
Other Expense and Provision for Income Taxes  $7,539   $800 
Net Loss  $(713,263)  $(281,542)

 

Revenues

 

We generated no revenues during the periods ended December 31, 2020 and 2019 as we were forming our business and commencing operations.

 

Operating Expenses

 

Operating expenses for the period ended December 31, 2020 were $705,724 as compared to $280,742 for the period ended December 31, 2019, an increase of $424,982. Operating expenses consists of development costs, professional fees and general and administrative expenses.

 

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Development Costs

 

Development costs for the period ended December 31, 2020 were $96,567 compared with $86,755 for the period ended December 31, 2019. The increase of development costs related to the development of the various platforms the Company has developed and the eventual roll out of these platforms in 2021.

 

Professional Fees

 

Professional fees for the period ended December 31, 2020 were $539,568 compared with $187,003 for the period ended December 31, 2019. The increase in professional fees related to the roll out of HUMBL Marketplace and Studios as well as the HUMBL Financial platform. In addition, the Company completed its merger with Tesoro Enterprises which contributed to the large increase in legal, accounting and consulting costs.

 

General and Administrative

 

General and administrative expenses for the period ended December 31, 2020 were $69,589 compared with $6,984 for the period ended December 31, 2019. The increase in general and administrative expenses is related to a full year in 2020 of administrative expenses.

 

Other Income (Expense)

 

Interest expense, net of interest income, for the period ended December 31, 2020 was $6,739 as compared to $0 for the period ended December 31, 2019. The increase was the result of the interest incurred on the debt incurred in December 2020 related to the note payables, as well as the amortization of debt discount on those notes.

 

Net Loss

 

Net loss from operations for the period ended December 31, 2020 was ($713,263) as compared to a net loss of ($281,542) for the period ended December 31, 2019. The $431,721 increase in the net loss was primarily due to the professional fees and development costs on the commencement of operations in 2020.

 

Liquidity and Capital Resources

 

March 31, 2022 and 2021

 

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures.

 

As of March 31, 2022, we had $5,901,460 in cash and restricted cash. In the three months ended March 31, 2022, the Company’s subsidiaries experienced profitable periods generating over $1,135,000 in revenue. The Company expanded their product offerings through the acquisition of BizSecure, Inc. and the acquisition of Ixaya. These entities will be instrumental in the roll out of HUMBL’s Blockchain Services Group which currently is focused on providing services to governments as well as businesses. We also received $4,500,000 in related party long-term promissory notes and $2,000,000 from the exercise of 10,000,000 warrants. The Company intends to continue to pursue additional resources to continue the development of our core products and the roll out of new products.

 

We had a working capital deficit of $24,096,385 as of March 31, 2022 as compared to a working capital deficit of $20,965,419 as December 31, 2021, respectively. The increase in the working capital deficit is the result of the incurrence of expenditures related to the commencement of the various products and the current potion of debt that is due in the next 12 months. The Company believes it has adequate capital resources to meet its cash requirements during the next 12 months as they continue to grow and develop suitable sources of capital. A majority of the Company’s operating expenses (over 60%) are the result of non-cash charges such as impairment of goodwill and stock-based compensation. The actual monthly cash burn of the Company is approximately $1,311,000 per month at this time and as our core products come online, this is likely to decrease as much of this is directly related to the in-house and outsourced technology team. As a result of the operating losses and working capital deficit, management has determined that there is substantial doubt about the Company’s ability to continue as a going concern.

 

We expect that the revenue generating operations of the Company will continue to improve the liquidity of the Company moving forward. However, going forward, the effect of the pandemic and rising interest rates on the capital markets may limit our ability to raise additional capital on the terms acceptable to us at the time we need it, if at all. The challenges related to remote work and travel restrictions that we as a smaller company have faced in striving to meet our disclosure obligations in a timely manner while taking the steps to protect the health and safety of our employees have impacted, and may continue to further impact, our ability to raise additional capital.

 

The consolidated financial statements of the Company have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable period. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of the uncertainties.

 

The Company has made strategic acquisitions in the first few months of 2022 to enhance their core products and their intellectual property. Management believes these acquisitions will result in increased profitability.

 

The Company plans to raise additional capital through the exercising of their warrants as well as through future debt and equity financings to carry out its business plan. Obtaining additional financing and the successful development of the Company’s segments including their new Blockchain Services group, ultimately, to profitable operations, are necessary for the Company to continue operations.

 

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Net cash used in operating activities was $3,935,405 and $878,267 for the three months ended March 31, 2022 and 2021, respectively. The $3,057,138 increase in net cash used in operating activities was primarily a result of the net loss increase from 2021 to 2022 and the increase in account payable and accrued expenses ($861,319) in 2022 as well as the valuation of our share-based compensation which includes the value of issuances of common stock, Series B Preferred Stock, warrants, options and includes the expenses related to shares of common stock to be issued in 2021 ($3,881,686) as well as other non-cash charges such as amortization of discounts ($1,570,300), expenses related to the settlement ($1,120,000), depreciation and amortization ($258,378) and the impairment of goodwill ($1,008,642).

 

Net cash used in investing activities was $157,185 for the three months ended March 31, 2022 related to purchases of fixed assets of $8,510 and cash paid, net of amounts received in the acquisition of Ixaya of $148,675. There were no investing activities in 2021.

 

Cash provided by financing activities was $6,500,837 and $10,000 for the three months ended March 31, 2022 and 2021, respectively. Cash was provided through proceeds from sales of membership interests in HUMBL LLC in 2021 of $10,000. In 2022, the Company raised $2,000,000 from the exercise of warrants and proceeds from related party notes in the amount of $4,500,837.

 

Since the date of the reverse merger in December 2020 we have financed our operations through sales of common and preferred stock and the issuance of debt.

 

December 31, 2021 and 2020 

 

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures.

 

As of December 31, 2021, we had $3,493,213 in cash. Between the growth in revenues by fees generated by HUMBL Financial and through sales of merchandise and NFTs in the HUMBL Marketplace, as well as revenue generated through our subsidiaries Tickeri, Inc. and Monster Creative LLC, along with the successful launches of the HUMBL Pay application, HUMBL Financial and HUMBL Tickets in 2021 as well as proceeds received from the exercise of warrants in October 2021, we have sufficient operating cash to continue the development of our core products and services.

 

We had a working capital deficit of $20,965,419 as of December 31, 2021 as compared to a working capital surplus of $1,560,832 as December 31, 2020, respectively. The decrease in working capital is the result of the incurrence of expenditures related to the commencement of the various segments and the current potion of debt that is due in the next 12 months. The Company believes it has adequate capital resources to meet its cash requirements during the next 12 months as they continue to grow and develop suitable sources of capital. A majority of the Company’s operating expenses (over 70%) are the result of non-cash charges such as impairment of goodwill and stock-based compensation. The actual monthly cash burn of the Company is approximately $1,000,000 per month at this time and as our core products come online, this is likely to decrease as much of this is directly related to our in house and outsourced technology team. The Company has received $2,000,000 in additional warrant exercises and $3,000,000 in related party debt proceeds in the first quarter to date of 2022, however, as a result of the operating losses and working capital deficit, management has determined that there is substantial doubt about the Company’s ability to continue as a going concern.

 

We expect that the revenue generating operations of the Company will continue to improve the liquidity of the Company moving forward. However, going forward, the effect of the pandemic on the capital markets may limit our ability to raise additional capital on the terms acceptable to us at the time we need it, if at all. The challenges related to remote work and travel restrictions that we as a smaller company have faced in striving to meet our disclosure obligations in a timely manner while taking the steps to protect the health and safety of our employees have impacted, and may continue to further impact, our ability to raise additional capital.

 

The consolidated financial statements of the Company have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable period. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of the uncertainties.

 

The Company has made strategic acquisitions in the first few months of 2022 to enhance their core products and their intellectual property. Management believes these acquisitions will result in increased profitability.

 

The Company plans to raise additional capital through the exercising of their warrants as well as through future debt and equity financings to carry out its business plan. Obtaining additional financing and the successful development of the Company’s segments including their new Blockchain Services group, ultimately, to profitable operations, are necessary for the Company to continue operations.

 

Net cash used in operating activities was $9,608,212 and $856,317 for the years ended December 31, 2021 and 2020, respectively. The $8,751,895 increase in net cash used in operating activities was primarily a result of the net loss increase from 2020 to 2021 and the increase in account payable and accrued expenses ($1,054,048) in 2021 as well as the valuation of our share-based compensation which includes the value of issuances of common stock, Series B Preferred Stock, warrants, options and includes the expenses related to shares of common stock to be issued in 2021 ($11,027,334) as well as other non-cash charges such as amortization of discounts ($838,941), expenses related to the settlement ($1,870,000) and the beneficial conversion feature ($3,300,000).

 

Net cash used in investing activities was $237,182 for the year ended December 31, 2021 related to purchases of fixed assets of $367,576 offset by cash received in the acquisitions of Tickeri, Inc and Monster Creative, LLC of $130,394. There were no investing activities in 2020.

 

Cash provided by financing activities was $11,617,628 and $2,572,441 for the years ended December 31, 2021 and 2020, respectively. Cash was provided through proceeds from sales of membership interests in HUMBL LLC in 2021 and 2020 of $10,000 and $1,307,441, respectively; $0 and $1,000,000 from the sales of warrants and country rights in 2021 and 2020, respectively; $0 and $40,000 in proceeds of notes payable in 2021 and 2020, respectively; payments of notes payable of $40,557 and $0 in 2021 and 2020, respectively; repayment of amounts to seller of $51,600 and $0 in 2021 and 2020, respectively; proceeds of $6,700,000 and $225,000 in convertible notes payable in 2021 and 2020, respectively; proceeds from sales of common stock of $1,000,000 and $0, in 2021 and 2020 respectively; redemption of Series B Preferred Stock of $215 and $0, respectively, and proceeds from the exercise of warrants of $4,000,000 and $0 in 2021 and 2020, respectively.

 

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Since the date of the reverse merger in December 2020 we have financed our operations through sales of common and preferred stock and the issuance of debt.

 

The main sources of convertible notes in 2021 were as follows:

 

  (a) On April 14, 2021, the Company entered into a Convertible Promissory Note with Brighton Capital Partners, LLC (“BCP”) in the amount of $3,300,000, which includes a $300,000 Original Issue Discount (the “BCP Note”). The BCP Note bears interest at ten percent (10%) per annum and matures July 14, 2022. The BCP Note is convertible into shares of the Company’s common stock at $3.15 per share. As per the BCP Note, the Company shall have the right to prepay all or any portion of the outstanding balance. If the Company exercises its right to prepay this note, it will be at an amount of 115% of the balance being prepaid. The BCP Note also contains a redemption right, where beginning on the earlier of the effective date of the to be filed Form S-1 Registration Statement and the twelve-month anniversary of the BCP Note, BCP may cause the Company to redeem all or any portion of the BCP Note.
     
  (b)

On April 14, 2021, the Company and BCP entered into an EFA (“EFA”), whereby, at the Company’s election, BCP shall invest up to $50,000,000 over the course of twelve months. This EFA was terminated in October 2021.

 

  (c) On May 13, 2021, the Company issued a convertible promissory note to an investor for $382,500 with an original issue discount of $7,500, for a term of twenty-two months maturing March 13, 2023. In addition, the Company issued warrants to the same investors to purchase up to 750,000 warrant shares with the convertible note.

 

  (d) On May 13, 2021, the Company issued a convertible promissory note to an investor for $420,750 with an original issue discount of $8,250, for a term of twenty-two months maturing March 13, 2023. In addition, the Company issued a warrant to the same investor to purchase up to 825,000 warrant shares with the convertible note.
     
  (e) On May 17, 2021, the Company issued a convertible promissory note to an investor for $1,020,000 with an original issue discount of $20,000, for a term of twenty-two months maturing March 17, 2023. The Company is required to register 1,500,000 shares under a Form S-1 Registration Statement for this convertible note agreement.
     
  (f) On May 19, 2021, the Company issued a convertible promissory note to an investor for $497,250 with an original issue discount of $9,750, for a term of twenty-two months maturing March 19, 2023. In addition, the Company issued a warrant to the same investor to purchase up to 975,000 warrant shares with the convertible note. The Company is required to register this convertible note under a Form S-1 Registration Statement.
     
  (g) On May 19, 2021, the Company issued a convertible promissory note to an investor for $76,500 with an original issue discount of $1,500, for a term of twenty-two months maturing March 19, 2023. In addition, the Company issued a warrant to the same investor to purchase up to 150,000 warrant shares with the convertible note. The Company is required to register this convertible note under a Form S-1 Registration Statement.

 

  (h) On May 19, 2021, the Company issued a convertible promissory note to an investor for $153,000 with an original issue discount of $3,000, for a term of twenty-two months maturing March 19, 2023. In addition, the Company issued a warrant to the same investor to purchase up to 300,000 warrant shares with the convertible note. The Company is required to register this convertible note under a Form S-1 Registration Statement.
     
  (i)

On April 26, 2021, the Company, issued 437,500 for the acquisition of the Chile country rights. The value of this transaction was $1,000,000 received in cash.

 

(j) On June 21, 2021, the Company issued a convertible promissory note to an investor for $382,500 with an original issue discount of $7,500, for a term of twenty-two months maturing April 21, 2023. In addition, the Company issued a warrant to the same investor to purchase up to 750,000 warrant shares with the convertible note. The Company recognized a BCF discount in the amount of $100,828 on this convertible note that is being amortized over the life of the convertible note.

 

(k) On June 21, 2021, the Company issued a convertible promissory note to an investor for $382,500 with an original issue discount of $7,500, for a term of twenty-two months maturing April 21, 2023. In addition, the Company issued a warrant to the same investor to purchase up to 750,000 warrant shares with the convertible note. The Company recognized a BCF discount in the amount of $100,828 on this convertible note that is being amortized over the life of the convertible note.

 

(l) On August 30, 2021, the Company issued a convertible promissory note to an investor for $153,000 with an original issue discount of $3,000, for a term of twenty-two months maturing June 30, 2023. In addition, the Company issued a warrant to the same investor to purchase up to 375,000 warrant shares with the convertible note.

 

(m) On November 12, 2021, the Company issued a convertible promissory note to an investor for $306,000 with an original issue discount of $6,000, for a term of twenty-two months maturing September 12, 2023. In addition, the Company issued a warrant to the same investor to purchase up to 1,000,000 warrant shares with the convertible note.

 

We will continue to fund business operations through sales of our products and services, additional financings, and the exercise of warrants being registered in this registration statement which we believe will be exercised in whole or in part over the next twelve to eighteen months.

 

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BUSINESS

 

Overview

 

We are a Web 3, digital commerce platform that was built to connect consumers, businesses and governments in the digital economy. HUMBL provides simple tools and packaging for complex new technologies such as blockchain, in the same way that previous cycles of e-commerce and the cloud were more simply packaged by companies such as Facebook, Apple, Amazon and Netflix over the past several decades. The Company through their product offerings are looking to simplify and package the tokenized blockchain economy for consumers, corporations and government.

 

Our goal is to provide ready built tools and platforms for consumers and merchants to seamlessly participate in the digital economy. HUMBL is built on a patent-pending decentralized technology stack that utilizes both core and partner technologies, to provide faster connections to the digital economy and each other. We have four principal wholly-owned subsidiaries through which we provide a number of our products: Tickeri, Inc., Monster Creative, LLC and Ixaya Business SA de CV.

 

HUMBL’s core products and services are as follows:

 

HUMBL Mobile Wallet – A mobile app that allows peers, consumers and merchants to connect in the digital economy;

 

HUMBL Marketplace – A mobile marketplace that allows consumers and merchants to connect more seamlessly in the digital economy; and

 

HUMBL Financial – Financial products and services, targeted for simplified investing on the blockchain.

 

HUMBL Blockchain Services – Enterprise solutions for businesses and governments related primarily to credentialing and identity verification.

 

HUMBL Mobile Wallet (formerly HUMBL Pay)

 

HUMBL continues the development of a mobile application that allows customers to migrate to and participate in the digital economy. The Company has integrated a variety of useful functionality such as buying, selling, sending and receiving digital assets, storing personal digital credentials and supporting various digital forms of payment. The Company is also working rapidly to integrate the use of search, discovery, peer-to-peer cash and ticketing around the world, as these services migrate into digital and blockchain-based modalities. The mobile application is designed to provide functionality to the following groups:

 

Individuals - Consumers who want to participate in acquiring digital assets discover, pay, rate and review experiences digitally vs. paper bills and hardware point-of-sale (“POS”);

 

Freelancers - Service providers and gig workers that want to get paid from anywhere they work vs. paper bills and hardware POS; and

 

Merchants – Primarily brick and mortar vendors that want to get paid digitally vs. paper bills and hardware POS.

 

We can receive revenue from the mobile wallet in two ways. First, HUMBL can participate in any transactional fees generated from customers using the HUMBL Pay app. In these circumstances HUMBL can typically collect a percentage of the transaction for providing these services. Second, HUMBL can charge a monthly subscription fee for users such as merchants and freelancers that use the app. Currently, we are not receiving revenue in either of these ways. The Company is not charging fees (in addition to those charged by the third-party services providers) as a way to provide competitive pricing and incentivize customers to use the app. We could begin charging these fees at any time.

 

We engage the services of providers such as Stripe to process payments and Wyre and BitGo to act as custodians of the digital assets purchased by our customers using our HUMBL Pay app. The digital assets purchased on our platform are actually purchased through the Wyre and held by Wyre for our customers’ benefit. No digital assets are purchased through BitGo, but they do act as a custodian for certain of our digital assets.

 

HUMBL Marketplace

 

Through its online marketplace, HUMBL is developing the capability for merchants to list a wide range of soft goods and digital assets to mid-market audiences, that, where appropriate, incorporate the benefits of blockchain. HUMBL is developing products to provide merchants with the ability to list and sell goods with greater levels of authentication, by using technologies such as the HUMBL Token Engine and HUMBL Origin Assurance, to improve the merchant’s ability to trade, track and pay for assets.

 

Through our online marketplace we also allow for the listing of non-fungible tokens (“NFTs”). NFTs allow entities and individuals such as athletes, celebrities, agencies, artists and companies to monetize their digital images, multimedia content and catalogues on the blockchain. HUMBL provides a marketplace for artists and athletes to connect online in the sale of digital collectibles to fans and collectors and provides a rigorous set of terms and conditions that govern what can and cannot be listed on the marketplace. We currently review all listings to screen for graphic content, potential intellectual property rights violations, and potential securities law violations. The NFT marketplace is operated through a third-party marketplace plug-in (OpenSea), electronic wallet extensions (such as MetaMask), and the Ethereum blockchain. Users participate in the NFT marketplace by linking their digital wallets to our platform and engaging (e.g., buying, selling, bidding) with the NFTs listed on our platform. The services provided by HUMBL are administrative. HUMBL is a platform and does not act as a broker, financial institution, or creditor. We facilitate transactions between the buyer and seller in the auction/sale process but we are not a party to any agreement between the buyer and seller or between any users.

 

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We receive revenue from the NFT marketplace in two ways. First, for some clients HUMBL provides design services to help artists, athletes and entertainers create NFTs to be sold to their fans. In these circumstances HUMBL typically receives a flat fee for providing such services that is paid out of the sales price of the NFT. The size of the fee depends on the scope and complexity of the design services provided. Second, HUMBL receives a transaction fee each time an NFT sells on the NFT marketplace. 

 

The NFT marketplace allows creators to mint NFTs using their own intellectual property and list those NFTs for sale (primary sales) on the marketplace. The NFT marketplace also allows for NFTs to be resold (secondary sales) on the platform, but currently only NFTs that were originally minted on the Company’s NFT Marketplace or are otherwise approved by the Company may be listed for secondary sales on the Marketplace. The Company does not otherwise support or influence the market for the resale of NFTs sold on its platform. Other than requiring creators to attest they own the IP used to create their NFTs and monitoring for obvious copyright violations, the Company does not enforce any rights related to the primary or secondary sales of NFTs. Payment transactions for the purchase and sale of NFTs are made through the use of smart contracts on the Ethereum blockchain.

 

The Company does not handle separate, off-chain payments for NFTs. Tracking and payment of resale royalty fees are accomplished automatically through the use of smart contracts. The Company is not responsible for distributing or managing resale royalty fees.

 

In September of 2021, HUMBL launched HUMBL Tickets, initially focused on the offering of secondary (resale) tickets to thousands of live events across North America. The inventory listings and ticket fulfillment are provided by Ticket Evolution and HUMBL earns a commission for each sale. In addition to its subsidiary Tickeri, the Company will continue to work with clients to merge the realms of NFTs, event tickets and blockchain authentication.

 

HUMBL Financial

 

HUMBL Financial was developed to package step-function technologies such as blockchain into “several clicks” for the customer.

 

In 2021, HUMBL Financial created BLOCK ETX products to simplify digital asset investing for customers and institutions seeking exposure to a new, 24/7 digital asset class. We have launched this product in 100 countries outside the United States. HUMBL Financial has developed proprietary, multi-factor blockchain indexes, trading algorithms and financial services for the new digital asset trading markets to accommodate index, active and thematic investment strategies. BLOCK ETXs are completely non-custodial, algorithmically driven software services that allow customers to purchase and hold digital assets in pre-set allocations through their own digital asset exchange accounts. BLOCK ETXs are compatible for United States customers who have accounts with Coinbase Pro, Bittrex US or Binance US and for non-US customers who have accounts with Bittrex Global. BLOCK ETXs were served first on the desktop and web version of the HUMBL platform, with the goal of future applications inside the HUMBL mobile application. HUMBL Financial is open to the licensing of the BLOCK ETXs to institutions and exchanges. HUMBL Financial also plans to offer trusted, third-party financial services in areas such as payments, investments, credit card services and lending across the HUMBL platform over time.

 

In February 2022, the Company elected to suspend offering the BLOCK ETX products pending further legal analysis regarding how to offer the BLOCK ETXs in a fully compliant manner with the evolving laws and regulatory treatment of such novel products. The Company will continue to monitor the regulatory environment with respect to these products. In accordance with ASC 205-20-50-1(a), the timing of the disposal was February 28, 2022. The Company met the criteria for the BLOCK ETX operations to be classified as held for sale at that time.

 

HUMBL Blockchain Services

 

HUMBL Blockchain Services (“HBS”) was formed as part of the Company’s asset acquisition of BizSecure on February 12, 2022. Recognizing the opportunities for governments and commercial enterprises to incorporate Blockchain and Distributed Ledger Technologies (“DLT”), HBS is focused on working with clients to identify problems and develop solutions that build upon the various capabilities the Company has and continues to develop. The Company determined this was an acquisition of a business pursuant to the guidance provided in both ASC 805 and Rule 11-01(d) of Regulation S-X. BizSecure is not considered a significant subsidiary under Regulation S-X Rule 1-02(w).

 

Our solutions enable municipalities, government agencies, and other commercial entities the ability to offer mobile IDs and other credential verification services to their constituents. We continue to make significant investments to leverage our existing technologies and further expand both our DLT capabilities and are always exploring strategic alternatives intended to optimize the value of our Company.

 

COVID-19

 

The unprecedented events related to COVID-19, the disease caused by the novel coronavirus (SARS-CoV-2), have had significant health, economic, and market impacts and may have short-term and long-term adverse effects on our business that we cannot predict as the global pandemic continues to evolve. The extent and effectiveness of responses by governments and other organizations also cannot be predicted.

 

Our ability to access the capital markets and maintain existing operations is unknown during the COVID-19 pandemic. Any such limitation on available financing and how we conduct business with our customers and vendors would adversely affect our business both domestically and abroad.

 

A list of our critical accounting policies are as follows:

 

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Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. These estimates include, but are not limited to, management’s estimate of provisions required for permanent and temporary differences related to income taxes, liabilities to accrue, estimates of the fair value of goodwill and determination of the fair value of stock awards. Actual results could differ from those estimates.

 

Segment Reporting

 

The Company follows the provisions of ASC 280-10 Segment Reporting. This standard requires that companies disclose operating segments based on the manner in which management disaggregates the Company in making internal operating decisions.

 

For 2021, the Company established three distinct operating segments: HUMBL Marketplace; HUMBL Pay; and HUMBL Financial. Most of the operations for the year ended December 31, 2021 were conducted in North America. Commencing January 1, 2022, the Company simplified their business model to segment their business into two distinct divisions: Consumer and Commercial. The 2021 segments were all considered part of the consumer division.

 

All of the Company’s sales are from North America, therefore the Company has determined that segment reporting by geographic location was not necessary. In the future, the Company will continue to monitor their activity by region to determine if it is feasible to report segment information by location.

 

Revenue Recognition

 

The Company accounts for a contract with a customer that is within the scope of this Topic only when the five steps of revenue recognition under ASC 606 are met.

 

The five core principles will be evaluated for each service provided by the Company and is further supported by applicable guidance in ASC 606 to support the Company’s recognition of revenue.

 

The Company accounts for revenues based on the verticals in which they were earned. The four principal verticals in which the Company operates today are HUMBL Mobile Wallet, HUMBL Marketplace, HUMBL Financial and HUMBL Blockchain Services.

 

HUMBL Mobile Wallet (formerly HUMBL Pay)

 

The Company is anticipated to earn transaction revenues primarily from fees charged to merchants and consumers on a transaction basis through the Company’s mobile application. These fees may have a fixed and/or variable component. The variable component is generally a percentage of the value of the payment amount and is known at the time the transaction is processed. For a portion of our transactions, the variable component of the fee is eligible for reimbursement when the underlying transaction is approved for a refund. The Company may estimate the amount of fee refunds that will be processed each quarter and record a provision against the net revenues. The volume of activity processed on the platform, which results in transaction revenue, is referred to as Total Payment Volume (“TPV”). The Company will earn additional fees on transactions where currency conversion is performed, when cross-border transactions are enabled (i.e., transactions where the merchant and consumer are in different countries), to facilitate the instant transfer of funds for customers from their HUMBL account to their debit card or bank account, and other miscellaneous fees. The Company will rely on third party partners to perform all money transmission services.

 

The Company may earn revenues from other value-added services, which are comprised primarily of revenue earned through partnerships, referral fees, subscription fees, gateway fees, ticketing, peer-to-peer payments and other services that will be provided to merchants and consumers. These contracts typically have one performance obligation which is provided and recognized over the term of the contract.

 

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The transaction price is generally fixed and known at the end of each reporting period; however, for some agreements, it may be necessary to estimate the transaction price using the expected value method. The Company is expected to record revenue earned in revenues from other value-added services on a net basis when they are considered the agent with respect to processing transactions.

 

HUMBL Marketplace

 

The Company recognizes revenue when its transfer control of promised goods or services to customers in an amount that reflects the consideration to which is expected to be entitled in exchange for those goods or services. Revenue is recognized net of any taxes collected, which are subsequently remitted to governmental authorities.

 

Net transaction revenues

 

The net transaction revenues will primarily include final value fees, feature fees, including fees to promote listings, and listing fees from sellers in our Marketplace. The net transaction revenues will also include store subscription and other fees often from large enterprise sellers. The net transaction revenues are reduced by incentives provided to customers.

 

The Company has identified one performance obligation to sellers on the Marketplace platform, which is to connect buyers and sellers on the secure and trusted Marketplace platforms. Final value fees are recognized when an item is sold on a Marketplace platform, satisfying this performance obligation. There may be additional services available to Marketplace sellers, mainly to promote or feature listings, that are not distinct within the context of the contract.

 

Accordingly, fees for these additional services are recognized when the single performance obligation is satisfied. Promoted listing fees are recognized when the item is sold and feature and listing fees are recognized when an item is sold, or when the contract expires.

 

Further, to drive traffic to the platform, the Company will provide incentives to buyers and sellers in various forms including discounts on fees, discounts on items sold, coupons and rewards. Evaluating whether a promotion or incentive is a payment to a customer may require significant judgment. Promotions and incentives which are consideration payable to a customer are recognized as a reduction of revenue at the later of when revenue is recognized or when the incentive is paid or promise to be paid. Promotions and incentives to most buyers on our Marketplace platforms, to whom there is no performance obligation, are recognized as sales and marketing expense. In addition, there may be credits provided to customers when certain fees are refunded. Credits are accounted for as variable consideration at contract inception when estimating the amount of revenue to be recognized when a performance obligation is satisfied to the extent that it is probable that a significant reversal of revenue will not occur and updated as additional information becomes available.

 

Ticketing Revenues

 

The Company with the acquisition of Tickeri and launch of HUMBL Tickets recognizes revenues from their ticketing services primarily from service fees, commissions and payment processing fees charged at the time a ticket for an event is sold. We also derive revenues from providing certain creators with account management services and customer support. Our customers are primarily event creators who use our platform to sell tickets to attendees. Revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration we receive in exchange for those goods or services. We allocate the transaction price by estimating a standalone selling price for each performance obligation using a cost plus a margin approach. For service fees and payment processing fees, revenue is recognized when the ticket is sold. For account management services and customer support, revenue is recognized over the period from the date of the sale of the ticket to the date of the event.

 

We evaluate whether it is appropriate to recognize revenue on a gross or net basis based upon our evaluation of whether we obtain control of the specified goods or services by considering if we are primarily responsible for fulfillment of the promise, have inventory risk, and have the latitude in establishing pricing and selecting suppliers, among other factors.

 

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We determined the event creator is the party responsible for fulfilling the promise to the attendee, as the creator is responsible for providing the event for which a ticket is sold, determines the price of the ticket and is responsible for providing a refund if the event is canceled. Our service is to provide a platform for the creator and event attendee to transact and our performance obligation is to facilitate and process that transaction and issue the ticket. The amount that we earn for our services is fixed. For the payment processing service, we determined that we are the principal in providing the service as we responsible for fulfilling the promise to process the payment and we have discretion and latitude in establishing the price of our service. Based on our assessment, we record revenue on a net basis related to our ticketing service and on a gross basis related to our payment processing service. As a result, costs incurred for processing the transactions are included in cost of net revenues in the consolidated statements of operations.

 

Revenue is presented net of indirect taxes, value-added taxes, creator royalties and reserves for customer refunds, payment chargebacks and estimated uncollectible amounts. If an event is cancelled by a creator, then any obligations to provide refunds to event attendees are the responsibility of that creator.

 

If a creator is unwilling or unable to fulfill their refund obligations, we may, at our discretion, provide attendee refunds. Revenue is also presented net of the amortization of creator signing fees when applicable. The benefit we receive by securing exclusive ticketing and payment processing rights with certain creators from creator signing fees is inseparable from the customer relationship with the creator and accordingly these fees are recorded as a reduction of revenue in the consolidated statements of operations.

 

Marketing services and other revenues

 

Marketing services and other revenues are derived principally from the sale of advertisements, classifieds fees, and revenue sharing arrangements. Advertising revenue is derived principally from the sale of online advertisements which are based on “impressions” (i.e., the number of times that an advertisement appears in pages viewed by users of our platforms) or “clicks” (which are generated each time users on our platforms click through our advertisements to an advertiser’s designated website) delivered to advertisers.

 

The Company uses the output method and apply the practical expedient to recognize advertising revenue in the amount to which they have a right to invoice. For contracts with target advertising commitments with rebates, estimated payout is accounted for as a variable consideration to the extent it is probable that a significant reversal of revenue will not occur.

 

HUMBL Financial

 

Revenue was recognized upon transfer of control of services to customers in an amount to which the Company expects to be entitled in exchange for those services. Service subscription revenue is recognized for the month in which services are provided. If a customer pays for an annual subscription, revenue is allocated over the months in the subscription and recognized for each month of the service provided.

 

In February 2022, the Company elected to suspend offering the BLOCK ETX products pending further legal analysis regarding how to offer the BLOCK ETXs in a fully compliant manner with the evolving laws and regulatory treatment of such novel products. The Company will continue to monitor the regulatory environment with respect to these products. In accordance with ASC 205-20-50-1(a), the timing of the disposal was February 28, 2022.

 

HUMBL Blockchain Services

 

The Company disaggregates revenue from contracts with customers into product revenues and services revenues.

 

Product revenue related contracts with customers begin upon contract inception when a purchase order for a specific customer order of a product to be delivered in the near term. These purchase orders are short-term in nature. Product revenue is recognized at a point in time upon shipment or upon customer receipt of the product, depending on shipping terms. The Company determined that this method best represents the transfer of goods as transfer of control typically occurs upon shipment or upon customer receipt of the product.

 

Service revenues primarily consist of revenues derived from maintenance support and the use of the Company’s service platforms and application programming interface (“APIs”) on a subscription basis. The Company generates this revenue from fees for maintenance and support, monthly active user fees, SaaS fees, and hosting and storage fees. In most cases, the subscription or transaction arrangement is a single performance obligation comprised of a series of distinct services that are substantially the same and that have the same pattern of transfer (i.e., distinct days of service). The Company applies a time-based measure of progress to the total transaction price, which results in ratable recognition over the term of the contract. The Company determined that this method best represents the transfer of services as the customer obtains equal benefit from the service throughout the service period.

 

The Company accounts for individual goods and services separately if they are distinct performance obligations, which often requires significant judgment based upon knowledge of the products and/or services, the solution provided and the structure of the sales contract. In SaaS agreements, the Company provides a service to the customer that combines the software functionality, maintenance and hosting into a single performance obligation. In product-related contracts, a purchase order may cover different products, each constituting a separate performance obligation.

 

Fixed Assets and Long-Lived Assets

 

ASC 360 requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company has adopted Accounting Standard Update (“ASU”) 2017-04 Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment.

 

The Company reviews recoverability of long-lived assets on a periodic basis whenever events and changes in circumstances have occurred which may indicate a possible impairment. The assessment for potential impairment is based primarily on the Company’s ability to recover the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. If such assets are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets.

 

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Fixed assets and intangible assets with finite useful lives are stated at cost less accumulated amortization and impairment. Intangible assets with infinite lives, such as digital currency are valued at costs and reviewed for indicators of impairment at least annually, or more depending on circumstances.

 

The Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following:

 

1. Significant underperformance relative to expected historical or projected future operating results;

 

2. Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and

 

3. Significant negative industry or economic trends.

 

When the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows.

 

Significant Vendor Relationships

 

We have established contractual relationships with the following companies that we consider to be material to providing our four core product groups, HUMBL Pay, HUMBL Marketplace and HUMBL Financial:

 

We need in each country or region a payment processing company to allow the consumers to pay online the merchants using our software services. In the United States we have a Platform Connect Agreement and Services Agreement with Stripe, Inc. as well a Referral Agreement with Wyre, Inc. In South America we have a Payment Processing Services Agreement with Bexs Tehnologia Da Informacao LTDA. We have entered into the standard forms of agreements that these companies offer to companies such as ours that promote online purchase of goods and services.

 

We utilize Gumroad, an online platform that facilitates the sale of products by creators directly to consumer, to process payments for the monthly fee that HUMBL Financial charges its customers to use the service.

 

We utilize Very Good Security (“VGS”), a company that encrypts debit and credit card data as well as banking information, that allows us not to hold onto, see or decrypt any of the raw credit card or banking data from our customers since this information is handled directly by VGS which encrypts all of it and securely sends this data directly to Stripe.

 

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Competition

 

Each of our principal verticals is highly competitive. Throughout the globe, we currently face substantial competition from other service providers that offer mobile payments, ticketing, NFT marketplaces and digital asset investing products. We compete primarily on the basis of availability of services and products, unique product offerings and price.

 

HUMBL Pay competes with PayPal and Square.

 

HUMBL Marketplace competes with OpenSea, an open, decentralized marketplace for a large variety of digital items—from game items to digital collectibles to digital art, Makers Place, a digital creation platform powered by blockchain technology for digital creators, and Live Nation Entertainment, the world’s largest ticketing company.

 

HUMBL Financial competes with companies such as Shrimpy and Stacked Invest that also provide digital asset investing opportunities.

 

Employees and Human Capital

 

As of June 30, 2022, we had 38 full time employees. None of our employees or personnel is represented by a labor union, and we consider our employee/personnel relations to be good. Competition for qualified personnel in our industry is intense, particularly for software development and other technical staff. Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants.

 

Properties

 

We purchased a commercial property in the form of a suite at a luxury hotel. HUMBL is the owner of this suite and entered into a long-term rental agreement with the hotel to manage the property. HUMBL has use of the suite for 28 calendar days a year, and will receive their proportionate income for the other days the suite is being used. We currently rent an office in San Diego, California at a monthly cost of $12,400 on a six-month lease (“Company Headquarters”). We believe that the Company Headquarters is currently adequate for the purposes of our operations.

 

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Legal Proceedings

 

We recently received from Charles Lass a notification that he had filed four trademark applications using the HUMBL name in various classes. We have advised Mr. Lass through our trademark counsel that he should immediately discontinue any use of the trademark for similar services regarding his claims of ownership of the trademark HUMBL and reminded him that we had various trademarks issued under the name HUMBL with a first use date of April 1, 2018 and that his previous attempt at using the HUMBL name had resulted in him receiving a cease and desist letter from us dated April 14, 2020 regarding his since abandoned trademark filings for HUMBL. On April 11, 2021, Mr. Lass filed an action with the USPTO seeking to cancel our trademark. After initiating the action; however, Mr. Lass failed to take any steps to pursue action and did not respond to our discovery requests. As a result of Mr. Lass’s failure to prosecute the action, on March 28, 2022, we filed a motion for involuntary dismissal of the cancellation proceeding. The USPTO Trademark Trial and Appeal Board granted our motion and dismissed the proceeding. We consider this matter to be fully resolved.

 

We have been made aware of a lawsuit that has been filed, but not yet served, in the United States District Court for the Southern District of California styled Matt Pasquinelli and Bryan Paysen v. HUMBL, LLC, Brian Foote, Jeffrey Hinshaw and George Sharp, Case No.22CV0723 AJB BLM, which is a class action on behalf of shareholders of the Company since November 21, 2020 for alleged violations of the federal securities laws by allegedly making false and misleading statements regarding our business and operations, more specifically that the HUMBL Pay App did not have the functionality that it promised to investors and that several international business partnership had a low chance of contributing material revenues to our bottom line and that we sold unregistered securities through our BLOCK Exchange Traded Index products, all of which plaintiffs allege caused a decline in the market value of our shares of common stock. Plaintiffs seek unspecified monetary damages. We intend to vigorously defend the actions of the defendants and contest what we believe are baseless claims.

 

MANAGEMENT

 

Set forth below is certain information regarding our executive officers and directors. Each of the directors listed below was elected to our board of directors to serve until our next annual meeting of stockholders or until his or her successor is elected and qualified. All directors hold office for one-year terms until the election and qualification of their successors. The following table sets forth information regarding the members of our board of directors and our executive officers:

 

The following persons are the executive officers and directors of our Company:

 

Name   Age   Position
Brian Foote   42   President; Chief Executive Officer; Chairman
Jeffrey Hinshaw   34   Chief Operating Officer; Chief Financial Officer; Director
William B. Hoagland   40   Director
Peter Schulte   64   Director
Michele Rivera   46   Vice President, Global Partnerships; Director
Javier Gonzalez   34   Chief Technology Officer

 

Brian Foote has been our Chairman, President and Chief Executive Officer since November 24, 2020. Immediately prior to co-founding our predecessor entity HUMBL LLC in May 2019 (“HUMBL LLC”), Mr. Foote worked as a Strategic Consultant across a variety of projects at Epson from January 2011 to May 2019 including omnichannel marketing, sales and product launch strategies. From March 2005 to February 2011, Mr. Foote worked as a Senior VP of Sales and Marketing at The Wilkinson Group, a consulting group specializing in events and sponsorships. We believe that the broad business experience of Mr. Foote, including his experience with the daily operations of companies as well as with the challenges of growing companies, makes him qualified to be a member of our Board of Directors.

 

Jeffrey Hinshaw has served as our Chief Operating Officer, Chief Financial Officer, Corporate Secretary and a member of our Board of Directors since November 24, 2020. Immediately prior to co-founding HUMBL LLC in May 2019, Mr. Hinshaw worked as an adjunct faculty at San Diego State University. From July 2017 to November 2017, Mr. Hinshaw worked as a business analyst at Sempra Energy. From February 2015 to November 2018, Mr. Hinshaw worked as a strategic advisor to Balance Tracking Systems. From August 2012 to May 2014, Mr. Hinshaw worked as a graduate researcher in biomechanics at San Diego State University. We believe that this varied experience makes him qualified to be a member of our Board of Directors.

 

William B. Hoagland has served as a member of our Board of Directors since July 23, 2021. Since 2019, Mr. Hoagland has served as the Chief Executive Officer of Agora Digital Holdings, Inc. and Chief Financial Officer of Ecoark Holdings, Inc. Immediately prior to joining Ecoark Holdings, Inc. in 2019, Mr. Hoagland spent the previous eight years as Managing Member of Trend Discovery Capital Management (“Trend Discovery”), a hybrid hedge fund with a track record of outperforming the S&P 500. Prior to founding Trend Discovery in 2011, Mr. Hoagland spent six years as a Senior Associate at Prudential Global Investment Management (PGIM), working in both PGIM’s Newark, NJ and London, England offices. Mr. Hoagland holds the Chartered Financial Analyst designation and is a Level III candidate in the Chartered Market Technician Program. We believe that this financial expertise and knowledge of the capital markets makes him qualified to be a member of our Board of Directors.

 

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Peter Schulte has served as a member of our Board of Directors since September 24, 2021. Mr. Schulte holds the position of Managing Partner and Co-founder of private equity firm CM Equity Partners. His past experience includes public and private debt and equity financing and M&A at Salomon Brothers Inc. and large systems marketing at IBM’s Data Processing Division. Mr. Schulte has also established two successful publicly traded companies: ICF International and ATS Corporation. Mr. Schulte currently serves as a member of the Board of Directors at Black ICE Holdings, Citizant, Inc., and JANUS Research Group, Inc. among others. Mr. Schulte is a graduate of Harvard College (AB) and also holds a Master’s degree in Public and Private Management (MPPM) from Yale University. We believe that Mr. Schulte’s public company and capital market experience makes him qualified to be a member of our Board of Directors.

 

Michele Rivera has served as Vice President, Global Partnerships and has been a member of our Board of Directors since November 24, 2020. Prior to co-founding HUMBL LLC in May 2019, Ms. Rivera was a Retailer with ECSD from November 2018 to February 2019. Prior to that, Ms. Rivera worked as a Home Furnishings Retailer at Williams Sonoma Inc. from October 1999 to October 2018. We believe that the business experience of Ms. Rivera, including her experience with the daily operations of companies as well as with the challenges of growing companies, makes her qualified to be a member of our Board of Directors.

 

Javier Gonzalez has served as our Chief Technology Officer since June 3, 2021. Since November 2010, Mr. Gonzalez has worked as the Chief Technology Officer of Tickeri, Inc., a leading ticket broker in the Latin American and Caribbean ticketing market. From January 2008 to January 2015, Mr. Gonzalez also worked as the Chief Technology Officer of Kesta Happenings. From November 2007 to April 2013, Mr. Gonzalez worked as a Software Engineer for AboutWeb.

 

Board of Directors and Corporate Governance

 

When considering whether directors have the experience, qualifications, attributes and skills to enable the Board of Directors to satisfy its oversight responsibilities effectively in light of our business and structure, the Board of Directors focuses primarily on the information discussed in each of the directors’ individual biographies as set forth above. With regard to Mr. Foote, the Board considered their day-to-day operational leadership of our company and in-depth knowledge of our business and experience in corporate management that will assist our corporate governance.

 

The Board of Directors periodically reviews relationships that directors have with our company to determine whether the directors are independent. Directors are considered “independent” as long as they do not accept any consulting, advisory or other compensatory fee (other than director fees) from us, are not an affiliated person of our company or our subsidiaries (e.g., an officer or a greater than 10% stockholder) and are independent within the meaning of applicable United States laws, regulations and the Nasdaq Capital Market listing rules. In this latter regard, the Board of Directors uses the Nasdaq Marketplace Rules (specifically, Section 5605(a)(2) of such rules) as a benchmark for determining which, if any, of our directors are independent, solely in order to comply with applicable SEC disclosure rules.

 

Director or Officer Involvement in Certain Legal Proceedings

 

Our directors and executive officers were not involved in any legal proceedings as described in Item 401(f) of Regulation S-K in the past ten years.

 

Directors and Officers Liability Insurance

 

HUMBL has had a directors’ and officers’ liability insurance policy in place since September 7, 2021. Our officers and directors have indemnification rights under applicable laws, and our certificate of incorporation and bylaws.

 

Committees of the Board of Directors

 

Our Board of Directors has appointed an audit committee, a compensation committee and a nominating and corporate governance committee, each of which has the composition and responsibilities described below.

 

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Audit Committee

 

The Company’s audit committee consists of William B. Hoagland, Peter Schulte and Jeffrey Hinshaw. The Board has determined that Messrs. Schulte and Hoagland are financially literate and qualify as independent directors under Section 5605(a)(2) and Section 5605(c)(2) of the Nasdaq rules. Mr. Hoagland will be the chairman of our audit committee and he qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K.

 

Our audit committee has adopted a written audit committee charter, viewable at https://humbl.com/auditcommittee, that provides that the functions of our audit committee include, among other things:

 

  selecting a qualified firm to serve as the independent registered public accounting firm to audit our financial statements;

 

  helping to ensure the independence and performance of the independent registered public accounting firm;

 

  discussing the scope and results of the audit with the independent registered public accounting firm, and reviewing, with management and the independent accountants, our interim and year-end operating results;

 

  developing procedures for employees to submit concerns anonymously about questionable accounting or audit matters;

 

  reviewing our policies on risk assessment and risk management;

 

  reviewing and approving related party transactions;

 

  obtaining and reviewing a report by the independent registered public accounting firm, at least annually, that describes our internal quality-control procedures, any material issues with such procedures, and any steps taken to deal with such issues when required by applicable law; and

 

  approving (or, as permitted, pre-approving) all audit and all permissible non-audit services, other than de minimis non-audit services, to be performed by the independent registered public accounting firm.

 

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Compensation Committee

 

Our compensation committee is comprised of Peter Schulte, William B. Hoagland and Brian Foote. Our board has determined that each of Messrs. Schulte and Hoagland qualifies as an independent director under Section 5605(a)(2) of the Nasdaq rules and a “non-employee director” for purposes of Section 16b-3 under the Exchange Act and does not have a material relationship with us that would affect his ability to be independent from management in connection with the duties of a compensation committee member, as described in Section 5605(d)(2) of the Nasdaq rules. Mr. Schulte will be the chairman of our compensation committee.

 

Our compensation committee has adopted a written compensation committee charter, viewable at https://humbl.com/compensationcommittee, that provides that the functions of our compensation committee include, among other things:

 

  reviewing and approving, or recommending to our board of directors for approval, the compensation of our executive officers and any compensatory arrangement with our executive officers;

 

  reviewing and recommending to our board of directors for approval the compensation of our directors and any changes to their compensation;

 

  reviewing and approving, or recommending to our board of directors for approval, and administering incentive compensation and equity incentive plans; and

 

  reviewing and establishing general policies relating to compensation and benefits of our employees and reviewing our overall compensation philosophy.

 

Nominating and Corporate Governance Committee

 

Our corporate governance committee is comprised of Peter. Schulte, William B. Hoagland and Michele Rivera. Our board has determined that each of Messrs. Schulte and Hoagland qualifies as an independent director under Section 5605(a)(2) of the Nasdaq rules. Mr. Schulte is the chairman of our nominating and corporate governance committee.

 

Our nominating and corporate governance committee will have adopted a written nominating and corporate governance committee charter, viewable at https://humbl.com/nominatingandgovernance, that provides that the functions of our nominating and corporate governance committee include, among other things:

 

  identifying, evaluating and selecting, or making recommendations to our board of directors regarding, nominees for election to our board of directors and its committees;

 

  overseeing the evaluation and the performance of our board of directors and of individual directors;

 

  considering and making recommendations to our board of directors regarding the composition of our board of directors and its committees;

 

  overseeing our corporate governance practices;

 

  contributing to succession planning; and

 

  developing and making recommendations to our board of directors regarding corporate governance guidelines and matters.
 

Compensation Committee Interlocks and Insider Participation

 

None of our directors or executive officers serves as a member of the board of directors or compensation committee of any other entity that has one or more of its executive officers serving as a member of our board of directors.

 

Code of Ethics

 

We have adopted a written code of ethics that applies to all of our directors, officers and employees in accordance with the rules of the Nasdaq Capital Market and the SEC. We will post a copy of our code of ethics on our website, and intend to post amendments to this code, or any waivers of its requirements, as well.

 

Conflicts of Interest

 

We comply with applicable state law with respect to transactions (including business opportunities) involving potential conflicts. Applicable state corporate law requires that all transactions involving our company and any director or executive officer (or other entities with which they are affiliated) are subject to full disclosure and approval of the majority of the disinterested independent members of our Board of Directors, approval of the majority of our stockholders or the determination that the contract or transaction is intrinsically fair to us. More particularly, our policy is to have any related party transaction (i.e., transactions involving a director, an officer or an affiliate of our company) be approved solely by a majority of the disinterested independent directors serving on the Board of Directors. We expect to have at least three independent directors serving on the Board of Directors and intend to maintain a Board of Directors consisting of a majority of independent directors.

 

Indemnification of Directors and Executive Officers

 

Section 145 of the Delaware General Corporation Law provides for, under certain circumstances, the indemnification of our officers, directors, employees and agents against liabilities that they may incur in such capacities. Below is a summary of the circumstances in which such indemnification is provided.

 

In general, the statute provides that any director, officer, employee or agent of a corporation may be indemnified against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement, actually and reasonably incurred in a proceeding (including any civil, criminal, administrative or investigative proceeding) to which the individual was a party by reason of such status. Such indemnity may be provided if the indemnified person’s actions resulting in the liabilities: (i) were taken in good faith; (ii) were reasonably believed to have been in or not opposed to our best interests; and (iii) with respect to any criminal action, such person had no reasonable cause to believe the actions were unlawful. Unless ordered by a court, indemnification generally may be awarded only after a determination of independent members of the Board of Directors or a committee thereof, by independent legal counsel or by vote of the stockholders that the applicable standard of conduct was met by the individual to be indemnified.

 

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The statutory provisions further provide that to the extent a director, officer, employee or agent is wholly successful on the merits or otherwise in defense of any proceeding to which he or she was a party, he or she is entitled to receive indemnification against expenses, including attorneys’ fees, actually and reasonably incurred in connection with the proceeding.

 

Indemnification in connection with a proceeding by us or in our right in which the director, officer, employee or agent is successful is permitted only with respect to expenses, including attorneys’ fees actually and reasonably incurred in connection with the defense. In such actions, the person to be indemnified must have acted in good faith, in a manner believed to have been in our best interests and must not have been adjudged liable to us, unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability, in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expense which the Court of Chancery or such other court shall deem proper. Indemnification is otherwise prohibited in connection with a proceeding brought on our behalf in which a director is adjudged liable to us, or in connection with any proceeding charging improper personal benefit to the director in which the director is adjudged liable for receipt of an improper personal benefit.

 

Delaware law authorizes us to reimburse or pay reasonable expenses incurred by a director, officer, employee or agent in connection with a proceeding in advance of a final disposition of the matter. Such advances of expenses are permitted if the person furnishes to us a written agreement to repay such advances if it is determined that he or she is not entitled to be indemnified by us.

 

The statutory section cited above further specifies that any provisions for indemnification of or advances for expenses does not exclude other rights under our certificate of incorporation, by-laws, resolutions of our stockholders or disinterested directors, or otherwise. These indemnification provisions continue for a person who has ceased to be a director, officer, employee or agent of the corporation and inure to the benefit of the heirs, executors and administrators of such persons.

 

The statutory provision cited above also grants us the power to purchase and maintain insurance policies that protect any director, officer, employee or agent against any liability asserted against or incurred by him or her in such capacity arising out of his or her status as such. Such policies may provide for indemnification whether or not the corporation would otherwise have the power to provide for it.

 

At present, we do not maintain directors’ and officers’ liability insurance in order to limit the exposure to liability for indemnification of directors and officers, including liabilities under the Securities Act; however, we are in the process of obtaining such insurance.

 

EXECUTIVE COMPENSATION

 

Summary Compensation Table

 

The following table sets forth the cash and non-cash compensation awarded to or earned by: (i) each individual who served as the principal executive officer and principal financial officer of the Company during the years ended December 31, 2021 and 2020; and (ii) each other individual that served as an executive officer of the Company at the conclusion of the years ended December 31, 2021 and 2020 and who received more than $100,000 in the form of salary and bonus during such year. For purposes of this report, these individuals are collectively the “named executive officers” of our Company.

 

Name and Position  Years   Salary   Bonus   Stock Awards   Option Awards   Non-equity Incentive Plan Compensation   Non-qualified Deferred Compensation Earnings   All Other Compensation   Total 
                                     
Brian Foote,   2021   $1    -    -    -    -    -    -   $1 
Chairman, President and Chief Executive Officer   2020   $30,000    -    -    -    -    -    -   $30,000 
                                              
Jeffrey Hinshaw   2021   $90,000    -    -    -    -    -    -   $90,000 
Chief Operating Officer, Chief Financial Officer   2020   $48,750    -    -    -    -    -        $48,750 
                                              
William B. Hoagland,   2021    

25,000

         

146,340

                       $

146,340

25,000

 
Director   2020    -    -    -    -    -    -         - 
                                              
Peter Schulte, Director   2021    -         

250,000

                       $

250,000

 
    2020    -                                  - 
              -    -    -    -    -           
Michele Rivera   2021   $90,000                                 $90,000 
Vice President, Global Partnerships   2020   $53,900    -    -    -    -    -    -   $53,900 

 

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Employment and Advisory Agreements

 

On June 3, 2021, we entered into an employment agreement with Javier Gonzalez, our Chief Technology Officer and Juan Luis Gonzalez, the CEO of our subsidiary, Tickeri, Inc. The employment agreements provide that each executive will receive a salary of $150,000 a year. On June 30, 2021, Doug Brandt and Kevin Childress entered into employment agreements with our subsidiary, Monster Creative, LLC. Pursuant to those employment agreements, Mr. Brandt will be paid $500,000 a year and Mr. Childress will be paid $400,000 a year. Mr. Brandt will act as Chief Executive Officer of Monster Creative, LLC and Mr. Childress will act as President and Creative Director of Monster Creative, LLC. On July 13, 2021, we entered into a new employment agreement with Brian Foote, our Chairman, President and Chief Executive Officer; Jeffrey Hinshaw, our Chief Operating Officer, and Corporate Secretary; and Michele Rivera, our Vice President, Global Partnerships. The employment agreements are all in the same form and provide that Mr. Foote will receive a salary of $1 and each of the other three officers will receive salaries of $90,000 a year.

 

Each of the above employment agreements provides for termination by us upon the death or disability (defined as three aggregate months of incapacity during any 365-consecutive day period) or upon conviction of a felony crime of moral turpitude or a material breach of his obligations to us. In the event the employment agreement is terminated by us without cause or the employee resigns for good reason, the terminated employee will be entitled to compensation for the balance of the term.

 

Each executive also entered into a confidentiality and invention assignment agreement in conjunction with his or her employment agreement which contains covenants prohibiting him or her from disclosure of confidential information regarding our company at any time. The employment agreements for Juan Gonzalez, Javier Gonzalez, Doug Brandt and Kevin Childress also contain covenants restricting them from competing against the Company and its subsidiaries during the term of their employment and for a period of time thereafter.

 

Equity Compensation Plan Information

 

On July 21, 2021, our Board of Directors and stockholders adopted our 2021 Stock Incentive Plan (the “2021 Plan”). The purpose of the Plan is to provide an incentive to attract and retain directors, officers, consultants, advisors and employees whose services are considered valuable, to encourage a sense of proprietorship, and to stimulate an active interest of these persons in our development and financial success. Under the Plan, we are authorized to issue up to 20,000,000 shares of Common Stock, including incentive stock options intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended, non-qualified stock options, stock appreciation rights, performance shares, restricted stock and long-term incentive awards.

 

Administration. The 2021 Plan is administered by the Board of Directors or the committee or committees as may be appointed by the Board of Directors from time to time (the “Administrator”). The Administrator determines the persons who are to receive awards, the types of awards to be granted, the number of shares subject to each such award and the terms and conditions of such awards. The Administrator also has the authority to interpret the provisions of the 2021 Plan and of any awards granted there under and to modify awards granted under the 2021 Plan. The Administrator may not, however, reduce the price of options or stock appreciation rights issued under the 2021 Plan without prior approval of the Company’s shareholders.

 

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Eligibility. The 2021 Plan provides that awards may be granted to employees, officers, directors and consultants of the Company or of any parent, subsidiary or other affiliate of the Company as the Administrator may determine. A person may be granted more than one award under the 2021 Plan.

 

Shares that are subject to issuance upon exercise of an option under the 2021 Plan but cease to be subject to such option for any reason (other than exercise of such option), and shares that are subject to an award granted under the 2021 Plan but are forfeited or repurchased by the Company at the original issue price, or that are subject to an award that terminates without shares being issued, will again be available for grant and issuance under the 2021 Plan.

 

Terms of Options and Stock Appreciation Rights. The Administrator determines many of the terms and conditions of each option and SAR granted under the 2021 Plan, including whether the option is to be an incentive stock option or a non-qualified stock option, whether the SAR is a related SAR or a freestanding SAR, the number of shares subject to each option or SAR, and the exercise price of the option and the periods during which the option or SAR may be exercised. Each option and SAR is evidenced by a grant agreement in such form as the Administrator approves and is subject to the following conditions (as described in further detail in the 2021 Plan):

 

(a) Vesting and Exercisability: Options, restricted shares and SARs become vested and exercisable, as applicable, within such periods, or upon such events, as determined by the Administrator in its discretion and as set forth in the related grant agreement. The term of each option is also set by the Administrator. However, a related SAR will be exercisable at the time or times, and only to the extent, that the option is exercisable and will not be transferable except to the extent that the option is transferable. A freestanding SAR will be exercisable as determined by the Administrator but in no event after 10 years from the date of grant.

 

(b) Exercise Price: Each grant agreement states the related option exercise price, which, in the case of SARs, may not be less than 100% of the fair market value of the Company’s shares of common stock on the date of the grant. The exercise price of an incentive stock option granted to a 10% stockholder may not be less than 110% of the fair market value of shares of the Company’s common stock on the date of grant.

 

(c) Method of Exercise: The option exercise price is typically payable in cash, common stock or a combination of cash of common stock, as determined by the Administrator, but may also be payable, at the discretion of the Administrator, in a number of other forms of consideration.

 

(d) Recapitalization; Change of Control: The number of shares subject to any award, and the number of shares issuable under the 2021 Plan, are subject to proportionate adjustment in the event of a stock dividend, spin-off, split-up, recapitalization, merger, consolidation, business combination or exchange of shares and the like. Except as otherwise provided in any written agreement between the participant and the Company in effect when a change in control occurs, in the event an acquiring company does not assume plan awards (i) all outstanding options and SARs shall become fully vested and exercisable; (ii) for performance-based awards, all performance goals or performance criteria shall be deemed achieved at target levels and all other terms and conditions met, with award payout prorated for the portion of the performance period completed as of the change in control and payment to occur within 45 days of the change in control; (iii) all restrictions and conditional applicable to any restricted stock award shall lapse; (iv) all restrictions and conditions applicable to any restricted stock units shall lapse and payment shall be made within 45 days of the change in control; and (v) all other awards shall be delivered or paid within 45 days of the change in control.

 

(e) Other Provisions: The option grant and exercise agreements authorized under the 2021 Plan, which may be different for each option, may contain such other provisions as the Administrator deems advisable, including without limitation, (i) restrictions upon the exercise of the option and (ii) a right of repurchase in favor of the Company to repurchase unvested shares held by an optionee upon termination of the optionee’s employment at the original purchase price.

 

Amendment and Termination of the 2021 Plan. The Administrator, to the extent permitted by law, and with respect to any shares at the time not subject to awards, may suspend or discontinue the 2021 Plan or amend the 2021 Plan in any respect; provided that the Administrator may not, without approval of the stockholders, amend the 2021 Plan in a manner that requires stockholder approval.

 

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PRINCIPAL SECURITYHOLDERS

 

The following table sets forth certain information as of May 20, 2022, the beneficial ownership of our common stock by the following persons:

 

  each person or entity who, to our knowledge, owns more than 5% of our common stock;
     
  our executive officers named in the Summary Compensation Table above;
     
  each director; and
     
  all of our executive officers and directors as a group.

 

Unless otherwise indicated in the footnotes to the following table, each person named in the table has sole voting and investment power and that person’s address is c/o 600 B Street, San Diego, California 92102, and our telephone number is (786) 738-9012. Shares of common stock subject to options, warrants, or other rights currently exercisable or exercisable within 60 days of the date of this prospectus, are deemed to be beneficially owned and outstanding for computing the share ownership and percentage of the stockholder holding the options, warrants or other rights, but are not deemed outstanding for computing the percentage of any other stockholder.

 

Name and Address of Beneficial Owner  Class of Securities  # of Shares   % of Class   % of Voting Shares(2) 
                
Brian Foote(1)  Common   11,894,304    *    * 
   Series A Preferred   7,000,000    100%   51.9%
   Series B Preferred   243,421    49.05%   18.03%
                   
Jeffrey Hinshaw(1)  Common   75,940,000    6.72%   * 
   Series B Preferred   32,675    6.58%   2.42%
                   
Michele Rivera(1)  Common   30,460,000    3.22%   * 
   Series B Preferred   25,669    5.11%   1.9%
                   
William B. Hoagland  Common   150,000    *     * 
                   
Peter Schulte  Common   287,422    *    * 
                   
Javier Gonzalez  Common   4,672,897     *    * 
   Series B Preferred   25    *      
                   
Mark Grado  Series B Preferred   42,866    10.56%   3.88%
                   
All Officers and Directors as a Group (6 persons)                  
Common      123,404,623    7.78%   *%
Series A Preferred      7,000,000    100%   51.87%
Series B Preferred      301,790    

61.48

%   22.36%

 

(1) Officer and/or director of our Company.
(2) Voting control is based on a total of 13,495,214,389 voting rights attributable to shares of our commons stock with one vote per share, shares of our Series A Preferred stock with 1,000 votes per share and shares of our Series B Preferred stock with 10,000 votes per share.

 

* less than 1% of the issued and outstanding shares of common stock.

 

We have agreed to keep such registration effective until all shares of common stock can be sold without registration pursuant to Rule 144 under the Securities Act.

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

Except as set forth below, during the past three years, there have been no transactions, whether directly or indirectly, between the Company and any of its officers, directors or their family members.

 

Brian Foote’s parents, sister and cousin were investors in HUMBL LLC and are investors in Brighton Capital. The foregoing relatives own approximately 26.67% of the investor interests in Brighton Capital and have no management or control rights over the operations of Brighton Capital. Brian Foote’s parents are the trustees of the trust that owns Sartorii.

 

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DESCRIPTION OF SECURITIES

 

Authorized Capital Stock

 

Our authorized capital stock consists of 7,450,000,000 shares of common stock, par value $0.00001 per share, and 10,000,000 shares of “blank check” preferred stock, par value $0.00001 per share.

 

Issued and Outstanding Capital Stock

 

The issued and outstanding securities of the Company on the date of this prospectus are as follows:

 

  1,586,394,389 shares of common stock;
     
  7,000,000 shares of Series A preferred stock;
     
  490,882 shares of Series B preferred stock; and
     
  Warrants to purchase 283,650,000 shares of common stock at a range of $0.20 to $1.00 per share and stock options to purchase 9,290,000 shares of common stock at a range of $0.0983 to $0.70 per share.

 

Description of Common Stock

 

The holders of common stock are entitled to one vote per share on all matters submitted to a vote of the stockholders, including the election of directors. Generally, all matters to be voted on by stockholders must be approved by a majority (or, in the case of election of directors, by a plurality) of the votes entitled to be cast by all shares of common stock that are present in person or represented by proxy. Except as otherwise provided by law, amendments to the articles of incorporation generally must be approved by a majority of the votes entitled to be cast by all outstanding shares of common stock. Our Articles of Incorporation do not provide for cumulative voting in the election of directors. The common stockholders will be entitled to such cash dividends as may be declared from time to time by the Board from funds available. Upon liquidation, dissolution or winding up of the Company, the common stockholders will be entitled to receive pro rata all assets available for distribution to such holders.

 

Description of Preferred Stock

 

We have 10,000,000 shares of preferred stock authorized of which we have designated 7,000,000 shares of Series A preferred stock, 570,000 shares of Series B preferred stock and we had 150,000 shares of Series C preferred stock prior to withdrawing them on October 29, 2021.

 

Voting Rights

 

Holders of our Series A preferred stock are entitled to 1,000 votes for each share held on all matters submitted to a vote of stockholders, holders of our Series B preferred stock are entitled to 10,000 votes for each share held on all matters submitted to a vote of stockholders, and holders of our Series C preferred stock are entitled to 5,000 votes for each share hold on all matters submitted to a vote of stockholders on any matter that is submitted to a vote of stockholders.

 

Conversion Rights

 

Only our Series B preferred stock is convertible into common stock. Holders of Series B preferred stock may at any time after December 3, 2021 convert each share of Series B preferred stock into 10,000 shares of common stock.

 

On October 29, 2021, the Company by Board consent approved an amendment to their Certificate of Amendment for the Series B Preferred Stock to (a) reduce the number of authorized shares of Series B Preferred stock to 570,000 and (b) for Series B Preferred shareholders holding greater than 750 shares of Series B Preferred Stock, for the calendar months of December 2021 and January 2022, Series B Preferred shareholders shall not have the right, whether by election, operation of law, or otherwise, to convert into Common Stock shares of Series B Preferred stock constituting more than 5% of the total number of Series B Preferred shares held by them; and for each of the calendar months from February 2022 to May 2023, the percentage that the Series B Preferred shareholder may convert is 3% of the total number of Series B Preferred shares held by them. This action was approved by Series B Shareholder consent.

 

Dividends

 

Holders of our shares of Series A preferred stock and Series B preferred stock shall be entitled to receive dividends, out of funds legally available for that purpose, on the same terms and conditions as that of holders of common stock, as may be declared by the Board of Directors.

 

Redemption Rights

 

We have the right to redeem some or all the shares of the holders of our Series A preferred stock and Series B preferred stock in the event of a Change of Control (defined in our amended certificate of incorporation as the time at which as a third party not affiliated with the Company or any holders of the Series A preferred stock and Series B preferred stock shall have acquired, in one or a series of related transactions, more than 50% of our outstanding voting securities) at a price equal to 100% of their liquidation value.

 

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Liquidation Rights

 

Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”), the holders of the Series A preferred and Series B preferred will be entitled to receive out of the assets, whether capital or surplus, of the Company an amount equal to the liquidation value of their preferred shares before any distribution or payment shall be made to the holders of any junior securities, and if the assets of the Company are insufficient to pay in full such amounts, then the entire assets to be distributed to the holders of the Series A preferred stock and the Series B preferred stock shall be ratably distributed among those holders in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.

 

Anti-Takeover Provisions

 

Certain provisions of Delaware law, our amended certificate of incorporation and our bylaws, which are summarized below, may have the effect of delaying, deferring or discouraging another person from acquiring control of us. They are also designed, in part, to encourage persons seeking to acquire control of us to negotiate first with our board of directors. We believe that the benefits of increased protection of our potential ability to negotiate with an unfriendly or unsolicited acquirer outweigh the disadvantages of discouraging a proposal to acquire us because negotiation of these proposals could result in an improvement of their terms.

 

Amended Certificate of Incorporation and Bylaw Provisions

 

Our amended certificate of incorporation and our bylaws include a number of provisions that could deter hostile takeovers or delay or prevent changes in control of our board of directors or management team, including the following:

 

Board of Directors Vacancies

 

Our amended certificate of incorporation and bylaws authorize only our board of directors to fill vacant directorships, including newly created seats. In addition, the number of directors constituting our board of directors will be permitted to be set only by a resolution adopted by a majority vote of our entire board of directors. These provisions would prevent a stockholder from increasing the size of our board of directors and then gaining control of our board of directors by filling the resulting vacancies with its own nominees. This will make it more difficult to change the composition of our board of directors and will promote continuity of management.

 

Stockholder Action; Special Meeting of Stockholders

 

Our amended certificate of incorporation provides that special meetings of our stockholders may be called only by a majority of our board of directors, the chairperson of our board of directors, our Chief Executive Officer or our President, thus prohibiting a stockholder from calling a special meeting. These provisions might delay the ability of our stockholders to force consideration of a proposal or for stockholders controlling a majority of our capital stock to take any action, including the removal of directors.

 

Advance Notice Requirements for Stockholder Proposals and Director Nominations

 

Our bylaws provide advance notice procedures for stockholders seeking to bring business before our annual meeting of stockholders or to nominate candidates for election as directors at our annual meeting of stockholders. Our bylaws also specify certain requirements regarding the form and content of a stockholder’s notice. These provisions might preclude our stockholders from bringing matters before our annual meeting of stockholders or from making nominations for directors at our annual meeting of stockholders if the proper procedures are not followed. We expect that these provisions may also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company.

 

No Cumulative Voting

 

The Delaware General Corporation Law provides that stockholders are not entitled to cumulate votes in the election of directors unless a corporation’s certificate of incorporation provides otherwise. Our amended and restated certificate of incorporation does not provide for cumulative voting.

 

Amendment of Charter and Bylaws Provisions

 

Amendments to our amended certificate of incorporation will require the approval of the holders of at least a majority of the voting power of the outstanding shares of our Class A common stock and Class B common stock. Our amended and restated bylaws will provide that the approval of the holders of at least a majority of the voting power of the outstanding shares of our Class A common stock and Class B common voting together as a single class is required for stockholders to amend or adopt any provision of our bylaws.

 

Issuance of Undesignated Preferred Stock

 

Our board of directors will have the authority, without further action by our stockholders, to issue up to 10,000,000 shares of undesignated preferred stock with rights and preferences, including voting rights, designated from time to time by our board of directors. The existence of authorized but unissued shares of preferred stock would enable our board of directors to render more difficult or to discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or other means.

 

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Exclusive Forum

 

Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or other employees to us or our stockholders, (iii) any action asserting a claim against the company or any director or officer of the company arising pursuant to any provision of the Delaware General Corporation Law, (iv) any action to interpret, apply, enforce, or determine the validity of our amended and restated certificate of incorporation or amended and restated bylaws, or (v) any other action asserting a claim that is governed by the internal affairs doctrine shall be the Chancery Court of the State of Delaware, in all cases subject to the court’s having jurisdiction over indispensable parties named as defendants. Our bylaws also provide that the federal district court in the State of Delaware will be the exclusive forum for resolving any complaint asserting a cause of action under the Securities Act and the Exchange Act.

 

Any person or entity purchasing or otherwise acquiring any interest in our securities shall be deemed to have notice of and consented to these provisions. We note that stockholders cannot waive compliance (or consent to non-compliance) with the federal securities laws and the rules and regulations thereunder.

 

Transfer Agent

 

Our transfer agent is Pacific Stock Transfer Company, 6725 Via Austi Parkway, Suite 300, Las Vegas, Nevada.

 

Blank Check Preferred Stock

 

The ability to authorize “blank check” preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us. These and other provisions may have the effect of deferring hostile takeovers or delaying changes in control or management of our Company.

 

INDEMNIFICATION OF OFFICERS AND DIRECTORS

 

Delaware General Corporation Law (“DGCL”) Section 145 provides us with the power to indemnify any of our directors, officers, employees and agents. The person entitled to indemnification must have conducted himself in good faith, and must reasonably believe that his conduct was in, or not opposed to, our best interests. In a criminal action, the director, officer, employee or agent must not have had reasonable cause to believe that his conduct was unlawful.

 

Under DGCL section 145, advances for expenses may be made by agreement if the director or officer affirms in writing that he has met the standards for indemnification and will personally repay the expenses if it is determined that such officer or director did not meet those standards.

 

Our bylaws include an indemnification provision under which we have the power to indemnify our directors, officers, former directors and officers, employees and other agents (including heirs and personal representatives) against all costs, charges and expenses actually and reasonably incurred, including an amount paid to settle an action or satisfy a judgment to which a director or officer is made a party by reason of being or having been a director or officer of the Company. Our bylaws further provide for the advancement of all expenses incurred in connection with a proceeding upon receipt of an undertaking by or on behalf of such person to repay such amounts if it is determined that the party is not entitled to be indemnified under our bylaws. No advance will be made by the Company to a party if it is determined that the party acting in bad faith. These indemnification rights are contractual, and as such will continue as to a person who has ceased to be a director, officer, employee or other agent, and will inure to the benefit of the heirs, executors and administrators of such a person.

 

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

 

SHARES ELIGIBLE FOR FUTURE SALE

 

We have a limited public market for our common stock and a limited number of shares in the public float. Sales of substantial amounts of our common stock in the public market resulting from this Offering could adversely affect the prevailing market price and our ability to raise capital in the future.

 

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As of the date of this prospectus, we have 1,586,394,389 shares of common stock issued and outstanding. Upon the completion of this offering, we will have outstanding an aggregate of up to an additional 268,425,000 including the shares of the Selling Stockholders. All 369,082,466 shares included in this offering will be freely tradable without restriction or further registration under the Securities Act. Of the 1,586,394,389 shares of our common stock outstanding prior to the completion of this offering and held by existing stockholders, approximately 1,465,089,766 shares are currently free trading and the remaining are “restricted securities” as that term is defined in Rule 144 under the Securities Act. Restricted shares may be sold in the public market only if registered or if they qualify for exemption under Rule 144 or 701 promulgated under the Securities Act, which rules are summarized below, or another exemption.

 

Rule 144

 

In general, under Rule 144, as currently in effect, a person who owns shares that were acquired from us or one of our affiliates at least six months prior to the proposed sale is entitled to sell, within any three-month period beginning 90 days after the date of this prospectus, a number of shares that does not exceed the greater of:

 

  One percent of the number of shares of common stock then outstanding, which will equal approximately 18,030,294 shares immediately after this offering; or
     
  The average weekly trading volume of the common stock on a national securities exchange during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.
     
  In addition to these volume limitations, sales of unregistered shares of our common stock in reliance on Rule 144 may only be made by affiliates if such sales:

 

  are preceded by a notice filing on Form 144;
     
  are limited to broker’s transactions, as such term is defined under Section 4(a)(4) of the Securities Act; and
     
  only occur at a time when current public information about us is available, which generally would require that we are not delinquent with any of our reports required pursuant to Sections 13 or 15(d) of the Exchange Act. Rule 144 also provides that our affiliates who sell shares of our common stock that are not restricted shares must nonetheless comply with the same restrictions applicable to restricted shares, with the exception of the holding period requirement.

 

Under Rule 144, a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during the 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least six months, including the holding period of any prior owner other than one of our affiliates, is entitled to sell such shares without complying with the manner of sale, volume limitation or notice provisions of Rule 144. If the non-affiliate has held the shares for at least one year, then the shares may be sold without regard to the public information provisions of Rule 144. Therefore, unless otherwise restricted, shares held by non-affiliates may be sold immediately upon the expiration of the lock-up agreements.

 

Rule 701

 

In general, under Rule 701 as currently in effect, any of our employees, consultants or advisors who acquire shares from us in connection with a compensatory stock or option plan or other written agreement will be eligible to resell such shares 90 days after the effective date of this offering in reliance of Rule 144, but without compliance with certain restrictions, including the holding period, contained in Rule 144.

 

Penny Stock Rules

 

Broker-dealer practices in connection with transactions in penny stocks are regulated by certain penny stock rules adopted by the SEC. Penny stocks generally are equity securities with a price of less than US $5.00. 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 that provides information about penny stocks and the 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. In addition, the penny stock rules generally require that prior to a transaction in a penny stock, the broker-dealer 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 a stock that becomes subject to the penny stock rules. Our shares may in the future be subject to such penny stock rules in which care our stockholders would, in all likelihood, as a result of the penny stock rules, find it difficult to sell their securities.

 

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PLAN OF DISTRIBUTION

 

The Selling Stockholders may, from time to time, sell, transfer or otherwise dispose of any or all of their securities or interests in such securities on any stock exchange, market or trading facility on which the securities are traded or in private transactions. The Selling Stockholders may offer and sell the common stock registered pursuant to this prospectus at the prevailing market price or in a privately negotiated transaction.

 

The aggregate proceeds to the Selling Stockholders from the sale of the securities offered by them will be the purchase price of the securities less discounts or commissions, if any. Each of the Selling Stockholders reserves the right to accept and, together with their agents from time to time, to reject, in whole or in part, any proposed purchase of securities to be made directly or through agents. We will not receive any of the proceeds from the sale or other disposition of the securities by the Selling Stockholders. However, we would receive up to approximately $37,162,500 in gross proceeds upon the cash exercise of the warrants issued to the Selling Stockholders if they were exercised in full. The exercise price of our warrants range from $0.20 to $1.00, which is above the current trading price of our common stock. In order to receive the proceeds from the exercise of the warrants, our stock price would need to increase significantly. Our two largest warrants are for 125,000,000 shares each, 30,000,000 of which have already been exercised. In order for the remaining 220,000,000 shares to be exercised under the warrants, our stock price would likely need to be $0.25 or greater.

 

The Selling Stockholders also may resell all or a portion of the securities in open market transactions in reliance upon Rule 144 under the Securities Act of 1933, provided that they meet the criteria and conform to the requirements of that rule.

 

The Selling Stockholders and any underwriters, broker-dealers or agents that participate in the sale of the securities or interests therein may be “underwriters” within the meaning of Section 2(11) of the Securities Act. Any discounts, commissions, concessions or profit they earn on any resale of the securities may be underwriting discounts and commissions under the Securities Act. Selling Stockholders who are “underwriters” within the meaning of Section 2(11) of the Securities Act will be subject to the prospectus delivery requirements of the Securities Act.

 

To the extent required, the securities to be sold, the names of the Selling Stockholders, the respective purchase prices and public offering prices, the names of any agents, dealer or underwriter, any applicable commissions or discounts with respect to a particular offer will be set forth in an accompanying prospectus supplement or, if appropriate, a post-effective amendment to the Registration Statement.

 

The maximum amount of compensation to be received by any FINRA member or independent broker-dealer for the sale of any securities registered under this prospectus will not be greater than 8% of the gross proceeds from the sale of such securities.

 

To comply with the securities laws of some states, if applicable, the securities may be sold in these jurisdictions only through registered or licensed brokers or dealers. In addition, the securities may not be sold unless they have been registered or qualified for sale under the applicable state securities laws, or an exemption from registration or qualification requirements is available and is complied with, or registration or qualification is otherwise not required.

 

We have advised the Selling Stockholders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of securities in the market and to the activities of the Selling Stockholders and their affiliates. The Selling Stockholders may indemnify any broker-dealer that participates in transactions involving the sale of the securities against certain liabilities, including liabilities arising under the Securities Act.

 

We intend to seek qualification for sale of the securities in those states where the securities will be offered. That qualification is necessary to resell the securities in the public market. The securities can only be offered if they are qualified for sale or are exempt from qualification in the states in which the selling stockholders or proposed purchasers reside. There is no assurance that the states in which we seek qualification will approve of the security re-sales.

 

LEGAL MATTERS

 

Culhane Meadows PLLC, 1701 Pennsylvania Avenue, N.W., Suite 200, Washington, D.C. 20006, will pass upon the validity of the shares of our common stock to be sold in this Offering.

 

EXPERTS

 

The financial statements of the Company as of and for the years ended December 31, 2021 and 2020, included in this prospectus have been audited by B.F. Borgers CPA PC, (“Borgers”) an independent registered public accounting firm as set forth in their report, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing. Borgers also audited the Tickeri, Inc. financial statements for the period January 2, 2020 (Inception) through December 31, 2020 and the Monster Creative LLC financial statements for the years ended December 31, 2020 and 2019.

 

60

 

 

WHERE YOU CAN FIND MORE INFORMATION

 

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of our common stock offered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement, some of which is contained in exhibits to the registration statement as permitted by the rules and regulations of the SEC. For further information with respect to us and our common stock, we refer you to the registration statement, including the exhibits filed as a part of the registration statement. Statements contained in this prospectus concerning the contents of any contract or any other document are not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, please see the copy of the contract or document that has been filed. Each statement in this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit. The SEC maintains an internet website that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.

 

As a result of this offering, we will become subject to the information and reporting requirements of the Exchange Act and, in accordance with this law, will file periodic reports, proxy statements and other information with the SEC. We also maintain a website at www. humblpay.com. Upon completion of this offering, you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. Information contained on our website is not a part of this prospectus and the inclusion of our website address in this prospectus is an inactive textual reference only.

 

61

 

 

HUMBL, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

Report of Independent Registered Public Accounting Firm for HUMBL, Inc. F-2
Balance Sheets as of December 31, 2021 and 2020 F-3
Statements of Operations for the Years Ended December 31, 2021 and 2020 F-4
Statements of Cash Flows for the Years Ended December 31, 2021 and 2020 F-5
Statements of Stockholders’ Equity for the Years Ended December 31, 2021 and 2020 F-6
Notes to Financial Statements F-7 - F-35

 

Balance sheets as of March 31, 2022 (unaudited) F-36
Statements of operations (unaudited) for the Three Months Ended March 31, 2022 and 2021 F-37
Statements of cash flows (unaudited) for the Three Months Ended March 31, 2022 and 2021 F-38
Statements of stockholders’ equity (deficit) (unaudited) Three Months Ended March 31, 2022 and 2021 F-39
Notes to financial statements F-40 - F-72

 

UNAUDTED PROFORMA FINANCIAL STATEMENTS – HUMBL, BIZSECURE AND IXAYA

 

Pro forma unaudited consolidated financial statements F-73
Notes to unaudited pro forma consolidated financial statements F-75
Pro forma consolidated balance sheets
Pro forma consolidated statement of operations F-76

 

TICKERI, INC.

FINANCIAL STATEMENTS

MARCH 31, 2021 AND 2020

 

Table of Contents

 

Balance Sheets (unaudited for March 31, 2020) F-77
Statements of Operations (unaudited) F-78
Statements of Changes in Stockholders’ Equity (Deficit) (unaudited) F-79
Statements of Cash Flows (unaudited) F-80
Notes to Financial Statements F-81 - F-86

 

TICKERI, INC.

FINANCIAL STATEMENTS

DECEMBER 31, 2020

 

Table of Contents

 

Report of Independent Registered Public Accounting Firm F-87
Balance Sheet F-88
Statement of Operations F-89
Statement of Changes in Stockholders’ Equity (Deficit) F-90
Statement of Cash Flows F-91
Notes to Financial Statements F-92- F-97

 

MONSTER CREATIVE, LLC

FINANCIAL STATEMENTS

JUNE 30, 2021 AND 2020

 

Table of Contents

 

Balance Sheets (unaudited for June 30, 2021) F-98
Statements of Operations (unaudited) F-99
Statements of Changes in Members’ Equity (Deficit) (unaudited) F-100
Statements of Cash Flows (unaudited) F-101
Notes to Financial Statements F-102 - F-106

 

MONSTER CREATIVE, LLC

FINANCIAL STATEMENTS

DECEMBER 31, 2020 AND 2019

 

Table of Contents

 

Report of Independent Register Public Accounting Firm F-107
Balance Sheets F-108
Statements of Income F-109
Statements of Changes in Members’ Equity F-110
Statements of Cash Flows F-111
Notes to Financial Statements F-112 - F-116

 

F-1
 

 

Report of Independent Registered Public Accounting Firm

 

To the shareholders and the board of directors of HUMBL, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of HUMBL, Inc. as of December 31, 2021 and 2020, the related statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.

 

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experience 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. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

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

 

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

 

/S/ BF Borgers CPA PC

BF Borgers CPA PC

 

We have served as the Company’s auditor since 2021

Lakewood, CO

March 31, 2022

 

F-2
 

 

HUMBL, INC.

(FORMERLY TESORO ENTERPRISES, INC.)

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2021 AND 2020

 

   2021   2020 
ASSETS          
CURRENT ASSETS          
Cash  $3,493,213   $1,720,979 
Accounts receivable, net   325,267    - 
Intangible assets – digital currency   2,695    - 
Due from related parties, net   -    77,146 
Prepaid expenses and other current assets   57,693    7,445 
Total current assets   3,878,868    1,805,570 
           
NON-CURRENT ASSETS          
Fixed assets, net of depreciation   356,447    - 
Goodwill   6,531,346    - 
Total non-current assets   6,887,793    - 
TOTAL ASSETS  $10,766,661   $1,805,570 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)          
CURRENT LIABILITIES          
Accounts payable and accrued expenses  $1,460,266   $20,392 
Deferred revenue   -    43,243 
Obligation to issue common shares   676,408    - 
Due to seller   327,412    - 
Current portion of notes payable   501,828    40,000 
Notes payable – related parties   10,986,250    - 
Convertible notes payable – related parties   7,500,000    - 
Current portion of convertible notes payable, net of discount   3,392,123    141,103 
Total current liabilities   24,844,287    244,738 
           
LONG-TERM LIABILITIES          
Notes payable, net of current portion   148,172    - 
Convertible notes payable, net of discount and net of current portion   2,232,702    - 
Total non-current liabilities   2,380,874    - 
           
TOTAL LIABILITIES   27,225,161    244,738 
           
Commitments and contingency   -    - 
STOCKHOLDERS’ EQUITY (DEFICIT)          
Preferred stock, 7,000,000 shares Series A Preferred stock authorized, 570,000 and 900,000 Series B Preferred stock authorized, and 150,000 Series C Preferred stock authorized (through October 29, 2021 when cancelled)          
Series A Preferred stock, par value $0.00001; 7,000,000 issued and outstanding as of December 31, 2021 and 2020, respectively   70    70 
Series B Preferred stock, par value $0.00001; 544,759 and 0 issued and outstanding as of December 31, 2021 and 2020, respectively   5    - 
Series C Preferred stock, par value $0.00001; 0 issued and outstanding as of December 31, 2020, respectively   -    - 
Common stock, par value $0.00001; 7,450,000,000 and 5,000,000,000 shares authorized, 1,023,039,433 and 974,177,443 shares issued and outstanding as of December 31, 2021 and 2020, respectively   10,230    9,742 
Additional paid in capital   34,182,004    2,545,825 
Accumulated deficit   (50,650,809)   (994,805)
Total stockholders’ equity (deficit)   (16,458,500)   1,560,832 
           
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)  $10,766,661   $1,805,570 

 

See notes to consolidated financial statements.

 

F-3
 

 

HUMBL, INC.

(FORMERLY TESORO ENTERPRISES, INC.)

CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2021 AND 2020

 

   2021   2020 
         
REVENUES  $2,503,388   $- 
           
COST OF REVENUES   1,104,959    - 
           
GROSS PROFIT   1,398,429    - 
           
OPERATING EXPENSES:          
Development costs   2,117,683    96,567 
Professional fees   3,905,699    539,568 
Settlement   1,870,000    - 
Stock-based compensation   10,734,833    - 
Impairment - goodwill   22,203,422    - 
Impairment – digital assets   34,570    - 
General and administrative expenses   5,247,118    69,589 
Total operating expenses   46,113,325    705,724 
LOSS FROM OPERATIONS BEFORE OTHER INCOME (EXPENSES)   (44,714,896)   (705,724)
           
OTHER INCOME (EXPENSE):          
Interest expense   (943,559)   (4,697)
Beneficial conversion feature   (3,300,000)   - 
Amortization of debt discounts   (838,941)   (2,042
Gain on sale of digital assets   47,875    - 
Forgiveness of PPP loan   66,117    - 
Other income   28,200    - 
Total other income (expense)   (4,940,308)   (6,739)
LOSS FROM OPERATIONS BEFORE PROVISION FOR INCOME TAXES   (49,655,204)   (712,463)
PROVISION FOR INCOME TAXES   (800)   (800)
NET LOSS  $(49,656,004)  $(713,263)
           
NET LOSS PER SHARE          
Basic and diluted  $(0.05)  $(0.00)
           
SHARES USED IN CALCULATION OF NET LOSS PER SHARE          
Basic and diluted   942,331,830    982,108,478 

 

See notes to consolidated financial statements.

 

F-4
 

 

HUMBL, INC.

(FORMERLY TESORO ENTERPRISES, INC.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2021 AND 2020

 

   2021   2020 
         
Cash flows from operating activities:          
Net loss  $(49,656,004)  $(713,263)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation expense   11,129    - 
Impairment expense - goodwill   22,203,422    - 
Impairment expense – digital assets   34,570    - 
(Gain) on sale of digital assets   (47,875)   - 
Advertising expense paid for by digital assets   133,660    - 
Sales commission received in digital assets   (8,400)   - 
Amortization of debt discounts   838,941    2,042 
Warrants granted for services   3,789,864    - 
Stock-based compensation – common and preferred stock grants   6,268,562    - 
Obligation to issues common shares for services rendered   676,408    - 
Forgiveness of PPP loan   (66,117)   - 
Bad debt   88,693    - 
Settlement   1,870,000    - 
Beneficial conversion feature on convertible note payable   3,300,000    - 
Changes in assets and liabilities          
Accounts receivable   77,332    - 
Intangible assets – digital currency   (114,650)   - 
Prepaid expenses and other current assets   (50,248)   (5,050)
Increase (decrease) in amounts due related parties   (11,547)   (157,357)
Accounts payable and accrued expenses   1,054,048    17,311 
Net cash used in operating activities   (9,608,212)   (856,317)
           
Cash flows from investing activities:          
Purchase of fixed assets   (367,576)   - 
Cash received in purchase of Tickeri   127,377    - 
Cash received in purchase of Monster Creative   3,017    - 
Net cash used in investing activities   (237,182)   - 
           
Cash flows from financing activities:          
Proceeds from sales of membership interests of HUMBL, LLC   10,000    1,307,441 
Proceeds from sales of warrants and country rights option   -    1,000,000 
Redemption of Series B Preferred Stock   (215)   - 
Proceeds from the exercise of warrants   4,000,000    - 
Proceeds from note payable   -    40,000 
Payments of notes payable   (40,557)   - 
Repayment of amount due to seller   (51,600)   - 
Proceeds from convertible notes payable   6,700,000    225,000 
Proceeds from issuance of common stock for cash   1,000,000    - 
Net cash provided by financing activities   11,617,628    2,572,441 
NET INCREASE IN CASH   1,772,234    1,716,124 
Cash - beginning of year   1,720,979    4,855 
Cash - end of year  $3,493,213   $1,720,979 
           
SUPPLEMENTAL DISCLOSURES:          
Cash paid for interest  $3,760   $3,750 
Cash paid for income taxes  $800   $800 
           
SUMMARY OF NONCASH ACTIVITIES:          
Effect of reverse merger  $-   $10,062 
Cancellation of common stock  $-   $250 
Reclassification of deferred revenue related to warrant purchase  $43,243   $- 
Conversion of common stock into preferred stock  $796   $- 
Conversion of preferred stock into common stock  $794   $- 
Recognition of discounts at inception of convertible notes payable  $2,055,219   $85,939 
           
SUMMARY OF TICKERI ACQUISITION:          
Accounts receivable  $23,587   $- 
Goodwill   20,086,664    - 
Accounts payable and accrued expenses   (87,071)   - 
EIDL loan   (150,000)   - 
PPP loan   (557)   - 
Notes payable issued   (10,000,000)   - 
Common shares issued   (10,000,000)   - 
Net cash received in acquisition of Tickeri  $(127,377)  $- 
           
SUMMARY OF MONSTER CREATIVE ACQUISITION:          
Accounts receivable  $379,012   $- 
Goodwill   8,648,104    - 
Accounts payable and accrued expenses   (98,754)   - 
Due to seller   (379,012)   - 
Notes payable - officers   (486,250)   - 
PPP loan   (66,117)   - 
Notes payable issued   (500,000)   - 
Convertible notes issued   (7,500,000)   - 
Net cash received in acquisition of Monster Creative  $(3,017)  $- 

 

See notes to consolidated financial statements.

 

F-5
 

 

HUMBL, INC.

(FORMERLY TESORO ENTERPRISES, INC.)

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

YEARS ENDED DECEMBER 31, 2021 AND 2020

 

   Shares   Amount   Shares   Amount   Shares   Amount   Capital       Deficit    Total 
   Series A Preferred   Series B Preferred   Common  

Additional

Paid-In

   Accumulated     
   Shares   Amount   Shares   Amount   Shares   Amount   Capital       Deficit    Total 
Balances at January 1, 2020   -   $-    -   $-    -   $-   $205,500   $(281,542)  $(76,042)
Members interest purchased for cash   -    -    -    -    -    -    1,307,441    -    1,307,441 
Shares issued in reverse merger   7,000,000    70    -    -    999,177,443    9,992    (10,062)   -    - 
Share cancellation   -    -    -    -    (25,000,000)   (250)   250    -    - 
Discount on convertible notes   -    -    -    -    -    -    85,939    -    85,939 
Warrant purchases   -    -    -    -    -    -    956,757    -    956,757 
                                              
Net loss for the year   -    -    -    -    -    -    -    (713,263)   (713,263)
                                              
Balances December 31, 2020   7,000,000   $70    -   $-    974,177,443   $9,742   $2,545,825   $(994,805)  $1,560,832 
                                              
Balances at January 1, 2021   7,000,000   $70    -   $-    974,177,443   $9,742   $2,545,825   $(994,805)  $1,560,832 
Share adjustment   -    -    -    -    41,156    -    -    -    - 
Shares issued in reverse merger with HUMBL   -    -    552,029    6    -    -    39,961    -    39,967 
Shares issued for cash   -    -    -    -    437,500    4    999,996    -    1,000,000 
Shares issued for services   -    -    2,272    -    18,272,540    183    6,228,411    -    6,228,594 
Shares issued for acquisition of Tickeri   -    -    -    -    9,345,794    93    9,999,907    -    10,000,000 
Shares issued in settlement   -    -    -    -    1,000,000    10    1,169,990    -    1,170,000 
Shares issued in exercise of warrants   -    -    -    -    20,000,000    200    3,999,800    -    4,000,000 
Conversion of common shares to Preferred B shares   -    -    7,962    -    (79,625,000)   (796)   796    -    - 
Conversion of Preferred B shares for common shares   -    -    (7,939)   (1)   79,390,000    794    (793)   -    - 
Shares cancelled for no consideration   -    -    (9,350)   -    -    -    -    -    - 
Preferred B shares redeemed for cash   -    -    (215)   -    -    -    (215)   -    (215)
Members interest purchased for cash (timing difference from 2020)   -    -    -    -    -    -    10,000    -    10,000 
Reclassification from deferred revenue on warrant purchase   -    -    -    -    -    -    43,243    -    43,243 
Beneficial conversion feature on convertible note payable   -    -    -    -    -    -    3,300,000    -    3,300,000 
Discount on convertible notes   -    -    -    -    -    -    2,055,219    -    2,055,219 
Warrants granted to consultants   -    -    -    -    -    -    3,789,864    -    3,789,864 
                                              
Net loss for the year   -    -    -    -    -    -    -    (49,656,004)   (49,656,004)
                                              
Balances at December 31, 2021   7,000,000   $70    544,759   $5    1,023,039,433   $10,230   $34,182,004   $(50,650,809)  $(16,458,500)

 

* There was no Series C Preferred Stock activity during these periods through cancellation of the Series C Preferred Stock on October 29, 2021. Additionally on October 29, 2021, the Series B Preferred Stock had their authorized shares reduced from 900,000 shares to 570,000 shares.

 

See notes to consolidated financial statements.

 

F-6
 

 

HUMBL, INC.

(FORMERLY TESORO ENTERPRISES, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

 

NOTE 1: NATURE OF OPERATIONS

 

HUMBL, Inc. (formerly Tesoro Enterprises, Inc.), an Oklahoma corporation (“Company” or “HUMBL”) was incorporated November 12, 2009. The Company was redomiciled on November 30, 2020 to the State of Delaware.

 

Simultaneously with the November 12, 2009 incorporation, the Company entered into a share exchange agreement with Fashion Floor Covering and Tile, Inc. (“FFC&T), whereby the sole stockholder of FFC&T received 125,000 shares of the Company’s restricted shares of common stock in exchange for all the outstanding shares of FFC&T. FFC&T is a full line (wood, carpet and tile) retail dealer and installer of floor and hard wall covering materials. FFC&T has been in business for over twenty-five years under the same ownership and management.

 

On December 3, 2020, HUMBL, LLC (“HUMBL LLC”) merged into the Company in what is accounted for as a reverse merger. Under the terms of the Merger Agreement, HUMBL LLC exchanged 100% of their membership interests for 552,029 shares of newly created Series B Preferred Stock. The Series B Preferred shares were issued to the respective members of HUMBL LLC following the approval by FINRA of a one-for-four reverse stock split of the common shares and the increase in the authorized common shares to 7,450,000,000 shares, and 10,000,000 preferred shares.

 

The FINRA approval for both the increase in the authorized common shares and reverse stock split occurred on February 26, 2021. To assume control of the Company, the former CEO, Henry Boucher assigned his 7,000,000 shares of Series A Preferred Stock as well as 550,000,000 shares of common stock to Brian Foote, the President and CEO of HUMBL LLC for a $40,000 note payable. The Series A Preferred Stock is not convertible into common stock; however, it has voting rights of 10,000 votes per 1 share of stock. After the reverse merger was completed, HUMBL LLC ceased doing business, and all operations were conducted under Tesoro Enterprises, Inc. which later changed their name to HUMBL, Inc. (“HUMBL” or the “Company”).

 

All share figures and per share amounts have been stated retroactively for the reverse stock split.

 

On June 3, 2021 we acquired Tickeri, Inc. (“Tickeri”) in a debt and stock transaction totaling $20,000,000 following which Tickeri became a subsidiary of HUMBL. Tickeri is a leading ticketing, live events and box office SaaS platform featuring Latin events and artists throughout the United States, Latin America, and the Caribbean corridor. The purchase price for the stock purchase was $20,000,000 of which we must pay $10,000,000 in our common stock and $10,000,000 was paid through two promissory notes. The shares had a deemed value equal to the volume weighted average price per share of HUMBL common stock on the OTC Markets for the ten consecutive trading days ending with the complete trading day ending two trading days prior to the closing. We issued the two shareholders of Tickeri, Juan Gonzalez and Javier Gonzalez, 4,672,897 shares of our common stock each. We also issued to each of Juan and Javier Gonzalez a secured promissory note in the face amount of $5,000,000. The promissory notes are due and payable on or before December 31, 2022, bear interest at the rate of 5% per annum and are secured by the equity interests of Tickeri. In the event of an uncured default by HUMBL under the promissory note, Juan and Javier Gonzalez have the right to recover the ownership of Tickeri and re-commence the business and operations of Tickeri free and clear of any claims or encumbrances by HUMBL. We intend to limit the integration of Tickeri’s assets with our assets until the promissory notes are paid in full. We agreed to register on Form S-1 within three months from the closing the shares issued to Juan and Javier Gonzalez and have the registration statement declared effective within six months of the closing date. Following the closing, Juan Gonzalez and Javier Gonzalez, entered into employment agreements having a term of 18 months, appointing them CEO of Tickeri and CTO of HUMBL, respectively.

 

F-7
 

 

On June 30, 2021, we acquired Monster Creative, LLC (“Monster”). Monster is a Hollywood production studio that specializes in producing movie trailers and other related content. Monster was founded by Doug Brandt and Kevin Childress. Monster will collaborate with HUMBL in the production of NFTs and other digital content. The purchase price for all of the membership interests in Monster was paid through the issuance of one convertible note and one non-convertible note to each of Doug Brandt and Kevin Childress in the aggregate principal amount of $8,000,000. The convertible notes were issued to Doug Brandt (through an entity owned by him) and Kevin Childress in the aggregate principal amount of $7,500,000. The notes convert at the holder’s election at $1.20 per share, bear interest at 5% per annum and are due in 18 months from issuance. We also issued non-convertible notes to Doug Brandt and Kevin Childress in the aggregate amount of $500,000. These notes bear interest at the rate of 5% per annum and are due on the earlier of July 1, 2022 and 30 following the effectives of our registration statement. Doug Brandt and Kevin Childress each entered into employment agreements with Monster having a term of three years. Doug Brandt was appointed as the CEO of Monster and Kevin Childress was appointed as its President and Creative Director.

  

HUMBL is a Web 3, digital commerce platform that was built to connect consumers, freelancers and merchants in the digital economy. HUMBL provides simple tools and packaging for complex new technologies such as blockchain, in the same way that previous cycles of e-commerce and the cloud were more simply packaged by companies such as Facebook, Apple, Amazon and Netflix over the past several decades.

 

The goal of HUMBL is to provide ready built tools, and platforms for consumers and merchants to seamlessly participate in the digital economy. HUMBL is built on a patent-pending decentralized technology stack that utilizes both core and partner technologies, to provide faster connections to the digital economy and each other.

 

HUMBL has three interconnected product verticals:

 

HUMBL Pay – A mobile app that allows peers, consumers and merchants to connect in the digital economy;

 

HUMBL Marketplace – A mobile marketplace that allows consumers and merchants to connect more seamlessly in the digital economy; and

 

HUMBL Financial – Financial products and services, targeted for simplified investing on the blockchain.

 

HUMBL Pay

 

HUMBL is developing a mobile application that allows customers to migrate to digital forms of payment, along with services such as maps, ratings, and reviews. The Company is also working rapidly to integrate the use of search, discovery, peer-to-peer cash and ticketing around the world, as these services migrate into digital and blockchain-based modalities. The mobile application is designed to provide functionality to the following groups:

 

Individuals - Consumers who want to discover, pay, rate and review experiences digitally vs. paper bills and hardware point-of-sale (“POS”)

 

Freelancers - Service providers and gig workers that want to get paid from anywhere they work vs. paper bills and hardware POS; and

 

Merchants – Primarily brick and mortar vendors that want to get paid digitally vs. paper bills and hardware POS.

 

HUMBL Marketplace

 

Through its online marketplace, HUMBL is developing the capability for merchants to list a wide range of soft goods and digital assets to mid-market audiences, that, where appropriate, incorporate the benefits of blockchain. HUMBL provides merchants with the ability to list and sell goods with greater levels of authentication, by using technologies such as the HUMBL Token Engine and HUMBL Origin Assurance, to improve the merchant’s ability to trade, track and pay for assets.

 

F-8
 

 

Through our online marketplace we also allow for the listing of non-fungible tokens (NFTs). NFTs allow entities and individuals such as athletes, celebrities, agencies, artists and companies to monetize their digital images, multimedia content and catalogues on the blockchain. HUMBL provides a marketplace for artists and athletes to connect online in the sale of digital collectibles to fans and collectors and provides a rigorous set of terms and conditions that govern what can and cannot be listed on the marketplace. We currently review all listings to screen for graphic content, potential intellectual property rights violations, and potential securities law violations. The NFT marketplace is operated through a third-party marketplace plug-in (OpenSea), electronic wallet extensions (such as MetaMask), and the Ethereum blockchain. Users participate in the NFT marketplace by linking their digital wallets to our platform and engaging (e.g., buying, selling, bidding) with the NFTs listed on our platform. The services provided by HUMBL are administrative. HUMBL is a platform and does not act as a broker, financial institution, or creditor. We facilitate transactions between the buyer and seller in the auction/sale process but we are not a party to any agreement between the buyer and seller or between any users.

 

We receive revenue from the NFT marketplace in two ways. First, for some clients HUMBL provides design services to help artists, athletes and entertainers create NFTs to be sold to their fans. In these circumstances HUMBL typically receives a flat fee for providing such services that is paid out of the sales price of the NFT. The size of the fee depends on the scope and complexity of the design services provided. Second, HUMBL receives a transaction fee each time an NFT sells on the NFT marketplace.

 

The NFT marketplace allows creators to mint NFTs using their own intellectual property and list those NFTs for sale (primary sales) on the marketplace. The NFT marketplace also allows for NFTs to be resold (secondary sales) on the platform, but currently only NFTs that were originally minted on the Company’s NFT Marketplace or are otherwise approved by the Company may be listed for secondary sales on the Marketplace. The Company does not otherwise support or influence the market for the resale of NFTs sold on its platform. Other than requiring creators to attest they own the IP used to create their NFTs and monitoring for obvious copyright violations, the Company does not enforce any rights related to the primary or secondary sales of NFTs. Payment transactions for the purchase and sale of NFTs are made through the use of smart contracts on the Ethereum blockchain. The Company does not handle separate, off-chain payments for NFTs. Tracking and payment of resale royalty fees are accomplished automatically through the use of smart contracts. The Company is not responsible for distributing or managing resale royalty fees.

 

In September of 2021, HUMBL launched HUMBL Tickets, initially focused on the offering of secondary (resale) tickets to thousands of live events across North America. The inventory listings and ticket fulfillment are provided by Ticket Evolution and HUMBL earns a commission for each sale. In addition to its subsidiary Tickeri, the Company will continue to work with clients to merge the realms of NFTs, event tickets and blockchain authentication.

 

HUMBL Financial

 

HUMBL Financial has developed to package step-function technologies such as blockchain into “several clicks” for the customer.

 

In 2021, HUMBL Financial created BLOCK ETX products to simplify digital asset investing for customers and institutions seeking exposure to a new, 24/7 digital asset class. We have launched this product in 100 countries outside the United States. HUMBL Financial has developed proprietary, multi-factor blockchain indexes, trading algorithms and financial services for the new digital asset trading markets to accommodate index, active and thematic investment strategies. BLOCK ETXs are completely non-custodial, algorithmically driven software services that allow customers to purchase and hold digital assets in pre-set allocations through their own digital asset exchange accounts. BLOCK ETXs are compatible for United States customers who have accounts with Coinbase Pro, Bittrex US or Binance US and for non-US customers who have accounts with Bittrex Global. BLOCK ETXs were served first on the desktop and web version of the HUMBL platform, with the goal of future applications inside the HUMBL mobile application. HUMBL Financial is open to the licensing of the BLOCK ETXs to institutions and exchanges. HUMBL Financial also plans to offer trusted, third-party financial services in areas such as payments, investments, credit card services and lending across the HUMBL platform over time.

 

In February 2022, the Company elected to suspend offering the BLOCK ETX products pending further legal analysis regarding how to offer the BLOCK ETXs in a fully compliant manner with the evolving laws and regulatory treatment of such novel products. The Company will continue to monitor the regulatory environment with respect to these products. In accordance with ASC 205-20-50-1(a), the timing of the disposal was February 28, 2022. The Company met the criteria for the BLOCK ETX operations to be classified as held for sale at that time.

 

F-9
 

 

Going Concern

 

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures.

 

We incurred an increasing working capital deficit and accumulated deficit as of December 31, 2021 as we ramped up operations significantly in this period and incurred debt to assist in supporting our operations. As of December 31, 2021, we had $3,493,213 in cash. Between the growth in revenues by fees generated by HUMBL Financial and through sales of merchandise and NFTs in the HUMBL Marketplace, as well as revenue generated through our subsidiaries Tickeri, Inc. and Monster Creative LLC, along with the successful launches of the HUMBL Pay application, HUMBL Financial and HUMBL Tickets in 2021 as well as proceeds received from the exercise of warrants in October 2021, we have sufficient operating cash to continue the development of our core products and services.

 

We had a working capital deficit of $20,965,419 as of December 31, 2021 as compared to a working capital surplus of $1,560,832 as December 31, 2020, respectively. The decrease in working capital is the result of the incurrence of expenditures related to the commencement of the various segments and the current potion of debt that is due in the next 12 months. The Company believes it has adequate capital resources to meet its cash requirements during the next 12 months as they continue to grow and develop suitable sources of capital. A majority of the Company’s operating expenses (over 70%) are the result of non-cash charges such as impairment of goodwill and stock-based compensation. The actual monthly cash burn of the Company is approximately $1,000,000 per month at this time and as our core products come online, this is likely to decrease as much of this is directly related to our in house and outsourced technology team. The Company has received $2,000,000 in additional warrant exercises and $3,000,000 in related party debt proceeds in the first quarter to date of 2022, however, as a result of the operating losses and working capital deficit, management has determined that there is substantial doubt about the Company’s ability to continue as a going concern.

 

We expect that the revenue generating operations of the Company will continue to improve the liquidity of the Company moving forward. However, going forward, the effect of the pandemic on the capital markets may limit our ability to raise additional capital on the terms acceptable to us at the time we need it, if at all. The challenges related to remote work and travel restrictions that we as a smaller company have faced in striving to meet our disclosure obligations in a timely manner while taking the steps to protect the health and safety of our employees have impacted, and may continue to further impact, our ability to raise additional capital.

 

The consolidated financial statements of the Company have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable period. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of the uncertainties.

 

The Company has made strategic acquisitions in the first few months of 2022 to enhance their core products and their intellectual property. Management believes these acquisitions will result in increased profitability.

 

The Company plans to raise additional capital through the exercising of their warrants as well as through future debt and equity financings to carry out its business plan. Obtaining additional financing and the successful development of the Company’s segments including their new Blockchain Services group, ultimately, to profitable operations, are necessary for the Company to continue operations.

 

Impact of COVID-19

 

The COVID-19 pandemic previously had a profound effect on the U.S. and global economy and may continue to affect the economy and the industries in which we operate, depending on the vaccine rollouts and the emergence of virus mutations.

 

F-10
 

 

COVID-19 did not have a material effect on the Consolidated Statements of Operations or the Consolidated Balance Sheets.

 

Our ability to access the capital markets and maintain existing operations is unknown during the COVID-19 pandemic. Any such limitation on available financing and how we conduct business with our customers and vendors would adversely affect our business.

 

Because the federal government and some state and local authorities are reacting to the many variants of COVID-19, it is creating uncertainty on whether these actions could disrupt the operation of the Company’s business and have an adverse effect on the Company. The extent to which the COVID-19 outbreak may impact the Company’s results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.

 

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) includes, among other things, provisions relating to payroll tax credits and deferrals, net operating loss carryback periods, alternative minimum tax credits and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act also established a Paycheck Protection Program (“PPP”), whereby certain small businesses were eligible for a loan to fund payroll expenses, rent and related costs. The Company received forgiveness of their PPP loans during 2021.

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and the rules and regulations of the United States Securities and Exchange Commission (the “Commission” or the “SEC”). It is management’s opinion that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation.

 

As the acquisition of HUMBL resulted in the owners of HUMBL gaining control over the combined entity after the transaction, and the shareholders of Tesoro Enterprises, Inc. continuing only as passive investors, the transaction was not considered a business combination under the ASC. Instead, this transaction was considered to be a capital transaction of the legal acquiree (HUMBL) and was equivalent to the issuance of shares by HUMBL for the net monetary assets of Tesoro Enterprises, Inc. accompanied by a recapitalization. As a result, all historical balances are those of HUMBL as they are the accounting acquirer.

 

Under generally accepted accounting principles of the United States, any excess of the fair value of the shares issued by HUMBL over the value of the net monetary assets of Tesoro Enterprises, Inc. is recognized as a reduction of equity. There was no excess of fair value in this transaction.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of HUMBL, Inc. and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. HUMBL, Inc. holds 100% of Tickeri and Monster. The Company formed two additional subsidiaries in Singapore and Australia that are inactive and have no activity.

 

The Company applies the guidance of Topic 805 Business Combinations of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”).

 

For Tickeri and Monster, the Company accounted for these acquisitions as business combinations and the difference between the consideration paid and the net assets was applied to goodwill as there were no identifiable intangible assets acquired.

 

F-11
 

 

Reclassification

 

The Company has reclassified certain amounts in the 2020 financial statements to comply with the 2021 presentation. These principally relate to classification of certain expenses and liabilities. The reclassifications had no impact on total net loss or net cash flows for the year ended December 31, 2020.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. These estimates include, but are not limited to, management’s estimate of provisions required for permanent and temporary differences related to income taxes, liabilities to accrue, estimates of the fair value of goodwill and determination of the fair value of stock awards. Actual results could differ from those estimates.

 

Cash

 

Cash consists of cash and demand deposits with an original maturity of three months or less. The Company holds no cash equivalents as of December 31, 2021 and 2020, respectively. The Company maintains cash balances in excess of the FDIC insured limit at a single bank.

 

Fixed Assets and Long-Lived Assets

 

ASC 360 requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company has adopted Accounting Standard Update (“ASU”) 2017-04 Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment.

 

The Company reviews recoverability of long-lived assets on a periodic basis whenever events and changes in circumstances have occurred which may indicate a possible impairment. The assessment for potential impairment is based primarily on the Company’s ability to recover the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. If such assets are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets.

 

Fixed assets and intangible assets with finite useful lives are stated at cost less accumulated amortization and impairment. Intangible assets with infinite lives, such as digital currency are valued at costs and reviewed for indicators of impairment at least annually, or more depending on circumstances.

 

The Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following:

 

1. Significant underperformance relative to expected historical or projected future operating results;

 

2. Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and

 

3. Significant negative industry or economic trends.

 

When the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows.

 

F-12
 

 

Revenue Recognition

 

The Company accounts for a contract with a customer that is within the scope of this Topic only when the five steps of revenue recognition under ASC 606 are met.

 

The five core principles will be evaluated for each service provided by the Company and is further supported by applicable guidance in ASC 606 to support the Company’s recognition of revenue.

 

The Company accounts for revenues based on the verticals in which they were earned. The three principal verticals in which the Company operates today are HUMBL Pay, HUMBL Marketplace, and HUMBL Financial.

 

HUMBL Pay

 

The Company is anticipated to earn transaction revenues primarily from fees charged to merchants and consumers on a transaction basis through the Company’s mobile application. These fees may have a fixed and/or variable component. The variable component is generally a percentage of the value of the payment amount and is known at the time the transaction is processed. For a portion of our transactions, the variable component of the fee is eligible for reimbursement when the underlying transaction is approved for a refund. The Company may estimate the amount of fee refunds that will be processed each quarter and record a provision against the net revenues. The volume of activity processed on the platform, which results in transaction revenue, is referred to as Total Payment Volume (“TPV”).

 

The Company will earn additional fees on transactions where currency conversion is performed, when cross-border transactions are enabled (i.e., transactions where the merchant and consumer are in different countries), to facilitate the instant transfer of funds for customers from their HUMBL account to their debit card or bank account, and other miscellaneous fees. The Company will rely on third party partners to perform all money transmission services.

 

The Company may earn revenues from other value-added services, which are comprised primarily of revenue earned through partnerships, referral fees, subscription fees, gateway fees, ticketing, peer-to-peer payments and other services that will be provided to merchants and consumers. These contracts typically have one performance obligation which is provided and recognized over the term of the contract.

 

The transaction price is generally fixed and known at the end of each reporting period; however, for some agreements, it may be necessary to estimate the transaction price using the expected value method. The Company is expected to record revenue earned in revenues from other value-added services on a net basis when they are considered the agent with respect to processing transactions.

 

HUMBL Marketplace

 

The Company recognizes revenue when they transfer control of promised goods or services to customers in an amount that reflects the consideration to which is expected to be entitled in exchange for those goods or services. Revenue is recognized net of any taxes collected, which are subsequently remitted to governmental authorities.

 

Net transaction revenues

 

The net transaction revenues will primarily include final value fees, feature fees, including fees to promote listings, and listing fees from sellers in our Marketplace. The net transaction revenues will also include store subscription and other fees often from large enterprise sellers. The net transaction revenues are reduced by incentives provided to customers.

 

The Company has identified one performance obligation to sellers on the Marketplace platform, which is to connect buyers and sellers on the secure and trusted Marketplace platforms. Final value fees are recognized when an item is sold on a Marketplace platform, satisfying this performance obligation. There may be additional services available to Marketplace sellers, mainly to promote or feature listings, that are not distinct within the context of the contract.

 

Accordingly, fees for these additional services are recognized when the single performance obligation is satisfied. Promoted listing fees are recognized when the item is sold and feature and listing fees are recognized when an item is sold, or when the contract expires.

 

F-13
 

 

Further, to drive traffic to the platform, the Company will provide incentives to buyers and sellers in various forms including discounts on fees, discounts on items sold, coupons and rewards. Evaluating whether a promotion or incentive is a payment to a customer may require significant judgment. Promotions and incentives which are consideration payable to a customer are recognized as a reduction of revenue at the later of when revenue is recognized or when the incentive is paid or promise to be paid. Promotions and incentives to most buyers on our Marketplace platforms, to whom there is no performance obligation, are recognized as sales and marketing expense. In addition, there may be credits provided to customers when certain fees are refunded. Credits are accounted for as variable consideration at contract inception when estimating the amount of revenue to be recognized when a performance obligation is satisfied to the extent that it is probable that a significant reversal of revenue will not occur and updated as additional information becomes available.

 

Ticketing Revenues

 

The Company with the acquisition of Tickeri and launch of HUMBL Tickets recognizes revenues from their ticketing services primarily from service fees, commissions and payment processing fees charged at the time a ticket for an event is sold. We also derive revenues from providing certain creators with account management services and customer support. Our customers are primarily event creators who use our platform to sell tickets to attendees. Revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration we receive in exchange for those goods or services. We allocate the transaction price by estimating a standalone selling price for each performance obligation using a cost plus a margin approach. For service fees and payment processing fees, revenue is recognized when the ticket is sold. For account management services and customer support, revenue is recognized over the period from the date of the sale of the ticket to the date of the event.

 

We evaluate whether it is appropriate to recognize revenue on a gross or net basis based upon our evaluation of whether we obtain control of the specified goods or services by considering if we are primarily responsible for fulfillment of the promise, have inventory risk, and have the latitude in establishing pricing and selecting suppliers, among other factors.

 

We determined the event creator is the party responsible for fulfilling the promise to the attendee, as the creator is responsible for providing the event for which a ticket is sold, determines the price of the ticket and is responsible for providing a refund if the event is canceled. Our service is to provide a platform for the creator and event attendee to transact and our performance obligation is to facilitate and process that transaction and issue the ticket. The amount that we earn for our services is fixed. For the payment processing service, we determined that we are the principal in providing the service as we responsible for fulfilling the promise to process the payment and we have discretion and latitude in establishing the price of our service. Based on our assessment, we record revenue on a net basis related to our ticketing service and on a gross basis related to our payment processing service. As a result, costs incurred for processing the transactions are included in cost of net revenues in the consolidated statements of operations.

 

Revenue is presented net of indirect taxes, value-added taxes, creator royalties and reserves for customer refunds, payment chargebacks and estimated uncollectible amounts. If an event is cancelled by a creator, then any obligations to provide refunds to event attendees are the responsibility of that creator.

 

If a creator is unwilling or unable to fulfill their refund obligations, we may, at our discretion, provide attendee refunds. Revenue is also presented net of the amortization of creator signing fees when applicable. The benefit we receive by securing exclusive ticketing and payment processing rights with certain creators from creator signing fees is inseparable from the customer relationship with the creator and accordingly these fees are recorded as a reduction of revenue in the consolidated statements of operations.

 

In June 2021, the Company purchased some equipment and furniture as well as a commercial property in the form of a suite at a luxury hotel. The Company is the owner of this suite and entered into a long-term rental agreement with the hotel to manage the property. The Company has use of the suite for 28 calendar days a year and will receive their proportionate income for the other days the suite is being used. The Company recognizes rental revenue for the days in the month the suite is being rented in that month.

 

F-14
 

 

Marketing services and other revenues

 

Marketing services and other revenues are derived principally from the sale of advertisements, classifieds fees, and revenue sharing arrangements. Advertising revenue is derived principally from the sale of online advertisements which are based on “impressions” (i.e., the number of times that an advertisement appears in pages viewed by users of our platforms) or “clicks” (which are generated each time users on our platforms click through our advertisements to an advertiser’s designated website) delivered to advertisers.

 

The Company uses the output method and apply the practical expedient to recognize advertising revenue in the amount to which they have a right to invoice. For contracts with target advertising commitments with rebates, estimated payout is accounted for as a variable consideration to the extent it is probable that a significant reversal of revenue will not occur.

 

HUMBL Financial

 

Revenue is recognized upon transfer of control of services to customers in an amount to which the Company expects to be entitled in exchange for those services. Service subscription revenue is recognized for the month in which services are provided. If a customer pays for an annual subscription, revenue is allocated over the months in the subscription and recognized for each month of the service provided.

 

Accounts Receivable and Concentration of Credit Risk

 

An allowance is based on management’s estimate of the overall collectability of accounts receivable, considering historical losses. Based on these same factors, individual accounts are charged off against the allowance when management determines those individual accounts are uncollectible. Credit extended to customers is generally uncollateralized. Past-due status is based on contractual terms. The Company does not charge interest on accounts receivable. As of December 31, 2021 and 2020, there was no allowance necessary.

 

Income Taxes

 

Income taxes are accounted under the asset and liability method. The current charge for income tax expense is calculated in accordance with the relevant tax regulations applicable to the entities. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

 

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Differences between statutory tax rates and effective tax rates relate to permanent tax differences.

 

Prior to the merger with the Company, HUMBL LLC was a partnership. All losses generated were passed through to the individual members, and there was no provision for income taxes.

 

Uncertain Tax Positions

 

The Company follows ASC 740-10 Accounting for Uncertainty in Income Taxes. This requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. Management evaluates their tax positions on an annual basis.

 

The Company files income tax returns in the U.S. federal tax jurisdiction and various state tax jurisdictions. The federal and state income tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally for three years after they were filed.

 

F-15
 

 

Share-Based Compensation

 

The Company follows ASC 718 Compensation – Stock Compensation and has adopted ASU 2017-09 Compensation – Stock Compensation (Topic 718) Scope of Modification Accounting. The Company calculates compensation expense for all awards granted, but not yet vested, based on the grant-date fair values. Share-based compensation expense for all awards granted is based on the grant-date fair values. The Company policy is to recognize these compensation costs, on a pro rata basis over the requisite service period of each vesting tranche of each award for service-based grants, and as the criteria is achieved for performance-based grants, when such grants are made. For stock options and warrants, the Company uses the Black-Scholes model to estimate the value of those grants. The Company has not had any forfeitures of these grants, and these estimates of value will include a percentage of forfeitures when that percentage is able to be estimated.

 

The Company adopted ASU 2016-09 Improvements to Employee Share-Based Payment Accounting. Cash paid when shares are directly withheld for tax withholding purposes will be classified as a financing activity in the statement of cash flows.

 

Fair Value of Financial Instruments

 

ASC 825 Financial Instruments requires the Company to disclose estimated fair values for its financial instruments. Fair value estimates, methods, and assumptions are set forth below for the Company’s financial instruments: The carrying amount of cash, accounts receivable, prepaid and other current assets, accounts payable and accrued liabilities, and amounts payable to related parties, approximate fair value because of the short-term maturity of those instruments. The Company does not utilize derivative instruments.

 

Leases

 

The Company follows ASC 842 Leases in accounting for leased properties, when they exceed a one-year term. When the Company enters into leases with a term in excess of one year, they will recognize a lease liability and right of use asset in accordance with the provisions of ASC 842.

 

Earnings (Loss) Per Share of Common Stock

 

Basic net income (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted earnings per share (“EPS”) include additional dilution from common stock equivalents, such as convertible notes, preferred stock, stock issuable pursuant to the exercise of stock options and warrants.

 

Common stock equivalents are not included in the computation of diluted earnings per share when the Company reports a loss because to do so would be anti-dilutive for periods presented, so only the basic weighted average number of common shares are used in the computations.

 

Derivative Financial Instruments

 

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. Management evaluates all of the Company’s financial instruments, including convertible notes and warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives.

 

The Company generally uses a Black-Scholes model, as applicable, to value the derivative instruments at inception and subsequent valuation dates when needed. The classification of derivative instruments, including whether such instruments should be recorded as liabilities, is remeasured at the end of each reporting period.

 

Fair Value Measurements

 

ASC 820 Fair Value Measurements defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosure about fair value measurements. ASC 820 classifies these inputs into the following hierarchy:

 

Level 1 inputs: Quoted prices for identical instruments in active markets.

 

F-16
 

 

Level 2 inputs: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

 

Level 3 inputs: Instruments with primarily unobservable value drivers.

 

Segment Reporting

 

The Company follows the provisions of ASC 280-10 Segment Reporting. This standard requires that companies disclose operating segments based on the manner in which management disaggregates the Company in making internal operating decisions.

 

For the year ended December 31, 2020 the Company and its chief operating decision makers determined that the Company operated in one segment as they were developing their business model. Effective 2021, the Company has established three distinct operating segments: HUMBL Marketplace; HUMBL Pay; and HUMBL Financial. Most of the operations for the year ended December 31, 2021 and 2020, respectively were conducted in North America.

 

Less than 4% of the Company’s sales were from outside of North America, therefore the Company has determined that segment reporting by geographic location was not necessary. In the future, the Company will continue to monitor their activity by region to determine if it is feasible to report segment information by location.

 

Recent Accounting Pronouncements

 

In August, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40), Accounting for Convertible Instruments and Contract’s in an Entity’s Own Equity. The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU simplifies the diluted net income per share calculation in certain areas.

 

The ASU is effective for annual and interim periods beginning after December 31, 2021, and early adoption is permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company is currently evaluating the impact that this new guidance will have on its financial statements.

 

The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

 

NOTE 3: REVERSE MERGER

 

HUMBL LLC

 

On December 3, 2020, HUMBL LLC merged into the Company in what is accounted for as a reverse merger. Under the terms of the Merger Agreement, HUMBL LLC exchanged 100% of their membership interests for 552,029 shares of newly created Series B Preferred Stock. The Series B Preferred shares were issued to the respective members of HUMBL LLC following the approval by FINRA of the one-for-four reverse stock split of the common shares and the increase in the authorized common shares to 7,450,000,000 shares. The FINRA approval for both the increase in the authorized common shares and reverse stock split occurred on February 26, 2021.

 

To assume control of the Company, the former CEO, Henry Boucher assigned his 7,000,000 shares of Series A Preferred Stock to Brian Foote, the President and CEO of HUMBL LLC for a $40,000 note payable. The Series A Preferred Stock is not convertible into common stock, however, it has voting rights of 10,000 votes per 1 share of stock. After the reverse merger was completed, HUMBL LLC ceased doing business, and all operations were conducted under Tesoro Enterprises, Inc. which later changed its name to HUMBL.

 

F-17
 

 

As the acquisition of HUMBL resulted in the owners of HUMBL gaining control over the combined entity after the transaction, and the shareholders of Tesoro Enterprises, Inc. continuing only as passive investors, the transaction was not considered a business combination under the ASC. Instead, this transaction was considered to be a capital transaction of the legal acquiree (HUMBL) and was equivalent to the issuance of shares by HUMBL for the net monetary assets of Tesoro Enterprises, Inc. accompanied by a recapitalization. As a result, all historical balances are those of HUMBL as they are the accounting acquirer.

 

There were no outstanding liabilities of Tesoro Enterprises, Inc. that remained at the time of the merger so no amounts were assumed by HUMBL.

 

NOTE 4: ACQUISITIONS

 

Tickeri

 

On June 3, 2021 we acquired Tickeri, Inc. (“Tickeri”) in a debt and stock transaction totaling $20,000,000 following which Tickeri became a subsidiary of HUMBL. Tickeri is a leading ticketing, live events and box office SaaS platform featuring Latin events and artists throughout the United States, Latin America, and the Caribbean corridor. The purchase price for the stock purchase was $20,000,000 of which we must pay $10,000,000 in our common stock and $10,000,000 was paid through two promissory notes. The shares had a deemed value equal to the volume weighted average price per share of HUMBL common stock on the OTC Markets for the ten consecutive trading days ending with the complete trading day ending two trading days prior to the closing. We issued the two shareholders of Tickeri, Juan Gonzalez and Javier Gonzalez, 4,672,897 shares of our common stock each. We also issued to each of Juan and Javier Gonzalez a secured promissory note in the face amount of $5,000,000.

 

The promissory notes are due and payable on or before December 31, 2022, bear interest at the rate of 5% per annum and are secured by the equity interests of Tickeri. In the event of an uncured default by HUMBL under the promissory note, Juan and Javier Gonzalez have the right to recover the ownership of Tickeri and re-commence the business and operations of Tickeri free and clear of any claims or encumbrances by HUMBL. We intend to limit the integration of Tickeri’s assets with our assets until the promissory notes are paid in full. We agreed to register on Form S-1 within three months from the closing the shares issued to Juan and Javier Gonzalez and have the registration statement declared effective within six months of the closing date. Following the closing, Juan Gonzalez and Javier Gonzalez, entered into employment agreements having a term of 18 months, appointing them CEO of Tickeri and CTO of HUMBL, respectively.

 

The Company acquired the assets and liabilities noted below in in accordance with ASC 805. Based on the fair values at the effective date of acquisition the purchase price was recorded as follows (subject to adjustment):

 

    2021 
Cash  $127,377 
Accounts receivables   23,587 
Goodwill   20,086,664 
Accounts payable and accrued expenses   (87,071)
SBA EIDL   (150,000)
PPP loan   (557)
   $20,000,000 

 

The consideration paid for the acquisition of Tickeri was as follows:

 

    2021 
Common stock  $10,000,000 
Notes payable   10,000,000 
Total consideration  $20,000,000 

 

The Acquisition has been accounted for under the acquisition method of accounting. Under the acquisition method of accounting, the total acquisition consideration price was allocated to the assets acquired and liabilities assumed based on their preliminary estimated fair values. The fair value measurements utilize estimates based on key assumptions of the Acquisition, and historical and current market data. The excess of the purchase price over the total of the estimated fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed is recognized as goodwill. The Company has estimated the preliminary purchase price allocations based on historical inputs and data as of June 3, 2021. The preliminary allocation of the purchase price is based on the best information available and is pending, amongst other things: (i) the finalization of the valuation of the fair values and useful lives of tangible assets acquired; (ii) the finalization of the valuations and useful lives for the intangible assets acquired; (iii) finalization of the valuation of accounts payable and accrued expenses; and (iv) finalization of the fair value of non-cash consideration.

 

F-18
 

 

The Company has up to one-year from the date of acquisition to adjust any of the acquired assets and liabilities for information obtained during this measurement period. If new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of additional assets or liabilities as of the acquisition date or a re-allocation of assets and liabilities is necessary, the Company will adjust these figures. The Company has performed an analysis on the purchase price allocation and has determined that there are no adjustments to be made from the original allocation.

 

The goodwill is not expected to be deductible for tax purposes.

 

Monster Creative, LLC

 

On June 30, 2021, we acquired Monster Creative, LLC (“Monster”). Monster is a Hollywood production studio that specializes in producing movie trailers and other related content. Monster was founded by Doug Brandt and Kevin Childress. Monster will collaborate with HUMBL in the production of NFTs and other digital content. The purchase price for all of the membership interests in Monster was paid through the issuance of one convertible note and one non-convertible note to each of Doug Brandt and Kevin Childress in the aggregate principal amount of $8,000,000. The convertible notes were issued to Doug Brandt (through an entity owned by him) and Kevin Childress in the aggregate principal amount of $7,500,000. The notes convert at the holder’s election at $1.20 per share, bear interest at 5% per annum and are due in 18 months from issuance. We also issued non-convertible notes to Doug Brandt and Kevin Childress in the aggregate amount of $500,000. These notes bear interest at the rate of 5% per annum and are due on April 1, 2022. Doug Brandt and Kevin Childress each entered into employment agreements with Monster having a term of three years. Doug Brandt was appointed as the CEO of Monster and Kevin Childress was appointed as its President and Creative Director.

 

The Company acquired the assets and liabilities noted below in in accordance with ASC 805. Based on the fair values at the effective date of acquisition the purchase price was recorded as follows (subject to adjustment):

 

    2021 
Cash  $3,017 
Accounts receivables   379,012 
Goodwill   8,648,104 
Due to seller   (379,012)
Accounts payable and accrued expenses   (98,754)
Notes payable – related parties   (486,250)
PPP loan   (66,117)
   $8,000,000 

 

The consideration paid for the acquisition of Monster Creative, LLC was as follows:

 

    2021 
Convertible notes payable  $7,500,000 
Non-convertible notes payable   500,000 
Total consideration  $8,000,000 

 

The Acquisition has been accounted for under the acquisition method of accounting. Under the acquisition method of accounting, the total acquisition consideration price was allocated to the assets acquired and liabilities assumed based on their preliminary estimated fair values. The fair value measurements utilize estimates based on key assumptions of the Acquisition, and historical and current market data. The excess of the purchase price over the total of the estimated fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed is recognized as goodwill. The Company has estimated the preliminary purchase price allocations based on historical inputs and data as of June 30, 2021.

 

F-19
 

 

The preliminary allocation of the purchase price is based on the best information available and is pending, amongst other things: (i) the finalization of the valuation of the fair values and useful lives of tangible assets acquired; (ii) the finalization of the valuations and useful lives for the intangible assets acquired; (iii) finalization of the valuation of accounts payable and accrued expenses; and (iv) finalization of the fair value of non-cash consideration.

 

The Company has up to one-year from the date of acquisition to adjust any of the acquired assets and liabilities for information obtained during this measurement period. If new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of additional assets or liabilities as of the acquisition date or a re-allocation of assets and liabilities is necessary, the Company will adjust these figures. The Company has performed an analysis on the purchase price allocation and has determined that there are no adjustments to be made from the original allocation.

 

The goodwill is not expected to be deductible for tax purposes.

 

The following table shows the unaudited pro-forma results for the years ended December 31, 2021 and 2020, as if the acquisitions had occurred on January 1, 2020. These unaudited pro forma results of operations are based on the historical financial statements and related notes of Tickeri, Monster and the Company.

 

   Year Ended
December 31,
2021
 
   (Unaudited) 
Revenues  $3,121,680 
Net loss  $(50,276,526)
Net loss per share  $(0.05)

 

   Year Ended
December 31,
2020
 
   (Unaudited) 
Revenues  $2,375,716 
Net loss  $(763,007)
Net loss per share  $(0.00)

 

 

NOTE 5: REVENUE

 

The following table disaggregates the Company’s revenue by major source for the years ended December 31, 2021 and 2020:

 

   2021   2020 
   Years Ended December 31, 
   2021   2020 
Revenue:          
Service - Production  $1,104,322   $- 
Merchant Fees   774,731    - 
Financial Services   265,025    - 
Merchandise   192,003    - 
Tickets   127,947    - 
NFTs   26,507    - 
Rental income   2,270    - 
Other   10,583    - 
Total revenue  $2,503,388   $- 

 

F-20
 

 

There were no significant contract asset or contract liability balances for all periods presented. The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

 

Collections of the amounts billed are typically paid by the customers within 30 to 60 days.

 

NOTE 6: FIXED ASSETS AND GOODWILL

 

As of December 31, 2021 and 2020, the Company has the following fixed assets:

 

   2021   2020 
Non-residential property – 20 year-life  $345,497   $- 
Equipment – 5 year-life   5,772    - 
Furniture and fixtures – 5 year-life   16,307    - 
Accumulated depreciation   (11,129)   -
 Fixed assets  $356,447   $- 

 

In June 2021, the Company purchased some equipment and furniture as well as a commercial property in the form of a suite at a luxury hotel. The Company is the owner of this suite and entered into a long-term rental agreement with the hotel to manage the property. The Company has use of the suite for 28 calendar days a year and will receive their proportionate income for the other days the suite is being used.

 

Depreciation expense for the years ended December 31, 2021 was $11,129, as the property was placed into service on July 1, 2021.

 

As of December 31, 2021 and 2020, the Company has recorded goodwill as follows:

 

   2021   2020 
Tickeri  $3,353,392   $- 
Monster Creative   3,177,954    - 
 Goodwill  $6,531,346   $- 

 

The Company evaluated ASC 350-20-50 for the goodwill associated with the two acquisitions. The Company determined that there was impairment of goodwill associated with the Tickeri acquisition of $16,733,272 and impairment of goodwill associated with the Monster Creative transaction of $5,470,150 to be recognized in the year ended December 31, 2021, as reflected in operating expenses under the line item Impairment - goodwill. In accordance with ASC 350-20-50-6 (a through d), the Company determined based on the qualitative factors surrounding the Tickeri and Monster Creative acquisitions, which include the foothold of Tickeri in the Latin population of the United States, the development of the Company’s website, and the fact that the former President of Tickeri became the CTO of HUMBL, as well as the services being provided by Monster Creative in production, and the services for both entities in the COVID pandemic, the fair value of Tickeri and Monster Creative did not equate to the value that was paid for these entities. As a result, we recognized the goodwill at the time of purchase for Tickeri, and re-evaluated the goodwill determination as of December 31, 2021 for both Tickeri and Monster Creative which resulted in additional impairment to be recognized. We determined the value based on the multiple of earnings on similar companies evaluated in the ticketing space and in the production space for Monster Creative. Since both Tickeri and Monster Creative services fall under the HUMBL Marketplace segment, the entire impairment of the goodwill is reflected in that segment.

 

NOTE 7: INTANGIBLE ASSETS – DIGITAL CURRENCY

 

In 2021, the Company purchased Ethereum, a digital currency to create NFTs for beta testing to determine whether they would be able to place them onto the HUMBL Marketplace’s NFT Gallery in addition to the NFTs others create that are on the NFT Gallery. The Company purchased $114,650 in digital currency in the year ended December 31, 2021. The Company expensed $133,660 in the digital currency to create NFTs as beta testing for future endeavors and for payment of expenses, received commissions on sales of NFTs of $8,400, reflected $34,570 in impairment of the intangible asset for digital currency, and recognized a gain on sale of digital assets of $47,875. The value of the intangible asset as of December 31, 2021 is $2,695.

 

F-21
 

  

NOTE 8: NOTES PAYABLE

 

The Company entered into notes payable as follows as of December 31, 2021 and 2020:

 

   2021   2020 
Note payable, at 8% interest, maturing December 31, 2021 for merger with Tesoro Enterprises Inc. (see Note 1)’ payment due at maturity (repaid on December 30, 2021)  $-   $40,000 
           
Notes payable ($250,000 each), at 2% interest, maturing July 30, 2022; payments due at maturity   500,000    - 
           
EIDL loan at 3.75% interest, maturing May 18, 2050 (assumed in the acquisition of Tickeri), no payments for 2 years, then monthly payments of $731 per month inclusive of interest   150,000    - 
           
Total   650,000    40,000 
Less: Current portion   (501,828)   (40,000)
Long-term debt  $148,172   $- 

 

Maturities of notes payable for the next five years as of December 31 are as follows:

 

2   2021 
2022  $501,828 
2023   2,845 
2024   2,938 
2025   3,066 
2026   3,183 
Thereafter   136,140 
 Total  $650,000 

 

In the acquisition of Tickeri, the Company assumed a PPP loan and an EIDL loan. The PPP loan was repaid in its entirety in the year ended December 31, 2021. In the acquisition of Monster a $66,117 PPP loan was forgiven in the year ended December 31, 2021 and the forgiveness of this debt is reflected in other income. Interest expense for the years ended December 31, 2021 and 2020 was $17,358 and $552, respectively. Accrued interest at December 31, 2021 was $14,150.

 

NOTE 9: NOTES PAYABLE – RELATED PARTIES

 

The Company entered into notes payable as follows as of December 31, 2021 and 2020:

   2021   2020 
Notes payable ($5,000,000 each), at 5% interest, maturing December 3, 2022 for acquisition of Tickeri (see Note 4) with the two principals of Tickeri, one of which is an officer of the Company as well; payments due at maturity  $10,000,000   $- 
           
Notes payable ($435,000 and $65,000), at 5% interest, maturing April 1, 2022 for acquisition of Monster (see Note 4) with the two principals of Monster; payments due at maturity   500,000    - 
           
Notes payable ($271,250 and $215,000), at 3% interest, maturing December 31, 2022, with family relatives of the two principals of Monster; payments due at maturity   486,250    - 
           
Total   10,986,250    - 
Less: Current portion   (10,986,250)   -
Long-term debt  $-   $- 

 

F-22
 

SCHEDULE OF MATURITIES NOTES PAYABLE - RELATED PARTIES

Maturities of notes payable – related parties as of December 31 is as follows:    
     
2022  $10,986,250 
 Total  $10,986,250 

 

Interest expense for the years ended December 31, 2021 and 2020 was $308,938 and $0, respectively. Accrued interest at December 31, 2021 was $308,938.

 

NOTE 10: CONVERTIBLE PROMISSORY NOTES

 

The Company entered into convertible promissory notes as follows as of December 31, 2021 and 2020:

   2021   2020 
Convertible note, at 8% interest, maturing December 23, 2022 convertible into common shares at $0.60 per share  $112,500   $112,500 
           
Convertible note, at 8% interest, maturing December 23, 2022 convertible into common shares at $0.60 per share   112,500    112,500 
           
Convertible note at 10% interest, maturing July 14, 2022 convertible into common shares at $3.15 per share ($300,000 original issue discount)   3,300,000    - 
           
Convertible note at 8% interest, maturing March 13, 2023 convertible into common shares at $1.00 per share ($7,500 original issue discount)   382,500    - 
           
Convertible note at 8% interest, maturing March 13, 2023 convertible into common shares at $1.00 per share ($8,250 original issue discount)   420,750    - 
           
Convertible note at 8% interest, maturing March 17, 2023 convertible into common shares at $1.00 per share ($20,000 original issue discount)   1,020,000    - 
           
Convertible note at 8% interest, maturing March 19, 2023 convertible into common shares at $1,00 per share ($9,750 original issue discount)   497,250    - 
           
Convertible note at 8% interest, maturing March 19, 2023 convertible into common shares at $1.00 per share ($1,500 original issue discount)   76,500    - 
           
Convertible note at 8% interest, maturing March 19, 2023 convertible into common shares at $1.00 per share ($3,000 original issue discount)   153,000    - 
           
Convertible note at 8% interest, maturing April 21, 2023 convertible into common shares at $1.00 per share ($7,500 original issue discount)   382,500    - 
           
Convertible note at 8% interest, maturing April 21, 2023 convertible into common shares at $1.00 per share ($7,500 original issue discount)   382,500    - 
           
Convertible note at 8% interest, maturing June 30, 2023 convertible into common shares at $0.90 per share ($3,000 original issue discount)   153,000    - 
           
Convertible note at 8% interest, maturing September 12, 2023 convertible into common shares at $0.60 per share ($6,000 original issue discount)   306,000    - 
Long term debt, gross    7,299,000    225,000 
Less: Discounts   (1,674,175)   (83,897)
Total  $5,624,825   $141,103 

 

F-23
 

 

On April 14, 2021 we received bridge financing in the form of a loan in the principal amount of $3,300,000 from Brighton Capital Partners, LLC (“Brighton Capital” or “BCP”) for which we issued them a convertible promissory note due 15 months after April 14, 2021 (July 14, 2022). The note bears interest at 10% per annum and is convertible at Brighton Capital’s election at a fixed price of $3.15 per share. The Company recognized a $300,000 original issue discount at inception of this convertible note.

 

Under the terms of the note, Brighton Capital has a right of redemption commencing on the earlier of an effective date of a Registration Statement and the 12-month anniversary of the note, to cause us to redeem all or any portion of the note in cash or shares of our common stock, at the Company’s election.

 

Any redemption with shares of our common stock shall be at the “market price” which is defined as 80% of our lowest closing trade price for the 10 consecutive trading days prior to the date on which the market price is measured. The note was to serve as a bridge loan to a $50,000,000 Equity Financing Agreement (“EFA”), which was terminated on October 26, 2021. The Company recognized a beneficial conversion feature on this note in the amount of $3,300,000.

 

On October 26, 2021, the Company and BCP agreed to terminate the Equity Financing Agreement. The Company agreed to issue shares for the termination of the EFA in the registration statement they file.

 

On May 13, 2021, the Company issued a convertible promissory note to investors for $382,500 with an original issue discount of $7,500, for a term of twenty-two months maturing March 13, 2023. In addition, the Company issued warrants to the same investors to purchase up to 750,000 warrant shares with the convertible note. The Company recognized a $7,500 original issue discount and $257,531 debt discount at inception of this convertible note.

 

On May 13, 2021, the Company issued a convertible promissory note to an investor for $420,750 with an original issue discount of $8,250, for a term of twenty-two months maturing March 13, 2023. In addition, the Company issued a warrant to the same investor to purchase up to 825,000 warrant shares with the convertible note. The Company recognized a $8,250 original issue discount and $283,284 debt discount at inception of this convertible note.

 

On May 17, 2021, the Company issued a convertible promissory note to an investor for $1,020,000 with an original issue discount of $20,000, for a term of twenty-two months maturing March 17, 2023. The Company recognized a $20,000 original issue discount at inception of this convertible note.

 

On May 19, 2021, the Company issued a convertible promissory note to an investor for $497,250 with an original issue discount of $9,750, for a term of twenty-two months maturing March 19, 2023. In addition, the Company issued a warrant to the same investor to purchase up to 975,000 warrant shares with the convertible note. The Company recognized a $9,750 original issue discount and $317,561 debt discount at inception of this convertible note.

 

On May 19, 2021, the Company issued a convertible promissory note to an investor for $76,500 with an original issue discount of $1,500, for a term of twenty-two months maturing March 19, 2023. In addition, the Company issued a warrant to the same investor to purchase up to 150,000 warrant shares with the convertible note. The Company recognized a $1,500 original issue discount and $48,855 debt discount at inception of this convertible note.

 

On May 19, 2021, the Company issued a convertible promissory note to an investor for $153,000 with an original issue discount of $3,000, for a term of twenty-two months maturing March 19, 2023. In addition, the Company issued a warrant to the same investor to purchase up to 300,000 warrant shares with the convertible note. The Company recognized a $3,000 original issue discount and $97,711 debt discount at inception of this convertible note.

 

On June 21, 2021, the Company issued a convertible promissory note to an investor for $382,500 with an original issue discount of $7,500, for a term of twenty-two months maturing April 21, 2023. In addition, the Company issued a warrant to the same investor to purchase up to 750,000 warrant shares with the convertible note. The Company recognized a $7,500 original issue discount and $274,172 debt discount at inception of this convertible note. The Company recognized a BCF discount in the amount of $100,828 on this convertible note that is being amortized over the life of the convertible note.

 

F-24
 

 

On June 21, 2021, the Company issued a convertible promissory note to an investor for $382,500 with an original issue discount of $7,500, for a term of twenty-two months maturing April 21, 2023. In addition, the Company issued a warrant to the same investor to purchase up to 750,000 warrant shares with the convertible note. The Company recognized a $7,500 original issue discount and $274,172 debt discount at inception of this convertible note. The Company recognized a BCF discount in the amount of $100,828 on this convertible note that is being amortized over the life of the convertible note.

 

On August 30, 2021, the Company issued a convertible promissory note to an investor for $153,000 with an original issue discount of $3,000, for a term of twenty-two months maturing June 30, 2023. In addition, the Company issued a warrant to the same investor to purchase up to 375,000 warrant shares with the convertible note. The Company recognized a $3,000 original issue discount and $102,486 debt discount at inception of this convertible note.

 

On November 12, 2021, the Company issued a convertible promissory note to an investor for $306,000 with an original issue discount of $6,000, for a term of twenty-two months maturing September 12, 2023. In addition, the Company issued a warrant to the same investor to purchase up to 1,000,000 warrant shares with the convertible note. The Company recognized a $6,000 original issue discount and $197,791 debt discount at inception of this convertible note.

 

Maturities of convertible promissory notes for the next two years as of December 31 are as follows (with discount):

2   2021 
2022  $3,550,000 
2023   3,749,000 
 Total  $7,299,000 

 

The Company recognized $2,055,219 and $85,939 in original issue discounts, debt discounts and BCF discounts on the convertible notes. The Company evaluated the terms of the convertible notes and warrant agreements and determined that there were no terms that would necessitate the recognition of any derivative liabilities. The Company is amortizing the debt discounts over the life of the convertible notes based on the effective interest method.

 

Interest expense for the years ended December 31, 2021 and 2020 was $425,408 and $394, respectively. Amortization of debt discount, original issue discount and BCF discount was $838,941 and $2,042 for the years ended December 31, 2021 and 2020, respectively. Accrued interest at December 31, 2021 was $425,808.

 

NOTE 11: CONVERTIBLE PROMISSORY NOTES – RELATED PARTIES

 

The Company entered into convertible promissory notes as follows as of December 31, 2021 and 2020:

   2021   2020 
Convertible note at 5% interest, maturing December 31, 2022 convertible into common shares at $1.20 per share (two notes – one for $6,525,000 and one for $975,000) for the acquisition of Monster Creative, LLC (see Note 4) with the two principals of Monster; payments due at maturity  $7,500,000   $- 
Long term debt, gross    7,500,000    - 
Less: Current portion   (7,500,000)   -
Total  $-   $- 

 

Maturities of convertible promissory notes – related parties as of December 31 are as follows:

    2021 
2022  $7,500,000 
 Total  $7,500,000 

 

F-25
 

 

On June 30, 2021, the Company acquired Monster Creative, LLC. The Monster Purchase Price included: (a) a convertible note to Phantom Power, LLC in the amount of $6,525,000 that bears interest at 5% per annum, and matures December 31, 2022, convertible into the Company’s common stock at $1.20 per share; and (b) a convertible note to Kevin Childress in the amount of $975,000 that bears interest at 5% per annum, and matures December 31, 2022, convertible into the Company’s common stock at $1.20 per share.

 

The Company evaluated the terms of the convertible notes and determined that there were no terms that would necessitate the recognition of any derivative liabilities.

 

Interest expense for the years ended December 31, 2021 and 2020 was $189,041 and $0, respectively, and accrued interest as of December 31, 2021 was $189,041.

 

NOTE 12: STOCKHOLDERS’ EQUITY (DEFICIT)

 

Preferred Stock

 

As of December 31, 2021, the Company has 10,000,000 shares of Preferred Stock authorized, designated as follows: 7,000,000 shares of Series A Preferred Stock authorized, and 570,000 shares of Series B Preferred Stock authorized. All shares of preferred stock have a par value of $0.00001.

 

On October 29, 2021, the Series B Preferred Stock had their authorized shares reduced from 900,000 shares to 570,000 and the 150,000 shares of Series C Preferred Stock were cancelled.

 

Series A Preferred Stock

 

Dividends. Shares of Series A Preferred Stock shall be entitled to receive, out of funds legally available for that purpose, on the same terms and conditions as that of holders of common stock, as may be declared by the Board of Directors.

 

Conversion. There are no conversion rights.

 

Redemption. Subject to certain conditions set forth in the Series A Certificate of Designation, in the event of a Change of Control (defined in the Series A Certificate of Designation as the time at which as a third party not affiliated with the Company or any holders of the Series A Preferred Stock shall have acquired, in one or a series of related transactions, equity securities of the Company representing more than fifty percent 50% of the outstanding voting securities of the Company), the Company, at its option, will have the right to redeem all or a portion of the outstanding Series A Preferred Stock in cash at a price per share of Series A Preferred Stock equal to 100% of the liquidation value.

 

Voting Rights. Holders of Series A Preferred Stock are entitled to vote on all matters, together with the holders of common stock, and have the equivalent of one thousand (1,000) votes for every share of Series A Preferred Stock held.

 

Liquidation. Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary, the holders of Series A Preferred Stock shall be entitled to receive out of the assets, whether capital or surplus, of the Company an amount equal to the liquidation value of the Series A Preferred Stock before any distribution or payment shall be made to the holders of any junior securities, and if the assets of the Company is insufficient to pay in full such amounts, then the entire assets to be distributed to the holders of the Series A Preferred Stock shall be ratably distributed among the holders in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.

 

The 7,000,000 shares were issued to a former officer of the Company and assigned to the new CEO at the time of the reverse merger of HUMBL.

 

Series B Preferred Stock

 

Prior to the amendment of the Certificate of Incorporation on October 29, 2021, the criteria established for the Series B Preferred Stock was as follows:

 

F-26
 

 

Dividends. Shares of Series B Preferred Stock shall be entitled to receive, out of funds legally available for that purpose, on the same terms and conditions as that of holders of common stock, as may be declared by the Board of Directors.

 

Conversion. Each share of Series B Preferred Stock shall be convertible at the option of the holder thereof at any time after December 3, 2021 at the office of the Company or any transfer agent for such stock, into ten thousand (10,000) fully paid and nonassessable shares of common stock subject to adjustment for any stock split or distribution of securities or subdivision of the outstanding shares of common stock.

 

Redemption. Subject to certain conditions set forth in the Series B Certificate of Designation, in the event of a Change of Control (defined in the Series B Certificate of Designation as the time at which as a third party not affiliated with the Company or any holders of the Series B Preferred Stock shall have acquired, in one or a series of related transactions, equity securities of the Company representing more than fifty percent 50% of the outstanding voting securities of the Company), the Company, at its option, will have the right to redeem all or a portion of the outstanding Series B Preferred Stock in cash at a price per share of Series B Preferred Stock equal to 100% of the liquidation value.

 

Voting Rights. Holders of Series B Preferred Stock are entitled to vote on all matters, together with the holders of common stock, and have the equivalent of ten thousand (10,000) votes for every share of Series B Preferred Stock held.

 

Liquidation. Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary, the holders of Series B Preferred Stock shall be entitled to receive out of the assets, whether capital or surplus, of the Company an amount equal to the liquidation value of the Series B Preferred Stock before any distribution or payment shall be made to the holders of any junior securities, and if the assets of the Company is insufficient to pay in full such amounts, then the entire assets to be distributed to the holders of the Series B Preferred Stock shall be ratably distributed among the holders in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.

 

HUMBL exchanged 100% of their membership interests for 552,029 shares of newly created Series B Preferred Stock. The Series B Preferred shares were issued to the respective members of HUMBL following the approval by FINRA of the one-for-four reverse stock split of the common shares and the increase in the authorized common shares to 7,450,000,000 shares. The FINRA approval for both the increase in the authorized common shares and reverse stock split occurred on February 26, 2021. These shares that were issued in the reverse merger had a value of $39,967.

 

These shares have a lock-up provision that prevents the holders to convert into common stock for a period of one-year from the date of the merger of December 3, 2020, with the exception of those held by the CEO who has a two-year lock up provision. In addition, officers and directors that received these shares are subject to strict selling limitations, where the number of shares sold within the preceding three months cannot exceed the greater of: (a) 1% of the total outstanding common shares; and (b) the average weekly reported trading volume for the previous four weeks.

 

On February 26, 2021, the Company issued 493 shares of Series B Preferred Stock for services rendered that were cancelled. On April 15, 2021, the Company revised their issuances and issued with an effective date of March 31, 2021, 2,272 Series B Preferred shares for services rendered. Of the 2,272 shares issued, 528 are vested immediately, 1,219 are vested over one year, and 525 are vested over two years. The vesting period commenced January 1, 2021. All of the Series B Preferred Shares issued have one-year lock up provisions to convert into common stock from the date of the merger of December 3, 2020. For the year ended December 31, 2021, the Company expensed $401,900 for these Series B Preferred grants.

 

Between May 3 and May 6, 2021, the Company’s CEO converted 79,625,000 shares of common stock into 7,962 Series B Preferred shares. These shares are subject to a lock-up provision whereby the CEO has agreed not to convert these Series B shares to common for a period of two years.

 

On July 6, 2021, the CEO of the Company cancelled 9,350 shares of Series B Preferred Stock (93,500,000 if converted into common stock) for no consideration.

 

F-27
 

 

On November 19, 2021, the Company paid $215, to redeem 215 Series B Preferred Shares.

 

In December 2021, there were 7,939 Series B Preferred shares converted into 79,390,000 common shares.

 

As of December 31, 2021 and 2020, the Company has 544,759 and 0 shares of Series B Preferred Stock issued and outstanding, respectively.

 

On October 29, 2021, the Company by Board consent approved an amendment to their Certificate of Amendment for the Series B Preferred Stock to (a) reduce the number of authorized shares of Series B Preferred stock to 570,000 and (b) for Series B Preferred shareholders holding greater than 750 shares of Series B Preferred Stock, for the calendar months of December 2021 and January 2022, Series B Preferred shareholders shall not have the right, whether by election, operation of law, or otherwise, to convert into Common Stock shares of Series B Preferred stock constituting more than 5% of the total number of Series B Preferred shares held by them; and for each of the calendar months from February 2022 to May 2023, the percentage that the Series B Preferred shareholder may convert is 3% of the total number of Series B Preferred shares held by them. This action was approved by Series B Shareholder consent.

 

In addition to the conversion restrictions in the certificate of incorporation to which they are subject, HUMBL’s four founders have imposed additional limitations on their ability to convert and sell common stock. As of December 31, 2021, HUMBL’s CEO and co-founder, Brian Foote, owns approximately 43.5% of the Series B shares. Mr. Foote’s co-founders, Jeffrey Hinshaw, Michele Rivera and Karen Garcia own approximately 14.6% of the Series B shares. Mr. Foote has committed not to sell any shares of his common stock for all of calendar year 2022. In addition to being subject to the affiliate sales limitations under Rule 144, all of the co-founders have agreed to extend the 3% per month conversion limitations on their Series B shares through the end of calendar year 2024 in an effort to limit potential dilution.

 

Series C Preferred Stock

 

Dividends. Shares of Series C Preferred Stock shall be entitled to receive, out of funds legally available for that purpose, on the same terms and conditions as that of holders of common stock, as may be declared by the Board of Directors.

 

Conversion. Each share of Series C Preferred Stock shall be convertible at the option of the holder thereof at the office of the Company or any transfer agent for such stock, into five thousand (5,000) fully paid and nonassessable shares of common stock subject to adjustment for any stock split or distribution of securities or subdivision of the outstanding shares of common stock.

 

Redemption. Subject to certain conditions set forth in the Series C Certificate of Designation, in the event of a Change of Control (defined in the Series C Certificate of Designation as the time at which as a third party not affiliated with the Company or any holders of the Series C Preferred Stock shall have acquired, in one or a series of related transactions, equity securities of the Company representing more than fifty percent 50% of the outstanding voting securities of the Company), the Company, at its option, will have the right to redeem all or a portion of the outstanding Series C Preferred Stock in cash at a price per share of Series C Preferred Stock equal to 100% of the liquidation value.

 

Voting Rights. Holders of Series C Preferred Stock are entitled to vote on all matters, together with the holders of common stock, and have the equivalent of five thousand (5,000) votes for every share of Series C Preferred Stock held.

 

Liquidation. Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary, the holders of Series C Preferred Stock shall be entitled to receive out of the assets, whether capital or surplus, of the Company an amount equal to the liquidation value of the Series C Preferred Stock before any distribution or payment shall be made to the holders of any junior securities, and if the assets of the Company is insufficient to pay in full such amounts, then the entire assets to be distributed to the holders of the Series C Preferred Stock shall be ratably distributed among the holders in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.

 

On October 29, 2021, the Series C Preferred Stock was withdrawn.

 

F-28
 

 

Common Stock

 

The Company has 7,450,000,000 shares of common stock, par value $0.00001, authorized. The Company has 1,023,039,433 and 974,177,443 shares issued and outstanding as of December 31, 2021 and 2020, respectively. The Company on February 26, 2021 increased its authorized shares from 5,000,000,000 to 7,450,000,000 shares.

 

In December 2020 following the reverse merger, the Company cancelled 25,000,000 shares of common stock for no value received to assist in completing the merger with HUMBL, and the raising of capital through the purchase of warrants and warrants granted in the convertible notes.

 

In March 2021 there was an adjustment for 41,156 shares of common stock from the reverse stock split on February 26, 2021.

 

On April 26, 2021, the Company, issued 437,500 for the acquisition of the Chile country rights. The value of this transaction was $1,000,000 received in cash.

 

Between May 3 and May 6, 2021, the Company’s CEO converted 79,625,000 shares of common stock into 7,962 Series B Preferred shares. These shares are subject to a lock-up provision whereby the CEO has agreed not to convert these Series B shares to common for a period of two years.

 

On June 3, 2021, the Company issued 9,345,794 shares of common stock valued at $10,000,000 using the 10-day VWAP price as part of the consideration for Tickeri. These shares were issued to the two principals of Tickeri.

 

On June 30, 2021, the Company issued 1,000,000 shares of common stock in settlement of a liability.

 

In December 2021, there were 7,939 Series B Preferred shares converted into 79,390,000 common shares.

.

During the year ended December 31, 2021, the Company issued 18,272,540 shares of common stock to consultants and advisors for services. These shares were valued at the market price of the Company’s common stock on the respective dates of issuance. These shares will be expensed as stock-based compensation expense through June 30, 2025. In addition, the Company committed to issue an additional 1,318,926 common shares that have a value of $676,408 for services rendered and to be rendered through February 2022. For the year ended December 31, 2021, the Company expensed $6,521,095, and $6,066,881 is yet to be expensed and is reflected as an offset to additional paid in capital as of December 31, 2021.

 

Stock Incentive Plan

 

On July 21, 2021, the Company established the HUMBL, Inc. 2021 Stock Incentive Plan (the “Plan”) for a total issuance not to exceed 20,000,000 shares of common stock. The purpose of the Plan is to promote the long-term growth and profitability of the Company by (i) providing key people with incentives to improve stockholder value and to contribute to the growth and financial success of the Company, and (ii) enabling the Company to attract, retain and reward the best-available persons.

 

The Plan permits the granting of Stock Options (including incentive stock options qualifying under Code Section 422 and nonqualified stock options), Stock Appreciation Rights, restricted or unrestricted Stock Awards, Restricted Stock Units, Performance Awards, other stock-based awards, or any combination of the foregoing.

 

F-29
 

 

Warrants

 

On December 4, 2020, the Company granted 250,000,000 warrants to two separate holders at a price of $400,000. These warrants have a term of 2 years and are exercisable into shares of common stock at a price of $0.20 per share. In October 2021, 20,000,000 of these warrants have been exercise for $4,000,000.

 

On December 23, 2020, the Company granted 12,500,000 warrants which were part of a country rights option HUMBL granted. These warrants have a term of 1 year and are exercisable into shares of common stock at a price of $1.00 per share.

 

On December 23, 2020, the Company entered into two separate convertible note agreements that are convertible into shares of common stock at $0.60 per share. The note holders were each granted 112,500 warrants under the convertible note agreements. These warrants have a term of 2 years and are exercisable into shares of common stock at a price of $1.00 per share.

 

On May 13, 2021, the Company entered into two separate convertible note agreements that are convertible into shares of common stock at $1.00 per share. The note holders were granted 1,575,000 warrants under the convertible note agreements. These warrants have a term of 2 years and are exercisable into shares of common stock at a price of $1.00 per share. The relative fair value of the warrants of $540,815 was recognized as a debt discount and is being amortized over the life of the convertible notes.

 

On May 19, 2021, the Company entered into three separate convertible note agreements that are convertible into shares of common stock at $1.00 per share. The note holders were granted 1,425,000 warrants under the convertible note agreements. These warrants have a term of 2 years and are exercisable into shares of common stock at a price of $1.00 per share. The relative fair value of the warrants of $464,127 was recognized as a debt discount and is being amortized over the life of the convertible notes.

 

On May 21, 2021, the Company entered into a consulting agreement and granted 25,000,000 warrants under this agreement. The warrants have a term of 5 years and expire May 21, 2026. The value of the warrants is $19,132,393 and is being expensed over the 5 year period. The Company expensed $2,337,341 for the year ended December 31, 2021 for these warrants.

 

On June 21, 2021, the Company entered into two separate convertible note agreements that are convertible into shares of common stock at $1.00 per share. The note holders were granted 1,500,000 warrants under the convertible note agreements. These warrants have a term of 2 years and are exercisable into shares of common stock at a price of $1.00 per share. The relative fair value of the warrants of $548,344 was recognized as a debt discount and is being amortized over the life of the convertible notes.

 

On August 30, 2021, the Company entered into a convertible note agreement that is convertible into shares of common stock at $0.90 per share. The note holder was granted 375,000 warrants under the convertible note agreement. These warrants have a term of 2 years. The relative fair value of the warrants of $102,486 was recognized as a debt discount and is being amortized over the life of the convertible notes.

 

On October 6, 2021, the Company entered into a consulting agreement and granted 6,000,000 warrants under this agreement. The warrants have a term of 4 years and expire September 30, 2025. The warrants vest as follows: 750,000 per quarter for the quarters ended December 31, 2021, March 31, 2022, June 30, 2022 and September 30, 2022; 1,000,000 upon release of a fully functional cryptocurrency wallet by December 31, 2021, which criteria was satisfied; and 2,000,000 upon the completion of peer-to-peer in the mobile application by March 31, 2022. The Company has expensed $1,146,998 with respect to these warrants for the year ended December 31, 2021.

 

On November 12, 2021, the Company entered into a convertible note agreement that is convertible into shares of common stock at $0.60 per share. The note holder was granted 1,000,000 warrants under the convertible note agreement. These warrants have a term of 2 years. The relative fair value of the warrants of $197,791 was recognized as a debt discount and is being amortized over the life of the convertible notes.

 

On December 31, 2021, the Company entered into a consulting agreement and granted 1,500,000 warrants under this agreement. The warrants have a term of 2 years and expire December 31, 2023. The warrants vest as follows: 500,000 immediately and 250,000 quarterly through December 31, 2022. The Company has expensed $112,410 with respect to these warrants for the year ended December 31, 2021.

 

F-30
 

 

On December 31, 2021, the Company entered into a consulting agreement and granted 2,500,000 warrants under this agreement. The warrants have a term of 2 years and expire December 31, 2023. The warrants vest as follows: 750,000 immediately and 150,000 monthly through December 31, 2022. The Company has expensed $168,615 with respect to these warrants for the year ended December 31, 2021.

 

The following represents a summary of the warrants:

 

  

Year Ended December 31,

2021

  

Year Ended December 31,

2020

 
   Number  

Weighted
Average
Exercise

Price

   Number  

Weighted
Average
Exercise

Price

 
Beginning balance   262,725,000   $0.23875    -   $- 
                     
Granted   40,925,000    0.82643    262,725,000    0.23875 
Exercised   (20,000,000)   0.20    -    - 
Forfeited   -    -    -    - 
Expired   -    -    -    - 
Ending balance   283,650,000   $0.32627    262,725,000   $0.23875 
Intrinsic value of warrants  $18,400,000        $104,800,000      
Weighted Average Remaining Contractual Life (Years)   2.19         1.88      

 

As of December 31, 2021, 256,600,000 warrants are vested.

 

For the years ended December 31, 2021 and 2020, the Company incurred stock-based compensation expense of $3,765,363 and $0, respectively for the warrants in accordance with ASC 718-10-50-1 and ASC 718-10-50-2. The fair value of the grants were calculated based on the black-scholes calculation using the assumptions reflected in the chart below for both the service-based grants and the performance-based grants.

  

As of December 31, 2021, there remains unrecognized stock-based compensation expense related to these warrants of $20,682,021 comprising of $19,213,864 in service-based grants and $1,468,157 in performance-based grants, respectively through June 30, 2026.

 

Options

 

On October 26, 2021, the Company granted 630,000 stock options to employees. These options have a term of 10 years and are exercisable into shares of common stock at a price of $0.70 per share. As of December 31, 2021, none of the stock options are vested.

 

  

Year Ended December 31,

2021

  

Year Ended December 31,

2020

 
   Number  

Weighted
Average
Exercise

Price

   Number  

Weighted
Average
Exercise

Price

 
Beginning balance   -   $-    -   $- 
                     
Granted   630,000    0.70    -    - 
Exercised   -    -    -    - 
Forfeited   -    -    -    - 
Expired   -    -    -    - 
Ending balance   630,000   $0.70    -   $- 
Intrinsic value of warrants  $-        $-      
Weighted Average Remaining Contractual Life (Years)   9.82         -      

 

F-31
 

 

For the years ended December 31, 2021 and 2020, the Company incurred stock-based compensation expense of $24,500 and $0, respectively for the options in accordance with ASC 718-10-50-1 and ASC 718-10-50-2. The fair value of the grants were calculated based on the black-scholes calculation using the assumptions reflected in the chart below for the service-based grants.

 

As of December 31, 2021, there remains unrecognized stock-based compensation expense related to these options of $416,496 comprising of service-based grants through October 26, 2024.

 

Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each option/warrant is estimated using the Black-Scholes valuation model. The following assumptions were used for the periods as follows:

 

  

Year

Ended

  

Year

Ended

 
  

December 31,

2021

  

December 31,

2020

 
Expected term   2-10    2 
Expected volatility   182 - 409%   761%
Expected dividend yield   -    - 
Risk-free interest rate   0.10 - 0.58%   0.33%

 

NOTE 13: RELATED-PARTY TRANSACTIONS

 

Since May 13, 2019 when HUMBL was incorporated, they relied on entities that had common ownership to HUMBL for either assistance with payment of bills or for services rendered to assist HUMBL in bringing their products to market. The Company has not relied on these entities since early 2021 for this assistance. The amounts were largely for shared services that have ceased in 2021. The Company had recorded $15,200 and $89,491 in the years ended December 31, 2021 that were recorded in development costs.

 

NOTE 14: COUNTRY RIGHTS OPTION

 

Tuigamala Group Pty Ltd

 

On December 23, 2020, the Company and Tuigamala Group Pty Ltd, an Australian corporation (“TGP”), entered into a Securities Purchase Agreement whereby TGP agreed to purchase an option to purchase territory rights to 15 countries in the Oceania region (“Option”). The purchase price for this Option was $5,600,000, payable in two payments. The initial payment was $600,000 and was paid on December 23, 2020. The second payment of $5,000,000 was due on or before March 31, 2021.

 

In addition to receiving the Option, TGP was granted a warrant to purchase 12,500,000 shares of common stock of the Company at an exercise price of $1.00 per share. The warrant expires two-years from the grant date, December 23, 2021. As the warrant and the Option were granted for one price, the Company calculated the relative fair values of each instrument and recognized $556,757 of the $600,000 paid as the value of the warrant, and the remaining $43,243 as the value of the Option, which is reflected as deferred revenue on the Consolidated Balance Sheet as the criteria for revenue recognition under ASC 606 has not been satisfied to be recognized as revenue as of December 31, 2020. There was no guarantee that TGP would be able to make the second payment under the Option by the deadline of March 31, 2021.

 

On February 26, 2021, the Company and TGP entered into a term sheet to revise the Option. The revised terms of the Option are that the Company would form a subsidiary in the Oceania region. TGP would purchase a 35% ownership interest in the subsidiary and 3,750,000 shares of common stock for an aggregate purchase price of $15,000,000. The subsidiary shares and common shares would be purchased as follows: (a) by March 31, 2021, 1,250,000 shares will be issued for $5,000,000 and 33.33% of the subsidiary shares are to be sold to TGP; and (b) by September 30, 2021 with reasonable extensions to be determined, 2,500,000 shares will be issued for $10,000,000 and the remaining 66.66% of the subsidiary shares are to be sold to TGP. As a result of the revised terms, the $600,000 paid on December 23, 2020, will be used in its entirety to pay for the warrants described below, and the deferred revenue recognized will be reflected as additional paid in capital on February 26, 2021.

 

The Company and TGP were unable to come to agreement on new terms of this transaction and as of April 14, 2021 have terminated negotiations. TGP still owns the warrants received in December 2020. The Company is not obligated to return any of the $600,000 received on December 23, 2020.

 

These warrants were assigned to Archumbl Pty Ltd. in May 2021.

 

F-32
 

 

Aurea Group

 

On March 15, 2021 we entered into a Securities Purchase Agreement with HUMBL CL SpA (“HUMBL CL”), an affiliate of Aurea Group Ventures (“Aurea Group”), a Chilean multi-family office, under which Aurea Group purchased shares of our common stock in return for exclusive country rights to Chile of our HUMBL products for a purchase price of up to $7,500,000.

 

Under the terms of the Securities Purchase Agreement, HUMBL CL agreed to purchase 437,500 shares of our common stock for $1,000,000. The payment for these shares was due on or before March 30, 2021 but as a result of restrictions imposed due to COVID-19 was paid in two tranches of $500,000 each on April 5, 2021 and April 6, 2021. In addition, HUMBL CL also received the right to purchase 1,562,500 shares of HUMBL common stock for $6,500,000 by December 31, 2021 and to receive a 35% equity interest in a Chilean subsidiary HUMBL intends to form to conduct its operations in Chile.

 

The Securities Purchase Agreement provides that if HUMBL CL exercises its right to purchase the subsidiary interest, it will receive 35% of the profits from operations of the HUMBL family of products in Chile. In addition, HUMBL CL also received a right of first refusal with respect to regional or country rights sales in Latin America.

 

On January 3, 2022, the Company entered into a Settlement Agreement with HUMBL CL whereby HUMBL issued HUMBL CL 4,000,000 shares of common stock and HUMBL CL agreed to waive its right to purchase the Latin America territory rights.

 

The Company is still working with Aurea Group on Latin American business development opportunities for their products in key verticals such as: banking, merchant and financial services, real estate, hospitality, tourism, sports, festivals, entertainment and ticketing services in the region.

 

NOTE 15: SEGMENT REPORTING

 

The Company follows the provisions of ASC 280-10 Disclosures about Segments of an Enterprise and Related Information. This standard requires that companies disclose operating segments based on the manner in which management disaggregates the Company in making operating decisions. As of December 31, 2021 and for the year ended December 31, 2021, the Company operated in three segments. The segments are HUMBL Marketplace, HUMBL Pay, and HUMBL Financial. For the year ended December 31, 2020, the Company operated in one segment.

 

Year Ended December 31, 2021 

HUMBL

Pay

   HUMBL Marketplace   HUMBL Financial   Total 
Segmented operating revenues  $15,114   $2,224,506   $263,768   $2,503,388 
Cost of revenues   -    1,104,959    -    1,104,959 
Gross profit   15,114    1,119,547    263,768    1,398,429 
Total operating expenses net of depreciation, amortization and impairment   11,201,593    10,555,028    2,108,383    23,865,004 
Depreciation, amortization and impairment   22,850    22,221,701    4,570    22,249,121 
Other expenses   2,531,630    1,902,352    506,326    4,940,308 
(Loss) from operations  $(13,740,959)  $(33,559,534)  $(2,355,511)  $(49,656,004)
                     
Segmented assets as of December 31, 2021                    
Property and equipment, net  $9,794   $344,694   $1,959   $356,447 
Intangible assets – digital assets  $-   $2,695   $-   $2,695 
Goodwill  $-   $6,531,346   $-   $6,531,346 
Capital expenditures  $11,040   $354,328   $2,208   $367,576 

 

F-33
 

 

NOTE 16: INCOME TAXES

 

The following table summarizes the significant differences between the U.S. Federal statutory tax rate and the Company’s effective tax rate for financial statement purposes for the years ended December 31, 2021 and 2020:

 

   2021   2020 
Federal income taxes at statutory rate   21.00%   21.00%
State income taxes at statutory rate   8.90%   6.90%
Permanent differences   0.00%   0.00%
Stock compensation/consultant stock   19.80%   0.00%
Debt discounts   (2.27)%   0.00%
Change in valuation allowance   (47.43)%   (27.90)%
Totals   0.00%   (0.00)%

 

The following is a summary of the net deferred tax asset (liability) as of December 31, 2021 and 2020:

 

  

As of

December 31, 2021

  

As of  

December 31, 2020

 
Deferred tax assets (liabilities):          
Net operating losses  $580,302   $277,704 
Stock compensation/consultant stock   3,308,200    - 
Debt discounts   (378,743)   - 
Other expense   -    - 
Total deferred tax assets (liabilities)   3,509,759    79,005 
Less: Valuation allowance   (3,509,759)   (79,005)
           
Net deferred tax assets (liabilities)  $-   $- 

 

Section 382 of the Internal Revenue Code provides an annual limitation on the amount of federal NOLs and tax credits that may be used in the event of an ownership change. During 2020, the Company wrote off all of the net operating losses due to an ownership change. The Company had a net operating loss carryforward totaling approximately $16,713,136 at December 31, 2021.

 

The Company classifies accrued interest and penalties, if any, for unrecognized tax benefits as part of income tax expense. The Company did not accrue any penalties or interest as of December 31, 2021 and 2020.

 

The provision (benefit) for income taxes for the year ended December 31, 2021 and 2020 is as follows and represents minimum state taxes:

 

    2021    2020 
Current  $800   $800 
Deferred   -    - 
           
Total  $800   $800 

 

NOTE 17: SUBSEQUENT EVENTS

 

In accordance with ASC 855-10-50-1, the Company has evaluated subsequent events through March 30, 2022 which is the date that the financial statements were available to be issued.

 

The Company has evaluated subsequent events through the date the financial statements were available to be issued and has concluded that no such events or transactions took place that would require disclosure.

 

F-34
 

 

On January 3, 2022, the Company entered into a Settlement Agreement with HUMBL CL whereby HUMBL issued HUMBL CL 4,000,000 shares of common stock and HUMBL CL agreed to waive its right to purchase the Latin America territory rights.

 

On January 21, 2022, the Company issued 10,000,000 shares of common stock for the exercise of $2,000,000 of warrants.

 

From January 1, 2022 through March 30, 2022, the Company issued 675,000 shares of common stock for services rendered.

 

On February 12, 2022, the Company entered into an asset purchase agreement with BizSecure, Inc. (“BizSecure”). The Company acquired certain assets of BizSecure including tradenames, trademarks and logos; the Self Sovereign Identity Wallet; digital files, technology, specification sheets, product design information, code, algorithms; and customer contracts. The Company entered into employment agreements with two BizSecure employees as part of the agreement. The Company issued 13,200,000 common shares and 26,800,000 restricted stock units that vest quarterly commencing April 1, 2022 for a period of two years. The shares and restricted stock units have a value of $6,756,000. The Company accounted for this transaction as an asset purchase and not a business combination under ASC 805. The Company has included the value of $4,526,520 which represents the value of the restricted stock units in contingent consideration. This amount will be reclassified to equity upon the vesting of those restricted stock units over the two-year period. The Company determined this was an acquisition of a business pursuant to the guidance provided in both ASC 805 and Rule 11-01(d) of Regulation S-X. BizSecure is not considered a significant subsidiary under Regulation S-X Rule 1-02(w).

 

On February 22, 2022, the Company entered into a promissory note with a limited liability company, that is managed by a related party in the amount of $3,000,000. The promissory note bears interest at the annual interest rate of four percent (4%) and matures on February 22, 2025.

 

Effective, February 28, 2022, the Company met the criteria for the BLOCK ETX operations to be classified as held for sale at that time pursuant to ASC 205-20-50-1(a).

 

On March 3, 2022, the Company acquired Ixaya Business SA de CV, a Mexican corporation (“Ixaya”), under a Stock Purchase Agreement (“Ixaya SPA”). The acquisition of Ixaya was for $150,000 and 8,962,036 shares of common stock (a value of $1,500,000) for a total of $1,650,000. The Company accounted for this acquisition as a business combination under ASC 805, and Ixaya is not considered a significant subsidiary under Regulation S-X Rule 1-02(w).

 

On March 25, 2022, the Company cancelled 175,000 common shares of stock for a terminated employee.

 

On March 25, 2022, the Company’s CEO unilaterally cancelled 4,900 shares of Series B Preferred stock (a total of 49,000,000 common shares if converted) to enable the Company to complete strategic acquisitions of certain assets of BizSecure and to acquire Ixaya.

 

On March 30, 2022, the Company entered into a promissory note with a limited liability company, that is managed by a related party in the amount of $1,500,000. The promissory note bears interest at the annual interest rate of four percent (4%) and matures on March 30, 2025.

 

In the period January 1, 2022 through March 30, 2022, the Company issued 220,640,000 shares of common stock in the conversion of 22,064 shares of Series B Preferred stock.

 

F-35
 

 

HUMBL, INC.

CONSOLIDATED BALANCE SHEETS (IN US$)

MARCH 31, 2022 (UNAUDITED) AND DECEMBER 31, 2021

 

     March 31, 2022     December 31, 2021 
   March 31, 2022   December 31, 2021 
  (unaudited)     
ASSETS        
CURRENT ASSETS          
Cash  $5,681,727   $3,493,213 
Restricted cash   219,733    - 
Accounts receivable   543,870    325,267 
Intangible assets – digital assets, current portion   32,064    2,695 
Prepaid expenses and other current assets   42,325    57,693 
Total current assets   6,519,719    3,878,868 
           
NON-CURRENT ASSETS          
Fixed assets, net of depreciation   359,106    356,447 
Intangible assets, net of amortization   3,333,284    - 
Intangible assets – digital assets, net of current portion   406,040    - 
Goodwill   10,512,346    6,531,346 
Total non-current assets   14,610,776    6,887,793 
TOTAL ASSETS  $21,130,495   $10,766,661 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)          
CURRENT LIABILITIES          
Accounts payable and accrued expenses  $2,275,264   $1,460,266 
Unfunded liability – digital assets   219,733    - 
Obligation to issue common shares   26,831    676,408 
Due to seller   327,412    327,412 
Contingent consideration   4,526,520    - 
Current portion of note payable - bank   4,152    - 
Current portion of notes payable   502,549    501,828 
Notes payable – related parties   10,996,921    10,986,250 
Convertible notes payable – related parties   7,500,000    7,500,000 
Current portion of convertible notes payable, net of discount   4,236,722    3,392,123 
Total current liabilities   30,616,104    24,844,287 
           
LONG-TERM LIABILITIES          
Note payable – bank, net of current portion   10,153    - 
Notes payable, net of current portion   147,451    148,172 
Notes payable – related parties, net of current portion   4,500,000    - 
Convertible notes payable, net of discount and net of current portion   -    2,232,702 
Total non-current liabilities   4,657,604    2,380,874 
           
TOTAL LIABILITIES   35,273,708    27,225,161 
           
Commitments and contingency   -    - 
STOCKHOLDERS’ EQUITY (DEFICIT)          
Preferred stock, 7,000,000 shares Series A Preferred stock authorized, and 570,000 Series B Preferred stock authorized (Series C was cancelled October 29, 2021)          
Series A Preferred stock, par value $0.00001; 7,000,000 issued and outstanding as of March 31, 2022 and December 31, 2021, respectively   70    70 
Series B Preferred stock, par value $0.00001; 517,795 and 544,759 issued and outstanding as of March 31, 2022 and December 31, 2021, respectively   5    5 
Common stock, par value $0.00001; 7,450,000,000 shares authorized, 1,317,065,639 and 1,023,039,433 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively   13,170    10,230 
Accumulated other comprehensive income (loss)   3,042    - 
Additional paid in capital   48,956,654    34,182,004 
Accumulated deficit   (63,116,154)   (50,650,809)
Total stockholders’ equity (deficit)   (14,143,213)   (16,458,500)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)  $21,130,495   $10,766,661 

 

See notes to consolidated financial statements.

 

F-36
 

 

HUMBL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN US$)

THREE MONTHS ENDED MARCH 31, 2022 AND 2021

 

     2022     2021 
   2022   2021 
         
REVENUES   $1,147,134   $154,104 
           
COST OF REVENUES    520,970    104,743 
           
GROSS PROFIT    626,164    49,361 
           
OPERATING EXPENSES:           
Development costs    1,263,992    102,303 
Professional fees   981,138    714,878 
Settlement   1,120,400    - 
Stock-based compensation   4,101,329    - 
Impairment - goodwill   1,008,642    - 
Impairment – digital assets   45,318    - 
General and administrative expenses    2,598,595    390,413 
Total operating expenses    11,119,414    1,207,594 
LOSS FROM OPERATIONS BEFORE OTHER INCOME (EXPENSES)    (10,493,250)   (1,158,233)
           
OTHER INCOME (EXPENSE):           
Interest expense   (402,804)   (5,228)
Amortization of debt discounts   (1,590,897)   (15,432)
Gain on sale of digital assets    29,551    - 
Total other income (expense)    (1,964,150)   (20,660)
LOSS FROM CONTINUING OPERATIONS BEFORE DISCONTINUED OPERATIONS AND PROVISION FOR INCOME TAXES    (12,457,400)   (1,436,862)
           
Discontinued Operations:          
Loss from discontinued operations   (7,945)   (257,969)
Gain on disposal of discontinued operations   -    - 
Total discontinued operations   (7,945)   (257,969)
           
NET LOSS FROM OPERATIONS BEFORE PROVISION FOR INCOME TAXES   (12,465,345)   (1,436,862)
PROVISION FOR INCOME TAXES    -   -
NET LOSS   $(12,465,345)  $(1,436,862)
           
Other comprehensive income (loss)          
Foreign currency translation adjustment   3,042    - 
Comprehensive loss  $(12,462,303)  $(1,436,862)
           
NET LOSS PER SHARE           
Basic and diluted   $(0.01)  $(0.00)
           
SHARES USED IN CALCULATION OF NET LOSS PER SHARE           
Basic and diluted    1,176,805,694    974,218,599 

 

See notes to consolidated financial statements.

 

F-37
 

 

HUMBL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN US$)

THREE MONTHS ENDED MARCH 31, 2022 AND 2021

 

     2022     2021 
   2022   2021 
Cash flows from operating activities:          
Net loss  $(12,465,345)  $(1,436,862)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation expense   5,851    - 
Amortization   91,716    - 
Impairment expense - goodwill   1,008,642    - 
Impairment expense – digital assets   45,318    - 
(Gain) on sale of digital assets   (29,551)   - 
Expenses paid for by digital assets   41,420    - 
Sales commission received in digital assets   (1,063)   - 
Amortization of debt discounts   1,590,897    15,432 
Foreign currency adjustment   3,042    - 
Stock-based compensation, net of cancellation of shares   4,074,497    219,642 
Obligation to issues common shares for services rendered   26,831    - 
Settlement   1,120,400    - 
Bad debt   -    88,693 
Changes in assets and liabilities          
Accounts receivable   (194,157)   - 
Intangible assets – digital assets   (271,800)   - 
Prepaid expenses and other current assets   15,368    - 
Increase (decrease) in amounts due related parties   -    (11,547)
Accounts payable and accrued expenses   1,002,529    246,375 
Net cash used in operating activities   (3,935,405)   (878,267)
           
Cash flows from investing activities:          
Purchase of fixed assets   (8,510)   - 
Cash paid in purchase of Ixaya, net of amounts received   (148,675)   - 
Net cash used in investing activities   (157,185)   - 
           
Cash flows from financing activities:          
Proceeds from sales of membership interests of HUMBL, LLC   -    10,000 
Redemption of Series B Preferred Stock   -    - 
Proceeds from the exercise of warrants   2,000,000    - 
Proceeds from related party notes payable   4,500,837    - 
Net cash provided by financing activities   6,500,837    10,000 
NET INCREASE (DECREASE) IN CASH AND RESTRICTED CASH   2,408,247    (868,267)
Cash and Restricted Cash - beginning of period   3,493,213    1,720,979 
Cash and Restricted Cash - end of period  $5,901,460   $852,712 
           
SUPPLEMENTAL DISCLOSURES:          
Cash paid for interest  $-   $- 
Cash paid for income taxes  $-   $- 
           
SUMMARY OF NONCASH ACTIVITIES:          
Reclassification of deferred revenue related to warrant purchase  $-   $43,243 
Conversion of preferred stock into common stock  $2,206   $- 
Conversion of obligation to issue common stock into common stock  $449,950   $- 
Exchange of convertible notes payable and accrued interest into common stock  $3,176,805   $- 
NFT purchased with digital assets  $406,040   $- 
Adjustment for unfunded liability  $219,733   $- 
           
Acquisition of Ixaya:          
Accounts receivable  $24,446   $- 
Goodwill   1,008,642    - 
Intellectual property - software   650,000    - 
Accounts payable and accrued expenses   (10,779)   - 
Note payable - bank   (13,879)   - 
Related party advance   (9,834)   - 
           
Total   1,648,675    - 
Common stock issued   (1,500,000)   - 
           
Net cash paid in acquisition of Ixaya, net of amounts received  $148,675   $- 
           
Acquisition of BizSecur:          
Customer relationship  $275,000   $- 
Intellectual property - software   2,500,000    - 
Goodwill   3,981,000    - 
           
Total   6,756,000    - 
Common stock issued   (2,229,480)   - 
Contingent consideration   (4,526,520)   - 
           
Net cash paid in acquisition of BizSecure  $-   $- 

 

See notes to consolidated financial statements.

 

F-38
 

 

HUMBL, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) (UNAUDITED) (IN US$)

THREE MONTHS ENDED MARCH 31, 2022 AND 2021

 

S  -   -   -   -   -   -    -         -    - 
   Series A Preferred  Series B Preferred  Common  Additional Paid-In   Accumulated Comprehensive   Accumulated     
   Shares  Amount   Shares  Amount   Shares  Amount   Capital   Income (Loss)   Deficit   Total 
Balances at January 1, 2021  7,000,000  $70   -  $-   974,177,443  $9,742   $2,545,825   $-   $(994,805)  $1,560,832 
Share adjustment  -   -   -   -   41,156   -    -         -    - 
Members interest purchased for cash (timing difference from 2020)  -   -   -   -   -   -    10,000         -    10,000 
Shares issued in reverse merger with HUMBL  -   -   552,029   6   -   -    39,961         -    39,967 
Shares issued for services  -   -   2,272   -   -   -    179,675         -    179,675 
Reclassification from deferred revenue on warrant purchase  -   -   -   -   -   -    43,243         -    43,243 
                                             
Net loss for the period  -   -   -   -   -   -    -    -    (1,436,862)   (1,436,862)
                                             
Balances March 31, 2021  7,000,000  $70   554,301  $6   974,218,599  $9,742   $2,818,704   $-   $(2,431,667)  $396,855 
                                             
Balances at January 1, 2022  7,000,000  $70   544,759  $5   1,023,039,433  $10,230   $34,182,004   $-   $(50,650,809)  $(16,458,500)
Shares issued for cash  -   -   -   -   -   -    -         -    - 
Shares issued for services  -   -   -   -   675,000   7    190,586    -    -    190,593 
Shares cancelled  -   -   -   -   (825,000)   (9)   (187,241)   -    -    (187,250)
Shares issued for acquisition of BizSecure  -   -   -   -   13,200,000   132    2,229,348    -    -    2,229,480 
Shares issued for acquisition of Ixaya  -   -   -   -   8,962,036   90    1,499,910    -    -    1,500,000 
Shares issued in settlement  -   -   -   -   4,000,000   40    1,120,360    -    -    1,120,400 
Shares issued in exercise of warrants  -   -   -   -   10,000,000   100    1,999,900    -    -    2,000,000 
Shares issued in exchange of notes payable and accrued interest  -   -   -   -   37,374,170   374    3,176,430    -    -    3,176,804 
Conversion of Preferred B shares for common shares  -   -   (22,064)   -   220,640,000   2,206    (2,206)   -    -    - 
Shares cancelled for no consideration  -   -   (4,900)   -   -   -    -    -    -    - 
Stock based compensation - warrants  -   -   -   -   -   -    3,270,349    -    -    3,270,349 
Stock based compensation - options  -   -   -   -   -   -    36,750    -    -    36,750 
Stock based compensation – restricted stock grants  -   -   -   -   -   -    1,440,464    -    -    1,440,464 
                                             
Net loss for the period  -   -   -   -   -   -    -    3,042    (12,465,345)   (12,462,303)
                                             
Balances at March 31, 2022  7,000,000  $70   517,795  $5   1,317,065,639  $13,170   $48,956,654   $3,042   $(63,116,154)  $(14,143,213)

 

* There was no Series C Preferred Stock activity during these periods through cancellation of the Series C Preferred Stock on October 29, 2021. Additionally on October 29, 2021, the Series B Preferred Stock had their authorized shares reduced from 900,000 shares to 570,000 shares.

  

See notes to consolidated financial statements.

 

F-39
 

 

HUMBL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (IN US$)

MARCH 31, 2022 AND 2021

 

NOTE 1: NATURE OF OPERATIONS

 

HUMBL, Inc. (“Company” or “HUMBL”) was incorporated November 12, 2009. The Company was redomiciled on November 30, 2020 to the State of Delaware.

 

On December 3, 2020, HUMBL, LLC (“HUMBL LLC”) merged into the Company in what is accounted for as a reverse merger. Under the terms of the Merger Agreement, HUMBL LLC exchanged 100% of their membership interests for 552,029 shares of newly created Series B Preferred Stock. The Series B Preferred shares were issued to the respective members of HUMBL LLC following the approval by FINRA of a one-for-four reverse stock split of the common shares and the increase in the authorized common shares to 7,450,000,000 shares, and 10,000,000 preferred shares.

 

The FINRA approval for both the increase in the authorized common shares and reverse stock split occurred on February 26, 2021. To assume control of the Company, the former CEO, Henry Boucher assigned his 7,000,000 shares of Series A Preferred Stock as well as 550,000,000 shares of common stock to Brian Foote, the President and CEO of HUMBL LLC for a $40,000 note payable. The Series A Preferred Stock is not convertible into common stock; however, it has voting rights of 10,000 votes per 1 share of stock. After the reverse merger was completed, HUMBL LLC ceased doing business, and all operations were conducted under Tesoro Enterprises, Inc. which later changed their name to HUMBL, Inc. (“HUMBL” or the “Company”).

 

On June 3, 2021 we acquired Tickeri, Inc. (“Tickeri”) in a debt and stock transaction totaling $20,000,000 following which Tickeri became a subsidiary of HUMBL. Tickeri is a leading ticketing, live events and box office SaaS platform featuring Latin events and artists throughout the United States, Latin America, and the Caribbean corridor. The purchase price for the stock purchase was $20,000,000 of which we must pay $10,000,000 in our common stock and $10,000,000 was paid through two promissory notes. The shares had a deemed value equal to the volume weighted average price per share of HUMBL common stock on the OTC Markets for the ten consecutive trading days ending with the complete trading day ending two trading days prior to the closing. We issued the two shareholders of Tickeri, Juan Gonzalez and Javier Gonzalez, 4,672,897 shares of our common stock each. We also issued to each of Juan and Javier Gonzalez a secured promissory note in the face amount of $5,000,000. The promissory notes are due and payable on or before December 31, 2022, bear interest at the rate of 5% per annum and are secured by the equity interests of Tickeri. In the event of an uncured default by HUMBL under the promissory note, Juan and Javier Gonzalez have the right to recover the ownership of Tickeri and re-commence the business and operations of Tickeri free and clear of any claims or encumbrances by HUMBL. We intend to limit the integration of Tickeri’s assets with our assets until the promissory notes are paid in full. We agreed to register on Form S-1 within three months from the closing the shares issued to Juan and Javier Gonzalez and have the registration statement declared effective within six months of the closing date. Following the closing, Juan Gonzalez and Javier Gonzalez, entered into employment agreements having a term of 18 months, appointing them CEO of Tickeri and CTO of HUMBL, respectively. The Company has been negotiating with both Juan Luis and Javier Gonzalez regarding the registration rights effectiveness provision and have accrued $400,000 through March 31, 2022 as a result of the failure to have the registration statement originally filed in July 2021 declared effective. We evaluated whether this penalty would constitute a derivative liability, and we determined that there are sufficient funds to cover this fee and sufficient authorized common stock should we pay this fee in stock.

 

On June 30, 2021, we acquired Monster Creative, LLC (“Monster”). Monster is a Hollywood production studio that specializes in producing movie trailers and other related content. Monster was founded by Doug Brandt and Kevin Childress. Monster will collaborate with HUMBL in the production of NFTs and other digital content. The purchase price for all of the membership interests in Monster was paid through the issuance of one convertible note and one non-convertible note to each of Doug Brandt and Kevin Childress in the aggregate principal amount of $8,000,000. The convertible notes were issued to Doug Brandt (through an entity owned by him) and Kevin Childress in the aggregate principal amount of $7,500,000. The notes convert at the holder’s election at $1.20 per share, bear interest at 5% per annum and are due in 18 months from issuance. We also issued non-convertible notes to Doug Brandt and Kevin Childress in the aggregate amount of $500,000. These notes bear interest at the rate of 5% per annum and are due on April 1, 2022. Doug Brandt and Kevin Childress each entered into employment agreements with Monster having a term of three years. Doug Brandt was appointed as the CEO of Monster and Kevin Childress was appointed as its President and Creative Director. The Company and Doug Brandt and Kevin Childress agreed to an extension on March 30, 2022 of the notes that were due April 1, 2022 until the earlier of July 1, 2022 or 30 days after the effectiveness of the Company’s registration statement on Form S-1.

 

F-40
 

 

In the extension agreements, the Company added $7,500 to Doug Brandt and $1,500 to Kevin Childress in their note agreements. The extension of the notes did not constitute a material modification of the debt.

 

On February 12, 2022, the Company entered into an asset purchase agreement with BizSecure, Inc. (“BizSecure”). The Company determined this was an acquisition of a business pursuant to the guidance provided in both ASC 805 and Rule 11-01(d) of Regulation S-X. BizSecure is not considered a significant subsidiary under Regulation S-X Rule 1-02(w). The Company acquired a customer relationship with the US Air Force and BizSecure’s Mobile ID technology. The Company entered into employment agreements with two BizSecure employees as part of the agreement to help integrate the Mobile ID technology into the Company’s larger suite of products and help operate the blockchain services division. The assets acquired from BizSecure represented the majority of the operations of the entity and BizSecure post-acquisition has only conducted nominal operations and has no employees. The Company issued 13,200,000 common shares and 26,800,000 restricted stock units that vest quarterly commencing April 1, 2022 for a period of two years. The shares and restricted stock units have a value of $6,756,000. The Company has included the value of $4,526,520 which represents the value of the restricted stock units in contingent consideration. This amount will be reclassified to equity upon the vesting of those restricted stock units over the two-year period.

 

On March 3, 2022, the Company acquired Ixaya Business SA de CV, a Mexican corporation (“Ixaya”), under a Stock Purchase Agreement (“Ixaya SPA”). The acquisition of Ixaya was for $150,000 and 8,962,036 shares of common stock (a value of $1,500,000) for a total of $1,650,000. The Company accounted for this acquisition as a business combination under ASC 805, and Ixaya is not considered a significant subsidiary under Regulation S-X Rule 1-02(w).

 

HUMBL is a Web 3, digital commerce platform that was built to connect consumers, businesses and governments in the digital economy. HUMBL provides simple tools and packaging for complex new technologies such as blockchain, in the same way that previous cycles of e-commerce and the cloud were more simply packaged by companies such as Facebook, Apple, Amazon and Netflix over the past several decades. The Company through their product offerings are looking to simplify and package the tokenized blockchain economy for consumers, corporations and government.

 

The goal of HUMBL is to provide ready built tools, and platforms for consumers and merchants to seamlessly participate in the digital economy. HUMBL is built on a patent-pending decentralized technology stack that utilizes both core and partner technologies, to provide faster connections to the digital economy and each other.

 

The Company is organized into two divisions: a) HUMBL Consumer and b) HUMBL Commercial. These two divisions incorporate and expand the Company’s core products that were formerly set up into three distinct segments prior to 2022. The majority of the Company’s operations prior to 2022 were focused on the Consumer division. With the acquisition of the Mobile ID technology from BizSecure and software capabilities from Ixaya, the development of our newly formed HUMBL Blockchain Services unit we anticipate that the Commercial division will provide opportunities across the governmental sector as well as businesses in search of enhancing their platforms.

 

HUMBL’s core products and services are as follows:

 

HUMBL Mobile Wallet – A mobile app that allows peers, consumers and merchants to connect in the digital economy;

 

HUMBL Marketplace – A mobile marketplace that allows consumers and merchants to connect more seamlessly in the digital economy; and

 

HUMBL Financial – Financial products and services, targeted for simplified investing on the blockchain.

 

HUMBL Blockchain Services – Enterprise solutions for businesses and governments related primarily to credentialing and identity verification.

 

F-41
 

 

HUMBL Mobile Wallet (formerly HUMBL Pay)

 

HUMBL continues the development of a mobile application that allows customers to migrate to and participate in the digital economy. The Company has integrated a variety of useful functionality such as buying, selling, sending and receiving digital assets, storing personal digital credentials and supporting various digital forms of payment. The Company is also working rapidly to integrate the use of search, discovery, peer-to-peer cash and ticketing around the world, as these services migrate into digital and blockchain-based modalities. The mobile application is designed to provide functionality to the following groups:

 

Individuals - Consumers who want to participate in acquiring digital assets discover, pay, rate and review experiences digitally vs. paper bills and hardware point-of-sale (“POS”);

 

Freelancers - Service providers and gig workers that want to get paid from anywhere they work vs. paper bills and hardware POS; and

 

Merchants – Primarily brick and mortar vendors that want to get paid digitally vs. paper bills and hardware POS.

 

We can receive revenue from the mobile wallet in two ways. First, HUMBL can participate in any transactional fees generated from customers using the HUMBL Pay app. In these circumstances HUMBL can typically collect a percentage of the transaction for providing these services. Second, HUMBL can charge a monthly subscription fee for users such as merchants and freelancers that use the app. Currently, we are not receiving revenue in either of these ways. The Company is not charging fees (in addition to those charged by the third-party services providers) as a way to provide competitive pricing and incentivize customers to use the app. We could begin charging these fees at any time.

 

We engage the services of providers such as Stripe to process payments and Wyre and BitGo to act as custodians of the digital assets purchased by our customers using our HUMBL Pay app. The digital assets purchased on our platform are actually purchased through the Wyre and held by Wyre for our customers’ benefit. No digital assets are purchased through BitGo, but they do act as a custodian for certain of our digital assets.

 

HUMBL Marketplace

 

Through its online marketplace, HUMBL is developing the capability for merchants to list a wide range of soft goods and digital assets to mid-market audiences, that, where appropriate, incorporate the benefits of blockchain. HUMBL provides merchants with the ability to list and sell goods with greater levels of authentication, by using technologies such as the HUMBL Token Engine and HUMBL Origin Assurance, to improve the merchant’s ability to trade, track and pay for assets.

 

Through our online marketplace we also allow for the listing of non-fungible tokens (“NFTs”). NFTs allow entities and individuals such as athletes, celebrities, agencies, artists and companies to monetize their digital images, multimedia content and catalogues on the blockchain. HUMBL provides a marketplace for artists and athletes to connect online in the sale of digital collectibles to fans and collectors and provides a rigorous set of terms and conditions that govern what can and cannot be listed on the marketplace. We currently review all listings to screen for graphic content, potential intellectual property rights violations, and potential securities law violations. The NFT marketplace is operated through a third-party marketplace plug-in (OpenSea), electronic wallet extensions (such as MetaMask), and the Ethereum blockchain. Users participate in the NFT marketplace by linking their digital wallets to our platform and engaging (e.g., buying, selling, bidding) with the NFTs listed on our platform. The services provided by HUMBL are administrative. HUMBL is a platform and does not act as a broker, financial institution, or creditor. We facilitate transactions between the buyer and seller in the auction/sale process but we are not a party to any agreement between the buyer and seller or between any users.

 

We receive revenue from the NFT marketplace in two ways. First, for some clients HUMBL provides design services to help artists, athletes and entertainers create NFTs to be sold to their fans. In these circumstances HUMBL typically receives a flat fee for providing such services that is paid out of the sales price of the NFT. The size of the fee depends on the scope and complexity of the design services provided. Second, HUMBL receives a transaction fee each time an NFT sells on the NFT marketplace.

 

The NFT marketplace allows creators to mint NFTs using their own intellectual property and list those NFTs for sale (primary sales) on the marketplace. The NFT marketplace also allows for NFTs to be resold (secondary sales) on the platform, but currently only NFTs that were originally minted on the Company’s NFT Marketplace or are otherwise approved by the Company may be listed for secondary sales on the Marketplace. The Company does not otherwise support or influence the market for the resale of NFTs sold on its platform. Other than requiring creators to attest they own the IP used to create their NFTs and monitoring for obvious copyright violations, the Company does not enforce any rights related to the primary or secondary sales of NFTs. Payment transactions for the purchase and sale of NFTs are made through the use of smart contracts on the Ethereum blockchain.

 

The Company does not handle separate, off-chain payments for NFTs. Tracking and payment of resale royalty fees are accomplished automatically through the use of smart contracts. The Company is not responsible for distributing or managing resale royalty fees.

 

F-42
 

 

In September of 2021, HUMBL launched HUMBL Tickets, initially focused on the offering of secondary (resale) tickets to thousands of live events across North America. The inventory listings and ticket fulfillment are provided by Ticket Evolution and HUMBL earns a commission for each sale. In addition to its subsidiary Tickeri, the Company will continue to work with clients to merge the realms of NFTs, event tickets and blockchain authentication.

 

HUMBL Financial

 

HUMBL Financial was developed to package step-function technologies such as blockchain into “several clicks” for the customer.

 

In 2021, HUMBL Financial created BLOCK ETX products to simplify digital asset investing for customers and institutions seeking exposure to a new, 24/7 digital asset class. We have launched this product in 100 countries outside the United States. HUMBL Financial has developed proprietary, multi-factor blockchain indexes, trading algorithms and financial services for the new digital asset trading markets to accommodate index, active and thematic investment strategies. BLOCK ETXs are completely non-custodial, algorithmically driven software services that allow customers to purchase and hold digital assets in pre-set allocations through their own digital asset exchange accounts. BLOCK ETXs are compatible for United States customers who have accounts with Coinbase Pro, Bittrex US or Binance US and for non-US customers who have accounts with Bittrex Global. BLOCK ETXs were served first on the desktop and web version of the HUMBL platform, with the goal of future applications inside the HUMBL mobile application. HUMBL Financial is open to the licensing of the BLOCK ETXs to institutions and exchanges. HUMBL Financial also plans to offer trusted, third-party financial services in areas such as payments, investments, credit card services and lending across the HUMBL platform over time.

 

In February 2022, the Company elected to suspend offering the BLOCK ETX products pending further legal analysis regarding how to offer the BLOCK ETXs in a fully compliant manner with the evolving laws and regulatory treatment of such novel products. The Company will continue to monitor the regulatory environment with respect to these products. In accordance with ASC 205-20-50-1(a), the timing of the disposal was February 28, 2022. The Company met the criteria for the BLOCK ETX operations to be classified as held for sale at that time.

 

HUMBL Blockchain Services

 

HUMBL Blockchain Services (“HBS”) was formed as part of the Company’s asset acquisition of BizSecure on February 12, 2022. Recognizing the opportunities for governments and commercial enterprises to incorporate Blockchain and Distributed Ledger Technologies (“DLT”), HBS is focused on working with clients to identify problems and develop solutions that build upon the various capabilities the Company has and continues to develop. The Company determined this was an acquisition of a business pursuant to the guidance provided in both ASC 805 and Rule 11-01(d) of Regulation S-X. BizSecure is not considered a significant subsidiary under Regulation S-X Rule 1-02(w).

 

Our solutions enable municipalities, government agencies, and other commercial entities the ability to offer mobile IDs and other credential verification services to their constituents. We continue to make significant investments to leverage our existing technologies and further expand both our DLT capabilities and are always exploring strategic alternatives intended to optimize the value of our Company.

 

Going Concern

 

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures.

 

We have incurred an increased working capital deficit and accumulated deficit as of March 31, 2022 as we continued to ramp up operations significantly in this period and incurred new debt mostly offset by exchanging some debt into shares of common stock to assist in supporting our operations. As of March 31, 2022, we had $5,901,460 in cash and restricted cash. Between the growth in revenues and profitability from our subsidiaries as well as through sales of merchandise, HUMBL Tickets and NFTs in the HUMBL Marketplace, we continue to fund the development of the HUMBL Wallet. In February 2022 we entered into a purchase agreement with BizSecure that coincided with the commencement of HUMBL Blockchain Services. With the acquisitions of BizSecure in February 2022 and Ixaya in March 2022, we are growing our operations in both the US (BizSecure) as well as LatAm region (Ixaya) of the world and expect to be able to offer our array of core products to governmental agencies as well as the private sector not in the United States, but throughout the world. With the BizSecure acquisition, we acquired a contract with the US Air Force and subsequent to the acquisition have been able to secure a pilot program with a county in the State of California to provide services to incorporate Blockchain and Distributed Ledger Technologies. In addition to the acquisition of Ixaya in Mexico, we currently have an office and team in Santiago, Chile, that is generating several opportunities that we are considering moving forward on. future view Latin America as an important market for our products and servicese. We have generated a majority of our proceeds from the issuance of debt and through the exercise of warrants.

 

F-43
 

 

We had a working capital deficit of $23,706,538 and $20,965,419 as of March 31, 2022 and December 31, 2021, respectively. The majority of our current liabilities is in the form of related party notes for the acquisitions of Tickeri and Monster. The decrease in working capital is the direct result of these notes as well as the debt incurred related to the cash necessary to continue the development of our mobile wallet. The Company believes it has adequate capital resources to meet its cash requirements during the next 12 months as they continue to grow and develop suitable sources of capital. A majority of the Company’s operating expenses in 2022 (58%) were the result of non-cash charges such as impairment of goodwill, settlement and stock-based compensation. The actual monthly cash burn of the Company is approximately $1,312,000 per month at this time and as our core products come online, this is likely to decrease upon our technology being completed. The Company has received $2,000,000 in additional warrant exercises and $4,500,000 in related party debt proceeds in the first quarter to date of 2022, however, as a result of the operating losses and working capital deficit, management has determined that there is substantial doubt about the Company’s ability to continue as a going concern.

 

We expect that the revenue generating operations of the Company will continue to improve the liquidity of the Company moving forward. However, going forward, the effect of the pandemic on the capital markets may limit our ability to raise additional capital on the terms acceptable to us at the time we need it, if at all. The challenges related to remote work and travel restrictions that we as a smaller company have faced in striving to meet our disclosure obligations in a timely manner while taking the steps to protect the health and safety of our employees have impacted, and may continue to further impact, our ability to raise additional capital.

 

The consolidated financial statements of the Company have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable period of time pursuant to ASC 205-40-50-13. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of the uncertainties.

 

Management’s plans include raising additional capital through the exercising of their warrants as well as through future debt and equity financings to carry out its business plan. Obtaining additional financing and the successful development of the Company’s segments including their new Blockchain Services group, ultimately, to profitable operations, are necessary for the Company to continue operations.

 

Impact of COVID-19

 

The COVID-19 pandemic previously had a profound effect on the U.S. and global economy and may continue to affect the economy and the industries in which we operate, depending on the vaccine rollouts and the emergence of virus mutations.

 

COVID-19 did not have a material effect on the Consolidated Statements of Operations or the Consolidated Balance Sheets.

 

Our ability to access the capital markets and maintain existing operations is unknown during the COVID-19 pandemic. Any such limitation on available financing and how we conduct business with our customers and vendors would adversely affect our business.

 

Because the federal government and some state and local authorities are reacting to the many variants of COVID-19, it is creating uncertainty on whether these actions could disrupt the operation of the Company’s business and have an adverse effect on the Company. The extent to which the COVID-19 outbreak may impact the Company’s results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.

 

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) includes, among other things, provisions relating to payroll tax credits and deferrals, net operating loss carryback periods, alternative minimum tax credits and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act also established a Paycheck Protection Program (“PPP”), whereby certain small businesses were eligible for a loan to fund payroll expenses, rent and related costs. The Company received forgiveness of their PPP loans during 2021.

 

F-44
 

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and the rules and regulations of the United States Securities and Exchange Commission (the “Commission” or the “SEC”). It is management’s opinion that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation.

 

As the acquisition of HUMBL resulted in the owners of HUMBL gaining control over the combined entity after the transaction, and the shareholders of Tesoro Enterprises, Inc. continuing only as passive investors, the transaction was not considered a business combination under the ASC. Instead, this transaction was considered to be a capital transaction of the legal acquiree (HUMBL) and was equivalent to the issuance of shares by HUMBL for the net monetary assets of Tesoro Enterprises, Inc. accompanied by a recapitalization. As a result, all historical balances are those of HUMBL as they are the accounting acquirer.

 

Under generally accepted accounting principles of the United States, any excess of the fair value of the shares issued by HUMBL over the value of the net monetary assets of Tesoro Enterprises, Inc. is recognized as a reduction of equity. There was no excess of fair value in this transaction.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of HUMBL, Inc. and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. HUMBL, Inc. holds 100% of Tickeri, Monster and Ixaya. The Company formed additional subsidiaries that are inactive and have no activity for future use.

 

The Company applies the guidance of Topic 805 Business Combinations of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”).

 

For Tickeri, Monster, BizSecure and Ixaya, the Company accounted for these acquisitions as business combinations and the difference between the consideration paid and the net assets was applied to goodwill as there were no identifiable intangible assets acquired.

 

Reclassification

 

The Company has reclassified certain amounts in the 2021 financial statements to comply with the 2022 presentation. These principally relate to classification of certain expenses and liabilities. The reclassifications had no impact on total net loss or net cash flows for the three months ended March 31, 2021.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. These estimates include, but are not limited to, management’s estimate of provisions required for permanent and temporary differences related to income taxes, liabilities to accrue, estimates of the fair value of goodwill and determination of the fair value of stock awards. Actual results could differ from those estimates.

 

Cash and Restricted Cash

 

Cash consists of cash and demand deposits with an original maturity of three months or less. The Company holds no cash equivalents as of March 31, 2022 and December 31, 2021, respectively. The Company maintains cash balances in excess of the FDIC insured limit at a single bank.

 

F-45
 

 

In 2022, the Company established a service to their HUMBL Pay app users. The service enables HUMBL Pay app users the ability through a Company maintained digital asset wallet with Wyre (“Wyre”) to purchase digital assets (cryptocurrency). As it can take 5 to 8 business days to physically settle funds in the Wyre wallet, there may be delays in digital assets being received by customers and the delivery of BLOCKS in a BitGo wallet (“BitGo”). BitGo is a third-party custodian service that provides the custody for the customers’ BLOCKS. These timing differences occur, and on March 31, 2022, we had an unfunded liability of $219,733 related to the purchase of BLOCKS that had not yet been settled. The Company has restricted their cash in the same amount of this liability. As of May 6, 2022, the entire liability has been settled and all BLOCKS have been delivered to the customers.

 

The BitGo account is not the Company’s account; however represents the pool of all BLOCKS held by and allocated to HUMBL Pay users accounts. The users may choose to transfer the purchased BLOCKS to their individual wallets outside of HUMBL and as of March 31, 2022, approximately 25% of those users did transfer their BLOCKS.

 

Fixed Assets and Long-Lived Assets

 

ASC 360 requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company has adopted Accounting Standard Update (“ASU”) 2017-04 Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment.

 

The Company reviews recoverability of long-lived assets on a periodic basis whenever events and changes in circumstances have occurred which may indicate a possible impairment. The assessment for potential impairment is based primarily on the Company’s ability to recover the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. If such assets are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets.

 

Fixed assets and intangible assets with finite useful lives are stated at cost less accumulated amortization and impairment. Intangible assets with infinite lives, such as digital currency are valued at costs and reviewed for indicators of impairment at least annually, or more depending on circumstances.

 

The Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following:

 

1. Significant underperformance relative to expected historical or projected future operating results;

 

2. Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and

 

3. Significant negative industry or economic trends.

 

When the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows.

 

Revenue Recognition

 

The Company accounts for a contract with a customer that is within the scope of this Topic only when the five steps of revenue recognition under ASC 606 are met.

 

The five core principles will be evaluated for each service provided by the Company and is further supported by applicable guidance in ASC 606 to support the Company’s recognition of revenue.

 

The Company accounts for revenues based on the verticals in which they were earned. The four principal verticals in which the Company operates today are HUMBL Mobile Wallet, HUMBL Marketplace, HUMBL Financial and HUMBL Blockchain Services.

 

F-46
 

 

HUMBL Mobile Wallet (formerly HUMBL Pay)

 

The Company is anticipated to earn transaction revenues primarily from fees charged to merchants and consumers on a transaction basis through the Company’s mobile application. These fees may have a fixed and/or variable component. The variable component is generally a percentage of the value of the payment amount and is known at the time the transaction is processed. For a portion of our transactions, the variable component of the fee is eligible for reimbursement when the underlying transaction is approved for a refund. The Company may estimate the amount of fee refunds that will be processed each quarter and record a provision against the net revenues. The volume of activity processed on the platform, which results in transaction revenue, is referred to as Total Payment Volume (“TPV”).

 

The Company will earn additional fees on transactions where currency conversion is performed, when cross-border transactions are enabled (i.e., transactions where the merchant and consumer are in different countries), to facilitate the instant transfer of funds for customers from their HUMBL account to their debit card or bank account, and other miscellaneous fees. The Company will rely on third party partners to perform all money transmission services.

 

The Company may earn revenues from other value-added services, which are comprised primarily of revenue earned through partnerships, referral fees, subscription fees, gateway fees, ticketing, peer-to-peer payments and other services that will be provided to merchants and consumers. These contracts typically have one performance obligation which is provided and recognized over the term of the contract.

 

The transaction price is generally fixed and known at the end of each reporting period; however, for some agreements, it may be necessary to estimate the transaction price using the expected value method. The Company is expected to record revenue earned in revenues from other value-added services on a net basis when they are considered the agent with respect to processing transactions.

 

HUMBL Marketplace

 

The Company recognizes revenue when they transfer control of promised goods or services to customers in an amount that reflects the consideration to which is expected to be entitled in exchange for those goods or services. Revenue is recognized net of any taxes collected, which are subsequently remitted to governmental authorities.

 

Net transaction revenues

 

The net transaction revenues will primarily include final value fees, feature fees, including fees to promote listings, and listing fees from sellers in our Marketplace. The net transaction revenues will also include store subscription and other fees often from large enterprise sellers. The net transaction revenues are reduced by incentives provided to customers.

 

The Company has identified one performance obligation to sellers on the Marketplace platform, which is to connect buyers and sellers on the secure and trusted Marketplace platforms. Final value fees are recognized when an item is sold on a Marketplace platform, satisfying this performance obligation. There may be additional services available to Marketplace sellers, mainly to promote or feature listings, that are not distinct within the context of the contract.

 

Accordingly, fees for these additional services are recognized when the single performance obligation is satisfied. Promoted listing fees are recognized when the item is sold and feature and listing fees are recognized when an item is sold, or when the contract expires.

 

Further, to drive traffic to the platform, the Company will provide incentives to buyers and sellers in various forms including discounts on fees, discounts on items sold, coupons and rewards. Evaluating whether a promotion or incentive is a payment to a customer may require significant judgment. Promotions and incentives which are consideration payable to a customer are recognized as a reduction of revenue at the later of when revenue is recognized or when the incentive is paid or promise to be paid. Promotions and incentives to most buyers on our Marketplace platforms, to whom there is no performance obligation, are recognized as sales and marketing expense. In addition, there may be credits provided to customers when certain fees are refunded. Credits are accounted for as variable consideration at contract inception when estimating the amount of revenue to be recognized when a performance obligation is satisfied to the extent that it is probable that a significant reversal of revenue will not occur and updated as additional information becomes available.

 

F-47
 

 

Ticketing Revenues

 

The Company with the acquisition of Tickeri and launch of HUMBL Tickets recognizes revenues from their ticketing services primarily from service fees, commissions and payment processing fees charged at the time a ticket for an event is sold. We also derive revenues from providing certain creators with account management services and customer support. Our customers are primarily event creators who use our platform to sell tickets to attendees. Revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration we receive in exchange for those goods or services. We allocate the transaction price by estimating a standalone selling price for each performance obligation using a cost plus a margin approach. For service fees and payment processing fees, revenue is recognized when the ticket is sold. For account management services and customer support, revenue is recognized over the period from the date of the sale of the ticket to the date of the event.

 

We evaluate whether it is appropriate to recognize revenue on a gross or net basis based upon our evaluation of whether we obtain control of the specified goods or services by considering if we are primarily responsible for fulfillment of the promise, have inventory risk, and have the latitude in establishing pricing and selecting suppliers, among other factors.

 

We determined the event creator is the party responsible for fulfilling the promise to the attendee, as the creator is responsible for providing the event for which a ticket is sold, determines the price of the ticket and is responsible for providing a refund if the event is canceled. Our service is to provide a platform for the creator and event attendee to transact and our performance obligation is to facilitate and process that transaction and issue the ticket. The amount that we earn for our services is fixed. For the payment processing service, we determined that we are the principal in providing the service as we responsible for fulfilling the promise to process the payment and we have discretion and latitude in establishing the price of our service. Based on our assessment, we record revenue on a net basis related to our ticketing service and on a gross basis related to our payment processing service. As a result, costs incurred for processing the transactions are included in cost of net revenues in the consolidated statements of operations.

 

Revenue is presented net of indirect taxes, value-added taxes, creator royalties and reserves for customer refunds, payment chargebacks and estimated uncollectible amounts. If an event is cancelled by a creator, then any obligations to provide refunds to event attendees are the responsibility of that creator.

 

If a creator is unwilling or unable to fulfill their refund obligations, we may, at our discretion, provide attendee refunds. Revenue is also presented net of the amortization of creator signing fees when applicable. The benefit we receive by securing exclusive ticketing and payment processing rights with certain creators from creator signing fees is inseparable from the customer relationship with the creator and accordingly these fees are recorded as a reduction of revenue in the consolidated statements of operations.

 

In June 2021, the Company purchased some equipment and furniture as well as a commercial property in the form of a suite at a luxury hotel. The Company is the owner of this suite and entered into a long-term rental agreement with the hotel to manage the property. The Company has use of the suite for 28 calendar days a year and will receive their proportionate income for the other days the suite is being used. The Company recognizes rental revenue for the days in the month the suite is being rented in that month.

 

Marketing services and other revenues

 

Marketing services and other revenues are derived principally from the sale of advertisements, classifieds fees, and revenue sharing arrangements. Advertising revenue is derived principally from the sale of online advertisements which are based on “impressions” (i.e., the number of times that an advertisement appears in pages viewed by users of our platforms) or “clicks” (which are generated each time users on our platforms click through our advertisements to an advertiser’s designated website) delivered to advertisers.

 

The Company uses the output method and apply the practical expedient to recognize advertising revenue in the amount to which they have a right to invoice. For contracts with target advertising commitments with rebates, estimated payout is accounted for as a variable consideration to the extent it is probable that a significant reversal of revenue will not occur.

 

HUMBL Financial

 

Revenue was recognized upon transfer of control of services to customers in an amount to which the Company expects to be entitled in exchange for those services. Service subscription revenue is recognized for the month in which services are provided. If a customer pays for an annual subscription, revenue is allocated over the months in the subscription and recognized for each month of the service provided.

 

F-48
 

 

In February 2022, the Company elected to suspend offering the BLOCK ETX products pending further legal analysis regarding how to offer the BLOCK ETXs in a fully compliant manner with the evolving laws and regulatory treatment of such novel products. The Company will continue to monitor the regulatory environment with respect to these products. In accordance with ASC 205-20-50-1(a), the timing of the disposal was February 28, 2022.

 

HUMBL Blockchain Services

 

The Company disaggregates revenue from contracts with customers into product revenues and services revenues.

Product revenue related contracts with customers begin upon contract inception when a purchase order for a specific customer order of a product to be delivered in the near term. These purchase orders are short-term in nature. Product revenue is recognized at a point in time upon shipment or upon customer receipt of the product, depending on shipping terms. The Company determined that this method best represents the transfer of goods as transfer of control typically occurs upon shipment or upon customer receipt of the product.

 

Service revenues primarily consist of revenues derived from maintenance support and the use of the Company’s service platforms and application programming interface (“APIs”) on a subscription basis. The Company generates this revenue from fees for maintenance and support, monthly active user fees, SaaS fees, and hosting and storage fees. In most cases, the subscription or transaction arrangement is a single performance obligation comprised of a series of distinct services that are substantially the same and that have the same pattern of transfer (i.e., distinct days of service). The Company applies a time-based measure of progress to the total transaction price, which results in ratable recognition over the term of the contract. The Company determined that this method best represents the transfer of services as the customer obtains equal benefit from the service throughout the service period.

 

The Company accounts for individual goods and services separately if they are distinct performance obligations, which often requires significant judgment based upon knowledge of the products and/or services, the solution provided and the structure of the sales contract. In SaaS agreements, the Company provides a service to the customer that combines the software functionality, maintenance and hosting into a single performance obligation. In product-related contracts, a purchase order may cover different products, each constituting a separate performance obligation.

 

Accounts Receivable and Concentration of Credit Risk

 

An allowance is based on management’s estimate of the overall collectability of accounts receivable, considering historical losses. Based on these same factors, individual accounts are charged off against the allowance when management determines those individual accounts are uncollectible. Credit extended to customers is generally uncollateralized. Past-due status is based on contractual terms. The Company does not charge interest on accounts receivable. As of March 31, 2022 and December 31, 2021, there was no allowance necessary.

 

Income Taxes

 

Income taxes are accounted under the asset and liability method. The current charge for income tax expense is calculated in accordance with the relevant tax regulations applicable to the entities. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Differences between statutory tax rates and effective tax rates relate to permanent tax differences.

 

Uncertain Tax Positions

 

The Company follows ASC 740-10 Accounting for Uncertainty in Income Taxes. This requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. Management evaluates their tax positions on an annual basis.

 

The Company files income tax returns in the U.S. federal tax jurisdiction and various state tax jurisdictions. The federal and state income tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally for three years after they were filed.

 

F-49
 

 

Share-Based Compensation

 

The Company follows ASC 718 Compensation – Stock Compensation and has adopted ASU 2017-09 Compensation – Stock Compensation (Topic 718) Scope of Modification Accounting. The Company calculates compensation expense for all awards granted, but not yet vested, based on the grant-date fair values. Share-based compensation expense for all awards granted is based on the grant-date fair values. The Company policy is to recognize these compensation costs, on a pro rata basis over the requisite service period of each vesting tranche of each award for service-based grants, and as the criteria is achieved for performance-based grants, when such grants are made. For stock options and warrants, the Company uses the Black-Scholes model to estimate the value of those grants. The Company has not had any forfeitures of these grants, and these estimates of value will include a percentage of forfeitures when that percentage is able to be estimated.

 

The Company adopted ASU 2016-09 Improvements to Employee Share-Based Payment Accounting. Cash paid when shares are directly withheld for tax withholding purposes will be classified as a financing activity in the statement of cash flows.

 

Fair Value of Financial Instruments

 

ASC 825 Financial Instruments requires the Company to disclose estimated fair values for its financial instruments. Fair value estimates, methods, and assumptions are set forth below for the Company’s financial instruments: The carrying amount of cash, accounts receivable, prepaid and other current assets, accounts payable and accrued liabilities, and amounts payable to related parties, approximate fair value because of the short-term maturity of those instruments. The Company does not utilize derivative instruments.

 

Leases

 

The Company follows ASC 842 Leases in accounting for leased properties, when they exceed a one-year term. When the Company enters into leases with a term in excess of one year, they will recognize a lease liability and right of use asset in accordance with the provisions of ASC 842.

 

Earnings (Loss) Per Share of Common Stock

 

Basic net income (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted earnings per share (“EPS”) include additional dilution from common stock equivalents, such as convertible notes, preferred stock, stock issuable pursuant to the exercise of stock options and warrants.

 

Common stock equivalents are not included in the computation of diluted earnings per share when the Company reports a loss because to do so would be anti-dilutive for periods presented, so only the basic weighted average number of common shares are used in the computations.

 

Currency Translation

 

Ixaya’s functional currency is the Mexican Peso and its reporting currency is the United States dollar. Transactions denominated in the functional currency are converted into United States dollars using the exchange rate in effect at the date of the transaction or the average rate for the period in the case of revenue and expense transactions. Monetary assets and liabilities are re-valued into the reporting currency at each balance sheet date using the exchange rate in effect at the balance sheet date, with any resulting exchange gains or losses being credited or charged to accumulated other comprehensive income (loss). Non-monetary assets and liabilities are recorded in the reporting currency using the exchange rate in effect at the date of the transaction and are not revalued for subsequent changes in exchange rates.

 

Derivative Financial Instruments

 

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. Management evaluates all of the Company’s financial instruments, including convertible notes and warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives.

 

The Company generally uses a Black-Scholes model, as applicable, to value the derivative instruments at inception and subsequent valuation dates when needed. The classification of derivative instruments, including whether such instruments should be recorded as liabilities, is remeasured at the end of each reporting period.

 

F-50
 

 

Digital Assets

 

Digital assets, including non-fungible tokens and cryptocurrencies, are included in the consolidated balance sheets. We have ownership of and control over our digital assets and may use third party custodial services to secure them. Digital assets are initially recorded at cost and are subsequently remeasured at cost, net of any impairment losses on our consolidated balance sheets. We assign costs to digital asset transactions on a first-in, first-out basis. Gains or losses are not recorded until realized upon sale(s).

 

We determine the fair value of our digital assets on a nonrecurring basis, based on quoted prices on the active exchange(s) that we have determined is the principal market for such assets (Level 1 inputs). We perform a quarterly, or more frequent review to identify whether events or changes in circumstances, principally decreases in the quoted prices on active exchanges on any day during the quarter, indicate that it is more likely than not that our digital assets are impaired.

 

The cost basis of digital assets will not be adjusted upward for subsequent increases in fair value. Such impairment in the value of digital assets is recorded as a component of other operating expenses in our consolidated statements of operations. We recorded an impairment loss of approximately $45,318 related to digital assets during the three months ended March 31, 2022.

 

Fair Value Measurements

 

ASC 820 Fair Value Measurements defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosure about fair value measurements. ASC 820 classifies these inputs into the following hierarchy:

 

Level 1 inputs: Quoted prices for identical instruments in active markets.

 

Level 2 inputs: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

 

Level 3 inputs: Instruments with primarily unobservable value drivers.

 

Segment Reporting

 

The Company follows the provisions of ASC 280-10 Segment Reporting. This standard requires that companies disclose operating segments based on the manner in which management disaggregates the Company in making internal operating decisions.

 

For 2021, the Company established three distinct operating segments: HUMBL Marketplace; HUMBL Pay; and HUMBL Financial. Most of the operations for the year ended December 31, 2021 were conducted in North America. Commencing January 1, 2022, the Company simplified their business model to segment their business into two distinct divisions: Consumer and Commercial. The 2021 segments were all considered part of the consumer division.

 

All of the Company’s sales are from North America, therefore the Company has determined that segment reporting by geographic location was not necessary. In the future, the Company will continue to monitor their activity by region to determine if it is feasible to report segment information by location.

 

Recent Accounting Pronouncements

 

In August, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40), Accounting for Convertible Instruments and Contract’s in an Entity’s Own Equity. The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU simplifies the diluted net income per share calculation in certain areas.

 

The ASU is effective for annual and interim periods beginning after December 31, 2021, and early adoption is permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company does not believe that this new guidance will have a material impact on its financial statements.

 

F-51
 

 

On March 31, 2022, the SEC added Staff Accounting Bulletin (“SAB”) No. 121 (“SAB 121”) into Section FF to Topic 5. The interpretations in this SAB express views of the staff regarding the accounting for entities that have obligations to safeguard crypto-assets held for their platform users. In connection with these services, these entities and/or their agents may safeguard the platform users’ crypto-assets and also maintain the cryptographic key information necessary to access the crypto-asset. The obligations associated with these arrangements involve unique risks and uncertainties not present in arrangements to safeguard assets that are not crypto-assets, including technological, legal, and regulatory risks and uncertainties.

 

These risks can have a significant impact on the entity’s operations and financial condition. The staff believes that the recognition, measurement, and disclosure guidance in this SAB will enhance the information received by investors and other uses of financial statements about these risks, thereby assisting them in making investment and other capital allocation decisions.

 

This guidance should be applied no later than the financial statements covering the first interim or annual report ending after June 15, 2022, with retroactive application as of the beginning of the fiscal year to which the interim or annual period relates. Upon adoption of this guidance, the Company expects to reflect the asset and liability related to the digital assets held on the Company’s platform of approximately $1,000,000. We do not have any ownership or custody of the digital assets maintained on our platform. We engage the services of Wyre and BitGo to act as the custodians of the digital assets held on our platform.

 

The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

 

NOTE 3: DISCONTINUED OPERATIONS

 

BLOCK ETX

 

Effective February 28, 2022, the Company elected to suspend offering the BLOCK ETX products pending further legal analysis regarding how to offer the BLOCK ETXs in a fully compliant manner with the evolving laws and regulatory treatment of such novel products. The Company will continue to monitor the regulatory environment with respect to these products. Per ASC 205-20-50-1(a), the timing of the disposal was February 28, 2022. The Company met the criteria for the BLOCK ETX operations to be classified as held for sale at that time.

 

All subscription revenues recognized in January and February 2022, were refunded to the subscribers. The only amounts reflected as discontinued operations in 2022 relate to the direct expenses attributable to the BLOCK ETX product line that include direct payroll and direct subcontractor costs. These amounts are reflected in the loss for discontinued operations as noted in the chart below.

 

   2022 
Revenue  $- 
Cost of revenue   - 
Gross (loss)   - 
Operating expenses   7,945 
Loss from discontinued operations  $(7,945)

 

The Company paid the refunds to the subscribers in the three months ended March 31, 2022.

 

The Company commenced operations of the BLOCK ETX products in March 2021. The Company has reclassified the statement of operations for the three months ended March 31, 2021 to reflect the subscription revenue and the direct expenses attributable to the BLOCK ETX product line that included direct payroll and direct subcontractor costs. These amounts are reflected in the loss for discontinued operations as noted in the chart below.

 

   2021 
Revenue  $2,156 
Cost of revenue   - 
Gross profit   2,156 
Operating and non-operating expenses   (260,125)
Loss from discontinued operations  $(257,969)

 

F-52
 

 

NOTE 4: BUSINESS COMBINATIONS AND ACQUISITIONS OF ASSETS

 

Tickeri

 

On June 3, 2021, the Company acquired the assets and liabilities of Tickeri noted below in in accordance with ASC 805. Based on the fair values at the effective date of acquisition the purchase price was recorded as follows:

 

    2021 
Cash  $127,377 
Accounts receivables   23,587 
Goodwill   20,086,664 
Accounts payable and accrued expenses   (87,071)
SBA EIDL   (150,000)
PPP loan   (557)
   $20,000,000 

 

The consideration paid for the acquisition of Tickeri was as follows:

    2021 
Common stock  $10,000,000 
Notes payable   10,000,000 
 Total consideration  $20,000,000 

 

The Acquisition has been accounted for under the acquisition method of accounting. Under the acquisition method of accounting, the total acquisition consideration price was allocated to the assets acquired and liabilities assumed based on their preliminary estimated fair values. The fair value measurements utilize estimates based on key assumptions of the Acquisition, and historical and current market data. The excess of the purchase price over the total of the estimated fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed is recognized as goodwill. The Company has estimated the preliminary purchase price allocations based on historical inputs and data as of June 3, 2021. The preliminary allocation of the purchase price is based on the best information available and is pending, amongst other things: (i) the finalization of the valuation of the fair values and useful lives of tangible assets acquired; (ii) the finalization of the valuations and useful lives for the intangible assets acquired; (iii) finalization of the valuation of accounts payable and accrued expenses; and (iv) finalization of the fair value of non-cash consideration.

 

The Company has up to one-year from the date of acquisition to adjust any of the acquired assets and liabilities for information obtained during this measurement period. If new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of additional assets or liabilities as of the acquisition date or a re-allocation of assets and liabilities is necessary, the Company will adjust these figures. The Company has performed an analysis on the purchase price allocation and has determined that there are no adjustments to be made from the original allocation.

 

The goodwill is not expected to be deductible for tax purposes.

 

Monster

 

On June 30, 2021, the Company acquired the assets and liabilities of Monster noted below in in accordance with ASC 805. Based on the fair values at the effective date of acquisition the purchase price was recorded as follows:

 

    2021 
Cash  $3,017 
Accounts receivables   379,012 
Goodwill   8,648,104 
Due to seller   (379,012)
Accounts payable and accrued expenses   (98,754)
Notes payable – related parties   (486,250)
PPP loan   (66,117)
   $8,000,000 

 

The consideration paid for the acquisition of Monster was as follows:

    2021 
Convertible notes payable  $7,500,000 
Non-convertible notes payable   500,000 
 Total consideration  $8,000,000 

 

F-53
 

 

The Acquisition has been accounted for under the acquisition method of accounting. Under the acquisition method of accounting, the total acquisition consideration price was allocated to the assets acquired and liabilities assumed based on their preliminary estimated fair values. The fair value measurements utilize estimates based on key assumptions of the Acquisition, and historical and current market data. The excess of the purchase price over the total of the estimated fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed is recognized as goodwill. The Company has estimated the preliminary purchase price allocations based on historical inputs and data as of June 30, 2021. The preliminary allocation of the purchase price is based on the best information available and is pending, amongst other things: (i) the finalization of the valuation of the fair values and useful lives of tangible assets acquired; (ii) the finalization of the valuations and useful lives for the intangible assets acquired; (iii) finalization of the valuation of accounts payable and accrued expenses; and (iv) finalization of the fair value of non-cash consideration.

 

The Company has up to one-year from the date of acquisition to adjust any of the acquired assets and liabilities for information obtained during this measurement period. If new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of additional assets or liabilities as of the acquisition date or a re-allocation of assets and liabilities is necessary, the Company will adjust these figures. The Company has performed an analysis on the purchase price allocation and has determined that there are no adjustments to be made from the original allocation.

 

The goodwill is not expected to be deductible for tax purposes.

 

BizSecure

 

On February 12, 2022, the Company entered into an asset purchase agreement with BizSecure, Inc. (“BizSecure”). The Company determined this was an acquisition of a business pursuant to the guidance provided in both ASC 805 and Rule 11-01(d) of Regulation S-X. BizSecure is not considered a significant subsidiary under Regulation S-X Rule 1-02(w). The Company acquired a customer relationship with the US Air Force and BizSecure’s Mobile ID technology. The Company entered into employment agreements with two BizSecure employees as part of the agreement to help integrate the Mobile ID technology into the Company’s larger suite of products and help operate the blockchain services division. The assets acquired from BizSecure represented the majority of the operations of the entity and BizSecure post-acquisition has only conducted nominal operations and has no employees. The Company issued to BizSecure 13,200,000 common shares and 26,800,000 restricted stock units that vest quarterly commencing April 1, 2022 for a period of two years. The shares and restricted stock units have a value of $6,756,000. The Company has included the value of $4,526,520 which represents the value of the restricted stock units in contingent consideration pursuant to ASC 805-10-55-25. Management considered several factors when making the determination to treat the RSUs as contingent consideration and not post-combination compensation, including, but not limited to, the following: (a) the RSUs are not automatically forfeited upon termination of the two key employees as those RSUs would vest if the employees were terminated without cause or if the employees resigned with good reasons; (b) all selling shareholders of BizSecure receive the same pro rata compensation; (c) the BizSecure shareholders hired by the Company receive compensation commensurate with other employees in the Company at the same level; (d) there are no adjustments to the RSUs based on earnings and thus there is no profit-sharing component to the RSUs; and (e) the parties desired for the compensation to be paid over time and not all up front. Therefore, the Company determined that the restricted stock units should be treated as contingent consideration.

 

    2022 
Customer relationships  $275,000 
Intellectual property - software   2,500,000 
Goodwill   3,981,000 
   $6,756,000 

 

The consideration paid for the acquisition of assets of BizSecure was as follows:

  

    2022 
Common stock  $2,229,480 
Contingent consideration (RSUs)   4,526,520 
 Total consideration  $6,756,000 

 

The Acquisition has been accounted for under the acquisition method of accounting. Under the acquisition method of accounting, the total acquisition consideration price was allocated to the assets acquired and liabilities assumed based on their preliminary estimated fair values. The fair value measurements utilize estimates based on key assumptions of the Acquisition, and historical and current market data. The excess of the purchase price over the total of the estimated fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed is recognized as goodwill. The Company has estimated the preliminary purchase price allocations based on historical inputs and data as of February 12, 2022.

 

F-54
 

 

The preliminary allocation of the purchase price is based on the best information available and is pending, amongst other things: (i) the finalization of the valuation of the fair values and useful lives of tangible assets acquired; (ii) the finalization of the valuations and useful lives for the intangible assets acquired; and (iii) finalization of the fair value of non-cash consideration.

 

The Company has up to one-year from the date of acquisition to adjust any of the acquired assets and liabilities for information obtained during this measurement period. If new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of additional assets or liabilities as of the acquisition date or a re-allocation of assets and liabilities is necessary, the Company will adjust these figures.

 

The goodwill is not expected to be deductible for tax purposes.

 

Ixaya

 

On March 3, 2022, the Company acquired the assets and liabilities of Ixaya noted below in in accordance with ASC 805. Based on the fair values at the effective date of acquisition the purchase price was recorded as follows:

  

    2022 
Cash  $1,325 
Accounts receivables   24,446 
Goodwill   1,008,642 
Intellectual property - software   650,000 
Accounts payable and accrued expenses   (10,700)
Payable – officer   (9,834)
Note payable - bank   (13,879)
   $1,650,000 

 

The consideration paid for the acquisition of Ixaya was as follows:

 

    2022 
Cash  $150,000 
Common stock   1,500,000 
 Total consideration  $1,650,000 

 

The Acquisition has been accounted for under the acquisition method of accounting. Under the acquisition method of accounting, the total acquisition consideration price was allocated to the assets acquired and liabilities assumed based on their preliminary estimated fair values. The fair value measurements utilize estimates based on key assumptions of the Acquisition, and historical and current market data. The excess of the purchase price over the total of the estimated fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed is recognized as goodwill. The Company has estimated the preliminary purchase price allocations based on historical inputs and data as of March 3, 2022. The preliminary allocation of the purchase price is based on the best information available and is pending, amongst other things: (i) the finalization of the valuation of the fair values and useful lives of tangible assets acquired; (ii) the finalization of the valuations and useful lives for the intangible assets acquired; (iii) finalization of the valuation of accounts payable and accrued expenses; and (iv) finalization of the fair value of non-cash consideration.

 

The Company has up to one-year from the date of acquisition to adjust any of the acquired assets and liabilities for information obtained during this measurement period. If new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of additional assets or liabilities as of the acquisition date or a re-allocation of assets and liabilities is necessary, the Company will adjust these figures. The Company has performed an analysis on the purchase price allocation and has determined that there are no adjustments to be made from the original allocation. During the three months ended March 31, 2022, the Company impaired $1,008,642 of the goodwill.

 

The goodwill was not expected to be deductible for tax purposes.

 

The following table shows the unaudited pro-forma results for the three months ended March 31, 2022 and 2021, as if the acquisitions had occurred on January 1, 2021. These unaudited pro forma results of operations are based on the historical financial statements and related notes of Tickeri, Monster, BizSecure, Ixaya and the Company for 2021, and BizSecure, Ixaya and the Company for 2022.

 

F-55
 

 

   Three Months Ended
March 31, 2021
 
    (Unaudited) 
Revenues  $413,644 
Net loss  $(1,779,447)
Net loss per share  $(0.00)

 

   Three Months Ended
March 31, 2022
 
    (Unaudited) 
Revenues  $1,187,634 
Net loss  $(12,304,705)
Net loss per share  $(0.01)

 

NOTE 5: REVENUE

 

The following table disaggregates the Company’s revenue by major source for the three months ended March 31, 2022 and 2021:

 

   2022   2021 
  

Three Months Ended March 31,

 
   2022   2021 
Revenue:           
Services - Production   $826,552   $- 
Services - Ixaya    18,384    - 
Merchandise    1,477    154,104 
Tickets   295,239    - 
NFTs   1,063    - 
Rental income   2,842    - 
Other    1,577    - 
Total revenue  $1,147,134   $154,104 

 

There were no significant contract asset or contract liability balances for all periods presented. The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

 

Collections of the amounts billed are typically paid by the customers within 30 to 60 days.

 

NOTE 6: FIXED ASSETS

 

As of March 31, 2022 and December 31, 2021, the Company has the following fixed assets:

 

   2022   2021 
Non-residential property – 20 year-life  $345,497   $345,497 
Equipment – 5 year-life   14,282    5,772 
Furniture and fixtures – 5 year-life   16,307    16,307 
Accumulated depreciation   (16,980)   (11,129)
Fixed assets  $359,106   $356,447 

 

In June 2021, the Company purchased some equipment and furniture as well as a commercial property in the form of a suite at a luxury hotel. The Company is the owner of this suite and entered into a long-term rental agreement with the hotel to manage the property. The Company has use of the suite for 28 calendar days a year and will receive their proportionate income for the other days the suite is being used.

 

Depreciation expense for the three months ended March 31, 2022 was $5,851, as the property was placed into service on July 1, 2021.

 

F-56
 

 

NOTE 7: INTANGIBLE ASSETS AND GOODWILL

 

As of March 31, 2022 and December 31, 2021, the Company has the following intangible assets:

 

   2022   2021 
Intellectual property - software – 5 year-life  $3,150,000   $- 
Customer relationship – 5 year-life   275,000    - 
Accumulated amortization   (91,716)       -
Intangible assets, net  $3,333,284   $- 

 

In February 2022, the Company acquired intangible assets from BizSecure valued at $2,775,000, and in March 2022 in the acquisition of Ixaya acquired intangible assets valued at $650,000. There were no intangible assets as of December 31, 2021.

 

Amortization expense for the three months ended March 31, 2022 was $91,716.

 

As of March 31, 2022 and December 31, 2021, the Company has recorded goodwill as follows:

 

Ixaya   -    - 
   2022   2021 
Tickeri  $3,353,392   $3,353,392 
Monster Creative   3,177,954    3,177,954 
BizSecure   3,981,000    - 
Ixaya   -    - 
Goodwill  $10,512,346   $6,531,346 

 

In 2021, the Company evaluated ASC 350-20-50 for the goodwill associated with the two acquisitions. The Company determined that there was impairment of goodwill associated with the Tickeri acquisition of $16,733,272 and impairment of goodwill associated with the Monster Creative transaction of $5,470,150 to be recognized in the year ended December 31, 2021, as reflected in operating expenses under the line item Impairment - goodwill. In accordance with ASC 350-20-50-6 (a through d), the Company determined based on the qualitative factors surrounding the Tickeri and Monster Creative acquisitions, which include the foothold of Tickeri in the Latin population of the United States, the development of the Company’s website, and the fact that the former President of Tickeri became the CTO of HUMBL, as well as the services being provided by Monster Creative in production, and the services for both entities in the COVID pandemic, the fair value of Tickeri and Monster Creative did not equate to the value that was paid for these entities. As a result, we recognized the goodwill at the time of purchase for Tickeri, and re-evaluated the goodwill determination as of December 31, 2021 for both Tickeri and Monster Creative which resulted in additional impairment to be recognized. We determined the value based on the multiple of earnings on similar companies evaluated in the ticketing space and in the production space for Monster Creative. Since both Tickeri and Monster Creative services fall under the HUMBL Marketplace segment in 2021 (now Consumer division), the entire impairment of the goodwill is reflected in that segment. The Company has determined that no further impairment of goodwill for either of these two acquisitions was necessary during the three months ended March 31, 2022.

 

In 2022, the Company evaluated ASC 350-20-50 for the goodwill associated with the BizSecure and Ixaya acquisitions. The Company determined that there was impairment of goodwill associated with the Ixaya acquisition of $1,008,642 in the three months ended March 31, 2022. We determined the value of Ixaya’s intellectual property based on the multiple of earnings on similar companies evaluated in the blockchain technology space Since Ixaya services fall under the Commercial Division, the impairment of the goodwill for Ixaya is reflected in that division. The Company determined there was no indication of impairment for BizSecure as of March 31, 2022, as the assets purchased have contributed to significant enhancements to the HUMBL Pay app.

 

NOTE 8: INTANGIBLE ASSETS – DIGITAL ASSETS

 

In 2021, the Company purchased Ethereum, a digital asset to create NFTs for beta testing to determine whether they would be able to place them onto the HUMBL Marketplace’s NFT Gallery in addition to the NFTs others create that are on the NFT Gallery. The Company purchased $114,650 in digital currency in the year ended December 31, 2021. The Company expensed $133,660 in the digital currency to create NFTs as beta testing for future endeavors and for payment of expenses, received commissions on sales of NFTs of $8,400, reflected $34,570 in impairment of the intangible asset for digital currency, and recognized a gain on sale of digital assets of $47,875.

 

F-57
 

 

In 2022, the Company established a service to their HUMBL Pay app users. The “Buy Crypto, Earn Rewards” service enables HUMBL Pay app users the ability through a Company maintained digital asset wallet with Wyre to purchase digital assets (cryptocurrency) and earn rewards. These rewards are not paid by the Company, but by Wyre itself. As it can take 5 to 8 business days to physically settle funds in the Wyre wallet, there may be delays in digital assets being received by customers and the delivery of BLOCKS to BitGo. BitGo is a third-party custodian service that provides the custody for the customers’ BLOCKS. These timing differences occur, and on March 31, 2022, we had an unfunded liability of $219,733 related to the purchase of BLOCKS that had not yet been settled. The Company has restricted cash in the same amount of this liability. As of May 6, 2022, the entire liability has been settled and all BLOCKS has been delivered to the customers.

 

The BitGo account is not the Company’s account; however, represents the pool of all BLOCKS held by and allocated to HUMBL Pay users accounts. The users may choose to transfer the purchased BLOCKS to their individual wallets outside of HUMBL and as of March 31, 2022, approximately 25% of those users did transfer their BLOCKS.

 

In March 2022, the Company purchased an NFT for $406,046. The Company has evaluated the fair value of this NFT as of March 31, 2022 and has determined that there is no impairment necessary. The NFT will not be amortized as it is considered a non-statutory based digital asset. The NFT is considered a non-current asset while the other digital assets held by the Company are considered current assets. In March 2022, the Company’s CEO announced that he would contribute capital to pay for this NFT. The contribution occurred May 3, 2022.

 

In the three months ended March 31, 2022, the Company purchased $271,800 in digital currency expensed $41,420 in the digital currency for future endeavors and for payment of expenses, received commissions on sales of NFTs of $1,063, reflected $45,318 in impairment of the intangible asset for digital currency, and recognized a gain on sale of digital assets of $29,551. The Company also received a net $219,733 in digital currency to be used for the purchase of BLOCKS on behalf of HUMBL Pay users. The net amount was funded to the third-party wallet in April 2022 when all the funds cleared. This amount is reflected in the Consolidated Balance Sheet as an unfunded liability and restricted cash.

 

The value of the digital asset as of March 31, 2022 and December 31, 2021 is $438,104 (of which the value of the non-fungible token of $406,040 is considered a non-current asset) and $2,695, respectively.

 

The following table presents additional information about the Company’s digital asset holdings during the period ended March 31, 2022:

 

Digital Assets Owned By HUMBL:

 

Three Months Ended March 31, 2022  ETH   BTC   WETH   DAI   USDC   Total 
Balance – January 1, 2022  $2,664   $28   $-   $-   $3   $2,695 
Purchases of digital assets   271,800    -    -    -    -    271,800 
Purchases of digital assets by customers in the HUMBL Pay App   -    -    -    -    574,313    574,313 
Purchases of BLOCKS for HUMBL Pay users   (295,784)   -    -    -    (58,796)   (354,580)
Transfers   425,223    -    34,056    15,721    (475,000)   - 
NFT commissions   1,063    -    -    -    -    1,063 
NFT purchase   (338,104)   -    (23,590)   (14,094)   (30,252)   (406,040)
Advertising expenses   (34,784)   -    -    -    3,014    (31,770)
Conferences   (9,650)   -    -    -    -    (9,650)
Impairment – digital assets   (42,580)   -    (1,972)   (766)   -    (45,318)
Gain (loss) on disposal of digital assets   27,976    -    1,571    7    (3)   29,551 
Balance – March 31, 2022  $7,824   $28   $10,065   $868   $13,279   $32,064 
Digital Assets held at March 31, 2022   2.390693611    0.00093788    4    868.26    -    - 

 

F-58
 

 

Digital Assets Owned By HUMBL Pay Users (SAB 121 disclosure):

 

Under SAB 121, companies are required to present the asset and liability at fair value for any crypto-assets and obligations to safeguard crypto-assets. The Company earns no revenue from providing this service to their customers. It is simply an added benefit that HUMBL Pay customers receive for using the app. The “Buy Crypto, Earn Rewards” service enables HUMBL Pay app users the ability through a Company maintained digital asset wallet with Wyre to purchase digital assets (cryptocurrency) and earn rewards. These rewards are not paid by the Company, but by Wyre itself. As it can take 5 to 8 business days to physically settle funds in Wyre, there may be delays in digital assets being received by customers and the delivery of BLOCKS to a BitGo. BitGo is a third-party custodian service that provides the custody for the customers’ BLOCKS. These timing differences occur, and on March 31, 2022, we had an unfunded liability of $219,733 related to the purchase of BLOCKS that had not yet been settled. The Company has restricted cash in the same amount of this liability. As of May 6, 2022, the entire liability has been settled and all BLOCKS has been delivered to the customers. Upon adoption of this guidance, the Company expects to reflect the asset and liability related to the digital assets held on the Company’s platform of approximately $1,000,000. We do not have any ownership or custody of the digital assets maintained on our platform. We engage the services of Wyre and BitGo to act as the custodians of the digital assets held on our platform.

 

NOTE 9: NOTE PAYABLE - BANK

 

On March 3, 2022 with the acquisition of Ixaya, the Company assumed a loan with Citibanamex. The loan is due in monthly payments of $7,110 MXN (approximately $350 US$) inclusive of interest and matures in July 2025. As of March 31, 2022, the Company has $14,305 outstanding under the loan. The Company has included $4,152 in current liabilities, and the balance of $10,153 in long-term liabilities.

 

NOTE 10: NOTES PAYABLE

 

The Company entered into notes payable as follows as of March 31, 2022 and December 31, 2021. The chart below does not include notes payable that were repaid or converted during 2021:

 

   2022   2021 
Notes payable ($250,000 each), at 2% interest, maturing July 30, 2022; payments due at maturity  $500,000   $500,000 
           
EIDL loan at 3.75% interest, maturing May 18, 2050 (assumed in the acquisition of Tickeri), no payments for 2 years, then monthly payments of $731 per month inclusive of interest   150,000    150,000 
           
Total   650,000    650,000 
Less: Current portion   (502,549)   (501,828)
Long-term debt  $147,451   $148,172 

 

Maturities of notes payable for the next five years as of March 31 are as follows:          
2023       $502,549 
2024        2,856 
2025        2,981 
2026        3,095 
2027        3,213 
Thereafter        135,306 
Total       $650,000 

 

In the acquisition of Tickeri, the Company assumed a PPP loan and an EIDL loan. The PPP loan was repaid in its entirety in the year ended December 31, 2021. In the acquisition of Monster a $66,117 PPP loan was forgiven in the year ended December 31, 2021 and the forgiveness of this debt is reflected in other income. Interest expense for the three months ended March 31, 2022 and 2021 was $3,853 and $789, respectively. Accrued interest at March 31, 2022 was $18,003.

 

F-59
 

 

NOTE 11: NOTES PAYABLE – RELATED PARTIES

 

The Company entered into notes payable as follows as of March 31, 2022 and December 31, 2021:

 

   2022   2021 
Notes payable ($5,000,000 each), at 5% interest, maturing December 3, 2022 for acquisition of Tickeri (see Note 4) with the two principals of Tickeri, one of which is an officer of the Company as well; payments due at maturity  $10,000,000   $10,000,000 
           
Notes payable ($435,000 and $65,000), at 5% interest, originally maturing April 1, 2022, extended to the earlier of July 1, 2022 or 30 days past the effectiveness of a registration statement on Form S-1 for the acquisition of Monster (see Note 4) with the two principals of Monster; payments due at maturity (increased note balance by $9,000 to the two noteholders for the extension which did not constitute a material modification of a debt instrument)   500,000    500,000 
           
Notes payable ($271,250 and $215,000), at 3% interest, maturing December 31, 2022, with family relatives of the two principals of Monster; payments due at maturity   486,250    486,250 
           
Note payable with a company whose managing member is related to an officer and director of the Company, at 4% interest, maturing February 22, 2025, payment due at maturity   3,000,000    - 
           
Note payable with a company whose managing member is related to an officer and director of the Company, at 4% interest, maturing March 31, 2025, payment due at maturity   1,500,000    - 
           
Advance – officer – Ixaya, on demand, no interest   10,671    - 
           
Total   15,496,921    10,986,250 
Less: Current portion   (10,996,921)   (10,986,250)
Long-term debt  $4,500,000   $- 

 

Maturities of notes payable – related parties as of March 31 is as follows:          
2023       $10,996,921 
2024        - 
2025        4,500,000 
Total       $15,496,921 

 

Interest expense for the three months ended March 31, 2022 and 2021 was $145,049 and $0, respectively. Accrued interest at March 31, 2022 was $453,987.

 

F-60
 

 

NOTE 12: CONVERTIBLE PROMISSORY NOTES

 

The Company entered into convertible promissory notes as follows as of March 31, 2022 and December 31, 2021:

 

     2022   2021 
Convertible note, at 8% interest, maturing December 23, 2022 convertible into common shares at $0.60 per share  $-   $112,500 
           
Convertible note, at 8% interest, maturing December 23, 2022 convertible into common shares at $0.60 per share   -    112,500 
           
Convertible note at 10% interest, maturing July 14, 2022 convertible into common shares at $3.15 per share ($300,000 original issue discount)   3,300,000    3,300,000 
           
Convertible note at 8% interest, maturing March 13, 2023 convertible into common shares at $1.00 per share ($7,500 original issue discount)   -    382,500 
           
Convertible note at 8% interest, maturing March 13, 2023 convertible into common shares at $1.00 per share ($8,250 original issue discount)   -    420,750 
           
Convertible note at 8% interest, maturing March 17, 2023 convertible into common shares at $1.00 per share ($20,000 original issue discount)   1,020,000    1,020,000 
           
Convertible note at 8% interest, maturing March 19, 2023 convertible into common shares at $1,00 per share ($9,750 original issue discount)   -    497,250 
           
Convertible note at 8% interest, maturing March 19, 2023 convertible into common shares at $1.00 per share ($1,500 original issue discount)   -    76,500 
           
Convertible note at 8% interest, maturing March 19, 2023 convertible into common shares at $1.00 per share ($3,000 original issue discount)   -    153,000 
           
Convertible note at 8% interest, maturing April 21, 2023 convertible into common shares at $1.00 per share ($7,500 original issue discount)   -    382,500 
           
Convertible note at 8% interest, maturing April 21, 2023 convertible into common shares at $1.00 per share ($7,500 original issue discount)   -    382,500 
           
Convertible note at 8% interest, maturing June 30, 2023 convertible into common shares at $0.90 per share ($3,000 original issue discount)   -    153,000 
           
Convertible note at 8% interest, maturing September 12, 2023 convertible into common shares at $0.60 per share ($6,000 original issue discount)   -    306,000 
Long term debt, gross   4,320,000    7,299,000 
Less: Discounts   (83,278)   (1,674,175)
Total  $4,236,722   $5,624,825 

 

F-61
 

 

On April 14, 2021 we received bridge financing in the form of a loan in the principal amount of $3,300,000 from Brighton Capital Partners, LLC (“Brighton Capital” or “BCP”) for which we issued them a convertible promissory note due 15 months after April 14, 2021 (July 14, 2022). The note bears interest at 10% per annum and is convertible at Brighton Capital’s election at a fixed price of $3.15 per share. The Company recognized a $300,000 original issue discount at inception of this convertible note.

 

Under the terms of the note, Brighton Capital has a right of redemption commencing on the earlier of an effective date of a Registration Statement and the 12-month anniversary of the note, to cause us to redeem all or any portion of the note in cash or shares of our common stock, at the Company’s election.

 

Any redemption with shares of our common stock shall be at the “market price” which is defined as 80% of our lowest closing trade price for the 10 consecutive trading days prior to the date on which the market price is measured. The note was to serve as a bridge loan to a $50,000,000 Equity Financing Agreement (“EFA”), which was terminated on October 26, 2021. The Company recognized a beneficial conversion feature on this note in the amount of $3,300,000.

 

On October 26, 2021, the Company and BCP agreed to terminate the Equity Financing Agreement. The Company agreed to issue shares for the termination of the EFA in the registration statement they file.

 

On May 13, 2021, the Company issued a convertible promissory note to investors for $382,500 with an original issue discount of $7,500, for a term of twenty-two months maturing March 13, 2023. In addition, the Company issued warrants to the same investors to purchase up to 750,000 warrant shares with the convertible note. The Company recognized a $7,500 original issue discount and $257,531 debt discount at inception of this convertible note. This note was exchanged for shares of common stock along with all accrued interest on March 31, 2022.

 

On May 13, 2021, the Company issued a convertible promissory note to an investor for $420,750 with an original issue discount of $8,250, for a term of twenty-two months maturing March 13, 2023. In addition, the Company issued a warrant to the same investor to purchase up to 825,000 warrant shares with the convertible note. The Company recognized a $8,250 original issue discount and $283,284 debt discount at inception of this convertible note. This note was exchanged for shares of common stock along with all accrued interest on March 31, 2022.

 

On May 17, 2021, the Company issued a convertible promissory note to an investor for $1,020,000 with an original issue discount of $20,000, for a term of twenty-two months maturing March 17, 2023. The Company recognized a $20,000 original issue discount at inception of this convertible note.

 

On May 19, 2021, the Company issued a convertible promissory note to an investor for $497,250 with an original issue discount of $9,750, for a term of twenty-two months maturing March 19, 2023. In addition, the Company issued a warrant to the same investor to purchase up to 975,000 warrant shares with the convertible note. The Company recognized a $9,750 original issue discount and $317,561 debt discount at inception of this convertible note. This note was exchanged for shares of common stock along with all accrued interest on March 31, 2022.

 

On May 19, 2021, the Company issued a convertible promissory note to an investor for $76,500 with an original issue discount of $1,500, for a term of twenty-two months maturing March 19, 2023. In addition, the Company issued a warrant to the same investor to purchase up to 150,000 warrant shares with the convertible note. The Company recognized a $1,500 original issue discount and $48,855 debt discount at inception of this convertible note. This note was exchanged for shares of common stock along with all accrued interest on March 31, 2022.

 

On May 19, 2021, the Company issued a convertible promissory note to an investor for $153,000 with an original issue discount of $3,000, for a term of twenty-two months maturing March 19, 2023. In addition, the Company issued a warrant to the same investor to purchase up to 300,000 warrant shares with the convertible note. The Company recognized a $3,000 original issue discount and $97,711 debt discount at inception of this convertible note. This note was exchanged for shares of common stock along with all accrued interest on March 31, 2022.

 

F-62
 

 

On June 21, 2021, the Company issued a convertible promissory note to an investor for $382,500 with an original issue discount of $7,500, for a term of twenty-two months maturing April 21, 2023. In addition, the Company issued a warrant to the same investor to purchase up to 750,000 warrant shares with the convertible note. The Company recognized a $7,500 original issue discount and $274,172 debt discount at inception of this convertible note. The Company recognized a BCF discount in the amount of $100,828 on this convertible note that is being amortized over the life of the convertible note. This note was exchanged for shares of common stock along with all accrued interest on March 31, 2022.

 

On June 21, 2021, the Company issued a convertible promissory note to an investor for $382,500 with an original issue discount of $7,500, for a term of twenty-two months maturing April 21, 2023. In addition, the Company issued a warrant to the same investor to purchase up to 750,000 warrant shares with the convertible note. The Company recognized a $7,500 original issue discount and $274,172 debt discount at inception of this convertible note. The Company recognized a BCF discount in the amount of $100,828 on this convertible note that is being amortized over the life of the convertible note. This note was exchanged for shares of common stock along with all accrued interest on March 31, 2022.

 

On August 30, 2021, the Company issued a convertible promissory note to an investor for $153,000 with an original issue discount of $3,000, for a term of twenty-two months maturing June 30, 2023. In addition, the Company issued a warrant to the same investor to purchase up to 375,000 warrant shares with the convertible note. The Company recognized a $3,000 original issue discount and $102,486 debt discount at inception of this convertible note. This note was exchanged for shares of common stock along with all accrued interest on March 31, 2022.

 

On November 12, 2021, the Company issued a convertible promissory note to an investor for $306,000 with an original issue discount of $6,000, for a term of twenty-two months maturing September 12, 2023. In addition, the Company issued a warrant to the same investor to purchase up to 1,000,000 warrant shares with the convertible note. The Company recognized a $6,000 original issue discount and $197,791 debt discount at inception of this convertible note. This note was exchanged for shares of common stock along with all accrued interest on March 31, 2022.

 

Maturities of convertible promissory notes for the next two years as of March 31 are as follows (with discount):

 

      
2023  $3,300,000 
2024   1,020,000 
Total  $4,320,000 

 

The Company recognized $0 and $2,055,219 in original issue discounts, debt discounts and BCF discounts on the convertible notes in the three months ended March 31, 2022 and year ended December 31, 2021 (none in the three months ended March 31, 2021). The Company evaluated the terms of the convertible notes and warrant agreements and determined that there were no terms that would necessitate the recognition of any derivative liabilities. The Company is amortizing the debt discounts over the life of the convertible notes based on the effective interest method.

 

Interest expense for the three months ended March 31, 2022 and 2021 was $159,654 and $4,438, respectively. Amortization of debt discount, original issue discount and BCF discount was $340,370 and $20,597 for the three months ended March 31, 2022 and 2021, respectively. Accrued interest at March 31, 2022 was $387,651.

 

On March 31, 2022, the Company entered into exchange agreements with most of their convertible note holders to exchange $2,979,000 of notes payable and $197,804 of accrued interest on those notes into 37,374,170 shares of common stock. The exchange agreements resulted in a $1,250,527 adjustment for the unvested debt discount at the time of the convertible note exchanges to common stock. This amount is reflected in the amortization of debt discounts in other income (expense) in the consolidated statement of operations for the three months ended March 31, 2022. The unamortized debt discount of $1,250,527 represents the loss on these exchange transactions.

 

NOTE 13: CONVERTIBLE PROMISSORY NOTES – RELATED PARTIES

 

The Company entered into convertible promissory notes as follows as of March 31, 2022 and December 31, 2021:

 

   2022   2021 
Convertible note at 5% interest, maturing December 31, 2022 convertible into common shares at $1.20 per share (two notes – one for $6,525,000 and one for $975,000) for the acquisition of Monster Creative, LLC (see Note 4) with the two principals of Monster; payments due at maturity  $7,500,000   $7,500,000 
Long term debt, gross    7,500,000    7,500,000 
Less: Current portion   (7,500,000)   (7,500,000)
Total  $-   $- 

 

F-63
 

 

Maturities of convertible promissory notes – related parties as of March 31 are as follows:

 

      
2023  $7,500,000 
Total  $7,500,000 

 

On June 30, 2021, the Company acquired Monster Creative, LLC. The Monster Purchase Price included: (a) a convertible note to Phantom Power, LLC in the amount of $6,525,000 that bears interest at 5% per annum, and matures December 31, 2022, convertible into the Company’s common stock at $1.20 per share; and (b) a convertible note to Kevin Childress in the amount of $975,000 that bears interest at 5% per annum, and matures December 31, 2022, convertible into the Company’s common stock at $1.20 per share.

 

The Company evaluated the terms of the convertible notes and determined that there were no terms that would necessitate the recognition of any derivative liabilities.

 

Interest expense for the three months ended March 31, 2022 and 2021 was $92,466 and $0, respectively, and accrued interest as of March 31, 2022 was $281,507.

 

NOTE 14: STOCKHOLDERS’ EQUITY (DEFICIT)

 

Preferred Stock

 

As of March 31, 2022 and December 31, 2021, the Company has 10,000,000 shares of Preferred Stock authorized, designated as follows: 7,000,000 shares of Series A Preferred Stock authorized, and 570,000 shares of Series B Preferred Stock authorized. All shares of preferred stock have a par value of $0.00001.

 

On October 29, 2021, the Series B Preferred Stock had their authorized shares reduced from 900,000 shares to 570,000 and the 150,000 shares of Series C Preferred Stock were cancelled.

 

Series A Preferred Stock

 

Dividends. Shares of Series A Preferred Stock shall be entitled to receive, out of funds legally available for that purpose, on the same terms and conditions as that of holders of common stock, as may be declared by the Board of Directors.

 

Conversion. There are no conversion rights.

 

Redemption. Subject to certain conditions set forth in the Series A Certificate of Designation, in the event of a Change of Control (defined in the Series A Certificate of Designation as the time at which as a third party not affiliated with the Company or any holders of the Series A Preferred Stock shall have acquired, in one or a series of related transactions, equity securities of the Company representing more than fifty percent 50% of the outstanding voting securities of the Company), the Company, at its option, will have the right to redeem all or a portion of the outstanding Series A Preferred Stock in cash at a price per share of Series A Preferred Stock equal to 100% of the liquidation value.

 

Voting Rights. Holders of Series A Preferred Stock are entitled to vote on all matters, together with the holders of common stock, and have the equivalent of one thousand (1,000) votes for every share of Series A Preferred Stock held.

 

Liquidation. Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary, the holders of Series A Preferred Stock shall be entitled to receive out of the assets, whether capital or surplus, of the Company an amount equal to the liquidation value of the Series A Preferred Stock before any distribution or payment shall be made to the holders of any junior securities, and if the assets of the Company is insufficient to pay in full such amounts, then the entire assets to be distributed to the holders of the Series A Preferred Stock shall be ratably distributed among the holders in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.

 

The 7,000,000 shares were issued to a former officer of the Company and assigned to the new CEO at the time of the reverse merger of HUMBL.

 

F-64
 

 

Series B Preferred Stock

 

Prior to the amendment of the Certificate of Incorporation on October 29, 2021, the criteria established for the Series B Preferred Stock was as follows:

 

Dividends. Shares of Series B Preferred Stock shall be entitled to receive, out of funds legally available for that purpose, on the same terms and conditions as that of holders of common stock, as may be declared by the Board of Directors.

 

Conversion. Each share of Series B Preferred Stock shall be convertible at the option of the holder thereof at any time after December 3, 2021 at the office of the Company or any transfer agent for such stock, into ten thousand (10,000) fully paid and nonassessable shares of common stock subject to adjustment for any stock split or distribution of securities or subdivision of the outstanding shares of common stock.

 

Redemption. Subject to certain conditions set forth in the Series B Certificate of Designation, in the event of a Change of Control (defined in the Series B Certificate of Designation as the time at which as a third party not affiliated with the Company or any holders of the Series B Preferred Stock shall have acquired, in one or a series of related transactions, equity securities of the Company representing more than fifty percent 50% of the outstanding voting securities of the Company), the Company, at its option, will have the right to redeem all or a portion of the outstanding Series B Preferred Stock in cash at a price per share of Series B Preferred Stock equal to 100% of the liquidation value.

 

Voting Rights. Holders of Series B Preferred Stock are entitled to vote on all matters, together with the holders of common stock, and have the equivalent of ten thousand (10,000) votes for every share of Series B Preferred Stock held.

 

Liquidation. Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary, the holders of Series B Preferred Stock shall be entitled to receive out of the assets, whether capital or surplus, of the Company an amount equal to the liquidation value of the Series B Preferred Stock before any distribution or payment shall be made to the holders of any junior securities, and if the assets of the Company is insufficient to pay in full such amounts, then the entire assets to be distributed to the holders of the Series B Preferred Stock shall be ratably distributed among the holders in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.

 

HUMBL exchanged 100% of their membership interests for 552,029 shares of newly created Series B Preferred Stock. The Series B Preferred shares were issued to the respective members of HUMBL following the approval by FINRA of the one-for-four reverse stock split of the common shares and the increase in the authorized common shares to 7,450,000,000 shares. The FINRA approval for both the increase in the authorized common shares and reverse stock split occurred on February 26, 2021. These shares that were issued in the reverse merger had a value of $39,967.

 

These shares have a lock-up provision that prevents the holders to convert into common stock for a period of one-year from the date of the merger of December 3, 2020, with the exception of those held by the CEO who has a two-year lock up provision. In addition, officers and directors that received these shares are subject to strict selling limitations, where the number of shares sold within the preceding three months cannot exceed the greater of: (a) 1% of the total outstanding common shares; and (b) the average weekly reported trading volume for the previous four weeks.

 

On February 26, 2021, the Company issued 493 shares of Series B Preferred Stock for services rendered that were cancelled. On April 15, 2021, the Company revised their issuances and issued with an effective date of March 31, 2021, 2,272 Series B Preferred shares for services rendered. Of the 2,272 shares issued, 528 are vested immediately, 1,219 are vested over one year, and 525 are vested over two years. The vesting period commenced January 1, 2021. All of the Series B Preferred Shares issued have one-year lock up provisions to convert into common stock from the date of the merger of December 3, 2020. For the three months ended March 31, 2022 and year ended December 31, 2021, the Company expensed $4,375 and $401,900 for these Series B Preferred grants.

 

F-65
 

 

Between May 3 and May 6, 2021, the Company’s CEO converted 79,625,000 shares of common stock into 7,962 Series B Preferred shares. These shares are subject to a lock-up provision whereby the CEO has agreed not to convert these Series B shares to common for a period of two years.

 

On July 6, 2021, the CEO of the Company cancelled 9,350 shares of Series B Preferred Stock (93,500,000 if converted into common stock) for no consideration.

 

On November 19, 2021, the Company paid $215, to redeem 215 Series B Preferred Shares.

 

In December 2021, there were 7,939 Series B Preferred shares converted into 79,390,000 common shares.

 

On March 17, 2022, the CEO of the Company cancelled 4,900 shares of Series B Preferred Stock (49,000,000 if converted into common stock) for no consideration.

 

During the three months ended March 31, 2022, there were 22,064 Series B Preferred shares converted into 220,640,000 common shares.

 

As of March 31, 2022, the Company has 517,795 shares of Series B Preferred Stock issued and outstanding.

 

On October 29, 2021, the Company by Board consent approved an amendment to their Certificate of Amendment for the Series B Preferred Stock to (a) reduce the number of authorized shares of Series B Preferred stock to 570,000 and (b) for Series B Preferred shareholders holding greater than 750 shares of Series B Preferred Stock, for the calendar months of December 2021 and January 2022, Series B Preferred shareholders shall not have the right, whether by election, operation of law, or otherwise, to convert into Common Stock shares of Series B Preferred stock constituting more than 5% of the total number of Series B Preferred shares held by them; and for each of the calendar months from February 2022 to May 2023, the percentage that the Series B Preferred shareholder may convert is 3% of the total number of Series B Preferred shares held by them. This action was approved by Series B Shareholder consent.

 

Common Stock

 

The Company has 7,450,000,000 shares of common stock, par value $0.00001, authorized. The Company has 1,317,065,639 and 1,023,039,433 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively. The Company on February 26, 2021 increased its authorized shares from 5,000,000,000 to 7,450,000,000 shares.

 

In March 2021 there was an adjustment for 41,156 shares of common stock from the reverse stock split on February 26, 2021.

 

On April 26, 2021, the Company, issued 437,500 for the acquisition of the Chile country rights. The value of this transaction was $1,000,000 received in cash.

 

Between May 3 and May 6, 2021, the Company’s CEO converted 79,625,000 shares of common stock into 7,962 Series B Preferred shares. These shares are subject to a lock-up provision whereby the CEO has agreed not to convert these Series B shares to common for a period of two years.

 

On June 3, 2021, the Company issued 9,345,794 shares of common stock valued at $10,000,000 using the 10-day VWAP price as part of the consideration for Tickeri. These shares were issued to the two principals of Tickeri.

 

On June 30, 2021, the Company issued 1,000,000 shares of common stock in settlement of a liability.

 

In December 2021, there were 7,939 Series B Preferred shares converted into 79,390,000 common shares.

 

During the year ended December 31, 2021, the Company issued 18,272,540 shares of common stock to consultants and advisors for services. These shares were valued at the market price of the Company’s common stock on the respective dates of issuance. These shares will be expensed as stock-based compensation expense through June 30, 2025. In addition, the Company committed to issue an additional 1,318,926 common shares that have a value of $676,408 for services rendered and to be rendered through February 2022. For the year ended December 31, 2021, the Company expensed $6,521,095, and $6,066,881 is yet to be expensed and is reflected as an offset to additional paid in capital as of December 31, 2021.

 

F-66
 

 

In the three months ended March 31, 2022, the Company: (a) issued 4,000,000 shares in a settlement; (b) 10,000,000 shares in the exercise of warrants; (c) 13,200,000 shares in the asset purchase of BizSecure (also granted 26,800,000 restricted stock units in this acquisition); (d) 8,962,036 shares in the acquisition of Ixaya; (e) 675,000 shares for services rendered; (f) 37,374,170 shares issued for the exchange of notes payable and accrued interest; and (g) 220,640,000 shares issued in conversion of 22,064 Series B Preferred stock. In addition, the Company cancelled 825,000 shares.

 

During the three months ended March 31, 2022, the Company expensed $1,440,464 related to shares issued to consultants and advisors for services as noted above, leaving $4,626,417 of stock-based compensation yet to be expensed as of March 31, 2022. The Company has reduced their obligation to issue common stock by 1,120,176 shares and as of March 31, 2022 has an obligation to issue 198,750 shares valued at $26,831. These shares were issued in April 2022.

 

Stock Incentive Plan

 

On July 21, 2021, the Company established the HUMBL, Inc. 2021 Stock Incentive Plan (the “Plan”) for a total issuance not to exceed 20,000,000 shares of common stock. The purpose of the Plan is to promote the long-term growth and profitability of the Company by (i) providing key people with incentives to improve stockholder value and to contribute to the growth and financial success of the Company, and (ii) enabling the Company to attract, retain and reward the best-available persons.

 

The Plan permits the granting of Stock Options (including incentive stock options qualifying under Code Section 422 and nonqualified stock options), Stock Appreciation Rights, restricted or unrestricted Stock Awards, Restricted Stock Units, Performance Awards, other stock-based awards, or any combination of the foregoing.

 

Warrants

 

On December 4, 2020, the Company granted 250,000,000 warrants to two separate holders at a price of $400,000. These warrants have a term of 2 years and are exercisable into shares of common stock at a price of $0.20 per share. In October 2021, 20,000,000 of these warrants have been exercise for $4,000,000.

 

On December 23, 2020, the Company granted 12,500,000 warrants which were part of a country rights option HUMBL granted. These warrants have a term of 1 year and are exercisable into shares of common stock at a price of $1.00 per share.

 

On December 23, 2020, the Company entered into two separate convertible note agreements that are convertible into shares of common stock at $0.60 per share. The note holders were each granted 112,500 warrants under the convertible note agreements. These warrants have a term of 2 years and are exercisable into shares of common stock at a price of $1.00 per share.

 

On May 13, 2021, the Company entered into two separate convertible note agreements that are convertible into shares of common stock at $1.00 per share. The note holders were granted 1,575,000 warrants under the convertible note agreements. These warrants have a term of 2 years and are exercisable into shares of common stock at a price of $1.00 per share. The relative fair value of the warrants of $540,815 was recognized as a debt discount and is being amortized over the life of the convertible notes.

 

On May 19, 2021, the Company entered into three separate convertible note agreements that are convertible into shares of common stock at $1.00 per share. The note holders were granted 1,425,000 warrants under the convertible note agreements. These warrants have a term of 2 years and are exercisable into shares of common stock at a price of $1.00 per share. The relative fair value of the warrants of $464,127 was recognized as a debt discount and is being amortized over the life of the convertible notes.

 

On May 21, 2021, the Company entered into a consulting agreement and granted 25,000,000 warrants under this agreement. The warrants have a term of 5 years and expire May 21, 2026. The value of the warrants is $19,132,393 and is being expensed over the 5 year period. The Company expensed $2,337,341 for the year ended December 31, 2021 for these warrants.

 

On June 21, 2021, the Company entered into two separate convertible note agreements that are convertible into shares of common stock at $1.00 per share. The note holders were granted 1,500,000 warrants under the convertible note agreements. These warrants have a term of 2 years and are exercisable into shares of common stock at a price of $1.00 per share. The relative fair value of the warrants of $548,344 was recognized as a debt discount and is being amortized over the life of the convertible notes.

 

On August 30, 2021, the Company entered into a convertible note agreement that is convertible into shares of common stock at $0.90 per share. The note holder was granted 375,000 warrants under the convertible note agreement. These warrants have a term of 2 years. The relative fair value of the warrants of $102,486 was recognized as a debt discount and is being amortized over the life of the convertible notes.

 

F-67
 

 

On October 6, 2021, the Company entered into a consulting agreement and granted 6,000,000 warrants under this agreement. The warrants have a term of 4 years and expire September 30, 2025. The warrants vest as follows: 750,000 per quarter for the quarters ended December 31, 2021, March 31, 2022, June 30, 2022 and September 30, 2022; 1,000,000 upon release of a fully functional cryptocurrency wallet by December 31, 2021, which criteria was satisfied; and 2,000,000 upon the completion of peer-to-peer in the mobile application by March 31, 2022. The Company has expensed $1,146,998 with respect to these warrants for the year ended December 31, 2021.

 

On November 12, 2021, the Company entered into a convertible note agreement that is convertible into shares of common stock at $0.60 per share. The note holder was granted 1,000,000 warrants under the convertible note agreement. These warrants have a term of 2 years. The relative fair value of the warrants of $197,791 was recognized as a debt discount and is being amortized over the life of the convertible notes.

 

On December 31, 2021, the Company entered into a consulting agreement and granted 1,500,000 warrants under this agreement. The warrants have a term of 2 years and expire December 31, 2023. The warrants vest as follows: 500,000 immediately and 250,000 quarterly through December 31, 2022. The Company has expensed $112,410 with respect to these warrants for the year ended December 31, 2021.

 

On December 31, 2021, the Company entered into a consulting agreement and granted 2,500,000 warrants under this agreement. The warrants have a term of 2 years and expire December 31, 2023. The warrants vest as follows: 750,000 immediately and 150,000 monthly through December 31, 2022. The Company has expensed $168,615 with respect to these warrants for the year ended December 31, 2021.

 

The following represents a summary of the warrants:

 

  

Three Months Ended

March 31, 2022

  

Year Ended

December 31, 2021

 
   Number   Weighted
Average
Exercise Price
   Number   Weighted
Average
Exercise Price
 
Beginning balance   283,650,000   $0.32627    262,725,000   $0.23875 
                     
Granted   -    -    40,925,000    0.82643 
Exercised   (10,000,000)   0.20    (20,000,000)   0.20 
Forfeited   -    -    -    - 
Expired   -    -    -    - 
Ending balance   273,650,000   $0.33088    283,650,000   $0.32627 
Intrinsic value of warrants  $-        $18,400,000      
Weighted Average Remaining Contractual Life (Years)   1.95         2.19      

 

As of March 31, 2022, 255,050,000 warrants are vested.

 

For the three months ended March 31, 2022 and 2021, the Company incurred stock-based compensation expense of $3,270,349 and $0, respectively for the warrants in accordance with ASC 718-10-50-1 and ASC 718-10-50-2. The fair value of the grants were calculated based on the black-scholes calculation using the assumptions reflected in the chart below for both the service-based grants and the performance-based grants.

 

As of March 31, 2022, there remains unrecognized stock-based compensation expense related to these warrants of $17,411,672 comprising of service-based grants through June 30, 2026.

 

F-68
 

 

Options

 

On October 26, 2021, the Company granted 630,000 stock options to employees. These options have a term of 10 years and are exercisable into shares of common stock at a price of $0.70 per share. As of March 31, 2022, none of the stock options are vested.

 

  

Three Months Ended

March 31, 2022

  

Year Ended

December 31, 2021

 
   Number   Weighted
Average
Exercise Price
   Number   Weighted
Average
Exercise Price
 
Beginning balance   630,000   $0.70    -   $- 
                     
Granted   -    -    630,000    0.70 
Exercised   -    -    -    - 
Forfeited   -    -    -    - 
Expired   -    -    -    - 
Ending balance   630,000   $0.70    630,000   $0.70 
Intrinsic value of warrants  $-        $-      
Weighted Average Remaining Contractual Life (Years)   9.57         9.82      

 

For the three months ended March 31, 2022 and 2021, the Company incurred stock-based compensation expense of $36,750 and $0, respectively for the options in accordance with ASC 718-10-50-1 and ASC 718-10-50-2. The fair value of the grants were calculated based on the black-scholes calculation using the assumptions reflected in the chart below for the service-based grants.

 

Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each option/warrant is estimated using the Black-Scholes valuation model. The following assumptions were used for the periods as follows:

 

        Three Months Ended    

Year

Ended

 
    

March 31, 2022

   December 31, 2021 
Expected term    -    2-10   
Expected volatility    -%   182-409%
Expected dividend yield    -    - 
Risk-free interest rate    -%   0.10-0.58%

 

Restricted Stock Units (RSUs)

 

On February 12, 2022, the Company granted 26,800,000 RSUs in the acquisition of the asserts of BizSecure. These RSUs commence vesting on April 1, 2022.

 

  

Three Months Ended

March 31, 2022

  

Year Ended

December 31, 2021

 
   Number   Weighted
Average
Exercise Price
   Number   Weighted
Average
Exercise Price
 
Beginning balance   -   $-    -   $- 
                     
Granted   26,800,000    0.1689    -    - 
Exercised   -    -    -    - 
Forfeited   -    -    -    - 
Vested   -    -    -    - 
Ending balance   26,800,000   $0.1689    -   $- 

 

For the three months ended March 31, 2022 and 2021, the Company expensed $0 and $0, respectively for the RSUs.

 

F-69
 

 

NOTE 15: RELATED-PARTY TRANSACTIONS

 

Since May 13, 2019 when HUMBL was incorporated, they relied on entities that had common ownership to HUMBL for either assistance with payment of bills or for services rendered to assist HUMBL in bringing their products to market. The Company has not relied on these entities since early 2021 for this assistance. The amounts were largely for shared services that have ceased in 2021. The Company had recorded $0 and $15,200 in the three months ended March 31, 2022 and 2021 that were recorded in development costs.

 

In May 2022, the Company’s CEO contributed $406,040 to pay for the purchase of the NFT that is reflected as a non-current asset on the Company’s consolidated balance sheet.

 

NOTE 16: COUNTRY RIGHTS OPTION

 

Tuigamala Group Pty Ltd

 

On December 23, 2020, the Company and Tuigamala Group Pty Ltd, an Australian corporation (“TGP”), entered into a Securities Purchase Agreement whereby TGP agreed to purchase an option to purchase territory rights to 15 countries in the Oceania region (“Option”). The purchase price for this Option was $5,600,000, payable in two payments. The initial payment was $600,000 and was paid on December 23, 2020. The second payment of $5,000,000 was due on or before March 31, 2021.

 

In addition to receiving the Option, TGP was granted a warrant to purchase 12,500,000 shares of common stock of the Company at an exercise price of $1.00 per share. The warrant expires two-years from the grant date, December 23, 2021. As the warrant and the Option were granted for one price, the Company calculated the relative fair values of each instrument and recognized $556,757 of the $600,000 paid as the value of the warrant, and the remaining $43,243 as the value of the Option, which is reflected as deferred revenue on the Consolidated Balance Sheet as the criteria for revenue recognition under ASC 606 has not been satisfied to be recognized as revenue as of December 31, 2020. There was no guarantee that TGP would be able to make the second payment under the Option by the deadline of March 31, 2021.

 

On February 26, 2021, the Company and TGP entered into a term sheet to revise the Option. The revised terms of the Option are that the Company would form a subsidiary in the Oceania region. TGP would purchase a 35% ownership interest in the subsidiary and 3,750,000 shares of common stock for an aggregate purchase price of $15,000,000. The subsidiary shares and common shares would be purchased as follows: (a) by March 31, 2021, 1,250,000 shares will be issued for $5,000,000 and 33.33% of the subsidiary shares are to be sold to TGP; and (b) by September 30, 2021 with reasonable extensions to be determined, 2,500,000 shares will be issued for $10,000,000 and the remaining 66.66% of the subsidiary shares are to be sold to TGP. As a result of the revised terms, the $600,000 paid on December 23, 2020, will be used in its entirety to pay for the warrants described below, and the deferred revenue recognized will be reflected as additional paid in capital on February 26, 2021.

 

The Company and TGP were unable to come to agreement on new terms of this transaction and as of April 14, 2021 have terminated negotiations. TGP still owns the warrants received in December 2020. The Company is not obligated to return any of the $600,000 received on December 23, 2020.

 

These warrants were assigned to Archumbl Pty Ltd. in May 2021.

 

Aurea Group

 

On March 15, 2021 we entered into a Securities Purchase Agreement with HUMBL CL SpA (“HUMBL CL”), an affiliate of Aurea Group Ventures (“Aurea Group”), a Chilean multi-family office, under which Aurea Group purchased shares of our common stock in return for exclusive country rights to Chile of our HUMBL products for a purchase price of up to $7,500,000.

 

Under the terms of the Securities Purchase Agreement, HUMBL CL agreed to purchase 437,500 shares of our common stock for $1,000,000. The payment for these shares was due on or before March 30, 2021 but as a result of restrictions imposed due to COVID-19 was paid in two tranches of $500,000 each on April 5, 2021 and April 6, 2021. In addition, HUMBL CL also received the right to purchase 1,562,500 shares of HUMBL common stock for $6,500,000 by December 31, 2021 and to receive a 35% equity interest in a Chilean subsidiary HUMBL intends to form to conduct its operations in Chile.

  

F-70
 

 

The Securities Purchase Agreement provides that if HUMBL CL exercises its right to purchase the subsidiary interest, it will receive 35% of the profits from operations of the HUMBL family of products in Chile. In addition, HUMBL CL also received a right of first refusal with respect to regional or country rights sales in Latin America.

 

On January 3, 2022, the Company entered into a Settlement Agreement with HUMBL CL whereby HUMBL issued HUMBL CL 4,000,000 shares of common stock and HUMBL CL agreed to waive its right to purchase the Latin America territory rights.

 

The Company is still working with Aurea Group on Latin American business development opportunities for their products in key verticals such as: banking, merchant and financial services, real estate, hospitality, tourism, sports, festivals, entertainment and ticketing services in the region.

 

NOTE 17: SEGMENT REPORTING

 

The Company follows the provisions of ASC 280-10 Disclosures about Segments of an Enterprise and Related Information. This standard requires that companies disclose operating segments based on the manner in which management disaggregates the Company in making operating decisions.

 

For 2021, the Company established three distinct operating segments: HUMBL Marketplace; HUMBL Pay; and HUMBL Financial. Most of the operations for the year ended December 31, 2021 were conducted in North America. Commencing January 1, 2022, the Company simplified their business model to segment their business into two distinct divisions: Consumer and Commercial. The 2021 segments were all considered part of the consumer division.

 

Less than 3-4% of the Company’s sales are from outside of North America, therefore the Company has determined that segment reporting by geographic location was not necessary. In the future, the Company will continue to monitor their activity by region to determine if it is feasible to report segment information by location.

 

 

Year Ended March 31, 2022  Consumer   Commercial   Total 
Segmented operating revenues  $1,128,750   $18,384   $1,147,134 
Cost of revenues   506,135    14,835    520,970 
Gross profit   622,615    3,549    626,164 
Total operating expenses net of depreciation, amortization and impairment   9,517,771    458,059    9,975,830 
Depreciation, amortization and impairment   46,053    1,105,476    1,151,529 
Other expenses (income)   1,966,758    (2,608)   1,964,150 
(Loss) from continuing operations  $(10,907,967)  $(1,557,378)  $(12,465,345)
Segmented assets as of March 31, 2022            
Property and equipment, net   $359,106   $-   $359,106 
Intangible assets  $-   $3,333,284   $3,333,284 
Intangible assets – digital assets   $32,064   $406,040   $438,104 
Goodwill  $6,531,346   $3,981,000   $10,512,346 
Capital expenditures   $8,510   $-   $8,510 

 

F-71
 

 

Three Months Ended March 31, 2021  HUMBL Pay   HUMBL Marketplace   HUMBL Financial   Total 
Segmented operating revenues  $-   $154,104   $-   $154,104 
Cost of revenues   -    104,743    -    104,743 
Gross profit   -    49,361    -    49,361 
Total operating expenses net of depreciation and amortization   841,719    365,875    -    1,207,594 
Depreciation and amortization   -    -    -    - 
Other (income) expense   12,912    7,748    -    20,660 
Income (loss) from continuing operations  $(854,631)  $(324,262)  $-   $(1,436,862)
Segmented assets as of March 31, 2021                     
Property and equipment, net   $-   $-   $-   $- 
Intangible assets, net   $-   $-   $-   $- 
Capital expenditures   $-   $-   $-   $- 

 

The HUMBL Financial sector is reflected in discontinued operations on the consolidated statement of operations for the three months ended March 31, 2021.

 

NOTE 18: SUBSEQUENT EVENTS

 

In the period April 1, 2022 through May 11, 2022, the Company issued 151,650,000 shares of common stock in the conversion of 15,165 shares of Series B Preferred stock.

 

In April 2022, the Company issued 198,750 shares of common stock that were accrued as of March 31, 2022 in the Obligation to Issue Common Stock.

 

In May 2022, the Company’s CEO contributed $406,040 to pay for the purchase of the NFT that is reflected as a non-current asset on the Company’s consolidated balance sheet.

 

F-72
 

 

HUMBL, INC.

PRO FORMA UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

The following unaudited pro forma consolidated financial statements give effect to the acquisition of Tickeri, Inc. (“Tickeri”) on June 3, 2021, the acquisition of Monster Creative, LLC (“Monster”) on June 30, 2021, the acquisition of BizSecure, Inc. (“BizSecure”) on February 12, 2022 and the acquisition of Ixaya Business SA de CV, a Mexican corporation (“Ixaya”) on March 3, 2022 by HUMBL, Inc. (“HUMBL” and the “Company”) and are based on estimates and assumptions set forth herein and in the notes to such pro forma statements.

 

On June 3, 2021 HUMBL acquired Tickeri in a debt and stock transaction totaling $20,000,000 following which Tickeri became a subsidiary of HUMBL The purchase price for the stock purchase was $20,000,000 of which HUMBL must pay $10,000,000 in their common stock and $10,000,000 is paid through two promissory notes. The shares had a deemed value equal to the volume weighted average price per share of HUMBL common stock on the OTC Markets for the ten consecutive trading days ending with the complete trading day ending two trading days prior to the closing. HUMBL issued the two shareholders of Tickeri, Juan Gonzalez and Javier Gonzalez, 4,672,897 shares of our common stock each. HUMBL also issued to each of Juan and Javier Gonzalez a secured promissory note in the face amount of $5,000,000. The promissory notes are due and payable on or before December 31, 2022, bear interest at the rate of 5% per annum and are secured by the equity interests of Tickeri.

 

On June 30, 2021, HUMBL acquired Monster. Monster was founded by Doug Brandt and Kevin Childress. Monster will collaborate with HUMBL in the production of NFTs and other digital content. The purchase price for all of the membership interests in Monster was paid through the issuance of one convertible note and one non-convertible note to each of Doug Brandt and Kevin Childress in the aggregate principal amount of $8,000,000. The convertible notes were issued to Doug Brandt (through an entity owned by him) and Kevin Childress in the aggregate principal amount of $7,500,000. The notes convert at the holder’s election at $1.20 per share of HUMBL, bear interest at 5% per annum and are due in 18 months from issuance. HUMBL issued non-convertible notes to Doug Brandt and Kevin Childress in the aggregate amount of $500,000.

 

On February 12, 2022, the Company entered into an asset purchase agreement with BizSecure. The Company determined this was an acquisition of a business pursuant to the guidance provided in both ASC 805 and Rule 11-01(d) of Regulation S-X. BizSecure is not considered a significant subsidiary under Regulation S-X Rule 1-02(w). The Company acquired a customer relationship with the US Air Force and BizSecure’s Mobile ID technology. The Company entered into employment agreements with two BizSecure employees as part of the agreement to help integrate the Mobile ID technology into the Company’s larger suite of products and help operate the blockchain services division. The assets acquired from BizSecure represented the majority of the operations of the entity and BizSecure post-acquisition has only conducted nominal operations and has no employees. The Company issued to BizSecure 13,200,000 common shares and 26,800,000 restricted stock units that vest quarterly commencing April 1, 2022 for a period of two years. The shares and restricted stock units have a value of $6,756,000. The Company has included the value of $4,526,520 which represents the value of the restricted stock units in contingent consideration pursuant to ASC 805-10-55-25. Management considered several factors when making the determination to treat the RSUs as contingent consideration and not post-combination compensation, including, but not limited to, the following: (a) the RSUs are not automatically forfeited upon termination of the two key employees as those RSUs would vest if the employees were terminated without cause or if the employees resigned with good reasons; (b) all selling shareholders of BizSecure receive the same pro rata compensation; (c) the BizSecure shareholders hired by the Company receive compensation commensurate with other employees in the Company at the same level; (d) there are no adjustments to the RSUs based on earnings and thus there is no profit-sharing component to the RSUs; and (e) the parties desired for the compensation to be paid over time and not all up front. Therefore, the Company determined that the restricted stock units should be treated as contingent consideration.

 

On March 3, 2022, the Company acquired Ixaya, under a Stock Purchase Agreement (“Ixaya SPA”). The acquisition of Ixaya was for $150,000 and 8,962,036 shares of common stock (a value of $1,500,000) for a total of $1,650,000. The Company accounted for this acquisition as a business combination under ASC 805, and Ixaya is not considered a significant subsidiary under Regulation S-X Rule 1-02(w).

 

These transactions are being accounted for as an acquisition. No cash was paid relating to the acquisitions.

 

The following unaudited pro forma consolidated statements of operations for the year ended December 31, 2021 of the Company, Tickeri, Monster, BizSecure and Ixaya gives effect to the above as if the transactions had occurred at the beginning of the period,which assumes the effects of the above as if these transaction had occurred as of January 1, 2021.

 

F-73
 

 

HUMBL, INC.

PRO FORMA UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

The unaudited pro forma consolidated financial statements are based upon, and should be read in conjunctions with the Company’s audited consolidated financial statements as of and for the year ended December 31, 2021.

 

The unaudited pro forma consolidated financial statements and notes thereto contained forward-looking statements that involve risks and uncertainties. Therefore, our actual results may vary materially from those discussed herein. The unaudited pro forma consolidated financial statements do not purport to be indicative of the results that would have been reported had such events actually occurred on the dates specified, nor is it indicative our future results. We refer you to the above referenced financial statements for additional disclosure regarding these acquisitions.

 

F-74
 

 

HUMBL, INC.

NOTES TO UNAUDITED PRO FORMA

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2021

 

NOTE A – ACCOUNTING TREATMENT APPLIED AS A RESULT OF THIS TRANSACTION

 

The acquisitions of Tickeri, Monster, BizSecure and Ixaya are being accounted for as business combinations, whereby HUMBL is the acquirer.

 

NOTE B – ADJUSTMENT

 

(1)Represents material increases related to amortization expense of intangible assets related to customer relationships and software costs of $700,000 acquired in the BizSecure and Ixaya acquisitions.
   
(2)One time impairment charge of $1,008,642 on the Ixaya acquisition.
   
 (3)To record interest expense of $461,250 on debt issued in acquisitions of Tickeri and Monster.

 

NOTE C – PRO FORMA WEIGHTED AVERAGES SHARES OUTSTANDING

 

Pro forma shares outstanding assuming the transaction occurred as of December 31, 2021:

 

HUMBL Weighted Average Shares Outstanding   942,331,830 
      
Pro forma adjustments – Shares issued to BizSecure (13,200,000) and Ixaya (8,962,036)   22,162,036 
      
Pro forma shares outstanding   964,493,866 

 

F-75
 

 

HUMBL, INC.

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2021

 

           Monster               Pro Forma 
   HUMBL, Inc.   Tickeri, Inc.   Creative, LLC   BizSecure, Inc.   Ixaya, Inc.   Adjustments   HUMBL, Inc. 
ASSETS                                   
                                    
CONTINUING OPERATIONS                                   
Revenues  $2,503,388   $71,500   $64,540   $-   $198,276   $-   $2,837,704 
                                    
Cost of revenues   1,104,959    21,871    207,256    -    138,680    -    1,472,766 
                                    
Gross profit   1,398,429    49,629    (142,716)   -    59,596    -    1,364,938 
                                    
OPERATING EXPENSES                                   
Development costs   2,117,683    -    -    -    43,567    -    2,161,250 
Professional fees   3,905,699    -    -    -    -    -    3,905,699 
Settlement   1,870,000    -    -    -    -    -    1,870,000 
Stock-based compensation   10,734,833    -    -    -    -    -    10,734,833 
Impairment - goodwill   22,203,422    -    -    -    -(2)  1,008,642    23,212,064 
Impairment - digital assets   34,570    -    -    -    -    -    34,570 
General and administrative   5,247,118    72,636    165,241    38,205    82,345(1)  700,000    6,305,545 
Total operating expenses   46,113,325    72,636    165,241    38,205    125,912    1,708,642    48,223,961 
                                    
Loss from operations   (44,714,896)   (23,007)   (307,957)   (38,205)   (66,316)   (1,708,642)   (46,859,023)
                                    
OTHER INCOME (EXPENSE)                                   
Interest expense, net   (943,559)   -    (9,658)   -    (790)(3)  (461,250)   (1,415,257)
Beneficial conversion feature   (3,300,000)   -    -    -    -    -    (3,300,000)
Amortization of debt discounts   (838,941)   -    -    -    -    -    (838,941)
Gain on sale of digital assets   47,875    -    -    -    -    -    47,875 
Forgiveness of debt   66,117    -    -    -    -    -    66,117 
Other income   28,200    -    -    -    -    -    28,200 
Total other income (expense)   (4,940,308)   -    (9,658)   -    (790)   (461,250)   (5,412,006)
                                    
LOSS FROM OPERATIONS BEFORE PROVISION FOR INCOME TAXES   (49,655,204)   (23,007)   (317,615)   (38,205)   (67,106)   (2,169,892)   (52,271,029)
Provision for income taxes   (800)             -    -    -    (800)
                                    
NET LOSS  $(49,656,004)  $(23,007)  $(317,615)  $(38,205)  $(67,106)  $(2,169,892)  $(52,271,829)
                                    
NET LOSS PER SHARE                                   
                                    
Basic and Diluted loss per share:  $(0.0527)                           $(0.0542)
                                    
WEIGHTED AVERAGE SHARES OUTSTANDING   942,331,830                             964,493,866 

 

F-76
 

 

TICKERI, INC.

BALANCE SHEETS

MARCH 31, 2021 (UNAUDITED) AND DECEMBER 31, 2020

 

           
   MARCH 31,   DECEMBER 31, 
   2021   2020 
   (UNAUDITED)     
ASSETS          
Current Assets:          
Cash  $36,657   $43,519 
Accounts receivable, net   13,113    16,320 
Prepaid expenses and other current assets   106    214 
           
Total Current Assets   49,876    60,053 
           
TOTAL ASSETS  $49,876   $60,053 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)          
           
LIABILITIES          
Current Liabilities:          
Accounts payable and accrued expenses  $49,822   $36,992 
Current portion of notes payable   192,123    192,123 
           
Total Current Liabilities   241,945    229,115 
           
Total Liabilities   241,945    229,115 
           
STOCKHOLDERS’ EQUITY (DEFICIT)          
Common stock, $0.00001, par value, 10,000,000 shares authorized, 8,500,000 shares issued and outstanding   85    85 
Additional paid in capital   25,383    25,383 
Accumulated deficit   (217,537)   (194,530)
           
Total Stockholders’ Equity (Deficit)   (192,069)   (169,062)
           
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)  $49,876   $60,053 

 

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

 

F-77
 

 

TICKERI, INC.

STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND PERIOD JANUARY 2, 2020 (INCEPTION)

THROUGH MARCH 31, 2020

 

           
   MARCH 31,   MARCH 31, 
   2021   2020 
         
REVENUES  $71,500   $101,747 
           
COST OF REVENUES   21,871    28,366 
           
GROSS PROFIT   49,629    73,381 
           
OPERATING EXPENSES          
General and administrative expenses   72,636    111,054 
           
Total Operating Expenses   72,636    111,054 
           
OPERATING LOSS   (23,007)   (37,673)
           
NON-OPERATING EXPENSE          
Interest expense   -    - 
           
Total Non-Operating Expense   -    - 
           
NET LOSS BEFORE PROVISION FOR INCOME TAXES   (23,007)   (37,673)
           
Provision for income taxes   -    - 
           
NET LOSS  $(23,007)  $(37,673)

 

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

 

F-78
 

 

TICKERI, INC.

STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND PERIOD JANUARY 2, 2020 (INCEPTION) THROUGH DECEMBER 31, 2020

 

                                
       Additional                 
   Common Stock   Paid-In   Accumulated             
   Shares   Amount   Capital   Deficit   Total       
                             
Balance - January 2, 2020   -   $-   $-   $-   $-      -  
                                  
Founders shares   8,500,000    85    383    -    468       
Contribution of equity   -    -    25,000         25,000       
Net loss for the period   -    -    -    (37,673)   (37,673)     -  
                                  
Balance - March 31, 2020   8,500,000   $85   $25,383   $(37,673)  $(12,205)     -  
                                  
Balance - December 31, 2020   8,500,000   $85   $25,383   $(194,530)  $(169,062)     1,560,832  
                                
Net loss for the period   -    -    -    (23,007)   (23,007)     (1,436,862)  
                                  
Balance - March 31, 2021   8,500,000   $85   $25,383   $(217,537)  $(192,069)     396,855  

 

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

 

F-79
 

 

TICKERI, INC.

STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND PERIOD JANUARY 2, 2020 (INCEPTION)

THROUGH MARCH 31, 2020

 

           
   2021   2020 
CASH FLOW FROM OPERTING ACTIVIITES          
Net loss  $(23,007)  $(37,673)
Adjustments to reconcile net loss to net cash used in operating activities          
           
Shares issued to founders for services   -    468 
           
Changes in assets and liabilities          
Accounts receivable   3,207    (10,025)
Prepaid expenses and other assets   108    (43)
Accounts payable and accrued expenses   12,830    22,273 
Total adjustments   16,145    12,673 
           
Net cash (used in) operating activities   (6,862)   (25,000)
           
CASH FLOWS FROM FINANCING ACTIVITES          
Contribution of equity from shareholder   -    25,000 
Proceeds from notes payable   -    - 
Net cash provided by financing activities   -    25,000 
           
NET (DECREASE) IN CASH   (6,862)   - 
           
CASH - BEGINNING OF PERIOD   43,519    - 
           
CASH - END OF PERIOD  $36,657   $- 
           
CASH PAID DURING THE PERIOD FOR:          
Interest expense  $-   $- 
           
Income taxes  $-   $- 

 

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

 

F-80
 

 

TICKERI, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2021 AND 2020

 

NOTE 1: NATURE OF OPERATIONS

 

Tickeri, Inc. (the “Company” or “Tickeri”) is a leading ticketing, live events and box office SaaS platform featuring Latin events and artists throughout the United States, Latin America, and the Caribbean corridor.

 

The Company, a Delaware corporation was formed on January 2, 2020.

 

On June 3, 2021 HUMBL, Inc. (“HUMBL”) acquired the Company in a debt and stock transaction totaling $20,000,000 following which Tickeri became a subsidiary of HUMBL The purchase price for the stock purchase was $20,000,000 of which HUMBL must pay $10,000,000 in their common stock and $10,000,000 iss paid through two promissory notes. The shares had a deemed value equal to the volume weighted average price per share of HUMBL common stock on the OTC Markets for the ten consecutive trading days ending with the complete trading day ending two trading days prior to the closing. HUMBL issued the two shareholders of Tickeri, Juan Gonzalez and Javier Gonzalez, 4,672,897 shares of our common stock each. HUMBL also issued to each of Juan and Javier Gonzalez a secured promissory note in the face amount of $5,000,000. The promissory notes are due and payable on or before December 31, 2022, bear interest at the rate of 5% per annum and are secured by the equity interests of Tickeri. In the event of an uncured default by HUMBL under the promissory note, Juan and Javier Gonzalez have the right to recover the ownership of Tickeri and re-commence the business and operations of Tickeri free and clear of any claims or encumbrances by HUMBL. Following the closing, Juan Gonzalez and Javier Gonzalez, entered into employment agreements having a term of 18 months, appointing them CEO of Tickeri and CTO of HUMBL, respectively.

 

Going Concern

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company has suffered losses and has not generated significant revenues as of yet as they are still in the very early stages of their business.

 

The financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis and ultimately to attain profitability. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Impact of COVID-19

 

The recent unprecedented events related to COVID-19, the disease caused by the novel coronavirus (SARS-CoV-2), have had significant health, economic, and market impacts and may have short-term and long-term adverse effects on our business that we cannot predict as the global pandemic continues to evolve. The extent and effectiveness of responses by governments and other organizations also cannot be predicted.

 

Our ability to maintain existing operations has been affected during the COVID-19 pandemic. Going forward any possible adverse effects on the business are uncertain given any possible limitations on how we conduct business with our customers and vendors.

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”).

 

F-81
 

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. These estimates include, but are not limited to, management’s estimate of provisions required for permanent and temporary differences related to income taxes, and liabilities to accrue. Actual results could differ from those estimates.

 

Cash

 

Cash consists of cash and demand deposits with an original maturity of three months or less. The Company holds no cash equivalents as of March 31, 2021 and December 31, 2020, respectively.

 

Fixed Assets and Long-Lived Assets

 

ASC 360 requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company has adopted Accounting Standard Update (“ASU”) 2017-04 Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment.

 

The Company reviews recoverability of long-lived assets on a periodic basis whenever events and changes in circumstances have occurred which may indicate a possible impairment. The assessment for potential impairment is based primarily on the Company’s ability to recover the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. If such assets are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets.

 

Fixed assets and intangible assets with finite useful lives are stated at cost less accumulated amortization and impairment. Intangible assets with infinite lives, such as digital currency are valued at costs and reviewed for indicators of impairment at least annually, or more depending on circumstances.

 

The Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following:

 

  1. Significant underperformance relative to expected historical or projected future operating results;
     
  2. Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and
     
  3. Significant negative industry or economic trends.

 

When the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows.

 

Subsequent Events

 

Subsequent events were evaluated through the date the financial statements were filed.

 

Revenue Recognition

 

The Company accounts for a contract with a customer that is within the scope of this Topic only when the five steps of revenue recognition under ASC 606 are met.

 

F-82
 

 

The five core principles will be evaluated for each service provided by the Company and is further supported by applicable guidance in ASC 606 to support the Company’s recognition of revenue.

 

Ticketing Revenues

 

The Company recognizes revenues from their ticketing services primarily from service fees and payment processing fees charged at the time a ticket for an event is sold. We also derive revenues from providing certain creators with account management services and customer support. Our customers are primarily event creators who use our platform to sell tickets to attendees. Revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration we receive in exchange for those goods or services. We allocate the transaction price by estimating a standalone selling price for each performance obligation using a cost plus a margin approach. For service fees and payment processing fees, revenue is recognized when the ticket is sold. For account management services and customer support, revenue is recognized over the period from the date of the sale of the ticket to the date of the event.

 

We evaluate whether it is appropriate to recognize revenue on a gross or net basis based upon our evaluation of whether we obtain control of the specified goods or services by considering if we are primarily responsible for fulfillment of the promise, have inventory risk, and have the latitude in establishing pricing and selecting suppliers, among other factors.

 

We determined the event creator is the party responsible for fulfilling the promise to the attendee, as the creator is responsible for providing the event for which a ticket is sold, determines the price of the ticket and is responsible for providing a refund if the event is canceled. Our service is to provide a platform for the creator and event attendee to transact and our performance obligation is to facilitate and process that transaction and issue the ticket. The amount that we earn for our services is fixed. For the payment processing service, we determined that we are the principal in providing the service as we responsible for fulfilling the promise to process the payment and we have discretion and latitude in establishing the price of our service. Based on our assessment, we record revenue on a net basis related to our ticketing service and on a gross basis related to our payment processing service. As a result, costs incurred for processing the transactions are included in cost of net revenues in the consolidated statements of operations.

 

Revenue is presented net of indirect taxes, value-added taxes, creator royalties and reserves for customer refunds, payment chargebacks and estimated uncollectible amounts. If an event is cancelled by a creator, then any obligations to provide refunds to event attendees are the responsibility of that creator.

 

If a creator is unwilling or unable to fulfill their refund obligations, we may, at our discretion, provide attendee refunds. Revenue is also presented net of the amortization of creator signing fees when applicable. The benefit we receive by securing exclusive ticketing and payment processing rights with certain creators from creator signing fees is inseparable from the customer relationship with the creator and accordingly these fees are recorded as a reduction of revenue in the consolidated statements of operations.

 

Accounts Receivable and Concentration of Credit Risk

 

An allowance is based on management’s estimate of the overall collectability of accounts receivable, considering historical losses. Based on these same factors, individual accounts are charged off against the allowance when management determines those individual accounts are uncollectible. Credit extended to customers is generally uncollateralized. Past-due status is based on contractual terms. The Company does not charge interest on accounts receivable. As of March 31, 2021 and December 31, 2020, there was no allowance necessary.

 

F-83
 

 

Income Taxes

 

Income taxes are accounted under the asset and liability method. The current charge for income tax expense is calculated in accordance with the relevant tax regulations applicable to the entities. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

 

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Differences between statutory tax rates and effective tax rates relate to permanent tax differences.

 

Uncertain Tax Positions

 

The Company follows ASC 740-10 Accounting for Uncertainty in Income Taxes. This requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. Management evaluates their tax positions on an annual basis.

 

The Company files income tax returns in the U.S. federal tax jurisdiction and various state tax jurisdictions. The federal and state income tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally for three years after they were filed.

 

Vacation and Paid-Time-Off

 

The Company follows ASC 710-10 Compensation – General. The Company records liabilities and expense when obligations are attributable to services already rendered, will be paid even if an employee is terminated, payment is probable, and the amount can be estimated.

 

Share-Based Compensation

 

The Company follows ASC 718 Compensation – Stock Compensation and has adopted ASU 2017-09 Compensation – Stock Compensation (Topic 718) Scope of Modification Accounting. The Company calculates compensation expense for all awards granted, but not yet vested, based on the grant-date fair values. Share-based compensation expense for all awards granted is based on the grant-date fair values. The Company policy is to recognize these compensation costs, on a pro rata basis over the requisite service period of each vesting tranche of each award for service-based grants, and as the criteria is achieved for performance-based grants, when such grants are made.

 

The Company adopted ASU 2016-09 Improvements to Employee Share-Based Payment Accounting. Cash paid when shares are directly withheld for tax withholding purposes will be classified as a financing activity in the statement of cash flows.

 

Fair Value of Financial Instruments

 

ASC 825 Financial Instruments requires the Company to disclose estimated fair values for its financial instruments. Fair value estimates, methods, and assumptions are set forth below for the Company’s financial instruments: The carrying amount of cash, accounts receivable, prepaid and other current assets, accounts payable and accrued liabilities, and amounts payable to related parties, approximate fair value because of the short-term maturity of those instruments. The Company does not utilize derivative instruments.

 

Leases

 

The Company follows ASC 842 Leases in accounting for leased properties, when they exceed a one-year term.

 

F-84
 

 

Fair Value Measurements

 

ASC 820 Fair Value Measurements defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosure about fair value measurements. ASC 820 classifies these inputs into the following hierarchy:

 

Level 1 inputs: Quoted prices for identical instruments in active markets.

 

Level 2 inputs: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

 

Level 3 inputs: Instruments with primarily unobservable value drivers.

 

Related-Party Transactions

 

Parties are considered to be related to the Company if the parties directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal stockholders of the Company, its management, members of the immediate families of principal stockholders of the Company and its management and other parties with which the Company may deal where one-party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all material related-party transactions. All transactions shall be recorded at fair value of the goods or services exchanged.

 

NOTE 3: REVENUE

 

All revenue for the three months ended March 31, 2021 and period January 2, 2020 through March 31, 2020 was for ticketing services.

 

There were no significant contract asset or contract liability balances for all periods presented. The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

 

Collections of the amounts billed are typically paid by the customers within 30 to 60 days.

 

NOTE 4: NOTES PAYABLE

 

The Company entered into notes payable as follows as of March 31, 2021 and December 31, 2020:

 

  

March 31,

2021

  

December 31,

2020

 
PPP SBA loan - Tickeri  $42,123   $42,123 
EIDL loan - Tickeri   150,000    150,000 
           
Total   192,123    192,123 
Less: Current portion   (192,123)   (192,123)
Long-term debt  $-   $- 

 

There was no interest recorded on the loans as they did not start commencing interest.

 

F-85
 

 

NOTE 5: STOCKHOLDERS’ EQUITY (DEFICIT)

 

The Company has 10,000,000 shares of common stock, par value $0.00001, authorized. The Company has 8,500,000 shares issued and outstanding as of December 31, 2020. The shares of stock were issued at a value of $468. In addition, in February 2020, the shareholders contributed $25,000 for working capital purposes.

 

NOTE 6: SUBSEQUENT EVENTS

 

On June 3, 2021 HUMBL, Inc. (“HUMBL”) acquired the Company in a debt and stock transaction totaling $20,000,000 following which Tickeri became a subsidiary of HUMBL The purchase price for the stock purchase was $20,000,000 of which HUMBL must pay $10,000,000 in their common stock and $10,000,000 is paid through two promissory notes. The shares had a deemed value equal to the volume weighted average price per share of HUMBL common stock on the OTC Markets for the ten consecutive trading days ending with the complete trading day ending two trading days prior to the closing. HUMBL issued the two shareholders of Tickeri, Juan Gonzalez and Javier Gonzalez, 4,672,897 shares of our common stock each. HUMBL also issued to each of Juan and Javier Gonzalez a secured promissory note in the face amount of $5,000,000. The promissory notes are due and payable on or before December 31, 2022, bear interest at the rate of 5% per annum and are secured by the equity interests of Tickeri. In the event of an uncured default by HUMBL under the promissory note, Juan and Javier Gonzalez have the right to recover the ownership of Tickeri and re-commence the business and operations of Tickeri free and clear of any claims or encumbrances by HUMBL. Following the closing, Juan Gonzalez and Javier Gonzalez, entered into employment agreements having a term of 18 months, appointing them CEO of Tickeri and CTO of HUMBL, respectively.

 

F-86
 

 

Report of Independent Registered Public Accounting Firm

 

To the shareholders and the board of directors of Tickeri, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheet of Tickeri, Inc. (the “Company”) as of December 31, 2020, the related statement of operations, stockholders’ equity (deficit), and cash flows for the period January 2, 2020 (Inception) through December 31, 2020 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the period January 2, 2020 (Inception) through December 31, 2020, in conformity with accounting principles generally accepted in the United States.

 

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

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

 

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

 

/S/ BF Borgers CPA PC

BF Borgers CPA PC

 

We have served as the Company’s auditor since 2021

Lakewood, CO

November 10, 2021

 

F-87
 

 

TICKERI, INC.

BALANCE SHEET

DECEMBER 31, 2020

 

     
ASSETS    
Current Assets:     
Cash  $43,519 
Accounts receivable, net   16,320 
Prepaid expenses and other current assets   214 
      
Total Current Assets   60,053 
      
TOTAL ASSETS  $60,053 
      
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)     
      
LIABILITIES     
Current Liabilities:     
Accounts payable and accrued expenses  $36,992 
Current portion of notes payable   192,123 
      
Total Current Liabilities   229,115 
      
Total Liabilities   229,115 
      
STOCKHOLDERS’ EQUITY (DEFICIT)     
Common stock, $0.00001, par value, 10,000,000 shares authorized, 8,500,000 shares issued and outstanding   85 
Additional paid in capital   25,383 
Accumulated deficit   (194,530)
      
Total Stockholders’ Equity (Deficit)   (169,062)
      
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)  $60,053 

 

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

 

F-88
 

 

TICKERI, INC.

STATEMENT OF OPERATIONS

FOR THE PERIOD JANUARY 2, 2020 (INCEPTION) THROUGH DECEMBER 31, 2020

 

      
REVENUES  $166,644 
      
COST OF REVENUES   41,282 
      
GROSS PROFIT   125,362 
      
OPERATING EXPENSES     
General and administrative expenses   319,892 
      
Total Operating Expenses   319,892 
      
OPERATING LOSS   (194,530)
      
NON-OPERATING EXPENSE     
Interest expense   - 
      
Total Non-Operating Expense   - 
      
NET LOSS BEFORE PROVISION FOR INCOME TAXES   (194,530)
      
Provision for income taxes   - 
      
NET LOSS  $(194,530)

 

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

 

F-89
 

 

TICKERI, INC.

STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE PERIOD JANUARY 2, 2020 (INCEPTION) THROUGH DECEMBER 31, 2020

 

          Additional               
   Common Stock   Paid-In   Accumulated             
   Shares   Amount   Capital   Deficit   Total         
                             
Balance - January 2, 2020   -   $-   $-   $-   $-      -  
                                  
Founders shares   8,500,000    85    383    -    468      -  
Contribution of equity   -    -    25,000    -    25,000         
Net loss for the period   -    -    -    (194,530)   (194,530)     -
                                  
Balance - December 31, 2020   8,500,000   $85   $25,383   $(194,530)  $(169,062)     1,560,832

 

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

 

F-90
 

 

TICKERI, INC.

STATEMENT OF CASH FLOWS

FOR THE PERIOD JANUARY 2, 2020 (INCEPITON) THROUGH DECEMBER 31, 2020

 

     
CASH FLOW FROM OPERTING ACTIVIITES    
Net loss  $(194,530)
Adjustments to reconcile net loss to net cash used in operating activities     
      
Shares issued to founders for services   468 
      
Changes in assets and liabilities     
Accounts receivable   (16,320)
Prepaid expenses and other assets   (214)
Accounts payable and accrued expenses   36,992 
Total adjustments   20,926 
      
Net cash (used in) operating activities   (173,604)
      
CASH FLOWS FROM FINANCING ACTIVITES     
Contribution of equity from shareholders   25,000 
Proceeds from notes payable   192,123 
Net cash (used in) provided by financing activities   217,123 
      
NET INCREASE IN CASH   43,519 
      
CASH - BEGINNING OF PERIOD   - 
      
CASH - END OF PERIOD  $43,519 
      
CASH PAID DURING THE PERIOD FOR:     
Interest expense  $- 
      
Income taxes  $- 

 

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

 

F-91
 

 

TICKERI, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2020

 

NOTE 1: NATURE OF OPERATIONS

 

Tickeri, Inc. (the “Company” or “Tickeri”) is a leading ticketing, live events and box office SaaS platform featuring Latin events and artists throughout the United States, Latin America, and the Caribbean corridor.

 

The Company, a Delaware corporation was formed on January 2, 2020.

 

On June 3, 2021 HUMBL, Inc. (“HUMBL”) acquired the Company in a debt and stock transaction totaling $20,000,000 following which Tickeri became a subsidiary of HUMBL The purchase price for the stock purchase was $20,000,000 of which HUMBL must pay $10,000,000 in their common stock and $10,000,000 is paid through two promissory notes. The shares had a deemed value equal to the volume weighted average price per share of HUMBL common stock on the OTC Markets for the ten consecutive trading days ending with the complete trading day ending two trading days prior to the closing. HUMBL issued the two shareholders of Tickeri, Juan Gonzalez and Javier Gonzalez, 4,672,897 shares of our common stock each. HUMBL also issued to each of Juan and Javier Gonzalez a secured promissory note in the face amount of $5,000,000. The promissory notes are due and payable on or before December 31, 2022, bear interest at the rate of 5% per annum and are secured by the equity interests of Tickeri. In the event of an uncured default by HUMBL under the promissory note, Juan and Javier Gonzalez have the right to recover the ownership of Tickeri and re-commence the business and operations of Tickeri free and clear of any claims or encumbrances by HUMBL. Following the closing, Juan Gonzalez and Javier Gonzalez, entered into employment agreements having a term of 18 months, appointing them CEO of Tickeri and CTO of HUMBL, respectively.

 

Going Concern

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company has suffered losses and has not generated significant revenues as of yet as they are still in the very early stages of their business.

 

The financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis and ultimately to attain profitability. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Impact of COVID-19

 

The recent unprecedented events related to COVID-19, the disease caused by the novel coronavirus (SARS-CoV-2), have had significant health, economic, and market impacts and may have short-term and long-term adverse effects on our business that we cannot predict as the global pandemic continues to evolve. The extent and effectiveness of responses by governments and other organizations also cannot be predicted.

 

Our ability to maintain existing operations has been affected during the COVID-19 pandemic. Going forward any possible adverse effects on the business are uncertain given any possible limitations on how we conduct business with our customers and vendors.

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”).

 

F-92
 

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. These estimates include, but are not limited to, management’s estimate of provisions required for permanent and temporary differences related to income taxes, and liabilities to accrue. Actual results could differ from those estimates.

 

Cash

 

Cash consists of cash and demand deposits with an original maturity of three months or less. The Company holds no cash equivalents as of December 31, 2020.

 

Fixed Assets and Long-Lived Assets

 

ASC 360 requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company has adopted Accounting Standard Update (“ASU”) 2017-04 Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment.

 

The Company reviews recoverability of long-lived assets on a periodic basis whenever events and changes in circumstances have occurred which may indicate a possible impairment. The assessment for potential impairment is based primarily on the Company’s ability to recover the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. If such assets are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets.

 

Fixed assets and intangible assets with finite useful lives are stated at cost less accumulated amortization and impairment. Intangible assets with infinite lives, such as digital currency are valued at costs and reviewed for indicators of impairment at least annually, or more depending on circumstances.

 

The Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following:

 

1. Significant underperformance relative to expected historical or projected future operating results;

 

2. Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and

 

3. Significant negative industry or economic trends.

 

When the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows.

 

Subsequent Events

 

Subsequent events were evaluated through the date the financial statements were filed.

 

F-93
 

 

Revenue Recognition

 

The Company accounts for a contract with a customer that is within the scope of this Topic only when the five steps of revenue recognition under ASC 606 are met.

 

The five core principles will be evaluated for each service provided by the Company and is further supported by applicable guidance in ASC 606 to support the Company’s recognition of revenue.

 

Ticketing Revenues

 

The Company recognizes revenues from their ticketing services primarily from service fees and payment processing fees charged at the time a ticket for an event is sold. We also derive revenues from providing certain creators with account management services and customer support. Our customers are primarily event creators who use our platform to sell tickets to attendees. Revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration we receive in exchange for those goods or services. We allocate the transaction price by estimating a standalone selling price for each performance obligation using a cost plus a margin approach. For service fees and payment processing fees, revenue is recognized when the ticket is sold. For account management services and customer support, revenue is recognized over the period from the date of the sale of the ticket to the date of the event.

 

We evaluate whether it is appropriate to recognize revenue on a gross or net basis based upon our evaluation of whether we obtain control of the specified goods or services by considering if we are primarily responsible for fulfillment of the promise, have inventory risk, and have the latitude in establishing pricing and selecting suppliers, among other factors.

 

We determined the event creator is the party responsible for fulfilling the promise to the attendee, as the creator is responsible for providing the event for which a ticket is sold, determines the price of the ticket and is responsible for providing a refund if the event is canceled. Our service is to provide a platform for the creator and event attendee to transact and our performance obligation is to facilitate and process that transaction and issue the ticket. The amount that we earn for our services is fixed. For the payment processing service, we determined that we are the principal in providing the service as we responsible for fulfilling the promise to process the payment and we have discretion and latitude in establishing the price of our service. Based on our assessment, we record revenue on a net basis related to our ticketing service and on a gross basis related to our payment processing service. As a result, costs incurred for processing the transactions are included in cost of net revenues in the consolidated statements of operations.

 

Revenue is presented net of indirect taxes, value-added taxes, creator royalties and reserves for customer refunds, payment chargebacks and estimated uncollectible amounts. If an event is cancelled by a creator, then any obligations to provide refunds to event attendees are the responsibility of that creator.

 

If a creator is unwilling or unable to fulfill their refund obligations, we may, at our discretion, provide attendee refunds. Revenue is also presented net of the amortization of creator signing fees when applicable. The benefit we receive by securing exclusive ticketing and payment processing rights with certain creators from creator signing fees is inseparable from the customer relationship with the creator and accordingly these fees are recorded as a reduction of revenue in the consolidated statements of operations.

 

Accounts Receivable and Concentration of Credit Risk

 

An allowance is based on management’s estimate of the overall collectability of accounts receivable, considering historical losses. Based on these same factors, individual accounts are charged off against the allowance when management determines those individual accounts are uncollectible. Credit extended to customers is generally uncollateralized. Past-due status is based on contractual terms. The Company does not charge interest on accounts receivable. As of December 31, 2020, there was no allowance necessary.

 

F-94
 

 

Income Taxes

 

Income taxes are accounted under the asset and liability method. The current charge for income tax expense is calculated in accordance with the relevant tax regulations applicable to the entities. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

 

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Differences between statutory tax rates and effective tax rates relate to permanent tax differences.

 

Uncertain Tax Positions

 

The Company follows ASC 740-10 Accounting for Uncertainty in Income Taxes. This requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. Management evaluates their tax positions on an annual basis.

 

The Company files income tax returns in the U.S. federal tax jurisdiction and various state tax jurisdictions. The federal and state income tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally for three years after they were filed.

 

Vacation and Paid-Time-Off

 

The Company follows ASC 710-10 Compensation – General. The Company records liabilities and expense when obligations are attributable to services already rendered, will be paid even if an employee is terminated, payment is probable, and the amount can be estimated.

 

Share-Based Compensation

 

The Company follows ASC 718 Compensation – Stock Compensation and has adopted ASU 2017-09 Compensation – Stock Compensation (Topic 718) Scope of Modification Accounting. The Company calculates compensation expense for all awards granted, but not yet vested, based on the grant-date fair values. Share-based compensation expense for all awards granted is based on the grant-date fair values. The Company policy is to recognize these compensation costs, on a pro rata basis over the requisite service period of each vesting tranche of each award for service-based grants, and as the criteria is achieved for performance-based grants, when such grants are made.

 

The Company adopted ASU 2016-09 Improvements to Employee Share-Based Payment Accounting. Cash paid when shares are directly withheld for tax withholding purposes will be classified as a financing activity in the statement of cash flows.

 

Fair Value of Financial Instruments

 

ASC 825 Financial Instruments requires the Company to disclose estimated fair values for its financial instruments. Fair value estimates, methods, and assumptions are set forth below for the Company’s financial instruments: The carrying amount of cash, accounts receivable, prepaid and other current assets, accounts payable and accrued liabilities, and amounts payable to related parties, approximate fair value because of the short-term maturity of those instruments. The Company does not utilize derivative instruments.

 

Leases

 

The Company follows ASC 842 Leases in accounting for leased properties, when they exceed a one-year term.

 

F-95
 

 

Fair Value Measurements

 

ASC 820 Fair Value Measurements defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosure about fair value measurements. ASC 820 classifies these inputs into the following hierarchy:

 

Level 1 inputs: Quoted prices for identical instruments in active markets.

 

Level 2 inputs: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

 

Level 3 inputs: Instruments with primarily unobservable value drivers.

 

Related-Party Transactions

 

Parties are considered to be related to the Company if the parties directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal stockholders of the Company, its management, members of the immediate families of principal stockholders of the Company and its management and other parties with which the Company may deal where one-party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all material related-party transactions. All transactions shall be recorded at fair value of the goods or services exchanged.

 

NOTE 3: REVENUE

 

All revenue for the period January 2, 2020 through December 31, 2020 was for ticketing services.

 

There were no significant contract asset or contract liability balances for all periods presented. The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

 

Collections of the amounts billed are typically paid by the customers within 30 to 60 days.

 

NOTE 4: NOTES PAYABLE

 

The Company entered into notes payable as follows as of December 31, 2020:

 

   December
31, 2020
 
PPP SBA loan - Tickeri  $42,123 
EIDL loan - Tickeri   150,000 
      
Total   192,123 
Less: Current portion   (192,123)
Long-term debt  $- 

 

There was no interest recorded on the loans as they did not start commencing interest.

 

F-96
 

 

NOTE 5: STOCKHOLDERS’ EQUITY (DEFICIT)

 

The Company has 10,000,000 shares of common stock, par value $0.00001, authorized. The Company has 8,500,000 shares issued and outstanding as of December 31, 2020. The shares of stock were issued at a value of $468. In addition, in February 2020, the shareholders contributed $25,000 for working capital purposes.

 

NOTE 6: SUBSEQUENT EVENTS

 

On June 3, 2021 HUMBL, Inc. (“HUMBL”) acquired the Company in a debt and stock transaction totaling $20,000,000 following which Tickeri became a subsidiary of HUMBL The purchase price for the stock purchase was $20,000,000 of which HUMBL must pay $10,000,000 in their common stock and $10,000,000 is paid through two promissory notes. The shares had a deemed value equal to the volume weighted average price per share of HUMBL common stock on the OTC Markets for the ten consecutive trading days ending with the complete trading day ending two trading days prior to the closing. HUMBL issued the two shareholders of Tickeri, Juan Gonzalez and Javier Gonzalez, 4,672,897 shares of our common stock each. HUMBL also issued to each of Juan and Javier Gonzalez a secured promissory note in the face amount of $5,000,000. The promissory notes are due and payable on or before December 31, 2022, bear interest at the rate of 5% per annum and are secured by the equity interests of Tickeri. In the event of an uncured default by HUMBL under the promissory note, Juan and Javier Gonzalez have the right to recover the ownership of Tickeri and re-commence the business and operations of Tickeri free and clear of any claims or encumbrances by HUMBL. Following the closing, Juan Gonzalez and Javier Gonzalez, entered into employment agreements having a term of 18 months, appointing them CEO of Tickeri and CTO of HUMBL, respectively.

 

F-97
 

 

MONSTER CREATIVE, LLC

BALANCE SHEETS

JUNE 30, 2021 (UNAUDITED) AND DECEMBER 31, 2020

 

   JUNE 30,   DECEMBER 31, 
   2021   2020 
   (UNAUDITED)     
ASSETS        
Current Assets:          
Cash  $3,017   $1,169,619 
Accounts receivable, net   109,113    196,683 
Prepaid expenses and other current assets   -    50,445 
           
Total Current Assets   112,130    1,416,747 
           
           
TOTAL ASSETS  $112,130   $1,416,747 
           
LIABILITIES AND MEMBERS’ EQUITY (DEFICIT)          
           
LIABILITIES          
Current Liabilities:          
Accounts payable and accrued expenses  $98,754   $8,629 
Current portion of notes payable   66,117    66,117 
Current portion of notes payable - related parties   486,250    979,012 
           
Total Current Liabilities   651,121    1,053,758 
           
Total Liabilities   651,121    1,053,758 
           
MEMBERS’ EQUITY (DEFICIT)          
Members’ equity (deficit)   (538,991)   362,989 
           
Total Members’ Equity (Deficit)   (538,991)   362,989 
           
TOTAL LIABILITIES AND MEMBERS’ EQUITY (DEFICIT)  $112,130   $1,416,747 

 

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

 

F-98
 

 

MONSTER CREATIVE, LLC
STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

 

         
   JUNE 30,   JUNE 30, 
   2021   2020 
         
REVENUES  $362,559   $1,177,325 
           
COST OF REVENUES   610,626    604,673 
           
GROSS PROFIT (LOSS)   (248,067)   572,652 
           
OPERATING EXPENSES          
General and administrative expenses   517,047    162,393 
           
Total Operating Expenses   517,047    162,393 
           
OPERATING (LOSS) INCOME   (765,114)   410,259 
           
NON-OPERATING EXPENSE          
Interest expense   (18,707)   (29,150)
           
Total Non-Operating Expense   (18,707)   (29,150)
           
NET (LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES   (783,821)   381,109 
           
Provision for income taxes   -    - 
           
NET (LOSS) INCOME  $(783,821)  $381,109 

 

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

 

F-99
 

 

MONSTER CREATIVE, LLC

STATEMENT OF CHANGES IN MEMBERS’ EQUITY (DEFICIT) (UNAUDITED)

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

 

     
   Amount   
       
Balance - December 31, 2019  $344,944 
        
Member distributions   (200,962)  
Net income for the period   381,109  -
        
Balance - June 30, 2020  $525,091  -
        
Balance - December 31, 2020  $362,989 
        
Member distributions   (118,159)  
Net loss for the period   (783,821) -
        
Balance - June 30, 2021  $(538,991) -

 

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

 

F-100
 

 

MONSTER CREATIVE, LLC

STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

 

         
   2021   2020 
CASH FLOW FROM OPERTING ACTIVIITES          
Net income (loss)  $(783,821)  $381,109 
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities          
          
Changes in assets and liabilities          
Accounts receivable   87,570    382,890 
Prepaid expenses and other assets   50,445    - 
Accounts payable and accrued expenses   90,125    7,596 
Total adjustments   228,140    390,486 
           
Net cash (used in) provided by operating activities   (555,681)   771,595 
           
CASH FLOWS FROM INVESTING ACTIVITIES          
Purchase of fixed assets   -    - 
Net cash used in investing activities   -    - 
           
CASH FLOWS FROM FINANCING ACTIVITES          
Member distributions   (118,159)   (200,962)
Proceeds from notes payable   -    66,117 
Proceeds from notes payable - related parties   (492,762)   (179,360)
Net cash (used in) financing activities   (610,921)   (314,205)
           
NET (DECREASE) INCREASE IN CASH   (1,166,602)   457,390 
           
CASH - BEGINNING OF PERIOD   1,169,619    1,231,704 
           
CASH - END OF PERIOD  $3,017   $1,689,094 
           
CASH PAID DURING THE PERIOD FOR:          
Interest expense  $18,707   $29,150 
           
Income taxes  $-   $- 

 

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

 

F-101
 

 

MONSTER CREATIVE, LLC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2021 AND 2020

 

NOTE 1: NATURE OF OPERATIONS

 

Monster Creative, LLC. (the “Company” or “Monster”) is a Hollywood production studio that specializes in producing movie trailers and other related content.

 

The Company, a California limited liability corporation was formed on September 18, 2018.

 

On June 30, 2021, HUMBL, Inc. (“HUMBL”) acquired Monster. Monster was founded by Doug Brandt and Kevin Childress. Monster will collaborate with HUMBL in the production of NFTs and other digital content. The purchase price for all of the membership interests in Monster was paid through the issuance of one convertible note and one non-convertible note to each of Doug Brandt and Kevin Childress in the aggregate principal amount of $8,000,000. The convertible notes were issued to Doug Brandt (through an entity owned by him) and Kevin Childress in the aggregate principal amount of $7,500,000. The notes convert at the holder’s election at $1.20 per share of HUMBL, bear interest at 5% per annum and are due in 18 months from issuance. HUMBL issued non-convertible notes to Doug Brandt and Kevin Childress in the aggregate amount of $500,000. These notes bear interest at the rate of 5% per annum and are due on April 1, 2022. Doug Brandt and Kevin Childress each entered into employment agreements with Monster having a term of three years. Doug Brandt was appointed as the CEO of Monster and Kevin Childress was appointed as its President and Creative Director.

 

Going Concern

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company has suffered losses and has not generated significant revenues as of yet as they are still in the very early stages of their business.

 

The financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis and ultimately to attain profitability. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Impact of COVID-19

 

The recent unprecedented events related to COVID-19, the disease caused by the novel coronavirus (SARS-CoV-2), have had significant health, economic, and market impacts and may have short-term and long-term adverse effects on our business that we cannot predict as the global pandemic continues to evolve. The extent and effectiveness of responses by governments and other organizations also cannot be predicted.

 

Our ability to maintain existing operations has been affected during the COVID-19 pandemic. Going forward any possible adverse effects on the business are uncertain given any possible limitations on how we conduct business with our customers and vendors.

 

F-102
 

  

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”).

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. These estimates include, but are not limited to, management’s estimate of provisions required for permanent and temporary differences related to income taxes, and liabilities to accrue. Actual results could differ from those estimates.

 

Cash

 

Cash consists of cash and demand deposits with an original maturity of three months or less. The Company holds no cash equivalents as of June 30, 2021 and December 31, 2020, respectively. The Company maintains cash balances in excess of the FDIC insured limit at a single bank. The Company does not consider this risk to be material.

 

Fixed Assets and Long-Lived Assets

 

ASC 360 requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company has adopted Accounting Standard Update (“ASU”) 2017-04 Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment.

 

The Company reviews recoverability of long-lived assets on a periodic basis whenever events and changes in circumstances have occurred which may indicate a possible impairment. The assessment for potential impairment is based primarily on the Company’s ability to recover the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. If such assets are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets.

 

Fixed assets and intangible assets with finite useful lives are stated at cost less accumulated amortization and impairment. Intangible assets with infinite lives, such as digital currency are valued at costs and reviewed for indicators of impairment at least annually, or more depending on circumstances.

 

The Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following:

 

1. Significant underperformance relative to expected historical or projected future operating results;

 

2. Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and

 

3. Significant negative industry or economic trends.

 

F-103
 

 

 

When the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows.

 

Subsequent Events

 

Subsequent events were evaluated through the date the financial statements were filed.

 

Revenue Recognition

 

The Company accounts for a contract with a customer that is within the scope of this Topic only when the five steps of revenue recognition under ASC 606 are met.

 

The five core principles will be evaluated for each service provided by the Company and is further supported by applicable guidance in ASC 606 to support the Company’s recognition of revenue.

 

Accounts Receivable and Concentration of Credit Risk

 

An allowance is based on management’s estimate of the overall collectability of accounts receivable, considering historical losses. Based on these same factors, individual accounts are charged off against the allowance when management determines those individual accounts are uncollectible. Credit extended to customers is generally uncollateralized. Past-due status is based on contractual terms. The Company does not charge interest on accounts receivable. As of June 30, 2021 and December 31, 2020, there was no allowance necessary.

 

Income Taxes

 

The Company is taxed as a partnership for Federal income tax purposes. Therefore, the Company will record no provision or liability for Federal income tax. Partners are individually taxed on their proportionate share of the Company’s earnings.

 

Vacation and Paid-Time-Off

 

The Company follows ASC 710-10 Compensation – General. The Company records liabilities and expense when obligations are attributable to services already rendered, will be paid even if an employee is terminated, payment is probable, and the amount can be estimated.

 

Share-Based Compensation

 

The Company follows ASC 718 Compensation – Stock Compensation and has adopted ASU 2017-09 Compensation – Stock Compensation (Topic 718) Scope of Modification Accounting. The Company calculates compensation expense for all awards granted, but not yet vested, based on the grant-date fair values. Share-based compensation expense for all awards granted is based on the grant-date fair values. The Company policy is to recognize these compensation costs, on a pro rata basis over the requisite service period of each vesting tranche of each award for service-based grants, and as the criteria is achieved for performance-based grants, when such grants are made.

 

The Company adopted ASU 2016-09 Improvements to Employee Share-Based Payment Accounting. Cash paid when shares are directly withheld for tax withholding purposes will be classified as a financing activity in the statement of cash flows.

 

F-104
 

 

Fair Value of Financial Instruments

 

ASC 825 Financial Instruments requires the Company to disclose estimated fair values for its financial instruments. Fair value estimates, methods, and assumptions are set forth below for the Company’s financial instruments: The carrying amount of cash, accounts receivable, prepaid and other current assets, accounts payable and accrued liabilities, and amounts payable to related parties, approximate fair value because of the short-term maturity of those instruments. The Company does not utilize derivative instruments.

 

Leases

 

The Company follows ASC 842 Leases in accounting for leased properties, when they exceed a one-year term.

 

Fair Value Measurements

 

ASC 820 Fair Value Measurements defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosure about fair value measurements. ASC 820 classifies these inputs into the following hierarchy:

 

Level 1 inputs: Quoted prices for identical instruments in active markets.

 

Level 2 inputs: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

 

Level 3 inputs: Instruments with primarily unobservable value drivers.

 

Related-Party Transactions

 

Parties are considered to be related to the Company if the parties directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal stockholders of the Company, its management, members of the immediate families of principal stockholders of the Company and its management and other parties with which the Company may deal where one-party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all material related-party transactions. All transactions shall be recorded at fair value of the goods or services exchanged.

 

NOTE 3: REVENUE

 

All of the Company’s revenue for the years ended December 31, 2020 and 2019 were generated from video content production.

 

There were no significant contract asset or contract liability balances for all periods presented. The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

 

Collections of the amounts billed are typically paid by the customers within 30 to 60 days.

 

F-105
 

 

NOTE 4: NOTES PAYABLE

 

The Company entered into notes payable as follows as of June 30, 2021 and December 31, 2020:

 

   June 30, 2021   December 31, 2020 
PPP SBA loan  $66,117   $66,117 
           
Total   66,117    66,117 
Less: Current portion   (66,117)   (66,117)
Long-term debt  $-   $- 

 

There was no interest expense for the six months ended June 30, 2021 and 2020 related to this loan.

 

NOTE 5: NOTES PAYABLE – RELATED PARTIES

 

The Company entered into notes payable as follows as of June 30, 2021 and December 31, 2020:

 

   June 30, 2021   December 31, 2020 
Officer  $-   $399,512 
Childress   215,000    380,500 
Brandt   271,250    199,000 
           
Total   486,250    979,012 
Less: Current portion   (486,250)   (979,012)
Long-term debt  $-   $- 

 

Interest expense for the six months ended June 30, 2021 and 2020 was $18,707 and $29,150 respectively. Accrued interest at June 30, 2021 was $0.

 

NOTE 6: RELATED-PARTY TRANSACTIONS

 

An officer of the Company from time to time has funded operations at various points in unsecured advances. These advances as well as advances with relatives of the officers accrue interest at 5% interest per annum. All interest is paid through the six months ended June 30, 2021 and 2020. There are no other related party transactions in these years.

 

NOTE 7: ACQUISITION

 

On June 30, 2021, HUMBL, Inc. (“HUMBL”) acquired Monster. Monster was founded by Doug Brandt and Kevin Childress. Monster will collaborate with HUMBL in the production of NFTs and other digital content. The purchase price for all of the membership interests in Monster was paid through the issuance of one convertible note and one non-convertible note to each of Doug Brandt and Kevin Childress in the aggregate principal amount of $8,000,000. The convertible notes were issued to Doug Brandt (through an entity owned by him) and Kevin Childress in the aggregate principal amount of $7,500,000. The notes convert at the holder’s election at $1.20 per share of HUMBL, bear interest at 5% per annum and are due in 18 months from issuance. HUMBL issued non-convertible notes to Doug Brandt and Kevin Childress in the aggregate amount of $500,000. These notes bear interest at the rate of 5% per annum and are due on April 1, 2022. Doug Brandt and Kevin Childress each entered into employment agreements with Monster having a term of three years. Doug Brandt was appointed as the CEO of Monster and Kevin Childress was appointed as its President and Creative Director.

 

F-106
 

 

Report of Independent Registered Public Accounting Firm

 

To the shareholders and the board of directors of Monster Creative, LLC

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheets of Monster Creative, LLC as of December 31, 2020 and 2019, the related statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.

 

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company’s minimal net income raises substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

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

 

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

 

/S/ BF Borgers CPA PC

BF Borgers CPA PC

 

We have served as the Company’s auditor since 2021

Lakewood, CO

November 10, 2021

 

F-107
 

 

MONSTER CREATIVE, LLC

BALANCE SHEETS

DECEMBER 31, 2020 AND 2019

 

   DECEMBER 31,   DECEMBER 31, 
   2020   2019 
ASSETS          
           
Current Assets:          
Cash  $1,169,619   $1,231,704 
Accounts receivable, net   196,683    493,890 
Prepaid expenses and other current assets   50,445    72,645 
           
Total Current Assets   1,416,747    1,798,239 
           
TOTAL ASSETS  $1,416,747   $1,798,239 
           
LIABILITIES AND MEMBERS’ EQUITY          
           
LIABILITIES          
Current Liabilities:          
Accounts payable and accrued expenses  $8,629   $26,782 
Current portion of notes payable   66,117    - 
Current portion of notes payable - related parties   979,012    1,426,513 
           
Total Current Liabilities   1,053,758    1,453,295 
           
Total Liabilities   1,053,758    1,453,295 
           
MEMBERS’ EQUITY          
Members’ equity   362,989    344,944 
           
Total Members’ Equity   362,989    344,944 
           
TOTAL LIABILITIES AND MEMBERS’ EQUITY  $1,416,747   $1,798,239 

 

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

 

F-108
 

 

MONSTER CREATIVE, LLC

STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

 

         
   DECEMBER 31,   DECEMBER 31, 
   2020   2019 
         
REVENUES  $2,209,072   $1,964,432 
           
COST OF REVENUES   1,324,685    957,320 
           
GROSS PROFIT   884,387    1,007,112 
           
OPERATING EXPENSES          
General and administrative expenses   689,624    518,128 
           
Total Operating Expenses   689,624    518,128 
           
OPERATING INCOME   (49,977    488,984 
           
NON-OPERATING EXPENSE          
Interest expense   (49,977)   (60,128)
           
Total Non-Operating Expense   (49,977)   (60,128)
           
NET INCOME BEFORE PROVISION FOR INCOME TAXES   144,786    428,856 
           
Provision for income taxes   -    - 
           
NET INCOME  $144,786   $428,856 

 

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

 

F-109
 

 

MONSTER CREATIVE, LLC

STATEMENT OF CHANGES IN MEMBERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

 

   Amount 
       
Balance - December 31, 2018  $(83,912)
        
Member distributions   -  -
Net income for the period   428,856  -
       -
Balance - December 31, 2019   344,944  -
        
Member distributions   (126,741) -
Net income for the period   144,786  (713,263)
        
Balance - December 31, 2020  $362,989 

 

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

 

F-110
 

 

MONSTER CREATIVE, LLC

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

 

   2020   2019 
CASH FLOW FROM OPERTING ACTIVIITES          
Net income  $144,786   $428,856 
Adjustments to reconcile net income to net cash provided by (used in) operating activities          
           
Changes in assets and liabilities          
Accounts receivable   297,207    (493,890)
Prepaid expenses and other assets   22,200    - 
Accounts payable and accrued expenses   (18,153)   26,682 
Total adjustments   301,254    (467,208)
           
Net cash provided by (used in) operating activities   446,040    (38,352)
           
CASH FLOWS FROM FINANCING ACTIVITES          
Member distributions   (126,741)   - 
Proceeds from notes payable   66,117    - 
Proceeds from notes payable - related parties   (447,501)   1,270,056 
Net cash (used in) provided by financing activities   (508,125)   1,270,056 
           
NET (DECREASE) INCREASE IN CASH   (62,085)   1,231,704 
           
CASH - BEGINNING OF PERIOD   1,231,704    - 
           
CASH - END OF PERIOD  $1,169,619   $1,231,704 
           
CASH PAID DURING THE PERIOD FOR:          
Interest expense  $49,977   $60,128 
           
Income taxes  $-   $- 

 

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

 

F-111
 

 

MONSTER CREATIVE, LLC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2020 AND 2019

 

NOTE 1: NATURE OF OPERATIONS

 

Monster Creative, LLC. (the “Company” or “Monster”) is a Hollywood production studio that specializes in producing movie trailers and other related content.

 

The Company, a California limited liability corporation was formed on September 18, 2018.

 

On June 30, 2021, HUMBL, Inc. (“HUMBL”) acquired Monster. Monster was founded by Doug Brandt and Kevin Childress. Monster will collaborate with HUMBL in the production of NFTs and other digital content. The purchase price for all of the membership interests in Monster was paid through the issuance of one convertible note and one non-convertible note to each of Doug Brandt and Kevin Childress in the aggregate principal amount of $8,000,000. The convertible notes were issued to Doug Brandt (through an entity owned by him) and Kevin Childress in the aggregate principal amount of $7,500,000. The notes convert at the holder’s election at $1.20 per share of HUMBL, bear interest at 5% per annum and are due in 18 months from issuance. HUMBL issued non-convertible notes to Doug Brandt and Kevin Childress in the aggregate amount of $500,000. These notes bear interest at the rate of 5% per annum and are due on April 1, 2022. Doug Brandt and Kevin Childress each entered into employment agreements with Monster having a term of three years. Doug Brandt was appointed as the CEO of Monster and Kevin Childress was appointed as its President and Creative Director.

 

Going Concern

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company has suffered losses and has not generated significant revenues as of yet as they are still in the very early stages of their business.

 

The financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis and ultimately to attain profitability. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Impact of COVID-19

 

The recent unprecedented events related to COVID-19, the disease caused by the novel coronavirus (SARS-CoV-2), have had significant health, economic, and market impacts and may have short-term and long-term adverse effects on our business that we cannot predict as the global pandemic continues to evolve. The extent and effectiveness of responses by governments and other organizations also cannot be predicted.

 

Our ability to maintain existing operations has been affected during the COVID-19 pandemic. Going forward any possible adverse effects on the business are uncertain given any possible limitations on how we conduct business with our customers and vendors.

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”).

 

F-112
 

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. These estimates include, but are not limited to, management’s estimate of provisions required for permanent and temporary differences related to income taxes, and liabilities to accrue. Actual results could differ from those estimates.

 

Cash

 

Cash consists of cash and demand deposits with an original maturity of three months or less. The Company holds no cash equivalents as of December 31, 2020 and 2019, respectively. The Company maintains cash balances in excess of the FDIC insured limit at a single bank. The Company does not consider this risk to be material.

 

Fixed Assets and Long-Lived Assets

 

ASC 360 requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company has adopted Accounting Standard Update (“ASU”) 2017-04 Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment.

 

The Company reviews recoverability of long-lived assets on a periodic basis whenever events and changes in circumstances have occurred which may indicate a possible impairment. The assessment for potential impairment is based primarily on the Company’s ability to recover the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. If such assets are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets.

 

Fixed assets and intangible assets with finite useful lives are stated at cost less accumulated amortization and impairment. Intangible assets with infinite lives, such as digital currency are valued at costs and reviewed for indicators of impairment at least annually, or more depending on circumstances.

 

The Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following:

 

  1. Significant underperformance relative to expected historical or projected future operating results;
     
  2. Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and
     
  3. Significant negative industry or economic trends.

 

When the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows.

 

Subsequent Events

 

Subsequent events were evaluated through the date the financial statements were filed.

 

F-113
 

 

Revenue Recognition

 

The Company accounts for a contract with a customer that is within the scope of this Topic only when the five steps of revenue recognition under ASC 606 are met.

 

The five core principles will be evaluated for each service provided by the Company and is further supported by applicable guidance in ASC 606 to support the Company’s recognition of revenue.

 

Accounts Receivable and Concentration of Credit Risk

 

An allowance is based on management’s estimate of the overall collectability of accounts receivable, considering historical losses. Based on these same factors, individual accounts are charged off against the allowance when management determines those individual accounts are uncollectible. Credit extended to customers is generally uncollateralized. Past-due status is based on contractual terms. The Company does not charge interest on accounts receivable. As of December 31, 2020 and 2019, there was no allowance necessary.

 

Income Taxes

 

The Company is taxed as a partnership for Federal income tax purposes. Therefore, the Company will record no provision or liability for Federal income tax. Partners are individually taxed on their proportionate share of the Company’s earnings.

 

Vacation and Paid-Time-Off

 

The Company follows ASC 710-10 Compensation – General. The Company records liabilities and expense when obligations are attributable to services already rendered, will be paid even if an employee is terminated, payment is probable, and the amount can be estimated.

 

Share-Based Compensation

 

The Company follows ASC 718 Compensation – Stock Compensation and has adopted ASU 2017-09 Compensation – Stock Compensation (Topic 718) Scope of Modification Accounting. The Company calculates compensation expense for all awards granted, but not yet vested, based on the grant-date fair values. Share-based compensation expense for all awards granted is based on the grant-date fair values. The Company policy is to recognize these compensation costs, on a pro rata basis over the requisite service period of each vesting tranche of each award for service-based grants, and as the criteria is achieved for performance-based grants, when such grants are made.

 

The Company adopted ASU 2016-09 Improvements to Employee Share-Based Payment Accounting. Cash paid when shares are directly withheld for tax withholding purposes will be classified as a financing activity in the statement of cash flows.

 

Fair Value of Financial Instruments

 

ASC 825 Financial Instruments requires the Company to disclose estimated fair values for its financial instruments. Fair value estimates, methods, and assumptions are set forth below for the Company’s financial instruments: The carrying amount of cash, accounts receivable, prepaid and other current assets, accounts payable and accrued liabilities, and amounts payable to related parties, approximate fair value because of the short-term maturity of those instruments. The Company does not utilize derivative instruments.

 

Leases

 

The Company follows ASC 842 Leases in accounting for leased properties, when they exceed a one-year term.

 

F-114
 

 

Fair Value Measurements

 

ASC 820 Fair Value Measurements defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosure about fair value measurements. ASC 820 classifies these inputs into the following hierarchy:

 

Level 1 inputs: Quoted prices for identical instruments in active markets.

 

Level 2 inputs: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

 

Level 3 inputs: Instruments with primarily unobservable value drivers.

 

Related-Party Transactions

 

Parties are considered to be related to the Company if the parties directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal stockholders of the Company, its management, members of the immediate families of principal stockholders of the Company and its management and other parties with which the Company may deal where one-party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all material related-party transactions. All transactions shall be recorded at fair value of the goods or services exchanged.

 

NOTE 3: REVENUE

 

All of the Company’s revenue for the years ended December 31, 2020 and 2019 were generated from video content production.

 

There were no significant contract asset or contract liability balances for all periods presented. The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

 

Collections of the amounts billed are typically paid by the customers within 30 to 60 days.

 

NOTE 4: NOTES PAYABLE

 

The Company entered into notes payable as follows as of December 31, 2020 and 2019:

 

  

December 31, 2020

  

December 31, 2019

 
PPP SBA loan  $66,117   $        - 
           
Total   66,117    - 
Less: Current portion   (66,117)   -
Long-term debt  $-   $- 

 

There was no interest expense for the years ended December 31, 2020 and 2019 related to this loan.

 

F-115
 

 

NOTE 5: NOTES PAYABLE – RELATED PARTIES

 

The Company entered into notes payable as follows as of December 31, 2020 and 2019:

 

  

December 31, 2020

  

December 31, 2019

 
Officer  $399,512   $860,513 
Childress   380,500    373,000 
Brandt   199,000    193,000 
           
Total   979,012    1,426,513 
Less: Current portion   (979,012)   (1,426,513)
Long-term debt  $-   $- 

 

Interest expense for the years ended December 31, 2020 and 2019 was $49,977 and $60,128, respectively. Accrued interest at December 31, 2020 was $0.

 

NOTE 6: RELATED-PARTY TRANSACTIONS

 

An officer of the Company from time to time has funded operations at various points in unsecured advances. These advances as well as advances with relatives of the officers accrue interest at 5% interest per annum. All interest is paid through the years ended December 31, 2020 and 2019. There are no other related party transactions in these years.

 

NOTE 7: SUBSEQUENT EVENTS

 

On June 30, 2021, HUMBL, Inc. (“HUMBL”) acquired Monster. Monster was founded by Doug Brandt and Kevin Childress. Monster will collaborate with HUMBL in the production of NFTs and other digital content. The purchase price for all of the membership interests in Monster was paid through the issuance of one convertible note and one non-convertible note to each of Doug Brandt and Kevin Childress in the aggregate principal amount of $8,000,000. The convertible notes were issued to Doug Brandt (through an entity owned by him) and Kevin Childress in the aggregate principal amount of $7,500,000. The notes convert at the holder’s election at $1.20 per share of HUMBL, bear interest at 5% per annum and are due in 18 months from issuance. HUMBL issued non-convertible notes to Doug Brandt and Kevin Childress in the aggregate amount of $500,000. These notes bear interest at the rate of 5% per annum and are due on April 1, 2022. Doug Brandt and Kevin Childress each entered into employment agreements with Monster having a term of three years. Doug Brandt was appointed as the CEO of Monster and Kevin Childress was appointed as its President and Creative Director.

 

F-116
 

 

OUTSIDE BACK COVER OF PROSPECTUS

 

We have not authorized any dealer, salesperson or any other person to give any information or to represent anything other than those contained in this prospectus in connection with the offer contained herein, and, if given or made, you should not rely upon such information or representations as having been authorized by HUMBL, Inc. This prospectus does not constitute an offer of any securities other than those to which it relates or an offer to sell, or a solicitation of an offer to buy, to those to which it relates in any state to any person to whom it is not lawful to make such offer in such state. The delivery of this prospectus at any time does not imply that the information herein is correct as of any time after the date of this prospectus.

 

DEALER PROSPECTUS DELIVERY REQUIREMENT

 

Until _______________, 2022 [90 days from the date of this prospectus], all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

 

HUMBL, INC.

 

_______ Shares

 

Common Stock

 

PROSPECTUS

 

_______ ___, 2022

 

 
 

 

PART II

 

INFORMATION NOT REQUIRED IN PROSPECTUS

 

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

 

The following table sets forth the costs and expenses payable by us in connection with the issuance and distribution of the securities being registered. None of the following expenses are payable by the Selling Stockholders. All of the amounts shown are estimates, except for the SEC registration fee.

 

SEC registration fee   $ 3,766.59  
Legal fees and expenses     85,000.00  
Accounting fees and expenses     25,000.00  
Miscellaneous     2,500.00  
TOTAL   $ 116,266.59  

 

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

 

Delaware General Corporation Law (“DGCL”) Section 145 provide us with the power to indemnify any of our directors, officers, employees and agents. The person entitled to indemnification must have conducted himself in good faith, and must reasonably believe that his conduct was in, or not opposed to, our best interests. In a criminal action, the director, officer, employee or agent must not have had reasonable cause to believe that his conduct was unlawful.

 

Under DGCL section 145, advances for expenses may be made by agreement if the director or officer affirms in writing that he has met the standards for indemnification and will personally repay the expenses if it is determined that such officer or director did not meet those standards.

 

Our bylaws include an indemnification provision under which we have the power to indemnify our directors, officers, former directors and officers, employees and other agents (including heirs and personal representatives) against all costs, charges and expenses actually and reasonably incurred, including an amount paid to settle an action or satisfy a judgment to which a director or officer is made a party by reason of being or having been a director or officer of the Company. Our bylaws further provide for the advancement of all expenses incurred in connection with a proceeding upon receipt of an undertaking by or on behalf of such person to repay such amounts if it is determined that the party is not entitled to be indemnified under our bylaws. No advance will be made by the Company to a party if it is determined that the party acting in bad faith. These indemnification rights are contractual, and as such will continue as to a person who has ceased to be a director, officer, employee or other agent, and will inure to the benefit of the heirs, executors and administrators of such a person.

 

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

 

Our Corporate Bylaws at Article IX, provide that the Corporation has accepted a provision indemnifying to the full extent permitted by the law, thereby eliminating or limiting the personal liability of directors, officers, employees or corporate agents for damages for breach of fiduciary duty as a director or officer, but such provision must not eliminate or limit the liability of a director or officer for (a) acts or omissions involving willful misconduct, gross negligence, fraud, or knowing violation of law; or (b) the payments of distributions in violation of Delaware General Corporation Law.

 

INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF 1933 MAY BE PERMITTED TO OUR DIRECTORS, OFFICERS AND CONTROLLING PERSONS PURSUANT TO THE FORGOING PROVISIONS OR OTHERWISE, WE HAVE BEEN ADVISED THAT, IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION, SUCH INDEMNIFICATION IS AGAINST PUBLIC POLICY AS EXPRESSED IN THAT ACT AND IS, THEREFORE, UNENFORCEABLE.

 

II-1
 

 

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

 

Since December 31, 2018, we have issued the following unregistered securities:

 

Common Stock and Note Issuances

 

On December 23, 2020, we issued two convertible notes, one to Kevin Levine and the other to Judith Levine, each in the principal amount of $112,500 convertible into shares of our common stock at $0.60 per share.

 

On April 14, 2021, we issued a convertible note to Brighton Capital Partners, LLC in the amount of $3,300,000. The note is convertible into shares of our common stock at $3.15 per share.

 

On May 13, 2021, we issued a convertible note to Next Generation Wealth Management LLC in the amount of $382,500. The note is convertible into shares of our common stock at $1.00 per share. On June 24, 2021, the note was split into two separate notes and assigned to The Strider Lir Trust and Scottish Isles Investing, LLC.

 

On May 13, 2021, we issued a convertible note to 9G Investments, LLC (f/k/a Maize and Gray, LLC) in the amount of $402,750. The note is convertible into shares of our common stock at $1.00 per share.

 

On May 19, 2021, we issued a convertible note to KWP 50, LLC in the amount of $497,250.00. The note is convertible into shares of our common stock at $1.00 per share.

 

On May 19, 2021, we issued a convertible note to North Falls Investments, L.P. in the amount of $153,000. The note is convertible into shares of our common stock at $1.00 per share.

 

On May 19, 2021, we issued a convertible note to CMP76, LLC in the amount of $76,500. The note is convertible into shares of our common stock at $1.00 per share.

 

On June 21, 2021, we issued a convertible note to Infinity Blocks Investments, LLC in the amount of $382,500. The note is convertible into shares of our common stock at $1.00 per share.

 

On June 21, 2021, we issued a convertible note to Murtaugh Group LLC in the amount of $382,500. The note is convertible into shares of our common stock at $1.00 per share.

 

On August 30, 2021, we issued a convertible note to Hahanakai, LLC in the amount of $153,000. The note is convertible into shares of our common stock at $0.90 per share.

 

On November 12, 2021, we issued a convertible note to Joy Corbin in the amount of $306,000. The note is convertible into share of common stock at $0.60 per share.

 

On November 11, 2021, we issued Charger Corporation 20,000,000 shares of common stock in connection with the exercise of a warrant.

 

On January 21, 2022, we issued Forwardly, Inc. 10,000,000 shares of common stock in connection with the exercise of a warrant.

 

On February 22, 2022, we issued a promissory note to Sartorii, LLC. The note is not convertible into common stock, has a term of 36 months and bears interest at 4%.

 

On March 30, 2022, we issued a promissory note to Sartorii, LLC. The note is not convertible into common stock, has a term of 36 months and bears interest at 4%.

 

Securities Issued in Connection with Acquisitions

 

On February 26, 2021, we issued 552,029 shares of our Series B preferred stock to the former members of HUMBL LLC in connection with the merger of Tesoro Enterprises, Inc. and HUMBL LLC.

 

On June 23, 2021, we issued 4,672,897 shares of common stock to each of Javier Gonzalez and Juan Gonzalez and a $5,000,000 non-convertible note to each of Javier Gonzalez and Juan Gonzalez in connection with the acquisition of Tickeri, Inc.

 

On June 30, 2021, we issued non-convertible notes totaling $500,000 and convertible notes totaling $7,500,000 to Doug Brandt (through an entity owned by him) and Kevin Childress in connection with the acquisition of Monster Creative, LLC. The convertible notes are convertible at $1.20 per share.

 

On February 12, 2022, we issued 13,200,000 shares of common stock and 26,800,000 restricted stock units to BizSecure in connection with our acquisition of their assets.

 

On March 3, 2022, we issued 8,962,306 shares of common stock to Gustavo Moya Ortiz in connection with the acquisition of Ixaya Business SA de CV.

 

Warrants Issued

 

On December 4, 2020 we issued a warrant to purchase 125,000,000 post-split shares of our common stock to Forwardly, Inc., at an exercise price of $0.20 per share that is exercisable for two years from the date of issuance.

 

On December 4, 2020 we issued a warrant to purchase 125,000,000 post-split shares of our common stock to Charger Corporation at an exercise price of $0.20 per share that is exercisable for two years from the date of issuance.

 

On December 23, 2020, we issued a warrant to purchase 12,500,000 post-split shares of our common stock to Tuigamala Group Pty Ltd (“Tuigamala Group”), at an exercise price of $1.00 per share that is exercisable for one year from the date of issuance. On May 10, 2021, the Tuigamala Group assigned the warrant to Archumbl Pty Ltd (“Archumbl”). On May 17, 2021, HUMBL and Archumbl amended the warrant to make the warrant exercisable for two years from the date of issuance.

 

On December 23, 2020, each of Kevin Levine and Judith Levine was issued a warrant to purchase 112,500 shares of our common stock at an exercise price of $1.00 per share that is exercisable for two years.

 

On May 13, 2021, we issued a warrant to purchase 750,000 post-split shares of our common stock to Next Generation Wealth Management LLC, at an exercise price of $1.00 per share that is exercisable for two years from the date of issuance. On June 24, 2021, the warrant was split into two and assigned to The Strider Lir Trust and Scottish Isles Investing, LLC.

 

On May 13, 2021, we issued a warrant to purchase 825,000 post-split shares of our common stock to Maize and Gray, LLC at an exercise price of $1.00 per share that is exercisable for two years from the date of issuance.

 

On May 19, 2021, we issued a warrant to purchase 975,000 post-split shares of our common stock to KWP 50, LLC at an exercise price of $1.00 per share that is exercisable for two years from the date of issuance.

 

II-2
 

 

On May 19, 2021, we issued a warrant to purchase 300,000 post-split shares of our common stock to North Falls Investments, L.P. at an exercise price of $1.00 per share that is exercisable for two years from the date of issuance.

 

On May 19, 2021, we issued a warrant to purchase 150,000 post-split shares of our common stock to CMP76, LLC at an exercise price of $1.00 per share that is exercisable for two years from the date of issuance.

 

On June 21, 2021, we issued a warrant to purchase 750,000 post-split shares of our common stock to Infinity Block Investments, LLC at an exercise price of $1.00 per share that is exercisable for two years from the date of issuance.

 

On June 21, 2021, we issued a warrant to purchase 750,000 post-split shares of our common stock to Murtaugh Group, LLC at an exercise price of $1.00 per share that is exercisable for two years from the date of issuance

 

On August 30, 2021, we issued a warrant to purchase 375,000 post-split shares of our common stock to Hahanakai, LLC at an exercise price of $0.90 per share that is exercisable for two years from the date of issuance.

 

On November 12, 2021, we issued a warrant to purchase 1,000,000 post-split shares of our common stock to Joy Corbin at an exercise price of $0.60 per share that is exercisable for two years from the date of issuance.

 

None of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering. We believe the offers, sales and issuances of the above securities were exempt from registration under the Securities Act (or Regulation D or Regulation S promulgated thereunder) by virtue of Section 4(a)(2) of the Securities Act because the issuance of securities to the recipients did not involve a public offering, or in reliance on Rule 701 because the transactions were pursuant to compensatory benefit plans or contracts relating to compensation as provided under such rule. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions. All recipients had adequate access, through their relationships with us, to information about us. The sales of these securities were made without any general solicitation or advertising.

 

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

 

(a) Exhibits

 

See the Exhibit Index immediately preceding the signature page hereto for a list of exhibits filed as part of this registration statement on Form S-1, which Exhibit Index is incorporated herein by reference.

 

(b) Financial Statement Schedules

 

All financial statement schedules are omitted because the information called for is not required or is shown either in the consolidated financial statements or in the notes thereto.

 

ITEM 17. UNDERTAKINGS.

 

The undersigned registrant hereby undertakes:

 

(1) To file, during any period in which offers, or sales are being made, a post-effective amendment to this registration statement:

 

(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

 

(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;

 

(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

 

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

 

II-3
 

 

(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

 

(5) That, for the purpose of determining any liability under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

 

(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 (§ 230.424 of this chapter);

 

(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant. The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

 

(iii) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

 

(6) (i) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

 

(i) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

(7) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

 

II-4
 

 

EXHIBIT INDEX

 

Exhibit No.   Description
2.1   Plan of Merger and Securities Exchange Agreement, dated as of December 2, 2020, by and between Tesoro Enterprises, Inc. and HUMBL LLC.
     
2.2   Certificate of Merger of Tesoro Enterprises, Inc. and HUMBL LLC dated December 3, 2020
     
3.1   Certificate of Incorporation
     
3.2   Amendment to Certificate of Incorporation
     
3.3   Amendment to Certificate of Incorporation – Series B
     
3.4   Certificate of Withdrawal – Series C
     
3.5   Bylaws of HUMBL, Inc.
     
5.1   Opinion of Culhane Meadows PLLC
     
10.1   Stock Purchase Agreement dated November 4, 2020 among Tesoro Enterprises, Inc., Henry J. Boucher and Brian Foote.
     
10.2   Warrant dated December 4, 2020 issued to Forwardly, Inc.
     
10.3   Warrant dated December 4, 2020 issued to Charger Corporation
     
10.4   Convertible Promissory Note dated December 23, 2020 issued to Kevin Levine
     
10.5   Warrant dated December 23, 2020 issued to Kevin Levine
     
10.6   Convertible Promissory Note dated December 23, 2020 Issued to Judith Levine
     
10.7   Warrant dated December 23, 2020 issued to Judith Levine
     
10.8   Warrant dated December 23, 2020 issued to Tuigamala Pty Ltd and subsequently assigned to Archumbl Pty Ltd
     
10.9   Securities Purchase Agreement dated March 15, 2021 between HUMBL, Inc. and HUMBL CL SpA
     
10.10   Securities Purchase Agreement dated April 14, 2021 between HUMBL, Inc. and Brighton Capital Partners, LLC
     
10.11   Convertible Promissory Note dated April 14, 2021 issued to Brighton Capital Partners, LLC
     
10.12   Equity Financing Agreement dated April 14, 2021 between HUMBL, Inc. and Brighton Capital Partners, LLC
     
10.13   Registration Rights Agreement dated April 14, 2021 between HUMBL, Inc. and Brighton Capital Partners, LLC
     
10.14   Convertible Promissory Note with an original issuance date of May 13, 2021 issued to The Strider Lir Trust
     
10.15   Warrant with an original issuance date of May 13, 2021 issued to The Strider Lir Trust

 

II-5
 

 

10.16   Convertible Promissory Note with an original issuance date of May 13, 2021 issued to Scottish Isles Investing, LLC
     
10.17   Warrant with an original issuance date of May 13, 2021 issued to Scottish Isle Investing, LLC
     
10.18   Convertible Promissory Note dated May 13, 2021 issued to Maize and Gray, LLC
     
10.19   Warrant dated May 13, 2021 issued to Maize and Gray, LLC
     
10.20   Convertible Promissory Note issued on May 17, 2021 to Archura Capital Pty Ltd
     
10.21   Convertible Promissory Note dated May 19, 2021 issued to KWP50, LLC
     
10.22   Warrant dated May 19, 2021 issued to KWP50, LLC
     
10.23   Convertible Promissory Note dated May 19, 2021 issued to North Falls Investments, L.P.
     
10.24   Warrant dated May 19, 2021 issued to North Falls Investments, L.P.
     
10.25   Convertible Promissory Note dated May 19, 2021 issued to CMP76, LLC
     
10.26   Warrant dated May 19, 2021 issued to CMP76, LLC
     
10.27   Agreement and Plan of Merger dated June 3, 2021 among HUMBL, Inc., Tickeri, Inc., Tickeri I Acquisition Corp., Tickeri II Acquisition Corp., Javier Gonzalez and Juan Luis Gonzalez
     
10.28   Secured Promissory Note dated June 3, 2021 issued to Juan Luis Gonzalez
     
10.29   Secured Promissory Note dated June 3, 2021 issued to Javier Gonzalez
     
10.30   Stock Pledge Agreement dated June 3, 2021 among HUMBL, Inc., Javier Gonzalez and Juan Luis Gonzalez.
     
10.31   Employment Agreement dated June 3, 2021 between Tickeri, Inc. and Juan Luis Gonzalez
     
10.32   Employment Agreement dated June 3, 2021 between HUMBL, Inc. and Javier Gonzalez
     
10.33   Convertible Promissory Note dated June 21, 2021 issued to Infinity Block Investments, LLC
     
10.34   Warrant dated June 21, 2021 issued to Infinity Block Investments, LLC
     
10.35   Convertible Promissory Note dated June 21, 2021 issued to Murtaugh Group, LLC
     
10.36   Warrant dated June 21, 2021 issued to Murtaugh Group, LLC
     
10.37   Warrant dated May 21, 2021 issued to Athletes First, LLC
     
10.38   Membership Interest Purchase Agreement dated June 30, 2021 among HUMBL, Inc., Phantom Power, LLC and Kevin Childress
     
10.39   Convertible Promissory Note dated June 30, 2021 issued to Phantom Power, LLC
     
10.40   Convertible Promissory Note dated June 30, 2021 issued to Kevin Childress

 

II-6
 

 

10.41   Promissory Note dated June 30, 2021 issued to Phantom Power, LLC
     
10.42   Promissory Note dated June 30, 2021 issued to Kevin Childress
     
10.43   Employment Agreement dated June 30, 2021 between HUMBL, Inc. and Doug Brandt
     
10.44   Employment Agreement dated June 30, 2021 between HUMBL, Inc. and Kevin Childress
     
10.45   Employment Agreement dated July 13, 2021 between HUMBL, Inc. and Brian Foote
     
10.46   Employment Agreement dated July 13, 2021 between HUMBL, Inc. and Jeffrey Hinshaw
     
10.47   Employment Agreement dated July 13, 2021 between HUMBL, Inc. and Michele Rivera
     
10.48   Employment Agreement dated July 13, 2021 between HUMBL, Inc. and Karen Garcia
     
10.49   Development Services Agreement dated July 29, 2021 between HUMBL, Inc. and Red Rock Development Group, LLC as amended on November 15, 2021
     
10.50   Convertible Promissory Note dated August 30, 2021 issued to Hahanakai, LLC
     
10.51   Warrant dated August 30, 2021 issued to Hahanakai, LLC
     
10.52   Convertible Promissory Note dated November 13, 2021 issued to Joy Corbin
     
10.53   Warrant dated November 13, 2021 issued to Joy Corbin
     
10.54   Warrant dated November 22, 2021 issued to Charger Corporation
     
10.55   Warrant dated November 22, 2021 issued to Konop Enterprises Inc.
     
10.56   Warrant dated November 22, 2021 issued to Adel Wakil
     
10.57   Warrant dated November 22, 2021 issued to Antonio Dutra
     
10.58   Engagement Agreement for Advisory Services dated November 18, 2021 between HUMBL, Inc. and George Sharp
     
10.59   Asset Purchase Agreement dated February 12, 2022 among HUMBL, Inc., Alfonso Arana, Alfonso Rodriguez-Arana and Clement Danish.
     
10.60   Promissory Note dated February 12, 2022 issued to Sartorii, LLC.
     
10.61   Stock Purchase Agreement dated March 3, 2022 between HUMBL, Inc. and Gustavo Moya Ortiz.
     
10.62   Form of Exchange Agreement used in our March 28, 2022 note for common stock exchange transaction.
     
10.63   Promissory Note dated March 30, 2022 issued to Sartorii, LLC.
     
10.64   Amendment to Brighton Capital Partners, LLC Convertible Promissory Note dated June 11, 2022
     
21.1   Subsidiaries of HUMBL, Inc.
     
23.1   Consent of B.F. Borgers CPA PC regarding HUMBL, Inc.
     
23.2   Consent of Culhane Meadows PLLC (included in Exhibit 5.1)
     
24.1   Power of Attorney (included on the signature page to this Registration Statement)
     
107   Filing Fee Table

 

II-7
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Diego, California, on July 20, 2022.

 

  HUMBL, INC.
     
  By: /s/ Brian Foote
  Name: Brian Foote
  Title: Chief Executive Officer

 

POWER OF ATTORNEY

 

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Brian Foote as their true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for them and in their name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to sign any registration statement for the same offering covered by this registration statement that is to be effective on filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and all post-effective amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as they might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

 

Pursuant to the requirements of the Securities Act of 1933, this registration statement on Form S-1 has been signed by the following persons in the capacities and on the dates indicated.

 

Signature   Title   Date
         
/s/ Brian Foote   President, CEO (principal executive officer)   July 20, 2022
Brian Foote   and Director    
         
/s/ Jeffrey Hinshaw   COO, CFO (principal financial officer)  

July 20, 2022

    and Director    
         
/s/ Michele Rivera   Vice President, Global Partnerships   July 20, 2022
    and Director    
         
/s/ William B. Hoagland   Director  

July 20, 2022

         
         
/s/ Peter Schulte   Director  

July 20, 2022

         
         
*/s/ Brian Foote   As Attorney-In-Fact*  

July 20, 2022

Brian Foote        

 

II-8

 

 

 

Exhibit 2.1

 

PLAN OF MERGER AND SECURITIES EXCHANGE

 

BY AND BETWEEN

 

TESORO ENTERPRISES, INC.

 

A DELAWARE CORPORATION

 

AND

 

HUMBL LLC

 

A DELAWARE LIMITED LIABILITY COMPANY

 

Dated as of December 2, 2020

 

 

 

 

THIS PLAN OF MERGER AND SECURITIES EXCHANGE (this “Agreement”) is made and entered into as of December 2, 2020, by and between Tesoro Enterprises, Inc., a Delaware corporation (the “C Corp”), and HUMBL LLC, a Delaware limited liability company (the “LLC”).

 

RECITALS

 

A. The Board of Directors of the C Corp and the Managers of the LLC believe it is advisable and in the best interests of each company and its respective stockholders or holders of membership interests that the C Corp acquire the LLC through the merger of the LLC into the C Corp, upon the terms and conditions set forth herein, and, in furtherance thereof, have approved this Agreement and the transactions contemplated hereby.

 

B. This Agreement contemplates a merger (the “Merger”) in a transaction that is intended to qualify, for federal income tax purposes, as a tax-free merger under Section 368(a)(1)(B) or (C) of the Code (as defined below), in which the members of the LLC will receive capital stock of the C Corp in exchange for their membership interests (“Interests”, and, individually, an “Interest”) of the LLC.

 

C. Pursuant to the Merger, among other things, and subject to the terms and conditions of this Agreement, all of the Interests of the LLC shall be exchanged for the Merger Consideration (defined below) and all references to the C Corp common stock reflect a planned 1:4 reverse split.

 

D. The LLC and the C Corp each desire to make certain representations, warranties, covenants and other agreements in connection with the transactions contemplated hereby.

 

E. Concurrent with the execution and delivery of this Agreement, as a material inducement to the C Corp to enter into this Agreement, all of the LLC’s members shall have approved this Agreement and the transactions contemplated hereby.

 

NOW, THEREFORE, in consideration of the mutual agreements, covenants and other premises set forth herein, the mutual benefits to be gained by the performance thereof, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and accepted, the parties hereby agree as follows:

 

ARTICLE I

 

THE MERGER

 

1.1 The Merger.

 

Upon and subject to the terms and conditions of this Agreement, the LLC shall be merged into the C Corp (the “Surviving Corporation” or “the C Corp”) (such merger is referred to herein as the “Merger”) at the Effective Time. The “Effective Time” shall be the time at which the Certificate of Merger (“Certificate of Merger”) of the C Corp and the LLC, prepared and executed in accordance with the relevant provisions of the Delaware Limited Liability Company Act (“Delaware LLCA”) with respect to the LLC and the Delaware General Corporation Law (“Delaware GCL”) with respect to the C Corp, are filed with and accepted by the Secretary of State of the State of Delaware. The Merger shall have the effects specified in this Agreement, the Certificate of Merger and the applicable provisions of Delaware Law.

 

 
CONFIDENTIAL

 

1.2 Effect of the Merger.

 

The effect of the Merger shall be as set forth in this Agreement and as provided in the applicable provisions of Delaware Law. Without limiting the generality of the foregoing, and subject thereto, upon the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, except as otherwise agreed to pursuant to the terms of this Agreement, all of the property, rights, privileges, powers and franchises of the LLC shall vest in the C Corp, the surviving corporation, and all debts, liabilities and duties of the LLC, shall become the debts, liabilities and duties of the C Corp.

 

1.3 Organizational Documents.

 

(a) Unless otherwise determined by the LLC prior to the Effective Time, the Certificate of Incorporation of the C Corp shall remain as its Certificate of Incorporation after the Effective Time.

 

(b) Unless otherwise determined by the LLC prior to the Effective Time, the Bylaws of the C Corp shall remain the Bylaws of the C Corp after the Effective Time.

 

1.4 Directors and Officers.

 

(a) Directors of the Surviving Corporation. The directors of the C Corp immediately after the Effective Time shall be Brian Foote, Jeffrey Hinshaw and Michele Rivera to hold the office of a director of the C Corp in accordance with the provisions of Delaware Law until their successors are duly elected and qualified, or until their earlier resignation or removal.

 

(b) Officers of the C Corp. The officers of the C Corp immediately after the Effective Time shall be Brian Foote, President and CEO, Jeffrey Hinshaw, COO and Secretary, Adam Wolfe, Chief Technology Officer, Michele Rivera, Vice President, Global Partnerships and Karen Garcia, Vice President, Major Accounts, to hold office until their successors are duly elected and qualified, or until their earlier resignation or removal in accordance with the provisions of the Bylaws of the C Corp.

 

1.5 Definitions. For all purposes of this Agreement, the following terms shall have the following respective meanings:

 

Common Stock” shall mean shares of the common stock, par value $.00001 per share, of the C Corp.

 

Business Day” shall mean each day that is not a Saturday, Sunday or other day on which the C Corp is closed for business or banking institutions located in Washington, D.C. are authorized or obligated by law or executive order to close.

 

Closing Date” shall mean when all pre-conditions of the Merger under Article IV of this Agreement have been met.

 

Court” shall mean any court or arbitration tribunal of the United States, any domestic state, or any foreign court or arbitration tribunal.

 

Knowledge” or “Known” shall mean, with respect to the C Corp, the actual knowledge of Brian Foote and Jeffrey Hinshaw.

 

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Law” shall mean any law (statutory, common or otherwise), constitution, treaty, convention, ordinance, equitable principle, code, rule, regulation, executive order, or other similar authority enacted, adopted, promulgated, or applied by any Governmental Entity, each as amended and now in effect.

 

“Material Adverse Effect” when used in connection with an entity means any change, event, circumstance or effect whether or not such change, event, circumstance or effect is caused by or arises in connection with a breach of a representation, warranty, covenant or agreement of such entity in this Agreement that is or is reasonably likely to be materially adverse to the business, assets (including intangible assets), capitalization, financial condition, operations or results of operations, employees, or prospects of such entity taken as a whole with its subsidiaries, except to the extent that any such change, event, circumstance or effect results from (i) changes in general economic conditions, (ii) changes affecting the industry generally in which such entity operates (provided that such changes do not affect such entity in a substantially disproportionate manner), or (iii) changes in the trading prices for such entity’s capital stock.

 

Merger Consideration” shall mean the issuance of 552,029 shares of Series B Preferred Stock of the C Corp for the Interests of the Members of the LLC.

 

Order” shall mean any order, ruling, decision, verdict, decree, writ, subpoena, mandate, precept, command, directive, approval, award, judgment, injunction, or other similar determination or finding issued, granted or made by any Governmental Entity or Court.

 

Person” shall mean an individual or entity, including a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a Governmental Entity (or any department, agency, or political subdivision thereof).

 

Related Agreements” shall mean the Certificate of Merger and all other agreements and certificates entered into by the LLC or the C Corp in connection with the transactions contemplated herein.

 

Requisite Stockholder Vote” shall mean the affirmative vote of the holders of at least 51% of the outstanding shares of common stock of the C Corp.

 

SEC” shall mean the United States Securities and Exchange Commission.

 

Securities Act” shall mean the Securities Act of 1933, as amended.

 

“Security Interest” shall mean any mortgage, pledge, security interest, encumbrance, charge, or other lien (whether arising by contract or by operation of law), other than (i) mechanic’s, materialmen’s, and similar liens, (ii) liens arising under worker’s compensation, unemployment insurance, social security, retirement, and similar legislation, (iii) liens on goods in transit incurred pursuant to documentary letters of credit, in each case arising in the ordinary course of business of the LLC and not material to the LLC, and (iv) liens for current Taxes that are being contested in good faith.

 

Subsidiaryshall mean a company controlled by a parent company through ownership of greater than 50% of its voting stock.

 

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1.6 Effect on Capital Stock.

 

At the Effective Time, by virtue of the Merger and without any action on the part of the LLC, upon the terms and subject to the conditions set forth in this Article 1 and throughout this Agreement, the Interests of the LLC will be converted automatically into the right to receive their pro-rata share of the Merger Consideration.

 

1.7 Necessary Actions.

 

Prior to the Effective Time, and subject to the review and approval of the C Corp, the LLC shall take all actions necessary to effect the transactions anticipated by this Section 1 under all agreements related to the LLC and any other plan or arrangement of the LLC (whether written or oral, formal or informal), including delivering all required notices or obtaining any required consents.

 

1.8 Withholding Taxes.

 

The C Corp, and on its behalf the LLC, shall be entitled to deduct and withhold from any consideration payable or otherwise deliverable pursuant to this Agreement to any Person such amounts as may be required to be deducted or withheld therefrom under any provision of federal, state, local or foreign tax law or under any applicable legal requirement.

 

1.9 No Liability.

 

Notwithstanding anything to the contrary in this Article I, neither the LLC, the C Corp, nor any party hereto shall be liable to a holder of an LLC Certificate of Interest for any amount paid to a public official pursuant to any applicable abandoned property, escheat or similar law.

 

1.10 Lost, Stolen or Destroyed Certificates.

 

In the event any of the LLC Certificates of Interest shall have been lost, stolen or destroyed, the Member who is the owner of such lost, stolen or destroyed certificate shall either (i) deliver a bond in such amount as the C Corp may direct or (ii) provide an indemnification agreement in form and substance acceptable to the C Corp, against any claim that may be made against the C Corp with respect to the certificates alleged to have been lost, stolen or destroyed.

 

1.11 Tax Consequences.

 

The LLC and the C Corp (i) intend that the Merger shall constitute a reorganization within the meaning of Section 368(a)(1)(B) or (C) of the Code, (ii) shall report the Merger (if such Person has tax reporting obligations in respect thereof) as a merger of the LLC with and into the C Corp qualifying as a reorganization within the meaning of Section 368(a)(1)(B) or (C) of the Code for federal income tax purposes, and (iii) by executing this Agreement, adopt a plan of tax-free reorganization within the meaning of Treasury Regulations Sections 1.368 2(g) and 1.368 3. However, no party hereto makes any representations or warranties regarding the tax treatment of the Merger, or any of the tax consequences relating to the Merger, this Agreement, or any of the other transactions or agreements contemplated hereby. Each party hereto acknowledges that it is relying solely on its own tax advisors in connection with the Merger, this Agreement and the other transactions and agreements contemplated hereby.

 

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1.12 Taking of Necessary Action; Further Action.

 

If at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement and to vest the C Corp with full right, title and possession to all assets, property, rights, privileges, powers and franchises of the LLC, the C Corp and the LLC and the officers and directors of the LLC and the C Corp are fully authorized in the name of their respective corporations or otherwise to take, and will take, all such lawful and necessary action.

 

ARTICLE II

 

REPRESENTATIONS AND WARRANTIES OF THE LLC

 

Subject to such exceptions as are specifically disclosed in the disclosure schedule dated as of the date hereof (each of which disclosures, in order to be effective, shall clearly reference the appropriate section of this 1 to which it relates and each of which disclosures shall be deemed to be incorporated by reference into the representations and warranties made in this Article II; provided, however, that any information disclosed under any section of the disclosure schedule shall be deemed disclosed and incorporated into any other section of the disclosure schedule where it should be reasonably apparent to the C Corp to assume that such disclosure, without reference to extrinsic documentation, is relevant to such other section) delivered by the LLC to the C Corp concurrently with the execution of this Agreement (the “the LLC Disclosure Schedule”) the LLC hereby represents and warrants to the C Corp on the date hereof and as of the Effective Time, as follows:

 

2.1 Organization, Qualification and Corporate Power.

 

The LLC is duly organized, validly existing and in good standing under the laws of the State of Delaware. The LLC is duly qualified to conduct business and is in good standing under the laws of each jurisdiction in which the nature of its businesses or the ownership or leasing of its properties requires such qualification, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect on the LLC. The LLC has the power and authority to carry on the businesses in which it is engaged and to own and use the properties owned and used by it. Tthe LLC has furnished or made available to the C Corp true and complete copies of its Certificate of Formation and Limited Liability Company Agreement, each as amended and as in effect on the date hereof. The LLC is not in default under or in violation of any provision of the LLC’s Certificate of Formation.

 

2.2 Capitalization.

 

Schedule A is incorporated into the LLC Disclosure Schedule and sets forth a complete and accurate list of all members of the LLC, indicating the LLC membership interest held by each Member and their respective addresses. All of the LLC Interests and other outstanding securities of the LLC have been duly and validly issued in compliance with federal and state securities laws. There are no outstanding or authorized subscriptions, options, warrants, plans or, except for this Agreement and as contemplated by this Agreement, other agreements or rights of any kind to purchase or otherwise receive or be issued, or securities or obligations of any kind convertible into, any Interests of the LLC, and there are no distributions which have accrued or been declared but are unpaid on the LLC Interests. All of the issued and outstanding Interests of the LLC are free and clear of any liens, pledges, encumbrances, charges, agreements adversely effecting title to such shares or claims (other than those created by virtue of this Agreement or by the LLC), and the certificates evidencing the ownership of such Interests are in proper form for the enforcement of the rights and limitations of rights pertaining to said Interests.

 

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2.3 Authorization of Transaction.

 

Subject to the LLC Member Approval (as defined below) of the Merger and this Agreement, the LLC has the power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement and, subject to the adoption of this Agreement and the approval of the Merger by a majority of the votes represented by the outstanding Interests entitled to vote on this Agreement and the Merger, voting in accordance with the laws of the State of Delaware (the “Member Approval”), the performance by the LLC of this Agreement and the consummation by the LLC of the transactions contemplated hereby have been duly and validly authorized by all necessary company action on the part of the LLC. This Agreement has been duly and validly executed and delivered by the LLC and, assuming the due authorization, execution and delivery by the LLC, constitutes a valid and binding obligation of the LLC, enforceable against the LLC in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting the enforcement of creditors’ rights generally, and except that the availability of equitable remedies, including specific performance, is subject to the discretion of the court before which any proceeding therefor may be brought.

 

2.4 Non-contravention.

 

Subject to receipt of the LLC Member Approval, compliance with the applicable requirements of the Securities Act and any applicable state securities laws and the filing of the Certificate of Merger as required by the State of Delaware, neither the execution and delivery of this Agreement by the LLC, nor the consummation by the LLC of the transactions contemplated hereby, will: (a) conflict with or violate any provision of the LLC Certificate of Formation or Operating Agreement; (b) require on the part of the LLC any filing with, or any permit, authorization, consent or approval of, any Governmental Entity, other than (i) those required solely by reason of the LLC’s participation in the transactions contemplated hereby, (ii) those required to be made by the LLC, and (iii) any filing, permit, authorization, consent or approval which if not made or obtained would not have a Material Adverse Effect on the LLC; (c) conflict with, result in a breach of, constitute (with or without due notice or lapse of time or both) a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify or cancel, or require any notice, consent or waiver under, except for any conflict, breach, default, acceleration, right to accelerate, termination, modification, cancellation, notice, consent or waiver that would not reasonably be expected to have a Material Adverse Effect on the LLC; (d) result in the imposition of any Security Interest upon any assets of the LLC; or (e) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the LLC, any of its properties or assets, other than such conflicts, violations, defaults, breaches, cancellations or accelerations referred to in clauses (a) through (e) (inclusive) hereof which would not have a Material Adverse Effect on the LLC.

 

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2.5 Intellectual Property.

 

The LLC has previously provided a list of all Intellectual Property presently owned or held by the LLC and (ii) any license agreements under which the LLC has access to any confidential information used by the LLC in its business (such licenses and agreements, collectively, the “Intellectual Property Rights”) necessary for the conduct of the LLC’s business as conducted and as currently proposed to be conducted by the LLC. The LLC owns, or has the right to use, free and clear of all Security Interests, all of the Intellectual Property and the Intellectual Property Rights. There are no outstanding options, licenses or agreements of any kind relating to the Intellectual Property and the Intellectual Property Rights, nor is the LLC bound by or a party to any options, licenses or agreements of any kind with respect to any of the Intellectual Property, the Intellectual Property Rights and the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and processes of any other person or entity other than such licenses or agreements arising from the purchase of “off the shelf” or standard products. the LLC has not received any communications alleging that the LLC has violated or, by conducting its business as conducted and as currently proposed to be conducted by the LLC, violates any Third Party Intellectual Property Rights and to the LLC’s knowledge, the business as conducted and as currently proposed to be conducted by the LLC will not cause the LLC to infringe or violate any Third Party Intellectual Property Rights. There is no defect in the title to any of the Intellectual Property or, to the extent that the LLC has title to Intellectual Property Rights to any Intellectual Property Rights. To the LLC’s knowledge, no officer, employee or director is obligated under any contract (including any license, covenant or commitment of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would conflict or interfere with the performance of such person’s duties as an officer, employee or director of the LLC, the use of such person’s best efforts to promote the interests of the LLC or the LLC’s business as conducted or as currently proposed to be conducted by the LLC. No prior employer of any current or former employee of the LLC has any right, title or interest in the Intellectual Property and to the LLC’s knowledge, no person or entity has any right, title or interest in any Intellectual Property. It is not and will not be with respect to the business as currently proposed to be conducted necessary for the LLC to use any inventions of any of its employees made prior to their employment by the LLC.

 

2.6 Litigation.

 

(a) There are no: (i) unsatisfied judgments, orders, decrees, stipulations or injunctions; or (ii) claims, complaints, actions, suits, proceedings or hearings or, to the LLC’s knowledge, investigations in or before any Governmental Entity or any arbitrator or to the LLC’s knowledge expected to be before any Governmental Entity or any arbitrator; to which the LLC, any officer, director, employee or agent of the LLC (in such person’s capacity as an officer, director, employee or agent of the LLC and not personally) is or was (for the two years prior to and including the date hereof) a party or, to the knowledge of the LLC, is threatened to be made a party.

 

(b) There are no material agreements or other documents or instruments settling any claim, complaint, action, suit or other proceeding against the LLC.

 

2.7 Access to Information.

 

Until the Closing, the LLC will allow the C Corp and its agents reasonable access to the files, books, records and offices of the LLC, including, without limitation, any and all information relating to the LLC’s taxes, commitments, contracts, leases, licenses, and real, personal and intangible property and financial condition. the LLC will cause its accountants to cooperate with the C Corp and its agents in making available all financial information reasonably requested, including without limitation the right to examine all working papers pertaining to all financial statements prepared or audited by such accountants.

 

2.8 Disclosure.

 

No representation or warranty by the LLC contained in this Agreement, including any statement contained in the LLC Disclosure Schedule or any closing document contains any untrue statement of a material fact or omits to state any material fact necessary, in light of the circumstances under which it was made, in order to make the statements herein not misleading.

 

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ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF THE C CORP

 

The C Corp represents and warrants to the LLC that, as of the date hereof, the statements contained in this Article III are true and correct, except as set forth in the schedule provided by the C Corp and attached hereto (the “C Corp Disclosure Schedule”) and in the filings made by the Company under the OTC Markets Alternative Reporting Standards:

 

3.1 Organization.

 

The C Corp is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. the C Corp is duly qualified to conduct business and is in corporate good standing under the laws of each jurisdiction in which the nature of its businesses or the ownership or leasing of its properties requires such qualification, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect on the C Corp. The C Corp has the corporate power and authority to carry on the business in which it is engaged and to own and use the properties owned and used by it. The C Corp has furnished or made available to the LLC true and complete copies of its Certificate of Incorporation and Bylaws, each as amended and as in effect on the date hereof. The C Corp is not in default under or in violation of any provision of its Certificate of Incorporation, or Bylaws, as amended.

 

3.2 Capitalization.

 

The C Corp has authorized as of the Closing 7,450,000,000 shares of Common Stock, of which 3,907,709,773 will be issued and outstanding at or immediately prior to Closing, and 10,000,000 shares of Preferred Stock, of which 7,000,000 shares are designated Series A preferred stock, all of which will be issued and outstanding at or immediately prior to Closing, 900,000 Series B preferred stock, none of which will be issued and outstanding immediately prior to Closing and 150,000 Series C preferred stock, none of which will be issued and outstanding prior to Closing. All of the issued and outstanding shares of Common Stock and preferred stock are duly authorized, validly issued, fully paid, nonassessable and free of all preemptive rights. All of the outstanding shares of Common Stock and preferred stock and other securities of the C Corp have been duly and validly issued in compliance with federal and state securities laws. There are no outstanding or authorized subscriptions, options, warrants, plans or, except for this Agreement and as contemplated by this Agreement, other agreements or rights of any kind to purchase or otherwise receive or be issued, or securities or obligations of any kind convertible into, any shares of capital stock or other securities of the C Corp, and there are no dividends which have accrued or been declared but are unpaid on the capital stock of the C Corp.

 

3.3 Authorization of Transaction.

 

The C Corp has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement and the performance of this Agreement and the consummation of the transactions contemplated hereby by the C Corp (including the Merger) have been duly and validly authorized by all necessary corporate action on the part of the C Corp. This Agreement has been duly and validly executed and delivered by the C Corp and, assuming the due authorization, execution and delivery by the C Corp, constitutes a valid and binding obligation of the C Corp, enforceable against them in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors’ rights generally, and except that the availability of equitable remedies, including specific performance, is subject to the discretion of the court before which any proceeding therefor may be brought.

 

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3.4 Non-contravention.

 

Subject to compliance with the applicable requirements of the Securities Act and any applicable state securities laws, the Exchange Act and the filing of the Certificate of Merger as required by Delaware Law, neither the execution and delivery of this Agreement, nor the consummation by the C Corp of the transactions contemplated hereby or thereby, will: (a) conflict with or violate any provision of the Certificate of Incorporation or Bylaws of the C Corp; (b) require on the part of the C Corp any filing with, or any permit, authorization, consent or approval of, any Governmental Entity, other than those (i) required solely by reason of the C Corp’s participation in the transactions contemplated hereby or (ii) to be made by the C Corp or (iii) any filing, permit, authorization, consent or approval which, if not made or obtained, would not have a Material Adverse Effect on the C Corp; (c) conflict with, result in breach of, constitute (with or without due notice or lapse of time or both) a default under, result in the acceleration of, create in any party any right to accelerate, terminate, modify or cancel, or require any notice, consent or waiver under, any contract, lease, sublease, license, sublicense, franchise, permit, indenture, agreement or mortgage for borrowed money, instrument of indebtedness, Security Interest or other arrangement to which the C Corp is a party or by which either is bound or to which any of their assets are subject, except for any conflict, breach, default, acceleration, right to accelerate, termination, modification, cancellation, notice, consent or waiver that would not reasonably be expected to have a Material Adverse Effect on the C Corp; (d) result in the imposition of any Security Interest upon any assets of the C Corp; or (e) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the C Corp or any of their properties or assets, except for any violation that would not have a Material Adverse Effect on the C Corp.

 

3.5 Undisclosed Liabilities.

 

The C Corp has no liability (whether known or unknown, whether absolute or contingent, whether liquidated or unliquidated and whether due or to become due), except for (a) liabilities accrued, reflected, reserved against on the Financial Statements, (b) liabilities which have arisen since the formation of the C Corp in February 2020, in the ordinary course of business, (c) contractual or statutory liabilities incurred in the ordinary course of business, the aggregate when combined with those shown in the Financial Statements shall not exceed $25,000, and (d) liabilities which would not have a Material Adverse Effect on the C Corp.

 

3.6 Litigation.

 

There are no suits, arbitrations, actions, claims, complaints, grievances, or to the C Corp’s knowledge, investigations or proceedings pending or, to the C Corp’s knowledge, threatened against the C Corp or its Subsidiaries that, if resolved against the C Corp or its Subsidiaries could be reasonably expected to have a Material Adverse Effect on the C Corp, or the C Corp’s ability to consummate the transactions contemplated by this Agreement.

 

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3.7 Legal Compliance; Restrictions on Business Activities.

 

The C Corp and the conduct and operation of its business are in material compliance with each law (including rules, regulations and requirements thereunder) of any federal, state, local or foreign government or any Governmental Entity which (a) affects or relates to this Agreement or the transactions contemplated hereby or (b) is applicable to the C Corp or its businesses, except, in each case, where such non-compliance would not reasonably be expected to have a Material Adverse Effect on the C Corp. There is no agreement, judgment, injunction, order or decree binding upon the C Corp which has or would reasonably be expected to have the effect of prohibiting or materially impairing any current or future business practice of the C Corp, as currently contemplated by the C Corp, and any acquisition of property of the C Corp or the conduct of business by the C Corp as currently conducted or proposed to be conducted.

 

3.8 Disclosure.

 

No representation or warranty by the C Corp contained in this Agreement or any closing document contains any untrue statement of a material fact or omits to state any material fact necessary, in light of the circumstances under which it was made, in order to make the statements herein not misleading.

 

3.9 Access to Information.

 

Until the Closing, the C Corp will allow the LLC and its agents reasonable access to the files, books, records and offices of the C Corp, including, without limitation, any and all information relating to the C Corp’s taxes, commitments, contracts, leases, licenses, and real, personal and intangible property and financial condition. the C Corp will cause its accountants to cooperate with the LLC and its agents in making available all financial information reasonably requested, including without limitation the right to examine all working papers pertaining to all financial statements prepared or audited by such accountants.

 

3.10 Disclosure.

 

No representation or warranty by the C Corp contained in this Agreement, including any statement contained in the C Corp Disclosure Schedule or any closing document contains any untrue statement of a material fact or omits to state any material fact necessary, in light of the circumstances under which it was made, in order to make the statements herein not misleading.

 

ARTICLE IV

 

CONDITIONS TO THE MERGER

 

4.1 Conditions to Each Party’s Obligations.

 

The respective obligations of each party to consummate the Merger and the other transactions contemplated hereby are subject to the satisfaction of the following conditions unless any such condition is waived, in writing, by the other party:

 

(a) This Agreement and the Merger shall have received the LLC Member Approval and the C Corp Requisite Shareholder Vote;

 

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(b) no temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal or regulatory restraint or prohibition preventing the consummation of the Merger shall have been issued, nor shall any proceeding brought by any Governmental Entity, seeking any of the foregoing be pending; nor shall there be any action taken, or any statute, rule, regulation or order enacted, entered, enforced or deemed applicable to the Merger which makes the consummation of the Merger illegal; and

 

(c) no proceeding in which the LLC and the C Corp shall be a debtor, defendant or party seeking an order for its own relief or reorganization shall have been brought or be pending by or against the C Corp or the LLC under any United States or state bankruptcy or insolvency law.

 

4.2 Conditions to Obligations of the LLC.

 

The obligation of the LLC to consummate the Merger is subject to the satisfaction of the following additional conditions, unless any such condition is waived, in writing, by the LLC:

 

(a) this Agreement and the Merger shall have been approved and adopted by the C Corp shareholders;

 

(b) the C Corp shall have obtained all of the necessary waivers, permits, consents, approvals or other authorizations, and effected all of the filings and notices prior to the consummation of the Merger, except for any which if not obtained or effected would not have a Material Adverse Effect on the C Corp or on the ability of the parties to consummate the transactions contemplated by this Agreement;

 

(c) the representations and warranties of the C Corp set forth in Article III shall be true and correct as of the Closing Date, except for representations and warranties made as of a specified date, which shall be true and correct as of such date;

 

(d) the C Corp shall have performed or complied with, in all material respects, its agreements and covenants required to be performed or complied with under this Agreement as of or prior to the Closing Date;

 

(e) the C Corp shall have delivered all documents required to be delivered to the LLC on or before the Closing Date; and

 

(f) in connection with the consummation of the transactions contemplated hereby, and all certificates, opinions, instruments and other documents required to effect the transactions contemplated hereby shall be reasonably satisfactory in form and substance to the LLC.

 

4.3 Conditions to Obligations of the C Corp.

 

The obligation of the C Corp to consummate the Merger is subject to the satisfaction of the following additional conditions, unless any such condition is waived, in writing, by the C Corp:

 

(a) the LLC shall have obtained all of the necessary waivers, permits, consents, approvals or other authorizations, and effected all of the filings and notices prior to the consummation of the Merger, except for any which if not obtained or effected would not have a Material Adverse Effect on the LLC or on the ability of the parties to consummate the transactions contemplated by this Agreement;

 

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(b) the LLC shall have performed or complied with in all material respects its agreements and covenants required to be performed or complied with under this Agreement as of or prior to the Effective Time;

 

(c) the representations and warranties of the LLC set forth in Article II shall be true and correct as of the Closing Date, except for representations and warranties made as of a specified date, which shall be true and correct as of such date;

 

(d) the LLC shall have delivered all documents required to be delivered to the C Corp on or before the Closing Date; and

 

(f) all certificates, opinions, instruments and other documents required to effect the transactions contemplated hereby shall be reasonably satisfactory in form and substance to the C Corp.

 

4.4 Certain Waivers.

 

The parties acknowledge and agree that if a party has actual knowledge of any breach by any other party of any representation, warranty, agreement or covenant contained in this Agreement, and such party proceeds with the Closing, such party shall be deemed to have irrevocably waived such breach for that particular breach only and such party and its successors and assigns shall not be entitled to assert any right or to seek any remedy for any damages arising from any matters relating to such breach, notwithstanding anything to the contrary contained herein or in any certificate delivered pursuant hereto.

 

ARTICLE V

 

TERMINATION, AMENDMENT AND WAIVER

 

5.1 Termination.

 

Subject to Article VI hereof, this Agreement may be terminated and the Merger abandoned at any time prior to the Closing by mutual agreement of the LLC and the C Corp.

 

5.2 Effect of Termination.

 

In the event of termination of this Agreement as provided in this Article V hereof, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of the LLC, the C Corp, or their respective officers, directors, members or shareholders, if applicable.

 

5.3 Amendment

 

This Agreement may be amended by the parties hereto at any time by execution of an instrument in writing signed on behalf of the party against whom enforcement is sought.

 

5.4 Extension; Waiver

 

At any time prior to the Closing, the LLC, on the one hand, and the C Corp, on the other hand, may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations of the other party hereto, (ii) waive compliance with any of the covenants, agreements or conditions for the benefit of such party contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party.

 

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ARTICLE VI

 

GENERAL PROVISIONS

 

6.1 Notices.

 

All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or by commercial messenger or courier service or by electronic mail with proof of receipt, or mailed by registered or certified mail (return receipt requested) to the parties at the following addresses; provided, however, that notices sent by mail will not be deemed given until received:

 

if to the LLC to:

 

HUMBL LLC

600 B Street

San Diego, CA 92101

Attn: Brian Foote, President

email: brian@humblpay.com

 

with a copy to:

 

Culhane Meadows PLLC

1101 Pennsylvania Avenue, N.W.,

Suite 300

Washington, D.C. 20004

Attn: Ernest M. Stern, Esq.

email: estern@culhanemeadows.com

 

if to the C Corp, to:

 

Tesoro Enterprises, Inc.

600 B Street

San Diego, CA 92101

Attn: Brian Foote, President and CEO

email: brian@humblpay.com

 

with a copy to:

 

Culhane Meadows PLLC

1101 Pennsylvania Avenue, N.W.,

Suite 300

Washington, D.C. 20004

Attn: Ernest M. Stern, Esq.

email: estern@culhanemeadows.com

 

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The words “include,” “includes” and “including” when used herein shall be deemed in each case to be followed by the words “without limitation.” The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

 

6.2 Counterparts.

 

This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that all parties need not sign the same counterpart.

 

6.3 Entire Agreement; Assignment.

 

This Agreement, the Disclosure Schedule and the documents and instruments and other agreements among the parties hereto referenced herein: (i) constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings both written and oral, among the parties with respect to the subject matter hereof; (ii) are not intended to confer upon any other person any rights or remedies hereunder; and (iii) shall not be assigned by operation of law or otherwise, except that the C Corp may, upon two (2) Business Days’ prior written notice to the LLC assign its rights and delegate its obligations hereunder to a wholly-owned Subsidiary as long as the C Corp remains primarily liable for all of the LLC’s obligations hereunder and such assignment and/or delegation does not adversely affect the characterization of the Merger as a statutory merger of the LLC with and into the C Corp for federal income tax purposes.

 

6.4 Severability

 

In the event that any provision of this Agreement or the application thereof becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision.

 

6.5 Other Remedies

 

Any and all remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy.

 

6.6 No Third-Party Beneficiaries

 

This Agreement, the Schedules hereto, the Disclosure Schedule and the documents and instruments and other agreements among the parties hereto referenced herein are not intended to, and shall not, confer upon any other person any rights or remedies hereunder, nor create any right, claim or remedy of any nature whatsoever, including, but not limited to, any rights of employment for any specified period and/or any employee benefits in favor of any Person, union, association, Continuing Employee, key employee, employer, other employee or former employee, contractor or other entity, other than the parties hereto and their respective successors and permitted assigns.

 

15
CONFIDENTIAL

 

6.7 Governing Law

 

This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof.

 

6.8 Gender and Number.

 

As used in this Agreement, the masculine, feminine and neuter gender, and singular and plural number, shall be deemed to include the others wherever the context so indicates or requires.

 

6.9 Rules of Construction.

 

The parties hereto agree that they have been represented by counsel during the negotiation and execution of this Agreement and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document. Nothing in the Disclosure Schedule hereto shall be deemed adequate to disclose an exception to a representation or warranty made herein unless the Disclosure Schedule identifies the exception with reasonable particularity and describes the relevant facts in reasonable detail. Without limiting the generality of the foregoing, the mere listing (or inclusion of a copy) of a document or other item shall not be deemed adequate to disclose an exception to a representation or warranty made herein (unless the representation or warranty has to do with the existence of the document or other item itself). The Disclosure Schedule shall be arranged in separate parts corresponding to the numbered and lettered sections contained herein permitting such disclosure, and the information disclosed in any numbered or lettered part shall be deemed to relate to and to qualify only (a) the particular representation or warranty set forth in the corresponding numbered or lettered section herein permitting such disclosure and (b) any other representation or warranty that is contained in this Agreement to the extent the relevance of such disclosure is reasonably apparent on its face (without any independent knowledge on the part of the reader regarding the matter disclosed or any reference to any underlying document) to such other representation or warranty. The parties intend that each representation, warranty and covenant contained herein shall have independent significance. If any party has breached any representation, warranty or covenant contained herein in any respect, the fact that there exists another representation, warranty or covenant relating to the same subject matter (regardless of the relative levels of specificity) that the party has not breached shall not detract from or mitigate the fact that the party is in breach of the first representation, warranty or covenant. In addition, each of the parties acknowledges and agrees that any purchase price adjustment as a result of the application of any provision of this Agreement, the Related Agreements or any of the other agreements contemplated hereby or thereby does not prejudice or limit in any respect whatsoever any party’s rights to indemnification under any other provision of this Agreement, the Related Agreements or any other agreements contemplated hereby or thereby, except to the extent that such a recovery would result in a duplication of damages. All references to dollars or “$” shall refer to U.S. dollars unless otherwise indicated.

 

[Signature Page Follows]

 

16
CONFIDENTIAL

 

IN WITNESS WHEREOF, the C Corp and the LLC have caused this Agreement to be signed, all as of the date first written above.

 

  TESORO ENTERPRISES, INC.
  a Delaware corporation
     
  By:  
  Name: Brian Foote
  Title: President and CEO
     
  HUMBL LLC
  a Delaware limited liability company
     
  By:
  Name: Brian Foote
  Title: Manager 

 

[Signature Page to Plan of Merger and Securities Exchange]

 

17
 

 

Schedule A

 

MEMBERS OF THE LLC

 

See Attached.

 

 

 

 

LLC DISCLOSURE SCHEDULE

 

None.

 

 

 

 

C CORP DISCLOSURE SCHEDULE

 

None.

 

 

 

 

 

Exhibit 2.2

 

CERTIFICATE OF MERGER

 

MERGING

 

HUMBL, LLC

A DELAWARE LIMITED LIABILITY COMPANY

 

WITH AND INTO

 

TESORO ENTERPRISES, INC.

A DELAWARE CORPORATION

 

Pursuant to Section 264 of the General Corporation Law of the State of Delaware

and Section 18-209 of the Delaware Limited Liability Company Act

 

Tesoro Enterprises, Inc., a Delaware corporation (the “Company”), does hereby certify as follows:

 

FIRST: The Company is a Delaware corporation duly organized and existing under the laws of the State of Delaware.

 

SECOND: An Agreement and Plan of Merger dated December 2, 2020 (the “Merger Agreement”), by and between the Company and Humbl, LLC, a Delaware limited liability company (the “Merger”), has been approved, adopted, certified, executed and acknowledged by each of the constituent entities in accordance with Section 264 of the Delaware General Corporation Law.

 

THIRD: The Company is the surviving corporation in the Merger (the “Surviving Corporation”) and the name of the Surviving Corporation shall be Tesoro Enterprises, Inc.

 

FOURTH: The Certificate of Incorporation of the Surviving Corporation shall be the Certificate of Incorporation of the Surviving Corporation.

 

FIFTH: An executed copy of the Merger Agreement is on file at the principal place of business of the Surviving Corporation at the following address:

 

Tesoro Enterprises, Inc.

600 B Street

San Diego, CA 92101

 

SIXTH: A copy of the Merger Agreement will be furnished by the Surviving Corporation, on request and without cost, to any stockholder of either constituent corporation.

 

SEVENTH: The Merger shall become effective upon filing of this Certificate of Merger with the Secretary of State of Delaware.

 

 
 

 

IN WITNESS WHEREOF, Company has caused this Certificate of Merger to be executed in its corporate name as of the 3rd day of December, 2020.

 

  HUMBL, INC.
     
  By: /s/ Brian Foote
  Name: Brian Foote
  Title: President

 

-2-

 

 

 

Exhibit 3.1

 

CERTIFICATE OF INCORPORATION

 

OF

 

TESORO ENTERPRISES, INC.

 

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

 

THE UNDERSIGNED, in order to form a corporation for the purposes hereinafter stated, under and pursuant to the provisions of the General Corporation Law of the State of Delaware, does hereby certify as follows:

 

First: The name of the Corporation is Tesoro Enterprises, Inc.

 

Second: The registered office of the Corporation is to be located at 1013 Centre Road, Suite 403-B in the City of Wilmington in the County of New Castle, in the State of Delaware 19805. The name of its registered agent at that address is Vcorp Services, LLC.

 

Third: The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of Delaware.

 

Fourth: The aggregate number of shares which the Corporation shall have authority to issue is 5,000,000,000 shares of common stock, $.00001 par value per share, and 25,000,000 shares of “blank check” preferred stock, par value $.00001 per share. The Board of Directors is hereby expressly authorized to provide, out of the unissued shares of preferred stock, for one or more series of preferred stock and, with respect to each such series, to fix the number of shares constituting such series and the designation of such series, the voting powers, if any, of the shares of such series, and the preferences and relative, participating, optional, or other special rights, if any, and any qualifications, limitations, or restrictions thereof, of the shares of such series. The powers, preferences and relative, participating, optional and other special rights of each series of preferred stock, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding.

 

Fifth: The name and address of the Incorporator are as follows:

 

  NAME ADDRESS
     
  Ernest M. Stern c/o Culhane Meadows PLLC
    1101 Pennsylvania Avenue, N.W.
    Suite 300
    Washington, D.C. 20004

 

Sixth: The following provisions are inserted for the management of the business and for the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders.

 

 
 

 

(1) The number of directors of the Corporation shall be such as from time to time shall be fixed by, or in the manner provided in, the by-laws. Election of directors need not be by ballot unless the by-laws so provide.

 

(2) The Board of Directors shall have power without the assent or vote of the stockholders to make, alter, amend, change, add to or repeal the by-laws of the Corporation; to fix and vary the amount of capital to be reserved for any proper purpose; to authorize and cause to be executed mortgages and liens on all or any part of the property of the Corporation; to determine the use and disposition of any surplus or net profits; and to fix the times for the declaration and payment of dividends.

 

(3) The directors in their discretion may submit any contract or act for approval or ratification at any annual meeting of the stockholders or at any meeting of the stockholders called for the purpose of considering any such contract or act, and any contract or act that shall be approved or be ratified by the vote of the holders of a majority of the stock of the Corporation which is represented in person or by proxy at such meeting and entitled to vote thereat (provided that a lawful quorum of stockholders be there represented in person or by proxy) shall be as valid and as binding upon the Corporation and upon all the stockholders as though it had been approved or ratified by every stockholder of the Corporation, whether or not the contract or act would otherwise be open to legal attack because of directors’ interest, or for any other reason.

 

(4) In addition to the powers and authorities hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation; subject, nevertheless, to the provisions of the statutes of Delaware, to the provisions of this Certificate, and to the provisions of any by-laws from time to time made by the stockholders or by the Board of Directors; provided, however, that no by-laws so made shall invalidate any prior act of the directors which would have been valid if such by-law had not been made.

 

Seventh: The Corporation shall, to the fullest extent permitted by Section 145 of the Delaware General Corporation Law, as amended from time to time, indemnify all persons whom it may indemnify pursuant thereto.

 

Eighth: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware, may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders of this Corporation, as the case may be, and also on this Corporation.

 

2

 

 

Ninth: The liability of the Corporation’s directors to the Corporation or its stockholders shall be eliminated to the fullest extent permitted by the General Corporation Law of the State of Delaware, as the same may be amended and supplemented. No amendment to or repeal of this ARTICLE NINTH shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal.

 

Tenth: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation in the manner now or hereafter prescribed by law, and all rights and powers conferred herein on stockholders, directors and officers are subject to this reserved power.

 

IN WITNESS WHEREOF, I have hereunto set my hand this 18th day of November, 2020.

 

  /s/ Ernest M. Stern
  Ernest M. Stern, Incorporator

 

3

 

 

Exhibit 3.2

 

STATE OF DELAWARE

CERTIFICATE OF AMENDMENT TO

THE CERTIFICATE OF INCORPORATION

OF

TESORO ENTERPRISES, INC.

 

Tesoro Enterprises, Inc. (the “Corporation”), a Delaware corporation, does hereby certify that the following amendments to the Corporation’s Certificate of Incorporation to change Paragraph First to change the name of the Corporation and to amend and restate Paragraph Fourth to increase the number of authorized shares, to designate a Series B preferred stock and a Series C preferred stock and to provide for a reverse split of one share for each four of its issued and outstanding shares of common stock have been duly adopted in accordance with the provisions of Sections 228 and 242 of the Delaware General Corporation Law, as follows:

 

PARAGRAPH FIRST

 

The name of the Corporation is HUMBL, Inc.

 

PARAGRAPH FOURTH

 

The aggregate number of shares which the Corporation shall have authority to issue is 7,450,000,000 shares of common stock, $.00001 par value per share (“Common Stock”), and 25,000,000 shares of “blank check” preferred stock, par value $.00001 per share. The Board of Directors is hereby expressly authorized to provide, out of the unissued shares of preferred stock, for one or more series of preferred stock and, with respect to each such series, to fix the number of shares constituting such series and the designation of such series, the voting powers, if any, of the shares of such series, and the preferences and relative, participating, optional, or other special rights, if any, and any qualifications, limitations, or restrictions thereof, of the shares of such series. The powers, preferences and relative, participating, optional and other special rights of each series of preferred stock, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding.

 

Reverse Stock Split. The effective date of this reverse stock split shall be immediately upon the approval by the Financial Industry Regulatory Authority (FINRA) of such corporate action (the “Effective Time”). At the Effective Time, each four (4) shares of Common Stock of the Corporation issued and outstanding immediately prior to the Effective Time shall automatically be combined and converted, without any action on the part of the holder thereof, into one (1) share of fully paid and nonassessable Common Stock of the Corporation (the “Reverse Stock Split”). This Reverse Stock Split shall be effected on a certificate-by-certificate basis, and no fractional shares shall be issued as a result of this Reverse Stock Split. In lieu thereof, the Corporation shall round up in the event a stockholder would be entitled to receive less than one (1) share of Common Stock as a result of the Reverse Split.

 

1
 

 

A. Description and Designation of Series A Preferred Stock.

 

(1) Designation. A total of 7,000,000 shares of the Corporation’s Preferred Stock shall be designated as “Series A Preferred Stock”. As used herein, the term “Preferred Stock” used without reference to the Series A Preferred Stock means the shares of Series A Preferred Stock and the shares of any series of authorized Preferred Stock of the Corporation issued and designated from time to time by a resolution or resolutions of the Board of Directors, share for share alike and without distinction as to class or series, except as otherwise expressly provided below.

 

(2) Dividends. Holders of the Series A Preferred Stock shall be entitled to receive, out of funds legally available for that purpose, on the same terms and conditions as that of holders of common stock, as may be declared by the Board of Directors.

 

(3) Liquidation. Dissolution or Winding Up.

 

(a) Treatment at Sale. Liquidation. Dissolution or Winding Up. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, any distribution or payment shall be made to any holders of any shares of Common Stock or any other class or series of capital stock of the Corporation designated to be junior to the Series A Preferred Stock or Common Stock, and subject to the liquidation rights and preferences of any class or series of Preferred Stock designated to be senior to, or on a parity with, the Series A Preferred Stock, holders of the shares of Series A Preferred Stock, Series B Preferred Stock (defined below) and Series C Preferred Stock (defined below) shall be entitled to be paid in cash first out of the assets of the Corporation available for distribution to holders of the Corporation’s capital stock, whether such assets are capital, surplus or earnings, an amount equal to the price per share of Series A Preferred Stock originally paid to the Corporation by a holder, plus any and all accrued and unpaid dividends thereof (whether or not declared). Such amounts shall be subject to equitable adjustment whenever there shall occur a stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event involving the Series A Preferred Stock and such amount, as so determined, is referred to herein as the “Series A Liquidation Value” with respect to such shares.

 

(b) Insufficient Funds. If upon such liquidation, dissolution or winding up the assets or surplus funds of the Corporation to be distributed to the holders of shares of Series A Preferred Stock and any other then-outstanding shares of the Corporation’s capital stock ranking on a parity with respect to payment on liquidation with the Series A Preferred Stock, which shall include the Common Stock (such shares being referred to herein as the “Series A Parity Stock”) shall be insufficient to permit payment to such respective holders of the full Series A Liquidation Value and all other preferential amounts payable with respect to the Series A Preferred Stock and such Series A Parity Stock, then the assets available for payment or distribution to such holders shall be allocated among the holders of the Series A Preferred Stock and such Series A Parity Stock, pro rata, in proportion to the full respective preferential amounts to which the Series A Preferred Stock and such Series A Parity Stock are each entitled.

 

2
 

 

(c) Certain Transactions Treated as Liquidation. For purposes of this Section 3, (A) any sale, exchange, conveyance or other disposition of the capital stock of the Corporation in a transaction or series of related transactions in which more than 50% of the voting power of the Corporation is disposed of or shifts, (B) any acquisition of the Corporation by means of merger or other form of corporate reorganization or consolidation with or into another corporation in which outstanding shares of the Corporation, including shares of Series A Preferred·Stock, are exchanged for securities or other consideration issued, or caused to be issued, by the other corporation or its subsidiary and, as a result of which transaction, the stockholders of this Corporation own 50% or less of the voting power of the surviving entity (other than a mere re-incorporation transaction), or (C) a sale, transfer or lease (other than a pledge or grant of a security interest to a bona fide lender) of all or substantially an of the assets of the Corporation (other than to or by a majority-owned or wholly-owned subsidiary of the Corporation), shall be treated as a liquidation, dissolution or winding up of the Corporation and shall entitle the holders of the Series A Preferred Stock to receive the amount that would be received in a liquidation, dissolution or winding up pursuant to Section 3(a) hereof, if the holders of at least 50% of the then outstanding shares of Series A Preferred Stock so elect by giving written notice thereof to the Corporation at least three (3) business days before the effective date of such event. The Corporation will provide the holders of Preferred Stock with notice of all transactions which are to be treated as a liquidation, dissolution or winding up pursuant to this Section 3(c) twenty (20) days prior to the earlier of the vote relating to such transaction or the closing of such transaction.

 

(d) Distributions of Property. Whenever the distribution provided for in this Section 3 shall be payable in property other than cash, the value of such distribution shall be the fair market value of such property as determined in good faith by the Board of Directors, unless the holders of 50% or more of the then outstanding shares of Series A Preferred Stock request, in writing, that an independent appraiser perform such valuation, then by an independent appraiser selected by the Board of Directors and reasonably acceptable to 50% or more of the holders of such series of Preferred Stock.

 

(4) Voting Power. Except as otherwise expressly provided herein or as required by law, holders of Series A Preferred Stock shall have all voting rights of those of the holders of Corporation common stock, based on one thousand (1,000) votes of Common Stock for each one share of Series A Preferred Stock so held.

 

(5) Conversion Rights. There are no conversion rights.

 

(6) Registration Rights. Holders of Series A Preferred Stock shall be entitled to such demand and piggyback registration rights as shall be designated between each such Holder and the Corporation.

 

(7) Registration of Transfer. The Corporation will keep at its principal office a register for the registration of shares of Preferred Stock. Subject to the next sentence, upon the surrender of any certificate representing shares of Preferred Stock at such place, the Corporation will, at the request of the record holders of such certificate, execute and deliver (at the Corporation’s expense) a new certificate or certificates in exchange therefore representing the aggregate number of shares of Preferred Stock represented by the surrendered certificate. It shall be a condition precedent to any such transfer that the Corporation shall receive an opinion of counsel reasonably acceptable to the Corporation that such certificates may be issued (and the Preferred Stock transferred) pursuant to an available exemption from the registration requirements of applicable state and federal securities laws. Each such new certificate will be registered in such name and will represent such number of shares of Preferred Stock as is required by the holder of the surrendered certificate and will be substantially identical in form to the surrendered certificate.

 

3
 

 

(8) Replacement. Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered holder will be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing shares of Preferred Stock, and in the case of any such loss, theft or destruction, upon receipt of an unsecured indemnity from the holder reasonably satisfactory to the Corporation or, in the case of such mutilation upon surrender of such certificate, the Corporation will (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares of Preferred Stock represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate.

 

(9) Restrictions and Limitations on Corporate Action and Amendments to Articles. The Corporation shall not take any corporate action or otherwise amend its Certificate of Incorporation or these designations without the approval by vote or written consent of the holders of at least 70% of the then outstanding shares of Series A Preferred Stock, voting together as a single class, if such corporate action or amendment would:

 

(a) authorize or create any class of stock or security senior to, or on parity with, the Preferred Stock as to dividends or liquidation preferences or redemption rights;

 

(b) increase the authorized number of Preferred Stock or alter the powers, preferences, or right of the Preferred Stock, so as to affect them adversely;

 

(c) authorize the merger, consolidation, or the sale, lease or other disposition of all or substantially all of the assets of the Corporation;

 

(d) declare or pay any dividend or distribution on any capital stock, other than the Series A Preferred Stock or the Preferred Stock; or

 

(e) enter into any material joint venture, joint marketing or joint development agreement, not in the ordinary course of business; or make any changes to the employee or incentive stock option plan; make any grants of stock options or any other forms of equity or incentive compensation.

 

(10) No Dilution or Impairment. The Corporation will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of capital stock or assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of the Preferred Stock set forth herein, but will at all times, in good faith, assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holders of the Preferred Stock hereunder. Without limiting the generality of the foregoing, the Corporation will not issue any capital stock that would dilute the voting rights of the Holders of the Series A Preferred Stock to less than 51%.

 

4
 

 

(11) Notices of Record Date. In the event of:

 

(a) any taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of capital stock of any class or any other securities or property, or to receive any other right, or

 

(b) any capital reorganization of the Corporation, any reclassification or recapitalization of the capital stock of the Corporation, any merger or consolidation of the Corporation, or any transfer of all or substantially all of the assets of the Corporation to any other corporation, or any other entity or person, or Corporation,

 

(c) any voluntary or involuntary dissolution, liquidation or winding up of the Corporation,

 

then and in each such event the Corporation shall mail or cause to be mailed to each holder of Preferred Stock a notice specifying (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right and a description of such dividend, distribution or right, (ii) the date on which any such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding up is expected to become effective, and (iii) the time, if any, that is to be fixed, as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding up. Such notice shall be mailed by first class mail, postage prepaid, at least ten (10) days prior to the earlier of (1) the date specified in such notice on which such record is to be taken and (2) the date on which such action is to be taken. Failure to mail such notice on a timely basis or any defect in such notice shall not affect the validity of any transaction or action referred to in this Section 11.

 

(12) Notices. Except as otherwise expressly provided, all notices referred to herein will be in writing and will be delivered by registered or certified mail, return receipt requested, postage prepaid and will be deemed to have been given when so mailed (i) to the Corporation, at its principal executive offices and (ii) to any stockholder, at such holder’s address as it appears in the stock records of the Corporation (unless otherwise indicated in writing by any such holder). ·

 

B. Description and Designation of Series B Preferred Stock.

 

(1) Designation. A total of 900,000 shares of the Corporation’s Preferred Stock shall be designated as “Series B Preferred Stock”. As used herein, the term “Preferred Stock” used without reference to the Series B Preferred Stock means the shares of Series B Preferred Stock and the shares of any series of authorized Preferred Stock of the Corporation issued and designated from time to time by a resolution or resolutions of the Board of Directors, share for share alike and without distinction as to class or series, except as otherwise expressly provided below.

 

5
 

 

(2) Dividends. Holders of the Series B Preferred Stock shall be entitled to receive, out of funds legally available for that purpose, on the same terms and conditions as that of holders of Common Stock, as may be declared by the Board of Directors.

 

(3) Liquidation. Dissolution or Winding Up.

 

(a) Treatment at Sale. Liquidation. Dissolution or Winding Up. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, any distribution or payment shall be made to any holders of any shares of Common Stock or any other class or series of capital stock of the Corporation designated to be junior to the Series B Preferred Stock or Common Stock, and subject to the liquidation rights and preferences of any class or series of Preferred Stock designated to be senior to, or on a parity with, the Series B Preferred Stock, holders of the shares of Series B Preferred Stock shall be entitled to be paid in cash first with the Series A Preferred Stock and Series C Preferred Stock out of the assets of the Corporation available for distribution to holders of the Corporation’s capital stock, whether such assets are capital, surplus or earnings, an amount equal to the price per share of Series B Preferred Stock originally paid to the Corporation by a holder, plus any and all accrued and unpaid dividends thereof (whether or not declared). Such amounts shall be subject to equitable adjustment whenever there shall occur a stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event involving the Series B Preferred Stock and such amount, as so determined, is referred to herein as the “Series B Liquidation Value” with respect to such shares.

 

(b) Insufficient Funds. If upon such liquidation, dissolution or winding up the assets or surplus funds of the Corporation to be distributed to the holders of shares of Series B Preferred Stock and any other then-outstanding shares of the Corporation’s capital stock ranking on a parity with respect to payment on liquidation with the Series B Preferred Stock, which shall include the Common Stock (such shares being referred to herein as the “Series B Parity Stock”) shall be insufficient to permit payment to such respective holders of the full Series B Liquidation Value and all other preferential amounts payable with respect to the Series B Preferred Stock and such Series B Parity Stock, then the assets available for payment or distribution to such holders shall be allocated among the holders of the Series B Preferred Stock and such Series B Parity Stock, pro rata, in proportion to the full respective preferential amounts to which the Series B Preferred Stock and such Series B Parity Stock are each entitled.

 

6
 

 

(c) Certain Transactions Treated as Liquidation. For purposes of this Section 4, (A) any sale, exchange, conveyance or other disposition of the capital stock of the Corporation in a transaction or series of related transactions in which more than 50% of the voting power of the Corporation is disposed of or shifts, (B) any acquisition of the Corporation by means of merger or other form of corporate reorganization or consolidation with or into another corporation in which outstanding shares of the Corporation, including shares of Series B Preferred Stock, are exchanged for securities or other consideration issued, or caused to be issued, by the other corporation or its subsidiary and, as a result of which transaction, the stockholders of this Corporation own 50% or less of the voting power of the surviving entity (other than a mere re-incorporation transaction), or (C) a sale, transfer or lease (other than a pledge or grant of a security interest to a bona fide lender) of all or substantially an of the assets of the Corporation (other than to or by a majority-owned or wholly-owned subsidiary of the Corporation), shall be treated as a liquidation, dissolution or winding up of the Corporation and shall entitle the holders of the Series B Preferred Stock to receive the amount that would be received in a liquidation, dissolution or winding up pursuant to Section 4(a) hereof, if the holders of at least 50% of the then outstanding shares of Series B Preferred Stock so elect by giving written notice thereof to the Corporation at least three business days before the effective date of such event. The Corporation will provide the holders of Preferred Stock with notice of all transactions which are to be treated as a liquidation, dissolution or winding up pursuant to this Section 4(c) twenty (20) days prior to the earlier of the vote relating to such transaction or the closing of such transaction.

 

(d) Distributions of Property. Whenever the distribution provided for in this Section 4 shall be payable in property other than cash, the value of such distribution shall be the fair market value of such property as determined in good faith by the Board of Directors, unless the holders of 50% or more of the then outstanding shares of Series B Preferred Stock request, in writing, that an independent appraiser perform such valuation, then by an independent appraiser selected by the Board of Directors and reasonably acceptable to 50% or more of the holders of such series of Preferred Stock.

 

(4) Voting Power. Except as otherwise expressly provided herein or as required by law, holders of Series B Preferred Stock shall have all voting rights of those of the holders of Corporation common stock, based on ten thousand (10,000) votes of Common Stock for each one share of Series B Preferred Stock so held.

 

(5) Conversion Rights. There are no conversion rights.

 

(6) Registration Rights. Holders of Series B Preferred Stock shall be entitled to such demand and piggyback registration rights as shall be designated between each such Holder and the Corporation.

 

(7) Registration of Transfer. The Corporation will keep at its principal office a register for the registration of shares of Preferred Stock. Subject to the next sentence, upon the surrender of any certificate representing shares of Preferred Stock at such place, the Corporation will, at the request of the record holders of such certificate, execute and deliver (at the Corporation’s expense) a new certificate or certificates in exchange therefore representing the aggregate number of shares of Preferred Stock represented by the surrendered certificate. It shall be a condition precedent to any such transfer that the Corporation shall receive an opinion of counsel reasonably acceptable to the Corporation that such certificates may be issued (and the Preferred Stock transferred) pursuant to an available exemption from the registration requirements of applicable state and federal securities laws. Each such new certificate will be registered in such name and will represent such number of shares of Preferred Stock as is required by the holder of the surrendered certificate and will be substantially identical in form to the surrendered certificate.

 

7
 

 

(8) Replacement. Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered holder will be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing shares of Preferred Stock, and in the case of any such loss, theft or destruction, upon receipt of an unsecured indemnity from the holder reasonably satisfactory to the Corporation or, in the case of such mutilation upon surrender of such certificate, the Corporation will (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares of Preferred Stock represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate.

 

(9) No Dilution or Impairment. The Corporation will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of capital stock or assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of the Preferred Stock set forth herein, but will at all times, in good faith, assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holders of the Preferred Stock hereunder.

 

(10) Notices of Record Date. In the event of:

 

(a) any taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of capital stock of any class or any other securities or property, or to receive any other right, or

 

(b) any capital reorganization of the Corporation, any reclassification or recapitalization of the capital stock of the Corporation, any merger or consolidation of the Corporation, or any transfer of all or substantially all of the assets of the Corporation to any other corporation, or any other entity or person, or Corporation,

 

(c) any voluntary or involuntary dissolution, liquidation or winding up of the Corporation,

 

then and in each such event the Corporation shall mail or cause to be mailed to each holder of Preferred Stock a notice specifying (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right and a description of such dividend, distribution or right, (ii) the date on which any such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding up is expected to become effective, and (iii) the time, if any, that is to be fixed, as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding up. Such notice shall be mailed by first class mail, postage prepaid, at least ten (10) days prior to the earlier of (1) the date specified in such notice on which such record is to be taken and (2) the date on which such action is to be taken. Failure to mail such notice on a timely basis or any defect in such notice shall not affect the validity of any transaction or action referred to in this Section 10.

 

8
 

 

(11) Notices. Except as otherwise expressly provided, all notices referred to herein will be in writing and will be delivered by registered or certified mail, return receipt requested, postage prepaid and will be deemed to have been given when so mailed (i) to the Corporation, at its principal executive offices and (ii) to any stockholder, at such holder’s address as it appears in the stock records of the Corporation (unless otherwise indicated in writing by any such holder). ·

 

B. Description and Designation of Series C Preferred Stock.

 

(1) Designation. A total of 150,000 shares of the Corporation’s Preferred Stock shall be designated as “Series C Preferred Stock”. As used herein, the term “Preferred Stock” used without reference to the Series C Preferred Stock means the shares of Series C Preferred Stock and the shares of any series of authorized Preferred Stock of the Corporation issued and designated from time to time by a resolution or resolutions of the Board of Directors, share for share alike and without distinction as to class or series, except as otherwise expressly provided below.

 

(2) Dividends. Holders of the Series C Preferred Stock shall be entitled to receive, out of funds legally available for that purpose, on the same terms and conditions as that of holders of common stock, as may be declared by the Board of Directors.

 

(3) Liquidation. Dissolution or Winding Up.

 

(a) Treatment at Sale. Liquidation. Dissolution or Winding Up. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, any distribution or payment shall be made to any holders of any shares of Common Stock or any other class or series of capital stock of the Corporation designated to be junior to the Series C Preferred Stock or Common Stock, and subject to the liquidation rights and preferences of any class or series of Preferred Stock designated to be senior to, or on a parity with, the Series C Preferred Stock, holders of the shares of Series C Preferred Stock shall be entitled to be paid in cash first with the Series A Preferred Stock and Series B Preferred Stock out of the assets of the Corporation available for distribution to holders of the Corporation’s capital stock, whether such assets are capital, surplus or earnings, an amount equal to the price per share of Series C Preferred Stock originally paid to the Corporation by a holder, plus any and all accrued and unpaid dividends thereof (whether or not declared). Such amounts shall be subject to equitable adjustment whenever there shall occur a stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event involving the Series C Preferred Stock and such amount, as so determined, is referred to herein as the “Series C Liquidation Value” with respect to such shares.

 

(b) Insufficient Funds. If upon such liquidation, dissolution or winding up the assets or surplus funds of the Corporation to be distributed to the holders of shares of Series C Preferred Stock and any other then-outstanding shares of the Corporation’s capital stock ranking on a parity with respect to payment on liquidation with the Series C Preferred Stock, which shall include the Common Stock (such shares being referred to herein as the “Series C Parity Stock”) shall be insufficient to permit payment to such respective holders of the full Series C Liquidation Value and all other preferential amounts payable with respect to the Series C Preferred Stock and such Series C Parity Stock, then the assets available for payment or distribution to such holders shall be allocated among the holders of the Series C Preferred Stock and such Series C Parity Stock, pro rata, in proportion to the full respective preferential amounts to which the Series C Preferred Stock and such Series C Parity Stock are each entitled.

 

9
 

 

(c) Certain Transactions Treated as Liquidation. For purposes of this Section 4, (A) any sale, exchange, conveyance or other disposition of the capital stock of the Corporation in a transaction or series of related transactions in which more than 50% of the voting power of the Corporation is disposed of or shifts, (B) any acquisition of the Corporation by means of merger or other form of corporate reorganization or consolidation with or into another corporation in which outstanding shares of the Corporation, including shares of Series C Preferred·Stock, are exchanged for securities or other consideration issued, or caused to be issued, by the other corporation or its subsidiary and, as a result of which transaction, the stockholders of this Corporation own 50% or less of the voting power of the surviving entity (other than a mere re-incorporation transaction), or (C) a sale, transfer or lease (other than a pledge or grant of a security interest to a bona fide lender) of all or substantially an of the assets of the Corporation (other than to or by a majority-owned or wholly-owned subsidiary of the Corporation), shall be treated as a liquidation, dissolution or winding up of the Corporation and shall entitle the holders of the Series C Preferred Stock to receive the amount that would be received in a liquidation, dissolution or winding up pursuant to Section 4(a) hereof, if the holders of at least 50% of the then outstanding shares of Series C Preferred Stock so elect by giving written notice thereof to the Corporation at least three (3) business days before the effective date of such event. The Corporation will provide the holders of Preferred Stock with notice of all transactions which are to be treated as a liquidation, dissolution or winding up pursuant to this Section 4(c) twenty (20) days prior to the earlier of the vote relating to such transaction or the closing of such transaction.

 

(d) Distributions of Property. Whenever the distribution provided for in this Section 4 shall be payable in property other than cash, the value of such distribution shall be the fair market value of such property as determined in good faith by the Board of Directors, unless the holders of 50% or more of the then outstanding shares of Series C Preferred Stock request, in writing, that an independent appraiser perform such valuation, then by an independent appraiser selected by the Board of Directors and reasonably acceptable to 50% or more of the holders of such series of Preferred Stock.

 

(4) Voting Power. Except as otherwise expressly provided herein or as required by law, holders of Series B Preferred Stock shall have all voting rights of those of the holders of Corporation common stock, based on five thousand (5,000) votes of Common Stock for each one share of Series C Preferred Stock so held.

 

(5) Conversion Rights. There are no conversion rights.

 

(6) Registration Rights. Holders of Series C Preferred Stock shall be entitled to such demand and piggyback registration rights as shall be designated between each such Holder and the Corporation.

 

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(7) Registration of Transfer. The Corporation will keep at its principal office a register for the registration of shares of Preferred Stock. Subject to the next sentence, upon the surrender of any certificate representing shares of Preferred Stock at such place, the Corporation will, at the request of the record holders of such certificate, execute and deliver (at the Corporation’s expense) a new certificate or certificates in exchange therefore representing the aggregate number of shares of Preferred Stock represented by the surrendered certificate. It shall be a condition precedent to any such transfer that the Corporation shall receive an opinion of counsel reasonably acceptable to the Corporation that such certificates may be issued (and the Preferred Stock transferred) pursuant to an available exemption from the registration requirements of applicable state and federal securities laws. Each such new certificate will be registered in such name and will represent such number of shares of Preferred Stock as is required by the holder of the surrendered certificate and will be substantially identical in form to the surrendered certificate.

 

(8) Replacement. Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered holder will be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing shares of Preferred Stock, and in the case of any such loss, theft or destruction, upon receipt of an unsecured indemnity from the holder reasonably satisfactory to the Corporation or, in the case of such mutilation upon surrender of such certificate, the Corporation will (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares of Preferred Stock represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate.

 

(9) No Dilution or Impairment. The Corporation will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of capital stock or assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of the Preferred Stock set forth herein, but will at all times, in good faith, assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holders of the Preferred Stock hereunder.

 

(10) Notices of Record Date. In the event of:

 

(a) any taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of capital stock of any class or any other securities or property, or to receive any other right, or

 

(b) any capital reorganization of the Corporation, any reclassification or recapitalization of the capital stock of the Corporation, any merger or consolidation of the Corporation, or any transfer of all or substantially all of the assets of the Corporation to any other corporation, or any other entity or person, or Corporation,

 

(c) any voluntary or involuntary dissolution, liquidation or winding up of the Corporation,

 

then and in each such event the Corporation shall mail or cause to be mailed to each holder of Preferred Stock a notice specifying (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right and a description of such dividend, distribution or right, (ii) the date on which any such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding up is expected to become effective, and (iii) the time, if any, that is to be fixed, as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding up. Such notice shall be mailed by first class mail, postage prepaid, at least ten (10) days prior to the earlier of (1) the date specified in such notice on which such record is to be taken and (2) the date on which such action is to be taken. Failure to mail such notice on a timely basis or any defect in such notice shall not affect the validity of any transaction or action referred to in this Section 10.

 

(11) Notices. Except as otherwise expressly provided, all notices referred to herein will be in writing and will be delivered by registered or certified mail, return receipt requested, postage prepaid and will be deemed to have been given when so mailed (i) to the Corporation, at its principal executive offices and (ii) to any stockholder, at such holder’s address as it appears in the stock records of the Corporation (unless otherwise indicated in writing by any such holder). ·

 

11
 

 

IN WITNESS WHEREOF, the Corporation has made the foregoing Amendment to the Amended and Restated Certificate of Incorporation and the President has hereunto set his hand as of the ___ day of December, 2020.

 

  TESORO ENTERPRISES, INC.
   
  By: /s/ Brian Foote
    Brian Foote, President

 

12

 

 

Exhibit 3.3

 

CERTIFICATE OF AMENDMENT TO

CERTIFICATE OF INCORPORATION OF

HUMBL, Inc.

 

[Series B Amendment]

 

HUMBL, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “Corporation”), does hereby certify as follows:

 

1. The name of the corporation is HUMBL, Inc. The date of the filing of its original Certificate of Incorporation (the “Certificate of Incorporation”) with the Secretary of State of the State of Delaware was November 18, 2020.

 

2. This Certificate of Amendment to Certificate of Incorporation (this “Certificate of Amendment”) (i) reduces the authorized shares of Series B Preferred Stock of the Corporation (the “Series B Preferred Stock”); and (ii) amends and restates the text of Section 4(a) of the Certificate of Incorporation of the Corporation (the “Certificate”) to add certain provisions to the designation of the Series B Preferred Stock.

 

3. The number “900,000” in Section (B)(1) of Article FOURTH of the Certificate is hereby amended to read “570,000”.

 

4. Subsection (5)(a) of the first Subsection “B” of Article FOURTH of the Certificate is hereby amended and restated in its entirety to provide as follows:

 

(a) Right to Convert.

 

(i)Subject to the terms and conditions herein, each share of Series B Preferred Stock shall be convertible at the option of the holder thereof (each, a “Series B Holder”) at any time after December 3, 2021 at the office of the Corporation or any transfer agent for such stock into ten thousand (10,000) fully paid and nonassessable shares of Common Stock subject to adjustment for any stock split or distribution of securities or subdivision of the outstanding shares of Common Stock.

 

(ii)Notwithstanding the provisions of Section 5(a)(i) above, the conversion of Series B Preferred Stock shall be subject to the following limitations each Series B Holder, agrees as follows with respect to the shares of Series B Preferred Stock that such Series B Holder beneficially owns or controls the disposition as of December 3, 2021 (as to each Series B Holder, the “Applicable Series B Shares”):

 

1.For each of the calendar months of December 2021 and January 2022, a Series B Holder who owns more than 750 shares of Series B Preferred Stock shall not have the right, whether by election, operation of law, or otherwise, to convert into Common Stock shares of Series B Preferred Stock constituting more than five percent (5%) (rounded down to the nearest whole share) of the total number of shares of Series B Preferred Stock then held by such Series B Holder (as to each Series B Holder, the “Applicable Series B Shares”). By way of example and not limitation, if the Applicable Series B Shares for a Series B Holder was 1,000 Applicable Series B Shares, such Series B Holder would be entitled to convert 50 shares of Series B Preferred Stock into shares of Common Stock in December 2021, and to convert 50 shares of Series B Preferred Stock into shares of Common Stock in January 2022.

 

2.For each of the calendar months from February 2022 to May 2023, a Series B Holder who owns more than 750 shares of Series B Preferred Stock shall not have the right, whether by election, operation of law, or otherwise, to convert into Common Stock shares of Series B Preferred Stock constituting more than three percent (3%) (rounded down to the nearest whole share) of the total number of such Series B Holder’s Applicable Series B Shares. By way of example and not limitation, if the Applicable Series B Shares for such Series B Holder was 1,000 Applicable Series B Shares, such Series B Holder would be entitled to convert 30 shares of Series B Preferred Stock into shares of Common Stock in each calendar month from February 2022 to May 2023.

 

(iii)Each Series B Holder acknowledges and agrees that the Company shall not be required to effect or recognize any conversion of any shares of Series B Preferred Stock which would be in violation of the terms and conditions herein.

 

5. The remaining provisions of the Certificate of Incorporation not affected by the aforementioned amendments shall remain in full force and shall not be affected by this Certificate of Amendment.

 

6. This Certificate of Amendment was duly adopted by the Board of Directors of the Corporation on October 27, 2021 and by the holders of the Series B Preferred Stock on October 28, 2021 in accordance with the applicable provisions of Sections 141, 228 and 242 of the General Corporation Law of the State of Delaware.

 

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be executed by its duly authorized officer this 29th day of October, 2021.

 

  HUMBL, Inc.
     
  By:  
  Name: Brian Foote
  Title: Chief Executive Officer

 

 

 

 

Exhibit 3.4

 

CERTIFICATE OF WITHDRAWAL OF THE DESIGNATIONS OF

PREFERENCES AND RIGHTS OF

SERIES C PREFERRED STOCK

OF

HUMBL, Inc.

 

a Delaware corporation

 

HUMBL, Inc., a Delaware corporation (the “Corporation”), DOES HEREBY CERTIFY:

 

That, pursuant to authority conferred on the Board of Directors of the Corporation by the Certificate of Incorporation of the Corporation (the “Certificate of Incorporation”) and pursuant to the provisions of Section 151 of Title 8 of the Delaware Code, the Board of Directors (“Board”), by unanimous written consent of the Board dated October 27, 2021, adopted resolutions eliminating the designation and the relative powers, preferences, rights, qualifications, limitations and restrictions of the Corporation’s Series C Preferred Stock, and these composite resolutions eliminating the designation and relative powers, preferences, rights, qualifications, limitations and restrictions of such Series C Preferred Stock are as follows:

 

WHEREAS, the Board of Directors of the Corporation has previously adopted resolutions providing for the designation, preferences and relative, participating, optional or other rights, and qualifications, limitations or restrictions thereof, of 150,000 shares of the Corporation’s preferred stock, par value $0.00001 per share, as the Series C Preferred Stock (the “Series C Preferred Stock”) as set forth in the second subsection “B” of Article FOURTH of the Certificate of Incorporation of the Corporation, as set forth in the Certificate of Amendment to the Certificate of Incorporation of the Corporation as filed with the Secretary of State of the State of Delaware on December 23, 2020 (the “Series C Designation”);

 

WHEREAS, no shares of Series C Preferred Stock are outstanding and no shares of Series C Preferred Stock with such rights and preferences shall be issued in the future and Board of Directors of the Corporation deems it to be in the best interests of the Corporation and its stockholders to withdraw the Series C Designation and return the shares of preferred stock previously designated as Series C Preferred Stock to authorized preferred stock available for designation and issuance in accordance with the Certificate of Incorporation, pursuant to a Certificate of Withdrawal of the Designations of Preferences and Rights of the Series C Preferred Stock;

 

NOW THEREFORE, BE IT RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of the Corporation in accordance with the provisions of the Certificate of Incorporation of the Corporation, the Board of Directors of the Corporation hereby withdraws the Series C Designation, and the provisions of the second subsection “B” of Article FOURTH of the Certificate of Incorporation of the Corporation, as set forth in the Certificate of Amendment to the Certificate of Incorporation of the Corporation as filed with the Secretary of State of the State of Delaware on December 23, 2020 are hereby deleted and removed from the Certificate of Incorporation of the Corporation, and the Board of Directors hereby returns the previously designated shares of Series C Preferred Stock to their status as authorized Preferred Stock available for designation and issuance as determined by the Board of Directors of the Corporation, and that the officers of the Corporation, and each acting singly, are hereby authorized, empowered and directed to file with the Secretary of State of the State of Delaware a Certificate of Withdrawal of the Designation, Preferences and Rights of the Series C Preferred Stock in such form as the officers of the Corporation may deem necessary, and to take such other actions as such officers shall deem necessary or advisable to carry out the purposes of this resolution; and be it

 

FURTHER RESOLVED, that when such certificate of withdrawal becomes effective upon acceptance of the Secretary of State of the State of Delaware, it shall have the effect of eliminating from the Corporation’s current Certificate of Incorporation all matters set forth in the Series C Designation and the Certificate of Incorporation with respect to the Series C Preferred Stock.

 

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Withdrawal to be signed by and attested by its duly authorized officer this 29th day of October, 2021.

 

  HUMBL, Inc.
     
  By:  
  Name: Brian Foote
  Title: Chief Executive Officer

 

 

 

 

Exhibit 3.5

 

BYLAWS OF HUMBL, INC.

(A DELAWARE CORPORATION)

 

 

 

ARTICLE I - CORPORATE OFFICES

 

1.1 REGISTERED OFFICE.

 

The registered office of the Corporation shall be fixed in the corporation’s certificate of incorporation, as the same may be amended from time to time.

 

1.2 OTHER OFFICES.

 

The corporation’s Board of Directors (the “Board”) may at any time establish branch or other offices at any place or places where the corporation is qualified to do business.

 

ARTICLE II - MEETINGS OF STOCKHOLDERS

2.1 PLACE OF MEETINGS.

 

Meetings of stockholders shall be held at any place, within or outside the State of Delaware, designated by the Board. The Board may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211 of the General Corporation Law of Delaware (the “DGCL”). In the absence of any such designation or determination, stockholders’ meetings shall be held at the corporation’s principal executive office.

 

2.2 ANNUAL MEETING.

 

The annual meeting of stockholders shall be held each year. The Board shall designate the date and time of the annual meeting. At the annual meeting, directors shall be elected and any other proper business may be transacted.

 

2.3 SPECIAL MEETING.

 

A special meeting of the stockholders may be called at any time by the Board, chairperson of the Board, chief executive officer or president (in the absence of a chief executive officer), but such special meetings may not be called by any other person or persons.

 

No business may be transacted at such special meeting other than the business specified in such notice to stockholders. Nothing contained in this paragraph of this Section 2.3 shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board may be held.

 

 
 

 

2.4 ADVANCE NOTICE PROCEDURES; NOTICE OF STOCKHOLDERS’ MEETINGS.

 

(i) At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be: (A) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the board of directors, (B) otherwise properly brought before the meeting by or at the direction of the board of directors, or (C) otherwise properly brought before the meeting by a stockholder. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the secretary of the corporation. To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the corporation not more than one hundred twenty (120) calendar days nor less than ninety (90) calendar days before the one year anniversary of the date on which the corporation first mailed its proxy statement to stockholders in connection with the previous year’s annual meeting of stockholders; provided, however, that in the event that no annual meeting was held in the previous year or the date of the annual meeting has been changed by more than thirty (30) days from the date of the prior year’s meeting, notice by the stockholder to be timely must be so received not later than the close of business on the later of one hundred twenty (120) calendar days in advance of such annual meeting and ten (10) calendar days following the date on which public announcement of the date of the meeting is first made. A stockholder’s notice to the secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting: (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and address, as they appear on the corporation’s books, of the stockholder proposing such business, (c) the class and number of shares of the corporation that are beneficially owned by the stockholder, (d) any material interest of the stockholder in such business, and (e) any other information that is required to be provided by the stockholder pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), in his capacity as a proponent to a stockholder proposal. Notwithstanding the foregoing, in order to include information with respect to a stockholder proposal in the proxy statement and form of proxy for a stockholder’s meeting, stockholders must provide notice as required by the regulations promulgated under the Exchange Act. Notwithstanding anything in these bylaws to the contrary, no business shall be conducted at any annual meeting except in accordance with the procedures set forth in this paragraph (i). The chairman of the annual meeting shall, if the facts warrant, determine and declare at the meeting that business was not properly brought before the meeting and in accordance with the provisions of this paragraph (i), and, if he should so determine, he shall so declare at the meeting that any such business not properly brought before the meeting shall not be transacted.

 

(ii) Only persons who are nominated in accordance with the procedures set forth in this paragraph (ii) shall be eligible for election as directors. Nominations of persons for election to the board of directors of the corporation may be made at a meeting of stockholders by or at the direction of the board of directors or by any stockholder of the corporation entitled to vote in the election of directors at the meeting who complies with the notice procedures set forth in this paragraph (ii). Such nominations, other than those made by or at the direction of the board of directors, shall be made pursuant to timely notice in writing to the secretary of the corporation in accordance with the provisions of paragraph (i) of this Section 2.4. Such stockholder’s notice shall set forth (a) as to each person, if any, whom the stockholder proposes to nominate for election or re-election as a director: (A) the name, age, business address and residence address of such person, (B) the principal occupation or employment of such person, (C) the class and number of shares of the corporation that are beneficially owned by such person, (D) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the stockholder, and (E) any other information relating to such person that is required to be disclosed in solicitations of proxies for elections of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act (including without limitation such person’s written consent to being named in the proxy statement, if any, as a nominee and to serving as a director if elected); and (b) as to such stockholder giving notice, the information required to be provided pursuant to paragraph (i) of this Section 2.4. At the request of the board of directors, any person nominated by a stockholder for election as a director shall furnish to the secretary of the corporation that information required to be set forth in the stockholder’s notice of nomination which pertains to the nominee. No person shall be eligible for election as a director of the corporation unless nominated in accordance with the procedures set forth in this paragraph (ii). The chairman of the meeting shall, if the facts warrant, determine and declare at the meeting that a nomination was not made in accordance with the procedures prescribed by these bylaws, and if he should so determine, he shall so declare at the meeting, and the defective nomination shall be disregarded.

 

These provisions shall not prevent the consideration and approval or disapproval at an annual meeting of reports of officers, directors and committees of the board of directors, but in connection therewith no new business shall be acted upon at any such meeting unless stated, filed and received as herein provided. Notwithstanding anything in these bylaws to the contrary, no business brought before a meeting by a stockholder shall be conducted at an annual meeting except in accordance with procedures set forth in this Section 2.4. All notices of meetings of stockholders shall be sent or otherwise given in accordance with either Section 2.5 or Section 8.1 of these bylaws not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting. The notice shall specify the place, if any, date and hour of the meeting, the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called.

 

 
 

 

2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.

 

Notice of any meeting of stockholders shall be given either (i) personally, (ii) by private courier, (iii) by first- or third-class United States mail, (iv) by other written communication, or (v) by electronic transmission as provided in Section 8.1 or other wireless means. Notices not personally delivered shall be sent postage prepaid, directed to the stockholder at his or her address as it appears on the records of the Corporation or given by the stockholder to the corporation for the purpose of notice. Notice shall be deemed to have been given at the time when delivered personally or by courier or deposited in the mail or sent by other means of written communication or by electronic transmission or other wireless means.

 

An affidavit of the secretary or an assistant secretary of the corporation or of the transfer agent or any other agent of the corporation that the notice has been given by mail or by a form of electronic transmission, as applicable, shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

 

2.6 QUORUM.

 

The holders of a majority of the stock issued and outstanding and entitled to vote, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders. If, however, such quorum is not present or represented at any meeting of the stockholders, then either (i) the chairperson of the meeting, or (ii) the stockholders entitled to vote at the meeting, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed.

 

2.7 ADJOURNED MEETING; NOTICE.

 

When a meeting is adjourned to another time or place, unless these bylaws otherwise require, notice need not be given of the adjourned meeting if the time, place if any thereof, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

 

2.8 CONDUCT OF BUSINESS.

 

The chairperson of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of business.

 

2.9 VOTING.

 

The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.11 of these bylaws, subject to Section 217 (relating to voting rights of fiduciaries, pledgors and joint owners of stock) and Section 218 (relating to voting trusts and other voting agreements) of the DGCL.

 

 
 

 

Except as may be otherwise provided in the certificate of incorporation or these bylaws, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder. Except as otherwise provided by the DGCL or the certificate of incorporation, when a quorum is present at any meeting of the stockholders, the vote of the holders of a majority of the shares having voting power present in person or represented by proxy shall decide any action brought to vote before such meeting, other than the election of directors for which the vote of a plurality of the shares having voting power present in person or represented by proxy is required. There shall be no cumulative voting in the election of directors.

 

2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.

 

Any action required or permitted to be taken by the stockholders of the corporation at a duly called annual or special meeting of stockholders of the corporation may be effected by a consent in writing by such stockholders.

 

2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS.

 

In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted and which shall not be more than sixty (60) calendar days nor less than ten (10) calendar days before the date of such meeting, nor more than sixty (60) calendar days prior to any other such action.

 

If the Board does not so fix a record date:

 

(i) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.

 

(ii) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.

 

A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting.

 

2.12 PROXIES.

 

Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder as proxy by executing an instrument in writing or by authorizing the transmission of a telegram, cablegram or other means of electronic transmission (provided that any such telegram, cablegram, or other means of electronic transmission either sets forth or is submitted with information from which it can be determined that the telegram, cablegram, or other means of electronic transmission was authorized by the person) and filed in accordance with the procedure established for the meeting, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212 of the DGCL.

 

 
 

 

2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE.

 

The officer who has charge of the stock ledger of the corporation shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. The corporation shall not be required to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least ten (10) calendar days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the corporation’s principal executive office. In the event that the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. Such list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them.

 

2.14 INSPECTORS OF ELECTION

 

Before any meeting of stockholders, the board of directors shall appoint an inspector or inspectors of election to act at the meeting or its adjournment. The number of inspectors shall be either one (1) or three (3). If any person appointed as inspector fails to appear or fails or refuses to act, then the chairperson of the meeting may, and upon the request of any stockholder or a stockholder’s proxy shall, appoint a person to fill that vacancy.

 

Such inspectors shall:

 

  (i) determine the number of shares outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies;
  (ii) receive votes, ballots or consents;
     
  (iii) hear and determine all challenges and questions in any way arising in connection with the right to vote;
     
  (iv) count and tabulate all votes or consents;
     
  (v) determine when the polls shall close;
     
  (vi) determine the result; and
     
  (vii) do any other acts that may be proper to conduct the election or vote with fairness to all stockholders.

 

The inspectors of election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical. If there are three (3) inspectors of election, the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all. Any report or certificate made by the inspectors of election is prima facie evidence of the facts stated therein.

 

 
 

 

ARTICLE III - DIRECTORS

 

3.1 POWERS.

 

Subject to the provisions of the DGCL and any limitations in the certificate of incorporation or these bylaws relating to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board.

 

3.2 NUMBER OF DIRECTORS.

 

The authorized number of directors shall be determined from time to time by resolution of the Board, provided the Board shall consist of at least one member. No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.

 

3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS.

 

Except as provided in Section 3.4 of these bylaws, each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until such director’s successor is elected and qualified or until such director’s earlier death, resignation or removal. Directors need not be stockholders unless so required by the certificate of incorporation or these bylaws. The certificate of incorporation or these bylaws may prescribe other qualifications for directors.

 

3.4 RESIGNATION AND VACANCIES.

 

Any director may resign at any time upon notice given in writing or by electronic transmission to the corporation. When one or more directors so resigns and the resignation is effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in this section in the filling of other vacancies.

 

Unless otherwise provided in the certificate of incorporation or these bylaws, vacancies, including vacancies resulting from the removal of a director pursuant to Section 3.11 of these bylaws, and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. If the directors are divided into classes, a person so elected by the directors then in office to fill a vacancy or newly created directorship shall hold office until the next election of the class for which such director shall have been chosen and until his or her successor shall have been duly elected and qualified.

 

If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of the certificate of incorporation or these bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the DGCL.

 

3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.

 

The Board may hold meetings, both regular and special, either within or outside the State of Delaware.

 

Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the Board, or any committee designated by the Board, may participate in a meeting of the Board, or any committee, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

 

 
 

 

3.6 REGULAR MEETINGS.

 

Regular meetings of the Board may be held without notice at such time and at such place as shall from time to time be determined by the Board.

 

3.7 SPECIAL MEETINGS; NOTICE.

 

Special meetings of the Board for any purpose or purposes may be called at any time by the chairperson of the Board, the chief executive officer, the president, the secretary or a majority of the authorized number of directors.

 

Notice of the time and place of special meetings shall be:

 

    (i) delivered personally by hand, by courier or by telephone;
       
    (ii) sent by United States first-class mail, postage prepaid;
       
    (iii) sent by facsimile; or
       
    (iv) sent by electronic mail, directed to each director at that director’s address, telephone number, facsimile number or electronic mail address, as the case may be, as shown on the corporation’s records.

 

If the notice is (i) delivered personally by hand, by courier or by telephone, (ii) sent by facsimile or (iii) sent by electronic mail, it shall be delivered or sent at least 24 hours before the time of the holding of the meeting. If the notice is sent by United States mail, it shall be deposited in the United States mail at least four days before the time of the holding of the meeting. Any oral notice may be communicated to the director. The notice need not specify the place of the meeting (if the meeting is to be held at the corporation’s principal executive office) nor the purpose of the meeting.

 

3.8 QUORUM.

 

At all meetings of the Board, a majority of the authorized number of directors shall constitute a quorum for the transaction of business. The vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board, except as may be otherwise specifically provided by statute, the certificate of incorporation or these bylaws. If a quorum is not present at any meeting of the Board, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.

 

A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.

 

3.9 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING.

 

Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

 

3.10 FEES AND COMPENSATION OF DIRECTORS.

 

Unless otherwise restricted by the certificate of incorporation or these bylaws, the Board shall have the authority to fix the compensation of directors.

 

 
 

 

3.11 REMOVAL OF DIRECTORS.

 

Any director may be removed from office at any special or annual meeting of the shareholders by a majority of stockholders of the Corporation.

 

No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director’s term of office.

 

ARTICLE IV - COMMITTEES

 

4.1 COMMITTEES OF DIRECTORS.

 

The Board may, by resolution passed by a majority of the authorized number of directors, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board or in these bylaws, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority to (i) approve or adopt, or recommend to the stockholders, any action or matter expressly required by the DGCL to be submitted to stockholders for approval, or (ii) adopt, amend or repeal any bylaw of the corporation.

 

4.2 COMMITTEE MINUTES.

 

Each committee shall keep regular minutes of its meetings and report the same to the Board when required.

 

4.3 MEETINGS AND ACTION OF COMMITTEES.

 

Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of:

 

    (i) Section 3.5 (place of meetings and meetings by telephone);
       
    (ii) Section 3.6 (regular meetings);
       
    (iii) Section 3.7 (special meetings and notice);
       
    (iv) Section 3.8 (quorum);
       
    (v) Section 3.9 (action without a meeting); and
       
    (vi) Section 7.12 (waiver of notice) with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the Board and its members; provided, however:

 

  (i)the time of regular meetings of committees may be determined either by resolution of the Board or by resolution of the committee;

 

  (ii)special meetings of committees may also be called by resolution of the Board; and

 

  (iii)notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The Board may adopt rules for the governance of any committee not inconsistent with the provisions of these bylaws.

 

 
 

 

ARTICLE V - OFFICERS

 

5.1 OFFICERS.

 

The officers of the corporation shall be a president and a secretary. The corporation may also have, at the discretion of the Board, a chairperson of the Board, a vice chairperson of the Board, a chief executive officer, a chief financial officer or treasurer, one or more vice presidents, one or more assistant vice presidents, one or more assistant treasurers, one or more assistant secretaries, and any such other officers as may be appointed in accordance with the provisions of these bylaws. Any number of offices may be held by the same person.

 

5.2 APPOINTMENT OF OFFICERS.

 

The Board shall appoint the officers of the corporation, except such officers as may be appointed in accordance with the provisions of Sections 5.3 and 5.5 of these bylaws, subject to the rights, if any, of an officer under any contract of employment.

 

5.3 SUBORDINATE OFFICERS.

 

The Board may appoint, or empower the chief executive officer or, in the absence of a chief executive officer, the president, to appoint, such other officers and agents as the business of the corporation may require. Each of such officers and agents shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the Board may from time to time determine.

 

5.4 REMOVAL AND RESIGNATION OF OFFICERS.

 

Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by an affirmative vote of the majority of the Board at any regular or special meeting of the Board or, except in the case of an officer chosen by the Board, by any officer upon whom such power of removal may be conferred by the Board.

 

Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice. Unless otherwise specified in the notice of resignation, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party.

 

5.5 VACANCIES IN OFFICES.

 

Any vacancy occurring in any office of the corporation shall be filled by the Board or as provided in Section 5.2.

 

5.6 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.

 

The chairperson of the Board, the president, any vice president, the treasurer, the secretary or assistant secretary of this corporation, or any other person authorized by the Board or the president or a vice president, is authorized to vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.

 

5.7 CHAIRPERSON OF THE BOARD.

 

The chairperson of the Board, if such an officer be elected, shall, if present, preside at meetings of the board of directors and exercise such other powers and perform such other duties as may from time to time be assigned to him by the board of directors or as may be prescribed by these bylaws. If there is no chairperson of the Board, then the chief executive officer of the corporation shall have the powers and duties prescribed herein.

 

 
 

 

5.8 CHIEF EXECUTIVE OFFICER.

 

Subject to such supervisory powers, if any, as may be given by the Board to the chairperson of the Board, if there be such an officer, the chief executive officer of the corporation shall, subject to the control of the Board, have general supervision, direction and control of the business and the officers of the corporation. He or she shall preside at all meetings of the stockholders and, in the absence or nonexistence of a chairperson of the Board, at all meetings of the Board.

 

5.9 PRESIDENT.

 

Subject to such supervisory powers, if any, as may be given by the Board to the chief executive officer, if there be such an officer, the president of the corporation shall, subject to the control of the Board, have general supervision over the operations of the corporation. He or she shall have the general powers and duties of management usually vested in the office of president of a corporation and shall have such other powers and perform such other duties as may be prescribed by the Board or these bylaws.

 

5.10 VICE PRESIDENTS.

 

In the absence or disability of the president, and if there is no chairperson of the Board, the vice presidents, if any, in order of their rank as fixed by the Board or, if not ranked, a vice president designated by the Board, shall perform all the duties of the president and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board, these bylaws, the president or the chairperson of the Board.

 

5.11 SECRETARY.

 

The secretary shall keep or cause to be kept, at the principal executive office of the corporation or such other place as the Board may direct, a book of minutes of all meetings and actions of the Board, committees of directors and stockholders. The minutes shall show the time and place of each meeting, whether regular or special (and, if special, how authorized and the notice given), the names of those present at directors’ meetings or committee meetings, the number of shares present or represented at stockholders’ meetings and the proceedings thereof.

 

The secretary shall keep, or cause to be kept, at the principal executive office of the corporation or at the office of the corporation’s transfer agent or registrar, as determined by resolution of the Board, a share register or a duplicate share register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, and, if certificates have been issued, the number and date of certificates evidencing such shares and the number and date of cancellation of every certificate surrendered for cancellation.

 

 
 

 

The secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the Board required to be given by law or by these bylaws. He or she shall keep the seal of the corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the Board or by these bylaws.

 

5.12 CHIEF FINANCIAL OFFICER.

 

The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings and shares. The books of account shall at all reasonable times be open to inspection by any director for a purpose reasonably related to his position as a director.

 

The chief financial officer shall deposit all money and other valuables in the name and to the credit of the corporation with such depositaries as may be designated by the Board. He or she shall disburse the funds of the corporation as may be ordered by the Board, shall render to the president and directors, whenever they request it, an account of all of his or her transactions as chief financial officer and of the financial condition of the corporation, and shall have such other powers and perform such other duties as may be prescribed by the Board or these bylaws.

 

5.13 AUTHORITY AND DUTIES OF OFFICERS.

 

In addition to the foregoing authority and duties, all officers of the corporation shall respectively have such authority and perform such duties in the management of the business of the corporation as may be designated from time to time by the Board or the stockholders and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board.

 

ARTICLE VI - RECORDS AND REPORTS

 

6.1 MAINTENANCE AND INSPECTION OF RECORDS.

 

The corporation shall, either at its principal executive office or at such place or places as designated by the Board, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these bylaws as amended to date, accounting books, and other records.

 

Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business, at such stockholder’s expense, to inspect for any proper purpose the corporation’s stock ledger, a list of its stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person’s interest as a stockholder. In every instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent so to act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in Delaware or at its principal executive office.

 

6.2 INSPECTION BY DIRECTORS.

 

Any director shall have the right to examine the corporation’s stock ledger, a list of its stockholders, and its other books and records for a purpose reasonably related to his or her position as a director. The Court of Chancery is hereby vested with the exclusive jurisdiction to determine whether a director is entitled to the inspection sought. The Court may summarily order the corporation to permit the director to inspect any and all books and records, the stock ledger, and the stock list and to make copies or extracts therefrom. The Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief as the Court may deem just and proper.

 

 
 

 

ARTICLE VII - GENERAL MATTERS

 

7.1 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS.

 

The Board, except as otherwise provided in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the Board or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

 

7.2 STOCK CERTIFICATES; PARTLY PAID SHARES.

 

The shares of the corporation shall be represented by certificates, provided that the Board may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Notwithstanding the adoption of such a resolution by the Board, every holder of stock represented by certificates shall be entitled to have a certificate signed by, or in the name of the corporation by the chairperson or vice-chairperson of the Board, or the president or vice-president, and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary of such corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. The corporation also may issue paperless book-entry shares as a pre-condition for inclusion in the DWAC/FAST and DRS Profile systems offered by The Depository Trust & Clearing Corporation.

 

The corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, or upon the books and records of the corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.

 

7.3 SPECIAL DESIGNATION ON CERTIFICATES.

 

If the corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the DGCL, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the corporation shall issue to represent such class or series of stock a statement that the corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

 

 
 

 

7.4 LOST CERTIFICATES.

 

Except as provided in this Section 7.4, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and cancelled at the same time. The corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.

 

7.5 CONSTRUCTION; DEFINITIONS.

 

Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the DGCL shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both a business entity and a natural person.

 

7.6 DIVIDENDS.

 

The Board, subject to any restrictions contained in either (i) the DGCL, or (ii) the certificate of incorporation, may declare and pay dividends upon the shares of its capital stock. Dividends may be paid in cash, in property, or in shares of the corporation’s capital stock.

 

The Board may set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the corporation, and meeting contingencies.

 

7.7 FISCAL YEAR.

 

The fiscal year of the corporation shall be fixed by resolution of the Board and may be changed by the Board.

 

7.8 SEAL.

 

The corporation may adopt a corporate seal, which shall be adopted and which may be altered by the Board. The corporation may use the corporate seal by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.

 

7.9 TRANSFER OF STOCK.

 

To the extent that certificates have been issued, upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction in its books.

 

 
 

 

7.10 STOCK TRANSFER AGREEMENTS.

 

The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the DGCL.

 

7.11 REGISTERED STOCKHOLDERS.

 

The corporation:

 

(i) shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner;

 

(ii) shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares; and

 

(iii) shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

 

7.12 WAIVER OF NOTICE.

 

Whenever notice is required to be given under any provision of the DGCL, the certificate of incorporation or these bylaws, a written waiver, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the certificate of incorporation or these bylaws.

 

7.13 FORUM FOR ADJUDICATING DISPUTES.

 

(a) Unless the Corporation consents in writing to the selection of an alternative forum, to the fullest extent permitted by law, the Court of Chancery of the State of Delaware (or, if that court lacks subject matter jurisdiction, another federal or state court situated in the State of Delaware) shall be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim against the Corporation, its directors, officers or employees arising pursuant to any provision of the DGCL, the certificate of incorporation or these bylaws, or (iv) any action asserting a claim against the Corporation, its directors, officers or employees governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Section 7.13.

 

(b) Unless the Corporation consents in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States situated in the State of Delaware shall be the exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act of 1933 and the Securities Exchange Act of 1934. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the corporation shall be deemed to have notice of and consented to the provisions of this Section 7.13.

 

(c) If any action the subject matter of which is within the scope of Section 7.13(a) above is filed in a court other than a court located within the State of Delaware (a “Foreign Action”) in the name of any stockholder, such stockholder shall be deemed to have consented to (i) the personal jurisdiction of the state and/or federal courts (as applicable) located within the State of Delaware in connection with any action brought in any such court to enforce Section 7.13(a) above (an “FSC Enforcement Action”) and (ii) having service of process made upon such stockholder in any such FSC Enforcement Action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder.

 

 
 

 

(d). If any provision or provisions of this Section 7.13 shall be held to be invalid, illegal or unenforceable as applied to any person or entity or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Section 7.13 (including, without limitation, each portion of any sentence of this Section 7.13 containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) and the application of such provision to other persons or entities and circumstances shall not in any way be affected or impaired thereby. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Section 713.

 

ARTICLE VIII - NOTICE BY ELECTRONIC TRANSMISSION

 

8.1 NOTICE BY ELECTRONIC TRANSMISSION.

 

Without limiting the manner by which notice otherwise may be given effectively to stockholders pursuant to the DGCL, the certificate of incorporation or these bylaws, any notice to stockholders given by the corporation under any provision of the DGCL, the certificate of incorporation or these bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the corporation. Any such consent shall be deemed revoked if:

 

(i) the corporation is unable to deliver by electronic transmission two consecutive notices given by the corporation in accordance with such consent; and

 

(ii) such inability becomes known to the secretary or an assistant secretary of the corporation or to the transfer agent, or other person responsible for the giving of notice.

 

However, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.

 

Any notice given pursuant to the preceding paragraph shall be deemed given:

 

    (i) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice;
       
    (ii) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice;
       
    (iii) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and
       
    (iv) if by any other form of electronic transmission, when directed to the stockholder.

 

An affidavit of the secretary or an assistant secretary or of the transfer agent or other agent of the corporation that the notice has been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

 

 
 

 

8.2 DEFINITION OF ELECTRONIC TRANSMISSION.

 

An “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.

 

8.3 INAPPLICABILITY.

 

Notice by a form of electronic transmission shall not apply to Sections 164, 296, 311, 312 or 324 of the DGCL.

 

ARTICLE IX - INDEMNIFICATION

 

9.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS

 

The corporation shall indemnify and hold harmless, to the fullest extent permitted by the DGCL as it presently exists or may hereafter be amended, any director or officer of the corporation who was or is made or is threatened to be made a party or otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”) by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation or is or was serving at the written request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any such Proceeding. The corporation shall be required to indemnify a person in connection with a Proceeding initiated by such person only if the Proceeding was authorized by the Board.

 

9.2 INDEMNIFICATION OF OTHERS

 

The corporation may indemnify and hold harmless, to the extent permitted by the DGCL as it presently exists or may hereafter be amended, any employee or agent of the corporation who was or is made or is threatened to be made a party or otherwise involved in any Proceeding by reason of the fact that he or she is or was an employee or agent of the corporation or is or was serving at the written request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or enterprise against expenses actually and reasonably incurred by such person in connection with any such Proceeding.

 

9.3 PREPAYMENT OF EXPENSES

 

The corporation shall pay the expenses incurred by any officer or director of the corporation, and may pay the expenses incurred by any employee or agent of the corporation, in defending any Proceeding in advance of its final disposition; provided, however, that the payment of expenses incurred by a person in advance of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by the person to repay all amounts advanced if it should be determined that the person is not entitled to be indemnified under this Article IX or otherwise.

 

9.4 DETERMINATION; CLAIM

 

If a claim for indemnification or payment of expenses under this Article IX is not paid in full within sixty days after a written claim therefor has been received by the corporation the claimant may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim.

 

 
 

 

9.5 NON-EXCLUSIVITY OF RIGHTS

 

The rights conferred on any person by this Article IX shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the certificate of incorporation, these bylaws, agreement, vote of stockholders or disinterested directors or otherwise.

 

9.6 INSURANCE

 

The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify him or her against such liability under the provisions of the DGCL.

 

9.7 OTHER INDEMNIFICATION

 

The corporation’s obligation, if any, to indemnify any person who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint

venture, trust, enterprise or non-profit entity shall be reduced by any amount such person may collect as indemnification from such other corporation, partnership, joint venture, trust, enterprise or non-profit enterprise.

 

9.8 AMENDMENT OR REPEAL

 

Any repeal or modification of the foregoing provisions of this Article IX shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification.

 

ARTICLE X - AMENDMENTS

 

These bylaws may be adopted, amended or repealed by the board of directors or a majority of the stockholders entitled to vote thereon.

 

 

 

 

Exhibit 5.1

 

 

July 20, 2022

 

HUMBL, Inc.

600 B Street

Suite 300

San Diego, California 92101

 

  Re: Registration Statement on Form S-1 (File No. 333-261403)

 

Ladies and Gentlemen:

 

We have acted as counsel to HUMBL Inc., a Delaware corporation (the “Company”), in connection with the filing by the Company of a Registration Statement (No. 333-261403) on Form S-1 (as amended, the “Registration Statement”) with the Securities and Exchange Commission, including a related prospectus filed with the Registration Statement (the “Prospectus”), covering a resale registration of up to 369,082,466 shares of the Company’s common stock, par value $0.00001, (“Shares”), which include up to 114,275,000 Shares upon exercise of warrants, up to 77,450,000 Shares issuable upon conversion of Series B Preferred Stock, par value $0.00001 per share, and up to 76,200,000 Shares issuable upon conversion of convertible notes.

 

In connection with this opinion, we have (i) examined and relied upon (a) the Registration Statement and the Prospectus, (b) the Company’s Certificate of Incorporation, as amended, and Bylaws, each as currently in effect, (c) the forms of the Company’s Certificate of Incorporation and Bylaws filed as Exhibits 3.1 and 3.5, to the Registration Statement, respectively, each of which is to be in effect upon the effectiveness of the offering contemplated by the Registration Statement and (d) originals or copies certified to our satisfaction of such records, documents, certificates, memoranda and other instruments as in our judgment are necessary or appropriate to enable us to render the opinion expressed below and (ii) assumed that the Shares will be sold at the prevailing market price or in a privately negotiated transaction by the selling stockholders.

 

In connection with the foregoing, we have examined originals or copies of such corporate records of the Company, certificates and other communications of public officials, certificates of officers of the Company and such other documents as we have deemed relevant or necessary for the purpose of rendering the opinions expressed herein. As to questions of fact material to those opinions, we have, to the extent we deemed appropriate, relied on certificates of officers of the Company and on certificates and other communications of public officials. We have assumed the genuineness of all signatures on, and the authenticity of, all documents submitted to us as originals, the conformity to authentic original documents of all documents submitted to us as copies thereof, the due authorization, execution and delivery by the parties thereto other than the Company of all documents examined by us, and the legal capacity of each individual who signed any of those documents. In addition, we have assumed that (a) each of the warrants and convertible notes held by existing shareholders of the Company for which the underlying Shares are being registered (“Transaction Documents”) have been duly executed and delivered by all parties thereto, (b) the parties to the Transaction Documents had the power, corporate or otherwise, to enter into and perform their obligations under those documents, (c) there will not have occurred, prior to the date of the issuance of the Shares: (i) any change in law affecting the validity or enforceability of the Transaction documents or (ii) any amendments to the Transaction Documents, (d) the selling stockholders are not restricted from selling or transferring the Shares, (e) at the time of the issuance and sale of the Shares: (i) the Company is validly existing and in good standing under the law of the State of Delaware, (ii) the Company has not amended its certificate of incorporation or bylaws, and (iii) the board of directors of the Company and any committee thereof has not taken any action to amend, rescind or otherwise reduce its prior authorization of the issuance of the Shares, (f) the Registration Statement becomes and remains effective, and the prospectus which is a part of the Registration Statement, and the prospectus delivery requirements with respect thereto, fulfill all of the requirements of the Securities Act, throughout all periods relevant to the opinion, (g) the Shares will be offered in the manner and on the terms identified or referred to in the Registration Statement, including all amendments thereto, and (h) all offers and sales of the Shares will be made in compliance with the securities laws of the states having jurisdiction thereof.

 

 

 

 

 

Page 2 of 2

 

Our opinion is expressed only with respect to the General Corporation Law of the State of Delaware. We express no opinion to the extent that any other laws are applicable to the subject matter hereof and express no opinion and provide no assurance as to compliance with any federal or state securities law, rule or regulation.

 

On the basis of the foregoing, and in reliance thereon, we are of the opinion that the Shares, when sold and issued against payment therefor as described in the Registration Statement and the Prospectus, will be validly issued, fully paid and non-assessable.

 

We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and the reference to this firm under the caption “Legal Matters” in the prospectus contained in the Registration Statement. In giving such consent, we do not hereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act and the rules and regulations thereunder. This opinion is rendered to you as of the date hereof and we assume no obligation to advise you or any other person hereafter with regard to any change after the date hereof in the circumstances or the law that may bear on the matters set forth herein even though the change may affect the legal analysis or legal conclusion or other matters in this letter.

 

  Very truly yours,
   
  /s/ Culhane Meadows PLLC

 

 

 

 

Exhibit 10.1

 

STOCK PURCHASE AGREEMENT

 

THIS STOCK PURCHASE AGREEMENT (this “Agreement”) is entered into effective as of November 4, 2020 (the “Effective Date”), by and among Henry Boucher, an individual (“Seller”), Brian Foote, an individual (“Purchaser”), and Tesoro Enterprises, Inc., an Oklahoma corporation (“Company”).

 

A. Seller owns no less than 550,000,000 shares of common stock, $0.0001 par value per share (such 550,000,000 shares, the “Common Shares”), and 7,000,000 shares of Series A Preferred Stock, $0.0001 par value per share (such 7,000,000 shares, the “Preferred Shares”, and together with the Common Shares, the “Shares”), of the Company.

 

B. Upon the terms and subject to the conditions set forth herein, Seller desires to sell to Purchaser, and Purchaser desires to purchase from Seller, the Shares.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereby agree as follows:

 

1. Acquisition of Shares.

 

1.1 Sale and Purchase. On the terms and subject to the conditions of this Agreement, Seller hereby sells and assigns to Purchaser, and Purchaser hereby purchases and accepts from Seller, all of Seller’s right, title, and interest, in and to the Shares.

 

1.2 Consideration. In consideration for the purchase of the Shares hereunder, Purchaser shall assign to Seller a certain $40,000.00 promissory note (the “Note”) issued by Humbl LLC, a Delaware limited liability company (“Humbl”), to the order of Purchaser on October 29, 2020 (the “Purchase Price”).

 

2. Closing. The closing of the purchase and sale of the Shares shall occur on November 10, 2020 or such other date as is mutually agreed upon by Seller and Purchaser but no later than November 15, 2020. Such date of conveyance is herein called the “Closing.” At the Closing, Purchaser and Seller shall perform the following:

 

2.1 Purchaser shall deliver to Seller the Purchase Price by assigning the Note to Seller.

 

2.2 Seller shall deliver the Shares to Purchaser.

 

2.3 All representations and warranties made herein must be true and accurate as of the Closing.

 

3. Representations and Warranties of Seller. Seller hereby represents and warrants to Purchaser as of the date hereof as follows:

 

3.1 Ownership of Shares. As of the date hereof, Seller owns and has all right, title and interest (legal and beneficial) in and to all of the Shares. All of the Shares are free and clear of all liens, claims, pledges, charges, encumbrances or security interests of any kind or nature (“Liens”). Upon consummation of the transactions contemplated by this Agreement, Seller shall transfer good and marketable title to the Shares to Purchaser free from all Liens.

 

 
 

 

3.2 Authority of Seller. Seller has the requisite power, legal capacity, authority and legal right to sell the Shares to Purchaser under this Agreement and the other documents contemplated hereby to which Seller is or will be a party and to consummate the transactions contemplated hereby and thereby. This Agreement has been duly and validly authorized, executed and delivered by, and is the legal, valid and binding obligation of, Seller, enforceable against Seller in accordance with the terms herein, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors’ rights and by general equitable principles.

 

3.3 Publicity. Seller will not make any public statements or representations regarding the Company without Purchaser’s prior written consent other.

 

3.4 No Litigation. There is no lawsuit, action, proceeding or investigation pending or, to Seller’s knowledge, threatened against Seller or the Company that purports to affect the validity, enforceability or legality of this Agreement or the consummation of the transactions contemplated hereby.

 

3.5 No Bankruptcy. Seller has not made any assignment for the benefit of creditors, filed any petition in bankruptcy, been adjudicated insolvent or bankrupt, or petitioned or applied to any tribunal for any receiver, conservator or trustee of Seller or any of Seller’s property or assets.

 

3.6 Material Misstatements. Neither this Agreement nor any other document, certificate or written statement made in connection herewith, contains or will contain any untrue statement of a material fact, or omits or will omit to state any material fact necessary in order to make the statements contained herein or therein not misleading.

 

4. Representations and Warranties of Company. Company hereby represents to Purchaser as follows:

 

4.1 Incorporation, Good Standing of the Company. The Company is a corporation, duly incorporated, validly existing and in good standing under the laws of the State of Oklahoma. The Company has all requisite corporate power and authority to own and operate its properties and assets and to carry on its business as presently conducted.

 

4.2 No Litigation. There is no lawsuit, action, proceeding or investigation pending or, to Company’s knowledge, threatened against the Company that purports to affect the validity, enforceability or legality of this Agreement or the consummation of the transactions contemplated hereby.

 

4.3 No Bankruptcy. The Company has not made any assignment for the benefit of creditors, filed any petition in bankruptcy, been adjudicated insolvent or bankrupt, or petitioned or applied to any tribunal for any receiver, conservator or trustee of the Company or any of the Company’s property or assets.

 

2
 

 

4.4 Capitalization. The total capitalization of the Company is as follows: (a) 7,000,000 shares of preferred stock issued and outstanding, all of which preferred stock is designated as “Series A”; and (b) 4,548,379,108 shares of common stock issued and outstanding.

 

4.5 Liabilities. The Company has no liabilities or Liens of any kind.

 

4.6 Filings. The Company is current in its filings with OTC Markets (“OTCM”) and has provided “adequate current public information” as such term is defined in Rule 144 of the Securities Act of 1933, as amended. The Company’s profile on OTCM is accurate and up-to-date. All past statements made to and filings with OTCM and/or the United States Securities and Exchange Commission (“SEC”) are accurate and truthful and meet all applicable regulatory requirements.

 

4.7 Financial Statements. All financial statements filed by the Company with OTCM are accurate in all material respects, have been prepared in accordance with GAAP, and fairly present the Company’s financial situation.

4.8 Transfer Agent. The Company’s transfer agent, Pacific Stock Transfer, has a current stock register of all outstanding shares of capital stock, has approved all prior issuances of capital stock, and has been paid in full by the Company as of the date hereof.

 

4.9 DWAC. The Company’s common stock is DWAC eligible.

 

4.10 Compliance. Company has not received any compliance letter or other inquiry or correspondence from the SEC, Internal Revenue Service, Financial Industry Regulatory Association or any other governmental agency or regulatory body in the last ten (10) years.

 

4.11 Taxes. The Company is not delinquent with respect to the payment of any tax obligations.

 

4.12 Material Misstatements. Neither this Agreement nor any other document, certificate or written statement made in connection herewith, contains or will contain any untrue statement of a material fact, or omits or will omit to state any material fact necessary in order to make the statements contained herein or therein not misleading.

 

4.13 Resignation. Immediately following the Closing, Seller will resign as an officer and director of the Company and Purchaser will be appointed as an officer and director of the Company.

 

5. Representations and Warranties of Purchaser. Purchaser hereby represents and warrants to Seller as of the date hereof as follows:

 

5.1 Authority of Purchaser. Purchaser has the requisite power, legal capacity, authority and legal right to enter into and perform its obligations under this Agreement and the other documents contemplated hereby to which Purchaser is or will be a party and to consummate the transactions contemplated hereby and thereby. This Agreement has been duly and validly authorized, executed and delivered by, and is the legal, valid and binding obligation of, Purchaser, enforceable against Purchaser in accordance with the terms herein, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors’ rights and by general equitable principles.

 

3
 

 

6. Covenants.

 

6.1 Survival of Representations and Warranties. Each covenant and agreement contained in this Agreement or in any agreement or other document delivered pursuant hereto shall survive the Closing and be enforceable until such covenant or agreement has been fully performed. All representations and warranties of the Parties contained in this Agreement or in any other agreement or document executed and delivered pursuant hereto shall survive the Closing for the lesser of (x) indefinitely and (y) the expiration of the applicable statute of limitations.

 

6.2 Debenture. Upon consummation of the merger with Humbl and the Company, Purchaser will cause the surviving entity to exchange the Note for a convertible debenture bearing interest at the rate of 8% per annum, due on December 31, 2021 and convertible into Company common stock at $0.005 per share.

 

6.3 Reverse Split. Purchaser will not cause the execution of a reverse split of the Company common stock in an aggregate ratio greater than one for thirty (1:30) prior to December 31, 2021.

 

6.4 Additional Information. Seller will make himself available, free of charge, to answer and explain past actions, transactions, and filings of the Company upon reasonable notice by the Company.

 

6.5 Records. Seller will deliver to Purchaser at Closing, all corporate records from 2009 to present, account information, EIN, and any other applicable information of the Company.

 

6.6 Accounts. All outstanding bank accounts, credit accounts and any other instrument in the name of the Company, requiring the signature or acknowledgement of Seller will be closed and settled in full as of December 1, 2020.

6.7 No New Indebtedness. Neither the Company nor Seller or behalf of the Company will incur any new indebtedness or other obligations or commitments following the execution of this Agreement.

 

7. Miscellaneous.

 

7.1 Governing Law; Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to contracts made and wholly performed in that jurisdiction. Each party hereto submits to the exclusive jurisdiction of any state or federal court sitting in San Diego County, California in any proceeding arising out of or relating to this Agreement and agrees that all claims in respect of the proceeding may be heard and determined in any such court and hereby expressly submits to the personal jurisdiction and venue of such court for the purposes hereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum. Each party hereto hereby irrevocably consents to the service of process of any of the aforementioned courts in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to its address as set forth herein, such service to become effective ten (10) days after such mailing. The parties expressly and irrevocably waive the right to a trial by jury in any and all actions or proceedings brought with respect to this Agreement and with respect to any claims arising out of or related to this Agreement.

 

4
 

 

7.2 Expenses. Each party to the transactions contemplated by this Agreement shall pay its own expenses, if any, incurred in connection with such transactions.

 

7.3 Counterparts. This Agreement may be executed in two or more counterparts, and by facsimile or email signature, each of which when executed and delivered shall be deemed an original and all of which, taken together, shall constitute the same agreement.

 

7.4 Waiver. No waiver of any provision of this Agreement shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing. Any waiver or consent given by a party shall be null and void if the party requesting such waiver or consent has not provided a full and complete disclosure of all material facts relevant to the waiver requested.

 

7.5 Successors and Assigns. Neither Seller nor Purchaser may assign this Agreement without the prior written consent of the other party. All covenants will be enforceable by the parties’ respective successors, assigns, heirs, executors, administrators and legal representatives.

 

7.6 Notice. Except as may be otherwise provided herein, all notices and other communications required or permitted hereunder shall be in writing and shall be conclusively deemed to have been duly given to a party (a) when hand delivered to that party; (b) when received when sent by facsimile at that party’s number set forth or referenced below (provided, however, that notices given by facsimile shall not be effective unless either (i) a duplicate copy of such facsimile notice is promptly given by one of the other methods described in this Section 7.6, or (ii) the receiving party delivers a written confirmation of receipt for such notice either by facsimile or any other method described in this Section 7.6); (c) three business days after deposit in the U.S. mail with first class or certified mail, return receipt requested, postage prepaid and addressed to the other party as set forth below; or (d) the next business day after deposit with a national overnight delivery service, postage prepaid, addressed to that party as set forth below with next-business-day delivery guaranteed, provided that the sending party receives a confirmation of delivery from the delivery service provider.

 

  To Seller:   To Purchaser:
  Henry Boucher   Brian Foote
      600 B Street, Suite 300
      San Diego, California 92117

 

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A party may change or supplement the addresses given above, or designate additional addresses, for purposes of this Section 7.6 by giving the other party written notice of the new address in the manner set forth above.

 

7.7 Segregation. In the event one or more of the provisions of this Agreement should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

 

7.8 Further Assurances. Each party hereto agrees upon request to execute any further documents or instruments reasonably necessary or desirable to carry out the purposes or intent of this Agreement.

 

7.9 Entire Agreement. This Agreement and the other documents referenced herein and required to be delivered pursuant hereto constitute the entire understanding and agreement between the parties with regard to the specific subject matter hereof, and no party shall be liable or bound by any representation, warranty, covenant or agreement except as specifically set forth herein. Any previous agreement (whether written, oral or implied), including any letter of intent or term sheet, among the parties relative to the specific subject matter hereof is superseded by this Agreement.

 

7.10 Headings. The headings in this Agreement are intended solely for convenience of reference and shall be given no effect in the construction or interpretation of this Agreement.

 

7.11 Attorneys’ Fees. In the event that any dispute among the parties to this Agreement should result in litigation, the prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of such prevailing party under or with respect to this Agreement, including without limitation, such reasonable fees and expenses of attorneys, which shall include, without limitation, all fees, costs and expenses of appeals.

 

7.12 Mutual Drafting. This Agreement is the mutual product of the parties, and each provision hereof has been subject to the mutual consultation, negotiation and agreement of each of the parties, and shall not be construed for or against any party hereto.

 

7.13 Opportunity to Consult with Counsel. The parties hereby represent and acknowledge that they have been provided with the opportunity to discuss and review the terms of this Agreement with their respective attorneys before signing it and that they are freely and voluntarily signing this document in exchange for the benefits provided herein. The parties further represent and acknowledge that they have been provided a reasonable period of time within which to review the terms of this Agreement.

 

[Remainder of page intentionally left blank; signature page to follow]

 

6
 

 

IN WITNESS WHEREOF, this Stock Purchase Agreement is hereby executed effective as of the date first set forth above by the parties hereto.

 

   SELLER:
   
   
  HENRY BOUCHER, an individual

 

  PURCHASER:
   
 
  BRIAN FOOTE, an individual

 

  COMPANY:
     
  TESORO ENTERPRISES, INC.,
  an Oklahoma corporation
     
  By:  
    Henry Boucher, President

 

[Signature Page to Stock Purchase Agreement]

 

 

 

 

 

Exhibit 10.2

 

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF THIS WARRANT OR SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THIS WARRANT OR SUCH SECURITIES, AS APPLICABLE, MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS.

 

TESORO ENTERPRISES, INC.

 

WARRANT TO PURCHASE SHARES OF COMMON STOCK

 

1. Issuance. For good and valuable consideration as set forth in the Purchase Agreement (as defined below), including without limitation the Purchase Price (as defined in the Purchase Agreement), the receipt and sufficiency of which are hereby acknowledged by Tesoro Enterprises, Inc., a Delaware corporation, its successors and/or assigns (“Company”), Forwardly, Inc., a Nevada corporation, its successors and/or registered assigns (“Investor”), is hereby granted the right to purchase at any time on or after the Issue Date (as defined below) until the second anniversary of the Issue Date (the “Expiration Date”), 500,000,000 fully paid and non-assessable shares (the “Warrant Shares”) of Company’s common stock, par value $0.00001 per share (the “Common Stock”), as such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant to Purchase Shares of Common Stock (this “Warrant”).

 

This Warrant is being issued pursuant to the terms of that certain Warrant Purchase Agreement dated December 4, 2020, to which Company and Investor are parties (as the same may be amended from time to time, the “Purchase Agreement”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference. This Warrant was issued to Investor on December 4, 2020 (the “Issue Date”).

 

2. Exercise of Warrant.

 

2.1. General.

 

(a) This Warrant is exercisable in whole or in part at any time and from time to time commencing on the Issue Date and ending on the Expiration Date. Such exercise shall be effectuated by submitting to Company (either by delivery to Company or by email or facsimile transmission) a completed and signed Notice of Exercise substantially in the form attached to this Warrant as Exhibit A (the “Notice of Exercise”). The date a Notice of Exercise is delivered to Company shall be the “Exercise Date,” provided that, if such exercise represents the full exercise of the outstanding balance of this Warrant, Investor shall tender this Warrant to Company within five (5) Trading Days thereafter, but only if the Warrant Shares to be delivered pursuant to the Notice of Exercise have been delivered to Investor as of such date. The Notice of Exercise shall be executed by Investor and shall indicate the number of Warrant Shares to be issued pursuant to such exercise

 

 
 

 

(b) The Exercise Price per share of Common Stock for the Warrant Shares shall be payable, at the election of Investor, in cash or by certified or official bank check or by wire transfer in accordance with instructions provided by Company at the request of Investor.

 

(c) Upon the appropriate payment to Company of the Exercise Price for the Warrant Shares, Company shall promptly, but in no case later than the date that is ten (10) Trading Days following the date the Exercise Price is paid to Company (the “Delivery Date”), deliver or cause Company’s Transfer Agent to deliver the applicable Warrant Shares electronically via the DWAC system to the account designated by Investor on the Notice of Exercise. If for any reason Company is not able to so deliver the Warrant Shares via the DWAC system, Company shall instead, on or before the applicable date set forth above in this subsection, issue and deliver to Investor or its broker (as designated in the Notice of Exercise), via reputable overnight courier, a certificate, registered in the name of Investor or its designee, representing the applicable number of Warrant Shares.

 

(d) In no event may this Warrant be net cash settled.

 

2.2. Ownership Limitation. Notwithstanding anything to the contrary contained in this Warrant, if at any time Lender shall or would be issued shares of Common Stock under this Warrant, but such issuance would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance) (the “Maximum Percentage”), then Borrower shall not issue to Lender shares of Common Stock which would exceed the Maximum Percentage. The ownership limitation is enforceable, unconditional and non-waivable and shall apply to all affiliates and assigns of Lender.

 

3. Mutilation or Loss of Warrant. Upon receipt by Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, Company will execute and deliver to Investor a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void.

 

4. Rights of Investor. Investor shall not, by virtue of this Warrant alone, be entitled to any rights of a stockholder in Company, either at law or in equity, and the rights of Investor with respect to or arising under this Warrant are limited to those expressed in this Warrant and are not enforceable against Company except to the extent set forth herein

 

5. Adjustments. If Company shall issue any shares of Common Stock as a stock dividend or subdivide the number of outstanding shares of Common Stock into a greater number of shares, then, in either such case, the Exercise Price in effect before such dividend or subdivision shall be proportionately reduced and the number of Warrant Shares at that time issuable pursuant to the exercise of this Warrant shall be proportionately increased; and, conversely, if Company shall contract the number of outstanding shares of Common Stock by combining such shares into a smaller number of shares, then the Exercise Price in effect before such combination shall be proportionately increased and the number of Warrant Shares at that time issuable pursuant to the exercise or conversion of this Warrant shall be proportionately decreased. Each adjustment in the number of shares of Warrant Stock issuable shall be to the nearest whole share.

 

6. Certificate as to Adjustments. In the case of any adjustment in the Exercise Price or Warrant Shares, Company will promptly give written notice to Investor in the form of a certificate, certified and confirmed by an officer of the Company, setting forth the adjustment in reasonable detail.

 

2
 

 

7. Transfer to Comply with the Securities Act. This Warrant and the Warrant Shares have not been registered under the Securities Act of 1933, as amended (the “1933 Act”). Neither this Warrant nor the Warrant Shares may be sold, transferred, pledged or hypothecated without (a) an effective registration statement under the 1933 Act relating to such security or (b) an opinion of counsel reasonably satisfactory to Company that registration is not required under the 1933 Act. Until such time as registration has occurred under the 1933 Act, each certificate for this Warrant and any Warrant Shares shall contain a legend, in form and substance satisfactory to counsel for Company, setting forth the restrictions on transfer contained in this Section 7.

 

8. Notices. Any notice required or permitted hereunder shall be given in the manner provided in the subsection titled “Notices” in the Purchase Agreement, the terms of which are incorporated herein by reference.

 

9. Supplements and Amendments; Whole Agreement. This Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant, together with the Purchase Agreement, contains the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings with respect to the subject matter hereof and thereof other than as expressly contained herein and therein.

 

10. Governing Law; Venue. This Warrant shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of Delaware. The provisions set forth in the Purchase Agreement to determine the proper venue for any disputes are incorporated herein by this reference.

 

11. Waiver of Jury Trial. EACH OF COMPANY AND INVESTOR IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS WARRANT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, COMPANY ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY.

 

12. Counterparts. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Electronic signatures shall be considered original signatures for all purposes hereof.

 

13. Attorneys’ Fees. In the event of any litigation or dispute arising from this Warrant, the parties agree that the prevailing party shall be entitled to an additional award of the full amount of the reasonable attorneys’ fees and expenses paid by said prevailing party in connection with litigation or dispute.

 

14. Severability. Whenever possible, each provision of this Warrant shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be invalid or unenforceable in any jurisdiction, such provision shall be modified to achieve the objective of the parties to the fullest extent permitted and such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Warrant or the validity or enforceability of this Warrant in any other jurisdiction.

 

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

 

3
 

 

IN WITNESS WHEREOF, Company has caused this Warrant to be duly executed as of the Issue Date.

 

  COMPANY:
   
  Tesoro Enterprises, Inc.
   
  By:  
    Brian Foote, President and CEO

 

[Signature Page to Warrant]

 

 
 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

A1. “DTC” means the Depository Trust Company or any successor thereto.

 

A2. “DTC Eligible” means, with respect to the Common Stock, that such Common Stock is eligible to be deposited in certificate form at the DTC, cleared and converted into electronic shares by the DTC and held in the name of the clearing firm servicing Investor’s brokerage firm for the benefit of Investor.

 

A3. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A4. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A5. “Exercise Price” means $0.05 per share of Common Stock, as the same may be adjusted from time to time pursuant to the terms and conditions of this Warrant.

 

A6. “Trading Day” means any day the New York Stock Exchange is open for trading.

 

Attachment 1 to Warrant, Page 1
 

 

EXHIBIT A

 

NOTICE OF EXERCISE OF WARRANT

 
TO: TESORO ENTERPRISES, INC.
  ATTN: _______________
  VIA FAX TO: (     )______________ EMAIL: ______________

 

The undersigned hereby irrevocably elects to exercise the right, represented by the Warrant to Purchase Shares of Common Stock dated as of December 4, 2020 (the “Warrant”), to purchase shares of the common stock, $0.00001 par value (“Common Stock”), of Tesoro Enterprises, Inc., and tenders herewith payment in accordance with Section 2 of the Warrant, as follows:

 

Warrant Shares: _______________________

 

Exercise Price: $_______________________

 

Purchase Price: $___________________ = (Exercise Price x Warrant Shares)

 

Payment is being made by:

 
  _____ enclosed check
  _____ wire transfer
_____ other

 

Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Warrant.

 

It is the intention of Investor to comply with the provisions of Section 2.2 of the Warrant regarding certain limits on Investor’s right to receive shares thereunder. Investor believes this exercise complies with the provisions of such Section 2.2. Nonetheless, to the extent that, pursuant to the exercise effected hereby, Investor would receive more shares of Common Stock than permitted under Section 2.2, Company shall not be obligated and shall not issue to Investor such excess shares until such time, if ever, that Investor could receive such excess shares without violating, and in full compliance with, Section 2.2 of the Warrant.

 

As contemplated by the Warrant, this Notice of Exercise is being sent by email to the officer indicated above.

 

If this Notice of Exercise represents the full exercise of the entire Warrant, Investor will surrender (or cause to be surrendered) the Warrant to Company at the address indicated above by express courier within five (5) Trading Days after the Warrant Shares to be delivered pursuant to this Notice of Exercise have been delivered to Investor.

 

To the extent the Warrant Shares are not able to be delivered to Investor via the DWAC system, please deliver certificates representing the Warrant Shares to Investor via reputable overnight courier after receipt of this Notice of Exercise (by facsimile transmission or otherwise) to:

 

_____________________________________

_____________________________________

_____________________________________

 
Dated:                
   
   
[Name of Investor]  

 
By:    

 

Exhibit A to Warrant, Page 1

 

 

Exhibit 10.3

 

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF THIS WARRANT OR SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THIS WARRANT OR SUCH SECURITIES, AS APPLICABLE, MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS.

 

TESORO ENTERPRISES, INC.

 

WARRANT TO PURCHASE SHARES OF COMMON STOCK

 

1. Issuance. For good and valuable consideration as set forth in the Purchase Agreement (as defined below), including without limitation the Purchase Price (as defined in the Purchase Agreement), the receipt and sufficiency of which are hereby acknowledged by Tesoro Enterprises, Inc., a Delaware corporation, its successors and/or assigns (“Company”), Charger Corporation, an Ontario corporation, its successors and/or registered assigns (“Investor”), is hereby granted the right to purchase at any time on or after the Issue Date (as defined below) until the second anniversary of the Issue Date (the “Expiration Date”), 500,000,000 fully paid and non-assessable shares (the “Warrant Shares”) of Company’s common stock, par value $0.00001 per share (the “Common Stock”), as such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant to Purchase Shares of Common Stock (this “Warrant”).

 

This Warrant is being issued pursuant to the terms of that certain Warrant Purchase Agreement dated December 4, 2020, to which Company and Investor are parties (as the same may be amended from time to time, the “Purchase Agreement”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference. This Warrant was issued to Investor on December 4, 2020 (the “Issue Date”).

 

2. Exercise of Warrant.

 

2.1. General.

 

(a) This Warrant is exercisable in whole or in part at any time and from time to time commencing on the Issue Date and ending on the Expiration Date. Such exercise shall be effectuated by submitting to Company (either by delivery to Company or by email or facsimile transmission) a completed and signed Notice of Exercise substantially in the form attached to this Warrant as Exhibit A (the “Notice of Exercise”). The date a Notice of Exercise is delivered to Company shall be the “Exercise Date,” provided that, if such exercise represents the full exercise of the outstanding balance of this Warrant, Investor shall tender this Warrant to Company within five (5) Trading Days thereafter, but only if the Warrant Shares to be delivered pursuant to the Notice of Exercise have been delivered to Investor as of such date. The Notice of Exercise shall be executed by Investor and shall indicate the number of Warrant Shares to be issued pursuant to such exercise

 

 
 

 

(b) The Exercise Price per share of Common Stock for the Warrant Shares shall be payable, at the election of Investor, in cash or by certified or official bank check or by wire transfer in accordance with instructions provided by Company at the request of Investor.

 

(c) Upon the appropriate payment to Company of the Exercise Price for the Warrant Shares, Company shall promptly, but in no case later than the date that is ten (10) Trading Days following the date the Exercise Price is paid to Company (the “Delivery Date”), deliver or cause Company’s Transfer Agent to deliver the applicable Warrant Shares electronically via the DWAC system to the account designated by Investor on the Notice of Exercise. If for any reason Company is not able to so deliver the Warrant Shares via the DWAC system, Company shall instead, on or before the applicable date set forth above in this subsection, issue and deliver to Investor or its broker (as designated in the Notice of Exercise), via reputable overnight courier, a certificate, registered in the name of Investor or its designee, representing the applicable number of Warrant Shares.

 

(d) In no event may this Warrant be net cash settled.

 

2.2. Ownership Limitation. Notwithstanding anything to the contrary contained in this Warrant, if at any time Lender shall or would be issued shares of Common Stock under this Warrant, but such issuance would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance) (the “Maximum Percentage”), then Borrower shall not issue to Lender shares of Common Stock which would exceed the Maximum Percentage. The ownership limitation is enforceable, unconditional and non-waivable and shall apply to all affiliates and assigns of Lender.

 

3. Mutilation or Loss of Warrant. Upon receipt by Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, Company will execute and deliver to Investor a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void.

 

4. Rights of Investor. Investor shall not, by virtue of this Warrant alone, be entitled to any rights of a stockholder in Company, either at law or in equity, and the rights of Investor with respect to or arising under this Warrant are limited to those expressed in this Warrant and are not enforceable against Company except to the extent set forth herein

 

5. Adjustments. If Company shall issue any shares of Common Stock as a stock dividend or subdivide the number of outstanding shares of Common Stock into a greater number of shares, then, in either such case, the Exercise Price in effect before such dividend or subdivision shall be proportionately reduced and the number of Warrant Shares at that time issuable pursuant to the exercise of this Warrant shall be proportionately increased; and, conversely, if Company shall contract the number of outstanding shares of Common Stock by combining such shares into a smaller number of shares, then the Exercise Price in effect before such combination shall be proportionately increased and the number of Warrant Shares at that time issuable pursuant to the exercise or conversion of this Warrant shall be proportionately decreased. Each adjustment in the number of shares of Warrant Stock issuable shall be to the nearest whole share.

 

6. Certificate as to Adjustments. In the case of any adjustment in the Exercise Price or Warrant Shares, Company will promptly give written notice to Investor in the form of a certificate, certified and confirmed by an officer of the Company, setting forth the adjustment in reasonable detail.

 

2
 

 

7. Transfer to Comply with the Securities Act. This Warrant and the Warrant Shares have not been registered under the Securities Act of 1933, as amended (the “1933 Act”). Neither this Warrant nor the Warrant Shares may be sold, transferred, pledged or hypothecated without (a) an effective registration statement under the 1933 Act relating to such security or (b) an opinion of counsel reasonably satisfactory to Company that registration is not required under the 1933 Act. Until such time as registration has occurred under the 1933 Act, each certificate for this Warrant and any Warrant Shares shall contain a legend, in form and substance satisfactory to counsel for Company, setting forth the restrictions on transfer contained in this Section 7.

 

8. Notices. Any notice required or permitted hereunder shall be given in the manner provided in the subsection titled “Notices” in the Purchase Agreement, the terms of which are incorporated herein by reference.

 

9. Supplements and Amendments; Whole Agreement. This Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant, together with the Purchase Agreement, contains the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings with respect to the subject matter hereof and thereof other than as expressly contained herein and therein.

 

10. Governing Law; Venue. This Warrant shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of Delaware. The provisions set forth in the Purchase Agreement to determine the proper venue for any disputes are incorporated herein by this reference.

 

11. Waiver of Jury Trial. EACH OF COMPANY AND INVESTOR IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS WARRANT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, COMPANY ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY.

 

12. Counterparts. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Electronic signatures shall be considered original signatures for all purposes hereof.

 

13. Attorneys’ Fees. In the event of any litigation or dispute arising from this Warrant, the parties agree that the prevailing party shall be entitled to an additional award of the full amount of the reasonable attorneys’ fees and expenses paid by said prevailing party in connection with litigation or dispute.

 

14. Severability. Whenever possible, each provision of this Warrant shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be invalid or unenforceable in any jurisdiction, such provision shall be modified to achieve the objective of the parties to the fullest extent permitted and such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Warrant or the validity or enforceability of this Warrant in any other jurisdiction.

 

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

 

3
 

 

IN WITNESS WHEREOF, Company has caused this Warrant to be duly executed as of the Issue Date.

 

  COMPANY:
   
  Tesoro Enterprises, Inc.
   
  By:  
    Brian Foote, President and CEO

 

[Signature Page to Warrant]

 

 
 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

A1. “DTC” means the Depository Trust Company or any successor thereto.

 

A2. “DTC Eligible” means, with respect to the Common Stock, that such Common Stock is eligible to be deposited in certificate form at the DTC, cleared and converted into electronic shares by the DTC and held in the name of the clearing firm servicing Investor’s brokerage firm for the benefit of Investor.

 

A3. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A4. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A5. “Exercise Price” means $0.05 per share of Common Stock, as the same may be adjusted from time to time pursuant to the terms and conditions of this Warrant.

 

A6. “Trading Day” means any day the New York Stock Exchange is open for trading.

 

Attachment 1 to Warrant, Page 1
 

 

EXHIBIT A

 

NOTICE OF EXERCISE OF WARRANT

 
TO: TESORO ENTERPRISES, INC.
  ATTN: _______________
  VIA FAX TO: (     )______________ EMAIL: ______________

 

The undersigned hereby irrevocably elects to exercise the right, represented by the Warrant to Purchase Shares of Common Stock dated as of December 4, 2020 (the “Warrant”), to purchase shares of the common stock, $0.00001 par value (“Common Stock”), of Tesoro Enterprises, Inc., and tenders herewith payment in accordance with Section 2 of the Warrant, as follows:

 

Warrant Shares: _______________________

 

Exercise Price: $_______________________

 

Purchase Price: $___________________ = (Exercise Price x Warrant Shares)

 

Payment is being made by:

 
  _____ enclosed check
  _____ wire transfer
_____ other

 

Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Warrant.

 

It is the intention of Investor to comply with the provisions of Section 2.2 of the Warrant regarding certain limits on Investor’s right to receive shares thereunder. Investor believes this exercise complies with the provisions of such Section 2.2. Nonetheless, to the extent that, pursuant to the exercise effected hereby, Investor would receive more shares of Common Stock than permitted under Section 2.2, Company shall not be obligated and shall not issue to Investor such excess shares until such time, if ever, that Investor could receive such excess shares without violating, and in full compliance with, Section 2.2 of the Warrant.

 

As contemplated by the Warrant, this Notice of Exercise is being sent by email to the officer indicated above.

 

If this Notice of Exercise represents the full exercise of the entire Warrant, Investor will surrender (or cause to be surrendered) the Warrant to Company at the address indicated above by express courier within five (5) Trading Days after the Warrant Shares to be delivered pursuant to this Notice of Exercise have been delivered to Investor.

 

To the extent the Warrant Shares are not able to be delivered to Investor via the DWAC system, please deliver certificates representing the Warrant Shares to Investor via reputable overnight courier after receipt of this Notice of Exercise (by facsimile transmission or otherwise) to:

 

_____________________________________

_____________________________________

_____________________________________

 
Dated:              
   
   
[Name of Investor]  

 
By:    

 

Exhibit A to Warrant, Page 1

 

 

Exhibit 10.4

 

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

 

CONVERTIBLE PROMISSORY NOTE

 

Effective Date: December 23, 2020 U.S. $112,500.00

 

FOR VALUE RECEIVED, Tesoro Enterprises, Inc., a Delaware corporation (“Borrower”), promises to pay to the order of Kevin Levine, an individual, or his successors or assigns (“Lender”), $112,500.00 and any interest accrued hereunder on December 23, 2022 (the “Maturity Date”) in accordance with the terms set forth herein and to pay interest on the outstanding balance at the rate of eight percent (8%) per annum from the Effective Date until the same is paid in full. This Convertible Promissory Note (this “Note”) is issued and made effective as of December 23, 2020 (the “Effective Date”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.

 

1. Payment; Prepayment.

 

1.1. Payment. All payments owing hereunder shall be in lawful money of the United States of America or Conversion Shares (as defined below), as provided for herein, and delivered to Lender at the address or bank account furnished to Borrower for that purpose. All payments shall be applied first to (a) costs of collection, if any, then to (b) fees and charges, if any, then to (c) accrued and unpaid interest, and thereafter, to (d) principal.

 

1.2. Prepayment. Notwithstanding the foregoing, Borrower shall have the right to prepay all or any portion of the outstanding balance without penalty.

 

2. Security. This Note is unsecured.

 

3. Lender Optional Conversion.

 

3.1. Conversions. Lender has the right at any time after the Effective Date until the outstanding balance has been paid in full, at its election, to convert (“Conversion”) all or any portion of the outstanding balance into shares (“Conversion Shares”) of fully paid and non-assessable common stock, $0.00001 par value per share (“Common Stock”), of Borrower as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the “Conversion Amount”) divided by the Conversion Price (as defined below). Conversion notices in the form attached hereto as Exhibit A (each, a “Conversion Notice”) may be delivered from time to time by Lender to Borrower, and all Conversions shall be cashless and not require further payment from Lender. Borrower shall deliver the Conversion Shares from any Conversion to Lender in accordance with Section 7 below.

 

 
 

 

3.2. Conversion Price. The price at which Lender has the right to convert all or any portion of the outstanding balance into Common Stock is $0.15 per share of Common Stock (the “Conversion Price”). The Conversion Price will automatically be adjusted in the event Borrower consummates a stock split, stock combination or other similar change to the number of outstanding shares of Common Stock.

 

4. Defaults and Remedies.

 

4.1. Defaults. The following are events of default under this Note (each, an “Event of Default”): (a) Borrower fails to pay any principal, interest, fees, charges, or any other amount when due and payable hereunder; (b) Borrower fails to deliver any Conversion Shares in accordance with the terms hereof; (c) a receiver, trustee or other similar official shall be appointed over Borrower or a material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed or discharged within sixty (60) days; (d) Borrower makes a general assignment for the benefit of creditors; (e) Borrower files a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); or (f) an involuntary bankruptcy proceeding is commenced or filed against Borrower. Notwithstanding the foregoing, the occurrence of any of the foregoing events will not be considered an Event of Default unless Borrower fails to cure such event within ten (10) Trading Days of its receipt of written notice from Lender.

 

4.2. Remedies. Following an Event of Default, Lender may accelerate this Note by written notice to Borrower with the outstanding balance becoming immediately due and payable. Nothing herein shall limit Lender’s right to pursue any other remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to Borrower’s failure to timely deliver Conversion Shares upon Conversion of the Note as required pursuant to the terms hereof.

 

5. Unconditional Obligation; No Offset. Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset, deduction or counterclaim of any kind. Borrower hereby waives any rights of offset it now has or may have hereafter against Lender, its successors and assigns, and agrees to make the payments or Conversions called for herein in accordance with the terms of this Note.

 

6. Waiver. No waiver of any provision of this Note shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.

 

7. Method of Conversion Share Delivery. On or before the close of business on the seventh (7th) Trading Day following the date of delivery of a Conversion Notice (the “Delivery Date”), Borrower shall, provided it is DWAC Eligible at such time, deliver or cause its transfer agent to deliver the applicable Conversion Shares electronically via DWAC to the account designated by Lender in the applicable Conversion Notice. If Borrower is not DWAC Eligible, it shall deliver to Lender or its broker (as designated in the Conversion Notice), via reputable overnight courier, a certificate representing the number of shares of Common Stock equal to the number of Conversion Shares to which Lender shall be entitled, registered in the name of Lender or its designee.

 

8. Ownership Limitation. Notwithstanding anything to the contrary contained in this Note or the other Transaction Documents, Borrower shall not effect any conversion of this Note to the extent that after giving effect to such conversion would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance). For purposes of this section, beneficial ownership of Common Stock will be determined pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended.

 

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9. Opinion of Counsel. In the event that an opinion of counsel is needed for any matter related to this Note, Lender shall have such opinion provided by its counsel.

 

10. Governing Law; Venue. This Note shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and wholly performed in that jurisdiction. Each party hereto submits to the exclusive jurisdiction of any state or federal court sitting in San Diego County, California in any proceeding arising out of or relating to this Note and agrees that all claims in respect of the proceeding may be heard and determined in any such court and hereby expressly submits to the personal jurisdiction and venue of such court for the purposes hereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum. Each party hereto hereby irrevocably consents to the service of process of any of the aforementioned courts in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to its address as set forth herein, such service to become effective ten (10) days after such mailing. The parties expressly and irrevocably waive the right to a trial by jury in any and all actions or proceedings brought with respect to this Note and with respect to any claims arising out of or related to this Note.

 

11. Cancellation. After repayment or conversion of the entire outstanding balance, this Note shall be deemed paid in full, shall automatically be deemed canceled, and shall not be reissued.

 

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

 

13. Assignments. Neither party may assign this Note without the consent of the other party.

 

14. Notices. Whenever notice is required to be given under this Note, such notice shall be given to such address as has been provided to the other party.

 

15. Severability. If any part of this Note is construed to be in violation of any law, such part shall be modified to achieve the objective of Borrower and Lender to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect.

 

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


 

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

 

  BORROWER:
  Tesoro Enterprises, Inc.
     
  By:  
    Brian Foote, President and CEO

 

ACKNOWLEDGED, ACCEPTED AND AGREED:  
LENDER:  
     
By:    
  Kevin Levine, an individual  

 

[Signature Page to Convertible Promissory Note]

 

 
 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

A1. “DTC” means the Depository Trust Company or any successor thereto.

 

A2. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A3. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A4. “DWAC Eligible” means that (a) Borrower’s Common Stock is eligible at DTC for full services pursuant to DTC’s operational arrangements, including without limitation transfer through DTC’s DWAC system; (b) Borrower has been approved (without revocation) by DTC’s underwriting department; (c) Borrower’s transfer agent is approved as an agent in the DTC/FAST Program; (d) the Conversion Shares are otherwise eligible for delivery via DWAC; and (e) Borrower’s transfer agent does not have a policy prohibiting or limiting delivery of the Conversion Shares via DWAC.

 

A5. “Trading Day” means any day on which Borrower’s market is open for trading.

 

[Remainder of page intentionally left blank]


 

Attachment 1 to Convertible Promissory Note, Page 1

 

 

EXHIBIT A

 

Kevin Levine

 

HUMBL, Inc. Date: __________________
Attn: Brian Foote  
600 B. Street, Suite 300  

San Diego, California 92117

 

 

CONVERSION NOTICE

 

The above-captioned Lender hereby gives notice to HUMBL, Inc., a Delaware corporation (the “Borrower”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on December 23, 2020 (the “Note”), that Lender elects to convert the portion of the Note balance set forth below into fully paid and non-assessable shares of Common Stock of Borrower as of the date of conversion specified below. Said conversion shall be based on the Conversion Price set forth below. In the event of a conflict between this Conversion Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of Conversion Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.

 

  A. Date of Conversion: ____________

 

  B. Conversion #: ____________

 

  C. Conversion Amount: ____________

 

  D. Conversion Price: $0.15

 

  E. Conversion Shares: _______________ (C divided by D)

 

  F. Remaining Outstanding Balance of Note: ____________

 

Please transfer the Conversion Shares electronically (via DWAC) to the following account:

 

Broker: ____________________   Address:  
DTC#: _____________________      
Account #: __________________      
Account Name: _______________      

 

To the extent the Conversion Shares are not able to be delivered to Lender electronically via the DWAC system, deliver all such certificated shares to Lender via reputable overnight courier after receipt of this Conversion Notice (by facsimile transmission or otherwise) to:

_____________________________________

_____________________________________

_____________________________________

 

Sincerely,

 

Lender:

 

By:    
  Kevin Levine  

 

Exhibit A to Convertible Promissory Note, Page 1

 

Exhibit 10.5

 

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF THIS WARRANT OR SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THIS WARRANT OR SUCH SECURITIES, AS APPLICABLE, MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS.

 

TESORO ENTERPRISES, INC.

 

WARRANT TO PURCHASE SHARES OF COMMON STOCK

 

1. Issuance. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by Tesoro Enterprises, Inc., a Delaware corporation, its successors and assigns (“Company”), Kevin Levine, his successors and/or registered assigns (“Investor”), is hereby granted the right to purchase at any time on or after the Issue Date (as defined below) until December 23, 2022 (the “Expiration Date”), 450,000 fully paid and non-assessable shares (the “Warrant Shares”) of Company’s common stock, par value $0.00001 per share (the “Common Stock”), as such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant to Purchase Shares of Common Stock (this “Warrant”).

 

This Warrant is being issued pursuant to the terms of that certain Securities Purchase Agreement dated December 23, 2020, to which Company and Investor are parties (as the same may be amended from time to time, the “Purchase Agreement”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference. This Warrant was issued to Investor on December 23, 2020 (the “Issue Date”).

 

2. Exercise of Warrant.

 

2.1. General.

 

(a) This Warrant is exercisable in whole or in part at any time and from time to time commencing on the Issue Date and ending on the Expiration Date. Such exercise shall be effectuated by submitting to Company (either by delivery to Company or by email or facsimile transmission) a completed and signed Notice of Exercise substantially in the form attached to this Warrant as Exhibit A (the “Notice of Exercise”). The date a Notice of Exercise is delivered to Company shall be the “Exercise Date,” provided that, if such exercise represents the full exercise of the outstanding balance of this Warrant, Investor shall tender this Warrant to Company within five (5) Trading Days thereafter, but only if the Warrant Shares to be delivered pursuant to the Notice of Exercise have been delivered to Investor as of such date. The Notice of Exercise shall be executed by Investor and shall indicate the number of Warrant Shares to be issued pursuant to such exercise

 

 
 

 

(b) The Exercise Price per share of Common Stock for the Warrant Shares shall be payable, at the election of Investor, in cash or by certified or official bank check or by wire transfer in accordance with instructions provided by Company at the request of Investor.

 

(c) Upon the appropriate payment to Company of the Exercise Price for the Warrant Shares, Company shall promptly, but in no case later than the date that is ten (10) Trading Days following the date the Exercise Price is paid to Company (the “Delivery Date”), deliver or cause Company’s Transfer Agent to deliver the applicable Warrant Shares electronically via the DWAC system to the account designated by Investor on the Notice of Exercise. If for any reason Company is not able to so deliver the Warrant Shares via the DWAC system, Company shall instead, on or before the applicable date set forth above in this subsection, issue and deliver to Investor or its broker (as designated in the Notice of Exercise), via reputable overnight courier, a certificate, registered in the name of Investor or its designee, representing the applicable number of Warrant Shares.

 

(d) In no event may this Warrant be net cash settled.

 

2.2. Ownership Limitation. Notwithstanding anything to the contrary contained in this Warrant, if at any time Lender shall or would be issued shares of Common Stock under this Warrant, but such issuance would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance) (the “Maximum Percentage”), then Borrower shall not issue to Lender shares of Common Stock which would exceed the Maximum Percentage. The ownership limitation is enforceable, unconditional and non-waivable and shall apply to all affiliates and assigns of Lender.

 

3. Mutilation or Loss of Warrant. Upon receipt by Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, Company will execute and deliver to Investor a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void.

 

4. Rights of Investor. Investor shall not, by virtue of this Warrant alone, be entitled to any rights of a stockholder in Company, either at law or in equity, and the rights of Investor with respect to or arising under this Warrant are limited to those expressed in this Warrant and are not enforceable against Company except to the extent set forth herein

 

5. Adjustments. If Company shall issue any shares of Common Stock as a stock dividend or subdivide the number of outstanding shares of Common Stock into a greater number of shares, then, in either such case, the Exercise Price in effect before such dividend or subdivision shall be proportionately reduced and the number of Warrant Shares at that time issuable pursuant to the exercise of this Warrant shall be proportionately increased; and, conversely, if Company shall contract the number of outstanding shares of Common Stock by combining such shares into a smaller number of shares, then the Exercise Price in effect before such combination shall be proportionately increased and the number of Warrant Shares at that time issuable pursuant to the exercise or conversion of this Warrant shall be proportionately decreased. Each adjustment in the number of shares of Warrant Stock issuable shall be to the nearest whole share.

 

6. Certificate as to Adjustments. In the case of any adjustment in the Exercise Price or Warrant Shares, Company will promptly give written notice to Investor in the form of a certificate, certified and confirmed by an officer of the Company, setting forth the adjustment in reasonable detail.

 

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7. Transfer to Comply with the Securities Act. This Warrant and the Warrant Shares have not been registered under the Securities Act of 1933, as amended (the “1933 Act”). Neither this Warrant nor the Warrant Shares may be sold, transferred, pledged or hypothecated without (a) an effective registration statement under the 1933 Act relating to such security or (b) an opinion of counsel reasonably satisfactory to Company that registration is not required under the 1933 Act. Until such time as registration has occurred under the 1933 Act, each certificate for this Warrant and any Warrant Shares shall contain a legend, in form and substance satisfactory to counsel for Company, setting forth the restrictions on transfer contained in this Section 7.

 

8. Notices. Any notice required or permitted hereunder shall be given in the manner provided in the subsection titled “Notices” in the Purchase Agreement, the terms of which are incorporated herein by reference.

 

9. Supplements and Amendments; Whole Agreement. This Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant, together with the Purchase Agreement, contains the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings with respect to the subject matter hereof and thereof other than as expressly contained herein and therein.

 

10. Governing Law; Venue. This Warrant shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of Delaware. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state and federal courts in San Diego County, California. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The prevailing party in any dispute arising under this Agreement shall be entitled to recover from the other party its reasonable attorney’s fees and costs.

 

11. Waiver of Jury Trial. EACH OF COMPANY AND INVESTOR IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS WARRANT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, COMPANY ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY.

 

12. Counterparts. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Electronic signatures shall be considered original signatures for all purposes hereof.

 

13. Attorneys’ Fees. In the event of any litigation or dispute arising from this Warrant, the parties agree that the prevailing party shall be entitled to an additional award of the full amount of the reasonable attorneys’ fees and expenses paid by said prevailing party in connection with litigation or dispute.

 

14. Severability. Whenever possible, each provision of this Warrant shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be invalid or unenforceable in any jurisdiction, such provision shall be modified to achieve the objective of the parties to the fullest extent permitted and such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Warrant or the validity or enforceability of this Warrant in any other jurisdiction.

 

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

 

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IN WITNESS WHEREOF, Company has caused this Warrant to be duly executed as of the Issue Date.

 

  COMPANY:
     
  Tesoro Enterprises, Inc.
     
     
  By:  
    Brian Foote, President and CEO

 

[Signature page to Warrant]

 

 
 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

A1. “DTC” means the Depository Trust Company or any successor thereto.

A2. “DTC Eligible” means, with respect to the Common Stock, that such Common Stock is eligible to be deposited in certificate form at the DTC, cleared and converted into electronic shares by the DTC and held in the name of the clearing firm servicing Investor’s brokerage firm for the benefit of Investor.

 

A3. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A4. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A5. “Exercise Price” means $0.25 per share of Common Stock, as the same may be adjusted from time to time pursuant to the terms and conditions of this Warrant.

 

A6. “Trading Day” means any day the New York Stock Exchange is open for trading.

 

 
 

 

EXHIBIT A

 

NOTICE OF EXERCISE OF WARRANT

 

TO: TESORO ENTERPRISES, INC.

ATTN: _______________

VIA FAX TO: ( )______________ EMAIL: ______________

 

The undersigned hereby irrevocably elects to exercise the right, represented by the Warrant to Purchase Shares of Common Stock dated as of [_______] (the “Warrant”), to purchase shares of the common stock, $0.00001 par value (“Common Stock”), of Tesoro Enterprises, Inc., and tenders herewith payment in accordance with Section 2 of the Warrant, as follows:

 

  Warrant Shares: _______________________
   
   Exercise Price: $_______________________
   
   Purchase Price: $___________________ = (Exercise Price x Warrant Shares)

 

Payment is being made by:
_______ enclosed check
_______ wire transfer
_______ other

 

Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Warrant.

 

It is the intention of Investor to comply with the provisions of Section 2.2 of the Warrant regarding certain limits on Investor’s right to receive shares thereunder. Investor believes this exercise complies with the provisions of such Section 2.2. Nonetheless, to the extent that, pursuant to the exercise effected hereby, Investor would receive more shares of Common Stock than permitted under Section 2.2, Company shall not be obligated and shall not issue to Investor such excess shares until such time, if ever, that Investor could receive such excess shares without violating, and in full compliance with, Section 2.2 of the Warrant.

 

As contemplated by the Warrant, this Notice of Exercise is being sent by email to the officer indicated above.

 

If this Notice of Exercise represents the full exercise of the entire Warrant, Investor will surrender (or cause to be surrendered) the Warrant to Company at the address indicated above by express courier within five (5) Trading Days after the Warrant Shares to be delivered pursuant to this Notice of Exercise have been delivered to Investor.

 

To the extent the Warrant Shares are not able to be delivered to Investor via the DWAC system, please deliver certificates representing the Warrant Shares to Investor via reputable overnight courier after receipt of this Notice of Exercise (by facsimile transmission or otherwise) to:

 

_____________________________________

____________________________________

___________________________________

 

Exhibit A to Warrant, Page 1

 

 
 

 

Dated: _____________________

 

___________________________

[Name of Investor]

 

By:________________________

 

Exhibit A to Warrant, Page 2

 

 
 

 

EXHIBIT C

 

WIRING INSTRUCTIONS

 

Bank: JPMorgan Chase Bank, N.A.

Name on Account: Culhane, Meadows, Haughian & Walsh, PLLC

Routing No.: 111000614

Trust IOLTA Account No.: 216838617

Reference: Tesoro Enterprises Note and Warrant

 

 

 

 

Exhibit 10.6

 

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

 

CONVERTIBLE PROMISSORY NOTE

 

Effective Date: December 23, 2020 U.S. $112,500.00

 

FOR VALUE RECEIVED, Tesoro Enterprises, Inc., a Delaware corporation (“Borrower”), promises to pay to the order of Judith Levine, an individual, or his successors or assigns (“Lender”), $112,500.00 and any interest accrued hereunder on December 23, 2022 (the “Maturity Date”) in accordance with the terms set forth herein and to pay interest on the outstanding balance at the rate of eight percent (8%) per annum from the Effective Date until the same is paid in full. This Convertible Promissory Note (this “Note”) is issued and made effective as of December 23, 2020 (the “Effective Date”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.

 

1. Payment; Prepayment.

 

1.1. Payment. All payments owing hereunder shall be in lawful money of the United States of America or Conversion Shares (as defined below), as provided for herein, and delivered to Lender at the address or bank account furnished to Borrower for that purpose. All payments shall be applied first to (a) costs of collection, if any, then to (b) fees and charges, if any, then to (c) accrued and unpaid interest, and thereafter, to (d) principal.

 

1.2. Prepayment. Notwithstanding the foregoing, Borrower shall have the right to prepay all or any portion of the outstanding balance without penalty.

 

2. Security. This Note is unsecured.

 

3. Lender Optional Conversion.

 

3.1. Conversions. Lender has the right at any time after the Effective Date until the outstanding balance has been paid in full, at its election, to convert (“Conversion”) all or any portion of the outstanding balance into shares (“Conversion Shares”) of fully paid and non-assessable common stock, $0.00001 par value per share (“Common Stock”), of Borrower as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the “Conversion Amount”) divided by the Conversion Price (as defined below). Conversion notices in the form attached hereto as Exhibit A (each, a “Conversion Notice”) may be delivered from time to time by Lender to Borrower, and all Conversions shall be cashless and not require further payment from Lender. Borrower shall deliver the Conversion Shares from any Conversion to Lender in accordance with Section 7 below.

 

 
 

 

3.2. Conversion Price. The price at which Lender has the right to convert all or any portion of the outstanding balance into Common Stock is $0.15 per share of Common Stock (the “Conversion Price”). The Conversion Price will automatically be adjusted in the event Borrower consummates a stock split, stock combination or other similar change to the number of outstanding shares of Common Stock.

 

4. Defaults and Remedies.

 

4.1. Defaults. The following are events of default under this Note (each, an “Event of Default”): (a) Borrower fails to pay any principal, interest, fees, charges, or any other amount when due and payable hereunder; (b) Borrower fails to deliver any Conversion Shares in accordance with the terms hereof; (c) a receiver, trustee or other similar official shall be appointed over Borrower or a material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed or discharged within sixty (60) days; (d) Borrower makes a general assignment for the benefit of creditors; (e) Borrower files a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); or (f) an involuntary bankruptcy proceeding is commenced or filed against Borrower. Notwithstanding the foregoing, the occurrence of any of the foregoing events will not be considered an Event of Default unless Borrower fails to cure such event within ten (10) Trading Days of its receipt of written notice from Lender.

 

4.2. Remedies. Following an Event of Default, Lender may accelerate this Note by written notice to Borrower with the outstanding balance becoming immediately due and payable. Nothing herein shall limit Lender’s right to pursue any other remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to Borrower’s failure to timely deliver Conversion Shares upon Conversion of the Note as required pursuant to the terms hereof.

 

5. Unconditional Obligation; No Offset. Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset, deduction or counterclaim of any kind. Borrower hereby waives any rights of offset it now has or may have hereafter against Lender, its successors and assigns, and agrees to make the payments or Conversions called for herein in accordance with the terms of this Note.

 

6. Waiver. No waiver of any provision of this Note shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.

 

7. Method of Conversion Share Delivery. On or before the close of business on the seventh (7th) Trading Day following the date of delivery of a Conversion Notice (the “Delivery Date”), Borrower shall, provided it is DWAC Eligible at such time, deliver or cause its transfer agent to deliver the applicable Conversion Shares electronically via DWAC to the account designated by Lender in the applicable Conversion Notice. If Borrower is not DWAC Eligible, it shall deliver to Lender or its broker (as designated in the Conversion Notice), via reputable overnight courier, a certificate representing the number of shares of Common Stock equal to the number of Conversion Shares to which Lender shall be entitled, registered in the name of Lender or its designee.

 

8. Ownership Limitation. Notwithstanding anything to the contrary contained in this Note or the other Transaction Documents, Borrower shall not effect any conversion of this Note to the extent that after giving effect to such conversion would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance). For purposes of this section, beneficial ownership of Common Stock will be determined pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended.

 

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9. Opinion of Counsel. In the event that an opinion of counsel is needed for any matter related to this Note, Lender shall have such opinion provided by its counsel.

 

10. Governing Law; Venue. This Note shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and wholly performed in that jurisdiction. Each party hereto submits to the exclusive jurisdiction of any state or federal court sitting in San Diego County, California in any proceeding arising out of or relating to this Note and agrees that all claims in respect of the proceeding may be heard and determined in any such court and hereby expressly submits to the personal jurisdiction and venue of such court for the purposes hereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum. Each party hereto hereby irrevocably consents to the service of process of any of the aforementioned courts in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to its address as set forth herein, such service to become effective ten (10) days after such mailing. The parties expressly and irrevocably waive the right to a trial by jury in any and all actions or proceedings brought with respect to this Note and with respect to any claims arising out of or related to this Note.

 

11. Cancellation. After repayment or conversion of the entire outstanding balance, this Note shall be deemed paid in full, shall automatically be deemed canceled, and shall not be reissued.

 

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

 

13. Assignments. Neither party may assign this Note without the consent of the other party.

 

14. Notices. Whenever notice is required to be given under this Note, such notice shall be given to such address as has been provided to the other party.

 

15. Severability. If any part of this Note is construed to be in violation of any law, such part shall be modified to achieve the objective of Borrower and Lender to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect.

 

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

 

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

 

  BORROWER:
     
  Tesoro Enterprises, Inc.
     
  By:  
    Brian Foote, President and CEO

 

ACKNOWLEDGED, ACCEPTED AND AGREED:  
   
LENDER:  
     
By:    
  Judith Levine, an individual  

 

[Signature Page to Convertible Promissory Note]

 

 
 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

A1. “DTC” means the Depository Trust Company or any successor thereto.

 

A2. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A3. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A4. “DWAC Eligible” means that (a) Borrower’s Common Stock is eligible at DTC for full services pursuant to DTC’s operational arrangements, including without limitation transfer through DTC’s DWAC system; (b) Borrower has been approved (without revocation) by DTC’s underwriting department; (c) Borrower’s transfer agent is approved as an agent in the DTC/FAST Program; (d) the Conversion Shares are otherwise eligible for delivery via DWAC; and (e) Borrower’s transfer agent does not have a policy prohibiting or limiting delivery of the Conversion Shares via DWAC.

 

A5. “Trading Day” means any day on which Borrower’s market is open for trading.

 

[Remainder of page intentionally left blank]

 

Attachment 1 to Convertible Promissory Note, Page 1
 

 

EXHIBIT A

 

Judith Levine

 

HUMBL, Inc. Date:______________________
Attn: Brian Foote  

600 B. Street, Suite 300

 
San Diego, California 92117  

 

CONVERSION NOTICE

 

The above-captioned Lender hereby gives notice to HUMBL, Inc., a Delaware corporation (the “Borrower”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on December 23, 2020 (the “Note”), that Lender elects to convert the portion of the Note balance set forth below into fully paid and non-assessable shares of Common Stock of Borrower as of the date of conversion specified below. Said conversion shall be based on the Conversion Price set forth below. In the event of a conflict between this Conversion Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of Conversion Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.

 

  A. Date of Conversion:  ____________

 

  B. Conversion #:  ____________

 

  C. Conversion Amount:  ____________

 

  D. Conversion Price: $0.15

 

  E. Conversion Shares: _______________ (C divided by D)

 

  F. Remaining Outstanding Balance of Note: ____________

 

Please transfer the Conversion Shares electronically (via DWAC) to the following account:

 

Broker: ____________________________   Address:  
DTC#: _____________________________      
Account #: __________________________      
Account Name: _______________________      

 

To the extent the Conversion Shares are not able to be delivered to Lender electronically via the DWAC system, deliver all such certificated shares to Lender via reputable overnight courier after receipt of this Conversion Notice (by facsimile transmission or otherwise) to:

_____________________________________

_____________________________________

_____________________________________

 

Sincerely,

 

Lender:

 

By:    
  Judith Levine  

 

Exhibit A to Convertible Promissory Note, Page 1

 

 

Exhibit 10.7

 

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF THIS WARRANT OR SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THIS WARRANT OR SUCH SECURITIES, AS APPLICABLE, MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS.

 

TESORO ENTERPRISES, INC.

 

WARRANT TO PURCHASE SHARES OF COMMON STOCK

 

1. Issuance. For good and valuable consideration as set forth in the Purchase Agreement (as defined below), including without limitation the Purchase Price (as defined in the Purchase Agreement), the receipt and sufficiency of which are hereby acknowledged by Tesoro Enterprises, Inc., a Delaware corporation, its successors and assigns (“Company”), Tuigamala Group PTY LTD, an Australian corporation, its successors and/or registered assigns (“Investor”), is hereby granted the right to purchase at any time on or after the Issue Date (as defined below) until the one-year anniversary of the Issue Date (the “Expiration Date”), 50,000,000 fully paid and non-assessable shares (the “Warrant Shares”) of Company’s common stock, par value $0.00001 per share (the “Common Stock”), as such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant to Purchase Shares of Common Stock (this “Warrant”).

 

This Warrant is being issued pursuant to the terms of that certain Warrant Purchase Agreement dated December 23, 2020, to which Company and Investor are parties (as the same may be amended from time to time, the “Purchase Agreement”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference. This Warrant was issued to Investor on December 23, 2020 (the “Issue Date”).

 

2. Exercise of Warrant.

 

2.1. General.

 

(a) This Warrant is exercisable in whole or in part at any time and from time to time commencing on the Issue Date and ending on the Expiration Date. Such exercise shall be effectuated by submitting to Company (either by delivery to Company or by email or facsimile transmission) a completed and signed Notice of Exercise substantially in the form attached to this Warrant as Exhibit A (the “Notice of Exercise”). The date a Notice of Exercise is delivered to Company shall be the “Exercise Date,” provided that, if such exercise represents the full exercise of the outstanding balance of this Warrant, Investor shall tender this Warrant to Company within five (5) Trading Days thereafter, but only if the Warrant Shares to be delivered pursuant to the Notice of Exercise have been delivered to Investor as of such date. The Notice of Exercise shall be executed by Investor and shall indicate the number of Warrant Shares to be issued pursuant to such exercise

 

 
 

 

(b) The Exercise Price per share of Common Stock for the Warrant Shares shall be payable, at the election of Investor, in cash or by certified or official bank check or by wire transfer in accordance with instructions provided by Company at the request of Investor.

 

(c) Upon the appropriate payment to Company of the Exercise Price for the Warrant Shares, Company shall promptly, but in no case later than the date that is ten (10) Trading Days following the date the Exercise Price is paid to Company (the “Delivery Date”), deliver or cause Company’s Transfer Agent to deliver the applicable Warrant Shares electronically via the DWAC system to the account designated by Investor on the Notice of Exercise. If for any reason Company is not able to so deliver the Warrant Shares via the DWAC system, Company shall instead, on or before the applicable date set forth above in this subsection, issue and deliver to Investor or its broker (as designated in the Notice of Exercise), via reputable overnight courier, a certificate, registered in the name of Investor or its designee, representing the applicable number of Warrant Shares.

 

(d) In no event may this Warrant be net cash settled.

 

2.2. Ownership Limitation. Notwithstanding anything to the contrary contained in this Warrant, if at any time Lender shall or would be issued shares of Common Stock under this Warrant, but such issuance would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance) (the “Maximum Percentage”), then Borrower shall not issue to Lender shares of Common Stock which would exceed the Maximum Percentage. The ownership limitation is enforceable, unconditional and non-waivable and shall apply to all affiliates and assigns of Lender.

 

3. Mutilation or Loss of Warrant. Upon receipt by Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, Company will execute and deliver to Investor a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void.

 

4. Rights of Investor. Investor shall not, by virtue of this Warrant alone, be entitled to any rights of a stockholder in Company, either at law or in equity, and the rights of Investor with respect to or arising under this Warrant are limited to those expressed in this Warrant and are not enforceable against Company except to the extent set forth herein

 

5. Adjustments. If Company shall issue any shares of Common Stock as a stock dividend or subdivide the number of outstanding shares of Common Stock into a greater number of shares, then, in either such case, the Exercise Price in effect before such dividend or subdivision shall be proportionately reduced and the number of Warrant Shares at that time issuable pursuant to the exercise of this Warrant shall be proportionately increased; and, conversely, if Company shall contract the number of outstanding shares of Common Stock by combining such shares into a smaller number of shares, then the Exercise Price in effect before such combination shall be proportionately increased and the number of Warrant Shares at that time issuable pursuant to the exercise or conversion of this Warrant shall be proportionately decreased. Each adjustment in the number of shares of Warrant Stock issuable shall be to the nearest whole share.

 

6. Certificate as to Adjustments. In the case of any adjustment in the Exercise Price or Warrant Shares, Company will promptly give written notice to Investor in the form of a certificate, certified and confirmed by an officer of the Company, setting forth the adjustment in reasonable detail.

 

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7. Transfer to Comply with the Securities Act. This Warrant and the Warrant Shares have not been registered under the Securities Act of 1933, as amended (the “1933 Act”). Neither this Warrant nor the Warrant Shares may be sold, transferred, pledged or hypothecated without (a) an effective registration statement under the 1933 Act relating to such security or (b) an opinion of counsel reasonably satisfactory to Company that registration is not required under the 1933 Act. Until such time as registration has occurred under the 1933 Act, each certificate for this Warrant and any Warrant Shares shall contain a legend, in form and substance satisfactory to counsel for Company, setting forth the restrictions on transfer contained in this Section 7.

 

8. Notices. Any notice required or permitted hereunder shall be given in the manner provided in the subsection titled “Notices” in the Purchase Agreement, the terms of which are incorporated herein by reference.

 

9. Supplements and Amendments; Whole Agreement. This Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant, together with the Purchase Agreement, contains the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings with respect to the subject matter hereof and thereof other than as expressly contained herein and therein.

 

10. Governing Law; Venue. This Warrant shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of Delaware. The provisions set forth in the Purchase Agreement to determine the proper venue for any disputes are incorporated herein by this reference.

 

11. Waiver of Jury Trial. EACH OF COMPANY AND INVESTOR IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS WARRANT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, COMPANY ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY.

 

12. Counterparts. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Electronic signatures shall be considered original signatures for all purposes hereof.

 

13. Attorneys’ Fees. In the event of any litigation or dispute arising from this Warrant, the parties agree that the prevailing party shall be entitled to an additional award of the full amount of the reasonable attorneys’ fees and expenses paid by said prevailing party in connection with litigation or dispute.

 

14. Severability. Whenever possible, each provision of this Warrant shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be invalid or unenforceable in any jurisdiction, such provision shall be modified to achieve the objective of the parties to the fullest extent permitted and such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Warrant or the validity or enforceability of this Warrant in any other jurisdiction.

 

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

 

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IN WITNESS WHEREOF, Company has caused this Warrant to be duly executed as of the Issue Date.

 

  COMPANY:
   
  Tesoro Enterprises, Inc.
   
  By:  
    Brian Foote, President and CEO

 

[Signature Page to Warrant]

 

 
 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

A1. “DTC” means the Depository Trust Company or any successor thereto.

 

A2. “DTC Eligible” means, with respect to the Common Stock, that such Common Stock is eligible to be deposited in certificate form at the DTC, cleared and converted into electronic shares by the DTC and held in the name of the clearing firm servicing Investor’s brokerage firm for the benefit of Investor.

 

A3. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A4. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A5. “Exercise Price” means $0.25 per share of Common Stock, as the same may be adjusted from time to time pursuant to the terms and conditions of this Warrant.

 

A6. “Trading Day” means any day the New York Stock Exchange is open for trading.

 

Attachment 1 to Warrant, Page 1

 

 
 

 

EXHIBIT A

 

NOTICE OF EXERCISE OF WARRANT

 

TO: TESORO ENTERPRISES, INC.  
  ATTN: _______________________
  VIA FAX TO: (     ) _______________________ EMAIL: _______________________

 

The undersigned hereby irrevocably elects to exercise the right, represented by the Warrant to Purchase Shares of Common Stock dated as of December 23, 2020 (the “Warrant”), to purchase shares of the common stock, $0.00001 par value (“Common Stock”), of Tesoro Enterprises, Inc., and tenders herewith payment in accordance with Section 2 of the Warrant, as follows:

 

  Warrant Shares:    
       
  Exercise Price: $    
       
  Purchase Price: $ = (Exercise Price x Warrant Shares)

 

Payment is being made by:

 

      enclosed check
      wire transfer
      other

 

 

Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Warrant.

 

It is the intention of Investor to comply with the provisions of Section 2.2 of the Warrant regarding certain limits on Investor’s right to receive shares thereunder. Investor believes this exercise complies with the provisions of such Section 2.2. Nonetheless, to the extent that, pursuant to the exercise effected hereby, Investor would receive more shares of Common Stock than permitted under Section 2.2, Company shall not be obligated and shall not issue to Investor such excess shares until such time, if ever, that Investor could receive such excess shares without violating, and in full compliance with, Section 2.2 of the Warrant.

 

As contemplated by the Warrant, this Notice of Exercise is being sent by email to the officer indicated above.

 

If this Notice of Exercise represents the full exercise of the entire Warrant, Investor will surrender (or cause to be surrendered) the Warrant to Company at the address indicated above by express courier within five (5) Trading Days after the Warrant Shares to be delivered pursuant to this Notice of Exercise have been delivered to Investor.

 

To the extent the Warrant Shares are not able to be delivered to Investor via the DWAC system, please deliver certificates representing the Warrant Shares to Investor via reputable overnight courier after receipt of this Notice of Exercise (by facsimile transmission or otherwise) to:

 

     
   
   

 

Dated:    
     
   
[Name of Investor]  
     
By:    

 

Exhibit A to Warrant, Page 1

 

 

 

 

EXHIBIT C

 

WIRING INSTRUCTIONS

 

 

 

  

WARRANT ASSIGNMENT

 

FOR VALUE RECEIVED, the undersigned, Tuigamala Group Pty Ltd, an Australian private limited company (“Assignor”), hereby assigns and transfers to Archumbl Pty Ltd, an Australian private limited company (ACN 649 688 666), as trustee for Archumbl Trust (“Assignee”), and Assignee hereby receives and accepts, all of Assignor’s right, title and interest in and to, free and clear of any lien, claim or encumbrance, that certain Warrant to Purchase Shares of Common Stock issued on December 23, 2020 by HUMBL, Inc., a Delaware corporation (f/k/a Tesoro Enterprises, Inc.), to the order of Assignor.

 

WITNESS our hands this 10th day of May 2021.

 

  ASSIGNOR:
   
  TUIGAMALA GROUP PTY LTD
   
  By:  
    Julius Tuigamala, Sole Director
     
  ASSIGNEE:
   
  ARCHUMBL PTY LTD, as Trustee for Archumbl Trust
   
  By:  
    Alev Dover, Director

 

 

 

 

AMENDMENT TO WARRANT TO PURCHASE SHARES OF COMMON STOCK

 

This Amendment to Warrant to Purchase Shares of Common Stock (this “Amendment”) is entered into as of May 17, 2021, by and between HUMBL, Inc., a Delaware corporation (“Company”), and Archumbl Pty Ltd, an Australian private limited company (ACN 649 688 666), as trustee for Archumbl Trust (“Holder”). Capitalized terms used in this Amendment without definition shall have the meanings given to them in the Warrant (as defined below).

 

A. Holder previously issued to Tuigamala Group Pty Ltd (“Tuigamala Group”) that certain Warrant to Purchase Shares of Common Stock dated December 23, 2020 (the “Warrant”).

 

B. Tuigamala Group subsequently assigned the Warrant to Holder.

 

C. Company and Holder have agreed, subject to the terms, amendments, conditions and understandings expressed in this Amendment to extend the Expiration Date of the Warrant.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

 

1. Recitals. Each of the parties hereto acknowledges and agrees that the recitals set forth above in this Amendment are true and accurate and are hereby incorporated into and made a part of this Amendment.

 

2. Expiration Date. Company and Holder agree that the Expiration Date of the Warrant is hereby extended to December 23, 2022.

 

3. Registration. Company agrees to register all of the Warrant Shares in the Form S-1 Registration Statement it intends to file.

 

4. Other Terms Unchanged. The Warrant, as amended by this Amendment remains and continues in full force and effect, constitutes legal, valid, and binding obligations of each of the parties, and is in all respects agreed to, ratified, and confirmed. Any reference to the Warrant after the date of this Amendment is deemed to be a reference to the Warrant as amended by this Amendment. If there is a conflict between the terms of this Amendment and the Warrant, the terms of this Amendment shall control.

 

5. No Reliance. Holder acknowledges and agrees that neither Company nor any of its officers, directors, members, managers, equity holders, representatives or agents has made any representations or warranties to Holder or any of its agents, representatives, officers, directors, or employees except as expressly set forth in this Amendment and the Transaction Documents and, in making its decision to enter into the transactions contemplated by this Amendment, Holder is not relying on any representation, warranty, covenant or promise of Company or its officers, directors, members, managers, equity holders, agents or representatives other than as set forth in this Amendment.

 

 
 

 

6. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument. The parties hereto confirm that any electronic copy of another party’s executed counterpart of this Amendment (or such party’s signature page thereof) will be deemed to be an executed original thereof.

 

7. Further Assurances. Each party shall do and perform or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Amendment and the consummation of the transactions contemplated hereby.

 

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date set forth above.

 

  COMPANY:
   
  HUMBL, Inc.
   
  By:  
    Brian Foote, CEO
     
  HOLDER:
   
  Archumbl Pty Ltd, as Trustee for Archumbl Trust
   
  By:  
    Alev Dover, Director

 

[Signature Page to Amendment to Warrant to Purchase Shares of Common Stock]

 

 

 

 

 

 

Exhibit 10.8

 

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF THIS WARRANT OR SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THIS WARRANT OR SUCH SECURITIES, AS APPLICABLE, MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS.

 

TESORO ENTERPRISES, INC.

 

WARRANT TO PURCHASE SHARES OF COMMON STOCK

 

1. Issuance. For good and valuable consideration as set forth in the Purchase Agreement (as defined below), including without limitation the Purchase Price (as defined in the Purchase Agreement), the receipt and sufficiency of which are hereby acknowledged by Tesoro Enterprises, Inc., a Delaware corporation, its successors and assigns (“Company”), Tuigamala Group PTY LTD, an Australian corporation, its successors and/or registered assigns (“Investor”), is hereby granted the right to purchase at any time on or after the Issue Date (as defined below) until the one-year anniversary of the Issue Date (the “Expiration Date”), 50,000,000 fully paid and non-assessable shares (the “Warrant Shares”) of Company’s common stock, par value $0.00001 per share (the “Common Stock”), as such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant to Purchase Shares of Common Stock (this “Warrant”).

 

This Warrant is being issued pursuant to the terms of that certain Warrant Purchase Agreement dated December 23, 2020, to which Company and Investor are parties (as the same may be amended from time to time, the “Purchase Agreement”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference. This Warrant was issued to Investor on December 23, 2020 (the “Issue Date”).

 

2. Exercise of Warrant.

 

2.1. General.

 

(a) This Warrant is exercisable in whole or in part at any time and from time to time commencing on the Issue Date and ending on the Expiration Date. Such exercise shall be effectuated by submitting to Company (either by delivery to Company or by email or facsimile transmission) a completed and signed Notice of Exercise substantially in the form attached to this Warrant as Exhibit A (the “Notice of Exercise”). The date a Notice of Exercise is delivered to Company shall be the “Exercise Date,” provided that, if such exercise represents the full exercise of the outstanding balance of this Warrant, Investor shall tender this Warrant to Company within five (5) Trading Days thereafter, but only if the Warrant Shares to be delivered pursuant to the Notice of Exercise have been delivered to Investor as of such date. The Notice of Exercise shall be executed by Investor and shall indicate the number of Warrant Shares to be issued pursuant to such exercise

 

 
 

 

(b) The Exercise Price per share of Common Stock for the Warrant Shares shall be payable, at the election of Investor, in cash or by certified or official bank check or by wire transfer in accordance with instructions provided by Company at the request of Investor.

 

(c) Upon the appropriate payment to Company of the Exercise Price for the Warrant Shares, Company shall promptly, but in no case later than the date that is ten (10) Trading Days following the date the Exercise Price is paid to Company (the “Delivery Date”), deliver or cause Company’s Transfer Agent to deliver the applicable Warrant Shares electronically via the DWAC system to the account designated by Investor on the Notice of Exercise. If for any reason Company is not able to so deliver the Warrant Shares via the DWAC system, Company shall instead, on or before the applicable date set forth above in this subsection, issue and deliver to Investor or its broker (as designated in the Notice of Exercise), via reputable overnight courier, a certificate, registered in the name of Investor or its designee, representing the applicable number of Warrant Shares.

 

(d) In no event may this Warrant be net cash settled.

 

2.2. Ownership Limitation. Notwithstanding anything to the contrary contained in this Warrant, if at any time Lender shall or would be issued shares of Common Stock under this Warrant, but such issuance would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance) (the “Maximum Percentage”), then Borrower shall not issue to Lender shares of Common Stock which would exceed the Maximum Percentage. The ownership limitation is enforceable, unconditional and non-waivable and shall apply to all affiliates and assigns of Lender.

 

3. Mutilation or Loss of Warrant. Upon receipt by Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, Company will execute and deliver to Investor a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void.

 

4. Rights of Investor. Investor shall not, by virtue of this Warrant alone, be entitled to any rights of a stockholder in Company, either at law or in equity, and the rights of Investor with respect to or arising under this Warrant are limited to those expressed in this Warrant and are not enforceable against Company except to the extent set forth herein

 

5. Adjustments. If Company shall issue any shares of Common Stock as a stock dividend or subdivide the number of outstanding shares of Common Stock into a greater number of shares, then, in either such case, the Exercise Price in effect before such dividend or subdivision shall be proportionately reduced and the number of Warrant Shares at that time issuable pursuant to the exercise of this Warrant shall be proportionately increased; and, conversely, if Company shall contract the number of outstanding shares of Common Stock by combining such shares into a smaller number of shares, then the Exercise Price in effect before such combination shall be proportionately increased and the number of Warrant Shares at that time issuable pursuant to the exercise or conversion of this Warrant shall be proportionately decreased. Each adjustment in the number of shares of Warrant Stock issuable shall be to the nearest whole share.

 

6. Certificate as to Adjustments. In the case of any adjustment in the Exercise Price or Warrant Shares, Company will promptly give written notice to Investor in the form of a certificate, certified and confirmed by an officer of the Company, setting forth the adjustment in reasonable detail.

 

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7. Transfer to Comply with the Securities Act. This Warrant and the Warrant Shares have not been registered under the Securities Act of 1933, as amended (the “1933 Act”). Neither this Warrant nor the Warrant Shares may be sold, transferred, pledged or hypothecated without (a) an effective registration statement under the 1933 Act relating to such security or (b) an opinion of counsel reasonably satisfactory to Company that registration is not required under the 1933 Act. Until such time as registration has occurred under the 1933 Act, each certificate for this Warrant and any Warrant Shares shall contain a legend, in form and substance satisfactory to counsel for Company, setting forth the restrictions on transfer contained in this Section 7.

 

8. Notices. Any notice required or permitted hereunder shall be given in the manner provided in the subsection titled “Notices” in the Purchase Agreement, the terms of which are incorporated herein by reference.

 

9. Supplements and Amendments; Whole Agreement. This Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant, together with the Purchase Agreement, contains the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings with respect to the subject matter hereof and thereof other than as expressly contained herein and therein.

 

10. Governing Law; Venue. This Warrant shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of Delaware. The provisions set forth in the Purchase Agreement to determine the proper venue for any disputes are incorporated herein by this reference.

 

11. Waiver of Jury Trial. EACH OF COMPANY AND INVESTOR IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS WARRANT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, COMPANY ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY.

 

12. Counterparts. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Electronic signatures shall be considered original signatures for all purposes hereof.

 

13. Attorneys’ Fees. In the event of any litigation or dispute arising from this Warrant, the parties agree that the prevailing party shall be entitled to an additional award of the full amount of the reasonable attorneys’ fees and expenses paid by said prevailing party in connection with litigation or dispute.

 

14. Severability. Whenever possible, each provision of this Warrant shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be invalid or unenforceable in any jurisdiction, such provision shall be modified to achieve the objective of the parties to the fullest extent permitted and such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Warrant or the validity or enforceability of this Warrant in any other jurisdiction.

 

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

 

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IN WITNESS WHEREOF, Company has caused this Warrant to be duly executed as of the Issue Date.

 

  COMPANY:
   
  Tesoro Enterprises, Inc.
   
  By:  
    Brian Foote, President and CEO

 

[Signature Page to Warrant]

 

 
 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

A1. “DTC” means the Depository Trust Company or any successor thereto.

 

A2. “DTC Eligible” means, with respect to the Common Stock, that such Common Stock is eligible to be deposited in certificate form at the DTC, cleared and converted into electronic shares by the DTC and held in the name of the clearing firm servicing Investor’s brokerage firm for the benefit of Investor.

 

A3. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A4. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A5. “Exercise Price” means $0.25 per share of Common Stock, as the same may be adjusted from time to time pursuant to the terms and conditions of this Warrant.

 

A6. “Trading Day” means any day the New York Stock Exchange is open for trading.

 

Attachment 1 to Warrant, Page 1

 

 
 

 

EXHIBIT A

 

NOTICE OF EXERCISE OF WARRANT

 

TO: TESORO ENTERPRISES, INC.  
  ATTN: _______________________
  VIA FAX TO: (     ) _______________________ EMAIL: _______________________

 

The undersigned hereby irrevocably elects to exercise the right, represented by the Warrant to Purchase Shares of Common Stock dated as of December 23, 2020 (the “Warrant”), to purchase shares of the common stock, $0.00001 par value (“Common Stock”), of Tesoro Enterprises, Inc., and tenders herewith payment in accordance with Section 2 of the Warrant, as follows:

 

  Warrant Shares:    
       
  Exercise Price: $    
       
  Purchase Price: $ = (Exercise Price x Warrant Shares)

 

Payment is being made by:

 

      enclosed check
      wire transfer
      other

 

 

Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Warrant.

 

It is the intention of Investor to comply with the provisions of Section 2.2 of the Warrant regarding certain limits on Investor’s right to receive shares thereunder. Investor believes this exercise complies with the provisions of such Section 2.2. Nonetheless, to the extent that, pursuant to the exercise effected hereby, Investor would receive more shares of Common Stock than permitted under Section 2.2, Company shall not be obligated and shall not issue to Investor such excess shares until such time, if ever, that Investor could receive such excess shares without violating, and in full compliance with, Section 2.2 of the Warrant.

 

As contemplated by the Warrant, this Notice of Exercise is being sent by email to the officer indicated above.

 

If this Notice of Exercise represents the full exercise of the entire Warrant, Investor will surrender (or cause to be surrendered) the Warrant to Company at the address indicated above by express courier within five (5) Trading Days after the Warrant Shares to be delivered pursuant to this Notice of Exercise have been delivered to Investor.

 

To the extent the Warrant Shares are not able to be delivered to Investor via the DWAC system, please deliver certificates representing the Warrant Shares to Investor via reputable overnight courier after receipt of this Notice of Exercise (by facsimile transmission or otherwise) to:

 

     
   
   

 

Dated:    
     
   
[Name of Investor]  
     
By:    

 

Exhibit A to Warrant, Page 1

 

 

 

 

EXHIBIT C

 

WIRING INSTRUCTIONS

 

Bank:
Name on Account:
Routing No.:
Trust IOLTA Account No.:
Reference:

 

 

 

 

 

Exhibit 10.9 

 

Securities Purchase Agreement

 

This Securities Purchase Agreement (this “Agreement”), dated as of March 15, 2021, is entered into by and between HUMBL, Inc., a Delaware corporation, its successors and/or assigns (“Company”), and HUMBL CL SpA., a Chilean corporation, its successors and/or assigns (“Investor”).

 

A. Company and Investor are executing and delivering this Agreement in reliance upon an exemption from securities registration afforded by the Securities Act of 1933, as amended (the “Securities Act”), and the rules and regulations promulgated thereunder by the United States Securities and Exchange Commission (the “SEC”).

 

B. Investor desires to purchase and Company desires to issue and sell, upon the terms and conditions set forth in this Agreement: (i) up to 2,000,000 shares of Company common stock (the “HUMBL Shares”), and (ii) 35% of the equity interests (“Subsidiary Shares”) in a to-be-formed Chilean subsidiary (the “Subsidiary”).

 

C. For purposes of this Agreement: “Securities” means the HUMBL Shares and the Subsidiary Shares.

 

NOW, THEREFORE, in consideration of the above recitals and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Company and Investor hereby agree as follows:

 

1. Purchase, Option to Purchase and Sale of Securities

 

1.1. Purchase of Securities. On the First Closing Date (as defined below), Company shall issue and sell to Investor 437,500 HUMBL Shares (the “First Closing Shares”) and Investor shall purchase the First Closing Shares from Company by delivering to Company $1,000,000.00 (the “First Tranche Purchase Price”) on the First Closing Date (as defined below) in exchange for the First Closing Shares.

 

1.2. Option to Purchase Securities. At any time on or before the Outside Date (as defined below) Investor shall have the right and option to, in its sole discretion, elect to purchase an additional 1,562,500 HUMBL Shares (the “Second Closing HUMBL Shares”) and the Subsidiary Shares (together with the Second Closing HUMBL Shares, the “Second Closing Shares”) (the “Call Option”) by delivering notice of such election to Company (the “Call Option Election Notice”) which notice shall specify the Second Closing Date (which will be on or prior to the Outside Date). If Investor elects to exercise the Call Option, Investor shall deliver to Company $6,500,000.00 (the “Second Tranche Purchase Price”) on the Second Closing Date (as specified in the Call Option Election Notice) in exchange for the Second Closing Shares. If Investor does not deliver the Call Option Election Notice on or prior to the Outside Date, the Call Option shall expire and Investor will be deemed to have relinquished the Call Option. In any case and for the avoidance of doubt, Investor’s election not to exercise the Call Option shall not affect the First Closing Shares.

 

1.3. Payment of Purchase Price. Investor shall pay the First Tranche Purchase Price and upon exercise of the Call Option, the Second Tranche Purchase Price, via wire transfer of immediately available funds to the account designated by Company.

 

1.4. Closing Date. The issuance and sale of the Securities pursuant to this Agreement shall occur in two closings (each, a “Closing”). The first Closing shall occur on March 30, 2021 (the “First Closing Date”). The second Closing shall occur on or before December 30, 2021 (the “Outside Date”). The date that the second Closing occurs is referred to herein as the “Second Closing Date”.

 

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2. Investor’s Representations and Warranties. Investor hereby represents and warrants to Company that:

 

2.1. Existence and Power. Investor is duly organized and validly existing under the laws of the jurisdiction of its formation; and has the requisite power and authority to execute, deliver and perform its obligations hereunder.

 

2.2. Authorization; No Contravention. The execution, delivery and performance by Investor of this Agreement and the transactions contemplated hereby (a) have been duly authorized by all necessary officers, partners, managers or members of Investor, (b) do not contravene the terms of Investor’s organizational documents, or any amendment thereof, (c) do not materially violate, conflict with or result in any material breach or contravention of, or the creation of any lien under, any contractual obligation of Investor or any requirement of law applicable to Investor, and (d) do not materially violate any orders of any governmental authority against, or binding upon, Investor to the knowledge of Investor.

 

2.3. Binding Effect. This Agreement has been duly executed and delivered by Investor and constitutes the legal, valid and binding obligation of Investor, enforceable against Investor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability (regardless of whether considered in a proceeding at law or in equity).

 

2.4. Restricted Securities. Investor understands that the Securities will not be registered under the Securities Act at the time of purchase and, therefore, cannot be resold unless registered under the Securities Act and applicable state securities laws or unless an exemption from such registration requirements is available. Investor is aware that Company is under no obligation to effect any such registration with respect to the Securities or to file for or comply with any exemption from registration. Investor acknowledges that the HUMBL Shares may not be sold in the United States, its territories or possessions, or to United States residents or to a United States person within the meaning of SEC Regulation S (a “U.S. Person”) until the expiration of a one-year period commencing on the date of the closing of the purchase of the applicable HUMBL Shares acquired pursuant to this agreement or such other restricted period as shall be required pursuant to Regulation S as it may be in effect from time to time and, thereafter, only if the HUMBL Shares are registered under the Securities Act of 1933, as amended, or an exemption from the registration requirements under that Act is available. The undersigned represents and warrants that it is a not a United States entity nor otherwise deemed to be a U.S. Person.

 

2.5. Disclosure of Information. Investor has been furnished with, and has had access to, such information as it considers necessary or appropriate for deciding whether to enter into this Agreement, and Investor has had an opportunity to ask questions and receive answers from Company and its officers concerning Company’s financial situation, business, prospects, and any other matter that Investor has deemed relevant or important in determining whether to enter into this Agreement. Among other things, Investor is aware that Company’s business prospects are speculative. Investor has had the opportunity to consult with counsel of its choosing with respect to this Agreement and the transactions contemplated herein. No representations or warranties have been made to Investor by Company, or any of its respective officers, directors, employees, agents, sub-agents, affiliates or subsidiaries, other than the representations of Company contained herein, and in purchasing the Securities hereunder, Investor is not relying upon any representations of Company other than those contained herein.

 

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2.6. Investment Risk. Investor is aware that its purchase of the Securities pursuant to this Agreement is a speculative investment that is subject to the risk of complete loss. Investor is able, without impairing Investor’s financial condition, to suffer a complete loss of such investment in Company.

 

2.7. Sophisticated Investor. Investor has such knowledge and experience in financial and business matters that Investor is capable of evaluating the merits and risks of such investment, is able to incur a complete loss of such investment and is able to bear the economic risk of such investment for an indefinite period of time. Investor is purchasing the Securities for its own account for investment, not as a nominee or agent, and not with a view to, or for resale in connection with, the distribution thereof.

 

2.8. Foreign Investor. If Investor is not a United States person (as defined by Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended), such Investor hereby represents that it has satisfied itself as to the full observance of the laws of its jurisdiction in connection with any invitation to purchase the Securities or any use of this Agreement, including (i) the legal requirements within its jurisdiction for the purchase of the Securities, (ii) any foreign exchange restrictions applicable to such purchase, (iii) any governmental or other consents that may need to be obtained, and (iv) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale, or transfer of the Securities. Investor’s purchase of, payment for and continued beneficial ownership of the Securities, will not violate any applicable securities or other laws of Investor’s jurisdiction.

 

3. Company’s Representations and Warranties. Company hereby represents and warrants to Investor that:

 

3.1. Organization, Good Standing, Corporate Power and Qualification. Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as now conducted and as presently proposed to be conducted. Company is duly qualified to transact business.

 

3.2. Capitalization. The authorized capital of Company consists, as of the date hereof, of: (a) 7,450,000,000 authorized shares of common stock of which, 974,177,443 are issued and outstanding; (b) 7,000,000 authorized shares of Series A Preferred Stock, of which 7,000,000 are issued and outstanding; (c) 900,000 authorized shares of Series B Preferred Stock, of which 552,552 are issued and outstanding; and (d) 150,000 authorized shares of Series C Preferred Stock, of which 0 are issued and outstanding.

 

3.3. Valid Issuance of Shares. The HUMBL Shares, when issued, sold and delivered in accordance with the terms and for the consideration set forth in this agreement, will be validly issued, fully paid and nonassessable and free of restrictions on transfer, other than restrictions provided in Section 2.4 hereof, applicable state and federal securities laws and liens or encumbrances that may be created by or imposed by Investor. Assuming the accuracy of the representations of Investor in Section 2 hereof, the HUMBL Shares will be issued in compliance with all applicable federal and state securities laws.

 

3.4. Legal Capacity; Existence and Power. Company is a corporation, duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation, with the requisite power and authority to enter into this Agreement and perform its obligations hereunder and each other document contemplated hereby to which Company is or will be a party, and to consummate the transactions contemplated hereby and thereby.

 

3.5. Authorization; No Contravention. The execution, delivery and performance by Company of this Agreement and the transactions contemplated hereby (a) have been duly authorized by all necessary officers, managers or members of Company, (b) do not contravene the terms of Company’s charter documents, or any amendment thereof, and (c) do not materially violate, conflict with or result in any material breach or contravention of, or the creation of any lien under, any contractual obligation of Company.

 

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3.6. Governmental Authorization; Third Party Consents. To the best of Company’s knowledge, no approval, consent, compliance, exemption, authorization or other action by, or notice to, or filing with, any governmental authority or any other person, and no lapse of a waiting period under any requirement of law, is necessary or required in connection with the execution, delivery or performance by, or enforcement against, Company, of this Agreement.

 

3.7. Binding Effect. This Agreement has been duly executed and delivered by Company and constitutes the legal, valid and binding obligations of Company, enforceable against Company in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability (regardless of whether considered in a proceeding at law or in equity).

 

3.8. Litigation. There is no claim, action, suit, proceeding, arbitration, complaint, charge or investigation pending or to Company’s knowledge, currently threatened in writing (i) against Company or any officer, director or any executive-level employee (including division director and vice president-level positions) as well as any employee or consultant who either alone or in concert with others develops, invents, programs or designs any Company Intellectual Property (as defined below), of Company (all as “Key Employees”) arising out of their employment or board relationship with Company; or (ii) to Company’s knowledge, that questions the validity of this Agreement or the right of Company to enter into it, or to consummate the transactions contemplated herein; or (iii) to Company’s knowledge, that would reasonably be expected to have, either individually or in the aggregate, a material adverse effect. Neither Company nor, to Company’s knowledge, any of its officers, directors or Key Employees is a party or is named as subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality (in the case of officers, directors or Key Employees, such as would affect Company). There is no action, suit, proceeding or investigation by Company pending or which Company intends to initiate. The foregoing includes, without limitation, actions, suits, proceedings or investigations pending or threatened in writing (or any basis therefor known to Company) involving the prior employment of any of Company’s employees, their services provided in connection with Company’s business, any information or techniques allegedly proprietary to any of their former employers or their obligations under any agreements with prior employers.

 

3.9. Intellectual Property.

 

(a) Company owns or possesses or believes it can acquire on commercially reasonable terms sufficient legal rights to all Company Intellectual Property without any known conflict with, or infringement of, the rights of others, including prior employees or consultants. Company has not received any communications alleging that Company has violated, or by conducting its business, would violate any of the patents, trademarks, service marks, tradenames, copyrights, trade secrets, mask works or other proprietary rights or processes of any other Person.

 

(b) To Company’s knowledge, no product or service marketed or sold (or proposed to be marketed or sold) by Company violates or will violate any license or infringes or will infringe any intellectual property rights of any other party.

 

(c) Other than with respect to commercially available software products under standard end-user object code license agreements, there are no outstanding options, licenses, agreements, claims, encumbrances or shared ownership interests of any kind relating to Company Intellectual Property, nor is Company bound by or a party to any options, licenses or agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information, proprietary rights and processes of any other Person.

 

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(d) Company has obtained and possesses valid licenses to use all of the software programs present on the computers and other software-enabled electronic devices that it owns or leases or that it has otherwise provided to its employees for their use in connection with Company’s business.

 

(e) Each employee and consultant has assigned to Company all intellectual property rights he or she owns that are related to Company’s business as now conducted and as presently proposed to be conducted and all intellectual property rights that he, she or it solely or jointly conceived, reduced to practice, developed or made during the period of his, her or its employment or consulting relationship with Company that (i) relate, at the time of conception, reduction to practice, development, or making of such intellectual property right, to Company’s business as then conducted or as then proposed to be conducted, (ii) were developed on any amount of Company’s time or with the use of any of Company’s equipment, supplies, facilities or information or (iii) resulted from the performance of services for Company. To Company’s knowledge, it will not be necessary to use any inventions of any of its employees or consultants (or persons it currently intends to hire) made prior to their employment by Company, including prior employees or consultants, or academic institution with which any of them may be affiliated now or may have been affiliated in the past.

 

(f) Company has not embedded, used or distributed any open source, copyleft or community source code (including but not limited to any libraries or code, software, technologies or other materials that are licensed or distributed under any General Public License, Lesser General Public License or similar license arrangement or other distribution model described by the Open Source Initiative at www.opensource.org, collectively “Open Source Software”) in connection with any of its products or services that are generally available or in development in any manner that would materially restrict the ability of Company to protect its proprietary interests in any such product or service or in any manner that requires, or purports to require (i) any Company IP (other than the Open Source Software itself) be disclosed or distributed in source code form or be licensed for the purpose of making derivative works; (ii) any restriction on the consideration to be charged for the distribution of any Company IP; (iii) the creation of any obligation for Company with respect to Company IP owned by Company, or the grant to any third party of any rights or immunities under Company IP owned by Company; or (iv) any other limitation, restriction or condition on the right of Company with respect to its use or distribution of any Company IP.

 

(g) No government funding, facilities of a university, college, other educational institution or research center, or funding from third parties was used in the development of any Company Intellectual Property. No Person who was involved in, or who contributed to, the creation or development of any Company Intellectual Property, has performed services for the government, university, college, or other educational institution or research center in a manner that would affect Company’s rights in Company Intellectual Property.

 

For purposes of this agreement, “Company Intellectual Property” or “Company IP” means all patents, patent applications, registered and unregistered trademarks, trademark applications, registered and unregistered service marks, service mark applications, tradenames, copyrights, trade secrets, domain names, mask works, information and proprietary rights and processes, similar or other intellectual property rights, subject matter of any of the foregoing, tangible embodiments of any of the foregoing, licenses in, to and under any of the foregoing, and in any and all such cases that are owned or used by Company in the conduct of Company’s business as now conducted and as presently proposed to be conducted.

 

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3.10. Certain Transactions.

 

(a) Other than (i) standard employee benefits generally made available to all employees, standard employee offer letters and Confidential Information Agreements (as defined below), (ii) standard director and officer indemnification agreements approved by the Board of Directors, and (iii) the purchase of shares of Company’s capital stock and the issuance of options to purchase shares of Company’s shares, in each instance, approved in the written minutes of the Board of Directors, there are no agreements, understandings or proposed transactions between Company and any of its officers, directors, consultants or Key Employees, or any affiliate thereof.

 

(b) Company is not indebted, directly or indirectly, to any of its directors, officers or employees or to their respective spouses or children or to any affiliate of any of the foregoing, other than in connection with expenses or advances of expenses incurred in the ordinary course of business or employee relocation expenses and for other customary employee benefits made generally available to all employees. None of Company’s directors, officers or employees, or any members of their immediate families, or any affiliate of the foregoing are, directly or indirectly, indebted to Company or, to Company’s knowledge, have any (i) material commercial, industrial, banking, consulting, legal, accounting, charitable or familial relationship with any of Company’s customers, suppliers, service providers, joint venture partners, licensees and competitors, (ii) direct or indirect ownership interest in any firm or corporation with which Company is affiliated or with which Company has a business relationship, or any firm or corporation which competes with Company except that directors, officers, employees or stockholders of Company may own stock in (but not exceeding two percent (2%) of the outstanding capital stock of) publicly traded companies that may compete with Company; or (iii) financial interest in any material contract with Company.

 

3.11. Property. The property and assets that Company owns are free and clear of all mortgages, deeds of trust, liens, loans and encumbrances, except for statutory liens for the payment of current taxes that are not yet delinquent and encumbrances and liens that arise in the ordinary course of business and do not materially impair Company’s ownership or use of such property or assets. With respect to the property and assets it leases, Company is in compliance with such leases and holds a valid leasehold interest free of any liens, claims or encumbrances other than those of the lessors of such property or assets. Company does not own any real property.

 

3.12. Employee Matters.

 

(a) To Company’s knowledge, none of its employees is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would materially interfere with such employee’s ability to promote the interest of Company or that would conflict with Company’s business. Neither the execution or delivery of this Agreement, nor the carrying on of Company’s business by the employees of Company, nor the conduct of Company’s business as now conducted and as presently proposed to be conducted, will, to Company’s knowledge, conflict with or result in a breach of the terms, conditions, or provisions of, or constitute a default under, any contract, covenant or instrument under which any such employee is now obligated.

 

(b) Company is not delinquent in payments to any of its employees, consultants, or independent contractors for any wages, salaries, commissions, bonuses, or other direct compensation for any service performed for it to the date hereof or amounts required to be reimbursed to such employees, consultants or independent contractors. Company has complied in all material respects with all applicable state and federal equal employment opportunity laws and with other laws related to employment, including those related to wages, hours, worker classification and collective bargaining. Company has withheld and paid to the appropriate governmental entity or is holding for payment not yet due to such governmental entity all amounts required to be withheld from employees of Company and is not liable for any arrears of wages, taxes, penalties or other sums for failure to comply with any of the foregoing.

 

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(c) To Company’s knowledge, no Key Employee intends to terminate employment with Company or is otherwise likely to become unavailable to continue as a Key Employee. Company does not have a present intention to terminate the employment of any of the foregoing.

 

(d) Company has not made any representations regarding equity incentives to any officer, employee, director or consultant that are inconsistent with the share amounts and terms set forth in the minutes of meetings of (or actions taken by unanimous written consent by) Company’s Board of Directors.

 

(e) Each former Key Employee whose employment was terminated by Company has entered into an agreement with Company providing for the full release of any claims against Company or any related party arising out of such employment.

 

(f) Company is not bound by or subject to (and none of its assets or properties is bound by or subject to) any written or oral, express or implied, contract, commitment or arrangement with any labor union, and no labor union has requested or, to the knowledge of Company, has sought to represent any of the employees, representatives or agents of Company. There is no strike or other labor dispute involving Company pending, or to Company’s knowledge, threatened, which could have a Material Adverse Effect, nor is Company aware of any labor organization activity involving its employees.

 

(g) To Company’s knowledge, none of the Key Employees or directors of Company has been (i) subject to voluntary or involuntary petition under the federal bankruptcy laws or any state insolvency law or the appointment of a receiver, fiscal agent or similar officer by a court for his or her business or property; (ii) convicted in a criminal proceeding or named as a subject of a pending criminal proceeding (excluding traffic violations and other minor offenses); (iii) subject to any order, judgment or decree (not subsequently reversed, suspended, or vacated) of any court of competent jurisdiction permanently or temporarily enjoining him or her from engaging, or otherwise imposing limits or conditions on his or her engagement in any securities, investment advisory, banking, insurance, or other type of business or acting as an officer or director of a public company; or (iv) found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated any federal or state securities, commodities, or unfair trade practices law, which such judgment or finding has not been subsequently reversed, suspended, or vacated.

 

3.13. Tax Returns and Payments. There are no federal, state, county, local or foreign taxes due and payable by Company which have not been timely paid. There are no accrued and unpaid federal, state, country, local or foreign taxes of Company which are due, whether or not assessed or disputed. There have been no examinations or audits of any tax returns or reports by any applicable federal, state, local or foreign governmental agency. Company has duly and timely filed all federal, state, county, local and foreign tax returns required to have been filed by it and there are in effect no waivers of applicable statutes of limitations with respect to taxes for any year.

 

3.14. Employee Agreements. Each current and former employee, consultant and officer of Company has executed an agreement with Company regarding confidentiality and proprietary information substantially in the form or forms delivered to the Purchasers or their respective counsel (the “Confidential Information Agreements”). No current or former Key Employee has excluded works or inventions from his or her assignment of inventions pursuant to such Key Employee’s Confidential Information Agreement.

 

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3.15. Permits. Company has all franchises, permits, licenses and any similar authority necessary for the conduct of its business, the lack of which could reasonably be expected to have a material adverse effect. Company is not in default in any material respect under any of such franchises, permits, licenses or other similar authority.

 

3.16. Data Privacy. In connection with its collection, storage, use and/or disclosure of any information that constitutes “personal information,” “personal data” or “personally identifiable information” as defined in applicable laws (collectively “Personal Information”) by or on behalf of Company, Company is and has been, to Company’s knowledge, in compliance with (i) all applicable laws (including, without limitation, laws relating to privacy, data security, telephone and text message communications, and marketing by email or other channels) in all relevant jurisdictions, (ii) Company’s privacy policies and public written statements regarding Company’s privacy or data security practices, and (iii) the requirements of any contract codes of conduct or industry standards, by which Company is bound. Company maintains and has maintained reasonable physical, technical, and administrative security measures and policies designed to protect all Personal Information owned, stored, used, maintained or controlled by or on behalf of Company from and against unlawful, accidental or unauthorized access, destruction, loss, use, modification and/or disclosure. Company is and has been, to Company’s knowledge, in compliance in all material respects with all laws relating to data loss, theft and breach of security notification obligations. To Company’s knowledge, there has been no occurrence of (x) unlawful, accidental or unauthorized destruction, loss, use, modification or disclosure of or access to Personal Information owned, stored, used, maintained or controlled by or on behalf of Company such that Privacy Requirements require or required Company to notify government authorities, affected individuals or other parties of such occurrence or (y) unauthorized access to or disclosure of Company’s confidential information or trade secrets that reasonably would be expected to result in a material adverse effect.

 

4. Company Covenants. Company covenants and agrees as follows: (a) Company will form the Subsidiary in Chile as a sociedad por acciones (SpA) or such other business entity or entities as Company and Investor may mutually agree within thirty (30) days of Company’s receipt of the First Tranche Purchase Price; (b) within sixty (60) days of Company’s receipt of the First Tranche Purchase Price, Company will fund $100,000.00 to the Subsidiary to be used to further the Subsidiary’s operations in Chile; and (c) within ten (10) days of Company’s receipt of the Second Tranche Purchase Price, Company will fund $650,000.00 to the Subsidiary to be used to further the Subsidiary’s operations in Chile. On or before the Second Closing Date, Company will take all actions necessary to issue the Subsidiary Shares which shall represent no less than 35% of Subsidiary’s fully diluted capital. The Subsidiary Shares to be acquired by Investor shall have the rights and obligations to be agreed in a shareholders agreement to be entered into between Company and Investor, which shareholders agreement shall reflect terms and conditions similar to those contained in the Term Sheet entered by Company and Investor for this transaction dated March 1, 2021, which, among others, are: (i) Investor shall not resell its Subsidiary Shares until two years from acquisition, (ii) Investor’s 35% interest in the Subsidiary’s’ fully diluted capital shall remain for the lifetime of the Subsidiary and shall be non-dilutable, and (iii) Investor’s 35% interest in the Subsidiary shall entitle Investor to receive 35% of the profits earned by the Subsidiary or any other entity incorporated in Chile by Company to run Company’s business in Chile; (d) the Subsidiary will have the exclusive right to operate Company’s business in Chile, and will maintain all required licenses, and Company will provide the Subsidiary with rights to all intellectual property necessary to do so, at no cost whatsoever to Investor; (e) Company will provide transactional and operational support to the Subsidiary following the First Closing Date; and (f) at Investor’s request, Company will come to Chile and help Investor present to potential investors.

 

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5. Right of First Refusal. In the event Company desires to sell similar operational rights as have been granted herein to Investor (“Country Rights”) with respect to any other country or territory in Latin America, it must first provide notice of such proposed sale of Country Rights to Investor, which notice must include all of the material terms of the Country Rights sale. Investor shall then have a period of fifteen (15) days to give notice to Company (“Investor Notice”) of its intentions to accept such proposed purchase of the Country Rights on the same terms as outlined in the notice of the potential Country Rights sale, which purchase shall take place on the same terms and conditions on or before the date that is thirty (30) days after the date upon which Company receives Investor Notice. If Investor elects to not purchase the Country Rights, or does not timely send the Investor Notice, then Company may sell to third parties the Country Rights on the same terms that were offered to Investor during the sixty (60) day period following the expiration of the deadline to deliver Investor Notice. If after such sixty (60) day period, Company has not completed the sale of the Country Rights, any potential sale of Country Rights shall be offered to Investor observing the same procedure contained in this section. The foregoing right of first refusal shall expire on the date that is two (2) years from the First Closing Date. All notices required pursuant to this section shall be made in accordance with section 6.7 hereof.

 

6. Miscellaneous. The provisions set forth in this Section 6 shall apply to this Agreement.

 

6.1. Governing Law; Venue. This Agreement shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Agreement shall be governed by, the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware. Each party hereto hereby (i) consents to and expressly submits to the exclusive personal jurisdiction of any state or federal court sitting in San Diego County, California, (ii) expressly submits to the exclusive venue of any such court for the purposes hereof, and (iii) waives any claim of improper venue and any claim or objection that such courts are an inconvenient forum or any other claim, defense or objection to the bringing of any such proceeding in such jurisdiction or to any claim that such venue of the suit, action or proceeding is improper.

 

6.2. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument. The parties acknowledge and agree that this Agreement may be executed by electronic signature, which shall be considered as an original signature for all purposes and shall have the same force and effect as an original signature. The parties hereto confirm that any electronic copy of another party’s executed counterpart to this Agreement (or such party’s signature page thereof) will be deemed to be an executed original thereof.

 

6.3. Headings. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.

 

6.4. Severability. In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform to such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.

 

6.5. Entire Agreement. This Agreement contains the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither Company nor Investor makes any representation, warranty, covenant or undertaking with respect to such matters. For the avoidance of doubt, all prior term sheets or other documents between Company and Investor, or any affiliate thereof, related to the transactions contemplated by this Agreement (collectively, “Prior Agreements”), that may have been entered into between Company and Investor, or any affiliate thereof, are hereby null and void and deemed to be replaced in their entirety by this Agreement. To the extent there is a conflict between any term set forth in any Prior Agreement and the term(s) of this Agreement, this Agreement shall govern.

 

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

 

6.7. Notices. Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be deemed effectively given on the earliest of: (i) the date delivered, if delivered by personal delivery as against written receipt therefor or by email to an executive officer, or by facsimile (with successful transmission confirmation), (ii) the earlier of the date delivered or the third business day after deposit, postage prepaid, in the United States Postal Service by certified mail, or (iii) the earlier of the date delivered or the third business day after mailing by express courier, with delivery costs and fees prepaid, in each case, addressed to each of the other parties thereunto entitled at the following addresses (or at such other addresses as such party may designate by five (5) calendar days’ advance written notice similarly given to each of the other parties hereto):

 

If to Company:

 

HUMBL, Inc.

Attn: Jeff Hinshaw

600 W. B Street

San Diego, California 92101

jeff@humblpay.com

 

With a copy to (which copy shall not constitute notice):

 

Hansen Black Anderson Ashcraft PLLC

Attn: Brian R. Innes

3051 West Maple Loop Drive, Suite 325

Lehi, Utah 84043

binnes@hbaa.law

 

If to Investor:

 

HUMBL CL, SpA

Attn: Juan Pablo Morales

San Pio X 2445 oficina 1008

Providencia, Santiago

juanpablo@inversionesliv.com

 

With a copy to (which copy shall not constitute notice):

 

HUMBL CL, SpA.

Attn: Hernán Campos

San Pio X 2445 oficina 1008

Providencia, Santiago

hernan@inversionesliv.com

 

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6.8. Successors and Assigns. This Agreement or any of the severable rights and obligations inuring to the benefit of or to be performed by Investor hereunder may be assigned by Investor to its affiliates, in whole or in part, without the need to obtain Company’s consent thereto. Except as set forth above, neither Investor nor Company may assign its rights or obligations under this Agreement or delegate its duties hereunder without the prior written consent of the other party.

 

6.9. Survival. The representations and warranties of the parties and the agreements and covenants set forth in this Agreement shall survive the Closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of each party. Each party agrees to indemnify and hold harmless the other and all its respective officers, directors, employees, attorneys, and agents for loss or damage arising as a result of or related to any breach or alleged breach by the other party of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.

 

6.10. Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

6.11. Attorneys’ Fees. In the event any action is filed by either party against the other to interpret or enforce this Agreement, the unsuccessful party to such action agrees to pay to the prevailing party all costs and expenses, including reasonable attorneys’ fees incurred therein, including the same with respect to an appeal. The “prevailing party” shall be the party in whose favor a judgment is entered, regardless of whether judgment is entered on all claims asserted by such party and regardless of the amount of the judgment; or where, due to the assertion of counterclaims, judgments are entered in favor of and against both parties, then the judge shall determine the “prevailing party” by taking into account the relative dollar amounts of the judgments or, if the judgments involve nonmonetary relief, the relative importance and value of such relief.

 

6.12. Waiver. No waiver of any provision of this Agreement shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.

 

6.13. Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT IRREVOCABLY WAIVES ANY AND ALL RIGHTS SUCH PARTY MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, EACH PARTY HERETO ACKNOWLEDGES THAT SUCH PARTY IS KNOWINGLY AND VOLUNTARILY WAIVING SUCH PARTY’S RIGHT TO DEMAND TRIAL BY JURY.

 

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

 

6.15. Voluntary Agreement. Investor has carefully read this Agreement and has asked any questions needed for Investor to understand the terms, consequences and binding effect of this Agreement and the Securities and fully understand them. Investor has had the opportunity to seek the advice of an attorney of Investor’s choosing, or has waived the right to do so, and is executing this Agreement and the Securities voluntarily and without any duress or undue influence by Company or anyone else.

 

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

 

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

 

  INVESTOR:
     
  HUMBL CL SpA
     
  By:  
    Juan Pablo Morales, General Manager
     
  COMPANY:
     
  HUMBL, Inc.
                
  By:  
    Brian Foote, President and CEO

 

[Signature Page to Securities Purchase Agreement]

 

 

 

  

Amendment to Securities Purchase Agreement

 

This Amendment to Securities Purchase Agreement (this “Amendment”), dated as of June 1, 2021 (the “Effective Date”), is entered into by and between HUMBL, Inc., a Delaware corporation, its successors and/or assigns (“Company”), and HUMBL CL, SpA, a Chilean corporation, its successors and/or assigns (“Investor”, the foregoing collectively “Parties”).

 

WITNESSETH

 

WHEREAS, Parties have entered into that certain Securities Purchase Agreement, dated as of March 15, 2021 (as amended from time to time, the “SPA”). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings assigned thereto in the SPA.

 

WHEREAS, Parties desire to amend the SPA, effective as of the Effective Date, on the terms and conditions set out herein.

 

NOW, THEREFORE, in consideration of the above recitals and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

Section 1. Amendments.

 

Pursuant to section 6.6 (Amendments) of the SPA:

 

a) Section 1 (Purchase, Option to Purchase and Sale of Securities) of the SPA is hereby amended by amending Section 1.2 (Option to Purchase Securities) such that it is amended and restated as follows:

 

“1.2. Option to Purchase Securities. At any time on or before the Outside Date (as defined below) Investor shall have the right and option to, in its sole discretion, elect to purchase an additional (i) 1,562,500 HUMBL Shares, or (ii) the numbers of HUMBL Shares resulting from dividing the Second Tranche Purchase Price (as defined below) by the closing price of HUMBL Shares (OTCMKTS:HMBL) published at https://www.otcmarkets.com/ on the day before that the Call Option Election Notice (as defined below) is delivered, (the “Second Closing HUMBL Shares”), plus the Subsidiary Shares (together with the Second Closing HUMBL Shares, the “Second Closing Shares”) (the “Call Option”) by delivering notice of such election to Company (the “Call Option Election Notice”) which notice shall specify the Second Closing Date (which will be on or prior to the Outside Date) and the number of shares to be purchased pursuant to alternatives (i) or (ii) contained above in this paragraph. If Investor elects to exercise the Call Option, Investor shall deliver to Company $6,500,000.00 (the “Second Tranche Purchase Price”) on the Second Closing Date (as specified in the Call Option Election Notice) in exchange for the Second Closing Shares. If Investor does not deliver the Call Option Election Notice on or prior to the Outside Date, the Call Option shall expire and Investor will be deemed to have relinquished the Call Option. In any case and for the avoidance of doubt, Investor’s election not to exercise the Call Option shall not affect the First Closing Shares.”

 

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b) Section 4 (Company Covenants) of the SPA is hereby amended such that it is amended and restated as follows:

 

“4. Company Covenants. Company covenants and agrees as follows: (a) Company will form the Subsidiary in Chile as a sociedad por acciones (SpA) or such other business entity or entities as Company and Investor may mutually agree within ninety (90) days of Company’s receipt of the First Tranche Purchase Price; (b) within one hundred twenty (120) days of Company’s receipt of the First Tranche Purchase Price, Company will fund $100,000.00 to the Subsidiary to be used to further the Subsidiary’s operations in Chile; and (c) within ten (10) days of Company’s receipt of the Second Tranche Purchase Price, Company will fund $650,000.00 to the Subsidiary to be used to further the Subsidiary’s operations in Chile. On or before the Second Closing Date, Company will take all actions necessary to issue the Subsidiary Shares which shall represent no less than 35% of Subsidiary’s fully diluted capital. The Subsidiary Shares to be acquired by Investor shall have the rights and obligations to be agreed in a shareholders agreement to be entered into between Company and Investor, which shareholders agreement shall reflect terms and conditions similar to those contained in the Term Sheet entered by Company and Investor for this transaction dated March 1, 2021, which, among others, are: (i) Investor shall not resell its Subsidiary Shares until two years from acquisition, (ii) Investor’s 35% interest in the Subsidiary’s’ fully diluted capital shall remain for the lifetime of the Subsidiary and shall be non-dilutable, and (iii) Investor’s 35% interest in the Subsidiary shall entitle Investor to receive 35% of the profits earned by the Subsidiary or any other entity incorporated in Chile by Company to run Company’s business in Chile; (d) the Subsidiary will have the exclusive right to operate Company’s business in Chile, and will maintain all required licenses, and Company will provide the Subsidiary with rights to all intellectual property necessary to do so, at no cost whatsoever to Investor; (e) Company will provide transactional and operational support to the Subsidiary following the First Closing Date; and (f) at Investor’s request, Company will come to Chile and help Investor present to potential investors.”

 

Section 2. Reference to and Effect on the SPA.

 

(a) On and after the Effective Date, each reference in the SPA to “this Agreement”, “hereunder”, “hereof”, “herein”, “hereby” or words of like import, shall mean and be a reference to the SPA as amended hereby.

 

(b) Except as specifically amended above, the SPA shall remain in full force and effect and is hereby ratified and confirmed.

 

(c) The execution, delivery, and effectiveness of this Amendment shall be limited precisely as written and, except as expressly provided herein, shall not be deemed to (i) be a consent to any waiver or modification of any other term or condition of the SPA; (ii) create, or be evidence of, alone or taken with any consent to, waiver or modification of, or other amendment of the provisions of the SPA or any of the instruments or documents referred to therein, a course of conduct; or (iii) prejudice any right or rights that Parties may now have or may have in the future under or in connection with the SPA or any of the instruments or documents referred to therein.

 

(d) Section 6 (Miscellaneous) of the SPA shall apply mutatis mutandis to this Amendment as if fully set forth herein.

 

Section 3. Governing Law; Venue.

 

This Amendment shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Amendment shall be governed by, the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware. Each party hereto hereby (i) consents to and expressly submits to the exclusive personal jurisdiction of any state or federal court sitting in San Diego County, California, (ii) expressly submits to the exclusive venue of any such court for the purposes hereof, and (iii) waives any claim of improper venue and any claim or objection that such courts are an inconvenient forum or any other claim, defense or objection to the bringing of any such proceeding in such jurisdiction or to any claim that such venue of the suit, action or proceeding is improper.

 

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Section 4. Counterparts.

 

This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument. Parties acknowledge and agree that this Amendment may be executed by electronic signature, which shall be considered as an original signature for all purposes and shall have the same force and effect as an original signature. The parties hereto confirm that any electronic copy of another party’s executed counterpart to this Amendment (or such party’s signature page thereof) will be deemed to be an executed original thereof.

 

Section 5. Headings.

 

The headings of this Amendment are for convenience of reference only and shall not form part of, or affect the interpretation of, this Amendment.

 

Section 6. Severability.

 

In the event that any provision of this Amendment is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform to such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.

 

Section 7. Waiver of Jury Trial.

 

EACH PARTY TO THIS AMENDMENT IRREVOCABLY WAIVES ANY AND ALL RIGHTS SUCH PARTY MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS AMENDMENT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, EACH PARTY HERETO ACKNOWLEDGES THAT SUCH PARTY IS KNOWINGLY AND VOLUNTARILY WAIVING SUCH PARTY’S RIGHT TO DEMAND TRIAL BY JURY.

 

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

 

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

 

  INVESTOR:
     
  HUMBL CL, S.p.A.
     
  By:  
    Juan Pablo Morales General Manager
     
  COMPANY:
     
  HUMBL, Inc.
     
  By:  
    Brian Foote, CEO

 

[Signature Page to Amendment to Securities Purchase Agreement]

 

 

 

 

Exhibit 10.10

 

Securities Purchase Agreement

 

This Securities Purchase Agreement (this “Agreement”), dated as of April 14, 2021, is entered into by and between HUMBL, Inc., a Delaware corporation (“Company”), and Brighton Capital Partners, LLC, a Texas limited liability company, its successors and/or assigns (“Investor”).

 

A. Company and Investor are executing and delivering this Agreement in reliance upon an exemption from securities registration afforded by the Securities Act of 1933, as amended (the “1933 Act”), and the rules and regulations promulgated thereunder by the United States Securities and Exchange Commission (the “SEC”).

 

B. Investor desires to purchase and Company desires to issue and sell, upon the terms and conditions set forth in this Agreement a Convertible Promissory Note, in the form attached hereto as Exhibit A, in the original principal amount of $3,300,000.00 (the “Note”), convertible into shares of common stock, $0.00001 par value per share, of Company (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note.

 

C. This Agreement, the Note, and all other certificates, documents, agreements, resolutions and instruments delivered to any party under or in connection with this Agreement, as the same may be amended from time to time, are collectively referred to herein as the “Transaction Documents”.

 

D. For purposes of this Agreement: “Conversion Shares” means all shares of Common Stock issuable upon conversion of all or any portion of the Note; and “Securities” means the Note and the Conversion Shares.

 

NOW, THEREFORE, in consideration of the above recitals and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Company and Investor hereby agree as follows:

 

1. Purchase and Sale of Securities.

 

1.1. Purchase of Securities. Company shall issue and sell to Investor and Investor shall purchase from Company the Note. In consideration thereof, Investor shall pay the Purchase Price (as defined below) to Company.

 

1.2. Form of Payment. On the Closing Date (as defined below), Investor shall pay the Purchase Price to Company via wire transfer of immediately available funds against delivery of the Note.

 

1.3. Closing Date. Subject to the satisfaction (or written waiver) of the conditions set forth in Section 5 and Section 6 below, the date of the issuance and sale of the Note pursuant to this Agreement (the “Closing Date”) shall be April 14, 2021, or another mutually agreed upon date. The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the Closing Date by means of the exchange by email of signed .pdf documents, but shall be deemed for all purposes to have occurred at the offices of Hansen Black Anderson Ashcraft PLLC in Lehi, Utah.

 

1.4. Collateral for the Note. The Note shall be unsecured.

 

1.5. Original Issue Discount; Transaction Expense Amount. The Note carries an original issue discount of $300,000.00 (the “OID”). The OID will be added to the original principal amount of the Note. The “Purchase Price”, therefore, shall be $3,000,000.00, computed as follows: $3,300,000.00 initial principal balance, less the OID.

 

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2. Investor’s Representations and Warranties. Investor represents and warrants to Company that as of the Closing Date: (i) this Agreement has been duly and validly authorized; (ii) this Agreement constitutes a valid and binding agreement of Investor enforceable in accordance with its terms; and (iii) Investor is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D of the 1933 Act.

 

3. Company’s Representations and Warranties. Company represents and warrants to Investor that as of the Closing Date: (i) Company is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation and has the requisite corporate power to own its properties and to carry on its business as now being conducted; (ii) Company is duly qualified as a foreign corporation to do business and is in good standing in each jurisdiction where the nature of the business conducted or property owned by it makes such qualification necessary; (iii) each of the Transaction Documents and the transactions contemplated hereby and thereby, have been duly and validly authorized by Company and all necessary actions have been taken; (iv) this Agreement, the Note, and the other Transaction Documents have been duly executed and delivered by Company and constitute the valid and binding obligations of Company enforceable in accordance with their terms; (v) the execution and delivery of the Transaction Documents by Company, the issuance of Securities in accordance with the terms hereof, and the consummation by Company of the other transactions contemplated by the Transaction Documents do not and will not conflict with or result in a breach by Company of any of the terms or provisions of, or constitute a default under (a) Company’s formation documents or bylaws, each as currently in effect, (b) any indenture, mortgage, deed of trust, or other material agreement or instrument to which Company is a party or by which it or any of its properties or assets are bound, including, without limitation, any listing agreement for the Common Stock, or (c) any existing applicable law, rule, or regulation or any applicable decree, judgment, or order of any court, United States federal, state or foreign regulatory body, administrative agency, or other governmental body having jurisdiction over Company or any of Company’s properties or assets; (vi) no further authorization, approval or consent of any court, governmental body, regulatory agency, self-regulatory organization, or stock exchange or market or the stockholders or any lender of Company is required to be obtained by Company for the issuance of the Securities to Investor or the entering into of the Transaction Documents; (vii) none of Company’s filings with OTC Markets contained, at the time they were filed, any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading; (viii) Company has filed all reports, schedules, forms, statements and other documents required to be filed by Company with OTC Markets on a timely basis or has received a valid extension of such time of filing and has filed any such report, schedule, form, statement or other document prior to the expiration of any such extension; (ix) there is no action, suit, proceeding, inquiry or investigation before or by any court, public board or body pending or, to the knowledge of Company, threatened against or affecting Company before or by any governmental authority or non-governmental department, commission, board, bureau, agency or instrumentality or any other person, wherein an unfavorable decision, ruling or finding would have a material adverse effect on Company or which would adversely affect the validity or enforceability of, or the authority or ability of Company to perform its obligations under, any of the Transaction Documents; (x) Company is not, nor has it been at any time in the previous twelve (12) months, a “Shell Company,” as such type of “issuer” is described in Rule 144(i)(1) under the 1933 Act; (xi) with respect to any commissions, placement agent or finder’s fees or similar payments that will or would become due and owing by Company to any person or entity as a result of this Agreement or the transactions contemplated hereby (“Broker Fees”), any such Broker Fees will be made in full compliance with all applicable laws and regulations and only to a person or entity that is a registered investment adviser or registered broker-dealer; (xii) Investor shall have no obligation with respect to any Broker Fees or with respect to any claims made by or on behalf of other persons for fees of a type contemplated in this subsection that may be due in connection with the transactions contemplated hereby and Company shall indemnify and hold harmless each of Investor, Investor’s employees, officers, directors, stockholders, members, managers, agents, and partners, and their respective affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and attorneys’ fees) and expenses suffered in respect of any such claimed Broker Fees; and (xiii) neither Investor nor any of its officers, directors, stockholders, members, managers, employees, agents or representatives has made any representations or warranties to Company or any of its officers, directors, employees, agents or representatives except as expressly set forth in the Transaction Documents and, in making its decision to enter into the transactions contemplated by the Transaction Documents, Company is not relying on any representation, warranty, covenant or promise of Investor or its officers, directors, members, managers, employees, agents or representatives other than as set forth in the Transaction Documents.

 

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4. Company Covenants. Until all of Company’s obligations under all of the Transaction Documents are paid and performed in full, or within the timeframes otherwise specifically set forth below, Company will at all times comply with the following covenants: (i) so long as Investor beneficially owns any of the Securities and for at least twenty (20) Trading Days (as defined in the Note) thereafter, Company will timely file on the applicable deadline all reports required to be filed with OTC Markets, and will take all reasonable action under its control to ensure that adequate current public information with respect to Company, as required in accordance with Rule 144 of the 1933 Act, is publicly available; (ii) when issued, the Conversion Shares will be duly authorized, validly issued, fully paid for and non-assessable, free and clear of all liens, claims, charges and encumbrances; (iii) the Common Stock shall be listed or quoted for trading on any of (a) OTC Pink Current Information, (b) OTCQX, or (c) OTCQB; (iv) trading in Company’s Common Stock will not be suspended, halted, chilled, frozen, reach zero bid or otherwise cease trading on Company’s principal trading market; and (vi) Company will register on a Form S-1 registration statement a sufficient number of shares of Common Stock for Lender to convert the entire Outstanding Balance (as defined in the Note) of the Note in full, but in no event less than 5,000,000 shares.

 

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

 

5.1. Investor shall have executed this Agreement and delivered the same to Company.

 

5.2. Investor shall have delivered the Purchase Price to Company in accordance with Section 1.2 above.

 

6. Conditions to Investor’s Obligation to Purchase. The obligation of Investor hereunder to purchase the Securities at the Closing is subject to the satisfaction, on or before the Closing Date, of each of the following conditions, provided that these conditions are for Investor’s sole benefit and may be waived by Investor at any time in its sole discretion:

 

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

 

6.2. Company shall have delivered to Investor a fully executed Irrevocable Letter of Instructions to Transfer Agent (the “TA Letter”) substantially in the form attached hereto as Exhibit B acknowledged and agreed to in writing by Company’s transfer agent (the “Transfer Agent”).

 

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

 

6.4. Company shall have delivered to Investor a fully executed Share Issuance Resolution substantially in the form attached hereto as Exhibit D to be delivered to the Transfer Agent.

 

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

 

7. Reservation of Shares. On the date hereof, Company will reserve 4,500,000 shares of Common Stock from its authorized and unissued Common Stock to provide for all issuances of Common Stock under the Note (the “Share Reserve”). Company further agrees to add additional shares of Common Stock to the Share Reserve in increments of 100,000 shares as and when requested by Investor if as of the date of any such request the number of shares being held in the Share Reserve is less than three (3) times the number of shares of Common Stock obtained by dividing the Outstanding Balance as of the date of the request by the Redemption Conversion Price (as defined in the Note). Company shall further require the Transfer Agent to hold the shares of Common Stock reserved pursuant to the Share Reserve exclusively for the benefit of Investor and to issue such shares to Investor promptly upon Investor’s delivery of a Redemption Notice under the Note.

 

8. No Shorting. During the period beginning on the Closing Date and ending on the date the Note has been repaid in full or sold by Investor to a third party that is not an affiliate of Investor, Investor will not directly or through an affiliate engage in any open market Short Sales (as defined below) of the Common Stock; provided; however, that unless and until Company has affirmatively demonstrated by the use of specific evidence that Investor is engaging in open market Short Sales, Investor shall be assumed to be in compliance with the provisions of this Section 8 and Company shall remain fully obligated to fulfill all of its obligations under the Transaction Documents; and provided, further, that (i) Company shall under no circumstances be entitled to request or demand that Investor either (A) provide trading or other records of Investor or of any party or (B) affirmatively demonstrate that Investor or any other party has not engaged in any such Short Sales in breach of these provisions as a condition to Company’s fulfillment of its obligations under any of the Transaction Documents, (ii) Company shall not assert Investor’s or any other party’s failure to demonstrate such absence of such Short Sales or provide any trading or other records of Investor or any other party as all or part of a defense to any breach of Company’s obligations under any of the Transaction Documents, and (iii) Company shall have no setoff right with respect to any such Short Sales. As used herein, “Short Sale” has the meaning provided in Rule 200 promulgated under Regulation SHO under the 1934 Act.

 

9. Miscellaneous. The provisions set forth in this Section 9 shall apply to this Agreement, as well as all other Transaction Documents as if these terms were fully set forth therein; provided, however, that in the event there is a conflict between any provision set forth in this Section 9 and any provision in any other Transaction Document, the provision in such other Transaction Document shall govern.

 

9.1. Governing Law; Venue. This Agreement shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Agreement shall be governed by, the internal laws of the State of Texas, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Texas or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Texas. Each party hereto hereby (i) consents to and expressly submits to the exclusive personal jurisdiction of any state or federal court sitting in Travis County, Texas, (ii) expressly submits to the exclusive venue of any such court for the purposes hereof, and (iii) waives any claim of improper venue and any claim or objection that such courts are an inconvenient forum or any other claim, defense or objection to the bringing of any such proceeding in such jurisdiction or to any claim that such venue of the suit, action or proceeding is improper.

 

9.2. Specific Performance. Company acknowledges and agrees that Investor may suffer irreparable harm in the event that Company fails to perform any material provision of this Agreement or any of the other Transaction Documents in accordance with its specific terms. It is accordingly agreed that Investor shall be entitled to one or more injunctions to prevent or cure breaches of the provisions of this Agreement or such other Transaction Document and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other remedy to which the Investor may be entitled under the Transaction Documents, at law or in equity.

 

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9.3. Counterparts. Each Transaction Document may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument. The parties hereto confirm that any electronic copy of another party’s executed counterpart of a Transaction Document (or such party’s electronic signature page thereof) will be deemed to be an executed original thereof.

 

9.4. Headings. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.

 

9.5. Severability. In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform to such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.

 

9.6. Entire Agreement. This Agreement, together with the other Transaction Documents, contains the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither Company nor Investor makes any representation, warranty, covenant or undertaking with respect to such matters. For the avoidance of doubt, all prior term sheets or other documents between Company and Investor, or any affiliate thereof, related to the transactions contemplated by the Transaction Documents (collectively, “Prior Agreements”), that may have been entered into between Company and Investor, or any affiliate thereof, are hereby null and void and deemed to be replaced in their entirety by the Transaction Documents. To the extent there is a conflict between any term set forth in any Prior Agreement and the term(s) of the Transaction Documents, the Transaction Documents shall govern.

 

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

 

9.8. Notices. Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be deemed effectively given on the earliest of: (i) the date delivered, if delivered by personal delivery as against written receipt therefor or by email to an executive officer named below or such officer’s successor, or by facsimile (with successful transmission confirmation which is kept by sending party), (ii) the earlier of the date delivered or the third Trading Day after deposit, postage prepaid, in the United States Postal Service by certified mail, or (iii) the earlier of the date delivered or the third Trading Day after mailing by express courier, with delivery costs and fees prepaid, in each case, addressed to each of the other parties thereunto entitled at the following addresses (or at such other addresses as such party may designate by five (5) calendar days’ advance written notice similarly given to each of the other parties hereto):

 

If to Company:

 

HUMBL, Inc.

Attn: Brian Foote

600 B Street, Suite 300

San Diego, California 92101

 

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If to Investor:

 

Brighton Capital Partners, LLC

Attn: Lucas Hales

 

9.9. Successors and Assigns. This Agreement or any of the severable rights and obligations inuring to the benefit of or to be performed by Investor hereunder may be assigned by Investor to a third party, including its affiliates, in whole or in part, without the need to obtain Company’s consent thereto. Company may not assign its rights or obligations under this Agreement or delegate its duties hereunder, whether directly or indirectly, without the prior written consent of Investor, and any such attempted assignment or delegation shall be null and void.

 

9.10. Survival. The representations and warranties of Company and the agreements and covenants set forth in this Agreement shall survive the Closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of Investor. Company agrees to indemnify and hold harmless Investor and all its officers, directors, employees, attorneys, and agents for loss or damage arising as a result of or related to any breach or alleged breach by Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.

 

9.11. Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

9.12. Investor’s Rights and Remedies Cumulative. All rights, remedies, and powers conferred in this Agreement and the Transaction Documents are cumulative and not exclusive of any other rights or remedies, and shall be in addition to every other right, power, and remedy that Investor may have, whether specifically granted in this Agreement or any other Transaction Document, or existing at law, in equity, or by statute, and any and all such rights and remedies may be exercised from time to time and as often and in such order as Investor may deem expedient.

 

9.13. Attorneys’ Fees and Cost of Collection. In the event any suit, action or arbitration is filed by either party against the other to interpret or enforce any of the Transaction Documents, the unsuccessful party to such action agrees to pay to the prevailing party all costs and expenses, including attorneys’ fees incurred therein, including the same with respect to an appeal. The “prevailing party” shall be the party in whose favor a judgment is entered, regardless of whether judgment is entered on all claims asserted by such party and regardless of the amount of the judgment; or where, due to the assertion of counterclaims, judgments are entered in favor of and against both parties, then the arbitrator shall determine the “prevailing party” by taking into account the relative dollar amounts of the judgments or, if the judgments involve nonmonetary relief, the relative importance and value of such relief. Nothing herein shall restrict or impair an arbitrator’s or a court’s power to award fees and expenses for frivolous or bad faith pleading. If (i) the Note is placed in the hands of an attorney for collection or enforcement prior to commencing arbitration or legal proceedings, or is collected or enforced through any arbitration or legal proceeding, or Investor otherwise takes action to collect amounts due under the Note or to enforce the provisions of the Note, or (ii) there occurs any bankruptcy, reorganization, receivership of Company or other proceedings affecting Company’s creditors’ rights and involving a claim under the Note; then Company shall pay the costs incurred by Investor for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees, expenses, deposition costs, and disbursements.

 

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9.14. Waiver. No waiver of any provision of this Agreement shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.

 

9.15. Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT IRREVOCABLY WAIVES ANY AND ALL RIGHTS SUCH PARTY MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT, OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, EACH PARTY HERETO ACKNOWLEDGES THAT SUCH PARTY IS KNOWINGLY AND VOLUNTARILY WAIVING SUCH PARTY’S RIGHT TO DEMAND TRIAL BY JURY.

 

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

 

9.17. Voluntary Agreement. Company has carefully read this Agreement and each of the other Transaction Documents and has asked any questions needed for Company to understand the terms, consequences and binding effect of this Agreement and each of the other Transaction Documents and fully understand them. Company has had the opportunity to seek the advice of an attorney of Company’s choosing, or has waived the right to do so, and is executing this Agreement and each of the other Transaction Documents voluntarily and without any duress or undue influence by Investor or anyone else.

 

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

 

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

 

SUBSCRIPTION AMOUNT:     
      
Principal Amount of Note:  $3,300,000.00 
      
Purchase Price:  $3,000,000.00 

 

  INVESTOR:
   
  Brighton Capital Partners, LLC
     
  By:
    Lucas Hales, Manager
     
  COMPANY:
   
  HUMBL, Inc.
     
  By:
    Brian Foote, CEO

 

[Signature Page to Securities Purchase Agreement]

 

 
 

 

ATTACHED EXHIBITS:

 

Exhibit A Note
Exhibit B Irrevocable Transfer Agent Instructions
Exhibit C Secretary’s Certificate
Exhibit D Share Issuance Resolution

 

 

 

EXHIBIT 10.11

 

CONVERTIBLE PROMISSORY NOTE

 

Effective Date: April 14, 2021 U.S. $3,300,000.00

 

FOR VALUE RECEIVED, HUMBL, Inc., a Delaware corporation (“Borrower”), promises to pay to Brighton Capital Partners, LLC, a Texas limited liability company, or its successors or assigns (“Lender”), $3,300,000.00 and any interest, fees, charges, and late fees accrued hereunder on the date that is fifteen (15) months after the Purchase Price Date (the “Maturity Date”) in accordance with the terms set forth herein and to pay interest on the Outstanding Balance at the rate of ten percent (10%) per annum from the Purchase Price Date until the same is paid in full. All interest calculations hereunder shall be computed on the basis of a 360-day year comprised of twelve (12) thirty (30) day months, shall compound daily and shall be payable in accordance with the terms of this Note. This Convertible Promissory Note (this “Note”) is issued and made effective as of April 14, 2021 (the “Effective Date”). This Note is issued pursuant to that certain Securities Purchase Agreement dated April 14, 2021, as the same may be amended from time to time, by and between Borrower and Lender (the “Purchase Agreement”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.

 

This Note carries an OID of $300,000.00. The purchase price for this Note shall be $3,000,000.00 (the “Purchase Price”), computed as follows: $3,300,000.00 original principal balance, less the OID. The Purchase Price shall be payable by Lender by wire transfer of immediately available funds.

 

1. Payment; Prepayment; Use of Proceeds.

 

1.1. Payment. All payments owing hereunder shall be in lawful money of the United States of America or Conversion Shares (as defined below), as provided for herein, and delivered to Lender at the address or bank account furnished to Borrower for that purpose. All payments shall be applied first to (a) costs of collection, if any, then to (b) fees and charges, if any, then to (c) accrued and unpaid interest, and thereafter, to (d) principal.

 

1.2. Prepayment. Notwithstanding the foregoing, Borrower shall have the right to prepay all or any portion of the Outstanding Balance (less such portion of the Outstanding Balance for which Borrower has received a Lender Conversion Notice (as defined below) or a Redemption Notice (as defined below) from Lender where the applicable Conversion Shares have not yet been delivered). If Borrower exercises its right to prepay this Note, Borrower shall make payment to Lender of an amount in cash equal to 115% multiplied by the portion of the Outstanding Balance Borrower elects to prepay.

 

2. Security. This Note is unsecured.

 

3. Lender Optional Conversion.

 

3.1. Lender Conversions. Lender has the right at any time after the Purchase Price Date until the Outstanding Balance has been paid in full, at its election, to convert (“Lender Conversion”) all or any portion of the Outstanding Balance into shares (each instance of conversion is referred to herein as a “Lender Conversion Shares”) of fully paid and non-assessable common stock, $0.00001 par value per share (the “Common Stock”), of Borrower as per the following conversion formula: the number of Lender Conversion Shares equals the amount being converted (the “Conversion Amount”) divided by the Lender Conversion Price (as defined below). Conversion notices in the form attached hereto as Exhibit A (each, a “Lender Conversion Notice”) may be effectively delivered to Borrower by any method set forth in the “Notices” Section of the Purchase Agreement, and all Lender Conversions shall be cashless and not require further payment from Lender. Borrower shall deliver the Lender Conversion Shares from any Lender Conversion to Lender in accordance with Section 9 below.

 

 
 

 

3.2. Lender Conversion Price. Subject to adjustment as set forth in this Note, the price at which Lender has the right to convert all or any portion of the Outstanding Balance into Common Stock is $3.15 per share (the “Lender Conversion Price”).

 

4. Defaults and Remedies.

 

4.1. Defaults. The following are events of default under this Note (each, an “Event of Default”): (a) Borrower fails to pay any principal, interest, fees, charges, or any other amount when due and payable hereunder; (b) Borrower fails to deliver any Lender Conversion Shares in accordance with the terms hereof; (c) Borrower fails to deliver any Redemption Conversion Shares (as defined below) in accordance with the terms hereof; (d) a receiver, trustee or other similar official shall be appointed over Borrower or a material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed or discharged within sixty (60) days; (e) Borrower becomes insolvent or generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any; (f) Borrower makes a general assignment for the benefit of creditors; (g) Borrower files a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); (h) an involuntary bankruptcy proceeding is commenced or filed against Borrower; (i) Borrower or any pledgor, trustor, or guarantor of this Note defaults or otherwise fails to observe or perform any covenant, obligation, condition or agreement of Borrower or such pledgor, trustor, or guarantor contained herein or in any other Transaction Document (as defined in the Purchase Agreement), other than those specifically set forth in this Section 4.1 and Section 4 of the Purchase Agreement; (j) any representation, warranty or other statement made or furnished by or on behalf of Borrower or any pledgor, trustor, or guarantor of this Note to Lender herein, in any Transaction Document, or otherwise in connection with the issuance of this Note is false, incorrect, incomplete or misleading in any material respect when made or furnished; (k) the occurrence of a Fundamental Transaction without Lender’s prior written consent; (l) Borrower fails to maintain the Share Reserve (as defined in the Purchase Agreement); (m) any money judgment, writ or similar process is entered or filed against Borrower or any subsidiary of Borrower or any of its property or other assets for more than $1,000,000.00, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) calendar days unless otherwise consented to by Lender; or (n) Borrower fails to observe or perform any covenant set forth in Section 4 of the Purchase Agreement.

 

4.2. Remedies. At any time and from time to time after Lender becomes aware of the occurrence of any Event of Default, Lender may accelerate this Note by written notice to Borrower, with the Outstanding Balance becoming immediately due and payable in cash at the Mandatory Default Amount. Notwithstanding the foregoing, at any time following the occurrence of any Event of Default, Lender may, at its option, elect to increase the Outstanding Balance by applying the Default Effect (subject to the limitation set forth below) via written notice to Borrower without accelerating the Outstanding Balance, in which event the Outstanding Balance shall be increased as of the date of the occurrence of the applicable Event of Default pursuant to the Default Effect, but the Outstanding Balance shall not be immediately due and payable unless so declared by Lender (for the avoidance of doubt, if Lender elects to apply the Default Effect pursuant to this sentence, it shall reserve the right to declare the Outstanding Balance immediately due and payable at any time and no such election by Lender shall be deemed to be a waiver of its right to declare the Outstanding Balance immediately due and payable as set forth herein unless otherwise agreed to by Lender in writing). Notwithstanding the foregoing, upon the occurrence of any Event of Default described in clauses (d), (e), (f), (g) or (h) of Section 4.1, the Outstanding Balance as of the date of acceleration shall become immediately and automatically due and payable in cash at the Mandatory Default Amount, without any written notice required by Lender. At any time following the occurrence of any Event of Default, upon written notice given by Lender to Borrower, interest shall accrue on the Outstanding Balance beginning on the date the applicable Event of Default occurred at an interest rate equal to the lesser of twenty-two percent (22%) per annum or the maximum rate permitted under applicable law (“Default Interest”). For the avoidance of doubt, Lender may continue making Lender Conversions and Redemption Conversions (as defined below) at any time following an Event of Default until such time as the Outstanding Balance is paid in full. In connection with acceleration described herein, Lender need not provide, and Borrower hereby waives, any presentment, demand, protest or other notice of any kind, and Lender may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Lender at any time prior to payment hereunder and Lender shall have all rights as a holder of the Note until such time, if any, as Lender receives full payment pursuant to this Section 4.2. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. Nothing herein shall limit Lender’s right to pursue any other remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to Borrower’s failure to timely deliver Conversion Shares upon Conversion of the Note as required pursuant to the terms hereof.

 

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5. Unconditional Obligation; No Offset. Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset, deduction or counterclaim of any kind. Borrower hereby waives any rights of offset it now has or may have hereafter against Lender, its successors and assigns, and agrees to make the payments or Conversions called for herein in accordance with the terms of this Note.

 

6. Waiver. No waiver of any provision of this Note shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.

 

7. Adjustment of Lender Conversion Price upon Subdivision or Combination of Common Stock. Without limiting any provision hereof, if Borrower at any time on or after the Effective Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding Common Stock into a greater number of shares, the Lender Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. Without limiting any provision hereof, if Borrower at any time on or after the Effective Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding Common Stock into a smaller number of shares, the Lender Conversion Price in effect immediately prior to such combination will be proportionately increased. Any adjustment pursuant to this Section 7 shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this Section 7 occurs during the period that a Redemption Conversion Price is calculated hereunder, then the calculation of such Redemption Conversion Price shall be adjusted appropriately to reflect such event.

 

8. Borrower Redemptions.

 

8.1. Redemption Conversion Price. Subject to the adjustments set forth herein, the conversion price for each Redemption Conversion (the “Redemption Conversion Price”) shall be the lesser of (a) the Lender Conversion Price, and (b) the Market Price.

 

8.2. Redemption Conversions. Beginning on the earlier of the date that is twelve (12) months from the Purchase Price Date and the date the Form S-1 registration statement is declared effective, Lender shall have the right, exercisable at any time in its sole and absolute discretion, to redeem all or any portion of the Note (such amount, the “Redemption Amount”) by providing Borrower with a notice substantially in the form attached hereto as Exhibit B (each, a “Redemption Notice”, and each date on which Lender delivers a Redemption Notice, a “Redemption Date”). For the avoidance of doubt, Lender may submit to Borrower one (1) or more Redemption Notices in any given calendar month. Payments of each Redemption Amount may be made (a) in cash, or (b) by converting such Redemption Amount into Common Stock (“Redemption Conversion Shares”, and together with the Lender Conversion Shares, the “Conversion Shares”) in accordance with this Section 8.2 (each, a “Redemption Conversion”) per the following formula: the number of Redemption Conversion Shares equals the portion of the applicable Redemption Amount being converted divided by the Redemption Conversion Price, or (c) by any combination of the foregoing, so long as the cash is delivered to Lender on the third (3rd) Trading Day immediately following the applicable Redemption Date and the Redemption Conversion Shares are delivered to Lender on or before the applicable Delivery Date (as defined below). Notwithstanding the foregoing, Borrower will not be entitled to elect a Redemption Conversion with respect to any portion of any applicable Redemption Amount and shall be required to pay the Redemption Amount in cash, if on the applicable Redemption Date there is an Equity Conditions Failure, and such failure is not waived in writing by Lender. Borrower will also not be entitled to elect a Redemption Conversion with respect to any portion of any applicable Redemption Amount and shall be required to pay such Redemption Amount in cash, if on the applicable Redemption Date, the Redemption Conversion Price is below the Floor Price. Notwithstanding that failure to repay this Note in full by the Maturity Date is an Event of Default, the Redemption Dates shall continue after the Maturity Date pursuant to this Section 8.2 until the Outstanding Balance is repaid in full.

 

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8.3. Allocation of Redemption Amounts. Following its receipt of a Redemption Notice, Borrower may either ratify Lender’s proposed allocation in the applicable Redemption Notice or elect to change the allocation by written notice to Lender by email or fax within twenty-four (24) hours of its receipt of such Redemption Notice, so long as the sum of the cash payments and the amount of Redemption Conversions equal the applicable Redemption Amount. If Borrower fails to notify Lender of its election to change the allocation prior to the deadline set forth in the previous sentence, it shall be deemed to have ratified and accepted the allocation set forth in the applicable Redemption Notice prepared by Lender. Borrower acknowledges and agrees that the amounts and calculations set forth thereon are subject to correction or adjustment because of error, mistake, or any adjustment resulting from an Event of Default or other adjustment permitted under the Transaction Documents (an “Adjustment”). Furthermore, no error or mistake in the preparation of such notices, or failure to apply any Adjustment that could have been applied prior to the preparation of a Redemption Notice may be deemed a waiver of Lender’s right to enforce the terms of any Note, even if such error, mistake, or failure to include an Adjustment arises from Lender’s own calculation. Borrower shall deliver the Redemption Conversion Shares from any Redemption Conversion to Lender in accordance with Section 9 below on or before each applicable Delivery Date.

 

9. Method of Conversion Share Delivery. On or before the close of business on the third (3rd) Trading Day following each Redemption Date or the third (3rd) Trading Day following the date of delivery of a Lender Conversion Notice, as applicable (the “Delivery Date”), Borrower shall, provided it is DWAC Eligible at such time and such Conversion Shares are eligible for delivery via DWAC, deliver or cause its transfer agent to deliver the applicable Conversion Shares electronically via DWAC to the account designated by Lender in the applicable Lender Conversion Notice or Redemption Notice. If Borrower is not DWAC Eligible or such Conversion Shares are not eligible for delivery via DWAC, it shall deliver to Lender or its broker (as designated in the Lender Conversion Notice or Redemption Notice), via reputable overnight courier, a certificate representing the number of shares of Common Stock equal to the number of Conversion Shares to which Lender shall be entitled, registered in the name of Lender or its designee. For the avoidance of doubt, Borrower has not met its obligation to deliver Conversion Shares by the Delivery Date unless Lender or its broker, as applicable, has actually received the certificate representing the applicable Conversion Shares no later than the close of business on the relevant Delivery Date pursuant to the terms set forth above. Moreover, and notwithstanding anything to the contrary herein or in any other Transaction Document, in the event Borrower or its transfer agent refuses to deliver any Conversion Shares without a restrictive securities legend to Lender on grounds that such issuance is in violation of Rule 144 under the Securities Act of 1933, as amended (“Rule 144”), Borrower shall deliver or cause its transfer agent to deliver the applicable Conversion Shares to Lender with a restricted securities legend, but otherwise in accordance with the provisions of this Section 9. In conjunction therewith, Borrower will also deliver to Lender a written explanation from its counsel or its transfer agent’s counsel opining as to why the issuance of the applicable Conversion Shares violates Rule 144.

 

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10. Conversion Delays. If Borrower fails to deliver Conversion Shares in accordance with the timeframe stated in Section 9, Lender may at any time prior to receiving the applicable Conversion Shares rescind in whole or in part such Conversion, with a corresponding increase to the Outstanding Balance (any returned amount will tack back to the Purchase Price Date for purposes of determining the holding period under Rule 144). In addition, for each Lender Conversion, in the event that Lender Conversion Shares are not delivered by the third (3rd) Trading Day (inclusive of the day of the Conversion), a late fee equal to 2% of the applicable Conversion Share Value rounded to the nearest multiple of $100.00 but with a floor of $500.00 per day (but in any event the cumulative amount of such late fees for each Conversion shall not exceed 200% of the applicable Conversion Share Value) will be assessed for each day after the third (3rd) Trading Day (inclusive of the day of the Conversion) until Lender Conversion Share delivery is made; and such late fee will be added to the Outstanding Balance (such fees, the “Conversion Delay Late Fees”).

 

11. Ownership Limitation. Notwithstanding anything to the contrary contained in this Note or the other Transaction Documents, Borrower shall not effect any conversion of this Note to the extent that after giving effect to such conversion would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the Common Stock issuable upon such issuance) (the “Maximum Percentage”). For purposes of this section, beneficial ownership of Common Stock will be determined pursuant to Section 13(d) of the 1934 Act. Notwithstanding the forgoing, the term “4.99%” above shall be replaced with “9.99%” at such time as the Market Capitalization is less than $10,000,000.00. Notwithstanding any other provision contained herein, if the term “4.99%” is replaced with “9.99%” pursuant to the preceding sentence, such increase to “9.99%” shall remain at 9.99% until increased, decreased or waived by Lender as set forth below. By written notice to Borrower, Lender may increase, decrease or waive the Maximum Percentage as to itself but any such waiver will not be effective until the 61st day after delivery thereof. The foregoing 61-day notice requirement is enforceable, unconditional and non-waivable and shall apply to all affiliates and assigns of Lender.

 

12. Opinion of Counsel. In the event that an opinion of counsel is needed for any matter related to this Note, Lender has the right to have any such opinion provided by its counsel.

 

13. Governing Law; Venue. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of Texas, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Texas or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Texas. The provisions set forth in the Purchase Agreement to determine the proper venue for any disputes are incorporated herein by this reference.

 

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

 

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

 

16. Assignments. Borrower may not assign this Note without the prior written consent of Lender. This Note and any Common Stock issued upon conversion of this Note may be offered, sold, assigned or transferred by Lender without the consent of Borrower.

 

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17. Notices. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with the subsection of the Purchase Agreement titled “Notices.”

 

18. Liquidated Damages. Lender and Borrower agree that in the event Borrower fails to comply with any of the terms or provisions of this Note, Lender’s damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties’ inability to predict future interest rates, future share prices, future trading volumes and other relevant factors. Accordingly, Lender and Borrower agree that any fees, balance adjustments, Default Interest or other charges assessed under this Note are not penalties but instead are intended by the parties to be, and shall be deemed, liquidated damages (under Lender’s and Borrower’s expectations that any such liquidated damages will tack back to the Purchase Price Date for purposes of determining the holding period under Rule 144).

 

19. Severability. If any part of this Note is construed to be in violation of any law, such part shall be modified to achieve the objective of Borrower and Lender to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect.

 

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

 

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

 

  BORROWER:
   
  HUMBL, Inc.
     
  By:
    Brian Foote, CEO

 

ACKNOWLEDGED, ACCEPTED AND AGREED:  
   
LENDER:  
Brighton Capital Partners, LLC  
     
By:  
  Lucas Hales, Manager  

 

[Signature Page to Convertible Promissory Note]

 

 
 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

A1. “Closing Bid Price” and “Closing Trade Price” means the last closing bid price and last closing trade price, respectively, for the Common Stock on its principal market, as reported by Bloomberg, or, if its principal market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of the Common Stock prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if its principal market is not the principal securities exchange or trading market for the Common Stock, the last closing bid price or last trade price, respectively, of the Common Stock on the principal securities exchange or trading market where the Common Stock is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of the Common Stock in the over-the-counter market on the electronic bulletin board for the Common Stock as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for the Common Stock by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for the Common Stock as reported by OTC Markets Group, Inc., and any successor thereto. If the Closing Bid Price or the Closing Trade Price cannot be calculated for the Common Stock on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Trade Price (as the case may be) of the Common Stock on such date shall be the fair market value as mutually determined by Lender and Borrower. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

 

A2. “Conversion” means a Lender Conversion under Section 3 or a Redemption Conversion under Section 8.

 

A3. “Conversion Factor” means 80%.

 

A4. “Conversion Share Value” means the product of the number of Lender Conversion Shares deliverable pursuant to any Lender Conversion Notice multiplied by the Closing Trade Price of the Common Stock on the Delivery Date for such Lender Conversion.

 

A5. “Default Effect” means multiplying the Outstanding Balance as of the date the applicable Event of Default occurred by (a) fifteen percent (15%) for each occurrence of any Major Default, or (b) five percent (5%) for each occurrence of any Minor Default, and then adding the resulting product to the Outstanding Balance as of the date the applicable Event of Default occurred, with the sum of the foregoing then becoming the Outstanding Balance under this Note as of the date the applicable Event of Default occurred; provided that the Default Effect may only be applied three (3) times hereunder with respect to Major Defaults and three (3) times hereunder with respect to Minor Defaults; and provided further that the Default Effect shall not apply to any Event of Default pursuant to Section 4.1(b) hereof.

 

A6. “DTC” means the Depository Trust Company or any successor thereto.

 

A7. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A8. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A9. “DWAC Eligible” means that (a) Borrower’s Common Stock is eligible at DTC for full services pursuant to DTC’s operational arrangements, including without limitation transfer through DTC’s DWAC system; (b) Borrower has been approved (without revocation) by DTC’s underwriting department; (c) Borrower’s transfer agent is approved as an agent in the DTC/FAST Program; (d) the Conversion Shares are otherwise eligible for delivery via DWAC; and (e) Borrower’s transfer agent does not have a policy prohibiting or limiting delivery of the Conversion Shares via DWAC.

 

A10. “Equity Conditions Failure” means that any of the following conditions has not been satisfied on any given Redemption Date: (a) with respect to the applicable date of determination all of the Conversion Shares would be freely tradable under Rule 144, under an effective registration statement, or without the need for registration under any applicable federal or state securities laws (in each case, disregarding any limitation on conversion of this Note); (b) no Event of Default shall have occurred or be continuing hereunder; and (c) the average and median daily dollar volume of the Common Stock on its principal market for the previous twenty (20) and two hundred (200) Trading Days is be greater than $500,000.00.

 

Attachment 1 to Convertible Promissory Note, Page 1
 

 

A11. “Floor Price” means $0.10 per share of Common Stock.

 

A12. “Fundamental Transaction” means that (a) (i) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, consolidate or merge with or into (whether or not Borrower or any of its subsidiaries is the surviving corporation) any other person or entity, or (ii) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its respective properties or assets to any other person or entity, or (iii) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, allow any other person or entity to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of voting stock of Borrower (not including any shares of voting stock of Borrower held by the person or persons making or party to, or associated or affiliated with the persons or entities making or party to, such purchase, tender or exchange offer), or (iv) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other person or entity whereby such other person or entity acquires more than 50% of the outstanding shares of voting stock of Borrower (not including any shares of voting stock of Borrower held by the other persons or entities making or party to, or associated or affiliated with the other persons or entities making or party to, such stock or share purchase agreement or other business combination), or (v) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, reorganize, recapitalize or reclassify the Common Stock, other than an increase in the number of authorized shares of Borrower’s Common Stock, or (b) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding voting stock of Borrower.

 

A13. “Major Default” means any Event of Default occurring under Sections 4.1(a), 4.1(c), 4.1(l), or 4.1(n).

 

A14. “Mandatory Default Amount” means the Outstanding Balance following the application of the Default Effect.

 

A15. “Market Capitalization” means a number equal to (a) the average VWAP of the Common Stock for the immediately preceding fifteen (15) Trading Days, multiplied by (b) the aggregate number of outstanding Common Stock as reported on Borrower’s most recently filed Form 10-Q or Form 10-K.

 

A16. “Market Price” means the Conversion Factor multiplied by the lowest Closing Trade Price during the ten (10) Trading Days immediately preceding the applicable measurement date.

 

A17. “Minor Default” means any Event of Default that is not a Major Default.

 

A18. “OID” means an original issue discount.

 

A19. “Outstanding Balance” means as of any date of determination, the Purchase Price, as reduced or increased, as the case may be, pursuant to the terms hereof for payment, Conversion, offset, or otherwise, plus the OID, the Transaction Expense Amount, accrued but unpaid interest, collection and enforcements costs (including attorneys’ fees) incurred by Lender, transfer, stamp, issuance and similar taxes and fees related to Conversions, and any other fees or charges (including without limitation Conversion Delay Late Fees) incurred under this Note.

 

A20. “Purchase Price Date” means the date the Purchase Price is delivered by Lender to Borrower.

 

A21. “Trading Day” means any day on which Borrower’s principal market is open for trading.

 

A22. “VWAP” means the volume weighted average price of the Common Stock on the principal market for a particular Trading Day or set of Trading Days, as the case may be, as reported by Bloomberg.

 

[Remainder of page intentionally left blank]

 

Attachment 1 to Convertible Promissory Note, Page 2
 

 

EXHIBIT A

 

Brighton Capital Partners, LLC

 

HUMBL, Inc. Date:____________

Attn: Brian Foote

600 B Street, Suite 300

San Diego, California 92101

 

LENDER CONVERSION NOTICE

 

The above-captioned Lender hereby gives notice to HUMBL, Inc., a Delaware corporation (the “Borrower”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on April 14, 2021 (the “Note”), that Lender elects to convert the portion of the Note balance set forth below into fully paid and non-assessable Common Stock of Borrower as of the date of conversion specified below. Said conversion shall be based on the Lender Conversion Price set forth below. In the event of a conflict between this Lender Conversion Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of Lender Conversion Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.

 

A. Date of Conversion: ____________

B. Lender Conversion #: ____________

C. Conversion Amount: ____________

D. Lender Conversion Price: _______________

E. Lender Conversion Shares: _______________ (C divided by D)

F. Remaining Outstanding Balance of Note: ____________*

 

* Subject to adjustments for corrections, defaults, interest and other adjustments permitted by the Transaction Documents (as defined in the Purchase Agreement), the terms of which shall control in the event of any dispute between the terms of this Lender Conversion Notice and such Transaction Documents.

 

Please transfer the Lender Conversion Shares electronically (via DWAC) to the following account:

 

Broker: ____________ Address: ____________
DTC#: ____________   ____________
Account #: ____________   ____________
Account Name: ____________    

 

To the extent the Lender Conversion Shares are not able to be delivered to Lender electronically via the DWAC system, deliver all such certificated shares to Lender via reputable overnight courier after receipt of this Lender Conversion Notice (by facsimile transmission or otherwise) to:

_____________________________________

_____________________________________

_____________________________________

 

[Signature Page Follows]

 

Exhibit A to Convertible Promissory Note, Page 1
 

 

Sincerely,

 

Lender:

 

Brighton Capital Partners, LLC  
     
By:  
  Lucas Hales, Manager  

 

Exhibit A to Convertible Promissory Note, Page 2
 

 

EXHIBIT B

 

Brighton Capital Partners, LLC

 

HUMBL, Inc. Date: ____________

Attn: Brian Foote

600 B Street, Suite 300

San Diego, California 92101

 

REDEMPTION NOTICE

 

The above-captioned Lender hereby gives notice to HUMBL, Inc., a Delaware corporation (the “Borrower”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on April 14, 2021 (the “Note”), that Lender elects to redeem a portion of the Note in Redemption Conversion Shares or in cash as set forth below. In the event of a conflict between this Redemption Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of Redemption Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.

 

REDEMPTION INFORMATION

 

A. Redemption Date: ____________, 201_

B. Redemption Amount: ____________

C. Portion of Redemption Amount to be Paid in Cash: ____________

D. Portion of Redemption Amount to be Converted into Common Stock: ____________ (B minus C)

E. Redemption Conversion Price: _______________ (lower of (i) Lender Conversion Price in effect and (ii) Market Price as of Redemption Date)

F. Redemption Conversion Shares: _______________ (D divided by E)

G. Remaining Outstanding Balance of Note: ____________ *

 

* Subject to adjustments for corrections, defaults, interest and other adjustments permitted by the Transaction Documents (as defined in the Purchase Agreement), the terms of which shall control in the event of any dispute between the terms of this Redemption Notice and such Transaction Documents.

 

Please transfer the Redemption Conversion Shares, if applicable, electronically (via DWAC) to the following account:

 

 

Broker: ____________ Address: ____________
DTC#: ____________   ____________
Account #: ____________   ____________
Account Name: ____________    

 

To the extent the Redemption Conversion Shares are not able to be delivered to Lender electronically via the DWAC system, deliver all such certificated shares to Lender via reputable overnight courier after receipt of this Redemption Notice (by facsimile transmission or otherwise) to:

 

_____________________________________

_____________________________________

_____________________________________

 

Exhibit B to Convertible Promissory Note, Page 1
 

 

Sincerely,

 

Lender:

 

Brighton Capital Partners, LLC  
     
By:  
  Lucas Hales, Manager  

 

Exhibit B to Convertible Promissory Note, Page 2

 

Exhibit 10.12

 

EQUITY FINANCING AGREEMENT

 

This EQUITY FINANCING AGREEMENT (the “Agreement”), dated as of April 14, 2021 (the “Execution Date”), is entered into by and between HUMBL, Inc., a Delaware corporation (the “Company”), and Brighton Capital Partners, LLC, a Texas limited liability company (the “Investor”).

 

RECITALS:

 

WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Investor shall invest up to $50,000,000 (the “Commitment Amount”), over the course of twelve (12) months immediately following the Effective Date to purchase the Company’s common stock, $0.00001 per share (the “Common Stock”);

 

WHEREAS, such investments will be made in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “1933 Act”), Rule 506 of Regulation D promulgated by the SEC under the 1933 Act, and/or upon such other exemption from the registration requirements of the 1933 Act as may be available with respect to any or all of the investments in Common Stock to be made hereunder; and

 

WHEREAS, contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights Agreement substantially in the form attached hereto as Exhibit A (the “Registration Rights Agreement”) pursuant to which the Company has agreed to provide certain registration rights under the 1933 Act, and the rules and regulations promulgated thereunder, and applicable state securities laws.

 

NOW, THEREFORE, in consideration of the foregoing recitals, which shall be considered an integral part of this Agreement, the covenants and agreements set forth hereafter, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Investor hereby agree as follows:

 

SECTION I.

DEFINITIONS

 

For all purposes of and under this Agreement, the following terms shall have the respective meanings below, and such meanings shall be equally applicable to the singular and plural forms of such defined terms.

 

1933 Act” shall have the meaning set forth in the recitals.

 

1934 Act” shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the SEC thereunder, all as the same will then be in effect.

 

Affiliate” shall have the meaning set forth in Section 5.7.

 

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Agreement” shall have the meaning set forth in the preamble.

 

Bridge Note” means that certain Convertible Promissory Note issued by the Company in favor of the Investor on April 14, 2021 in the original principal amount of $3,300,000.

 

By-laws” shall have the meaning set forth in Section 4.3.

 

Certificate of Incorporation” shall have the meaning set forth in Section 4.3.

 

Closing” shall have the meaning set forth in Section 2.4.

 

Closing Date” shall have the meaning set forth in Section 2.4.

 

Commitment Shares” shall have the meaning set forth in Section 5.13.

 

Common Stock” shall have the meaning set forth in the recitals.

 

Control” or “Controls” shall have the meaning set forth in Section 5.7.

 

Effective Date” shall mean the date the SEC declares effective under the 1933 Act the Registration Statement covering the Securities.

 

Environmental Laws” shall have the meaning set forth in Section 4.13.

 

Execution Date” shall have the meaning set forth in the preamble.

 

Indemnified Liabilities” shall have the meaning set forth in Section 10.

 

Indemnitees” shall have the meaning set forth in Section 10.

 

Indemnitor” shall have the meaning set forth in Section 10.

 

Ineffective Period” shall mean any period of time that the Registration Statement or any supplemental registration statement becomes ineffective or unavailable for use for the sale or resale, as applicable, of any or all of the Registrable Securities (as defined in the Registration Rights Agreement) for any reason (or in the event the prospectus under either of the above is not current and deliverable) during any time period required under the Registration Rights Agreement.

 

Investor” shall have the meaning set forth in the preamble.

 

“Market Price” shall mean the lowest daily volume weighted average price (“VWAP”) of the Common Stock during the Pricing Period.

 

Material Adverse Effect” shall have the meaning set forth in Section 4.1.

 

Maximum Common Stock Issuance” shall have the meaning set forth in Section 2.5.

 

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Open Period” shall mean the period beginning on and including the Trading Day immediately following the Effective Date and ending on the termination of the Agreement in accordance with Section 8.

 

Pricing Period” shall mean the ten (10) consecutive Trading Days preceding the relevant Put Notice Date.

 

Principal Market” shall mean the New York Stock Exchange, the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, OTCQB, OTCQX, or whichever is the principal market on which the Common Stock is listed.

 

Prospectus” shall mean the prospectus, preliminary prospectus and supplemental prospectus used in connection with the Registration Statement.

 

Purchase Amount” shall mean the total amount being paid by the Investor on a particular Closing Date to purchase the Securities.

 

Purchase Price” shall mean eighty percent (80%) of the Market Price.

 

Put” shall mean the Company is entitled to request equity investments (the “Put” or “Puts”) by the Investor, pursuant to which the Company will issue Common Stock to the Investor with an aggregate Purchase Price equal to the value of the Put, subject to a price per share calculation based on the Market Price.

 

Put Amount” shall mean the total dollar amount requested by the Company pursuant to an applicable Put. The timing and amounts of each Put shall be at the discretion of the Company. The maximum dollar amount of each Put will not exceed two hundred and fifty percent (250%) of the average daily trading dollar volume for the Common Stock during the ten (10) consecutive Trading Days preceding the Put Notice Date. Unless otherwise agreed by the parties, no Put will be made in an amount equaling less than $10,000 or greater than the lesser of (a) $3,500,000; and (b) 100% of the average daily trading dollar volume of the previous five (5) days; provided, however, in no event shall the number of shares sold to Investor cause the aggregate number of shares of Common Stock beneficially owned by Investor and its affiliates to exceed 4.99% of the outstanding share capital of Company at any one time.

 

Put Notice” shall mean a written notice sent to the Investor by the Company stating the Put Amount in U.S. dollars that the Company intends to sell to the Investor pursuant to the terms of the Agreement and stating the current number of Shares issued and outstanding on such date.

 

Put Notice Date” shall mean the Trading Day on which the Investor receives a Put Notice.

 

Put Restriction” shall mean a minimum of ten (10) Trading Days following a Put Notice Date. During this time, the Company shall not be entitled to deliver another Put Notice.

 

Put Shares” shall have the meaning set forth in Section 2.4.

 

3
 

 

Registered Offering Transaction Documents” shall mean this Agreement, the Registration Rights Agreement and the Bridge Note between the Company and the Investor as of the date herewith.

 

Registration Rights Agreement” shall have the meaning set forth in the recitals.

 

Registration Statement” means the registration statement of the Company filed under the 1933 Act covering the Securities issuable hereunder.

 

Related Party” shall have the meaning set forth in Section 5.7.

 

Resolution” shall have the meaning set forth in Section 7.5.

 

SEC” shall mean the U.S. Securities and Exchange Commission.

 

OTC Markets Documents” shall have the meaning set forth in Section 4.6.

 

Securities” shall mean the shares of Common Stock issued pursuant to the terms of this Agreement and the Commitment Shares.

 

Settlement Date” shall have the meaning set forth in Section 2.4.

 

Shares” shall mean the shares of the Common Stock.

 

Subsidiaries” shall have the meaning set forth in Section 4.1.

 

Trading Day” shall mean any day on which the Principal Market for the Common Stock is open for trading, from the hours of 9:30 am until 4:00 pm.

 

Transaction Costs” the Company shall bear the costs of the Registration Statement.

 

SECTION II

PURCHASE AND SALE OF COMMON STOCK

 

2.1 PURCHASE AND SALE OF COMMON STOCK. Subject to the terms and conditions set forth herein, the Company shall sell to the Investor, and the Investor shall purchase from the Company, up to that number of Shares having an aggregate Purchase Price of up to $50,000,000.

 

2.2 DELIVERY OF PUT NOTICES. Subject to the terms and conditions herein, and from time to time during the Open Period, the Company may, in its sole discretion, deliver a Put Notice to the Investor which states the dollar amount (designated in U.S. Dollars), which the Company intends to sell to the Investor on a Closing Date (the “Put”). The Put Notice shall be in the form attached hereto as Exhibit B and incorporated herein by reference. The Purchase Price of the Put shall be eighty percent (80%) percent of the Market Price. During the Open Period, the Company shall not be entitled to submit a Put Notice until after the previous Closing has been completed. There will be a minimum of ten (10) trading days between Put Notices. Unless otherwise agreed by the Company and the Investor, no Put will be made in an amount equaling less than ten thousand dollars ($10,000) or greater than the lesser of (a) $3,500,000; and (b) 100% of the average daily trading dollar volume of the previous five (5) days; provided, however, in no event shall the number of shares sold to Investor cause the aggregate number of shares of Common Stock beneficially owned by Investor and its affiliates to exceed 4.99% of the outstanding share capital of Company at any one time.

 

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2.3 CONDITIONS TO INVESTOR’S OBLIGATION TO PURCHASE SHARES. Notwithstanding anything to the contrary in this Agreement, the Company shall not be entitled to deliver a Put Notice and the Investor shall not be obligated to purchase any Shares at a Closing unless each of the following conditions are satisfied:

 

i. a Registration Statement shall have been declared effective and shall remain effective and available for the resale of all the Registrable Securities (as defined in the Registration Rights Agreement) at all times until the Closing with respect to the subject Put Notice and Company shall have delivered to its transfer agent a Notice of Effectiveness of Registration Statement in the form attached hereto as Exhibit C;

 

ii. at all times during the period beginning on the related Put Notice Date and ending on and including the related Closing Date, the Common Stock shall have been listed or quoted for trading on the Principal Market and shall not have been suspended from trading thereon for a period of two (2) consecutive Trading Days during the Open Period and the Company shall not have been notified of any pending or threatened proceeding or other action to suspend the trading of the Common Stock;

 

iii. the Company has complied with its obligations and is otherwise not in breach of or in default under, this Agreement, the Registration Rights Agreement or any other agreement executed between the parties, which has not been cured prior to delivery of the Put Notice;

 

iv. no injunction shall have been issued and remain in force, or action commenced by a governmental authority which has not been stayed or abandoned, prohibiting the purchase or the issuance of the Securities;

 

v. the issuance of the Securities will not violate any requirements of the Principal Market;

 

vi. the Company shall have uplisted to OTCQB or OTCQX; and

 

vii. the Company shall have repaid the Bridge Note.

 

If any of the events described in clauses (i) through (v) above occurs during a Pricing Period, then the Investor shall have no obligation to purchase the Put Amount of Common Stock set forth in the applicable Put Notice.

 

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2.4 MECHANICS OF PURCHASE OF SHARES BY INVESTOR. Subject to the satisfaction of the conditions set forth in Sections 2.5, 7 and 8 of this Agreement, at the end of the Pricing Period, the Purchase Price shall be established and an amount of Shares equaling one hundred percent (100%) of the Put Amount (the “Put Shares”) shall be delivered to the Investor’s broker for a particular Put. Following its receipt of Put Notice, the Investor will deliver to the Company a Put Settlement Notice in substantially the form attached hereto as Exhibit D.

 

The Closing of a Put shall occur upon the first Trading Day following the confirmation of receipt and approval for trading by Investor’s broker of the Put Shares, whereby the Company shall have caused the Transfer Agent to electronically transmit, prior to the applicable Closing Date, the applicable Put Shares by crediting the account of the Investor’s broker with DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system. The Investor shall deliver the Purchase Amount specified in the Put Notice by wire transfer of immediately available funds to an account designated by the Company if the aforementioned receipt and approval are confirmed before 9:30 AM ET or on the following Trading Day if receipt and approval by the Investor’s broker is made after 9:30 AM ET (“Closing Date” or “Closing”). In addition, on or prior to such Closing Date, each of the Company and Investor shall deliver to each other all documents, instruments and writings required to be delivered or reasonably requested by either of them pursuant to this Agreement in order to implement and effect the transactions contemplated herein.

 

2.5 OVERALL LIMIT ON COMMON STOCK ISSUABLE. Notwithstanding anything contained herein to the contrary, if during the Open Period the Company becomes listed on an exchange which limits the number of shares of Common Stock that may be issued without shareholder approval, then the number of Shares issuable by the Company and purchasable by the Investor, shall not exceed that number of the shares of Common Stock that may be issuable without shareholder approval (the “Maximum Common Stock Issuance”). If such issuance of shares of Common Stock could cause a delisting on the Principal Market then the Maximum Common Stock Issuance shall first be approved by the Company’s shareholders in accordance with applicable law and the By-laws and the Certificate of Incorporation of the Company. The parties understand and agree that the Company’s failure to seek or obtain such shareholder approval shall in no way adversely affect the validity and due authorization of the issuance and sale of Securities or the Investor’s obligation in accordance with the terms and conditions hereof to purchase a number of Shares in the aggregate up to the Maximum Common Stock Issuance, and that such approval pertains only to the applicability of the Maximum Common Stock Issuance limitation provided in this Section 2.5.

 

2.6 LIMITATION ON AMOUNT OF OWNERSHIP. Notwithstanding anything to the contrary in this Agreement, in no event shall the Investor be entitled to purchase that number of Shares, which when added to the sum of the number of shares of Common Stock beneficially owned (as such term is defined under Section 13(d) and Rule 13d-3 of the 1934 Act), by the Investor, would exceed 4.99% of the number of shares of Common Stock outstanding on the Closing Date, as determined in accordance with Rule 13d-1(j) of the 1934 Act.

 

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SECTION III

 

INVESTOR’S REPRESENTATIONS, WARRANTIES AND COVENANTS

 

The Investor represents and warrants to the Company, and covenants, that to the best of the Investor’s knowledge:

 

3.1 SOPHISTICATED INVESTOR. The Investor has, by reason of its business and financial experience, such knowledge, sophistication and experience in financial and business matters and in making investment decisions of this type that it is capable of (I) evaluating the merits and risks of an investment in the Securities and making an informed investment decision; (II) protecting its own interest; and (III) bearing the economic risk of such investment for an indefinite period of time.

 

3.2 AUTHORIZATION; ENFORCEMENT. This Agreement has been duly and validly authorized, executed and delivered on behalf of the Investor and is a valid and binding agreement of the Investor enforceable against the Investor in accordance with its terms, subject as to enforceability to general principles of equity and to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.

 

3.3 SECTION 9 OF THE 1934 ACT. During the term of this Agreement, the Investor will comply with the provisions of Section 9 of the 1934 Act, and the rules promulgated thereunder, with respect to transactions involving the Common Stock.

 

3.4 ACCREDITED INVESTOR. Investor is an “Accredited Investor” as that term is defined in Rule 501(a) of Regulation D of the 1933 Act.

 

3.5 NO CONFLICTS. The execution, delivery and performance of the Documents by the Investor and the consummation by the Investor of the transactions contemplated hereby and thereby will not result in a violation of Partnership Agreement or other organizational documents of the Investor.

 

3.6 OPPORTUNITY TO DISCUSS. The Investor has received all materials relating to the Company’s business, finance and operations which it has requested. The Investor has had an opportunity to discuss the business, management and financial affairs of the Company with the Company’s management.

 

3.7 INVESTMENT PURPOSES. The Investor is purchasing the Securities for its own account for investment purposes and not with a view towards distribution and agrees to resell or otherwise dispose of the Securities solely in accordance with the registration provisions of the 1933 Act (or pursuant to an exemption from such registration provisions).

 

3.8 NO REGISTRATION AS A DEALER. The Investor is not required to be registered as a “dealer” under the 1934 Act, either as a result of its execution and performance of its obligations under this Agreement or otherwise.

 

3.9 GOOD STANDING. The Investor is a limited liability company, duly organized, validly existing and in good standing in the State of Texas.

 

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3.10 TAX LIABILITIES. The Investor understands that it is liable for its own tax liabilities.

 

3.11 PROHIBITED TRADING. No short sales shall be permitted by the Investor or its affiliates or through any agents of the Investor during the period commencing on the Execution Date and continuing through the termination of this Agreement.

 

SECTION IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except as set forth in the Schedules attached hereto, or as disclosed on the Company’s OTC Markets Documents, the Company represents and warrants to the Investor that:

 

4.1 ORGANIZATION AND QUALIFICATION. The Company is a corporation duly organized and validly existing in good standing under the laws of the State of Delaware and has the requisite corporate power and authorization to own its properties and to carry on its business as now being conducted. Both the Company and the companies it owns or controls (“Subsidiaries”) are duly qualified to do business and are in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect. As used in this Agreement, “Material Adverse Effect” means a change, event, circumstance, effect or state of facts that has had or is reasonably likely to have, a material adverse effect on the business, properties, assets, operations, results of operations, financial condition or prospects of the Company and its Subsidiaries, if any, taken as a whole, or on the transactions contemplated hereby or by the agreements and instruments to be entered into in connection herewith, or on the authority or ability of the Company to perform its obligations under the Registered offering Transaction Documents.

 

4.2 AUTHORIZATION; ENFORCEMENT COMPLIANCE WITH OTHER INSTRUMENTS.

 

i. The Company has the requisite corporate power and authority to enter into and perform this Agreement and the Registration Rights Agreement (collectively, the “Registered Offering Transaction Documents”), and to issue the Securities in accordance with the terms hereof and thereof.

 

ii. The execution and delivery of the Registered Offering Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby, including without limitation the issuance of the Securities pursuant to this Agreement, have been duly and validly authorized by the Company’s Board of Directors and no further consent or authorization is required by the Company, its Board of Directors, or its shareholders.

 

iii. The Registered Offering Transaction Documents have been duly and validly executed and delivered by the Company.

 

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iv. The Registered Offering Transaction Documents constitute the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors’ rights and remedies.

 

4.3 CAPITALIZATION. As of the date hereof, the authorized capital stock of the Company consists of: (i) 7,450,000,000 shares of Common Stock, $0.00001 par value, of which as of the date hereof 974,218,599 shares are issued and outstanding; (ii) 7,000,000 shares of Preferred A Stock, $0.00001 par value, of which as of the date hereof 7,000,000 shares are issued and outstanding; (iii) 900,000 shares of Preferred B Stock, $0.00001 par value, of which as of the date hereof 552,522 shares are issued and outstanding; and (iv) 150,000 shares of Preferred B Stock, $0.00001 par value, of which as of the date hereof 0 shares are issued and outstanding. All of such outstanding shares have been, or upon issuance will be, validly issued and are fully paid and non assessable.


Except as disclosed in the Company’s publicly available filings with OTC Markets, press releases, otherwise disclosed to the Investor and as will be disclosed in the Registration Statement, and based on the best information available and efforts of the Company’s management, or as otherwise set forth on Schedule 4.3:

 

i. no shares of the Company’s capital stock are subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company;

 

ii. there are no outstanding debt securities;

 

iii. there are no outstanding shares of capital stock, options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries;

 

iv. there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of their securities under the 1933 Act (except the Registration Rights Agreement);

 

v. there are no outstanding securities of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries;

 

vi. there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities as described in this Agreement;

 

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vii. the Company does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement; and

 

viii. there is no dispute as to the classification of any shares of the Company’s capital stock.

 

The Company has furnished to the Investor, or the Investor has had access through OTC Markets to, true and correct copies of the Company’s Certificate of Incorporation and all amendments thereto, as in effect on the date hereof (the “Certificate of Incorporation”), and the Company’s By-laws and all amendments thereto, as in effect on the date hereof (the “By-laws”), and the terms of all securities convertible into or exercisable for Common Stock and the material rights of the holders thereof in respect thereto.

 

4.4 ISSUANCE OF SHARES. As of the filing of the Registration Statement the Company will have reserved the amount of Shares included in the Registration Statement for issuance pursuant to the Registered Offering Transaction Documents, which have been duly authorized and reserved (subject to adjustment pursuant to the Company’s covenant set forth in Section 5.5 below) pursuant to this Agreement. Upon issuance in accordance with this Agreement, the Securities will be validly issued, fully paid for and non-assessable and free from all taxes, liens and charges with respect to the issuance thereof. In the event the Company cannot register a sufficient number of Shares for issuance pursuant to this Agreement, the Company will use its best efforts to authorize and reserve for issuance the number of Shares required for the Company to perform its obligations hereunder as soon as reasonably practicable.

 

4.5 NO CONFLICTS. The execution, delivery and performance of the Registered Offering Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby will not (i) result in a violation of the Certificate of Incorporation, any Certificate of Designations, Preferences and Rights of any outstanding series of preferred stock of the Company or the By-laws; or (ii) conflict with, or constitute a material default (or an event which with notice or lapse of time or both would become a material default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, contract, indenture mortgage, indebtedness or instrument to which the Company or any of its Subsidiaries is a party, or to the Company’s knowledge result in a violation of any law, rule, regulation, order, judgment or decree (including United States federal and state securities laws and regulations and the rules and regulations of the Principal Market or principal securities exchange or trading market on which the Common Stock is traded or listed) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected. Neither the Company nor its Subsidiaries is in violation of any term of, or in default under, the Certificate of Incorporation, any Certificate of Designations, Preferences and Rights of any outstanding series of preferred stock of the Company or the By-laws or their organizational charter or by-laws, respectively, or any contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or regulation applicable to the Company or its Subsidiaries, except for possible conflicts, defaults, terminations, amendments, accelerations, cancellations and violations that would not individually or in the aggregate have or constitute a Material Adverse Effect. The business of the Company and its Subsidiaries is not being conducted, and shall not be conducted, in violation of any law, statute, ordinance, rule, order or regulation of any governmental authority or agency, regulatory or self-regulatory agency, or court, except for possible violations the sanctions for which either individually or in the aggregate would not have a Material Adverse Effect. Except as specifically contemplated by this Agreement and as required under the 1933 Act or any securities laws of any states, to the Company’s knowledge, the Company is not required to obtain any consent, authorization, permit or order of, or make any filing or registration (except the filing of a registration statement as outlined in the Registration Rights Agreement between the parties) with, any court, governmental authority or agency, regulatory or self-regulatory agency or other third party in order for it to execute, deliver or perform any of its obligations under, or contemplated by, the Registered Offering Transaction Documents in accordance with the terms hereof or thereof. All consents, authorizations, permits, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof and are in full force and effect as of the date hereof. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing. The Company is not, and will not be, in violation of the listing requirements of the Principal Market as in effect on the date hereof and on each of the Closing Dates and is not aware of any facts which would reasonably lead to delisting of the Common Stock by the Principal Market in the foreseeable future.

 

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4.6 OTC MARKETS DOCUMENTS; FINANCIAL STATEMENTS. As of the date hereof, the Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with OTC Markets (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein, and amendments thereto, being hereinafter referred to as the “OTC Markets Documents”). The Company has delivered to the Investor or its representatives, or they have had access through OTC Markets to, true and complete copies of the OTC Markets Documents. As of their respective filing dates, the OTC Markets Documents complied in all material respects with the requirements of OTC Markets, and none of the OTC Markets Documents, at the time they were filed with OTC Markets or the time they were amended, if amended, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements of the Company included in the OTC Markets Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of OTC Markets with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles, by a firm that is a member of the Public Companies Accounting Oversight Board (“PCAOB”) consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). No other written information provided by or on behalf of the Company to the Investor which is not included in the OTC Markets Documents, including, without limitation, information referred to in Section 4.3 of this Agreement, contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstance under which they are or were made, not misleading. Neither the Company nor any of its Subsidiaries or any of their officers, directors, employees or agents have provided the Investor with any material, nonpublic information which was not publicly disclosed prior to the date hereof and any material, nonpublic information provided to the Investor by the Company or its Subsidiaries or any of their officers, directors, employees or agents prior to any Closing Date shall be publicly disclosed by the Company prior to such Closing Date.

 

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4.7 ABSENCE OF CERTAIN CHANGES. Except as otherwise set forth in the OTC Markets Documents, the Company does not intend to change the business operations of the Company in any material way. The Company has not taken any steps, and does not currently expect to take any steps, to seek protection pursuant to any bankruptcy law nor does the Company or its Subsidiaries have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings.

 

4.8 ABSENCE OF LITIGATION AND/OR REGULATORY PROCEEDINGS. Except as set forth in the OTC Markets Documents, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of Company or any of its Subsidiaries, threatened against or affecting the Company, the Common Stock or any of the Company’s Subsidiaries or any of the Company’s or the Company’s Subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a Material Adverse Effect.

 

4.9 ACKNOWLEDGMENT REGARDING INVESTOR’S PURCHASE OF SHARES. The Company acknowledges and agrees that the Investor is acting solely in the capacity of an arm’s length investor with respect to the Registered Offering Transaction Documents and the transactions contemplated hereby and thereby. The Company further acknowledges that the Investor is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Registered Offering Transaction Documents and the transactions contemplated hereby and thereby and any advice given by the Investor or any of its respective representatives or agents in connection with the Registered Offering Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to the Investor’s purchase of the Securities, and is not being relied on by the Company. The Company further represents to the Investor that the Company’s decision to enter into the Registered Offering Transaction Documents has been based solely on the independent evaluation by the Company and its representatives.

 

4.10 NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR CIRCUMSTANCES. Except as set forth in the OTC Markets Documents, as of the date hereof, no event, liability, development or circumstance has occurred or exists, or to the Company’s knowledge is contemplated to occur, with respect to the Company or its Subsidiaries or their respective business, properties, assets, prospects, operations or financial condition, that would be required to be disclosed by the Company under applicable securities laws on a registration statement filed with the SEC relating to an issuance and sale by the Company of its Common Stock and which has not been publicly announced.

 

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4.11 EMPLOYEE RELATIONS. Neither the Company nor any of its Subsidiaries is involved in any union labor dispute nor, to the knowledge of the Company or any of its Subsidiaries, is any such dispute threatened. Neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that relations with their employees are good. No executive officer (as defined in Rule 501(f) of the 1933 Act) has notified the Company that such officer intends to leave the Company’s employ or otherwise terminate such officer’s employment with the Company.

 

4.12 INTELLECTUAL PROPERTY RIGHTS. The Company and its Subsidiaries own or possess adequate rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted. Except as set forth in the OTC Markets Documents, none of the Company’s trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, government authorizations, trade secrets or other intellectual property rights necessary to conduct its business as now or as proposed to be conducted have expired or terminated, or are expected to expire or terminate within three (3) years from the date of this Agreement. The Company and its Subsidiaries do not have any knowledge of any infringement by the Company or its Subsidiaries of trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other similar rights of others, or of any such development of similar or identical trade secrets or technical information by others and, except as set forth in the OTC Markets Documents or otherwise disclosed to the Investor, there is no claim, action or proceeding being made or brought against, or to the Company’s knowledge, being threatened against, the Company or its Subsidiaries regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other infringement; and the Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing. The Company and its Subsidiaries have taken commercially reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties.

 

4.13 ENVIRONMENTAL LAWS. The Company and its Subsidiaries (i) are, to the knowledge of the management and directors of the Company and its Subsidiaries, in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”); (ii) have, to the knowledge of the management and directors of the Company, received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses; and (iii) are in compliance, to the knowledge of the management and directors of the Company, with all terms and conditions of any such permit, license or approval where, in each of the three (3) foregoing cases, the failure to so comply would have, individually or in the aggregate, a Material Adverse Effect.

 

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4.14 TITLE. The Company and its Subsidiaries have good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are described in the OTC Markets Documents or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company or any of its Subsidiaries. Any real property and facilities held under lease by the Company or any of its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries.

 

4.15 INSURANCE. Each of the Company’s Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company reasonably believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged. Neither the Company nor any of its Subsidiaries has been refused any insurance coverage sought or applied for and neither the Company nor its Subsidiaries has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.

 

4.16 REGULATORY PERMITS. The Company and its Subsidiaries have in full force and effect all certificates, approvals, authorizations and permits from the appropriate federal, state, local or foreign regulatory authorities and comparable foreign regulatory agencies, necessary to own, lease or operate their respective properties and assets and conduct their respective businesses, and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, approval, authorization or permit, except for such certificates, approvals, authorizations or permits which if not obtained, or such revocations or modifications which, would not have a Material Adverse Effect.

 

4.17 INTERNAL ACCOUNTING CONTROLS. Except as otherwise set forth in the OTC Markets Documents, the Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles by a firm with membership to the PCAOB and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company’s management has determined that the Company’s internal accounting controls were not effective as of the date of this Agreement as further described in the OTC Markets Documents.

 

4.18 NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Company nor any of its Subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Company’s officers has or is expected in the future to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a party to any contract or agreement which in the judgment of the Company’s officers has or is expected to have a Material Adverse Effect.

 

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4.19 TAX STATUS. The Company and each of its Subsidiaries has made or filed all United States federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.

 

4.20 CERTAIN TRANSACTIONS. Except as set forth in the OTC Markets Documents filed at least ten (10) days prior to the date hereof and except for arm’s length transactions pursuant to which the Company makes payments in the ordinary course of business upon terms no less favorable than the Company could obtain from disinterested third parties, none of the officers, directors, or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, such that disclosure would be required in the OTC Markets Documents.

 

4.21 DILUTIVE EFFECT. The Company understands and acknowledges that the number of shares of Common Stock issuable upon purchases pursuant to this Agreement will increase in certain circumstances including, but not necessarily limited to, the circumstance wherein the trading price of the Common Stock declines during the period between the Effective Date and the end of the Open Period. The Company’s executive officers and directors have studied and fully understand the nature of the transactions contemplated by this Agreement and recognize that they have a potential dilutive effect on the shareholders of the Company. The Board of Directors of the Company has concluded, in its good faith business judgment, and with full understanding of the implications, that such issuance is in the best interests of the Company. The Company specifically acknowledges that, subject to such limitations as are expressly set forth in the Registered Offering Transaction Documents, its obligation to issue shares of Common Stock upon purchases pursuant to this Agreement is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.

 

4.22 NO GENERAL SOLICITATION. Neither the Company, nor any of its affiliates, nor any person acting on its behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Common Stock to be offered as set forth in this Agreement.

 

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4.23 NO BROKERS, FINDERS OR FINANCIAL ADVISORY FEES OR COMMISSIONS. There are no brokers, finders or financial advisory fees or commissions payable by the Company, its agents or Subsidiaries, with respect to the transactions contemplated by this Agreement.

 

4.24 EXCLUSIVITY. The Company shall not pursue a similar equity financing transaction as envisioned hereunder (the “Equity Financing”) with any other party unless and until this Agreement has been terminated.

 

SECTION V

COVENANTS OF THE COMPANY

 

5.1 BEST EFFORTS. The Company shall use all commercially reasonable efforts to timely satisfy each of the conditions set forth in Section 7 of this Agreement.

 

5.2 REPORTING STATUS. Until one of the following occurs, the Company shall file all reports required to be filed with OTC Markets or the SEC pursuant to the 1934 Act, as applicable, and the Company shall not terminate its status, or take an action or fail to take any action, which would terminate its status as a reporting company under the 1934 Act: (i) this Agreement terminates pursuant to Section 8 and the Investor has the right to sell all of the Securities without restrictions pursuant to Rule 144 promulgated under the 1933 Act, or such other exemption, or (ii) the date on which the Investor has sold all the Securities and this Agreement has been terminated pursuant to Section 8.

 

5.3 USE OF PROCEEDS. The Company will use the proceeds from the sale of the Put Shares (excluding amounts paid by the Company for fees as set forth in the Registered Offering Transaction Documents) for general corporate and working capital purposes and acquisitions or assets, businesses or operations or for other purposes that the Board of Directors, in good faith, deem to be in the best interest of the Company.

 

5.4 FINANCIAL INFORMATION. During the Open Period, the Company agrees to make available to the Investor via EDGAR or other electronic means or the Investor will access via sec.gov the following documents and information on the forms set forth: (i) within five (5) Trading Days after the filing thereof with the SEC, a copy of its Annual Reports on Form 10-K, its Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and any Registration Statements or amendments filed pursuant to the 1933 Act; (ii) copies of any notices and other information made available or given to the shareholders of the Company generally, contemporaneously with the making available or giving thereof to the shareholders; and (iii) within two (2) calendar days of filing or delivery thereof, copies of all documents filed with, and all correspondence sent to, the Principal Market, any securities exchange or market, or the Financial Industry Regulatory Association, unless such information is material nonpublic information.

 

5.5 RESERVATION OF SHARES. The Company shall take all action necessary to at all times have authorized and reserved the amount of Shares included in the Company’s registration statement for issuance pursuant to the Registered Offering Transaction Documents. In the event that the Company determines that it does not have a sufficient number of authorized shares of Common Stock to reserve and keep available for issuance as described in this Section 5.5, the Company shall use all commercially reasonable efforts to increase the number of authorized shares of Common Stock by seeking shareholder approval for the authorization of such additional shares.

 

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5.6 QUOTATION. The Company shall maintain the quotation of its common stock on the Principal Market and each other national securities exchange and automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and shall maintain such quotation or listing. Neither the Company nor any of its Subsidiaries shall take any action which would be reasonably expected to result in the delisting or suspension of the Common Stock on the Principal Market (excluding suspensions of not more than one (1) Trading Day resulting from business announcements by the Company). The Company shall promptly provide to the Investor copies of any notices it receives from the Principal Market regarding the continued eligibility of the Common Stock for listing on such automated quotation system or securities exchange. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 5.6.

 

5.7 TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall cause each of its Subsidiaries not to, enter into, amend, modify or supplement, or permit any Subsidiary to enter into, amend, modify or supplement, any agreement, transaction, commitment or arrangement with any of its or any Subsidiary’s officers, directors, persons who were officers or directors at any time during the previous two (2) years, shareholders who beneficially own 5% or more of the Common Stock, or Affiliates or with any individual related by blood, marriage or adoption to any such individual or with any entity in which any such entity or individual owns a 5% or more beneficial interest (each a “Related Party”), except for (i) customary employment arrangements and benefit programs on reasonable terms, (ii) any agreement, transaction, commitment or arrangement on an arms-length basis on terms no less favorable than terms which would have been obtainable from a disinterested third party other than such Related Party, or (iii) any agreement, transaction, commitment or arrangement which is approved by a majority of the disinterested directors of the Company. For purposes hereof, any director who is also an officer of the Company or any Subsidiary of the Company shall not be a disinterested director with respect to any such agreement, transaction, commitment or arrangement. “Affiliate” for purposes hereof means, with respect to any person or entity, another person or entity that, directly or indirectly, (i) has a 5% or more equity interest in that person or entity, (ii) has 5% or more common ownership with that person or entity, (iii) controls that person or entity, or (iv) is under common control with that person or entity. “Control” or “Controls” for purposes hereof means that a person or entity has the power, directly or indirectly, to conduct or govern the policies of another person or entity.

 

5.8 FILING OF FORM 8-K. On or before the date which is four (4) Trading Days after the Execution Date, the Company shall issue a press release describing the terms of the transaction contemplated by the Registered Offering Transaction Documents, if such filing is required.

 

5.9 CORPORATE EXISTENCE. The Company shall use all commercially reasonable efforts to preserve and continue the corporate existence of the Company.

 

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5.10 NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF RIGHT TO MAKE A PUT. The Company shall promptly notify the Investor upon the occurrence of any of the following events in respect of a Registration Statement or related prospectus in respect of an offering of the Securities: (i) receipt of any request for additional information by the SEC or any other federal or state governmental authority during the period of effectiveness of the Registration Statement for amendments or supplements to the Registration Statement or related prospectus; (ii) the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of any Registration Statement or the initiation of any proceedings for that purpose; (iii) receipt of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Securities for sale in any jurisdiction or the initiation or notice of any proceeding for such purpose; (iv) the happening of any event that makes any statement made in such Registration Statement or related prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in the Registration Statement, related prospectus or documents so that, in the case of a Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the related prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (v) the Company’s reasonable determination that a post-effective amendment or supplement to the Registration Statement would be appropriate, and the Company shall promptly make available to Investor any such supplement or amendment to the related prospectus. The Company shall not deliver to Investor any Put Notice during the continuation of any of the foregoing events in this Section 5.10.

 

5.11 TRANSFER AGENT. The Company shall deliver instructions to its transfer agent to issue Shares to the Investor that are issued to the Investor pursuant to the Equity Financing and transactions contemplated herein.

 

5.12 ACKNOWLEDGEMENT OF TERMS. The Company hereby represents and warrants to the Investor that: (i) it is voluntarily entering into this Agreement of its own free will, (ii) it is not entering this Agreement under economic duress, (iii) the terms of this Agreement are reasonable and fair to the Company, and (iv) the Company has had independent legal counsel of its own choosing review this Agreement, advise the Company with respect to this Agreement, and represent the Company in connection with this Agreement.

 

5.13 COMMITMENT SHARES. The Company shall pay the Investor a commitment fee equal to one percent (1%) of the Commitment Amount which will be paid in shares of the Company’s Common Stock that will also be included in the Registration Statement (the “Commitment Shares”). The Commitment Shares will be issued and priced on the Trading Day immediately preceding the Registration Statement.

 

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SECTION VI

CONDITIONS OF THE COMPANY’S OBLIGATION TO SELL

 

The obligation hereunder of the Company to issue and sell the Securities to the Investor is further subject to the satisfaction, at or before each Closing Date, of each of the following conditions set forth below. These conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion.

 

6.1 The Investor shall have executed this Agreement and the Registration Rights Agreement and delivered the same to the Company.

 

6.2 The Investor shall have delivered to the Company the Purchase Price for the Securities being purchased by the Investor.

 

6.3 No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement.

 

SECTION VII

FURTHER CONDITIONS OF THE INVESTOR’S OBLIGATION TO PURCHASE

 

The obligation of the Investor hereunder to purchase Securities is subject to the satisfaction, on or before each Closing Date, of each of the following conditions set forth below.

 

7.1 The Company shall have executed the Registered Offering Transaction Documents and delivered the same to the Investor.

 

7.2 The representations and warranties of the Company shall be true and correct as of the date when made and as of the applicable Closing Date as though made at that time and the Company shall have performed, satisfied and complied with the covenants, agreements and conditions required by the Registered Offering Transaction Documents to be performed, satisfied or complied with by the Company on or before such Closing Date. The Investor may request an update as of such Closing Date regarding the representation contained in Section 4.3.

 

7.3 The Company shall have executed and delivered to the Investor via DWAC the Securities (in such denominations as the Investor shall request) being purchased by the Investor at such Closing.

 

7.4 The Board of Directors of the Company shall have adopted resolutions consistent with Section 4.2(ii) (the “Resolutions”) and such Resolutions shall not have been amended or rescinded prior to such Closing Date.

 

7.5 No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement.

 

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7.6 Within thirty (30) calendar days after the Agreement is executed, the Company agrees to use its best efforts to file with the SEC the Registration Statement covering the shares of stock underlying the Equity Financing contemplated herein. Such Registration Statement shall conform to the requirements of the rules and regulations of the SEC and be subject to the reasonable approval of the Investor. The Company will take any and all steps necessary to have its Registration Statement declared effective by the SEC within 30 calendar days but no more than 90 calendar days after the Company has filed its Registration Statement. The Registration Statement shall be effective on each Closing Date and no stop order suspending the effectiveness of the Registration statement shall be in effect or to the Company’s knowledge shall be pending or threatened. Furthermore, on each Closing Date (I) neither the Company nor the Investor shall have received notice that the SEC has issued or intends to issue a stop order with respect to such Registration Statement or that the SEC otherwise has suspended or withdrawn the effectiveness of such Registration Statement, either temporarily or permanently, or intends or has threatened to do so (unless the SEC’s concerns have been addressed), and (II) no other suspension of the use or withdrawal of the effectiveness of such Registration Statement or related prospectus shall exist.

 

7.7 At the time of each Closing, the Registration Statement (including information or documents incorporated by reference therein) and any amendments or supplements thereto shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading or which would require public disclosure or an update supplement to the prospectus.

 

7.8 If applicable, the shareholders of the Company shall have approved the issuance of any Shares in excess of the Maximum Common Stock Issuance in accordance with Section 2.5 or the Company shall have obtained appropriate approval pursuant to the requirements of applicable state and federal laws and the Company’s Certificate of Incorporation and By-laws.

 

7.9 The conditions to such Closing set forth in Section 2.3 shall have been satisfied on or before such Closing Date.

 

7.10 The Company shall have certified to the Investor the number of Shares of Common Stock outstanding when a Put Notice is given to the Investor. The Company’s delivery of a Put Notice to the Investor constitutes the Company’s certification of the existence of the necessary number of shares of Common Stock reserved for issuance.

 

SECTION VIII

TERMINATION

 

This Agreement shall terminate upon any of the following events:

 

8.1 when the Investor has purchased an aggregate of $50,000,000 in the Common Stock of the Company pursuant to this Agreement; or

 

8.2 twelve (12) months from the date of this Agreement’s execution have elapsed.

 

Any and all shares, or penalties, if any, due under this Agreement shall be immediately payable and due upon termination of this Agreement.

 

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SECTION IX

SUSPENSION

 

This Agreement shall be suspended upon any of the following events, and shall remain suspended until such event is rectified:

 

i. The trading of the Common Stock is suspended by the SEC, the Principal Market or FINRA for a period of two (2) consecutive Trading Days during the Open Period;

 

ii. The Common Stock ceases to be quoted, listed or traded on the Principal Market or the Registration Statement is no longer effective (except as permitted hereunder);

 

iii. The Company breaches any representation, warranty, covenant or other such term;

 

iv. The Company files, threatens or is compelled into Bankruptcy or insolvency; or

 

v. The Common Stock is no longer DWAC eligible.

 

Immediately upon the occurrence of one of the above-described events, the Company shall send written notice of such event to the Investor.

 

SECTION X

INDEMNIFICATION

 

In consideration of the parties mutual obligations set forth in the Transaction Documents, the Company (the “Indemnitor”) shall defend, protect, indemnify and hold harmless the Investor and all of Investor’s shareholders, officers, directors, employees, counsel, and direct or indirect investors and any of the foregoing person’s agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and reasonable expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or relating to (I) any misrepresentation or breach of any representation or warranty made by the Indemnitor or any other certificate, instrument or document contemplated hereby or thereby; (II) any breach of any covenant, agreement or obligation of the Indemnitor contained in the Registered Offering Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby; or (III) any cause of action, suit or claim brought or made against such Indemnitee by a third party and arising out of or resulting from the execution, delivery, performance or enforcement of the Registered Offering Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, except insofar as any such misrepresentation, breach or any untrue statement, alleged untrue statement, omission or alleged omission is made in reliance upon and in conformity with information furnished to Indemnitor which is specifically intended for use in the preparation of any such Registration Statement, preliminary prospectus, prospectus or amendments to the prospectus. To the extent that the foregoing undertaking by the Indemnitor may be unenforceable for any reason, the Indemnitor shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. The indemnity provisions contained herein shall be in addition to any cause of action or similar rights Indemnitor may have, and any liabilities the Indemnitor or the Indemnitees may be subject to.

 

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SECTION XI

GOVERNING LAW; DISPUTES SUBMITTED TO ARBITRATION.

 

11.1 Law Governing this Agreement. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state or federal courts located in Travis County, Texas. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non convenient. The parties executing this Agreement and other agreements referred to herein or delivered in connection herewith on behalf of the Company agree to submit to the in person jurisdiction of such courts and hereby irrevocably waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Documents by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

 

11.2 LEGAL FEES; AND MISCELLANEOUS FEES. Except as otherwise set forth in the Registered Offering Transaction Documents (including but not limited to Section V of the Registration Rights Agreement), each party shall pay the fees and expenses of its advisers, counsel, the accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. Any attorneys’ fees and expenses incurred by either the Company or the Investor in connection with the preparation, negotiation, execution and delivery of any amendments to this Agreement or relating to the enforcement of the rights of any party, after the occurrence of any breach of the terms of this Agreement by another party or any default by another party in respect of the transactions contemplated hereunder, shall be paid on demand by the party which breached the Agreement and/or defaulted, as the case may be. The Company shall pay all stamp and other taxes and duties levied in connection with the issuance of any Securities.

 

11.3 COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the different signatories hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument. This Agreement may be executed by facsimile transmission, PDF, electronic signature or other similar electronic means with the same force and effect as if such signature page were an original thereof.

 

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11.4 HEADINGS; SINGULAR/PLURAL. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. Whenever required by the context of this Agreement, the singular shall include the plural and masculine shall include the feminine.

 

11.5 SEVERABILITY. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction.

 

11.6 ENTIRE AGREEMENT; AMENDMENTS. This Agreement is the FINAL AGREEMENT between the Company and the Investor with respect to the terms and conditions set forth herein, and the terms of this Agreement may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the Parties. No provision of this Agreement may be amended other than by an instrument in writing signed by the Company and the Investor, and no provision hereof may be waived other than by an instrument in writing signed by the party against whom enforcement is sought. The execution and delivery of the Registered Offering Transaction Documents shall not alter the force and effect of any other agreements between the Parties, and the obligations under those agreements.

 

11.7 NOTICES. Any notices or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered (I) upon receipt, when delivered personally; (II) upon receipt, when sent by email; or (III) one (1) day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses for such communications shall be:

 

If to the Company:

 

Attn: Brian Foote

600 B Street, Suite 325

San Diego, California 92101

 

If to the Investor:

 

Attn: Lucas Hales

 

Each party shall provide five (5) days prior written notice to the other party of any change in address.

 

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11.8 NO ASSIGNMENT. This Agreement may not be assigned.

 

11.9 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for the benefit of the parties hereto and is not for the benefit of, nor may any provision hereof be enforced by, any other person, except that the Company acknowledges that the rights of the Investor may be enforced by its general partner.

 

11.10 SURVIVAL. The representations and warranties of the Company and the Investor contained in Sections 3 and 4, the agreements and covenants set forth in Sections 5 and 6, and the indemnification provisions set forth in Section 10, shall survive each of the Closings and the termination of this Agreement.

 

11.11 PUBLICITY. The Investor acknowledges that this Agreement and all or part of the Registered Offering Transaction Documents may be deemed to be “material contracts” as that term is defined by Item 601(b)(10) of Regulation S-K, and that the Company may therefore be required to file such documents as exhibits to reports or registration statements filed under the 1933 Act or the 1934 Act. The Investor further agrees that the status of such documents and materials as material contracts shall be determined solely by the Company, in consultation with its counsel.

 

11.12 FURTHER ASSURANCES. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

11.13 PLACEMENT AGENT. If so required, the Company agrees to pay a registered broker dealer, to act as placement agent. The Investor shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other persons or entities for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Registered Offering Transaction Documents. The Company shall indemnify and hold harmless the Investor, their employees, officers, directors, agents, and partners, and their respective affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and attorney’s fees) and expenses incurred in respect of any such claimed or existing fees, as such fees and expenses are incurred.

 

11.14 NO STRICT CONSTRUCTION. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party, as the parties mutually agree that each has had a full and fair opportunity to review this Agreement and seek the advice of counsel on it.

 

11.15 REMEDIES. The Investor shall have all rights and remedies set forth in this Agreement and the Registration Rights Agreement and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which the Investor has by law. Any person having any rights under any provision of this Agreement shall be entitled to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any default or breach of any provision of this Agreement, including the recovery of reasonable attorney’s fees and costs, and to exercise all other rights granted by law.

 

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11.16 PAYMENT SET ASIDE. To the extent that the Company makes a payment or payments to the Investor hereunder or under the Registration Rights Agreement or the Investor enforces or exercises its rights hereunder or thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

 

SECTION XII

NON-DISCLOSURE OF NON-PUBLIC INFORMATION

 

The Company shall not disclose non-public information to the Investor, its advisors, or its representatives.

 

Nothing herein shall require the Company to disclose non-public information to the Investor or its advisors or representatives, and the Company represents that it does not disseminate non-public information to any investors who purchase stock in the Company in a public offering, to money managers or to securities analysts, provided, however, that notwithstanding anything herein to the contrary, the Company will, as hereinabove provided, immediately notify the advisors and representatives of the Investor and, if any, underwriters, of any event or the existence of any circumstance (without any obligation to disclose the specific event or circumstance) of which it becomes aware, constituting non-public information (whether or not requested of the Company specifically or generally during the course of due diligence by such persons or entities), which, if not disclosed in the prospectus included in the Registration Statement would cause such prospectus to include a material misstatement or to omit a material fact required to be stated therein in order to make the statements, therein, in light of the circumstances in which they were made, not misleading. Nothing contained in this Section 12 shall be construed to mean that such persons or entities other than the Investor (without the written consent of the Investor prior to disclosure of such information) may not obtain non-public information in the course of conducting due diligence in accordance with the terms of this Agreement and nothing herein shall prevent any such persons or entities from notifying the Company of their opinion that based on such due diligence by such persons or entities, that the Registration Statement contains an untrue statement of material fact or omits a material fact required to be stated in the Registration Statement or necessary to make the statements contained therein, in light of the circumstances in which they were made, not misleading.

 

SECTION XIII

ACKNOWLEDGEMENTS OF THE PARTIES

 

Notwithstanding anything in this Agreement to the contrary, the parties hereto hereby acknowledge and agree to the following: (i) the Investor makes no representations or covenants that it will not engage in trading in the securities of the Company, other than as provided in Section 3.12 of this Agreement; (ii) the Company has not and shall not provide material non-public information to the Investor unless prior thereto the Investor shall have executed a written agreement regarding the confidentiality and use of such information; and (iii) the Company understands and confirms that the Investor will be relying on the acknowledgements set forth in clauses (i) through (iii) above if the Investor effects any transactions in the securities of the Company.

 

[Signature page follows]

 

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Your signature on this Signature Page evidences your agreement to be bound by the terms and conditions of the Investment Agreement as of the date first written above. The undersigned signatory hereby certifies that he has read and understands the Investment Agreement, and the representations made by the undersigned in this Investment Agreement are true and accurate and agrees to be bound by its terms.

 

  BRIGHTON CAPITAL PARTNERS, LLC
     
  By:  
    Lucas Hales, Manager
     
  HUMBL, INC.
     
  By:  
    Brian Foote, CEO

 

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LIST OF EXHIBITS

 

EXHIBIT A Registration Rights Agreement
   
EXHIBIT B Put Notice
   
EXHIBIT C Notice of Effectiveness
   
EXHIBIT D Put Settlement Sheet

 

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Exhibit 10.13

 

REGISTRATION RIGHTS AGREEMENT

 

This REGISTRATION RIGHTS AGREEMENT (the “Agreement”) dated as of April 14, 2021 (the “Execution Date”) is entered into by and between HUMBL, Inc., a Delaware corporation (the “Company”), and Brighton Capital Partners, LLC, a Delaware limited liability company (the “Investor”).

 

RECITALS

 

WHEREAS, pursuant to the Equity Financing Agreement entered into by and between the Company and the Investor dated April 14, 2021 (the “Equity Financing Agreement”), the Company has agreed to issue and sell to the Investor an indeterminate number of shares of the Company’s common stock, par value $0.00001 per share (the “Common Stock”), up to an aggregate purchase price of $50,000,000.

 

WHEREAS, as an inducement to the Investor to execute and deliver the Equity Financing Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the “1933 Act”), and applicable state securities laws, with respect to the shares of Common Stock issuable pursuant to the Equity Financing Agreement.

 

NOW, THEREFORE, in consideration of the foregoing promises and the mutual covenants contained hereinafter and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Investor hereby agree as follows:

 

SECTION I

DEFINITIONS

 

As used in this Agreement, the following terms shall have the following meanings:

 

Person” means a corporation, a limited liability company, an association, a partnership, an organization, a business, an individual, a governmental or political subdivision thereof or a governmental agency.

 

Potential Material Event” means any of the following: (i) the possession by the Company of material information not ripe for disclosure in the Registration Statement, which shall be evidenced by determinations in good faith by the Board of Directors of the Company that disclosure of such information in the Registration Statement would be detrimental to the business and affairs of the Company, or (ii) any material engagement or activity by the Company which would, in the good faith determination of the Board of Directors of the Company, be adversely affected by disclosure in the Registration Statement at such time, which determination shall be accompanied by a good faith determination by the Board of Directors of the Company that the Registration Statement would be materially misleading absent the inclusion of such information.

 

Register,” “Registered,” and “Registration” refer to the Registration effected by preparing and filing one (1) or more Registration Statements in compliance with the 1933 Act and pursuant to Rule 415 under the 1933 Act or any successor rule providing for offering securities on a continuous basis (“Rule 415”), and the declaration or ordering of effectiveness of such Registration Statement(s) by the United States Securities and Exchange Commission (the “SEC”).

 

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Registrable Securities” means (i) the shares of Common Stock issued or issuable pursuant to the Equity Financing Agreement, and (ii) any shares of capital stock issued or issuable with respect to such shares of Common Stock, if any, as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise, which have not been (x) included in the Registration Statement that has been declared effective by the SEC, or (y) sold under circumstances meeting all of the applicable conditions of Rule 144 (or any similar provision then in force) under the 1933 Act.

 

Registration Statement” means the registration statement of the Company filed under the 1933 Act covering the Registrable Securities.

 

Registered Offering Transaction Documents” shall mean this Agreement and the Equity Financing Agreement between the Company and the Investor as of the date hereof.

 

All capitalized terms used in this Agreement and not otherwise defined herein shall have the same meaning ascribed to them as in the Equity Financing Agreement.

 

SECTION II

REGISTRATION

 

2.1 The Company shall, within sixty (60) calendar days upon the date of execution of this Agreement, use its best efforts to file with the SEC a Registration Statement or Registration Statements (as is necessary) on Form S-1 (or, if such form is unavailable for such a registration, on such other form as is available for such registration), covering the resale of all of the Registrable Securities, which Registration Statement(s) shall state that, in accordance with Rule 416 promulgated under the 1933 Act, such Registration Statement also covers such indeterminate number of additional shares of Common Stock as may become issuable upon stock splits, stock dividends or similar transactions. The Company shall initially register for resale all of the Registrable Securities which would be issuable on the date preceding the filing of the Registration Statement based on the closing bid price of the Company’s Common Stock on such date and the amount reasonably calculated that represents Common Stock issuable to other parties as set forth in the Equity Financing Agreement except to the extent that the SEC requires the share amount to be reduced as a condition of effectiveness.

 

2.2 The Company shall use all commercially reasonable efforts to have the Registration Statement(s) declared effective by the SEC within thirty (30) calendar days, but no more than ninety (90) calendar days after the Company has filed the registration statement.

 

2.3 Notwithstanding the registration obligations set forth in this Section 2.1, if the staff of the SEC (the “Staff”) or the SEC informs the Company that all of the unregistered Registrable Securities cannot, as a result of the application of Rule 415, be registered for resale as a secondary offering on a single Registration Statement, the Company agrees to promptly (i) inform each of the holders thereof and use its commercially reasonable efforts to file amendments to the Registration Statement as required by the SEC and/or (ii) withdraw the Registration Statement and file a new registration statement (the “New Registration Statement”), in either case covering the maximum number of Registrable Securities permitted to be registered by the SEC, on Form S-1 to register for resale the Registrable Securities as a secondary offering. If the Company amends the Registration Statement or files a New Registration Statement, as the case may be, under clauses (i) or (ii) above, the Company will use its commercially reasonable efforts to file with the SEC, as promptly as allowed by the Staff or SEC, one or more registration statements on Form S-1 to register for resale those Registrable Securities that were not registered for resale on the Registration Statement, as amended, or the New Registration Statement (each, an “Additional Registration Statement”).

 

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SECTION III

RELATED OBLIGATIONS

 

At such time as the Company is obligated to prepare and file the Registration Statement with the SEC pursuant to Section 2, the Company will affect the registration of the Registrable Securities in accordance with the intended method of disposition thereof and, with respect thereto, the Company shall have the following obligations:

 

3.1 The Company shall use all commercially reasonable efforts to cause such Registration Statement relating to the Registrable Securities to become effective and shall keep such Registration Statement effective until the earlier to occur of the date on which (A) the Investor shall have sold all the Registrable Securities; or (B) the Investor has no right to acquire any additional shares of Common Stock under the Equity Financing Agreement (the “Registration Period”). The Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading. The Company shall use all commercially reasonable efforts to respond to all SEC comments within ten (10) business days from receipt of such comments by the Company. The Company shall use all commercially reasonable efforts to cause the Registration Statement relating to the Registrable Securities to become effective no later than three (3) business days after notice from the SEC that the Registration Statement may be declared effective. The Investor agrees to provide all information which is required by law to provide to the Company, including the intended method of disposition of the Registrable Securities, and the Company’s obligations set forth above shall be conditioned on the receipt of such information.

 

3.2 The Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to the Registration Statement and the prospectus used in connection with such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may be necessary to keep such Registration Statement effective during the Registration Period, and, during such period, comply with the provisions of the 1933 Act with respect to the disposition of all Registrable Securities of the Company covered by such Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the Investor thereof as set forth in such Registration Statement. In the event the number of shares of Common Stock covered by the Registration Statement filed pursuant to this Agreement is at any time insufficient to cover all of the Registrable Securities, the Company shall amend such Registration Statement, or file a new Registration Statement (on the short form available therefor, if applicable), or both, so as to cover all of the Registrable Securities, in each case, as soon as practicable, but in any event within thirty (30) calendar days after the necessity therefor arises (based on the then Purchase Price of the Common Stock and other relevant factors on which the Company reasonably elects to rely), assuming the Company has sufficient authorized shares at that time, and if it does not, within thirty (30) calendar days after such shares are authorized. The Company shall use commercially reasonable efforts to cause such amendment and/or new Registration Statement to become effective as soon as practicable following the filing thereof.

 

3.3 The Company shall make available to the Investor whose Registrable Securities are included in any Registration Statement and its legal counsel without charge (i) promptly after the same is prepared and filed with the SEC at least one (1) copy of such Registration Statement and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits, the prospectus included in such Registration Statement (including each preliminary prospectus) and, with regards to such Registration Statement(s), any correspondence by or on behalf of the Company to the SEC or the staff of the SEC and any correspondence from the SEC or the staff of the SEC to the Company or its representatives; (ii) upon the effectiveness of any Registration Statement, the Company shall make available copies of the prospectus, via EDGAR, included in such Registration Statement and all amendments and supplements thereto; and (iii) such other documents, including copies of any preliminary or final prospectus, as the Investor may reasonably request from time to time to facilitate the disposition of the Registrable Securities.

 

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3.4 The Company shall use commercially reasonable efforts to (i) register and qualify the Registrable Securities covered by the Registration Statement under such other securities or “blue sky” laws of such states in the United States as the Investor reasonably requests; (ii) prepare and file in those jurisdictions, such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period; (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3.4, or (y) subject itself to general taxation in any such jurisdiction. The Company shall promptly notify the Investor who holds Registrable Securities of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or “blue sky” laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threatening of any proceeding for such purpose.

 

3.5 As promptly as practicable after becoming aware of such event, the Company shall notify Investor in writing of the happening of any event as a result of which the prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (“Registration Default”) and use all diligent efforts to promptly prepare a supplement or amendment to such Registration Statement and take any other necessary steps to cure the Registration Default (which, if such Registration Statement is on Form S-3, may consist of a document to be filed by the Company with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act (as defined below) and to be incorporated by reference in the prospectus) to correct such untrue statement or omission, and make available copies of such supplement or amendment to the Investor. The Company shall also promptly notify the Investor (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and when the Registration Statement or any post-effective amendment has become effective (the Company will prepare notification of such effectiveness which shall be delivered to the Investor on the same day of such effectiveness and by overnight mail), additionally, the Company will promptly provide to the Investor, a copy of the effectiveness order prepared by the SEC once it is received by the Company; (ii) of any request by the SEC for amendments or supplements to the Registration Statement or related prospectus or related information, (iii) of the Company’s reasonable determination that a post-effective amendment to the Registration Statement would be appropriate, (iv) in the event the Registration Statement is no longer effective, or (v) if the Registration Statement is stale as a result of the Company’s failure to timely file its financials or otherwise

 

3.6 The Company shall use all commercially reasonable efforts to prevent the issuance of any stop order or other suspension of effectiveness of the Registration Statement, or the suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and to notify the Investor holding Registrable Securities being sold of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding concerning the effectiveness of the registration statement.

 

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3.7 The Company shall permit the Investor and one (1) legal counsel, designated by the Investor, to review and comment upon the Registration Statement and all amendments and supplements thereto at least one (1) calendar day prior to their filing with the SEC. However, any postponement of a filing of a Registration Statement or any postponement of a request for acceleration or any postponement of the effective date or effectiveness of a Registration Statement by written request of the Investor (collectively, the “Investor’s Delay”) shall not act to trigger any penalty of any kind, or any cash amount due or any in-kind amount due the Investor from the Company under any and all agreements of any nature or kind between the Company and the Investor. The event(s) of an Investor’s Delay shall act to suspend all obligations of any kind or nature of the Company under any and all agreements of any nature or kind between the Company and the Investor.

 

3.8 At the request of the Investor, the Company’s counsel shall furnish to the Investor, within two (2) business days, an opinion letter confirming the effectiveness of the registration statement. Such opinion letter shall be issued as of the date of the effectiveness of the registration statement, in a form suitable to the Investor.

 

3.9 The Company shall hold in confidence and not make any disclosure of information concerning the Investor unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement, or (iii) the release of such information is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction. The Company agrees that it shall, upon learning that disclosure of such information concerning the Investor is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt written notice to the Investor and allow the Investor, at the Investor’s expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order covering such information.

 

3.10 The Company shall use all commercially reasonable efforts to maintain designation and quotation of all the Registrable Securities covered by any Registration Statement on the Principal Market. If, despite the Company’s commercially reasonable efforts, the Company is unsuccessful in satisfying the preceding sentence, it shall use commercially reasonable efforts to cause all the Registrable Securities covered by any Registration Statement to be listed on each other national securities exchange and automated quotation system, if any, on which securities of the same class or series issued by the Company are then listed, if any, if the listing of such Registrable Securities is then permitted under the rules of such exchange or system. The Company shall pay all fees and expenses in connection with satisfying its obligation under this Section 3.10.

 

3.11 The Company shall cooperate with the Investor to facilitate the prompt preparation and delivery of the Registrable Securities to be offered pursuant to the Registration Statement and enable such Registrable Securities to be in such denominations or amounts, as the case may be, as the Investor may reasonably request.

 

3.12 The Company shall provide a transfer agent for all the Registrable Securities not later than the effective date of the first Registration Statement filed pursuant hereto.

 

3.13 If requested by the Investor, the Company shall (i) as soon as reasonably practical incorporate in a prospectus supplement or post-effective amendment such information as the Investor reasonably determines should be included therein relating to the sale and distribution of Registrable Securities, including, without limitation, information with respect to the offering of the Registrable Securities to be sold in such offering; (ii) make all required filings of such prospectus supplement or post-effective amendment as soon as reasonably possible after being notified of the matters to be incorporated in such prospectus supplement or post-effective amendment; and (iii) supplement or make amendments to any Registration Statement if reasonably requested by the Investor.

 

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3.14 The Company shall use all commercially reasonable efforts to cause the Registrable Securities covered by the applicable Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to facilitate the disposition of such Registrable Securities.

 

3.15 The Company shall otherwise use all commercially reasonable efforts to comply with all applicable rules and regulations of the SEC in connection with any registration hereunder.

 

3.16 Within three (3) business day after the Registration Statement which includes Registrable Securities is declared effective by the SEC, the Company shall deliver to the transfer agent for such Registrable Securities, with copies to the Investor, confirmation that such Registration Statement has been declared effective by the SEC.

 

3.17 The Company shall take all other reasonable actions necessary to expedite and facilitate disposition by the Investor of Registrable Securities pursuant to the Registration Statement.

 

SECTION IV

OBLIGATIONS OF THE INVESTOR

 

4.1 At least five (5) calendar days prior to the first anticipated filing date of the Registration Statement, the Company shall notify the Investor in writing of the information the Company requires from the Investor for the Registration Statement. It shall be a condition precedent to the obligations of the Company to complete the registration pursuant to this Agreement with respect to the Registrable Securities and the Investor agrees to furnish to the Company that information regarding itself, the Registrable Securities and the intended method of disposition of the Registrable Securities as shall reasonably be required to effect the registration of such Registrable Securities and the Investor shall execute such documents in connection with such registration as the Company may reasonably request. The Investor covenants and agrees that, in connection with any sale of Registrable Securities by it pursuant to the Registration Statement, it shall comply with the “Plan of Distribution” section of the then current prospectus relating to such Registration Statement.

 

4.2 The Investor, by its acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of any Registration Statement hereunder, unless the Investor has notified the Company in writing of an election to exclude all of the Investor’s Registrable Securities from such Registration Statement.

 

4.3 The Investor agrees that, upon receipt of written notice from the Company of the happening of any event of the kind described in Section 3.6 or the first sentence of 3.5, the Investor will immediately discontinue disposition of Registrable Securities pursuant to any Registration Statement(s) covering such Registrable Securities until the Investor’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 3.6 or the first sentence of 3.5.

 

SECTION V

EXPENSES OF REGISTRATION

 

All legal expenses, other than underwriting discounts and commissions and other than as set forth in the Equity Financing Agreement, incurred in connection with registrations including comments, filings or qualifications pursuant to Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees, and printing fees shall be paid by the Company.

 

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SECTION VI

INDEMNIFICATION

 

In the event any Registrable Securities are included in the Registration Statement under this Agreement:

 

6.1 To the fullest extent permitted by law, the Company, under this Agreement, will, and hereby does, indemnify, hold harmless and defend the Investor who holds Registrable Securities, the directors, officers, partners, employees, counsel, agents, representatives of, and each Person, if any, who controls, any Investor within the meaning of the 1933 Act or the Securities Exchange Act of 1934, as amended (the “1934 Act”) (each, an “Indemnified Person”), against any losses, claims, damages, liabilities, judgments, fines, penalties, charges, costs, attorneys’ fees, amounts paid in settlement or expenses, joint or several (collectively, “Claims”), incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether or not an indemnified party is or may be a party thereto (“Indemnified Damages”), to which any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in the Registration Statement or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities or other “blue sky” laws of any jurisdiction in which the Investor has requested in writing that the Company register or qualify the Shares (“Blue Sky Filing”), or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which the statements therein were made, not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading, or (iii) any violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities pursuant to the Registration Statement (the matters in the foregoing clauses (I) through (iii) being, collectively, “Violations”). Subject to the restrictions set forth in Section 6.3 the Company shall reimburse the Investor and each such controlling person, promptly as such expenses are incurred and are due and payable, for any reasonable legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6.1: (I) shall not apply to a Claim arising out of or based upon a Violation which is due to the inclusion in the Registration Statement of the information furnished to the Company by any Indemnified Person expressly for use in connection with the preparation of the Registration Statement or any such amendment thereof or supplement thereto; (ii) shall not be available to the extent such Claim is based on (a) a failure of the Investor to deliver or to cause to be delivered the prospectus made available by the Company or (b) the Indemnified Person’s use of an incorrect prospectus despite being promptly advised in advance by the Company in writing not to use such incorrect prospectus; (iii) any claims based on the manner of sale of the Registrable Securities by the Investor or of the Investor’s failure to register as a dealer under applicable securities laws; (iv) any omission of the Investor to notify the Company of any material fact that should be stated in the Registration Statement or prospectus relating to the Investor or the manner of sale; and (v) any amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the resale of the Registrable Securities by the Investor pursuant to the Registration Statement.

 

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6.2 In connection with any Registration Statement in which Investor is participating, the Investor agrees to severally and jointly indemnify, hold harmless and defend, to the same extent and in the same manner as is set forth in Section 6.1, the Company, each of its directors, each of its officers who signs the Registration Statement, each Person, if any, who controls the Company within the meaning of the 1933 Act or the 1934 Act and the Company’s agents (collectively and together with an Indemnified Person, an “Indemnified Party”), against any Claim or Indemnified Damages to which any of them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or are based upon any Violation, in each case to the extent, and only to the extent, that such Violation is due to the inclusion in the Registration Statement of the written information furnished to the Company by the Investor expressly for use in connection with such Registration Statement; and, subject to Section 6.3, the Investor will reimburse any legal or other expenses reasonably incurred by them in connection with investigating or defending any such Claim; provided, however, that the indemnity agreement contained in this Section 6.2 and the agreement with respect to contribution contained in Section 7 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Investor, which consent shall not be unreasonably withheld; provided, further, however, that the Investor shall only be liable under this Section 6.2 for that amount of a Claim or Indemnified Damages as does not exceed the net proceeds to such Investor as a result of the sale of Registrable Securities pursuant to such Registration Statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party and shall survive the resale of the Registrable Securities by the Investor pursuant to the Registration Statement. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6.2 with respect to any preliminary prospectus shall not inure to the benefit of any Indemnified Party if the untrue statement or omission of material fact contained in the preliminary prospectus were corrected on a timely basis in the prospectus, as then amended or supplemented. This indemnification provision shall apply separately to each Investor and liability hereunder shall not be joint and several.

 

6.3 Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6 of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be; provided, however, that an Indemnified Person or Indemnified Party shall have the right to retain its own counsel with the fees and expenses to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the Indemnified Person or Indemnified Party, the representation by counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual or potential differing interests between such Indemnified Person or Indemnified Party and any other party represented by such counsel in such proceeding. The indemnifying party shall pay for only one (1) separate legal counsel for the Indemnified Persons or the Indemnified Parties, as applicable, and such counsel shall be selected by the Investor, if the Investor is entitled to indemnification hereunder, or the Company, if the Company is entitled to indemnification hereunder, as applicable. The Indemnified Party or Indemnified Person shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or Claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person which relates to such action or Claim. The indemnifying party shall keep the Indemnified Party or Indemnified Person fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding affected without its written consent, provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the consent of the Indemnified Party or Indemnified Person, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or Indemnified Person of a release from all liability in respect to such Claim. Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified Person with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this Section 6, except to the extent that the indemnifying party is prejudiced in its ability to defend such action.

 

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6.4 The indemnity agreements contained herein shall be in addition to (I) any cause of action or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.

 

SECTION VII

CONTRIBUTION

 

To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however, that: (I) no contribution shall be made under circumstances where the maker would not have been liable for indemnification under the fault standards set forth in Section 6; (ii) no seller of Registrable Securities guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any seller of Registrable Securities who was not guilty of fraudulent misrepresentation; and (iii) contribution by any seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such seller from the sale of such Registrable Securities.

 

SECTION VIII

REPORTS UNDER THE 1934 ACT

 

8.1 With a view to making available to the Investor the benefits of Rule 144 promulgated under the 1933 Act or any other similar rule or regulation of the SEC that may at any time permit the Investor to sell securities of the Company to the public without registration (“Rule 144”), provided that the Investor holds any Registrable Securities are eligible for resale under Rule 144, the Company agrees to:

 

a. make and keep adequate current public information available, as those terms are understood and defined in Rule 144;

 

b. file with the SEC and/or OTC Markets in a timely manner all reports and other documents required of the Company under the 1933 Act and the 1934 Act so long as the Company remains subject to such requirements (it being understood that nothing herein shall limit the Company’s obligations under Section 5(c) of the Equity Financing Agreement) and the filing of such reports and other documents is required for the applicable provisions of Rule 144; and

 

c. furnish to the Investor, promptly upon request, (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested to permit the Investor to sell such securities pursuant to Rule 144 without registration.

 

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SECTION X

MISCELLANEOUS

 

9.1 NOTICES. Any notices or other communications required or permitted to be given under the terms of this Agreement that must be in writing will be deemed to have been delivered (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided a confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:

 

  If to the Company: HUMBL, Inc.
    600 B Street, Suite 300
    San Diego, California 92101
     
  With a copy to: Culhane Meadows
    1101 Pennsylvania Avenue, N.W., Suite 300
    Washington, D.C., 20004
     
  If to the Investor: Brighton Capital Partners, LLC

 

Each party shall provide five (5) business days prior notice to the other party of any change in address, phone number or facsimile number.

 

9.2 NO WAIVERS. Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.

 

9.3 NO ASSIGNMENTS. The rights and obligations under this Agreement shall not be assignable.

 

9.4 ENTIRE AGREEMENT/AMENDMENT. This Agreement and the Registered Offering Transaction Documents constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. This Agreement and the Registered Offering Transaction Documents supersede all prior agreements and understandings among the parties hereto with respect to the subject matter hereof and thereof. The provisions of this Agreement may be amended only with the written consent of the Company and Investor.

 

9.5 HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. Whenever required by the context of this Agreement, the singular shall include the plural and masculine shall include the feminine. This Agreement shall not be construed as if it had been prepared by one of the parties, but rather as if all the parties had prepared the same.

 

9.6 COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the different signatories hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument. This Agreement may be executed by facsimile transmission, PDF, electronic signature or other similar electronic means with the same force and effect as if such signature page were an original thereof.

 

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9.7 FURTHER ASSURANCES. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

9.8 SEVERABILITY. In case any provision of this Agreement is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Agreement will not in any way be affected or impaired thereby.

 

9.9 LAW GOVERNING THIS AGREEMENT. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the federal courts located in Travis County, Texas. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The parties executing this Agreement and other agreements referred to herein or delivered in connection herewith on behalf of the Company agree to submit to the in personam jurisdiction of such courts and hereby irrevocably waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Registered Offering Transaction Documents by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

 

9.10 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for the benefit of the parties hereto and is not for the benefit of, nor may any provision hereof be enforced by, any other person, except that the Company acknowledges that the rights of the Investor may be enforced by its general partner.

 

[Signature page follows]

 

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Your signature on this Signature Page evidences your agreement to be bound by the terms and conditions of the Registration Rights Agreement as of the date first written above. The undersigned signatory hereby certifies that he has read and understands the Registration Rights Agreement, and the representations made by the undersigned in this Registration Rights Agreement are true and accurate, and agrees to be bound by its terms.

 

  BRIGHTON CAPITAL PARTNERS, LLC
   
  By:  
    Lucas Hales, Manager
   
  HUMBL, INC.
   
  By:
    Brian Foote, CEO

 

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EXHIBIT B

 

FORM OF PUT NOTICE

 

Date:

 

RE: Put Notice Number __

 

Dear Mr./Ms.__________,

 

This is to inform you that as of today, HUMBL, Inc., a Delaware corporation (the “Company”), hereby elects to exercise its right pursuant to the Equity Financing Agreement to require Brighton Capital Partners, LLC to purchase shares of its common stock. The Company hereby certifies that:

 

The amount of this put is $__________.

 

The Pricing Period runs from _______________ until _______________.

 

The Purchase Price is: $_______________

 

The number of Put Shares due: ___________________.

 

The current number of shares of common stock issued and outstanding is: _________________.

 

The number of shares currently available for issuance on the S-1 is: ________________________.

 

Regards,

 

HUMBL, Inc.  
         
By:    
Name:    
Title:    

 

  Very truly yours,
   
  [Company Counsel]

 

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EXHIBIT C

 

FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT

 

Date: __________

 

[TRANSFER AGENT]

 

Re: HUMBL, Inc.

 

Ladies and Gentlemen:

 

We are counsel to HUMBL, Inc., a Delaware corporation (the “Company”), and have represented the Company in connection with that certain Equity Financing Agreement (the “Investment Agreement”) entered into by and between the Company and Brighton Capital Partners, LLC (the “Investor”) pursuant to which the Company has agreed to issue to the Investor shares of the Company’s common stock, $0.00001 (the “Common Stock”) on the terms and conditions set forth in the Investment Agreement. Pursuant to the Investment Agreement, the Company also has entered into a Registration Rights Agreement with the Investor (the “Registration Rights Agreement”) pursuant to which the Company agreed, among other things, to register the Registrable Securities (as defined in the Registration Rights Agreement), including the shares of Common Stock issued or issuable under the Investment Agreement under the Securities Act of 1933, as amended (the “1933 Act”). In connection with the Company’s obligations under the Registration Rights Agreement, on ____________ ___, 20__, the Company filed a Registration Statement on Form S-1 (File No. __-________) (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) relating to the Registrable Securities which names the Investor as a selling shareholder thereunder.

 

In connection with the foregoing, we advise you that a member of the SEC’s staff has advised us by telephone that the SEC has entered an order declaring the Registration Statement effective under the 1933 Act at ______ on __________, 20__ and we have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that any stop order suspending its effectiveness has been issued or that any proceedings for that purpose are pending before, or threatened by, the SEC and the Registrable Securities are available for sale under the 1933 Act pursuant to the Registration Statement

 

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EXHIBIT D

 

PUT SETTLEMENT SHEET

 

Date: ________________

 

Dear Mr. ________,

 

Pursuant to the Put given by HUMBL, Inc., to Brighton Capital Partners, LLC (“BCP”) on _________________ 202_, we are now submitting the amount of common shares for you to issue to BCP.

 

Please have a certificate bearing no restrictive legend totaling __________ shares issued to BCP immediately and send via DWAC to the following account:

 

[INSERT]

 

If not DWAC eligible, please send FedEx Priority Overnight to:

 

[INSERT ADDRESS]

 

Once these shares are received by us, we will have the funds wired to the Company.

 

Regards,

 

BRIGHTON CAPITAL PARTNERS, LLC  
     
By:              
Name:    
Title    

 

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Exhibit 10.14

 

THIS NOTE (AS DEFINED BELOW) IS ISSUED IN CONNECTION WITH THE BIFURCATION OF THAT CERTAIN CONVERTIBLE PROMISSORY NOTE IN THE ORIGINAL PRINCIPAL AMOUNT OF $382,500.00 HAVING AN ORIGINAL ISSUE DATE OF MAY 13, 2021. FOR PURPOSES OF RULE 144, THIS NOTE SHALL BE DEEMED TO HAVE BEEN ISSUED ON MAY 13, 2021.

 

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

 

CONVERTIBLE PROMISSORY NOTE

 

Original Issue Date”: May 13, 2021 U.S. $336,600.00

 

FOR VALUE RECEIVED, HUMBL, Inc., a Delaware corporation (“Borrower”), promises to pay to the order of Brian Christopher Kirchoff and Tirsa Kimberly Hackshaw, Trustees of the Strider Lir Trust dated December 22, 2016, or their successors or assigns (“Lender”), $336,600.00 and any interest accrued hereunder on the date that is twenty-two (22) months from the Original Issue Date (the “Maturity Date”) in accordance with the terms set forth herein and to pay interest on the outstanding balance at the rate of eight percent (8%) per annum from the Original Issue Date until the same is paid in full. This Convertible Promissory Note (this “Note”) is made effective as of June 24, 2021 (the “Bifurcation Date”) but shall be deemed for all purposes to have been issued on May 13, 2021. This Note is issued pursuant to that certain Bifurcation Agreement dated June 24, 2021, as the same may be amended from time to time, by and between Borrower and Lender, pursuant to which Borrower and Lender agreed to bifurcate that certain Convertible Promissory Note in the original principal amount of $382,500.00 issued on May 13, 2021 by Borrower in favor of Lender (the “Original Note”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.

 

The purchase price for the Original Note was paid in full on May 13, 2021. The purchase price for this Note shall be deemed to be paid in full as of the same date.

 

1. Payment; Prepayment.

 

1.1. Payment. All payments owing hereunder shall be in lawful money of the United States of America or Conversion Shares (as defined below), as provided for herein, and delivered to Lender at the address or bank account furnished to Borrower for that purpose. All payments shall be applied first to (a) costs of collection, if any, then to (b) fees and charges, if any, then to (c) accrued and unpaid interest, and thereafter, to (d) principal.

 

1.2. Prepayment. Notwithstanding the foregoing, Borrower shall have the right to prepay all or any portion of the outstanding balance without penalty.

 

 
 

 

2. Security. This Note is unsecured.

 

3. Lender Optional Conversion.

 

3.1. Conversions. Lender has the right at any time after the Bifurcation Date until the outstanding balance has been paid in full, at its election, to convert (“Conversion”) all or any portion of the outstanding balance into shares (“Conversion Shares”) of fully paid and non-assessable common stock, $0.00001 par value per share (“Common Stock”), of Borrower as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the “Conversion Amount”) divided by the Conversion Price (as defined below). Conversion notices in the form attached hereto as Exhibit A (each, a “Conversion Notice”) may be delivered from time to time by Lender to Borrower, and all Conversions shall be cashless and not require further payment from Lender. Borrower shall deliver the Conversion Shares from any Conversion to Lender in accordance with Section 7 below.

 

3.2. Conversion Price. The price at which Lender has the right to convert all or any portion of the outstanding balance into Common Stock is $1.00 per share of Common Stock (the “Conversion Price”). The Conversion Price will automatically be adjusted in the event Borrower consummates a stock split, stock combination or other similar change to the number of outstanding shares of Common Stock.

 

4. Defaults and Remedies.

 

4.1. Defaults. The following are events of default under this Note (each, an “Event of Default”): (a) Borrower fails to pay any principal, interest, fees, charges, or any other amount when due and payable hereunder; (b) Borrower fails to deliver any Conversion Shares in accordance with the terms hereof; (c) a receiver, trustee or other similar official shall be appointed over Borrower or a material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed or discharged within sixty (60) days; (d) Borrower makes a general assignment for the benefit of creditors; (e) Borrower files a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); or (f) an involuntary bankruptcy proceeding is commenced or filed against Borrower. Notwithstanding the foregoing, the occurrence of any of the foregoing events will not be considered an Event of Default unless Borrower fails to cure such event within ten (10) Trading Days of its receipt of written notice from Lender.

 

4.2. Remedies. Following an Event of Default, Lender may accelerate this Note by written notice to Borrower with the outstanding balance becoming immediately due and payable. Nothing herein shall limit Lender’s right to pursue any other remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to Borrower’s failure to timely deliver Conversion Shares upon Conversion of the Note as required pursuant to the terms hereof.

 

5. Unconditional Obligation; No Offset. Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset, deduction or counterclaim of any kind. Borrower hereby waives any rights of offset it now has or may have hereafter against Lender, its successors and assigns, and agrees to make the payments or Conversions called for herein in accordance with the terms of this Note.

 

6. Waiver. No waiver of any provision of this Note shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.

 

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7. Method of Conversion Share Delivery. On or before the close of business on the seventh (7th) Trading Day following the date of delivery of a Conversion Notice (the “Delivery Date”), Borrower shall, provided it is DWAC Eligible at such time, deliver or cause its transfer agent to deliver the applicable Conversion Shares electronically via DWAC to the account designated by Lender in the applicable Conversion Notice. If Borrower is not DWAC Eligible, it shall deliver to Lender or its broker (as designated in the Conversion Notice), via reputable overnight courier, a certificate representing the number of shares of Common Stock equal to the number of Conversion Shares to which Lender shall be entitled, registered in the name of Lender or its designee.

 

8. Ownership Limitation. Notwithstanding anything to the contrary contained in this Note or the other Transaction Documents, Borrower shall not effect any conversion of this Note to the extent that after giving effect to such conversion would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance). For purposes of this section, beneficial ownership of Common Stock will be determined pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended.

 

9. Opinion of Counsel. In the event that an opinion of counsel is needed for any matter related to this Note, Lender shall have such opinion provided by its counsel.

 

10. Governing Law; Venue. This Note shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and wholly performed in that jurisdiction. Each party hereto submits to the exclusive jurisdiction of any state or federal court sitting in San Diego County, California in any proceeding arising out of or relating to this Note and agrees that all claims in respect of the proceeding may be heard and determined in any such court and hereby expressly submits to the personal jurisdiction and venue of such court for the purposes hereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum. Each party hereto hereby irrevocably consents to the service of process of any of the aforementioned courts in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to its address as set forth herein, such service to become effective ten (10) days after such mailing. The parties expressly and irrevocably waive the right to a trial by jury in any and all actions or proceedings brought with respect to this Note and with respect to any claims arising out of or related to this Note.

 

11. Cancellation. After repayment or conversion of the entire outstanding balance, this Note shall be deemed paid in full, shall automatically be deemed canceled, and shall not be reissued.

 

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

 

13. Assignments. Neither party may assign this Note without the consent of the other party.

 

14. Notices. Whenever notice is required to be given under this Note, such notice shall be given to such address as has been provided to the other party.

 

15. Severability. If any part of this Note is construed to be in violation of any law, such part shall be modified to achieve the objective of Borrower and Lender to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect.

 

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

 

3
 

 

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

 

  BORROWER:
   
  HUMBL, Inc.
   
  By:  
    Brian Foote, President and CEO

 

ACKNOWLEDGED, ACCEPTED AND AGREED:  
   
LENDER:  
   
BRIAN CHRISTOPHER KIRCHOFF AND TIRSA KIMBERLY HACKSHAW, TRUSTEES OF THE STRIDER LIR TRUST DATED DECEMBER 22, 2016  
   
By:                        
  Brian Kirchoff, Trustee  

 

[Signature Page to Convertible Promissory Note]

 

 
 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

A1. “DTC” means the Depository Trust Company or any successor thereto.

 

A2. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A3. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A4. “DWAC Eligible” means that (a) Borrower’s Common Stock is eligible at DTC for full services pursuant to DTC’s operational arrangements, including without limitation transfer through DTC’s DWAC system; (b) Borrower has been approved (without revocation) by DTC’s underwriting department; (c) Borrower’s transfer agent is approved as an agent in the DTC/FAST Program; (d) the Conversion Shares are otherwise eligible for delivery via DWAC; and (e) Borrower’s transfer agent does not have a policy prohibiting or limiting delivery of the Conversion Shares via DWAC.

 

A5. “Trading Day” means any day on which Borrower’s market is open for trading.

 

[Remainder of page intentionally left blank]

 

Attachment 1 to Convertible Promissory Note, Page 1

 

 
 

 

EXHIBIT A

 

Strider Lir Trust

 

HUMBL, Inc. Date:    
Attn: Brian Foote      
600 B. Street, Suite 300      
San Diego, California 92101      

 

CONVERSION NOTICE

 

The above-captioned Lender hereby gives notice to HUMBL, Inc., a Delaware corporation (the “Borrower”), pursuant to that certain Convertible Promissory Note #1 made by Borrower in favor of Lender with an original issuance date of May 13, 2021 (the “Note”), that Lender elects to convert the portion of the Note balance set forth below into fully paid and non-assessable shares of Common Stock of Borrower as of the date of conversion specified below. Said conversion shall be based on the Conversion Price set forth below. In the event of a conflict between this Conversion Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of Conversion Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.

 

  A. Date of Conversion:      
  B. Conversion #:      
  C. Conversion Amount:      
  D. Conversion Price:      
  E. Conversion Shares:   (C divided by D)  
  F. Remaining Outstanding Balance of Note:    

 

Please transfer the Conversion Shares electronically (via DWAC) to the following account:

 

Broker:     Address:  
DTC#:        
Account #:        
Account Name:        

 

To the extent the Conversion Shares are not able to be delivered to Lender electronically via the DWAC system, deliver all such certificated shares to Lender via reputable overnight courier after receipt of this Conversion Notice (by facsimile transmission or otherwise) to:

 

     
     
     

 

Sincerely,  
   
Lender:  
   
By:    
  Brian Kirchoff, Trustee  

 

Exhibit A to Convertible Promissory Note, Page 1

 

 

 

 

 

Exhibit 10.15

 

THIS WARRANT (AS DEFINED BELOW) IS ISSUED IN CONNECTION WITH THE BIFURCATION OF THAT CERTAIN WARRANT TO PURCHASE SHARES OF COMMON STOCK HAVING AN ORIGINAL ISSUE DATE OF MAY 13, 2021. FOR PURPOSES OF RULE 144, THIS WARRANT SHALL BE DEEMED TO HAVE BEEN ISSUED ON MAY 13, 2021.

 

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF THIS WARRANT OR SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THIS WARRANT OR SUCH SECURITIES, AS APPLICABLE, MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS.

 

HUMBL, INC.

 

WARRANT TO PURCHASE SHARES OF COMMON STOCK

 

1.       Issuance. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by HUMBL, Inc., a Delaware corporation, its successors and assigns (“Company”), Brian Christopher Kirchoff and Tirsa Kimberly Hackshaw, Trustees of the Strider Lir Trust dated December 22, 2016, their successors and/or registered assigns (“Investor”), are hereby granted the right to purchase at any time on or after the Bifurcation Date (as defined below) until May 13, 2023 (the “Expiration Date”), 660,000 fully paid and non-assessable shares (the “Warrant Shares”) of Company’s common stock, par value $0.00001 per share (the “Common Stock”), as such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant to Purchase Shares of Common Stock (this “Warrant”).

 

This Warrant is issued as of June 24, 2021 (the “Bifurcation Date”) but shall be deemed for all purposes to have been issued on May 13, 2021 (the “Issue Date”). This Warrant is issued pursuant to that certain Bifurcation Agreement dated June 24, 2021 (the “Bifurcation Agreement”), as the same may be amended from time to time, by and between Company and Investor, pursuant to which Company and Investor agreed to bifurcate that certain Warrant to Purchase Shares of Common Stock previously issued on the Issue Date by Company in favor of Investor (the “Original Warrant”). The Original Warrant was originally issued pursuant to the terms of that certain Securities Purchase Agreement dated May 13, 2021, to which Company and Investor are parties (as the same may be amended from time to time, the “Purchase Agreement”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.

 

The purchase price for the Original Warrant was paid in full on the Issue Date. The purchase price for this Warrant shall be deemed to be paid in full as of the same date.

 

 

 

 

2.       Exercise of Warrant.

 

2.1.       General.

 

(a)       This Warrant is exercisable in whole or in part at any time and from time to time commencing on the Bifurcation Date and ending on the Expiration Date. Such exercise shall be effectuated by submitting to Company (either by delivery to Company or by email or facsimile transmission) a completed and signed Notice of Exercise substantially in the form attached to this Warrant as Exhibit A (the “Notice of Exercise”). The date a Notice of Exercise is delivered to Company shall be the “Exercise Date,” provided that, if such exercise represents the full exercise of the outstanding balance of this Warrant, Investor shall tender this Warrant to Company within five (5) Trading Days thereafter, but only if the Warrant Shares to be delivered pursuant to the Notice of Exercise have been delivered to Investor as of such date. The Notice of Exercise shall be executed by Investor and shall indicate the number of Warrant Shares to be issued pursuant to such exercise.

 

(b)       The Exercise Price per share of Common Stock for the Warrant Shares shall be payable, at the election of Investor, in cash or by certified or official bank check or by wire transfer in accordance with instructions provided by Company at the request of Investor.

 

(c)       Upon the appropriate payment to Company of the Exercise Price for the Warrant Shares, Company shall promptly, but in no case later than the date that is ten (10) Trading Days following the date the Exercise Price is paid to Company (the “Delivery Date”), deliver or cause Company’s Transfer Agent to deliver the applicable Warrant Shares electronically via the DWAC system to the account designated by Investor on the Notice of Exercise. If for any reason Company is not able to so deliver the Warrant Shares via the DWAC system, Company shall instead, on or before the applicable date set forth above in this subsection, issue and deliver to Investor or its broker (as designated in the Notice of Exercise), via reputable overnight courier, a certificate, registered in the name of Investor or its designee, representing the applicable number of Warrant Shares.

 

(d)       In no event may this Warrant be net cash settled.

 

2.2.       Ownership Limitation. Notwithstanding anything to the contrary contained in this Warrant, if at any time Investor shall or would be issued shares of Common Stock under this Warrant, but such issuance would cause Investor (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance) (the “Maximum Percentage”), then Company shall not issue to Investor shares of Common Stock which would exceed the Maximum Percentage. The ownership limitation is enforceable, unconditional and non-waivable and shall apply to all affiliates and assigns of Investor.

 

3.       Mutilation or Loss of Warrant. Upon receipt by Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, Company will execute and deliver to Investor a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void.

 

4.       Rights of Investor. Investor shall not, by virtue of this Warrant alone, be entitled to any rights of a stockholder in Company, either at law or in equity, and the rights of Investor with respect to or arising under this Warrant are limited to those expressed in this Warrant and are not enforceable against Company except to the extent set forth herein

 

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5.       Adjustments. If Company shall issue any shares of Common Stock as a stock dividend or subdivide the number of outstanding shares of Common Stock into a greater number of shares, then, in either such case, the Exercise Price in effect before such dividend or subdivision shall be proportionately reduced and the number of Warrant Shares at that time issuable pursuant to the exercise of this Warrant shall be proportionately increased; and, conversely, if Company shall contract the number of outstanding shares of Common Stock by combining such shares into a smaller number of shares, then the Exercise Price in effect before such combination shall be proportionately increased and the number of Warrant Shares at that time issuable pursuant to the exercise or conversion of this Warrant shall be proportionately decreased. Each adjustment in the number of shares of Warrant Stock issuable shall be to the nearest whole share.

 

6.       Certificate as to Adjustments. In the case of any adjustment in the Exercise Price or Warrant Shares, Company will promptly give written notice to Investor in the form of a certificate, certified and confirmed by an officer of the Company, setting forth the adjustment in reasonable detail.

 

7.       Transfer to Comply with the Securities Act. This Warrant and the Warrant Shares have not been registered under the Securities Act of 1933, as amended (the “1933 Act”). Neither this Warrant nor the Warrant Shares may be sold, transferred, pledged or hypothecated without (a) an effective registration statement under the 1933 Act relating to such security or (b) an opinion of counsel reasonably satisfactory to Company that registration is not required under the 1933 Act. Until such time as registration has occurred under the 1933 Act, each certificate for this Warrant and any Warrant Shares shall contain a legend, in form and substance satisfactory to counsel for Company, setting forth the restrictions on transfer contained in this Section 7.

 

8.       Notices. Any notice required or permitted hereunder shall be given in the manner provided in the subsection titled “Notices” in the Purchase Agreement, the terms of which are incorporated herein by reference.

 

9.       Supplements and Amendments; Whole Agreement. This Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant, together with the Purchase Agreement and the Bifurcation Agreement, contains the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings with respect to the subject matter hereof and thereof other than as expressly contained herein and therein.

 

10.       Governing Law; Venue. This Warrant shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of Delaware. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state and federal courts in San Diego County, California. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The prevailing party in any dispute arising under this Agreement shall be entitled to recover from the other party its reasonable attorney’s fees and costs.

 

11.       Waiver of Jury Trial. EACH OF COMPANY AND INVESTOR IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS WARRANT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, COMPANY ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY.

 

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12.       Counterparts. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Electronic signatures shall be considered original signatures for all purposes hereof.

 

13.       Attorneys’ Fees. In the event of any litigation or dispute arising from this Warrant, the parties agree that the prevailing party shall be entitled to an additional award of the full amount of the reasonable attorneys’ fees and expenses paid by said prevailing party in connection with litigation or dispute.

 

14.       Severability. Whenever possible, each provision of this Warrant shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be invalid or unenforceable in any jurisdiction, such provision shall be modified to achieve the objective of the parties to the fullest extent permitted and such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Warrant or the validity or enforceability of this Warrant in any other jurisdiction.

 

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

 

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IN WITNESS WHEREOF, Company has caused this Warrant to be duly executed as of the Bifurcation Date.

 

  COMPANY:
     
  HUMBL, Inc.
     
  By:  
    Brian Foote, President and CEO

 

[Signature Page to Warrant]

 

 

 

 

ATTACHMENT 1

 

DEFINITIONS

 

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

 

A1.     “DTC” means the Depository Trust Company or any successor thereto.

 

A2.     “DTC Eligible” means, with respect to the Common Stock, that such Common Stock is eligible to be deposited in certificate form at the DTC, cleared and converted into electronic shares by the DTC and held in the name of the clearing firm servicing Investor’s brokerage firm for the benefit of Investor.

 

A3.     “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A4.     “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A5.      “Exercise Price” means $1.00 per share of Common Stock, as the same may be adjusted from time to time pursuant to the terms and conditions of this Warrant.

 

A6.     “Trading Day” means any day the New York Stock Exchange is open for trading.

 

Attachment 1 to Warrant, Page 1

 

 

EXHIBIT A

 

NOTICE OF EXERCISE OF WARRANT

 

 

TO:         HUMBL, INC.

ATTN: _______________

VIA FAX TO: (      )______________ EMAIL: ______________

 

The undersigned hereby irrevocably elects to exercise the right, represented by the Warrant to Purchase Shares of Common Stock #1 having an original issue date of May 13, 2021 (the “Warrant”), to purchase shares of the common stock, $0.00001 par value (“Common Stock”), of HUMBL, Inc., and tenders herewith payment in accordance with Section 2 of the Warrant, as follows:

 

Warrant Shares: _______________________

 

Exercise Price: $_______________________

 

Purchase Price: $___________________ = (Exercise Price x Warrant Shares)

 

Payment is being made by:

 

_____     enclosed check

_____     wire transfer

_____     other

 

Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Warrant.

 

It is the intention of Investor to comply with the provisions of Section 2.2 of the Warrant regarding certain limits on Investor’s right to receive shares thereunder. Investor believes this exercise complies with the provisions of such Section 2.2. Nonetheless, to the extent that, pursuant to the exercise effected hereby, Investor would receive more shares of Common Stock than permitted under Section 2.2, Company shall not be obligated and shall not issue to Investor such excess shares until such time, if ever, that Investor could receive such excess shares without violating, and in full compliance with, Section 2.2 of the Warrant.

 

As contemplated by the Warrant, this Notice of Exercise is being sent by email to the officer indicated above.

 

If this Notice of Exercise represents the full exercise of the entire Warrant, Investor will surrender (or cause to be surrendered) the Warrant to Company at the address indicated above by express courier within five (5) Trading Days after the Warrant Shares to be delivered pursuant to this Notice of Exercise have been delivered to Investor.

 

To the extent the Warrant Shares are not able to be delivered to Investor via the DWAC system, please deliver certificates representing the Warrant Shares to Investor via reputable overnight courier after receipt of this Notice of Exercise (by facsimile transmission or otherwise) to:

 

_____________________________________

_____________________________________

_____________________________________

 

Exhibit A to Warrant, Page 1

 

 

Dated:   _____________________

 

___________________________

[Name of Investor]

 

By:________________________

 

Exhibit A to Warrant, Page 2

 

 

Exhibit 10.16 

 

THIS NOTE (AS DEFINED BELOW) IS ISSUED IN CONNECTION WITH THE BIFURCATION OF THAT CERTAIN CONVERTIBLE PROMISSORY NOTE IN THE ORIGINAL PRINCIPAL AMOUNT OF $382,500.00 HAVING AN ORIGINAL ISSUE DATE OF MAY 13, 2021. FOR PURPOSES OF RULE 144, THIS NOTE SHALL BE DEEMED TO HAVE BEEN ISSUED ON MAY 13, 2021.

 

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

 

CONVERTIBLE PROMISSORY NOTE

 

Original Issue Date”: May 13, 2021 U.S. $45,900.00

 

FOR VALUE RECEIVED, HUMBL, Inc., a Delaware corporation (“Borrower”), promises to pay to the order of Scottish Isles Investing, LLC, a Georgia limited liability company, or its successors or assigns (“Lender”), $45,900.00 and any interest accrued hereunder on the date that is twenty-two (22) months from the Original Issue Date (the “Maturity Date”) in accordance with the terms set forth herein and to pay interest on the outstanding balance at the rate of eight percent (8%) per annum from the Original Issue Date until the same is paid in full. This Convertible Promissory Note (this “Note”) is made effective as of June 24, 2021 (the “Bifurcation Date”) but shall be deemed for all purposes to have been issued on May 13, 2021. This Note is issued pursuant to that certain Bifurcation Agreement dated June 24, 2021, as the same may be amended from time to time, by and between Borrower and Lender, pursuant to which Borrower and Lender agreed to bifurcate that certain Convertible Promissory Note in the original principal amount of $382,500.00 issued on May 13, 2021 by Borrower in favor of Lender (the “Original Note”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.

 

The purchase price for the Original Note was paid in full on May 13, 2021. The purchase price for this Note shall be deemed to be paid in full as of the same date.

 

1. Payment; Prepayment.

 

1.1. Payment. All payments owing hereunder shall be in lawful money of the United States of America or Conversion Shares (as defined below), as provided for herein, and delivered to Lender at the address or bank account furnished to Borrower for that purpose. All payments shall be applied first to (a) costs of collection, if any, then to (b) fees and charges, if any, then to (c) accrued and unpaid interest, and thereafter, to (d) principal.

 

1.2. Prepayment. Notwithstanding the foregoing, Borrower shall have the right to prepay all or any portion of the outstanding balance without penalty.

 

 
 

 

2. Security. This Note is unsecured.

 

3. Lender Optional Conversion.

 

3.1. Conversions. Lender has the right at any time after the Bifurcation Date until the outstanding balance has been paid in full, at its election, to convert (“Conversion”) all or any portion of the outstanding balance into shares (“Conversion Shares”) of fully paid and non-assessable common stock, $0.00001 par value per share (“Common Stock”), of Borrower as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the “Conversion Amount”) divided by the Conversion Price (as defined below). Conversion notices in the form attached hereto as Exhibit A (each, a “Conversion Notice”) may be delivered from time to time by Lender to Borrower, and all Conversions shall be cashless and not require further payment from Lender. Borrower shall deliver the Conversion Shares from any Conversion to Lender in accordance with Section 7 below.

 

3.2. Conversion Price. The price at which Lender has the right to convert all or any portion of the outstanding balance into Common Stock is $1.00 per share of Common Stock (the “Conversion Price”). The Conversion Price will automatically be adjusted in the event Borrower consummates a stock split, stock combination or other similar change to the number of outstanding shares of Common Stock.

 

4. Defaults and Remedies.

 

4.1. Defaults. The following are events of default under this Note (each, an “Event of Default”): (a) Borrower fails to pay any principal, interest, fees, charges, or any other amount when due and payable hereunder; (b) Borrower fails to deliver any Conversion Shares in accordance with the terms hereof; (c) a receiver, trustee or other similar official shall be appointed over Borrower or a material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed or discharged within sixty (60) days; (d) Borrower makes a general assignment for the benefit of creditors; (e) Borrower files a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); or (f) an involuntary bankruptcy proceeding is commenced or filed against Borrower. Notwithstanding the foregoing, the occurrence of any of the foregoing events will not be considered an Event of Default unless Borrower fails to cure such event within ten (10) Trading Days of its receipt of written notice from Lender.

 

4.2. Remedies. Following an Event of Default, Lender may accelerate this Note by written notice to Borrower with the outstanding balance becoming immediately due and payable. Nothing herein shall limit Lender’s right to pursue any other remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to Borrower’s failure to timely deliver Conversion Shares upon Conversion of the Note as required pursuant to the terms hereof.

 

5. Unconditional Obligation; No Offset. Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset, deduction or counterclaim of any kind. Borrower hereby waives any rights of offset it now has or may have hereafter against Lender, its successors and assigns, and agrees to make the payments or Conversions called for herein in accordance with the terms of this Note.

 

6. Waiver. No waiver of any provision of this Note shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.

 

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7. Method of Conversion Share Delivery. On or before the close of business on the seventh (7th) Trading Day following the date of delivery of a Conversion Notice (the “Delivery Date”), Borrower shall, provided it is DWAC Eligible at such time, deliver or cause its transfer agent to deliver the applicable Conversion Shares electronically via DWAC to the account designated by Lender in the applicable Conversion Notice. If Borrower is not DWAC Eligible, it shall deliver to Lender or its broker (as designated in the Conversion Notice), via reputable overnight courier, a certificate representing the number of shares of Common Stock equal to the number of Conversion Shares to which Lender shall be entitled, registered in the name of Lender or its designee.

 

8. Ownership Limitation. Notwithstanding anything to the contrary contained in this Note or the other Transaction Documents, Borrower shall not effect any conversion of this Note to the extent that after giving effect to such conversion would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance). For purposes of this section, beneficial ownership of Common Stock will be determined pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended.

 

9. Opinion of Counsel. In the event that an opinion of counsel is needed for any matter related to this Note, Lender shall have such opinion provided by its counsel.

 

10. Governing Law; Venue. This Note shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and wholly performed in that jurisdiction. Each party hereto submits to the exclusive jurisdiction of any state or federal court sitting in San Diego County, California in any proceeding arising out of or relating to this Note and agrees that all claims in respect of the proceeding may be heard and determined in any such court and hereby expressly submits to the personal jurisdiction and venue of such court for the purposes hereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum. Each party hereto hereby irrevocably consents to the service of process of any of the aforementioned courts in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to its address as set forth herein, such service to become effective ten (10) days after such mailing. The parties expressly and irrevocably waive the right to a trial by jury in any and all actions or proceedings brought with respect to this Note and with respect to any claims arising out of or related to this Note.

 

11. Cancellation. After repayment or conversion of the entire outstanding balance, this Note shall be deemed paid in full, shall automatically be deemed canceled, and shall not be reissued.

 

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

 

13. Assignments. Neither party may assign this Note without the consent of the other party.

 

14. Notices. Whenever notice is required to be given under this Note, such notice shall be given to such address as has been provided to the other party.

 

15. Severability. If any part of this Note is construed to be in violation of any law, such part shall be modified to achieve the objective of Borrower and Lender to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect.

 

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

 

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

 

  BORROWER:
   
  HUMBL, Inc.
   
  By:  
    Brian Foote, President and CEO

 

ACKNOWLEDGED, ACCEPTED AND AGREED:  
   
LENDER:  
   
Scottish Isles Investing, LLC  
   
By:                             
  Becky Moore, Manager  

 

[Signature Page to Convertible Promissory Note]

 

 
 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

A1. “DTC” means the Depository Trust Company or any successor thereto.

 

A2. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A3. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A4. “DWAC Eligible” means that (a) Borrower’s Common Stock is eligible at DTC for full services pursuant to DTC’s operational arrangements, including without limitation transfer through DTC’s DWAC system; (b) Borrower has been approved (without revocation) by DTC’s underwriting department; (c) Borrower’s transfer agent is approved as an agent in the DTC/FAST Program; (d) the Conversion Shares are otherwise eligible for delivery via DWAC; and (e) Borrower’s transfer agent does not have a policy prohibiting or limiting delivery of the Conversion Shares via DWAC.

 

A5. “Trading Day” means any day on which Borrower’s market is open for trading.

 

[Remainder of page intentionally left blank]

 

Attachment 1 to Convertible Promissory Note, Page 1

 

 
 

 

EXHIBIT A

 

Scottish Isles Investing, LLC

 

HUMBL, Inc. Date:    
Attn: Brian Foote      
600 B. Street, Suite 300      
San Diego, California 92101      

 

CONVERSION NOTICE

 

The above-captioned Lender hereby gives notice to HUMBL, Inc., a Delaware corporation (the “Borrower”), pursuant to that certain Convertible Promissory Note #2 made by Borrower in favor of Lender with an original issuance date of May 13, 2021 (the “Note”), that Lender elects to convert the portion of the Note balance set forth below into fully paid and non-assessable shares of Common Stock of Borrower as of the date of conversion specified below. Said conversion shall be based on the Conversion Price set forth below. In the event of a conflict between this Conversion Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of Conversion Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.

 

  A. Date of Conversion:      
  B. Conversion #:      
  C. Conversion Amount:      
  D. Conversion Price:      
  E. Conversion Shares:   (C divided by D)  
  F. Remaining Outstanding Balance of Note:    

 

Please transfer the Conversion Shares electronically (via DWAC) to the following account:

 

Broker:     Address:    
DTC#:          
Account #:          
Account Name:          

 

To the extent the Conversion Shares are not able to be delivered to Lender electronically via the DWAC system, deliver all such certificated shares to Lender via reputable overnight courier after receipt of this Conversion Notice (by facsimile transmission or otherwise) to:

 

     
     
     

 

Sincerely,  
   
Lender:  
   
By:    
  Becky Moore, Manager  

 

Exhibit A to Convertible Promissory Note, Page 1

 

 

 

 

 

Exhibit 10.17

 

THIS WARRANT (AS DEFINED BELOW) IS ISSUED IN CONNECTION WITH THE BIFURCATION OF THAT CERTAIN WARRANT TO PURCHASE SHARES OF COMMON STOCK HAVING AN ORIGINAL ISSUE DATE OF MAY 13, 2021. FOR PURPOSES OF RULE 144, THIS WARRANT SHALL BE DEEMED TO HAVE BEEN ISSUED ON MAY 13, 2021.

 

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF THIS WARRANT OR SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THIS WARRANT OR SUCH SECURITIES, AS APPLICABLE, MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS.

 

HUMBL, INC.

 

WARRANT TO PURCHASE SHARES OF COMMON STOCK

 

1.       Issuance. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by HUMBL, Inc., a Delaware corporation, its successors and assigns (“Company”), Scottish Isles Investing, LLC, a Georgia limited liability company, its successors and/or registered assigns (“Investor”), is hereby granted the right to purchase at any time on or after the Bifurcation Date (as defined below) until May 13, 2023 (the “Expiration Date”), 90,000 fully paid and non-assessable shares (the “Warrant Shares”) of Company’s common stock, par value $0.00001 per share (the “Common Stock”), as such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant to Purchase Shares of Common Stock (this “Warrant”).

 

This Warrant is issued as of June 24, 2021 (the “Bifurcation Date”) but shall be deemed for all purposes to have been issued on May 13, 2021 (the “Issue Date”). This Warrant is issued pursuant to that certain Bifurcation Agreement dated June 24, 2021 (the “Bifurcation Agreement”), as the same may be amended from time to time, by and between Company and Investor, pursuant to which Company and Investor agreed to bifurcate that certain Warrant to Purchase Shares of Common Stock previously issued on the Issue Date by Company in favor of Investor (the “Original Warrant”). The Original Warrant was originally issued pursuant to the terms of that certain Securities Purchase Agreement dated May 13, 2021, to which Company and Investor are parties (as the same may be amended from time to time, the “Purchase Agreement”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.

 

The purchase price for the Original Warrant was paid in full on the Issue Date. The purchase price for this Warrant shall be deemed to be paid in full as of the same date.

 

 

 

 

2.       Exercise of Warrant.

 

2.1.       General.

 

(a)       This Warrant is exercisable in whole or in part at any time and from time to time commencing on the Bifurcation Date and ending on the Expiration Date. Such exercise shall be effectuated by submitting to Company (either by delivery to Company or by email or facsimile transmission) a completed and signed Notice of Exercise substantially in the form attached to this Warrant as Exhibit A (the “Notice of Exercise”). The date a Notice of Exercise is delivered to Company shall be the “Exercise Date,” provided that, if such exercise represents the full exercise of the outstanding balance of this Warrant, Investor shall tender this Warrant to Company within five (5) Trading Days thereafter, but only if the Warrant Shares to be delivered pursuant to the Notice of Exercise have been delivered to Investor as of such date. The Notice of Exercise shall be executed by Investor and shall indicate the number of Warrant Shares to be issued pursuant to such exercise.

 

(b)       The Exercise Price per share of Common Stock for the Warrant Shares shall be payable, at the election of Investor, in cash or by certified or official bank check or by wire transfer in accordance with instructions provided by Company at the request of Investor.

 

(c)       Upon the appropriate payment to Company of the Exercise Price for the Warrant Shares, Company shall promptly, but in no case later than the date that is ten (10) Trading Days following the date the Exercise Price is paid to Company (the “Delivery Date”), deliver or cause Company’s Transfer Agent to deliver the applicable Warrant Shares electronically via the DWAC system to the account designated by Investor on the Notice of Exercise. If for any reason Company is not able to so deliver the Warrant Shares via the DWAC system, Company shall instead, on or before the applicable date set forth above in this subsection, issue and deliver to Investor or its broker (as designated in the Notice of Exercise), via reputable overnight courier, a certificate, registered in the name of Investor or its designee, representing the applicable number of Warrant Shares.

 

(d)       In no event may this Warrant be net cash settled.

 

2.2.       Ownership Limitation. Notwithstanding anything to the contrary contained in this Warrant, if at any time Investor shall or would be issued shares of Common Stock under this Warrant, but such issuance would cause Investor (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance) (the “Maximum Percentage”), then Company shall not issue to Investor shares of Common Stock which would exceed the Maximum Percentage. The ownership limitation is enforceable, unconditional and non-waivable and shall apply to all affiliates and assigns of Investor.

 

3.       Mutilation or Loss of Warrant. Upon receipt by Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, Company will execute and deliver to Investor a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void.

 

4.       Rights of Investor. Investor shall not, by virtue of this Warrant alone, be entitled to any rights of a stockholder in Company, either at law or in equity, and the rights of Investor with respect to or arising under this Warrant are limited to those expressed in this Warrant and are not enforceable against Company except to the extent set forth herein

 

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5.       Adjustments. If Company shall issue any shares of Common Stock as a stock dividend or subdivide the number of outstanding shares of Common Stock into a greater number of shares, then, in either such case, the Exercise Price in effect before such dividend or subdivision shall be proportionately reduced and the number of Warrant Shares at that time issuable pursuant to the exercise of this Warrant shall be proportionately increased; and, conversely, if Company shall contract the number of outstanding shares of Common Stock by combining such shares into a smaller number of shares, then the Exercise Price in effect before such combination shall be proportionately increased and the number of Warrant Shares at that time issuable pursuant to the exercise or conversion of this Warrant shall be proportionately decreased. Each adjustment in the number of shares of Warrant Stock issuable shall be to the nearest whole share.

 

6.       Certificate as to Adjustments. In the case of any adjustment in the Exercise Price or Warrant Shares, Company will promptly give written notice to Investor in the form of a certificate, certified and confirmed by an officer of the Company, setting forth the adjustment in reasonable detail.

 

7.       Transfer to Comply with the Securities Act. This Warrant and the Warrant Shares have not been registered under the Securities Act of 1933, as amended (the “1933 Act”). Neither this Warrant nor the Warrant Shares may be sold, transferred, pledged or hypothecated without (a) an effective registration statement under the 1933 Act relating to such security or (b) an opinion of counsel reasonably satisfactory to Company that registration is not required under the 1933 Act. Until such time as registration has occurred under the 1933 Act, each certificate for this Warrant and any Warrant Shares shall contain a legend, in form and substance satisfactory to counsel for Company, setting forth the restrictions on transfer contained in this Section 7.

 

8.       Notices. Any notice required or permitted hereunder shall be given in the manner provided in the subsection titled “Notices” in the Purchase Agreement, the terms of which are incorporated herein by reference.

 

9.       Supplements and Amendments; Whole Agreement. This Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant, together with the Purchase Agreement and the Bifurcation Agreement, contains the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings with respect to the subject matter hereof and thereof other than as expressly contained herein and therein.

 

10.       Governing Law; Venue. This Warrant shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of Delaware. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state and federal courts in San Diego County, California. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The prevailing party in any dispute arising under this Agreement shall be entitled to recover from the other party its reasonable attorney’s fees and costs.

 

11.       Waiver of Jury Trial. EACH OF COMPANY AND INVESTOR IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS WARRANT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, COMPANY ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY.

 

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12.       Counterparts. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Electronic signatures shall be considered original signatures for all purposes hereof.

 

13.       Attorneys’ Fees. In the event of any litigation or dispute arising from this Warrant, the parties agree that the prevailing party shall be entitled to an additional award of the full amount of the reasonable attorneys’ fees and expenses paid by said prevailing party in connection with litigation or dispute.

 

14.       Severability. Whenever possible, each provision of this Warrant shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be invalid or unenforceable in any jurisdiction, such provision shall be modified to achieve the objective of the parties to the fullest extent permitted and such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Warrant or the validity or enforceability of this Warrant in any other jurisdiction.

 

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

 

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IN WITNESS WHEREOF, Company has caused this Warrant to be duly executed as of the Bifurcation Date.

 

  COMPANY:
     
  HUMBL, Inc.
     
  By:  
    Brian Foote, President and CEO

 

[Signature Page to Warrant]

 

 

 

 

ATTACHMENT 1

 

DEFINITIONS

 

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

 

A1.      “DTC” means the Depository Trust Company or any successor thereto.

 

A2.      “DTC Eligible” means, with respect to the Common Stock, that such Common Stock is eligible to be deposited in certificate form at the DTC, cleared and converted into electronic shares by the DTC and held in the name of the clearing firm servicing Investor’s brokerage firm for the benefit of Investor.

 

A3.      “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A4.      “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A5.      “Exercise Price” means $1.00 per share of Common Stock, as the same may be adjusted from time to time pursuant to the terms and conditions of this Warrant.

 

A6.      “Trading Day” means any day the New York Stock Exchange is open for trading.

 

Attachment 1 to Warrant, Page 1

 

 

EXHIBIT A

 

NOTICE OF EXERCISE OF WARRANT

 

TO: HUMBL, INC.  
  ATTN: _______________  
  VIA FAX TO: (       )______________ EMAIL: ______________
     
     

 

The undersigned hereby irrevocably elects to exercise the right, represented by the Warrant to Purchase Shares of Common Stock #2 having an original issue date of May 13, 2021 (the “Warrant”), to purchase shares of the common stock, $0.00001 par value (“Common Stock”), of HUMBL, Inc., and tenders herewith payment in accordance with Section 2 of the Warrant, as follows:

 

Warrant Shares: _______________________

 

Exercise Price: $_______________________

 

Purchase Price: $___________________ = (Exercise Price x Warrant Shares)

 

Payment is being made by:

 

_____       enclosed check

 

_____      wire transfer

 

_____       other

 

Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Warrant.

 

It is the intention of Investor to comply with the provisions of Section 2.2 of the Warrant regarding certain limits on Investor’s right to receive shares thereunder. Investor believes this exercise complies with the provisions of such Section 2.2. Nonetheless, to the extent that, pursuant to the exercise effected hereby, Investor would receive more shares of Common Stock than permitted under Section 2.2, Company shall not be obligated and shall not issue to Investor such excess shares until such time, if ever, that Investor could receive such excess shares without violating, and in full compliance with, Section 2.2 of the Warrant.

 

As contemplated by the Warrant, this Notice of Exercise is being sent by email to the officer indicated above.

 

If this Notice of Exercise represents the full exercise of the entire Warrant, Investor will surrender (or cause to be surrendered) the Warrant to Company at the address indicated above by express courier within five (5) Trading Days after the Warrant Shares to be delivered pursuant to this Notice of Exercise have been delivered to Investor.

 

To the extent the Warrant Shares are not able to be delivered to Investor via the DWAC system, please deliver certificates representing the Warrant Shares to Investor via reputable overnight courier after receipt of this Notice of Exercise (by facsimile transmission or otherwise) to:

_____________________________________

_____________________________________

_____________________________________

 

Exhibit A to Warrant, Page 1

 

 

Dated:  _____________________

 

___________________________

[Name of Investor]

 

By:________________________

 

Exhibit A to Warrant, Page 2

 

 

 

Exhibit 10.18

 

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

 

CONVERTIBLE PROMISSORY NOTE

 

Effective Date: May 13, 2021 U.S. $420,750.00

 

FOR VALUE RECEIVED, HUMBL, Inc., a Delaware corporation (“Borrower”), promises to pay to the order of Maize and Gray, LLC, a Michigan limited liability company, or its successors or assigns (“Lender”), $420,750.00 and any interest accrued hereunder on the date that is twenty-two (22) months from the Effective Date (the “Maturity Date”) in accordance with the terms set forth herein and to pay interest on the outstanding balance at the rate of eight percent (8%) per annum from the Effective Date until the same is paid in full. This Convertible Promissory Note (this “Note”) is issued and made effective as of May 13, 2021 (the “Effective Date”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.

 

1. Payment; Prepayment.

 

1.1. Payment. All payments owing hereunder shall be in lawful money of the United States of America or Conversion Shares (as defined below), as provided for herein, and delivered to Lender at the address or bank account furnished to Borrower for that purpose. All payments shall be applied first to (a) costs of collection, if any, then to (b) fees and charges, if any, then to (c) accrued and unpaid interest, and thereafter, to (d) principal.

 

1.2. Prepayment. Notwithstanding the foregoing, Borrower shall have the right to prepay all or any portion of the outstanding balance without penalty.

 

2. Security. This Note is unsecured.

 

3. Lender Optional Conversion.

 

3.1. Conversions. Lender has the right at any time after the Effective Date until the outstanding balance has been paid in full, at its election, to convert (“Conversion”) all or any portion of the outstanding balance into shares (“Conversion Shares”) of fully paid and non-assessable common stock, $0.00001 par value per share (“Common Stock”), of Borrower as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the “Conversion Amount”) divided by the Conversion Price (as defined below). Conversion notices in the form attached hereto as Exhibit A (each, a “Conversion Notice”) may be delivered from time to time by Lender to Borrower, and all Conversions shall be cashless and not require further payment from Lender. Borrower shall deliver the Conversion Shares from any Conversion to Lender in accordance with Section 7 below.

 

 

 

 

3.2. Conversion Price. The price at which Lender has the right to convert all or any portion of the outstanding balance into Common Stock is $1.00 per share of Common Stock (the “Conversion Price”). The Conversion Price will automatically be adjusted in the event Borrower consummates a stock split, stock combination or other similar change to the number of outstanding shares of Common Stock.

 

4. Defaults and Remedies.

 

4.1. Defaults. The following are events of default under this Note (each, an “Event of Default”): (a) Borrower fails to pay any principal, interest, fees, charges, or any other amount when due and payable hereunder; (b) Borrower fails to deliver any Conversion Shares in accordance with the terms hereof; (c) a receiver, trustee or other similar official shall be appointed over Borrower or a material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed or discharged within sixty (60) days; (d) Borrower makes a general assignment for the benefit of creditors; (e) Borrower files a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); or (f) an involuntary bankruptcy proceeding is commenced or filed against Borrower. Notwithstanding the foregoing, the occurrence of any of the foregoing events will not be considered an Event of Default unless Borrower fails to cure such event within ten (10) Trading Days of its receipt of written notice from Lender.

 

4.2. Remedies. Following an Event of Default, Lender may accelerate this Note by written notice to Borrower with the outstanding balance becoming immediately due and payable. Nothing herein shall limit Lender’s right to pursue any other remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to Borrower’s failure to timely deliver Conversion Shares upon Conversion of the Note as required pursuant to the terms hereof.

 

5. Unconditional Obligation; No Offset. Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset, deduction or counterclaim of any kind. Borrower hereby waives any rights of offset it now has or may have hereafter against Lender, its successors and assigns, and agrees to make the payments or Conversions called for herein in accordance with the terms of this Note.

 

6. Waiver. No waiver of any provision of this Note shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.

 

7. Method of Conversion Share Delivery. On or before the close of business on the seventh (7th) Trading Day following the date of delivery of a Conversion Notice (the “Delivery Date”), Borrower shall, provided it is DWAC Eligible at such time, deliver or cause its transfer agent to deliver the applicable Conversion Shares electronically via DWAC to the account designated by Lender in the applicable Conversion Notice. If Borrower is not DWAC Eligible, it shall deliver to Lender or its broker (as designated in the Conversion Notice), via reputable overnight courier, a certificate representing the number of shares of Common Stock equal to the number of Conversion Shares to which Lender shall be entitled, registered in the name of Lender or its designee.

 

8. Ownership Limitation. Notwithstanding anything to the contrary contained in this Note or the other Transaction Documents, Borrower shall not effect any conversion of this Note to the extent that after giving effect to such conversion would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance). For purposes of this section, beneficial ownership of Common Stock will be determined pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended.

 

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9. Opinion of Counsel. In the event that an opinion of counsel is needed for any matter related to this Note, Lender shall have such opinion provided by its counsel.

 

10. Governing Law; Venue. This Note shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and wholly performed in that jurisdiction. Each party hereto submits to the exclusive jurisdiction of any state or federal court sitting in San Diego County, California in any proceeding arising out of or relating to this Note and agrees that all claims in respect of the proceeding may be heard and determined in any such court and hereby expressly submits to the personal jurisdiction and venue of such court for the purposes hereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum. Each party hereto hereby irrevocably consents to the service of process of any of the aforementioned courts in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to its address as set forth herein, such service to become effective ten (10) days after such mailing. The parties expressly and irrevocably waive the right to a trial by jury in any and all actions or proceedings brought with respect to this Note and with respect to any claims arising out of or related to this Note.

 

11. Cancellation. After repayment or conversion of the entire outstanding balance, this Note shall be deemed paid in full, shall automatically be deemed canceled, and shall not be reissued.

 

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

 

13. Assignments. Neither party may assign this Note without the consent of the other party.

 

14. Notices. Whenever notice is required to be given under this Note, such notice shall be given to such address as has been provided to the other party.

 

15. Severability. If any part of this Note is construed to be in violation of any law, such part shall be modified to achieve the objective of Borrower and Lender to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect.

 

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

 

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

 

  BORROWER:
   
  HUMBL, Inc.
     
  By:  
    Brian Foote, President and CEO

 

ACKNOWLEDGED, ACCEPTED AND AGREED:  
   
LENDER:  
   
Maize and Gray, LLC  
   
By:                                        
  Richard Shebib II, Manager  

 

[Signature Page to Convertible Promissory Note]

 

 

 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

A1. “DTC” means the Depository Trust Company or any successor thereto.

 

A2. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A3. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A4. “DWAC Eligible” means that (a) Borrower’s Common Stock is eligible at DTC for full services pursuant to DTC’s operational arrangements, including without limitation transfer through DTC’s DWAC system; (b) Borrower has been approved (without revocation) by DTC’s underwriting department; (c) Borrower’s transfer agent is approved as an agent in the DTC/FAST Program; (d) the Conversion Shares are otherwise eligible for delivery via DWAC; and (e) Borrower’s transfer agent does not have a policy prohibiting or limiting delivery of the Conversion Shares via DWAC.

 

A5. “Trading Day” means any day on which Borrower’s market is open for trading.

 

[Remainder of page intentionally left blank]

 

Attachment 1 to Convertible Promissory Note, Page 1

 

 

EXHIBIT A

 

Maize and Gray, LLC

 
HUMBL, Inc. Date: ________________
Attn: Brian Foote    
600 B. Street, Suite 300    
San Diego, California 92101    

 

CONVERSION NOTICE

 

The above-captioned Lender hereby gives notice to HUMBL, Inc., a Delaware corporation (the “Borrower”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on May 13, 2021 (the “Note”), that Lender elects to convert the portion of the Note balance set forth below into fully paid and non-assessable shares of Common Stock of Borrower as of the date of conversion specified below. Said conversion shall be based on the Conversion Price set forth below. In the event of a conflict between this Conversion Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of Conversion Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.

 

  A. Date of Conversion: ____________
  B. Conversion #: ____________
  C. Conversion Amount: ____________
  D. Conversion Price: __________
  E. Conversion Shares: _______________ (C divided by D)
  F. Remaining Outstanding Balance of Note: ____________

 

Please transfer the Conversion Shares electronically (via DWAC) to the following account:

 

Broker: __________________________   Address: ________________________
DTC#: __________________________     ________________________
Account #: _______________________     ________________________
Account Name: ___________________      

 

To the extent the Conversion Shares are not able to be delivered to Lender electronically via the DWAC system, deliver all such certificated shares to Lender via reputable overnight courier after receipt of this Conversion Notice (by facsimile transmission or otherwise) to:

 

_____________________________________

_____________________________________

_____________________________________

 

Sincerely,  
   
Lender:  
   
By:    
  Richard Shebib II, Manager  

 

Exhibit A to Convertible Promissory Note, Page 1

 

 

EXHIBIT 10.19

 

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF THIS WARRANT OR SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THIS WARRANT OR SUCH SECURITIES, AS APPLICABLE, MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS.

 

HUMBL, INC.

 

WARRANT TO PURCHASE SHARES OF COMMON STOCK

 

1. Issuance. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by HUMBL, Inc., a Delaware corporation, its successors and assigns (“Company”), Maize and Gray, LLC, a Michigan limited liability company, its successors and/or registered assigns (“Investor”), is hereby granted the right to purchase at any time on or after the Issue Date (as defined below) until May 13, 2023 (the “Expiration Date”), 825,000 fully paid and non-assessable shares (the “Warrant Shares”) of Company’s common stock, par value $0.00001 per share (the “Common Stock”), as such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant to Purchase Shares of Common Stock (this “Warrant”).

 

This Warrant is being issued pursuant to the terms of that certain Securities Purchase Agreement dated May 13, 2021, to which Company and Investor are parties (as the same may be amended from time to time, the “Purchase Agreement”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference. This Warrant was issued to Investor on May 13, 2021 (the “Issue Date”).

 

2. Exercise of Warrant.

 

2.1. General.

 

(a) This Warrant is exercisable in whole or in part at any time and from time to time commencing on the Issue Date and ending on the Expiration Date. Such exercise shall be effectuated by submitting to Company (either by delivery to Company or by email or facsimile transmission) a completed and signed Notice of Exercise substantially in the form attached to this Warrant as Exhibit A (the “Notice of Exercise”). The date a Notice of Exercise is delivered to Company shall be the “Exercise Date,” provided that, if such exercise represents the full exercise of the outstanding balance of this Warrant, Investor shall tender this Warrant to Company within five (5) Trading Days thereafter, but only if the Warrant Shares to be delivered pursuant to the Notice of Exercise have been delivered to Investor as of such date. The Notice of Exercise shall be executed by Investor and shall indicate the number of Warrant Shares to be issued pursuant to such exercise

 

 

 

 

(b) The Exercise Price per share of Common Stock for the Warrant Shares shall be payable, at the election of Investor, in cash or by certified or official bank check or by wire transfer in accordance with instructions provided by Company at the request of Investor.

 

(c) Upon the appropriate payment to Company of the Exercise Price for the Warrant Shares, Company shall promptly, but in no case later than the date that is ten (10) Trading Days following the date the Exercise Price is paid to Company (the “Delivery Date”), deliver or cause Company’s Transfer Agent to deliver the applicable Warrant Shares electronically via the DWAC system to the account designated by Investor on the Notice of Exercise. If for any reason Company is not able to so deliver the Warrant Shares via the DWAC system, Company shall instead, on or before the applicable date set forth above in this subsection, issue and deliver to Investor or its broker (as designated in the Notice of Exercise), via reputable overnight courier, a certificate, registered in the name of Investor or its designee, representing the applicable number of Warrant Shares.

 

(d) In no event may this Warrant be net cash settled.

 

2.2. Ownership Limitation. Notwithstanding anything to the contrary contained in this Warrant, if at any time Lender shall or would be issued shares of Common Stock under this Warrant, but such issuance would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance) (the “Maximum Percentage”), then Borrower shall not issue to Lender shares of Common Stock which would exceed the Maximum Percentage. The ownership limitation is enforceable, unconditional and non-waivable and shall apply to all affiliates and assigns of Lender.

 

3. Mutilation or Loss of Warrant. Upon receipt by Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, Company will execute and deliver to Investor a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void.

 

4. Rights of Investor. Investor shall not, by virtue of this Warrant alone, be entitled to any rights of a stockholder in Company, either at law or in equity, and the rights of Investor with respect to or arising under this Warrant are limited to those expressed in this Warrant and are not enforceable against Company except to the extent set forth herein

 

5. Adjustments. If Company shall issue any shares of Common Stock as a stock dividend or subdivide the number of outstanding shares of Common Stock into a greater number of shares, then, in either such case, the Exercise Price in effect before such dividend or subdivision shall be proportionately reduced and the number of Warrant Shares at that time issuable pursuant to the exercise of this Warrant shall be proportionately increased; and, conversely, if Company shall contract the number of outstanding shares of Common Stock by combining such shares into a smaller number of shares, then the Exercise Price in effect before such combination shall be proportionately increased and the number of Warrant Shares at that time issuable pursuant to the exercise or conversion of this Warrant shall be proportionately decreased. Each adjustment in the number of shares of Warrant Stock issuable shall be to the nearest whole share.

 

6. Certificate as to Adjustments. In the case of any adjustment in the Exercise Price or Warrant Shares, Company will promptly give written notice to Investor in the form of a certificate, certified and confirmed by an officer of the Company, setting forth the adjustment in reasonable detail.

 

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7. Transfer to Comply with the Securities Act. This Warrant and the Warrant Shares have not been registered under the Securities Act of 1933, as amended (the “1933 Act”). Neither this Warrant nor the Warrant Shares may be sold, transferred, pledged or hypothecated without (a) an effective registration statement under the 1933 Act relating to such security or (b) an opinion of counsel reasonably satisfactory to Company that registration is not required under the 1933 Act. Until such time as registration has occurred under the 1933 Act, each certificate for this Warrant and any Warrant Shares shall contain a legend, in form and substance satisfactory to counsel for Company, setting forth the restrictions on transfer contained in this Section 7.

 

8. Notices. Any notice required or permitted hereunder shall be given in the manner provided in the subsection titled “Notices” in the Purchase Agreement, the terms of which are incorporated herein by reference.

 

9. Supplements and Amendments; Whole Agreement. This Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant, together with the Purchase Agreement, contains the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings with respect to the subject matter hereof and thereof other than as expressly contained herein and therein.

 

10. Governing Law; Venue. This Warrant shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of Delaware. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state and federal courts in San Diego County, California. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The prevailing party in any dispute arising under this Agreement shall be entitled to recover from the other party its reasonable attorney’s fees and costs.

 

11. Waiver of Jury Trial. EACH OF COMPANY AND INVESTOR IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS WARRANT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, COMPANY ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY.

 

12. Counterparts. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Electronic signatures shall be considered original signatures for all purposes hereof.

 

13. Attorneys’ Fees. In the event of any litigation or dispute arising from this Warrant, the parties agree that the prevailing party shall be entitled to an additional award of the full amount of the reasonable attorneys’ fees and expenses paid by said prevailing party in connection with litigation or dispute.

 

14. Severability. Whenever possible, each provision of this Warrant shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be invalid or unenforceable in any jurisdiction, such provision shall be modified to achieve the objective of the parties to the fullest extent permitted and such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Warrant or the validity or enforceability of this Warrant in any other jurisdiction.

 

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IN WITNESS WHEREOF, Company has caused this Warrant to be duly executed as of the Issue Date.

 

  COMPANY:
   
  HUMBL, Inc.
     
  By:
    Brian Foote, President and CEO

 

[Signature Page to Warrant]

 

 

 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

A1. “DTC” means the Depository Trust Company or any successor thereto.

 

A2. “DTC Eligible” means, with respect to the Common Stock, that such Common Stock is eligible to be deposited in certificate form at the DTC, cleared and converted into electronic shares by the DTC and held in the name of the clearing firm servicing Investor’s brokerage firm for the benefit of Investor.

 

A3. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A4. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A5. “Exercise Price” means $1.00 per share of Common Stock, as the same may be adjusted from time to time pursuant to the terms and conditions of this Warrant.

 

A6. “Trading Day” means any day the New York Stock Exchange is open for trading.

 

Attachment 1 to Warrant, Page 1
 

 

EXHIBIT A

 

NOTICE OF EXERCISE OF WARRANT

 

TO: HUMBL, INC.
  ATTN: _______________
  VIA FAX TO: (     )______________ EMAIL: ______________

 

The undersigned hereby irrevocably elects to exercise the right, represented by the Warrant to Purchase Shares of Common Stock dated as of May 13, 2021 (the “Warrant”), to purchase shares of the common stock, $0.00001 par value (“Common Stock”), of HUMBL, Inc., and tenders herewith payment in accordance with Section 2 of the Warrant, as follows:

 

Warrant Shares: _______________________

 

Exercise Price: $_______________________

 

Purchase Price: $___________________ = (Exercise Price x Warrant Shares)

 

Payment is being made by:

 

  _____ enclosed check
  _____ wire transfer
  _____ other

 

Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Warrant.

 

It is the intention of Investor to comply with the provisions of Section 2.2 of the Warrant regarding certain limits on Investor’s right to receive shares thereunder. Investor believes this exercise complies with the provisions of such Section 2.2. Nonetheless, to the extent that, pursuant to the exercise effected hereby, Investor would receive more shares of Common Stock than permitted under Section 2.2, Company shall not be obligated and shall not issue to Investor such excess shares until such time, if ever, that Investor could receive such excess shares without violating, and in full compliance with, Section 2.2 of the Warrant.

 

As contemplated by the Warrant, this Notice of Exercise is being sent by email to the officer indicated above.

 

If this Notice of Exercise represents the full exercise of the entire Warrant, Investor will surrender (or cause to be surrendered) the Warrant to Company at the address indicated above by express courier within five (5) Trading Days after the Warrant Shares to be delivered pursuant to this Notice of Exercise have been delivered to Investor.

 

To the extent the Warrant Shares are not able to be delivered to Investor via the DWAC system, please deliver certificates representing the Warrant Shares to Investor via reputable overnight courier after receipt of this Notice of Exercise (by facsimile transmission or otherwise) to:

 

_____________________________________

_____________________________________

_____________________________________

 

Dated:                  
   
   
[Name of Investor]  

 

By:    

 

Exhibit A to Warrant, Page 1

 

 

Exhibit 10.20

 

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

 

CONVERTIBLE PROMISSORY NOTE

 

Effective Date: May 17, 2021 U.S. $1,020,000.00

 

FOR VALUE RECEIVED, HUMBL, Inc., a Delaware corporation (“Borrower”), promises to pay to the order of Archura Capital Pty Ltd, an Australian private limited company, or its successors or assigns (“Lender”), $1,020,000.00 and any interest accrued hereunder on the date that is twenty-two (22) months from the Effective Date (the “Maturity Date”) in accordance with the terms set forth herein and to pay interest on the outstanding balance at the rate of eight percent (8%) per annum from the Effective Date until the same is paid in full. This Convertible Promissory Note (this “Note”) is issued and made effective as of May 17, 2021 (the “Effective Date”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.

 

1. Payment; Prepayment.

 

1.1. Payment. All payments owing hereunder shall be in lawful money of the United States of America or Conversion Shares (as defined below), as provided for herein, and delivered to Lender at the address or bank account furnished to Borrower for that purpose. All payments shall be applied first to (a) costs of collection, if any, then to (b) fees and charges, if any, then to (c) accrued and unpaid interest, and thereafter, to (d) principal.

 

1.2. Prepayment. Notwithstanding the foregoing, Borrower shall have the right to prepay all or any portion of the outstanding balance without penalty.

 

2. Security. This Note is unsecured.

 

3. Lender Optional Conversion.

 

3.1. Conversions. Lender has the right at any time after the Effective Date until the outstanding balance has been paid in full, at its election, to convert (“Conversion”) all or any portion of the outstanding balance into shares (“Conversion Shares”) of fully paid and non-assessable common stock, $0.00001 par value per share (“Common Stock”), of Borrower as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the “Conversion Amount”) divided by the Conversion Price (as defined below). Conversion notices in the form attached hereto as Exhibit A (each, a “Conversion Notice”) may be delivered from time to time by Lender to Borrower, and all Conversions shall be cashless and not require further payment from Lender. Borrower shall deliver the Conversion Shares from any Conversion to Lender in accordance with Section 7 below.

 

 
 

 

3.2. Conversion Price. The price at which Lender has the right to convert all or any portion of the outstanding balance into Common Stock is $1.00 per share of Common Stock (the “Conversion Price”). The Conversion Price will automatically be adjusted in the event Borrower consummates a stock split, stock combination or other similar change to the number of outstanding shares of Common Stock.

 

4. Defaults and Remedies.

 

4.1. Defaults. The following are events of default under this Note (each, an “Event of Default”): (a) Borrower fails to pay any principal, interest, fees, charges, or any other amount when due and payable hereunder; (b) Borrower fails to deliver any Conversion Shares in accordance with the terms hereof; (c) a receiver, trustee or other similar official shall be appointed over Borrower or a material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed or discharged within sixty (60) days; (d) Borrower makes a general assignment for the benefit of creditors; (e) Borrower files a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); or (f) an involuntary bankruptcy proceeding is commenced or filed against Borrower. Notwithstanding the foregoing, the occurrence of any of the foregoing events will not be considered an Event of Default unless Borrower fails to cure such event within ten (10) Trading Days of its receipt of written notice from Lender.

 

4.2. Remedies. Following an Event of Default, Lender may accelerate this Note by written notice to Borrower with the outstanding balance becoming immediately due and payable. Nothing herein shall limit Lender’s right to pursue any other remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to Borrower’s failure to timely deliver Conversion Shares upon Conversion of the Note as required pursuant to the terms hereof.

 

5. Unconditional Obligation; No Offset. Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset, deduction or counterclaim of any kind. Borrower hereby waives any rights of offset it now has or may have hereafter against Lender, its successors and assigns, and agrees to make the payments or Conversions called for herein in accordance with the terms of this Note.

 

6. Waiver. No waiver of any provision of this Note shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.

 

7. Method of Conversion Share Delivery. On or before the close of business on the seventh (7th) Trading Day following the date of delivery of a Conversion Notice (the “Delivery Date”), Borrower shall, provided it is DWAC Eligible at such time, deliver or cause its transfer agent to deliver the applicable Conversion Shares electronically via DWAC to the account designated by Lender in the applicable Conversion Notice. If Borrower is not DWAC Eligible, it shall deliver to Lender or its broker (as designated in the Conversion Notice), via reputable overnight courier, a certificate representing the number of shares of Common Stock equal to the number of Conversion Shares to which Lender shall be entitled, registered in the name of Lender or its designee. Lender is immediately authorized, so long as it does so in compliance with any applicable securities laws, to deal with (including sell, encumber, transfer, assign or otherwise dispose of) any of the Conversion Shares immediately after those Conversion Shares are registered in the name of Lender.

 

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8. Ownership Limitation. Notwithstanding anything to the contrary contained in this Note or the other Transaction Documents, Borrower shall not effect any conversion of this Note to the extent that after giving effect to such conversion would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance). For purposes of this section, beneficial ownership of Common Stock will be determined pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended.

 

9. Opinion of Counsel. In the event that an opinion of counsel is needed for any matter related to this Note, Lender shall have such opinion provided by its counsel.

 

10. Governing Law; Venue. This Note shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and wholly performed in that jurisdiction. Each party hereto submits to the exclusive jurisdiction of any state or federal court sitting in San Diego County, California in any proceeding arising out of or relating to this Note and agrees that all claims in respect of the proceeding may be heard and determined in any such court and hereby expressly submits to the personal jurisdiction and venue of such court for the purposes hereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum. Each party hereto hereby irrevocably consents to the service of process of any of the aforementioned courts in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to its address as set forth herein, such service to become effective ten (10) days after such mailing. The parties expressly and irrevocably waive the right to a trial by jury in any and all actions or proceedings brought with respect to this Note and with respect to any claims arising out of or related to this Note.

 

11. Cancellation. After repayment or conversion of the entire outstanding balance, this Note shall be deemed paid in full, shall automatically be deemed canceled, and shall not be reissued.

 

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

 

13. Assignments. Neither party may assign this Note without the consent of the other party.

 

14. Notices. Whenever notice is required to be given under this Note, such notice shall be given to such address as has been provided to the other party.

 

15. Severability. If any part of this Note is construed to be in violation of any law, such part shall be modified to achieve the objective of Borrower and Lender to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect.

 

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

 

3
 

 

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

 

  BORROWER:
   
  HUMBL, Inc.
     
  By:  
    Brian Foote, CEO

 

ACKNOWLEDGED, ACCEPTED AND AGREED:

 

LENDER:

 

Archura Capital Pty Ltd

 

By:    
  Alev Dover, Director  

 

[Signature Page to Convertible Promissory Note]

 

 
 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

A1. “DTC” means the Depository Trust Company or any successor thereto.

 

A2. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A3. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A4. “DWAC Eligible” means that (a) Borrower’s Common Stock is eligible at DTC for full services pursuant to DTC’s operational arrangements, including without limitation transfer through DTC’s DWAC system; (b) Borrower has been approved (without revocation) by DTC’s underwriting department; (c) Borrower’s transfer agent is approved as an agent in the DTC/FAST Program; (d) the Conversion Shares are otherwise eligible for delivery via DWAC; and (e) Borrower’s transfer agent does not have a policy prohibiting or limiting delivery of the Conversion Shares via DWAC.

 

A5. “Trading Day” means any day on which Borrower’s market is open for trading.

 

[Remainder of page intentionally left blank]

 

Attachment 1 to Convertible Promissory Note, Page 1
 

 

EXHIBIT A

 

ARCHURA CAPITAL PTY LTD

 

HUMBL, Inc. Date: ___________________

Attn: Brian Foote

600 B. Street, Suite 300

San Diego, California 92101

 

CONVERSION NOTICE

 

The above-captioned Lender hereby gives notice to HUMBL, Inc., a Delaware corporation (the “Borrower”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on May 13, 2021 (the “Note”), that Lender elects to convert the portion of the Note balance set forth below into fully paid and non-assessable shares of Common Stock of Borrower as of the date of conversion specified below. Said conversion shall be based on the Conversion Price set forth below. In the event of a conflict between this Conversion Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of Conversion Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.

 

A. Date of Conversion: ____________

B. Conversion #: ____________

C. Conversion Amount: ____________

D. Conversion Price: __________

E. Conversion Shares: _______________ (C divided by D)

F. Remaining Outstanding Balance of Note: ____________

 

Please transfer the Conversion Shares electronically (via DWAC) to the following account:

 

Broker:  _____________________________ Address: _____________________________
DTC#: _____________________________                                                                                    
Account #: _____________________________                                                                                    

Account Name: _____________________________

 

To the extent the Conversion Shares are not able to be delivered to Lender electronically via the DWAC system, deliver all such certificated shares to Lender via reputable overnight courier after receipt of this Conversion Notice (by facsimile transmission or otherwise) to:

_____________________________

_____________________________

_____________________________

 

Sincerely,

 

Lender:

 

By:    
  Alev Dover, Director  

 

Exhibit A to Convertible Promissory Note, Page 1

 

 

Exhibit 10.21

 

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

 

CONVERTIBLE PROMISSORY NOTE

 

Effective Date: May 19, 2021 U.S. $497,250.00

 

FOR VALUE RECEIVED, HUMBL, Inc., a Delaware corporation (“Borrower”), promises to pay to the order of KWP 50, LLC, an Arizona limited liability company, or its successors or assigns (“Lender”), $497,250.00 and any interest accrued hereunder on the date that is twenty-two (22) months from the Effective Date (the “Maturity Date”) in accordance with the terms set forth herein and to pay interest on the outstanding balance at the rate of eight percent (8%) per annum from the Effective Date until the same is paid in full. This Convertible Promissory Note (this “Note”) is issued and made effective as of May 19, 2021 (the “Effective Date”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.

 

1. Payment; Prepayment.

 

1.1. Payment. All payments owing hereunder shall be in lawful money of the United States of America or Conversion Shares (as defined below), as provided for herein, and delivered to Lender at the address or bank account furnished to Borrower for that purpose. All payments shall be applied first to (a) costs of collection, if any, then to (b) fees and charges, if any, then to (c) accrued and unpaid interest, and thereafter, to (d) principal.

 

1.2. Prepayment. Borrower may not prepay this Note without Lender’s prior written consent. Notwithstanding the forgoing, this Note may be prepaid immediately prior to the consummation of a Change of Control, provided that the Borrower provided prior written notice of such Change of Control to the Lender pursuant to Section 14.

 

2. Security. This Note is unsecured.

 

3. Lender Optional Conversion.

 

3.1. Conversions. Lender has the right at any time after the Effective Date until the outstanding balance has been paid in full, at its election, to convert (“Conversion”) all or any portion of the outstanding balance into shares (“Conversion Shares”) of fully paid and non-assessable common stock, $0.00001 par value per share (“Common Stock”), of Borrower as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the “Conversion Amount”) divided by the Conversion Price (as defined below). Conversion notices in the form attached hereto as Exhibit A (each, a “Conversion Notice”) may be delivered from time to time by Lender to Borrower, and all Conversions shall be cashless and not require further payment from Lender. Borrower shall deliver the Conversion Shares from any Conversion to Lender in accordance with Section 7 below.

 

 

 

 

3.2. Conversion Price. The price at which Lender has the right to convert all or any portion of the outstanding balance, including accrued but unpaid interest, into Common Stock is $1.00 per share of Common Stock (the “Conversion Price”). The Conversion Price will automatically be adjusted in the event Borrower consummates a stock split, stock combination or other similar change to the number of outstanding shares of Common Stock.

 

4. Defaults and Remedies.

 

4.1. Defaults. The following are events of default under this Note (each, an “Event of Default”): (a) Borrower fails to pay any principal, interest, fees, charges, or any other amount when due and payable hereunder; (b) Borrower fails to deliver any Conversion Shares in accordance with the terms hereof; (c) a receiver, trustee or other similar official shall be appointed over Borrower or a material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed or discharged within sixty (60) days; (d) Borrower makes a general assignment for the benefit of creditors; (e) Borrower files a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); or (f) an involuntary bankruptcy proceeding is commenced or filed against Borrower. Notwithstanding the foregoing, the occurrence of any of the foregoing events will not be considered an Event of Default unless Borrower fails to cure such event within ten (10) Trading Days of its receipt of written notice from Lender.

 

4.2. Remedies. Following an Event of Default, Lender may accelerate this Note by written notice to Borrower with the outstanding balance becoming immediately due and payable. Nothing herein shall limit Lender’s right to pursue any other remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to Borrower’s failure to timely deliver Conversion Shares upon Conversion of the Note as required pursuant to the terms hereof.

 

5. Unconditional Obligation; No Offset. Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset, deduction or counterclaim of any kind. Borrower hereby waives any rights of offset it now has or may have hereafter against Lender, its successors and assigns, and agrees to make the payments or Conversions called for herein in accordance with the terms of this Note.

 

6. Waiver. No waiver of any provision of this Note shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.

 

7. Method of Conversion Share Delivery. On or before the close of business on the seventh (7th) Trading Day following the date of delivery of a Conversion Notice (the “Delivery Date”), Borrower shall, provided it is DWAC Eligible at such time, deliver or cause its transfer agent to deliver the applicable Conversion Shares electronically via DWAC to the account designated by Lender in the applicable Conversion Notice. If Borrower is not DWAC Eligible, it shall deliver to Lender or its broker (as designated in the Conversion Notice), via reputable overnight courier, a certificate representing the number of shares of Common Stock equal to the number of Conversion Shares to which Lender shall be entitled, registered in the name of Lender or its designee.

 

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8. Ownership Limitation. Notwithstanding anything to the contrary contained in this Note or the other Transaction Documents, Borrower shall not effect any conversion of this Note to the extent that after giving effect to such conversion would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance). For purposes of this section, beneficial ownership of Common Stock will be determined pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended.

 

9. Opinion of Counsel. In the event that an opinion of counsel is needed for any matter related to this Note, Lender shall have such opinion provided by its counsel.

 

10. Governing Law; Venue. This Note shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and wholly performed in that jurisdiction. Each party hereto submits to the exclusive jurisdiction of any state or federal court sitting in San Diego County, California in any proceeding arising out of or relating to this Note and agrees that all claims in respect of the proceeding may be heard and determined in any such court and hereby expressly submits to the personal jurisdiction and venue of such court for the purposes hereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum. Each party hereto hereby irrevocably consents to the service of process of any of the aforementioned courts in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to its address as set forth herein, such service to become effective ten (10) days after such mailing. The parties expressly and irrevocably waive the right to a trial by jury in any and all actions or proceedings brought with respect to this Note and with respect to any claims arising out of or related to this Note.

 

11. Cancellation. After repayment or conversion of the entire outstanding balance, this Note shall be deemed paid in full, shall automatically be deemed canceled, and shall not be reissued.

 

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

 

13. Assignments. Neither party may assign this Note without the consent of the other party. Any assignment or assumption in connection with a Change of Control is subject to Lender’s approval, unless this Note is paid in full in connection with such Change of Control..

 

14. Notices. Whenever notice is required to be given under this Note, such notice shall be given to such address as has been provided to the other party. Borrower shall provide Lender with prompt written notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, Borrower will give written notice to Lender (i) as soon as practicable upon each adjustment of the Conversion Price and the number of Conversion Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, or (B) for determining rights to vote with respect to any Change of Control, dissolution or liquidation, provided in each case that such information, and (iii) at least ten (10) Trading Days prior to the consummation of any Change of Control.

 

15. Severability. If any part of this Note is construed to be in violation of any law, such part shall be modified to achieve the objective of Borrower and Lender to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect.

 

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3

 

 

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

 

  BORROWER:
   
  HUMBL, Inc.
   
  By:  
    Brian Foote, President and CEO

 

ACKNOWLEDGED, ACCEPTED AND AGREED:  
   
LENDER:  
   
KWP 50, LLC  
   
By:    
  Kendall Prince, Manager  

 

[Signature Page to Convertible Promissory Note]

 

 

 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

A1. “DTC” means the Depository Trust Company or any successor thereto.

 

A2. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A3. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A4. “DWAC Eligible” means that (a) Borrower’s Common Stock is eligible at DTC for full services pursuant to DTC’s operational arrangements, including without limitation transfer through DTC’s DWAC system; (b) Borrower has been approved (without revocation) by DTC’s underwriting department; (c) Borrower’s transfer agent is approved as an agent in the DTC/FAST Program; (d) the Conversion Shares are otherwise eligible for delivery via DWAC; and (e) Borrower’s transfer agent does not have a policy prohibiting or limiting delivery of the Conversion Shares via DWAC.

 

A5. “Trading Day” means any day on which Borrower’s market is open for trading.

 

A6. “Change of Control” means a merger or consolidation with another entity in which the Company’s stockholders do not own more than 50% of the outstanding voting power of the surviving entity, or the disposition of all or substantially all of the Company’s assets.

 

[Remainder of page intentionally left blank]

 

Attachment 1 to Convertible Promissory Note, Page 1

 

 

EXHIBIT A

 

KWP 50, LLC

 

HUMBL, Inc. Date:    

Attn: Brian Foote

600 B. Street, Suite 300

San Diego, California 92101

 

CONVERSION NOTICE

 

The above-captioned Lender hereby gives notice to HUMBL, Inc., a Delaware corporation (the “Borrower”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on May 19, 2021 (the “Note”), that Lender elects to convert the portion of the Note balance set forth below into fully paid and non-assessable shares of Common Stock of Borrower as of the date of conversion specified below. Said conversion shall be based on the Conversion Price set forth below. In the event of a conflict between this Conversion Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of Conversion Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.

 

A. Date of Conversion:          
B. Conversion #:          
C. Conversion Amount:          
D. Conversion Price:          
E. Conversion Shares:     (C divided by D)  
F. Remaining Outstanding Balance of Note:          

 

Please transfer the Conversion Shares electronically (via DWAC) to the following account:

 

Broker:     Address:  
DTC#:        
Account #:        
Account Name:        

 

To the extent the Conversion Shares are not able to be delivered to Lender electronically via the DWAC system, deliver all such certificated shares to Lender via reputable overnight courier after receipt of this Conversion Notice (by facsimile transmission or otherwise) to:

 

   
   
   

 

Sincerely,  
   
Lender:  
   
By:    
  Kendall Prince, Manager  

 

 

Exhibit A to Convertible Promissory Note, Page 1

 

 

 

Exhibit 10.22

 

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF THIS WARRANT OR SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THIS WARRANT OR SUCH SECURITIES, AS APPLICABLE, MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS.

 

HUMBL, INC.

 

WARRANT TO PURCHASE SHARES OF COMMON STOCK

 

1. Issuance. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by HUMBL, Inc., a Delaware corporation, its successors and assigns (“Company”), KWP 50, LLC, an Arizona limited liability company, its successors and/or registered assigns (“Investor”), is hereby granted the right to purchase at any time on or after the Issue Date (as defined below) until May 19, 2023 (the “Expiration Date”), 975,000 fully paid and non-assessable shares (the “Warrant Shares”) of Company’s common stock, par value $0.00001 per share (the “Common Stock”), as such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant to Purchase Shares of Common Stock (this “Warrant”).

 

This Warrant is being issued pursuant to the terms of that certain Securities Purchase Agreement dated May 19, 2021, to which Company and Investor are parties (as the same may be amended from time to time, the “Purchase Agreement”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference. This Warrant was issued to Investor on May 19, 2021 (the “Issue Date”).

 

2. Exercise of Warrant.

 

2.1. General.

 

(a) This Warrant is exercisable in whole or in part at any time and from time to time commencing on the Issue Date and ending on the Expiration Date. Such exercise shall be effectuated by submitting to Company (either by delivery to Company or by email or facsimile transmission) a completed and signed Notice of Exercise substantially in the form attached to this Warrant as Exhibit A (the “Notice of Exercise”). The date a Notice of Exercise is delivered to Company shall be the “Exercise Date,” provided that, if such exercise represents the full exercise of the outstanding balance of this Warrant, Investor shall tender this Warrant to Company within five (5) Trading Days thereafter, but only if the Warrant Shares to be delivered pursuant to the Notice of Exercise have been delivered to Investor as of such date. The Notice of Exercise shall be executed by Investor and shall indicate the number of Warrant Shares to be issued pursuant to such exercise

  

 

 

 

(b) The Exercise Price per share of Common Stock for the Warrant Shares shall be payable, at the election of Investor, in cash or by certified or official bank check or by wire transfer in accordance with instructions provided by Company at the request of Investor.

 

(c) Upon the appropriate payment to Company of the Exercise Price for the Warrant Shares, Company shall promptly, but in no case later than the date that is ten (10) Trading Days following the date the Exercise Price is paid to Company (the “Delivery Date”), deliver or cause Company’s Transfer Agent to deliver the applicable Warrant Shares electronically via the DWAC system to the account designated by Investor on the Notice of Exercise. If for any reason Company is not able to so deliver the Warrant Shares via the DWAC system, Company shall instead, on or before the applicable date set forth above in this subsection, issue and deliver to Investor or its broker (as designated in the Notice of Exercise), via reputable overnight courier, a certificate, registered in the name of Investor or its designee, representing the applicable number of Warrant Shares.

 

(d) In no event may this Warrant be net cash settled.

 

2.2. Ownership Limitation. Notwithstanding anything to the contrary contained in this Warrant, if at any time Lender shall or would be issued shares of Common Stock under this Warrant, but such issuance would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance) (the “Maximum Percentage”), then Borrower shall not issue to Lender shares of Common Stock which would exceed the Maximum Percentage. The ownership limitation is enforceable, unconditional and non-waivable and shall apply to all affiliates and assigns of Lender.

 

3. Mutilation or Loss of Warrant. Upon receipt by Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, Company will execute and deliver to Investor a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void.

 

4. Rights of Investor. Investor shall not, by virtue of this Warrant alone, be entitled to any rights of a stockholder in Company, either at law or in equity, and the rights of Investor with respect to or arising under this Warrant are limited to those expressed in this Warrant and are not enforceable against Company except to the extent set forth herein

 

5. Adjustments. If Company shall issue any shares of Common Stock as a stock dividend or subdivide the number of outstanding shares of Common Stock into a greater number of shares, then, in either such case, the Exercise Price in effect before such dividend or subdivision shall be proportionately reduced and the number of Warrant Shares at that time issuable pursuant to the exercise of this Warrant shall be proportionately increased; and, conversely, if Company shall contract the number of outstanding shares of Common Stock by combining such shares into a smaller number of shares, then the Exercise Price in effect before such combination shall be proportionately increased and the number of Warrant Shares at that time issuable pursuant to the exercise or conversion of this Warrant shall be proportionately decreased. Each adjustment in the number of shares of Warrant Stock issuable shall be to the nearest whole share.

 

6. Certificate as to Adjustments. In the case of any adjustment in the Exercise Price or Warrant Shares, Company will promptly give written notice to Investor in the form of a certificate, certified and confirmed by an officer of the Company, setting forth the adjustment in reasonable detail.

 

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7. Transfer to Comply with the Securities Act. This Warrant and the Warrant Shares have not been registered under the Securities Act of 1933, as amended (the “1933 Act”). The Warrant Shares may not be sold, transferred, pledged or hypothecated without (a) an effective registration statement under the 1933 Act relating to such security or (b) an opinion of counsel reasonably satisfactory to Company that registration is not required under the 1933 Act. Until such time as registration has occurred under the 1933 Act, each certificate for this Warrant and any Warrant Shares shall contain a legend, in form and substance satisfactory to counsel for Company, setting forth the restrictions on transfer contained in this Section 7. This Warrant may be transferred by Investor so long as such transfer is done in compliance with applicable securities laws. Upon receipt of a duly executed assignment of this Warrant, Company shall register the transferee thereon as the new holder on the books and records of Company and such transferee shall be deemed a “registered holder” or “registered assign” for all purposes hereunder, and shall have all the rights of Investor under this Warrant. Until this Warrant is transferred on the books of Company, Company may treat Investor as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary

 

8. Registration. Company agrees to register the Warrant Shares on a Form S-1 Registration Statement and to file such Registration Statement within ninety (90) days of the Issue Date.

 

9. Notices. Any notice required or permitted hereunder shall be given in the manner provided in the subsection titled “Notices” in the Purchase Agreement, the terms of which are incorporated herein by reference. Company shall provide Investor with prompt written notice of all actions taken pursuant to this Warrant, including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, Company will give written notice to Investor (i) as soon as practicable upon each adjustment of the Exercise Price and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, or (B) for determining rights to vote with respect to any Change of Control, dissolution or liquidation, provided in each case that such information, and (iii) at least ten (10) Trading Days prior to the consummation of any Change of Control.

 

10. Supplements and Amendments; Whole Agreement. This Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant, together with the Purchase Agreement, contains the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings with respect to the subject matter hereof and thereof other than as expressly contained herein and therein.

 

11. Governing Law; Venue. This Warrant shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of Delaware. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state and federal courts in San Diego County, California. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The prevailing party in any dispute arising under this Agreement shall be entitled to recover from the other party its reasonable attorney’s fees and costs.

 

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12. Waiver of Jury Trial. EACH OF COMPANY AND INVESTOR IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS WARRANT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, COMPANY ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY.

 

13. Counterparts. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Electronic signatures shall be considered original signatures for all purposes hereof.

 

14. Attorneys’ Fees. In the event of any litigation or dispute arising from this Warrant, the parties agree that the prevailing party shall be entitled to an additional award of the full amount of the reasonable attorneys’ fees and expenses paid by said prevailing party in connection with litigation or dispute.

 

15. Severability. Whenever possible, each provision of this Warrant shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be invalid or unenforceable in any jurisdiction, such provision shall be modified to achieve the objective of the parties to the fullest extent permitted and such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Warrant or the validity or enforceability of this Warrant in any other jurisdiction.

 

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

 

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IN WITNESS WHEREOF, Company has caused this Warrant to be duly executed as of the Issue Date.

 

  COMPANY:
   
  HUMBL, Inc.
   
  By:  
    Brian Foote, President and CEO

 

[Signature Page to Warrant] 

 

 

 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

A1. “DTC” means the Depository Trust Company or any successor thereto.

 

A2. “DTC Eligible” means, with respect to the Common Stock, that such Common Stock is eligible to be deposited in certificate form at the DTC, cleared and converted into electronic shares by the DTC and held in the name of the clearing firm servicing Investor’s brokerage firm for the benefit of Investor.

 

A3. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A4. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A5. “Exercise Price” means $1.00 per share of Common Stock, as the same may be adjusted from time to time pursuant to the terms and conditions of this Warrant.

 

A6. “Trading Day” means any day the New York Stock Exchange is open for trading.

 

A7. “Change of Control” means a merger or consolidation with another entity in which the Company’s stockholders do not own more than 50% of the outstanding voting power of the surviving entity, or the disposition of all or substantially all of the Company’s assets.

 

Attachment 1 to Warrant, Page 1

 

 

EXHIBIT A

 

NOTICE OF EXERCISE OF WARRANT

 

TO: HUMBL, INC.        
  ATTN:      
  VIA FAX TO: (         ) EMAIL:  

 

The undersigned hereby irrevocably elects to exercise the right, represented by the Warrant to Purchase Shares of Common Stock dated as of May 19, 2021 (the “Warrant”), to purchase shares of the common stock, $0.00001 par value (“Common Stock”), of HUMBL, Inc., and tenders herewith payment in accordance with Section 2 of the Warrant, as follows:

 

  Warrant Shares:  
       
  Exercise Price: $  
       
  Purchase Price: $ = (Exercise Price x Warrant Shares)
       
  Payment is being made by:    

 

    enclosed check
      wire transfer
      other

 

Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Warrant.

 

It is the intention of Investor to comply with the provisions of Section 2.2 of the Warrant regarding certain limits on Investor’s right to receive shares thereunder. Investor believes this exercise complies with the provisions of such Section 2.2. Nonetheless, to the extent that, pursuant to the exercise effected hereby, Investor would receive more shares of Common Stock than permitted under Section 2.2, Company shall not be obligated and shall not issue to Investor such excess shares until such time, if ever, that Investor could receive such excess shares without violating, and in full compliance with, Section 2.2 of the Warrant.

 

As contemplated by the Warrant, this Notice of Exercise is being sent by email to the officer indicated above.

 

If this Notice of Exercise represents the full exercise of the entire Warrant, Investor will surrender (or cause to be surrendered) the Warrant to Company at the address indicated above by express courier within five (5) Trading Days after the Warrant Shares to be delivered pursuant to this Notice of Exercise have been delivered to Investor.

 

To the extent the Warrant Shares are not able to be delivered to Investor via the DWAC system, please deliver certificates representing the Warrant Shares to Investor via reputable overnight courier after receipt of this Notice of Exercise (by facsimile transmission or otherwise) to:

 

   
   
     

 

Dated:  
     
 
[Name of Investor]  

 

By:  

 

Exhibit A to Warrant, Page 1

 

 

 

Exhibit 10.23

 

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

 

CONVERTIBLE PROMISSORY NOTE

 

Effective Date: May 19, 2021 U.S. $153,000.00

 

FOR VALUE RECEIVED, HUMBL, Inc., a Delaware corporation (“Borrower”), promises to pay to the order of North Falls Investments, L.P., a Utah limited partnership, or its successors or assigns (“Lender”), $153,000.00 and any interest accrued hereunder on the date that is twenty-two (22) months from the Effective Date (the “Maturity Date”) in accordance with the terms set forth herein and to pay interest on the outstanding balance at the rate of eight percent (8%) per annum from the Effective Date until the same is paid in full. This Convertible Promissory Note (this “Note”) is issued and made effective as of May 19, 2021 (the “Effective Date”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.

 

1. Payment; Prepayment.

 

1.1. Payment. All payments owing hereunder shall be in lawful money of the United States of America or Conversion Shares (as defined below), as provided for herein, and delivered to Lender at the address or bank account furnished to Borrower for that purpose. All payments shall be applied first to (a) costs of collection, if any, then to (b) fees and charges, if any, then to (c) accrued and unpaid interest, and thereafter, to (d) principal.

 

1.2. Prepayment. Notwithstanding the foregoing, Borrower shall have the right to prepay all or any portion of the outstanding balance without penalty.

 

2. Security. This Note is unsecured.

 

3. Lender Optional Conversion.

 

3.1. Conversions. Lender has the right at any time after the Effective Date until the outstanding balance has been paid in full, at its election, to convert (“Conversion”) all or any portion of the outstanding balance into shares (“Conversion Shares”) of fully paid and non-assessable common stock, $0.00001 par value per share (“Common Stock”), of Borrower as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the “Conversion Amount”) divided by the Conversion Price (as defined below). Conversion notices in the form attached hereto as Exhibit A (each, a “Conversion Notice”) may be delivered from time to time by Lender to Borrower, and all Conversions shall be cashless and not require further payment from Lender. Borrower shall deliver the Conversion Shares from any Conversion to Lender in accordance with Section 7 below.

 

 
 

 

3.2. Conversion Price. The price at which Lender has the right to convert all or any portion of the outstanding balance into Common Stock is $1.00 per share of Common Stock (the “Conversion Price”). The Conversion Price will automatically be adjusted in the event Borrower consummates a stock split, stock combination or other similar change to the number of outstanding shares of Common Stock.

 

4. Defaults and Remedies.

 

4.1. Defaults. The following are events of default under this Note (each, an “Event of Default”): (a) Borrower fails to pay any principal, interest, fees, charges, or any other amount when due and payable hereunder; (b) Borrower fails to deliver any Conversion Shares in accordance with the terms hereof; (c) a receiver, trustee or other similar official shall be appointed over Borrower or a material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed or discharged within sixty (60) days; (d) Borrower makes a general assignment for the benefit of creditors; (e) Borrower files a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); or (f) an involuntary bankruptcy proceeding is commenced or filed against Borrower. Notwithstanding the foregoing, the occurrence of any of the foregoing events will not be considered an Event of Default unless Borrower fails to cure such event within ten (10) Trading Days of its receipt of written notice from Lender.

 

4.2. Remedies. Following an Event of Default, Lender may accelerate this Note by written notice to Borrower with the outstanding balance becoming immediately due and payable. Nothing herein shall limit Lender’s right to pursue any other remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to Borrower’s failure to timely deliver Conversion Shares upon Conversion of the Note as required pursuant to the terms hereof.

 

5. Unconditional Obligation; No Offset. Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset, deduction or counterclaim of any kind. Borrower hereby waives any rights of offset it now has or may have hereafter against Lender, its successors and assigns, and agrees to make the payments or Conversions called for herein in accordance with the terms of this Note.

 

6. Waiver. No waiver of any provision of this Note shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.

 

7. Method of Conversion Share Delivery. On or before the close of business on the seventh (7th) Trading Day following the date of delivery of a Conversion Notice (the “Delivery Date”), Borrower shall, provided it is DWAC Eligible at such time, deliver or cause its transfer agent to deliver the applicable Conversion Shares electronically via DWAC to the account designated by Lender in the applicable Conversion Notice. If Borrower is not DWAC Eligible, it shall deliver to Lender or its broker (as designated in the Conversion Notice), via reputable overnight courier, a certificate representing the number of shares of Common Stock equal to the number of Conversion Shares to which Lender shall be entitled, registered in the name of Lender or its designee.

 

8. Ownership Limitation. Notwithstanding anything to the contrary contained in this Note or the other Transaction Documents, Borrower shall not effect any conversion of this Note to the extent that after giving effect to such conversion would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance). For purposes of this section, beneficial ownership of Common Stock will be determined pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended.

 

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9. Opinion of Counsel. In the event that an opinion of counsel is needed for any matter related to this Note, Lender shall have such opinion provided by its counsel.

 

10. Governing Law; Venue. This Note shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and wholly performed in that jurisdiction. Each party hereto submits to the exclusive jurisdiction of any state or federal court sitting in San Diego County, California in any proceeding arising out of or relating to this Note and agrees that all claims in respect of the proceeding may be heard and determined in any such court and hereby expressly submits to the personal jurisdiction and venue of such court for the purposes hereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum. Each party hereto hereby irrevocably consents to the service of process of any of the aforementioned courts in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to its address as set forth herein, such service to become effective ten (10) days after such mailing. The parties expressly and irrevocably waive the right to a trial by jury in any and all actions or proceedings brought with respect to this Note and with respect to any claims arising out of or related to this Note.

 

11. Cancellation. After repayment or conversion of the entire outstanding balance, this Note shall be deemed paid in full, shall automatically be deemed canceled, and shall not be reissued.

 

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

 

13. Assignments. Neither party may assign this Note without the consent of the other party.

 

14. Notices. Whenever notice is required to be given under this Note, such notice shall be given to such address as has been provided to the other party.

 

15. Severability. If any part of this Note is construed to be in violation of any law, such part shall be modified to achieve the objective of Borrower and Lender to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect.

 

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

 

3
 

 

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

 

      BORROWER:
       
      HUMBL, Inc.
       
      By:  
        Brian Foote, President and CEO
         
ACKNOWLEDGED, ACCEPTED AND AGREED:      
       
LENDER:      
       
North Falls Investments, L.P.      
                                          
By:        
  Kendal Madsen, Manager of General Partner      

 

[Signature Page to Convertible Promissory Note]

 

 
 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

A1. “DTC” means the Depository Trust Company or any successor thereto.

 

A2. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A3. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A4. “DWAC Eligible” means that (a) Borrower’s Common Stock is eligible at DTC for full services pursuant to DTC’s operational arrangements, including without limitation transfer through DTC’s DWAC system; (b) Borrower has been approved (without revocation) by DTC’s underwriting department; (c) Borrower’s transfer agent is approved as an agent in the DTC/FAST Program; (d) the Conversion Shares are otherwise eligible for delivery via DWAC; and (e) Borrower’s transfer agent does not have a policy prohibiting or limiting delivery of the Conversion Shares via DWAC.

 

A5. “Trading Day” means any day on which Borrower’s market is open for trading.

 

[Remainder of page intentionally left blank]

 

Attachment 1 to Convertible Promissory Note, Page 1
 

 

EXHIBIT A

 

North Falls Investments, L.P.

 

HUMBL, Inc. Date: ________________
Attn: Brian Foote    
600 B. Street, Suite 300    
San Diego, California 92101    

 

CONVERSION NOTICE

 

The above-captioned Lender hereby gives notice to HUMBL, Inc., a Delaware corporation (the “Borrower”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on May 19, 2021 (the “Note”), that Lender elects to convert the portion of the Note balance set forth below into fully paid and non-assessable shares of Common Stock of Borrower as of the date of conversion specified below. Said conversion shall be based on the Conversion Price set forth below. In the event of a conflict between this Conversion Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of Conversion Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.

 

  A. Date of Conversion: ____________
  B. Conversion #: ____________
  C. Conversion Amount: ____________
  D. Conversion Price: __________
  E. Conversion Shares: _______________ (C divided by D)
  F. Remaining Outstanding Balance of Note: ____________

 

Please transfer the Conversion Shares electronically (via DWAC) to the following account:

 

Broker: __________________________   Address: ________________________
DTC#: __________________________     ________________________
Account #: _______________________     ________________________
Account Name: ___________________      

 

To the extent the Conversion Shares are not able to be delivered to Lender electronically via the DWAC system, deliver all such certificated shares to Lender via reputable overnight courier after receipt of this Conversion Notice (by facsimile transmission or otherwise) to:

 

_____________________________________

_____________________________________

_____________________________________

 

Sincerely,

 

Lender:  
   
By:    
  Kendal Madsen, Manager of General Partner  

 

Exhibit A to Convertible Promissory Note, Page 1

 

 

 

 

Exhibit 10.24

 

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF THIS WARRANT OR SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THIS WARRANT OR SUCH SECURITIES, AS APPLICABLE, MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS.

 

HUMBL, INC.

 

WARRANT TO PURCHASE SHARES OF COMMON STOCK

 

1. Issuance. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by HUMBL, Inc., a Delaware corporation, its successors and assigns (“Company”), North Falls Investments, L.P., a Utah limited partnership, its successors and/or registered assigns (“Investor”), is hereby granted the right to purchase at any time on or after the Issue Date (as defined below) until May 19, 2023 (the “Expiration Date”), 300,000 fully paid and non-assessable shares (the “Warrant Shares”) of Company’s common stock, par value $0.00001 per share (the “Common Stock”), as such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant to Purchase Shares of Common Stock (this “Warrant”).

 

This Warrant is being issued pursuant to the terms of that certain Securities Purchase Agreement dated May 19, 2021, to which Company and Investor are parties (as the same may be amended from time to time, the “Purchase Agreement”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference. This Warrant was issued to Investor on May 19, 2021 (the “Issue Date”).

 

2. Exercise of Warrant.

 

2.1. General.

 

(a) This Warrant is exercisable in whole or in part at any time and from time to time commencing on the Issue Date and ending on the Expiration Date. Such exercise shall be effectuated by submitting to Company (either by delivery to Company or by email or facsimile transmission) a completed and signed Notice of Exercise substantially in the form attached to this Warrant as Exhibit A (the “Notice of Exercise”). The date a Notice of Exercise is delivered to Company shall be the “Exercise Date,” provided that, if such exercise represents the full exercise of the outstanding balance of this Warrant, Investor shall tender this Warrant to Company within five (5) Trading Days thereafter, but only if the Warrant Shares to be delivered pursuant to the Notice of Exercise have been delivered to Investor as of such date. The Notice of Exercise shall be executed by Investor and shall indicate the number of Warrant Shares to be issued pursuant to such exercise

 

 
 

 

(b) The Exercise Price per share of Common Stock for the Warrant Shares shall be payable, at the election of Investor, in cash or by certified or official bank check or by wire transfer in accordance with instructions provided by Company at the request of Investor.

 

(c) Upon the appropriate payment to Company of the Exercise Price for the Warrant Shares, Company shall promptly, but in no case later than the date that is ten (10) Trading Days following the date the Exercise Price is paid to Company (the “Delivery Date”), deliver or cause Company’s Transfer Agent to deliver the applicable Warrant Shares electronically via the DWAC system to the account designated by Investor on the Notice of Exercise. If for any reason Company is not able to so deliver the Warrant Shares via the DWAC system, Company shall instead, on or before the applicable date set forth above in this subsection, issue and deliver to Investor or its broker (as designated in the Notice of Exercise), via reputable overnight courier, a certificate, registered in the name of Investor or its designee, representing the applicable number of Warrant Shares.

 

(d) In no event may this Warrant be net cash settled.

 

2.2. Ownership Limitation. Notwithstanding anything to the contrary contained in this Warrant, if at any time Lender shall or would be issued shares of Common Stock under this Warrant, but such issuance would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance) (the “Maximum Percentage”), then Borrower shall not issue to Lender shares of Common Stock which would exceed the Maximum Percentage. The ownership limitation is enforceable, unconditional and non-waivable and shall apply to all affiliates and assigns of Lender.

 

3. Mutilation or Loss of Warrant. Upon receipt by Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, Company will execute and deliver to Investor a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void.

 

4. Rights of Investor. Investor shall not, by virtue of this Warrant alone, be entitled to any rights of a stockholder in Company, either at law or in equity, and the rights of Investor with respect to or arising under this Warrant are limited to those expressed in this Warrant and are not enforceable against Company except to the extent set forth herein

 

5. Adjustments. If Company shall issue any shares of Common Stock as a stock dividend or subdivide the number of outstanding shares of Common Stock into a greater number of shares, then, in either such case, the Exercise Price in effect before such dividend or subdivision shall be proportionately reduced and the number of Warrant Shares at that time issuable pursuant to the exercise of this Warrant shall be proportionately increased; and, conversely, if Company shall contract the number of outstanding shares of Common Stock by combining such shares into a smaller number of shares, then the Exercise Price in effect before such combination shall be proportionately increased and the number of Warrant Shares at that time issuable pursuant to the exercise or conversion of this Warrant shall be proportionately decreased. Each adjustment in the number of shares of Warrant Stock issuable shall be to the nearest whole share.

 

6. Certificate as to Adjustments. In the case of any adjustment in the Exercise Price or Warrant Shares, Company will promptly give written notice to Investor in the form of a certificate, certified and confirmed by an officer of the Company, setting forth the adjustment in reasonable detail.

 

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7. Transfer to Comply with the Securities Act. This Warrant and the Warrant Shares have not been registered under the Securities Act of 1933, as amended (the “1933 Act”). Neither this Warrant nor the Warrant Shares may be sold, transferred, pledged or hypothecated without (a) an effective registration statement under the 1933 Act relating to such security or (b) an opinion of counsel reasonably satisfactory to Company that registration is not required under the 1933 Act. Until such time as registration has occurred under the 1933 Act, each certificate for this Warrant and any Warrant Shares shall contain a legend, in form and substance satisfactory to counsel for Company, setting forth the restrictions on transfer contained in this Section 7.

 

8. Registration. Company agrees to register the Warrant Shares on a Form S-1 Registration Statement and to file such Registration Statement within ninety (90) days of the Issue Date.

 

9. Notices. Any notice required or permitted hereunder shall be given in the manner provided in the subsection titled “Notices” in the Purchase Agreement, the terms of which are incorporated herein by reference.

 

10. Supplements and Amendments; Whole Agreement. This Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant, together with the Purchase Agreement, contains the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings with respect to the subject matter hereof and thereof other than as expressly contained herein and therein.

 

11. Governing Law; Venue. This Warrant shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of Delaware. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state and federal courts in San Diego County, California. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The prevailing party in any dispute arising under this Agreement shall be entitled to recover from the other party its reasonable attorney’s fees and costs.

 

12. Waiver of Jury Trial. EACH OF COMPANY AND INVESTOR IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS WARRANT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, COMPANY ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY.

 

13. Counterparts. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Electronic signatures shall be considered original signatures for all purposes hereof.

 

14. Attorneys’ Fees. In the event of any litigation or dispute arising from this Warrant, the parties agree that the prevailing party shall be entitled to an additional award of the full amount of the reasonable attorneys’ fees and expenses paid by said prevailing party in connection with litigation or dispute.

 

15. Severability. Whenever possible, each provision of this Warrant shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be invalid or unenforceable in any jurisdiction, such provision shall be modified to achieve the objective of the parties to the fullest extent permitted and such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Warrant or the validity or enforceability of this Warrant in any other jurisdiction.

 

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

 

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IN WITNESS WHEREOF, Company has caused this Warrant to be duly executed as of the Issue Date.

 

  COMPANY:
   
  HUMBL, Inc.
     
  By:  
    Brian Foote, President and CEO

 

[Signature Page to Warrant]

 

 
 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

A1. “DTC” means the Depository Trust Company or any successor thereto.

 

A2. “DTC Eligible” means, with respect to the Common Stock, that such Common Stock is eligible to be deposited in certificate form at the DTC, cleared and converted into electronic shares by the DTC and held in the name of the clearing firm servicing Investor’s brokerage firm for the benefit of Investor.

 

A3. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A4. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A5. “Exercise Price” means $1.00 per share of Common Stock, as the same may be adjusted from time to time pursuant to the terms and conditions of this Warrant.

 

A6. “Trading Day” means any day the New York Stock Exchange is open for trading.

 

Attachment 1 to Warrant, Page 1
 

 

EXHIBIT A

 

NOTICE OF EXERCISE OF WARRANT

 

TO: HUMBL, INC.
  ATTN: _______________
  VIA FAX TO: (     )______________ EMAIL: ______________

 

The undersigned hereby irrevocably elects to exercise the right, represented by the Warrant to Purchase Shares of Common Stock dated as of May 19, 2021 (the “Warrant”), to purchase shares of the common stock, $0.00001 par value (“Common Stock”), of HUMBL, Inc., and tenders herewith payment in accordance with Section 2 of the Warrant, as follows:

 

Warrant Shares: _______________________

 

Exercise Price: $_______________________

 

Purchase Price: $___________________ = (Exercise Price x Warrant Shares)

 

Payment is being made by:

 

  _____ enclosed check
  _____ wire transfer
_____ other

 

Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Warrant.

 

It is the intention of Investor to comply with the provisions of Section 2.2 of the Warrant regarding certain limits on Investor’s right to receive shares thereunder. Investor believes this exercise complies with the provisions of such Section 2.2. Nonetheless, to the extent that, pursuant to the exercise effected hereby, Investor would receive more shares of Common Stock than permitted under Section 2.2, Company shall not be obligated and shall not issue to Investor such excess shares until such time, if ever, that Investor could receive such excess shares without violating, and in full compliance with, Section 2.2 of the Warrant.

 

As contemplated by the Warrant, this Notice of Exercise is being sent by email to the officer indicated above.

 

If this Notice of Exercise represents the full exercise of the entire Warrant, Investor will surrender (or cause to be surrendered) the Warrant to Company at the address indicated above by express courier within five (5) Trading Days after the Warrant Shares to be delivered pursuant to this Notice of Exercise have been delivered to Investor.

 

To the extent the Warrant Shares are not able to be delivered to Investor via the DWAC system, please deliver certificates representing the Warrant Shares to Investor via reputable overnight courier after receipt of this Notice of Exercise (by facsimile transmission or otherwise) to:

 

_____________________________________

_____________________________________

_____________________________________

 

Dated:             
   
   
[Name of Investor]  

 

By:    

 

Exhibit A to Warrant, Page 1

 

 

Exhibit 10.25

 

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

 

CONVERTIBLE PROMISSORY NOTE

 

Effective Date: May 19, 2021 U.S. $76,500.00

 

FOR VALUE RECEIVED, HUMBL, Inc., a Delaware corporation (“Borrower”), promises to pay to the order of CMP76, LLC, a California limited liability company, or its successors or assigns (“Lender”), $76,500.00 and any interest accrued hereunder on the date that is twenty-two (22) months from the Effective Date (the “Maturity Date”) in accordance with the terms set forth herein and to pay interest on the outstanding balance at the rate of eight percent (8%) per annum from the Effective Date until the same is paid in full. This Convertible Promissory Note (this “Note”) is issued and made effective as of May 19, 2021 (the “Effective Date”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.

 

1. Payment; Prepayment.

 

1.1. Payment. All payments owing hereunder shall be in lawful money of the United States of America or Conversion Shares (as defined below), as provided for herein, and delivered to Lender at the address or bank account furnished to Borrower for that purpose. All payments shall be applied first to (a) costs of collection, if any, then to (b) fees and charges, if any, then to (c) accrued and unpaid interest, and thereafter, to (d) principal.

 

1.2. Prepayment. Borrower may not prepay this Note without Lender’s prior written consent. Notwithstanding the forgoing, this Note may be prepaid immediately prior to the consummation of a Change of Control, provided that the Borrower provided prior written notice of such Change of Control to the Lender pursuant to Section 14.

 

2. Security. This Note is unsecured.

 

3. Lender Optional Conversion.

 

3.1. Conversions. Lender has the right at any time after the Effective Date until the outstanding balance has been paid in full, at its election, to convert (“Conversion”) all or any portion of the outstanding balance into shares (“Conversion Shares”) of fully paid and non-assessable common stock, $0.00001 par value per share (“Common Stock”), of Borrower as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the “Conversion Amount”) divided by the Conversion Price (as defined below). Conversion notices in the form attached hereto as Exhibit A (each, a “Conversion Notice”) may be delivered from time to time by Lender to Borrower, and all Conversions shall be cashless and not require further payment from Lender. Borrower shall deliver the Conversion Shares from any Conversion to Lender in accordance with Section 7 below.

 

 

 

 

3.2. Conversion Price. The price at which Lender has the right to convert all or any portion of the outstanding balance, including accrued but unpaid interest, into Common Stock is $1.00 per share of Common Stock (the “Conversion Price”). The Conversion Price will automatically be adjusted in the event Borrower consummates a stock split, stock combination or other similar change to the number of outstanding shares of Common Stock.

 

4. Defaults and Remedies.

 

4.1. Defaults. The following are events of default under this Note (each, an “Event of Default”): (a) Borrower fails to pay any principal, interest, fees, charges, or any other amount when due and payable hereunder; (b) Borrower fails to deliver any Conversion Shares in accordance with the terms hereof; (c) a receiver, trustee or other similar official shall be appointed over Borrower or a material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed or discharged within sixty (60) days; (d) Borrower makes a general assignment for the benefit of creditors; (e) Borrower files a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); or (f) an involuntary bankruptcy proceeding is commenced or filed against Borrower. Notwithstanding the foregoing, the occurrence of any of the foregoing events will not be considered an Event of Default unless Borrower fails to cure such event within ten (10) Trading Days of its receipt of written notice from Lender.

 

4.2. Remedies. Following an Event of Default, Lender may accelerate this Note by written notice to Borrower with the outstanding balance becoming immediately due and payable. Nothing herein shall limit Lender’s right to pursue any other remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to Borrower’s failure to timely deliver Conversion Shares upon Conversion of the Note as required pursuant to the terms hereof.

 

5. Unconditional Obligation; No Offset. Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset, deduction or counterclaim of any kind. Borrower hereby waives any rights of offset it now has or may have hereafter against Lender, its successors and assigns, and agrees to make the payments or Conversions called for herein in accordance with the terms of this Note.

 

6. Waiver. No waiver of any provision of this Note shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.

 

7. Method of Conversion Share Delivery. On or before the close of business on the seventh (7th) Trading Day following the date of delivery of a Conversion Notice (the “Delivery Date”), Borrower shall, provided it is DWAC Eligible at such time, deliver or cause its transfer agent to deliver the applicable Conversion Shares electronically via DWAC to the account designated by Lender in the applicable Conversion Notice. If Borrower is not DWAC Eligible, it shall deliver to Lender or its broker (as designated in the Conversion Notice), via reputable overnight courier, a certificate representing the number of shares of Common Stock equal to the number of Conversion Shares to which Lender shall be entitled, registered in the name of Lender or its designee.

 

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8. Ownership Limitation. Notwithstanding anything to the contrary contained in this Note or the other Transaction Documents, Borrower shall not effect any conversion of this Note to the extent that after giving effect to such conversion would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance). For purposes of this section, beneficial ownership of Common Stock will be determined pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended.

 

9. Opinion of Counsel. In the event that an opinion of counsel is needed for any matter related to this Note, Lender shall have such opinion provided by its counsel.

 

10. Governing Law; Venue. This Note shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and wholly performed in that jurisdiction. Each party hereto submits to the exclusive jurisdiction of any state or federal court sitting in San Diego County, California in any proceeding arising out of or relating to this Note and agrees that all claims in respect of the proceeding may be heard and determined in any such court and hereby expressly submits to the personal jurisdiction and venue of such court for the purposes hereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum. Each party hereto hereby irrevocably consents to the service of process of any of the aforementioned courts in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to its address as set forth herein, such service to become effective ten (10) days after such mailing. The parties expressly and irrevocably waive the right to a trial by jury in any and all actions or proceedings brought with respect to this Note and with respect to any claims arising out of or related to this Note.

 

11. Cancellation. After repayment or conversion of the entire outstanding balance, this Note shall be deemed paid in full, shall automatically be deemed canceled, and shall not be reissued.

 

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

 

13. Assignments. Neither party may assign this Note without the consent of the other party. Any assignment or assumption in connection with a Change of Control is subject to Lender’s approval, unless this Note is paid in full in connection with such Change of Control.

 

14. Notices. Whenever notice is required to be given under this Note, such notice shall be given to such address as has been provided to the other party. Borrower shall provide Lender with prompt written notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, Borrower will give written notice to Lender (i) as soon as practicable upon each adjustment of the Conversion Price and the number of Conversion Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, or (B) for determining rights to vote with respect to any Change of Control, dissolution or liquidation, provided in each case that such information, and (iii) at least ten (10) Trading Days prior to the consummation of any Change of Control.

 

15. Severability. If any part of this Note is construed to be in violation of any law, such part shall be modified to achieve the objective of Borrower and Lender to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect.

 

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

 

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

 

  BORROWER:
     
  HUMBL, Inc.
     
  By:  
    Brian Foote, President and CEO

 

ACKNOWLEDGED, ACCEPTED AND AGREED:  
     
LENDER:  
     
CMP76, LLC  
                              
By:    
  Christina Pelz, Manager  

 

[Signature Page to Convertible Promissory Note]

 

 

 

 

ATTACHMENT 1

 

DEFINITIONS

 

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

 

A1. “DTC” means the Depository Trust Company or any successor thereto.

 

A2. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A3. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A4. “DWAC Eligible” means that (a) Borrower’s Common Stock is eligible at DTC for full services pursuant to DTC’s operational arrangements, including without limitation transfer through DTC’s DWAC system; (b) Borrower has been approved (without revocation) by DTC’s underwriting department; (c) Borrower’s transfer agent is approved as an agent in the DTC/FAST Program; (d) the Conversion Shares are otherwise eligible for delivery via DWAC; and (e) Borrower’s transfer agent does not have a policy prohibiting or limiting delivery of the Conversion Shares via DWAC.

 

A5. “Trading Day” means any day on which Borrower’s market is open for trading.

 

A6. “Change of Control” means a merger or consolidation with another entity in which the Company’s stockholders do not own more than 50% of the outstanding voting power of the surviving entity, or the disposition of all or substantially all of the Company’s assets.

 

[Remainder of page intentionally left blank]

  

Attachment 1 to Convertible Promissory Note, Page 1

   

 

EXHIBIT A

 

CMP76, LLC

 

HUMBL, Inc. Date: _________________

Attn: Brian Foote

600 B. Street, Suite 300

San Diego, California 92101

 

CONVERSION NOTICE

 

The above-captioned Lender hereby gives notice to HUMBL, Inc., a Delaware corporation (the “Borrower”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on May 19, 2021 (the “Note”), that Lender elects to convert the portion of the Note balance set forth below into fully paid and non-assessable shares of Common Stock of Borrower as of the date of conversion specified below. Said conversion shall be based on the Conversion Price set forth below. In the event of a conflict between this Conversion Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of Conversion Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.

 

  A. Date of Conversion: ____________
     
  B. Conversion #: ____________
     
  C. Conversion Amount: ____________
     
  D. Conversion Price: __________
     
  E.  Conversion Shares: _______________ (C divided by D)
     
  F. Remaining Outstanding Balance of Note: ____________

 

Please transfer the Conversion Shares electronically (via DWAC) to the following account:

 

Broker: _________________________________ Address:             ___________________________________
DTC#: __________________________________               ___________________________________
Account #: ______________________________               ___________________________________
Account Name: ___________________________    

 

To the extent the Conversion Shares are not able to be delivered to Lender electronically via the DWAC system, deliver all such certificated shares to Lender via reputable overnight courier after receipt of this Conversion Notice (by facsimile transmission or otherwise) to:

 

     
     
     

 

Sincerely,  
     
Lender:  
     
By:    
  Christina Pelz, Manager  

 

Exhibit A to Convertible Promissory Note, Page 1

 

 

Exhibit 10.26

  

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF THIS WARRANT OR SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THIS WARRANT OR SUCH SECURITIES, AS APPLICABLE, MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS.

 

HUMBL, INC.

 

WARRANT TO PURCHASE SHARES OF COMMON STOCK

 

1. Issuance. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by HUMBL, Inc., a Delaware corporation, its successors and assigns (“Company”), CMP76, LLC, a California limited liability company, its successors and/or registered assigns (“Investor”), is hereby granted the right to purchase at any time on or after the Issue Date (as defined below) until May 19, 2023 (the “Expiration Date”), 150,000 fully paid and non-assessable shares (the “Warrant Shares”) of Company’s common stock, par value $0.00001 per share (the “Common Stock”), as such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant to Purchase Shares of Common Stock (this “Warrant”).

 

This Warrant is being issued pursuant to the terms of that certain Securities Purchase Agreement dated May 19, 2021, to which Company and Investor are parties (as the same may be amended from time to time, the “Purchase Agreement”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference. This Warrant was issued to Investor on May 19, 2021 (the “Issue Date”).

 

2. Exercise of Warrant.

 

2.1. General.

 

(a) This Warrant is exercisable in whole or in part at any time and from time to time commencing on the Issue Date and ending on the Expiration Date. Such exercise shall be effectuated by submitting to Company (either by delivery to Company or by email or facsimile transmission) a completed and signed Notice of Exercise substantially in the form attached to this Warrant as Exhibit A (the “Notice of Exercise”). The date a Notice of Exercise is delivered to Company shall be the “Exercise Date,” provided that, if such exercise represents the full exercise of the outstanding balance of this Warrant, Investor shall tender this Warrant to Company within five (5) Trading Days thereafter, but only if the Warrant Shares to be delivered pursuant to the Notice of Exercise have been delivered to Investor as of such date. The Notice of Exercise shall be executed by Investor and shall indicate the number of Warrant Shares to be issued pursuant to such exercise

 

   
   

 

(b) The Exercise Price per share of Common Stock for the Warrant Shares shall be payable, at the election of Investor, in cash or by certified or official bank check or by wire transfer in accordance with instructions provided by Company at the request of Investor.

 

(c) Upon the appropriate payment to Company of the Exercise Price for the Warrant Shares, Company shall promptly, but in no case later than the date that is ten (10) Trading Days following the date the Exercise Price is paid to Company (the “Delivery Date”), deliver or cause Company’s Transfer Agent to deliver the applicable Warrant Shares electronically via the DWAC system to the account designated by Investor on the Notice of Exercise. If for any reason Company is not able to so deliver the Warrant Shares via the DWAC system, Company shall instead, on or before the applicable date set forth above in this subsection, issue and deliver to Investor or its broker (as designated in the Notice of Exercise), via reputable overnight courier, a certificate, registered in the name of Investor or its designee, representing the applicable number of Warrant Shares.

 

(d) In no event may this Warrant be net cash settled.

 

2.2. Ownership Limitation. Notwithstanding anything to the contrary contained in this Warrant, if at any time Lender shall or would be issued shares of Common Stock under this Warrant, but such issuance would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance) (the “Maximum Percentage”), then Borrower shall not issue to Lender shares of Common Stock which would exceed the Maximum Percentage. The ownership limitation is enforceable, unconditional and non-waivable and shall apply to all affiliates and assigns of Lender.

 

3. Mutilation or Loss of Warrant. Upon receipt by Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, Company will execute and deliver to Investor a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void.

 

4. Rights of Investor. Investor shall not, by virtue of this Warrant alone, be entitled to any rights of a stockholder in Company, either at law or in equity, and the rights of Investor with respect to or arising under this Warrant are limited to those expressed in this Warrant and are not enforceable against Company except to the extent set forth herein

 

5. Adjustments. If Company shall issue any shares of Common Stock as a stock dividend or subdivide the number of outstanding shares of Common Stock into a greater number of shares, then, in either such case, the Exercise Price in effect before such dividend or subdivision shall be proportionately reduced and the number of Warrant Shares at that time issuable pursuant to the exercise of this Warrant shall be proportionately increased; and, conversely, if Company shall contract the number of outstanding shares of Common Stock by combining such shares into a smaller number of shares, then the Exercise Price in effect before such combination shall be proportionately increased and the number of Warrant Shares at that time issuable pursuant to the exercise or conversion of this Warrant shall be proportionately decreased. Each adjustment in the number of shares of Warrant Stock issuable shall be to the nearest whole share.

 

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6. Certificate as to Adjustments. In the case of any adjustment in the Exercise Price or Warrant Shares, Company will promptly give written notice to Investor in the form of a certificate, certified and confirmed by an officer of the Company, setting forth the adjustment in reasonable detail.

 

7. Transfer to Comply with the Securities Act. This Warrant and the Warrant Shares have not been registered under the Securities Act of 1933, as amended (the “1933 Act”). The Warrant Shares may not be sold, transferred, pledged or hypothecated without (a) an effective registration statement under the 1933 Act relating to such security or (b) an opinion of counsel reasonably satisfactory to Company that registration is not required under the 1933 Act. Until such time as registration has occurred under the 1933 Act, each certificate for this Warrant and any Warrant Shares shall contain a legend, in form and substance satisfactory to counsel for Company, setting forth the restrictions on transfer contained in this Section 7. This Warrant may be transferred by Investor so long as such transfer is done in compliance with applicable securities laws. Upon receipt of a duly executed assignment of this Warrant, Company shall register the transferee thereon as the new holder on the books and records of Company and such transferee shall be deemed a “registered holder” or “registered assign” for all purposes hereunder, and shall have all the rights of Investor under this Warrant. Until this Warrant is transferred on the books of Company, Company may treat Investor as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary.

 

8. Registration. Company agrees to register the Warrant Shares on a Form S-1 Registration Statement and to file such Registration Statement within ninety (90) days of the Issue Date.

 

9. Notices. Any notice required or permitted hereunder shall be given in the manner provided in the subsection titled “Notices” in the Purchase Agreement, the terms of which are incorporated herein by reference. Company shall provide Investor with prompt written notice of all actions taken pursuant to this Warrant, including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, Company will give written notice to Investor (i) as soon as practicable upon each adjustment of the Exercise Price and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, or (B) for determining rights to vote with respect to any Change of Control, dissolution or liquidation, provided in each case that such information, and (iii) at least ten (10) Trading Days prior to the consummation of any Change of Control.

 

10. Supplements and Amendments; Whole Agreement. This Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant, together with the Purchase Agreement, contains the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings with respect to the subject matter hereof and thereof other than as expressly contained herein and therein.

 

11. Governing Law; Venue. This Warrant shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of Delaware. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state and federal courts in San Diego County, California. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The prevailing party in any dispute arising under this Agreement shall be entitled to recover from the other party its reasonable attorney’s fees and costs.

 

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12. Waiver of Jury Trial. EACH OF COMPANY AND INVESTOR IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS WARRANT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, COMPANY ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY.

 

13. Counterparts. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Electronic signatures shall be considered original signatures for all purposes hereof.

 

14. Attorneys’ Fees. In the event of any litigation or dispute arising from this Warrant, the parties agree that the prevailing party shall be entitled to an additional award of the full amount of the reasonable attorneys’ fees and expenses paid by said prevailing party in connection with litigation or dispute.

 

15. Severability. Whenever possible, each provision of this Warrant shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be invalid or unenforceable in any jurisdiction, such provision shall be modified to achieve the objective of the parties to the fullest extent permitted and such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Warrant or the validity or enforceability of this Warrant in any other jurisdiction.

 

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

 

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IN WITNESS WHEREOF, Company has caused this Warrant to be duly executed as of the Issue Date.

 

  COMPANY:
     
  HUMBL, Inc.
     
  By:  
    Brian Foote, President and CEO

 

[Signature Page to Warrant]

 

 

 

 

ATTACHMENT 1

 

DEFINITIONS

 

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

 

A1. “DTC” means the Depository Trust Company or any successor thereto.

 

A2. “DTC Eligible” means, with respect to the Common Stock, that such Common Stock is eligible to be deposited in certificate form at the DTC, cleared and converted into electronic shares by the DTC and held in the name of the clearing firm servicing Investor’s brokerage firm for the benefit of Investor.

 

A3. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A4. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A5. “Exercise Price” means $1.00 per share of Common Stock, as the same may be adjusted from time to time pursuant to the terms and conditions of this Warrant.

 

A6. “Trading Day” means any day the New York Stock Exchange is open for trading.

 

A7. “Change of Control” means a merger or consolidation with another entity in which the Company’s stockholders do not own more than 50% of the outstanding voting power of the surviving entity, or the disposition of all or substantially all of the Company’s assets.

 

Attachment 1 to Warrant, Page 1

   

 

EXHIBIT A

 

NOTICE OF EXERCISE OF WARRANT

 

TO: HUMBL, INC.
  ATTN: _______________
  VIA FAX TO: (     )                                     EMAIL: ______________

 

The undersigned hereby irrevocably elects to exercise the right, represented by the Warrant to Purchase Shares of Common Stock dated as of May 19, 2021 (the “Warrant”), to purchase shares of the common stock, $0.00001 par value (“Common Stock”), of HUMBL, Inc., and tenders herewith payment in accordance with Section 2 of the Warrant, as follows:

 

Warrant Shares: _______________________

 

Exercise Price: $_______________________

 

Purchase Price: $___________________ = (Exercise Price x Warrant Shares)

 

Payment is being made by:

 

_____            enclosed check

_____            wire transfer

_____            other

 

Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Warrant.

 

It is the intention of Investor to comply with the provisions of Section 2.2 of the Warrant regarding certain limits on Investor’s right to receive shares thereunder. Investor believes this exercise complies with the provisions of such Section 2.2. Nonetheless, to the extent that, pursuant to the exercise effected hereby, Investor would receive more shares of Common Stock than permitted under Section 2.2, Company shall not be obligated and shall not issue to Investor such excess shares until such time, if ever, that Investor could receive such excess shares without violating, and in full compliance with, Section 2.2 of the Warrant.

 

As contemplated by the Warrant, this Notice of Exercise is being sent by email to the officer indicated above.

 

If this Notice of Exercise represents the full exercise of the entire Warrant, Investor will surrender (or cause to be surrendered) the Warrant to Company at the address indicated above by express courier within five (5) Trading Days after the Warrant Shares to be delivered pursuant to this Notice of Exercise have been delivered to Investor.

 

To the extent the Warrant Shares are not able to be delivered to Investor via the DWAC system, please deliver certificates representing the Warrant Shares to Investor via reputable overnight courier after receipt of this Notice of Exercise (by facsimile transmission or otherwise) to:

 

     
     
     

 

Dated: _____________________
                                     
 
[Name of Investor]  
     
By:    

 

Exhibit A to Warrant, Page 1

 

 

Exhibit 10.27

 

AGREEMENT AND PLAN OF MERGER

 

THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”) is entered into effective as of June 3, 2021, by and among (i) HUMBL, Inc., a Delaware corporation (the “Buyer”), (ii) Tickeri I Acquisition Corp., a Delaware corporation and a wholly-owned, direct subsidiary of Buyer (“First Merger Sub”), (iii) Tickeri II Acquisition Corp., a Delaware corporation and a wholly-owned, direct subsidiary of Buyer (“Second Merger Sub”, and with First Merger Sub, each a “Merger Sub”, and together, the “Merger Subs”), (iv) Tickeri, Inc., a Delaware corporation (the “Company”), (v) Javier Gonzalez, an individual (“Javier”), and (vi) Juan Gonzalez, an individual (“Juan,” and together with Javier, the “Sellers”). Each of the Buyer, the Merger Subs, the Company and the Sellers are referred to herein individually as a “Party” and collectively as the “Parties.”

 

A. Javier owns 4,250,000 shares of Common Stock of the Company, par value $0.00001 (the “Company Common Stock”), and Juan owns 4,250,000 shares of the Company Common Stock (collectively, the “Tickeri Shares”).

 

B. The Company, Buyer and First Merger Sub intend to effect a merger of First Merger Sub with and into the Company (the “First Merger”) in accordance with this Agreement and the General Corporation Law of the State of Delaware (the “DGCL”), whereupon consummation of the First Merger, First Merger Sub shall cease to exist and the Company shall become a wholly-owned subsidiary of Buyer.

 

C. As part of the same overall transaction, promptly following the First Merger, the Company, Buyer and Second Merger Sub intend to effect a merger of the Company with and into Second Merger Sub (the “Second Merger” and, together with the First Merger, the “Mergers”) in accordance with this Agreement and the DGCL whereupon consummation of the Second Merger, the Company shall cease to exist and Second Merger Sub shall survive the Second Merger as a continuing wholly-owned subsidiary of the Buyer.

 

D. The Parties intend that, for U.S. federal income tax purposes, the Mergers, taken together, qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and this Agreement will constitute, and is hereby adopted as, a “plan of reorganization” within the meaning of Sections 361 and 368 of the Code and the Treasury Regulations promulgated thereunder.

 

NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the Parties agree as follows:

 

ARTICLE I

THE CONTEMPLATED TRANSACTIONS

 

1.1. The Mergers.

 

(a) Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the applicable provisions of the DGCL, at the First Effective Time, First Merger Sub shall be merged with and into the Company. As a result of the First Merger, the separate corporate existence of First Merger Sub shall cease, and the Company shall continue as the surviving corporation and as a wholly-owned subsidiary of the Buyer following the First Merger. The Company, as the surviving corporation after the First Merger, is sometimes referred to herein as the “First-Step Surviving Corporation.”

 

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(b) As part of a single integrated plan, at the Second Effective Time, upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the applicable provisions of the DGCL, the First-Step Surviving Corporation shall be merged with and into Second Merger Sub. As a result of the Second Merger, the separate corporate existence of the First-Step Surviving Corporation shall cease, and Second Merger Sub shall continue as the surviving entity and as a wholly-owned subsidiary of the Buyer following the Second Merger. The surviving entity after the Second Merger is sometimes referred to herein as the “Surviving Entity.”

 

1.2. Closing; Effective Times. Subject to the satisfaction or written waiver (where permissible) of the conditions set forth in Article V and Article VI, the closing of the Mergers (the “Closing”) shall take place on the date hereof, unless another date is agreed to in writing by the Buyer and the Sellers. The Closing shall be effected by the electronic exchange of documents and signatures by electronic transmission, or by such other means or at such other place as the parties shall agree. The date on which the Closing actually takes place is referred to in this Agreement as the “Closing Date.” Subject to the terms and conditions of this Agreement, on the Closing Date, the Company shall cause the First Merger to be effected by filing a certificate of merger (the “First Certificate of Merger”) with the Secretary of State of the State of Delaware, in such form and containing such information as is required by, and executed in accordance with, the relevant provisions of the DGCL. The First Merger shall become effective at the date and time of such filing of the Certificate of Merger, or such later time as may be agreed by each of the parties hereto and specified in the First Certificate of Merger (such time being the “First Effective Time”). As soon as practicable following the First Effective Time and in any case on the same day as the First Effective Time, the Buyer and Second Merger Sub shall cause the Second Merger to be effected by filing a certificate of merger (the “Second Certificate of Merger” and, together with the First Certificate of Merger, the “Certificates of Merger”) with the Secretary of State of the State of Delaware, in such form and containing such information as is required by, and executed in accordance with, the relevant provisions of the DGCL. The Second Merger shall become effective at the date and time of such filing of the Second Certificate of Merger, or such later time as may be agreed by each of the parties hereto and specified in the Second Certificate of Merger (such time being the “Second Effective Time”).

 

1.3. Effects of the Mergers.

 

(a) At the First Effective Time, the effect of the First Merger shall be as provided in this Agreement, the First Certificate of Merger and in the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the First Effective Time, all the property, rights, privileges, agreements, powers and franchises, debts, liabilities, duties and obligations of First Merger Sub and the Company shall become the property, rights, privileges, agreements, powers and franchises, debts, liabilities, duties and obligations of the First-Step Surviving Corporation, which shall include the assumption by the First-Step Surviving Corporation of any and all agreements, covenants, duties and obligations of First Merger Sub and the Company set forth in this Agreement to be performed after the First Effective Time.

 

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(b) At the Second Effective Time, the effect of the Second Merger shall be as provided in this Agreement, the Second Certificate of Merger and in the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Second Effective Time, all the property, rights, privileges, agreements, powers and franchises, debts, liabilities, duties and obligations of Second Merger Sub and the First-Step Surviving Corporation shall become the property, rights, privileges, agreements, powers and franchises, debts, liabilities, duties and obligations of the Surviving Entity, which shall include the assumption by the Surviving Entity of any and all agreements, covenants, duties and obligations of the Surviving Entity and the First-Step Surviving Corporation set forth in this Agreement to be performed after the Second Effective Time.

 

1.4. Effects of First Merger on Capital Stock. At the First Effective Time, by virtue of the First Merger and without any action to be taken on the part of the holder of any shares of Company Common Stock or any shares of capital stock of First Merger Sub, or on the part of the Company, the Buyer, First Merger Sub or any other Person, the following shall occur:

 

(a) Capital Stock of First Merger Sub. Each share of capital stock of First Merger Sub issued and outstanding immediately prior to the First Effective Time shall be converted automatically into and become one validly issued, fully paid and non-assessable share of common stock, par value $0.001 per share, of the First-Step Surviving Corporation and collectively shall constitute the only outstanding shares of capital stock of the First-Step Surviving Corporation immediately following the First Merger and each stock certificate of First Merger Sub evidencing ownership of any such shares shall evidence ownership of such shares of common stock of the First-Step Surviving Corporation.

 

(b) Cancellation of Securities Held by the Company and the Buyer. Any shares of Company Common Stock that are owned by the Company (as treasury stock or otherwise), the Buyer or any direct or indirect wholly-owned subsidiary of the Buyer or the Company, in each case, immediately prior to the First Effective Time, shall be automatically cancelled and shall cease to exist and no consideration shall be delivered in exchange therefor.

 

(c) Conversion of the Tickeri Shares. The Tickeri Shares shall, subject to the terms and conditions of this Agreement, be converted into the right to receive the amount of $20,000,000.00 (the “Purchase Price”), payable in the manner set forth in Section 1.4(d) below.

 

(d) Payment of the Purchase Price. The Purchase Price shall be paid pursuant to: (i) the terms and conditions of a Secured Promissory Note in the form attached hereto as Exhibit A made by the Buyer in favor of each Seller in the amount of $5,000,000.00 (the “Notes”); and (ii) the issuance by Buyer of 4,672,897 shares of Common Stock, par value $0.00001, of the Buyer (the “Buyer Common Stock”) to each Seller (together, the “HUMBL Shares”).

 

(e) Deliveries. Within three (3) business days of Closing with respect to the following clause (a) and at the time of the Closing with respect the following clauses (b) – (d), (a) the issuance of the HUMBL Shares by Buyer to Sellers will be effected by an electronic deposit of the HUMBL Shares into the Sellers’ accounts, as applicable, with Buyer’s transfer agent; (b) the Buyer will execute and deliver to the Sellers the Notes in original form; (c) the Sellers will execute and deliver to the Buyer the Employment Agreements (as defined below) in original form; and (d) the Buyer will deliver to the Sellers a Stock Pledge Agreement in substantially the form attached as Exhibit B.

 

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1.5. Rights Cease to Exist. As of the First Effective Time, all shares of Company Common Stock shall no longer be outstanding, shall automatically be cancelled and shall cease to exist and each holder of any shares of Company Common Stock shall cease to have any rights with respect thereto, except the rights set forth in this Article I.

 

1.6. Effect of the Second Merger on Capital Stock. At the Second Effective Time, by virtue of the Second Merger and without any action to be taken on the part of the holder of any shares of Company Common Stock or any shares of capital stock of Second Merger Sub, or on the part of the Company, the Buyer, the Merger Subs or any other Person:

 

(a) each share of capital stock of the First-Step Surviving Corporation outstanding immediately prior to the Second Effective Time shall be cancelled and shall cease to exist and no consideration shall be delivered in exchange therefor; and

 

(b) each share of common stock of Second Merger Sub outstanding immediately prior to the Second Effective Time shall remain unchanged and continue to remain outstanding as a share of common stock in the Surviving Entity and collectively shall constitute the only outstanding shares of capital stock of the Surviving Entity immediately following the Second Merger. At the Second Effective Time, the Buyer shall continue as the sole, direct holder of shares of capital stock of the Surviving Entity.

 

1.7. Valuation of the HUMBL Shares. Buyer and Sellers hereby agree that, solely for the purposes of attributing a value to the HUMBL Shares in connection with the satisfaction of indemnification obligations pursuant to Section 4.4, the HUMBL Shares will have a deemed value per share equal to the volume weighted average price per share of Buyer’s Common Stock on the OTC markets for the ten (10) consecutive trading days ending with the complete trading day ending two (2) trading days prior to the Closing as reported on Bloomberg.

 

1.8. Tax Treatment.

 

(a) Definitions. As used herein, the following terms shall have the meanings ascribed to them in this Section 1.8(a):

 

Contract” means any written or oral contract, agreement, instrument, commitment, arrangement or undertaking of any nature (including leases, subleases, licenses, mortgages, notes, guarantees, sublicenses, subcontracts, letters of intent and purchase orders), including all amendments, supplements, exhibits and schedules thereto.

 

Governmental Authority” means any governmental, regulatory or administrative body, agency, commission or authority, any court, tribunal or judicial authority, any arbitrator or any other public authority, or any department, division, branch or other instrumentality of the foregoing, whether foreign, federal, state or local.

 

Law” means any law, code, statute, regulation, rule, ordinance, requirement, announcement or other binding guidance or action, in each case, of a Governmental Authority.

 

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Legal Proceeding” means any judicial, administrative or arbitral action, claim, litigation, charge, complaint, suit or other proceeding (public or private), whether at law or equity, by or before a Governmental Authority or arbitrator, including any administrative hearing or investigation.

 

Liabilities” means all debts, liabilities, commitments and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured, determined or determinable, liquidated or unliquidated, asserted or unasserted, known or unknown, whenever or however arising, including those arising under applicable Law or any Legal Proceeding or Order of a Governmental Authority and those arising under any Contract, regardless of whether such debt, liability, commitment or obligation would be required to be reflected on a balance sheet prepared in accordance with GAAP or disclosed in the notes thereto.

 

Order” means any decree, order, judgment, writ, award, injunction, stipulation or consent of or by a Governmental Authority.

 

Tax” (and, with correlative meaning, “Taxes” and “Taxable”) means (i) any net income, alternative or add-on minimum tax, gross income, estimated, gross receipts, sales, use, ad valorem, value added, transfer, franchise, fringe benefit, share capital, profits, license, registration, withholding, payroll, social security (or equivalent), employment, unemployment, disability, excise, severance, stamp, occupation, premium, property (real, tangible or intangible), environmental or windfall profit tax, custom duty, escheat amounts or other amounts due in respect of unclaimed property or other tax, governmental fee or other like assessment or charge (direct or reverse) of any kind whatsoever in the nature of a tax, together with any interest or any penalty, addition to tax or additional amount in relation to such tax (whether disputed or not) imposed by any Governmental Authority responsible for the imposition of any such tax (domestic or foreign), and (ii) any Liability for the payment of any amounts of the type described in clause (i) of this sentence as a result of being a member of an affiliated, consolidated, combined, unitary, aggregate or group (including any arrangement for group or consortium relief or similar arrangement) for any Taxable period.

 

Tax Return” means any return, declaration, statement, report, claim for refund, form (including estimated Tax returns and reports, withholding Tax returns and reports, any schedule or attachment, and information returns and reports) or other similar document, including any amendment thereof, filed or required to be filed with, or required to be supplied in copy to, a Governmental Authority with respect to Taxes.

 

(b) The Buyer, the Merger Subs and the Company each intend that, for U.S. federal income tax purposes, the Mergers, taken together, constitute a “reorganization” within the meaning of Section 368(a) of the Code and the Treasury Regulations promulgated thereunder, in accordance with IRS Revenue Ruling 2001-46, 2001-2 CB 321 (the “Intended Tax-Free Treatment”). Each of the Buyer, the Merger Subs and the Company and their respective affiliates and representatives shall, unless otherwise required by applicable Law, (A) file all Tax Returns consistent with the Intended Tax-Free Treatment (including attaching the statement described in Treasury Regulations Section 1.368-3(a) on or with the U.S. federal income Tax Returns of the Company and the Buyer for the taxable year that includes the Mergers), and (B) take no Tax position inconsistent with the Intended Tax-Free Treatment (whether in audits, Tax Returns or otherwise).

 

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(c) This Agreement is intended to constitute, and the parties hereby adopt this Agreement as, a “plan of reorganization” within the meaning Treasury Regulation Sections 1.368-2(g) and 1.368-3(a).

 

(d) Each of the Buyer, the Merger Subs and the Company and their respective affiliates and representatives shall reasonably cooperate and use their respective commercially reasonable efforts to cause the Mergers to qualify for the Intended Tax-Free Treatment, and, except for the performance of this Agreement in accordance with its terms, agree not to take any action or fail to take any action, in either case, that could reasonably be expected to prevent or impede the Mergers from qualifying for the Intended Tax-Free Treatment. Such cooperation and commercially reasonable efforts shall include taking actions (and not failing to take actions) to cause the Mergers to qualify for the Intended Tax-Free Treatment, and not taking actions (or failing to take actions) that could reasonably be expected to prevent or impede the Mergers from qualifying for the Intended Tax-Free Treatment.

 

(e) Notwithstanding any provision herein to the contrary, (i) no party or their respective affiliates shall have any liability to the other party, or any Seller, with respect to the tax treatment or the tax consequences of the Mergers (other than, for the avoidance of doubt, any liability resulting from (A) any tax representations provided by such party pursuant to Section 1.8(d) (if applicable) and (B) any breach of or failure to perform any covenant or agreement of such party provided for in this Agreement including pursuant to Section 1.8(d) (if applicable)) and (ii) each Seller shall be solely responsible with respect to the tax treatment of the Mergers as to such Seller as well as the tax consequences thereof.

 

(f) The Parties acknowledge and agree that the intended fair market value of the HUMBL Shares payable to the Sellers as part of the Purchase Price is $1.07 per share as of the date hereof.

 

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE SELLERS

 

Subject to the disclosures set forth in the disclosure schedule delivered to Buyer concurrently with the Parties’ execution of this Agreement and attached to this Agreement, as a material inducement to the Buyer to enter into this Agreement, Javier and Juan each represent and warrant to the Buyer individually as a Seller as follows:

 

2.1. Organization. Such Seller has full power, authority and legal right and capacity to enter into and perform such Seller’s obligations under this Agreement and each other document contemplated hereby to which he is or will be a party and to consummate the transactions contemplated hereby and thereby.

 

2.2 Binding Obligation. This Agreement and the other documents contemplated hereby to which such Seller is a party have been duly executed and delivered by such Seller and are legal, valid and binding obligations of such Seller, enforceable against such Seller in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights in general.

 

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2.3. No Violation to Result. Other than as would not reasonably be expected to be material to the Company, individually or in the aggregate, the execution, delivery and performance by such Seller of this Agreement and the other documents contemplated hereby and the consummation by such Seller of the transactions contemplated hereby and thereby, do not and will not, directly or indirectly (with or without notice or lapse of time): (i) violate, breach, conflict with, constitute a default under, accelerate or permit the acceleration of the performance required by (x) any note, debt instrument, security agreement, mortgage or any other Contract (defined below) to which such Seller is a party or by which he is bound or (y) any law, judgment, decree, order, rule, regulation, permit, license or other legal requirement of any nation, state or other instrumentality or political subdivision thereof (including any county or city), or any entity exercising executive, legislative, judicial, military, regulatory or administrative functions pertaining to any government (each, a “Government Authority”) which is applicable to such Seller; (ii) give any person, limited liability company, partnership, trust, unincorporated organization, corporation, association, joint stock company, business group, Government Authority or other entity (each, a “Person”) the right to challenge any of the transactions contemplated by this Agreement; or (iii) result in the creation or imposition of any Encumbrance, possibility of Encumbrance, or restriction in favor of any Person upon any of the Tickeri Shares or any of the properties or assets of the Company other than as set forth in the Notes. No filing with, or consent of, any Person is necessary in connection with, nor is any “change of control” provision triggered by, the execution, delivery or performance by such Seller of this Agreement and the other documents contemplated hereby nor the consummation by the Seller of the transactions contemplated hereby or thereby.

 

2.4. Ownership of Tickeri Shares. The Sellers are the sole owners of the Tickeri Shares and have good and marketable title thereto, and the Tickeri Shares are free and clear of all Encumbrances except for those imposed by applicable federal and state securities laws and the security interest pursuant to the Notes. There are no voting trusts or proxies with respect to the voting of the Tickeri Shares.

 

2.5. Entire Interest. The Tickeri Shares owned by such Seller constitute such Seller’s entire interest in the equity of the Company and, upon the Closing, such Seller will have no claim, right or interest in or to any shares of stock or other equity of the Company whatsoever other than as set forth in the Notes.

 

2.6. Brokers. No Person has or will have, as a result of the transactions contemplated by this Agreement, any right, interest or claim against or upon any of the Parties for any commission, fee or other compensation payable as a finder or broker because of any act or omission by the Seller.

 

2.7. Disclosure. To the actual knowledge of such Seller (or the knowledge that such Seller would obtain upon reasonable inquiry and investigation), no representation or warranty by such Seller contained in this Agreement contains any untrue statement of a material fact or omits to state any material fact necessary to make any statement herein or therein not misleading.

 

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2.8. Litigation and Known Claims. No litigation, including any arbitration, investigation or other proceeding of or before any court, arbitrator or governmental or regulatory official, body or authority, is pending or, to the best of such Seller’s knowledge, threatened against such Seller or which relates to the Tickeri Shares or the transactions contemplated by this Agreement, nor does such Seller know of any reasonably likely basis for any such litigation, arbitration, investigation or proceeding, the result of which could adversely affect such Seller, the Tickeri Shares, or the transactions contemplated hereby. As of the Closing Date, to the best of such Seller’s Knowledge, such Seller is not a party to or subject to the provisions of any judgment, order, writ, injunction, settlement, decree or award of any court, arbitrator or governmental or regulatory official, body or authority which affects such Seller, the Tickeri Shares, or the transactions contemplated hereby.

 

2.9. Bankruptcy. Such Seller has not made any assignment for the benefit of creditors, filed any petition in bankruptcy, been adjudicated insolvent or bankrupt, or petitioned or applied to any tribunal for any receiver, conservator or trustee of the Company or any of the Company’s property or assets.

 

2.10. Information. Such Seller believes he has received all the information he considers necessary or appropriate for deciding whether to enter into this Agreement and perform the obligations set forth herein. Such Seller hereby acknowledges that any future sale of shares of the Company’s capital stock could be at a premium or a discount to the deemed value of the HUMBL Shares, and such sale could occur at any time or not at all. Such Seller hereby acknowledges that he has not relied on any representation or statement of the Buyer or the Company, other than those set forth in this Agreement, in making his investment decision to sell the Tickeri Shares.

 

2.11. Valuation of Tickeri Shares. Such Seller acknowledges that (i) the per share Purchase Price is not based on an independent valuation of the Tickeri Shares or on any other commonly used valuation method and may not reflect the fair market value of the Tickeri Shares and (ii) he has had the opportunity to make inquiries of the Buyer and the Company and its officers regarding the Company’s and Buyer’s business affairs and financial condition and already has or has acquired sufficient information about the Company and Buyer to reach an informed and knowledgeable decision prior to entering into this Agreement. Such Seller acknowledges that at any time the Company may sell equity, be acquired or elect to liquidate its assets and pay available proceeds to the holders of its capital stock, and/or one or more of the Company’s shareholders may transfer shares of capital stock in each case in a transaction that values the Company’s capital stock at a higher valuation per share than the Purchase Price. In entering into this Agreement and consummating the sale of the Tickeri Shares contemplated hereby, such Seller assumes the risk that the Purchase Price may not reflect the fair market value of the Tickeri Shares or the value of the Tickeri Shares pursuant to any other valuation basis. Such Seller acknowledges that the Purchase Price was determined through an arm’s length negotiation between the Sellers and the Buyer, and that the Sellers did not rely on the Buyer or any other Person to determine the value of the Tickeri Shares.

 

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2.12. Taxes. Such Seller has reviewed with his own tax and legal advisors the federal, state, local and foreign tax consequences, including, but not limited to, capital gains treatment and other related tax provisions that may be applicable to the transaction contemplated by this Agreement. Such Seller relies solely on such advisors and not on any statements or representations of the Buyer or any of its agents, officers, directors, shareholders or employees for the federal, state, local and foreign tax consequences to such Seller that may result from the transaction contemplated by this Agreement. All material federal, state, county, local and other excise, franchise, property, payroll, income, capital stock, sales and use, and other tax returns of the Company which are required to be filed have been duly filed, and such material returns are true and correct in all material respects. The Company is not currently the beneficiary of any extension of time within which to file a material tax return. All material taxes of the Company which have become due or have been assessed against it, including all material taxes, penalties and interest, have been paid. There are no material tax deficiencies or claims presently being asserted against the Company and such Seller knows of no basis for such material claims or deficiencies. Neither the Company nor such Seller has granted any waiver currently in effect of the statute of limitations with respect to any such material taxes or assessments. The Company has complied in all material respects with all applicable laws, rules, and regulations relating to the payment and withholding of taxes and, within the time and in the manner prescribed by law, all material amounts required to be withheld and paid over to the proper governmental authorities have been so withheld and paid over under all applicable laws.

 

2.13. Indebtedness and Guaranties. Except as otherwise disclosed by the Sellers, the Company is not a guarantor or otherwise liable for any material liability (including indebtedness) of any other Person.

 

2.14. Real Property. The Company does not own, nor has ever owned, any real property. The Sellers have provided to Buyer a complete list (the “Real Property List”) of all of the real property and interests therein leased, subleased or otherwise occupied or used by the Company (with all easements and other rights appurtenant to such property, the “Real Property”). For each item of Real Property, the Real Property List also lists the lessor, the lessee, the lease term, the lease rate, and the lease, sublease, or other contract pursuant to which the Company holds a possessory interest in the Real Property and all amendments, renewals, or extensions thereto. The Real Property List sets forth all interests in real property currently used in connection with the business necessary to conduct the business in the ordinary course of business.

 

2.15. Transactions with Related Persons. For the past one (1) year, neither any shareholder, officer, director or employee of the Company nor any Related Person of any of the foregoing has (a) owned any interest in any asset used in the business, (b) been involved in any business or transaction with the Company other than in the ordinary course of business or (c) engaged in competition with the Company. Other than in the ordinary course of business, neither any shareholder, officer, director or employee of the Company nor any Related Person of any of the foregoing (i) is a party to any Contract with, or has any claim or right against, the Company or (ii) has any indebtedness owing to the Company. To the knowledge of such Seller, the Company does not have (A) any material claim or right against any shareholder, officer, director or employee of the Company or any Related Person of any of the foregoing or (B) any material indebtedness owing to any shareholder, officer, director or employee of the Company or any Related Person of any of the foregoing. For purposes of this Section, “Related Person” means (a) with respect to a specified individual, any member of such individual’s Family and any affiliate of any member of such individual’s Family, and (b) with respect to a specified person other than an individual, any affiliate of such person and any member of the Family of any such affiliates that are individuals. The “Family” of a specified individual means the individual, such individual’s spouse and former spouses, any other individual who is related to the specified individual or such individual’s spouse or former spouse within the third degree, and any other individual who resides with the specified individual.

 

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2.16. Employees. To the knowledge of such Seller, all former employees and independent contractors have been paid in full any and all compensation due and owing to such persons. The Company has complied with all applicable federal and state laws related to employment, including those related to wage, hours, worker classification and the payment and withholding of taxes and other sums as required by law. All amounts required to be withheld from employees of the Company have been withheld and paid to the appropriate governmental entity and the Company is not liable for any arrears of wages, taxes, penalties, or other sums for failure to comply with any of the foregoing. Such Seller has no knowledge of any employee indicating they will not remain employed by the Company after Closing. To the best of such Seller’s knowledge, neither the Company nor such Seller has committed any act which would be considered discriminatory or would constitute sexual harassment towards any employees of the Company.

 

2.17. Contracts. The Sellers have made available to Buyer a copy of all material contracts or agreements to which the Company is a party or by which the Company or any of its assets, businesses or operations are bound or affected (the “Contracts”). Except as otherwise disclosed to Buyer, the Company is not a party to or bound by any contract or agreement which would require the consent of the other party for the Company to enter into this Agreement for which such consent has not been obtained by the date hereof. Except as otherwise disclosed to Buyer, the Company is not a party to or bound by any contract or agreement, including, without limitation, any material contract, agreement, arrangement or commitment relating to:

 

(a) the employment of any person other than “at-will” employees at rates of compensation and on terms consistent with past business practice;

 

(b) collective bargaining with, or any representation of any employees by, any labor union or association;

 

(c) the acquisition of supplies, equipment or other personal property or the sale of personal property (including, without limitation, sales of inventory in the ordinary course of business), which is not terminable by the Company upon 30 days’ notice or less without obligation on the part of the Company;

 

(d) the purchase or sale of real property;

 

(e) lease of real or personal property as lessor or lessee or sublessor or sublessee;

 

(f) distribution, agency, public relations, advertising, printing, construction, accounting or legal services which is not terminable by the Company upon 30 days’ notice or less without obligation on the part of the Company;

 

(g) bonuses, vacations, vacation pay, pensions, profit sharing, retirement, stock options, stock purchase, employee discounts or other employee benefits;

 

(h) lending or advancing of funds other than the extension of credit to trade purchasers in the ordinary course of business consistent with past business practice;

 

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(i) borrowing of funds or receipt of credit other than in the ordinary course of business consistent with past practice and except for trade accounts payable in amounts and on terms consistent with past practice;

 

(j) incurring of any material obligation or liability except for transactions in the ordinary course of business consistent with past practice;

 

(k) the sale of personal property (other than sales of inventory in the ordinary course of business consistent with past practice) or services under which payments due after the date hereof will exceed $100,000; or

 

(l) any material matter or transaction not in the ordinary course of the business of the Company consistent with past practice.

 

2.18. Legal Compliance; Permits.

 

(a) To the actual knowledge of such Seller, the Company is in compliance in all material respects with all applicable laws and Permits. No proceeding is pending, nor since February 28, 2021, has been filed or commenced, against the Company alleging any failure to comply with any applicable law or Permit. To the actual knowledge of such Seller, no event has occurred or circumstance exists that (with or without notice or lapse of time) may constitute or result in a violation by the Company of any law or Permit other than as would not reasonably be expected to be material to the Company. The Company has not received any written notice or other communication from any person regarding any actual, alleged or potential violation by the Company of any law or Permit or any cancellation, termination or failure to renew any Permit held by the Company.

 

(b) The Sellers have provided to Buyer a complete and accurate list of each Permit (the “Permit List”) held by the Company or that otherwise relates to the business or any asset owned or leased by the Company and states whether each such Permit is transferable. Each Permit listed or required to be listed on the Permit List is valid and in full force and effect. Each Permit listed or required to be listed on the Permit List is renewable for no more than a nominal fee and, to such Seller’s knowledge, there is no reason why such Permit will not be renewed. The Permits listed on the Permit List constitute all of the Permits necessary to allow the Company to lawfully conduct and operate its business as currently conducted and operated and to own and use its assets as currently owned and used. For purposes of this Agreement, “Permit” means any permit, license or consent issued by any governmental body or pursuant to any law.

 

2.19. Financial Statements.

 

(a) The Sellers have provided to Buyer the following financial statements (collectively, the “Financial Statements”): (i) unaudited balance sheets of the Company as of December 31 for the year of 2020, and statements of income, changes in stockholders’ equity, and cash flow for the fiscal year then ended, all of which were paid at the expense of the Buyer; and (ii) an unaudited, consolidated balance sheet of the Company as of February 28, 2021, and statements of income, changes in stockholders’ equity, and cash flow for the 8-month period then ended for the Company, all of which were paid at the expense of the Buyer. The Financial Statements have been prepared in accordance with GAAP, applied on a consistent basis throughout the period covered thereby, and present fairly, to the knowledge of such Seller, the financial condition of the Company as of and for the respective date and period covered thereby; provided, however, that the interim financial statements described in clause (ii) above are subject to normal, recurring year-end adjustments (which will not be, individually or in the aggregate, materially adverse) and lack notes.

 

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(b) The Company’s books and records (including all financial records, business records, customer lists, and records pertaining to products or services delivered to customers) (i) are reasonably complete and correct in all material respects and all transactions to which it is or has been a party are accurately reflected therein in all material respects on an accrual basis, (ii) reasonably reflect all discounts, returns and allowances granted by it with respect to the periods covered thereby, (iii) have been maintained in accordance with customary and sound business practices in its industry, (iv) form the basis for the Financial Statements with respect to the Company and (v) reflect in all material respects the assets, liabilities, financial position, results of operations and cash flows of it on an accrual basis. All computer-generated reports and other computer output included in its books and records are reasonably complete and correct in all material respects and were prepared in accordance with sound business practices based upon authentic data. To the knowledge of the Sellers, the Company’s management information systems are adequate for the preservation of relevant information and the preparation of accurate reports.

 

2.20. Title to and Sufficiency of Assets. The Company has good and marketable title to, or a valid leasehold interest in, every property or asset used by it, located on its premises, purported to be owned by it, or shown on the Financial Statements or acquired by the Company (the “Assets”), free and clear of any Encumbrances except for properties and assets disposed of in the ordinary course of business and for valuable consideration. The Assets include (a) the tangible and intangible property and assets necessary for the continued conduct of the business and the provision of services therewith as of the Closing in the same manner as conducted immediately prior to the Closing and in compliance in all material respects with all applicable laws, Contracts and Permits as of the Closing, and (b) the property and assets necessary to generate the results of operations for the business reflected in the Financial Statements and to perform under the Contracts.

 

2.21. Intellectual Property.

 

(a) To the knowledge of such Seller, the Company has sole title to and ownership of, or possesses legally enforceable rights to use under valid and subsisting written license agreements, all applicable material Company Intellectual Property Rights (as defined below), and to the knowledge of such Seller, the Company has not misappropriated, is not in conflict with and is not infringing upon the Intellectual Property Rights of others. The Company is the sole and exclusive owner of all Company Intellectual Property Rights owned by the Company (the “Company Owned IP Rights”) free and clear of any Encumbrances. To the knowledge of such Seller, none of the Company Owned IP Rights is being infringed by activities, products or services of, or is being misappropriated by, any third party.

 

(b) The Company has made available to Buyer correct and complete copies of all registrations and applications relating to the Company’s applicable material Company Owned IP Rights. The Company is not a party to any oral license, sublicense or other agreement.

 

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(c) With respect to each item of material Third Party Intellectual Property Rights (as defined below), there are no royalty, commission or other executory payment agreements, arrangements or understandings relating to such item other than those required under the license agreements entered into by the Company with third parties.

 

(d) The Company has used reasonable efforts to protect and enforce its trade secrets and otherwise to safeguard and maintain the secrecy and confidentiality of all applicable material Company Intellectual Property Rights. To the knowledge of such Seller, no current or prior officers, employees or consultants of the Company have claimed any ownership interest in any material Company Intellectual Property Rights as a result of having been involved in the development of such property while employed by or consulting to the Company, or otherwise. To the knowledge of such Seller, there has been no violation of any trade secrets program or any confidentiality or nondisclosure agreement relating to the Company’s Intellectual Property Rights. Except for the Third Party Intellectual Property Rights, all Company Intellectual Property Rights have been developed by employees of the Company, within the course and scope of their employment.

 

(e) The term “Company Intellectual Property Rights” means the Intellectual Property Rights used in the conduct of the business of the Company as currently conducted.

 

(f) The term “Intellectual Property Rights” means all rights in (i) patents, patent applications, patent disclosures (ii) trademarks, service marks, trade dress, trade names, logos and corporate names and registrations and applications for registration thereof together with all of the goodwill associated therewith, (iii) copyrights (registered or unregistered) and copyrightable works and registrations and applications for registration thereof, together with all authors’ and moral rights, (iv) mask works and registrations and applications for registration thereof, (v) computer software (including source code, object code, macros, scripts, objects, routines, modules and other components), data, data bases and documentation thereof, (vi) trade secrets and other confidential information (including ideas, formulas, compositions, inventions (whether patentable or unpatentable and whether or not reduced to practice), know-how, products, processes, techniques, methods, research and development information and results, drawings, specifications, designs, plans, proposals, technical data, marketing plans and customer, prospect and supplier lists and information), (vii) other intellectual property rights, and (viii) “technical data” as defined in 48 Code of Federal Regulations, Chapter 1.

 

(g) The term “Third Party Intellectual Property Rights” means any Company Intellectual Property Rights specifically not owned by the Company.

 

2.22. Employee Benefit Plans. The Company has made no promises (whether through an employee benefit plan or otherwise) to provide medical, life or disability benefits for periods after an employee’s termination of employment or a director’s, independent contractor’s or consultant’s end of service to the Company, except as required by the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”). All employee benefit plans are and have always been maintained, funded and administered in material compliance with all applicable laws, and there are no audits, inquiries or proceedings pending or, to the knowledge of such Seller, threatened by any governmental agency or authority. The Company has complied with the notice and benefit obligations regarding any employee benefit plan mandated by COBRA. All contributions, premiums or payments required to be made with respect to any employee benefit plan have been made on or before their due dates. No action, claim or lawsuit is pending or threatened with respect to any employee benefit plan (other than claims for benefits in the ordinary course). The Company has no commitment (a) to create, incur liability with respect to or cause to exist, any other employee benefit plan, program or arrangement, (b) to enter into any contract or agreement to provide compensation or benefits to any individual, or (c) to modify, change or terminate any employee benefit plan, other than with respect to a modification, change or termination required by applicable Law.

 

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2.23. Undisclosed Liabilities and Obligations. To the knowledge of the Sellers, except for those items set forth on the Financial Statements or otherwise disclosed to Buyer, the Company has no material unpaid debt, obligations or liability, accrued, contingent or otherwise (asserted or unasserted), as of the date hereof.

 

2.24. No Other Representations or Warranties. Except for the representations and warranties contained in this Section 2 as modified by disclosures made in writing to the Buyer, and any certificates delivered pursuant to Section 5.3, neither the Sellers nor any other Person makes or has made any other representation or warranty, expressed or implied, at law or in equity, with respect to the Company, the transactions contemplated hereby, or any of the Company’s respective businesses, assets, liabilities, operations, prospects, or condition (financial or otherwise), and the Company disclaims any other representations or warranties, whether made by the Company or any of its or its affiliates, stockholders, officers, directors, employees, agents or representatives.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE BUYER AND MERGER SUBS

 

The Buyer and the Merger Subs represent and warrants to the Sellers, as of the Closing Date, as follows:

 

3.1. Organization. Each of the Buyer and the Merger Subs is a corporation, duly organized, validly existing and in good standing under the laws of the State of Delaware, and is qualified to do business and in good standing in each jurisdiction where the character or location of its assets or properties owned, leased or operated by it or the nature of its activities makes such qualification necessary.

 

3.2. Authority for Agreement. Each of the Buyer and the Merger Subs has full power, authority and legal right to enter into and perform its obligations under this Agreement and the other documents contemplated hereby to which it is or will be a party and to consummate the transactions contemplated hereby and thereby. Each of the Buyer and the Merger Subs has duly approved and authorized this Agreement and the other documents contemplated hereby and the transactions contemplated hereby and thereby and has authorized the execution, delivery and performance of this Agreement and the other documents contemplated hereby and the consummation of the transactions contemplated hereby and thereby. No other proceedings or actions on the part of the Buyer or the Merger Subs are necessary to approve and authorize the execution, delivery and performance of this Agreement and the other documents contemplated hereby and the consummation of the transactions contemplated hereby and thereby. This Agreement and the other documents contemplated hereby to which the Buyer or the Merger Subs are a party have been duly executed and delivered by the Buyer and the Merger Subs, as applicable, and are legal, valid and binding obligations of the Buyer and the Merger Subs, as applicable, enforceable against the Buyer and the Merger Subs, as applicable, in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights in general.

 

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3.3. No Violation to Result. The execution, delivery and performance by each of the Buyer and the Merger Subs of this Agreement and the other documents contemplated hereby and the consummation by each of the Buyer and the Merger Subs of the transactions contemplated hereby and thereby, do not and will not, directly or indirectly (with or without notice or lapse of time): (i) violate, breach, conflict with, constitute a default under, accelerate or permit the acceleration of the performance required by (x) any of the terms of the bylaws, articles of incorporation or other governing documents of the Buyer or the Merger Subs or any resolution adopted by the shareholders of the Buyer or the Merger Subs, (y) any note, debt instrument, security agreement, mortgage or any other contract to which the Buyer or the Merger Subs is a party or by which it is bound or (z) any law, judgment, decree, order, rule, regulation, permit, license or other legal requirement of any Government Authority applicable to the Buyer or the Merger Subs; (ii) give any Government Authority or other Person the right to challenge any of the transactions contemplated by this Agreement; or (iii) result in the creation or imposition of any Encumbrance, possibility of Encumbrance, or restriction in favor of any Person upon any of the properties or assets of the Buyer or the Merger Subs. No notice to, filing with, or consent of, any Person is necessary in connection with the execution, delivery or performance by the Buyer or the Merger Subs of this Agreement and the other documents contemplated hereby nor the consummation by the Buyer or the Merger Subs of the transactions contemplated hereby or thereby.

 

3.4. Litigation and Known Claims. There is no litigation, including any arbitration, investigation or other proceeding of or before any court, arbitrator or governmental or regulatory official, body or authority, pending or, to the best of the Buyer’s or the Merger Subs’ knowledge, threatened against the Buyer or the Merger Subs or which relates to the Buyer or the Merger Subs or the transactions contemplated by this Agreement, nor does the Buyer or the Merger Subs know of any reasonably likely basis for any such litigation, arbitration, investigation or proceeding, the result of which could adversely affect the Buyer, the Merger Subs, the HUMBL Shares, or the transactions contemplated hereby. As of the Closing Date, none of the Buyer or the Merger Subs is a party to or subject to the provisions of any judgment, order, writ, injunction, settlement, decree or award of any court, arbitrator or governmental or regulatory official, body or authority which affects the Buyer, the Merger Subs, the HUMBL Shares, or the transactions contemplated hereby.

 

3.5. Financial Advisors. No Person has acted, directly or indirectly, as a broker, finder or financial advisor for Buyer or the Merger Subs in connection with the transactions contemplated hereby and no such Person has or will have, as a result of the transactions contemplated by this Agreement, any right, interest or claim against or upon any of the Parties for any commission, fee or other compensation payable as a finder or broker because of any act or omission by the Buyer or the Merger Subs.

 

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3.6. Non-Reliance. The Buyer (including its affiliates) has conducted its own comprehensive investigation, due diligence, review, and analysis regarding the Company and the transactions contemplated hereby. The Buyer (including its affiliates) is not relying, has not relied, and disclaims all reliance upon any statement, representation, or warranty (whether oral, written, express, or implied) made by the Sellers, the Company, or any of their affiliates, or advisors of any kind whatsoever, except as expressly set forth herein.

 

3.7. HUMBL Shares. The HUMBL Shares, when issued, sold and delivered in accordance with the terms and for the consideration set forth in this Agreement, will be validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer under applicable state and federal securities laws. Assuming the accuracy of the representations of the Sellers in ARTICLE II, the HUMBL Shares will be issued in compliance with all applicable federal and state securities laws.

 

3.8. Valuation of HUMBL Shares. The Buyer acknowledges that (i) the per share Purchase Price is not based on an independent valuation of the Tickeri Shares or on any other commonly used valuation method and may not reflect the fair market value of the Tickeri Shares and (ii) it has had the opportunity to make inquiries of the Sellers and the Company and its officers regarding the Company’s business affairs and financial condition and already has or has acquired sufficient information about the Company and the Sellers to reach an informed and knowledgeable decision prior to entering into this Agreement. The Buyer acknowledges that the Purchase Price was determined through an arm’s length negotiation between the Sellers and the Buyer, and that the Buyer did not rely on the Sellers or any other Person to determine the value of the Tickeri Shares or the HUMBL Shares.

 

ARTICLE IV
ADDITIONAL AGREEMENTS

 

4.1. Transfer Taxes, Etc. All transfer taxes incurred in connection with the transactions contemplated by this Agreement are the responsibility of the Buyer. The Buyer shall, at its own expense, file all necessary tax returns and other documentation with respect to all such transfer taxes, and pay or cause to be paid all such transfer taxes when due under applicable law.

 

4.2. Further Assurances. Each Party will, either at or after the Closing, execute such further documents, deeds, bills of sale, assignments and assurances and take such further actions as may reasonably be required by the other Party to consummate the Mergers and to effect the other purposes of this Agreement.

 

4.3. Survival of Representations, Warranties and Covenants. Each covenant and agreement contained in this Agreement or in any agreement or other document delivered pursuant hereto shall survive the Closing for a period of two (2) years.

 

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4.4. Indemnification. Each of the Sellers, severally and not jointly, shall indemnify, defend, save and hold harmless the Buyer, and its affiliates, agents and representatives, and the Buyer shall indemnify, defend, save and hold harmless the Sellers, and each of their affiliates, agents and representatives, from and against any and all costs, losses, liabilities, damages, lawsuits, claims and expenses (whether or not arising out of third-party claims), including without limitation court costs, reasonable attorneys’ fees and disbursements and all amounts paid in investigation, defense or settlement of any of the foregoing (“Damages”), incurred in connection with or arising out of or resulting from (a) any material breach of any covenant or warranty, or any material inaccuracy in any representation made by such Party in or pursuant to this Agreement; (b) the material failure by such Party to perform or observe any term, provision or covenant of this Agreement; (c) any material liability of such Party asserted against another Party or its affiliates, including any third-party claims arising from the act or omission of such Party, or such Party’s officers, directors, employees, agents, or affiliates; or (d) the enforcement of this indemnification obligation. This indemnification obligation shall survive for two (2) years from the date hereof. Any indemnification obligation incurred by a Seller hereunder may be satisfied by a Seller, in such Seller’s reasonable discretion, in addition to any other permitted method, through: (i) the transfer and conveyance by Seller to Buyer of a number of HUMBL Shares equal in value to the amount of the Damages, or (ii) the offset of the Damages against amounts owing under the Notes. The aggregate amount of all Damages for which each Party shall be liable pursuant to this Section 4.4 shall not exceed $20,000,000 in the case of the Buyer and $10,000,000 in the case of each Seller. For the avoidance of doubt, the aggregate amount of all Damages for which each Seller may be liable pursuant to this Section 4.4 shall not exceed the actual consideration paid to such Seller pursuant to Section 12 of this Agreement.

 

4.5. Covenant Not to Compete. Each Seller agrees that for a period of two (2) years after the Closing Date (the “Restricted Period”), such Seller will not, without the prior written consent of the Buyer, whether paid or not: (i) serve as a partner, principal, licensor, licensee, employee, consultant, officer, director, manager, agent, affiliate, representative, advisor, promoter, associate, investor, or otherwise for, (ii) directly own, purchase, organize or take preparatory steps for the organization of, or (iii) build, design, finance, acquire, lease, operate, manage, control, invest in, work or consult for or otherwise join, participate in or affiliate with, any business whose business, products or operations are in any respect involved in the Covered Business. Notwithstanding the foregoing, the foregoing covenant shall not apply where (i) such Seller’s function and activities with respect to such Covered Business do not relate in substance to any business in which the Company is engaged or in which the Company has plans to be engaged, or any service that the Company provides or has plans to provide and (ii) the Covered Business is not a direct competitor of the Company. For the purposes of this Agreement, “Covered Business” shall mean any business in which the Company is engaged or in which the Company has plans to be engaged, or any service that the Company provides or has plans to provide. The foregoing covenant shall cover such Seller’s activities in every part of the Territory. “Territory” shall mean (i) all counties in the State of Virginia and the State of California; (ii) all other states of the United States of America in which the Company provided goods or services, had customers, or otherwise conducted business at any time during the two-year period prior to the date of the termination of such Seller’s relationship with the Company; and (iii) any other countries from which the Company provided goods or services, had customers, or otherwise conducted business at any time during the two-year period prior to the date of the termination of such Seller’s relationship with the Company.

 

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4.6. Ownership of Intellectual Property. Each Seller acknowledges that all discoveries, concepts, ideas, inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports, patent applications, copyrightable work and mask work (whether or not including any Buyer Confidential Information (as defined in Section 4.8 below)) and all registrations or applications related thereto, all other proprietary information and all similar or related information (whether or not patentable) which relate to the Company’s actual business, research and development, currently existing and which were conceived, developed or made by such Seller (whether above or jointly with others) prior to the Closing Date, belong to the Company. In furtherance of the foregoing, each Seller shall perform all actions reasonably requested by the Buyer, at Buyer’s expense, to establish and confirm such ownership (including, without limitation, assignments, consents, powers of attorney and other instruments).

 

4.7. Mutual Release of Claims. Each Seller, together with such Seller’s heirs, representatives and assigns, hereby fully and completely releases and waives any and all claims, complaints, causes of action or demands of whatever kind which he has or may have against the Buyer and the Company, their respective officers, employees, members or managers, arising out of any actions, conduct, decisions, behavior or events occurring prior to the Closing Date, including without limitation claims related to such Seller’s ownership of the Tickeri Shares or any other equity or claim thereto of the Company. The Buyer, together with the Buyer’s heirs, representatives and assigns, hereby fully and completely releases and waives any and all claims, complaints, causes of action or demands of whatever kind which he has or may have against the Seller and the Company, their respective officers, employees, members or managers, arising out of any actions, conduct, decisions, behavior or events occurring prior to the Closing Date. Each Party understands and accepts that this release specifically covers but is not limited to any and all claims, complaints, causes of action or demands which such Party has or may have against the above-referenced released parties.

 

4.8. Confidentiality. To the extent that a Seller has obtained Buyer Confidential Information prior to the execution of this Agreement, for a period of two (2) years after the date of this Agreement, such Seller agrees to hold such Buyer Confidential Information in the strictest confidence, and covenants and agrees not to disclose, duplicate, lecture upon or publish any of the Buyer Confidential Information after the Closing Date. For purposes of this Agreement, “Buyer Confidential Information” shall mean any and all confidential and/or proprietary knowledge, know-how, data or information of the Buyer, including, but not limited to, ideas, concepts, processes, designs, techniques, budgets, financials, products, marketing, selling and business plans, prices, costs, supplier, vendor, customer, membership or similar lists or contact information other than those previously identified and originated by such Seller and any other agreements of the Buyer, and all other similar information pertaining to the Buyer.

 

4.9. Mutual Nondisparagement. By execution below, each Party hereto agrees not to disparage or defame any other Party, including such Party’s products or services. In addition, each Party agrees not to counsel or assist any attorneys or their clients in the presentation or prosecution of any disputes, differences, grievances, claims, charges or complaints by any third party against any other Party and/or any officer, manager, employee, agent, representative, member or attorney of such other Party, unless under a subpoena or other court order to do so or pursuant to violations of agreements entered into between any of the Parties after the execution of this Agreement.

 

4.10. Employment Agreements. Buyer and each of the Sellers shall enter into Employment Agreements in form substantially similar to those attached hereto as Exhibit C (the “Employment Agreements”), incorporated herein by reference. Subject to the Employment Agreements and Buyer’s reasonable discretion, Javier and Juan shall be responsible for the business and operations of the Company following the Closing.

 

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4.11. Registration. Within three (3) months of the Closing, Buyer will file a registration statement on Form S-1 or Form 10 to register the HUMBL Shares with the Securities Exchange Commission (the “SEC”). If the registration statement is not declared effective within six (6) months of the Closing, until such time as the registration statement is declared effective, each month the Buyer will issue to the Seller shares of Buyer’s Common Stock in an amount equal to $100,000.00 divided by the volume weighted average price per share of Buyer’s Common Stock on the OTC markets or such other applicable markets for the ten (10) consecutive trading days ending with the complete trading day ending two (2) trading days prior to the date of such issuance as reported on Bloomberg (the “Delayed Registration Shares”).

 

4.12. Separation of Tickeri Assets. The Buyer agrees to reasonably limit the integration of the Company’s assets, and will not take any actions that would adversely impact Sellers’ right to reclaim ownership of the Company Owned IP Rights or any technology embodied by the Company Owned IP Rights pursuant to Section 2.21, until the Notes are paid in full. Buyer agrees that any violation or threatened violation of this Section 4.12 may cause irreparable injury to the Sellers, entitling each Seller to injunctive relief in addition to all other legal remedies.

 

ARTICLE V

CONDITIONS TO SELLER’S OBLIGATIONS TO CLOSE

 

The Seller’s obligation to effect the Mergers at the Closing is subject to the fulfillment on or before the Closing of the following conditions, unless waived in writing by the Seller:

 

5.1. Representations and Warranties. The representations and warranties made by the Buyer in Article III shall be true and correct in all material respects when made and as of the date of the Closing.

 

5.2. Covenants. All covenants, agreements and conditions contained in this Agreement to be performed by the Buyer on or prior to the Closing Date shall have been performed or complied with in all material respects as of the Closing Date.

 

5.3. Closing Deliveries. At the Closing, the Buyer shall deliver those items for which Buyer is responsible set forth in Section 1.4(e) above.

 

ARTICLE VI
CONDITIONS TO BUYER’S OBLIGATIONS TO CLOSE

 

The Buyer’s obligation to effect the Mergers, issue the Notes and issue, sell, transfer and convey the HUMBL Shares at the Closing is subject to the fulfillment on or before the Closing of each of the following conditions (the “Buyer Closing Conditions”), unless waived by the Buyer:

 

6.1. Representations and Warranties. The representations and warranties made by the Sellers in Article II shall be true and correct in all material respects when made and as of the Closing Date.

 

6.2. Covenants. All covenants, agreements and conditions contained in this Agreement to be performed by the Sellers on or prior to the Closing shall have been performed or complied with in all material respects.

 

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6.3. Due Diligence. The Sellers shall have delivered to the Buyer or its counsel, copies of all stock certificates and other documents the Buyer shall reasonably request. The Sellers shall have provided the Buyer access to such information as the Buyer shall have reasonably requested in connection with its due diligence review and the Buyer shall have concluded its due diligence review of the Tickeri Shares and all financial, business, tax, accounting, technical, and legal aspects of the Company to the Buyer’s sole satisfaction.

 

6.4. Closing Deliveries. At the Closing, the Sellers shall deliver those items for which the Seller are responsible set forth in Section 1.4(e) above.

 

ARTICLE VII

MISCELLANEOUS

 

7.1. Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the Sellers and their respective heirs, executors, administrators, legal representatives, successors and assigns. This Agreement or any of the severable rights and obligations inuring to the benefit of or to be performed by the Buyer hereunder may be assigned by the Buyer to a third party, including its financing sources, in whole or in part; provided, however, that any such assignment shall not relieve the Buyer of its obligations under this Agreement.

 

7.2. Governing Law; Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and wholly performed in that jurisdiction, without regard to conflict of law principles. The Sellers hereby expressly consent to the personal jurisdiction of the state and federal courts located in or about San Diego County, State of California, for any action or proceeding arising from or relating to this Agreement, waives any argument that venue in any such forum is not convenient, and agrees that any such action or proceeding shall only be venued in such courts.

 

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

 

7.4. Amendment. This Agreement may be amended, supplemented or modified only by execution of an instrument in writing signed by the Buyer and each of the Sellers.

 

7.5. Waiver. Any Party hereto may to the extent permitted by applicable law (i) extend the time for the performance of any of the obligations or other acts of the other Parties hereto, (ii) waive any inaccuracies in the representations and warranties of the other Parties hereto contained herein or in any document delivered pursuant hereto or (iii) waive compliance with any of the agreements of the other Parties hereto contained herein. No such extension or waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the Party extending the time of performance or waiving any such inaccuracy or non-compliance. No waiver by any Party of any term of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term of this Agreement on any future occasion.

 

20

 

 

7.6. Notices. All notices, requests, consents, waivers, and other communications required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given (a) if personally delivered, upon delivery or refusal of delivery; (b) if mailed by registered or certified United States mail, return receipt requested, postage prepaid, upon delivery or refusal of delivery; or (c) if sent by a nationally recognized overnight delivery service, upon delivery or refusal of delivery. All notices, consents, waivers, or other communications required or permitted to be given hereunder shall be addressed as follows:

 

(a) If to the Buyer:

 

HUMBL, Inc.

Attn: Jeff Hinshaw

600 B Street, Suite 300

San Diego, California 92101

 

With a copy, which shall not constitute notice, to:

 

Brian Innes

Hansen Black Anderson Ashcraft PLLC

3051 W. Maple Loop Drive, Suite 325

Lehi, Utah 84043

 

(b) If to the Sellers:

 

Javier and Juan Gonzalez

41865 Rawnsley Drive
Ashburn, VA 20148

 

With a copy, which shall not constitute notice, to:

 

Andrew P. Sparks

Goodwin Procter LLP

3 Embarcadero Center

San Francisco, CA 94111
andrewsparks@goodwinlaw.com

 

or at such other address or addresses as the Party addressed may from time to time designate in writing pursuant to notice given in accordance with this section.

 

7.7. Expenses. All legal and accounting fees incident to the negotiations and preparations of this Agreement and the transactions contemplated hereby shall be borne and paid by the Buyer.

 

7.8. Complete Agreement. This Agreement, including those documents expressly referred to herein and all Exhibits hereto, embody the complete agreement and understanding between the Parties and supersede and preempt any prior understandings, agreements or representation by or between the Parties, written or oral, which may have related to the subject matter herein.

 

21

 

 

7.9. Absence of Third-Party Beneficiary Rights. No provision of this Agreement is intended, nor will be interpreted, to provide or create any third-party beneficiary rights or any other rights of any kind in any client, customer, affiliate, equityholder, employee or partner of any Party hereto or any other Person.

 

7.10. Mutual Drafting. This Agreement is the mutual product of the Parties, and each provision hereof has been subject to the mutual consultation, negotiation and agreement of each of the Parties, and shall not be construed for entire or against any Party hereto.

 

7.11. Further Representations. Each Party to this Agreement acknowledges and represents that it has been represented by its own legal counsel in connection with the transaction contemplated by this Agreement, with the opportunity to seek advice as to its legal rights from such counsel.

 

7.12. Headings. The headings in this Agreement are intended solely for convenience of reference and shall be given no effect in the construction or interpretation of this Agreement.

 

7.13. Counterparts. This Agreement may be executed in two or more counterparts, each of which when executed and delivered shall be deemed an original and all of which, taken together, shall constitute the same agreement. This Agreement and any document required hereby may be executed by facsimile or email signature which shall be considered legally binding for all purposes.

 

7.14. Attorneys’ Fees. In the event that any dispute among the Parties should result in litigation, the prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of such prevailing party under or with respect to this Agreement, including without limitation, such reasonable fees and expenses of attorneys, which shall include, without limitation, all fees, costs and expenses of appeals.

 

7.15. Waiver of Jury Trial. THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A JURY TRIAL IN ANY AND ALL DISPUTES WHETHER ARISING HEREUNDER OR UNDER ANY OTHER AGREEMENTS, NOTES, PAPERS, INSTRUMENTS OR DOCUMENTS HERETOFORE OR HEREAFTER EXECUTED WHETHER SIMILAR OR DISSIMILAR.

 

7.16. Use of Certain Terms. As used in this Agreement, the words “herein,” “hereof,” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular section, subsection or other subdivision.

 

[Remainder of page intentionally left blank]

 

22

 

 

IN WITNESS WHEREOF, each Party hereto has caused this Stock Purchase Agreement to be duly executed effective as of the date first above written.

 

  BUYER:
     
  HUMBL, INC.
     
  By:                  
    Brian Foote, CEO 
 
  SELLERS:
     
   
  Javier Gonzalez
     
   
  Juan Gonzalez
     
  COMPANY:
     
  TICKERI, INC.
     
  By:  
  Name:  
  Title:  

 

[Signature page to Stock Purchase Agreement]

 

 

 

 

EXHIBIT A

 

NOTES

 

 

 

 

EXHIBIT B

 

STOCK PLEDGE AGREEMENT

 

 

 

 

EXHIBIT C

 

EMPLOYMENT AGREEMENTS

 

 

 

 

Exhibit 10.28

 

SECURED PROMISSORY NOTE

 

$5,000,000.00 June 3, 2021

 

LENDER: BORROWER:
Juan Gonzalez HUMBL, Inc.
41865 Rawnsley Drive 600 B Street, Suite 300
Ashburn, VA 20148 San Diego, California 92101

 

PROMISE TO PAY: HUMBL, Inc., a Delaware corporation (“Borrower”), promises to pay to the order of Juan Gonzalez, an individual (the “Lender”), in lawful money of the United States of America, the principal sum of Five Million dollars ($5,000,000.00) together with interest on the unpaid principal balance and all other amounts due under this Secured Promissory Note (this “Note”) on or before December 3, 2022.

 

PAYMENT: Borrower will make all payments of sums due hereunder in lawful money of the United States of America to Lender at Lender’s address shown above, or at such other place as Lender may designate in writing. Unless otherwise agreed or required by applicable law, payments will be applied first to any unpaid collection costs and late charges, then to accrued and unpaid interest hereon and finally to the principal of this Note.

 

INTEREST: Interest shall accrue on the unpaid principal balance of this Note and any unpaid late fees or other fees arising hereunder at a rate of five percent (5%) per annum, until the full amount of the principal of, interest on, and fees on this Note have been paid in full. Interest on this Note shall accrue on a simple interest basis based on a 360-day year. At Lender’s discretion, principal, interest and/or fees that are overdue shall bear interest at the rate of twelve percent (12%) per annum from the date due until paid.

 

PREPAYMENT: Borrower may prepay without penalty all or a portion of this Note at any time and from time to time. Early payments of less than all principal and interest outstanding of this Note will not relieve Borrower of any of Borrower’s obligations hereunder.

 

DEFAULT: Borrower will be in default under this Note if any of the following happens (each, an “Event of Default”): (a) Borrower fails to make any payment on this Note on its due date; (b) Borrower fails to comply with or to perform when due any other term, obligation, covenant, or condition contained in this Note or in any agreement securing or guaranteeing payment of this Note, or in any other agreement or loan Borrower has with Lender and such failure continues for fifteen (15) days; (c) Borrower becomes insolvent or admits in writing its inability to pay its debts generally as they mature; a receiver, trustee, liquidator or custodian is appointed for any part of Borrower’s property, Borrower makes an assignment for the benefit of creditors, or any proceeding is commenced either by Borrower or against Borrower, under any bankruptcy or insolvency laws; Borrower is dissolved or liquidated; or Borrower takes any action for the purpose of effecting any of the foregoing; (d) any default shall occur under that certain Secured Promissory Note by the Borrower in favor of Juan Gonzalez, dated on or around the date of this Note (together with this Note, the “Purchase Price Notes”); (e) Borrower shall fail to comply with Section 4.12 of the Agreement and Plan of Merger, entered into effective as of June 3, 2021, by and among Borrower, Tickeri I Acquisition Corp., Tickeri I Acquisition Corp., Tickeri, Inc., Lender and Juan Gonzalez (the “Merger Agreement”), or (f) the occurrence of a Change of Control.

 

 
 

 

If any default, is curable and if Borrower has not already been given notice of a breach of the same provision of this Note, the default may be cured (and no event of default will have occurred) if Borrower, after receiving written notice from Lender demanding cure of such default, either (a) cures the default within fifteen (15) days, or (b) if the cure requires more than fifteen (15) days, immediately initiates steps which Lender deems in Lender’s sole discretion to be sufficient to cure the default and thereafter diligently continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical.

 

Change of Control” means (i) any “person” or “group” (within the meaning of Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), becomes the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended), directly or indirectly, of more than 50% of the outstanding voting securities of Borrower having the right to vote for the election of members of the Board of Directors, (ii) any reorganization, merger or consolidation of Borrower, other than a transaction or series of related transactions in which the holders of the voting securities of Borrower outstanding immediately prior to such transaction or series of related transactions retain, immediately after such transaction or series of related transactions, at least a majority of the total voting power represented by the outstanding voting securities of Borrower or such other surviving or resulting entity or (iii) a sale, lease or other disposition of all or substantially all of the assets of Borrower.

 

COLLATERAL: This Note is secured by a Stock Pledge Agreement (as amended, restated, modified or otherwise supplemented from time to time, the “Pledge Agreement”) of even date herewith in favor of Lender and Juan Gonzalez made by Borrower with respect to 100 shares of common stock of Tickeri II Acquisition Corp., a Delaware corporation, and the other collateral as more specifically set forth in the Pledge Agreement, all the terms and conditions of which are hereby incorporated and made a part of this Note.

 

LENDER’S RIGHTS: Upon the occurrence of any Event of Default (other than an Event of Default described in clause (c) above) and at any time thereafter during the continuance of such Event of Default, Lender may, by written notice to Borrower, declare all outstanding Obligations payable by Borrower hereunder to be immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the Pledge Agreement to the contrary notwithstanding. Upon the occurrence of any Event of Default described in clause (c) above, immediately and without notice, all outstanding obligations payable by Borrower hereunder shall automatically become immediately due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the Pledge Agreement to the contrary notwithstanding. In addition to the foregoing remedies, upon the occurrence and during the continuance of any Event of Default, Lender may exercise any other right, power or remedy granted to it by this Note, the Pledge Agreement or otherwise permitted to it by law, either by suit in equity or by action at law, or both. As Lender’s sole and exclusive remedy hereunder, Lender will have the right to foreclose on, and exercise its rights and remedies against, the Collateral (as defined in the Pledge Agreement) pursuant to the Pledge Agreement.

 

2
 

 

Borrower waives presentment for payment, protest, notice of dishonor and protest, and consent to any extension of time with respect to any payment due under this Note, and to the addition to or release of any party. No waiver of any payment under this Note shall operate as a waiver of any other payment.

 

NO USURY: Notwithstanding any other provision contained in this Note or in any instrument given to evidence the obligations evidenced hereby: (a) the rates of interest and charges provided for herein and therein shall in no event exceed the rates and charges which result in interest being charged at a rate equaling the maximum allowed by law; and (b) if, for any reason whatsoever, Lender ever receives as interest in connection with the transaction of which this Note is a part an amount which would result in interest being charged at a rate exceeding the maximum allowed by law, such amount or portion thereof as would otherwise be excessive interest shall automatically be applied toward reduction of the unpaid principal balance then outstanding hereunder and not toward payment of interest.

 

PARI PASSU NOTES: Lender acknowledges and agrees that the payment of all or any portion of the outstanding principal amount of this Note and all interest hereon shall be pari passu in right of payment and in all other respects to any other Purchase Price Notes. In the event Investor receives payments in excess of its pro rata share of Borrower’s payments to the holders of all of the Purchase Price Notes, then Lender shall hold in trust all such excess payments for the benefit of the holders of the other Purchase Price Notes and shall pay such amounts held in trust to such other holders upon demand by such holders.

 

GENERAL CONDITIONS: Upon any change in the terms of this Note and unless otherwise expressly stated in writing, no party that signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. The parties hereto agree that Lender may renew or extend (repeatedly or for any length of time) this Note or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender’s security interest in the collateral; or take any other action deemed necessary by Lender without the consent of or notice to anyone. This Note is made under the laws of the State of Delaware and shall be governed by and construed and enforced in accordance with the laws of such state without regard to the principles of conflicts of laws. By executing this Note, all parties hereto agree to submit to the exclusive jurisdiction of and agree to the venue of the courts of the State of California located in San Diego County, California. The parties hereto agree not to bring any action in any court of law located outside of San Diego County, California. If any term or provision of this Note shall be determined to be illegal or unenforceable, all other terms and provisions hereof shall nevertheless remain effective and shall be in force to the fullest extent permitted by applicable law.

 

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER IRREVOCABLY WAIVES ANY AND ALL RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS NOTE, ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS NOTE, OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS. BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.

 

PRIOR TO SIGNING THIS NOTE, BORROWER REPRESENTS AND WARRANTS TO LENDER THAT BORROWER HAS READ AND UNDERSTANDS ALL OF THE PROVISIONS OF THE NOTE, INCLUDING INTEREST RATE PROVISIONS AND LATE PAYMENT PROVISIONS, IF ANY. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.

 

This Note, the other Purchase Price Note, the Pledge Agreement and the Merger Agreement contain the complete understanding and agreement of Borrower and Lender and supersede all prior representations, warranties, agreements, arrangements, understandings, and negotiations.

 

Neither this Note nor any of the rights, interests or obligations hereunder may be assigned, by operation of law or otherwise, in whole or in part, by Borrower without the prior written consent of Lender.

 

[Remainder of page intentionally left blank]

 

3
 

 

IN WITNESS WHEREOF, Borrower executes this Note to be effective as of the date first written above.

 

  BORROWER:
     
  HUMBL, INC.
     
  By:  
    Brian Foote, CEO

 

[Signature page to Secured Promissory Note]

 

 

 

 

Exhibit 10.29

 

SECURED PROMISSORY NOTE

 

$5,000,000.00 June 3, 2021

 

LENDER: BORROWER:
Javier Gonzalez HUMBL, Inc.
41865 Rawnsley Drive 600 B Street, Suite 300
Ashburn, VA 20148 San Diego, California 92101

 

PROMISE TO PAY: HUMBL, Inc., a Delaware corporation (“Borrower”), promises to pay to the order of Javier Gonzalez, an individual (the “Lender”), in lawful money of the United States of America, the principal sum of Five Million dollars ($5,000,000.00) together with interest on the unpaid principal balance and all other amounts due under this Secured Promissory Note (this “Note”) on or before December 3, 2022.

 

PAYMENT: Borrower will make all payments of sums due hereunder in lawful money of the United States of America to Lender at Lender’s address shown above, or at such other place as Lender may designate in writing. Unless otherwise agreed or required by applicable law, payments will be applied first to any unpaid collection costs and late charges, then to accrued and unpaid interest hereon and finally to the principal of this Note.

 

INTEREST: Interest shall accrue on the unpaid principal balance of this Note and any unpaid late fees or other fees arising hereunder at a rate of five percent (5%) per annum, until the full amount of the principal of, interest on, and fees on this Note have been paid in full. Interest on this Note shall accrue on a simple interest basis based on a 360-day year. At Lender’s discretion, principal, interest and/or fees that are overdue shall bear interest at the rate of twelve percent (12%) per annum from the date due until paid.

 

PREPAYMENT: Borrower may prepay without penalty all or a portion of this Note at any time and from time to time. Early payments of less than all principal and interest outstanding of this Note will not relieve Borrower of any of Borrower’s obligations hereunder.

 

DEFAULT: Borrower will be in default under this Note if any of the following happens (each, an “Event of Default”): (a) Borrower fails to make any payment on this Note on its due date; (b) Borrower fails to comply with or to perform when due any other term, obligation, covenant, or condition contained in this Note or in any agreement securing or guaranteeing payment of this Note, or in any other agreement or loan Borrower has with Lender and such failure continues for fifteen (15) days; (c) Borrower becomes insolvent or admits in writing its inability to pay its debts generally as they mature; a receiver, trustee, liquidator or custodian is appointed for any part of Borrower’s property, Borrower makes an assignment for the benefit of creditors, or any proceeding is commenced either by Borrower or against Borrower, under any bankruptcy or insolvency laws; Borrower is dissolved or liquidated; or Borrower takes any action for the purpose of effecting any of the foregoing; (d) any default shall occur under that certain Secured Promissory Note by the Borrower in favor of Juan Gonzalez, dated on or around the date of this Note (together with this Note, the “Purchase Price Notes”); (e) Borrower shall fail to comply with Section 4.12 of the Agreement and Plan of Merger, entered into effective as of June 3, 2021, by and among Borrower, Tickeri I Acquisition Corp., Tickeri I Acquisition Corp., Tickeri, Inc., Lender and Juan Gonzalez (the “Merger Agreement”), or (f) the occurrence of a Change of Control.

 

 
 

 

If any default, is curable and if Borrower has not already been given notice of a breach of the same provision of this Note, the default may be cured (and no event of default will have occurred) if Borrower, after receiving written notice from Lender demanding cure of such default, either (a) cures the default within fifteen (15) days, or (b) if the cure requires more than fifteen (15) days, immediately initiates steps which Lender deems in Lender’s sole discretion to be sufficient to cure the default and thereafter diligently continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical.

 

Change of Control” means (i) any “person” or “group” (within the meaning of Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), becomes the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended), directly or indirectly, of more than 50% of the outstanding voting securities of Borrower having the right to vote for the election of members of the Board of Directors, (ii) any reorganization, merger or consolidation of Borrower, other than a transaction or series of related transactions in which the holders of the voting securities of Borrower outstanding immediately prior to such transaction or series of related transactions retain, immediately after such transaction or series of related transactions, at least a majority of the total voting power represented by the outstanding voting securities of Borrower or such other surviving or resulting entity or (iii) a sale, lease or other disposition of all or substantially all of the assets of Borrower.

 

COLLATERAL: This Note is secured by a Stock Pledge Agreement (as amended, restated, modified or otherwise supplemented from time to time, the “Pledge Agreement”) of even date herewith in favor of Lender and Juan Gonzalez made by Borrower with respect to 100 shares of common stock of Tickeri II Acquisition Corp., a Delaware corporation, and the other collateral as more specifically set forth in the Pledge Agreement, all the terms and conditions of which are hereby incorporated and made a part of this Note.

 

LENDER’S RIGHTS: Upon the occurrence of any Event of Default (other than an Event of Default described in clause (c) above) and at any time thereafter during the continuance of such Event of Default, Lender may, by written notice to Borrower, declare all outstanding Obligations payable by Borrower hereunder to be immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the Pledge Agreement to the contrary notwithstanding. Upon the occurrence of any Event of Default described in clause (c) above, immediately and without notice, all outstanding obligations payable by Borrower hereunder shall automatically become immediately due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the Pledge Agreement to the contrary notwithstanding. In addition to the foregoing remedies, upon the occurrence and during the continuance of any Event of Default, Lender may exercise any other right, power or remedy granted to it by this Note, the Pledge Agreement or otherwise permitted to it by law, either by suit in equity or by action at law, or both. As Lender’s sole and exclusive remedy hereunder, Lender will have the right to foreclose on, and exercise its rights and remedies against, the Collateral (as defined in the Pledge Agreement) pursuant to the Pledge Agreement.

 

2
 

 

Borrower waives presentment for payment, protest, notice of dishonor and protest, and consent to any extension of time with respect to any payment due under this Note, and to the addition to or release of any party. No waiver of any payment under this Note shall operate as a waiver of any other payment.

 

NO USURY: Notwithstanding any other provision contained in this Note or in any instrument given to evidence the obligations evidenced hereby: (a) the rates of interest and charges provided for herein and therein shall in no event exceed the rates and charges which result in interest being charged at a rate equaling the maximum allowed by law; and (b) if, for any reason whatsoever, Lender ever receives as interest in connection with the transaction of which this Note is a part an amount which would result in interest being charged at a rate exceeding the maximum allowed by law, such amount or portion thereof as would otherwise be excessive interest shall automatically be applied toward reduction of the unpaid principal balance then outstanding hereunder and not toward payment of interest.

 

PARI PASSU NOTES: Lender acknowledges and agrees that the payment of all or any portion of the outstanding principal amount of this Note and all interest hereon shall be pari passu in right of payment and in all other respects to any other Purchase Price Notes. In the event Investor receives payments in excess of its pro rata share of Borrower’s payments to the holders of all of the Purchase Price Notes, then Lender shall hold in trust all such excess payments for the benefit of the holders of the other Purchase Price Notes and shall pay such amounts held in trust to such other holders upon demand by such holders.

 

GENERAL CONDITIONS: Upon any change in the terms of this Note and unless otherwise expressly stated in writing, no party that signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. The parties hereto agree that Lender may renew or extend (repeatedly or for any length of time) this Note or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender’s security interest in the collateral; or take any other action deemed necessary by Lender without the consent of or notice to anyone. This Note is made under the laws of the State of Delaware and shall be governed by and construed and enforced in accordance with the laws of such state without regard to the principles of conflicts of laws. By executing this Note, all parties hereto agree to submit to the exclusive jurisdiction of and agree to the venue of the courts of the State of California located in San Diego County, California. The parties hereto agree not to bring any action in any court of law located outside of San Diego County, California. If any term or provision of this Note shall be determined to be illegal or unenforceable, all other terms and provisions hereof shall nevertheless remain effective and shall be in force to the fullest extent permitted by applicable law.

 

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER IRREVOCABLY WAIVES ANY AND ALL RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS NOTE, ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS NOTE, OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS. BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.

 

PRIOR TO SIGNING THIS NOTE, BORROWER REPRESENTS AND WARRANTS TO LENDER THAT BORROWER HAS READ AND UNDERSTANDS ALL OF THE PROVISIONS OF THE NOTE, INCLUDING INTEREST RATE PROVISIONS AND LATE PAYMENT PROVISIONS, IF ANY. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.

 

This Note, the other Purchase Price Note, the Pledge Agreement and the Merger Agreement contain the complete understanding and agreement of Borrower and Lender and supersede all prior representations, warranties, agreements, arrangements, understandings, and negotiations.

 

Neither this Note nor any of the rights, interests or obligations hereunder may be assigned, by operation of law or otherwise, in whole or in part, by Borrower without the prior written consent of Lender.

 

[Remainder of page intentionally left blank]

 

3
 

 

IN WITNESS WHEREOF, Borrower executes this Note to be effective as of the date first written above.

 

  BORROWER:
     
  HUMBL, INC.
     
  By:  
    Brian Foote, CEO

 

[Signature page to Secured Promissory Note]

 

 

 

 

Exhibit 10.30

 

STOCK PLEDGE AGREEMENT

 

This Stock Pledge Agreement (as amended, restated, modified or otherwise supplemented from time to time, this “Agreement”) is entered into as of June 3, 2021, by and among HUMBL, Inc., a Delaware corporation (“Pledgor”), and Javier Gonzalez, an individual, and Juan Gonzalez, an individual (each, a “Secured Party”).

 

A. Secured Parties and Pledgor are parties to that certain Agreement and Plan of Merger of even date herewith (the “Merger Agreement”), pursuant to which, first, Tickeri I Acquisition Corp., a wholly-owned subsidiary of Pledgor (“First Merger Sub”) merged with and into Tickeri, Inc., a Delaware corporation, the capital stock of which was 100% owned by the Secured Parties (the “Company”), whereupon First Merger Sub ceased to exist and the Company survived as a wholly-owned subsidiary of Pledgor, and second, the Company merged with and into Tickeri II Acquisition Corp., a wholly-owned subsidiary of Pledgor (“Second Merger Sub”), whereupon the Company ceased to exist and Second Merger Sub survived as a continuing wholly-owned subsidiary of Pledgor, and pursuant to which Pledgor issued to each Secured Party a Secured Promissory Note of even date herewith in the face amount of $5,000,000.00 (each, a “Note”), for an aggregate principal amount of $10,000,000 in Notes.

 

B. Pledgor hereby desires to pledge pursuant to this Agreement all shares of common stock and other equity securities of Second Merger Sub from time to time held by Pledgor.

 

C. As borrower under the Notes, Pledgor shall benefit from the loans and other financial accommodations granted to Pledgor pursuant to the Notes.

 

D. In order to induce Secured Parties to extend credit to Pledgor pursuant to the Notes, Pledgor has agreed to pledge the Pledged Stock as security for performance and payment of all obligations under the Notes.

 

NOW, THEREFORE, the parties hereto agree as follows:

 

1. Defined Terms. All capitalized terms used and not otherwise defined herein shall have the meanings set forth in the Merger Agreement. The following terms shall have the following meanings:

 

Event of Default” shall have the meaning set forth in the Notes.

 

Lien” means any mortgage, lien, deed of trust, charge, pledge, security interest, or other encumbrance.

 

Obligations” means all loans, advances, debts, liabilities and obligations, howsoever arising, owed by Pledgor to any Secured Party of every kind and description (whether or not evidenced by any note or instrument and whether or not for the payment of money), now existing or hereafter arising under or pursuant to the terms of the Notes, this Agreement or any other instrument or agreement entered into in connection with the Notes or this Agreement, including, all interest, fees, charges, expenses, attorneys’ fees and costs and accountants’ fees and costs chargeable to and payable by Pledgor hereunder and thereunder, in each case, whether direct or indirect, absolute or contingent, due or to become due, and whether or not arising after the commencement of a proceeding under Title 11 of the United States Code (11 U.S.C. Section 101 et seq.), as amended from time to time (including post-petition interest) and whether or not allowed or allowable as a claim in any such proceeding.

 

 

 

 

Proceeds” shall mean “proceeds,” as such term is defined in the UCC and, in any event, shall include, without limitation, (1) all dividends or distributions in cash or in kind made to Pledgor from time to time in respect of the Pledged Stock, (2) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to Pledgor from time to time with respect to any of the Pledged Stock, (3) any and all payments (in any form whatsoever) made or due and payable to Pledgor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Pledged Stock by any foreign or domestic government or any instrumentality or agency thereof (a “Governmental Authority”) (or any person acting under color of any such Governmental Authority) and (4) any and all other amounts from time to time paid or payable under or in connection with any of the Pledged Stock. In addition, the term Proceeds shall include, without limitation, all accounts, chattel paper, deposit accounts, instruments, intellectual property, equipment, inventory, consumer goods, farm products, documents, general intangibles and other proceeds which arise from the sale, lease, transfer, or other use or disposition of any kind of the Pledged Stock and all proceeds of any type (all of the foregoing shall have the meaning given them in the UCC except as otherwise defined herein).

 

UCC” shall mean the Uniform Commercial Code as the same may, from time to time, be in effect in the State of Delaware; provided, however, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, priority or exercise of remedies of Lender’s security interest in any of the Pledged Collateral (as defined below) is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of Delaware, the term “UCC” shall mean the Uniform Commercial Code as adopted and in effect in such other jurisdiction for purposes of the provisions hereof relating to such attachment, perfection, priority or exercise of remedies and for purposes of definitions related to such provisions.

 

2. Grant of Security Interest.

 

a. Grant. As collateral security for the prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of the Obligations, Pledgor hereby grants to Secured Parties for their benefit a security interest in all of Pledgor’s right, title and interest in, to and under (i) the shares of Second Merger Sub listed on Schedule A hereto together with any additional shares or other securities of Second Merger Sub hereafter acquired by Pledgor (collectively, with the Securities, the “Pledged Stock”), (ii) all dividends (including cash dividends), other distributions (including redemption proceeds), or other property, securities or instruments in respect of or in exchange for the Pledged Stock, whether by way of dividends, stock dividends, recapitalizations, mergers, consolidations, split-ups, combinations or exchanges of shares or otherwise, and (iii) all Proceeds of the foregoing (collectively, the “Pledged Collateral”).

 

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b. Certificates. All certificates and instruments, if any, representing or evidencing the Pledged Collateral shall be delivered to and held by or on behalf of Lender pursuant hereto and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to Lender. Upon the occurrence of an Event of Default, Lender shall have the right at any time, in its discretion and without further notice to Pledgor, to transfer to or register in the name of Lender or any of its nominees any or all of the Pledged Collateral.

 

3. Limitations on Lender’s Rights and Obligations. Until the Obligations are paid in full, it is expressly agreed by Pledgor that, anything herein to the contrary notwithstanding, (a) no Secured Party shall have any obligation or liability for the performance by Pledgor of its obligations as a shareholder of Second Merger Sub by reason of or arising out of this Agreement or the granting to Secured Party of the security interest provided for herein or the receipt by Secured Party of any payment relating hereto, and (b) no Secured Party shall be required or obligated in any manner to perform or fulfill any of the obligations of Pledgor in its capacity as a shareholder of Second Merger Sub or to make any inquiry as to the nature or the sufficiency of any payment received by Pledgor or the sufficiency of any performance by any other party of any obligation owed to Pledgor, as the case may be, or to present or file any claim, or to take any action to collect or enforce any performance or the payment of any amounts which may have been assigned to Lender or to which Lender may be entitled at any time or times.

 

4. Representations, Warranties and Covenants. Pledgor hereby represents and warrants and covenants to Secured Parties that:

 

a. Capitalization. The Pledged Stock constitutes 100% of Second Merger Sub’s outstanding equity.

 

b. Title. Except for the security interest granted to Secured Parties pursuant to this Agreement, Pledgor is the sole owner of the Pledged Stock having good and marketable title thereto, free and clear of any and all Liens and any transfer restrictions affecting the Pledged Stock other than any restrictions on transfer which may be imposed under Second Merger Sub’s bylaws or other governing documents or applicable federal and state securities laws.

 

c. No Other Security Interests. No Lien exists or will exist on any part of the Pledged Collateral.

 

d. First Priority Perfected Security Interest. This Agreement is effective to create a valid and continuing first priority Lien on and first priority perfected security interest in the Pledged Stock in favor of Secured Parties and prior to all other Liens, and is enforceable as such as against creditors of and purchasers from Pledgor.

 

e. No Conflict. Neither Pledgor’s execution and delivery hereof nor its consummation of the transactions contemplated hereby nor its compliance with any of the terms and provisions hereof (i) does or will contravene any existing requirement of any Governmental Authority applicable to or binding on it or any of its properties, (ii) does or will contravene or result in any breach of or constitute any default under, or result in the creation of any Lien (other than the Lien created hereby) upon any of its property under any organizational document, indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, partnership agreement, limited liability company agreement or other agreement or instrument to which it is a party or by which it or any of its properties be bound or affected, except as may have been validly waived in connection with this Agreement.

 

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f. Enforceability. Pledgor has duly executed and delivered this Agreement and this Agreement constitutes a legal, valid and binding obligation of Pledgor enforceable against Pledgor in accordance with the terms hereof, except for the effect of applicable laws regarding bankruptcy, insolvency, moratorium or fraudulent transfer or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability.

 

g. Litigation. There are no actions or proceedings pending or, to Pledgor’s knowledge, threatened, against or affecting the Pledged Collateral before any court or administrative agency or arbitrator.

 

h. Legal Capacity. Pledgor has full power, authority and legal right and capacity to enter into and perform its obligations under this Agreement and each other document contemplated hereby to which Pledgor is or will be a party and to consummate the transactions contemplated hereby and thereby.

 

5. Covenants. Pledgor covenants and agrees with Secured Parties that from and after the effectiveness of this Agreement until the full payment and performance of Pledgor of the Obligations:

 

a. Further Assurances. At any time and from time to time, upon the written request of any Secured Party, Pledgor will promptly execute and deliver any and all such further instruments and documents as any Secured Party may reasonably deem necessary to obtain the full benefits and security of this Agreement, including, without limitation, executing and filing such financing or continuation statements, securities account control agreements or amendments thereto, as may be necessary or desirable or that any Secured Party may reasonably request in order to perfect, preserve and enforce the security interest created hereby.

 

b. Limitation on Liens on Pledged Collateral. Pledgor will not create, permit or suffer to exist, and will defend the Pledged Collateral against and take such other action as is necessary to remove, any Lien on the Pledged Collateral, except the Lien granted pursuant to this Agreement, and will defend the right, title and interest of Secured Parties in and to Pledgor’s rights under the Pledged Collateral against the claims and demands of all third parties whomsoever. Pledgor shall not cause or permit any amendment to any provision of any stock purchase agreements with Second Merger Sub or the bylaws of Second Merger Sub that would impair or otherwise negatively affect the Pledged Collateral or Secured Parties’ rights hereunder without the prior written consent of Secured Parties.

 

c. Limitations on Disposition. Pledgor will not sell, assign, exchange, lease, transfer, pledge or otherwise dispose of, or grant any option or other rights with respect to, the Pledged Collateral or any portion thereof.

 

d. Possession of Pledged Stock Collateral. Pledgor shall deliver any and all additional certificates or other indicia of ownership of the Pledged Stock to Secured Parties within three business days after receipt by Pledgor and, upon any Secured Party’s request, shall execute all pledge agreements, security agreements, stock powers, financing statements and all other documents that such Secured Party deems necessary or advisable to grant Lender a valid, perfected first priority security interest in such Pledged Stock.

 

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6. Voting Rights. Pledgor shall be permitted to exercise all voting rights with respect to the Pledged Stock; provided, however, that no vote shall be cast or other action taken which would impair the Pledged Stock or the rights of Secured Parties hereunder or which would be inconsistent with or result in any violation of any provision of the Notes, the Merger Agreement, any other documents related to this transaction, or any other provision of this Agreement. Upon the occurrence and during the continuance of an Event of Default, all rights of Pledgor to exercise the voting rights which it would otherwise be entitled to exercise pursuant to this Section 6 or to receive the dividends or distributions on account of the Pledged Collateral shall cease and all such rights shall thereupon become vested in Secured Parties which shall thereupon have the sole right, but not the obligation, to exercise such voting and other consensual rights and to receive and hold as Pledged Collateral such dividends and distributions.

 

7. Remedies.

 

a. If an Event of Default has occurred and is continuing (and has not been rescinded or waived pursuant to the Notes), in addition to, and not by way of limitation of, all rights and remedies granted in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Notes or otherwise available at law or in equity, without any other notice to or demand upon Pledgor, Secured Parties shall have all rights and remedies of a secured party under the UCC. Without limiting the generality of the foregoing, each Secured Party, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by applicable law referred to below) to or upon Pledgor or any third party (all and each of which demands, defenses, advertisements and notices are to the fullest extent permitted by applicable law hereby waived), may in such circumstances forthwith collect, receive, appropriate, foreclose and realize upon the Pledged Collateral so pledged hereunder, or any part thereof, and may assume control over the operations of Second Merger Sub free and clear of any claims or encumbrances of Pledgor, and/or may forthwith sell, assign, give option or options to purchase or otherwise dispose of and deliver the Pledged Collateral or any part thereof (or contract to do any of the foregoing), in one or more units at public or private sale or sales upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. Each Secured Party shall have the right upon any such public sale or sales, and, to the fullest extent permitted by applicable law, upon any such private sale or sales, to purchase the whole or any part of the Pledged Collateral so sold, free of any right or equity of redemption in Pledgor, which right or equity is hereby waived or released to the extent permitted by applicable law. Secured Parties shall apply any Proceeds from time to time held by it and the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable costs and expenses of every kind incurred therein or incidental to the care or safekeeping of any of the Pledged Collateral or in any way relating to the Pledged Collateral or the rights of any Secured Party hereunder, including, without limitation, reasonable attorneys’ fees and disbursements, to the payment in whole or in part of the Note, and only after such application and after the payment by any Secured Party of any other amount required by any provision of applicable law.

 

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b. Pledgor recognizes that Secured Parties may be unable to effect an unrestricted public sale of any or all of the Pledged Stock, by reason of certain prohibitions in the Securities Act of 1933, as amended, and applicable state securities laws or otherwise, and may be compelled to resort to one or more public or private sales thereof to a restricted group of purchasers which will be obligated to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. Pledgor acknowledges and agrees that any such private sale or restricted public sale may result in prices and other terms less favorable to Secured Parties than if such sale were an unrestricted public sale and agrees that such circumstances shall not, in and of themselves, result in a determination that such sale was not made in a commercially reasonable manner.

 

c. In the event Secured Parties foreclose on the Pledged Stock, Pledgor shall be deemed to have satisfied the Notes in full and Secured Parties shall have no further recourse against Pledgor with respect to the Notes.

 

8. Reinstatement. This Agreement shall, to the fullest extent permitted by applicable law, remain in full force and effect and continue to be effective should any petition be filed by or against Pledgor for liquidation or reorganization, should Pledgor become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of Pledgor’s assets, and shall continue to be effective or be reinstated, as the case may be, to the fullest extent permitted by applicable law, if at any time payment and performance of the Notes, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Notes, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Note, to the fullest extent permitted by applicable law, shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.

 

9. Successors and Assigns. The terms and provisions of this Agreement shall be binding upon, and, subject to the provisions of this Section 9, the benefits thereof shall inure to, the parties hereto and their respective successors and assigns; provided, however, that Pledgor shall not assign this Agreement or any of the rights, duties or obligations of Pledgor hereunder without the prior written consent of Secured Parties.

 

10. Notices. Any notice or communication given pursuant to this Agreement by any party to any other party shall be in writing and shall be sufficiently given if personally delivered, sent by facsimile or other means of electronic transmission or sent by mail, postage prepaid to the parties at the following addresses or to such other address as any party may hereafter designate to the others by like notice:

 

if to Pledgor:

 

HUMBL, Inc.

Attn: Jeff Hinshaw

600 B Street, Suite 300

San Diego, California 92101

Email: jeff@humblpay.com

 

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If to Secured Party:

 

Javier Gonzalez

41865 Rawnsley Drive

Ashburn, VA 20148

 

Juan Gonzalez

41865 Rawnsley Drive

Ashburn, VA 20148

 

With a copy, which shall not constitute notice, to:

 

Andrew P. Sparks

Wilson Sonsini Goodrich & Rosati, P.C.

139 Townsend Street, Suite 150

San Francisco, CA 94107

 

Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given when delivered if delivered personally, or, if sent by mail, at the earlier of its receipt or four (4) days after the same has been deposited in a regularly maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid or, if sent by facsimile, upon confirmation of facsimile transfer or, if sent by electronic mail, upon confirmation of delivery when directed to the electronic mail address set forth above. In the event of any conflict between Lender’s books and records and this Agreement or any notice delivered hereunder, Lender’s books and records will control absent fraud or error.

 

11. Severability. If any provision hereof is invalid and unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (a) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in favor of Secured Parties in order to carry out the intentions of the parties hereto as nearly as may be possible and (b) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction.

 

12. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. The parties hereto confirm that any telecopy or electronic copy of another party’s executed counterpart of this Agreement (or its signature page thereof) will be deemed to be an executed original thereof.

 

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13. No Waiver; Cumulative Remedies. Secured Parties shall not by any act, delay, omission or otherwise be deemed to have waived any of its rights or remedies hereunder, and no waiver shall be valid unless in writing, signed by Secured Parties, and then only to the extent therein set forth. A waiver by Secured Parties of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which Secured Parties would otherwise have had on any future occasion. No failure to exercise nor any delay in exercising on the part of Secured Parties, any right, power or privilege hereunder, shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or future exercise thereof or the exercise of any other right, power or privilege. The rights and remedies hereunder provided are cumulative and may be exercised singly or concurrently, and are in addition to any rights and remedies provided by law. None of the terms or provisions of this Agreement may be waived, altered, modified or amended except by an instrument in writing, duly executed by Secured Parties and, where applicable, by Pledgor.

 

14. Construction and Interpretation. The parties hereto have participated jointly in the negotiation and drafting of this Agreement and each party has been represented by his or its own legal counsel. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.

 

15. Governing Law and Consent to Jurisdiction. This Agreement is made under the laws of the State of Delaware and shall be governed by and construed and enforced in accordance with the laws of such state without regard to the principles of conflicts of laws. By executing this Agreement, all parties hereto agree to submit to the exclusive jurisdiction of and agree to the venue of the courts of the State of California located in San Diego County, California. The parties hereto agree not to bring any action in any court of law located outside of San Diego County, California.

 

16. Headings. Captions and headings in this Agreement are for convenience only and are not to be deemed part of this Agreement.

 

17. Power of Attorney; Appointment and Powers of Lender. Upon the occurrence and during the continuance of an Event of Default, Pledgor hereby irrevocably constitutes and appoints each Secured Party and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of Pledgor or in such Secured Party’s own name, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments that may be necessary or desirable to accomplish the purposes of this Agreement and, without limiting the generality of the foregoing, hereby gives such attorneys the power and right, on behalf of Pledgor, without notice to or assent by Pledgor, to do the following:

 

a. generally to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Pledged Stock in such manner as is consistent with the UCC and as fully and completely as though Lender was the absolute owner thereof for all purposes, and to do at Pledgor’s expense, at any time, or from time to time, all acts and things which Lender deems necessary to protect, preserve or realize upon the Pledged Stock and Lender’s security interest therein, in order to effect the intent of this Agreement, all as fully and effectively as Pledgor might do, including, without limitation, (A) upon written notice to Pledgor, the exercise of voting rights with respect to the Pledged Stock, which rights may be exercised, if Lender so elects, with a view to causing the liquidation of assets of Second Merger Sub, and (B) the execution, delivery and recording, in connection with any sale or other disposition of any Pledged Stocks, of the endorsements, assignments or other instruments of conveyance or transfer with respect to such Pledged Stock; and

 

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b. to the extent that Pledgor’s authorization given in Section 17 is not sufficient, to file such financing statements with respect hereto, with or without Pledgor’s signature, or a photocopy of this Agreement in substitution for a financing statement, as Lender may deem appropriate and to execute in Pledgor’s name such financing statements and amendments thereto and continuation statements which may require Pledgor’s signature.

 

18. Termination. Upon the full payment of the Obligations and performance of the Notes, this Agreement shall terminate and be of no further force and effect. Upon any such termination, Secured Parties shall deliver to Pledgor the Pledged Stock in their possession together with such documents as Pledgor may reasonably request to evidence such termination at Pledgor’s expense.

 

19. Authorization to File UCC Financing Statements. Pledgor hereby authorizes Secured Parties to file UCC financing statements concerning the Pledged Collateral. Pledgor will execute and deliver any documents (properly endorsed, if necessary) reasonably requested by any Secured Party for the perfection or enforcement of any security interest or lien, give good faith, diligent cooperation to Lender, and perform such acts reasonably requested by any Secured Party for perfection and enforcement of any security interest or lien, including, without limitation, obtaining control for purposes of perfection with respect to the Pledged Collateral. Each Secured Party is authorized to file, record, or otherwise utilize such documents as it deems necessary to perfect and/or enforce any security interest or lien granted hereunder.

 

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed as set forth above.

 

    PLEDGOR:
     
    HUMBL, INC.
     
    By:  
      Brian Foote, CEO
       
SECURED PARTIES:      
       
       
Javier Gonzalez      
       
       
Juan Gonzalez      

 

[Signature Page to Stock Pledge Agreement]

 

 

 

 

Schedule A

Shares

 

100 shares of common stock of Tickeri II Acquisition Corp. issued in book entry form.

 

[Signature Page to Stock Pledge Agreement]

 

 

 

 

 

Exhibit 10.31

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (this “Agreement”) is entered into by and between Tickeri, Inc., a Delaware corporation (the “Company”), and Juan Gonzalez, an individual (“Employee”), effective as of June 3, 2021 (the “Effective Date”).

 

In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereof agree as follows:

 

1. Employment. The Company hereby employs Employee, and Employee hereby accepts such employment, on the terms and conditions of this Agreement.

 

2. Term. By signing this Agreement, Employee reiterates his intention to remain employed with the Company for a period of time beginning on the Effective Date and ending on the date that is eighteen (18) months from the Effective Date (the “Initial Term”), unless earlier terminated pursuant to Section 6 below. Following the Initial Term, this Agreement will remain in effect until terminated by either party with fifteen (15) days’ prior written notice (the time during which Employee is employed by the Company is referred to hereinafter as the “Term”).

 

3. Duties.

 

3.1. General Duties. Employee shall be employed as the Chief Executive Officer of the Company, and shall have such duties, responsibilities and obligations as are established by the Company or are generally required of persons employed in similar positions. Employee shall also perform such other services and duties for the Company which are appropriate and customary to the offices and positions held by Employee and assigned or delegated to him from time to time by the Company. Employee shall report directly to HUMBL, Inc.’s (“HUMBL”) Chief Executive Officer, Brian Foote.

 

3.2. Performance. To the best of his ability and experience, Employee will at all times during the Term loyally and conscientiously perform all duties, and discharge all responsibilities and obligations, required of and from him pursuant to the express and implicit terms hereof, and to the reasonable satisfaction of the Company. Employee shall devote substantially all his business time, energy, skill and attention to the business of the Company, and the Company shall be entitled to all of the benefits and profits arising from or incident to all such work, services, and advice of Employee rendered to the Company during the Term.

 

4. Compensation and Benefits.

 

4.1. Salary. The Company shall pay to Employee an annual base salary of $150,000.00 (“Annual Base Salary”). Employee’s Annual Base Salary, which shall be prorated for any partial employment period, will be payable in equal bi-weekly installments or at such other intervals as may be established for the Company’s customary payroll schedule, less all applicable federal, state and local income and employment tax withholdings required by law.

 

4.2. Employee Benefits. During the Term, Employee will be entitled to participate in the employee benefit plans currently and hereafter maintained by the Company of general applicability to other similarly situated employees of the Company. The Company reserves the right to cancel or change the benefit plans and programs it offers to its employees at any time.

 

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4.3. Vacation. Employee will be entitled to fifteen (15) days of paid vacation per year, with the timing and duration of specific vacations mutually and reasonably agreed to by the parties hereto. Unused vacation days shall not be carried forward from year to year, nor shall Employee be compensated for any unused vacation days.

 

4.4. Expenses. The Company will reimburse Employee for reasonable travel, entertainment or other expenses incurred by Employee in the furtherance of or in connection with the performance of Employee’s duties hereunder, provided that such expenses are pre-approved in writing by the Company, are not in excess of any travel/expense budget provided to Employee, and Employee provides all receipts and other supporting documentation as may be requested by the Company.

 

4.5. Bonus. In the Company’s discretion and depending on various factors, including without limitation the profitability of the Company, Employee may be eligible for certain bonuses, which Company may pay in such amounts and at such times as it deems appropriate.

 

5. Restrictions.

 

5.1. No Use of Company Property for Personal Use. No Company property may be used for personal purposes by Employee without the prior written consent of the Company. Additionally, no personal expenses are to be paid for with Company funds.

 

5.2. Corporate Opportunity Doctrine. As an employee of the Company, Employee hereby acknowledges and agrees that the “corporate opportunity” doctrine applies to Employee with respect to his fiduciary duties to the Company. As a result, Employee agrees to provide the Company with a right to review and accept various business opportunities that may be complimentary to the Company’s business operations. Any business opportunity that is rejected by the Company in writing will then be excluded from the restrictions otherwise applicable to Employee under this Section 5.2.

 

6. Termination of Employment.

 

6.1. Death or Disability. If Employee’s employment shall terminate due to his/her death or Disability (defined below), Employee (or his/her estate) shall be paid, in lieu of all other payments hereunder, the following: (1) accrued and unpaid salary through the effective date of the termination of Employee’s employment with Company (“Date of Termination”); and (2) reimbursement for all actual and previously unreimbursed out-of-pocket business expenses properly incurred to the Date of Termination in accordance with Company’s standard business expense reimbursement policies (collectively, the “Accrued Amounts”). The Accrued Amounts shall be paid to Employee’s surviving spouse, if any, or otherwise to Employee’s estate, in a single lump sum payment within thirty (30) days of Employee’s death, or, if otherwise provided in an applicable employee benefit plan, in accordance with the time and form of payment provisions of such plan, in accordance with applicable law. For purposes of this Agreement “Disability” shall mean that Employee has been prevented from working for more than a continuous period of twelve (12) weeks, or for shorter periods aggregating more than ninety (90) days in any consecutive twelve (12) month period, because of physical or mental incapacity or other disability for which Employee has been provided all legally required leaves of absence and reasonable accommodations.

 

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6.2. Termination Without Cause or Resignation for Good Reason. If (1) Company terminates Employee’s employment during the Initial Term other than (a) due to Employee’s death or Disability or (b) for Cause (as defined below); or (2) if Employee resigns from Employee’s employment for Good Reason (as defined below) during the Initial Term, Employee shall receive the Accrued Amounts on the Date of Termination and, in addition, subject to the Severance Conditions below, (i) Company shall provide a severance payment equal to three (3) months of Employee’s salary as of the Date of Termination (the “Severance Payment”), divided and paid in equal installments over a period of three (3) months in accordance with Company’s regular payroll practices starting on the first regular payday occurring after the effective date of the Release (as defined below), and (ii) the Company will reimburse Employee for COBRA premiums (at the coverage levels and at the Company-paid rate in effect immediately prior to such termination) for Employee and Employee’s covered dependents until the earliest of (A) the date that is three (3) months following the Date of Termination, (B) the date that Employee (or Employee’s spouse or dependents, as applicable) are no longer eligible for COBRA coverage or (C) the date when Employee receives substantially equivalent health insurance coverage in connection with new employment (the “COBRA Benefit”). Company’s obligation to pay Employee the Severance Payment and COBRA Benefit shall be conditioned on Employee’s satisfaction of the following (the “Severance Conditions”): (1) Employee must first sign, and allow to become effective, a Company-approved separation agreement, which shall include a full general release in a form acceptable to Company, releasing all claims, known or unknown, that Employee may have against Company arising out of or any way related to Employee’s employment or termination of employment with Company (the “Release”); and (2) on or before the effective date of the Release, Employee must have (i) reconfirmed Employee’s agreement to abide by all of the surviving provisions of this Agreement and any other agreement between Employee and Company, (ii) agreed to cooperate in the transition of Employee’s employment; and (iii) agreed not to make any voluntary statements, written or oral, or cause or encourage others to make any such statements that defame, disparage, or in any way criticize the personal and/or business reputations, practices, or conduct of the Company or any of its affiliates. All other Company obligations to Employee will be automatically terminated and completely extinguished.

 

6.3. Termination for Cause. Company shall have the right at any time, upon written notice to Employee, to terminate Employee’s employment immediately for Cause. If Company terminates Employee’s employment for Cause, Employee shall have no right to receive any further compensation other than the Accrued Amounts. In the event that Company terminates Employee’s employment for Cause, Company shall pay Employee Employee’s Accrued Amounts on the Date of Termination.

 

As used herein “Cause” shall mean: (a) conviction or entry of a plea of nolo contendere for any felony; (b) embezzlement, misappropriation, fraud, dishonesty, unethical business conduct, or breach of fiduciary duty to Company or any affiliate (other than those acts that are curable without damage to the Company and/or its affiliates, in which case Employee will have ten (10) days to cure such breach following written notice thereof to Employee by Company, and other than those acts that do not result in material harm to the Company); (c) inability or refusal to substantially perform Employee’s duties hereunder and Employee’s failure to cure such condition within 30 days after receiving written notice thereof by the Company; (d) failure to follow reasonable and lawful directions from the persons to whom Employee report and Employee’s failure to cure such condition within 30 days after receiving written notice thereof by the Company; (e) use of alcohol or use of illegal drugs, interfering with performance of Employee’s obligations to Company or any affiliate, continuing after written warning; (f) commission of any willful or intentional act which materially injures or could reasonably be expected to materially injure the reputation, business or business relationships of Company, any affiliate, Employee or other employees of Company or any affiliates; (g) willful disregard or violation of Company’s or any affiliate’s written policies regarding harassment or discrimination, or any other material violation of Company’s or any affiliate’s written policies as in effect from time to time and Employee’s failure to cure such breach within 30 days after receiving written notice thereof by the Company; (h) gross negligence or willful misconduct in the performance Employee’s duties or with regard to the assets, business or employees of Company or any affiliates; (i) material breach of Employee’s obligations to Company or any affiliate (other than those acts that are curable without damage to the Company and/or its affiliates, in which case Employee will have ten (10) days to cure such breach following written notice thereof to Employee by Company); (j) usurpation of a corporate opportunity; or (k) misappropriation, unauthorized use or disclosure of Proprietary Information that results in a material breach of this Agreement.

 

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As used herein “Good Reason” shall mean Employee’s resignation due to the occurrence of any of the following conditions which occurs without Employee’s written consent, provided that the requirements regarding advance notice and an opportunity to cure set forth below are satisfied: (i) a material reduction of Employee’s duties, authority, responsibilities or reporting relationship relative to Employee’s duties, authority, responsibilities or reporting relationship as in effect immediately prior to such reduction; (ii) a 10% or more reduction in Employee’s then-current salary; (iii) any material breach by the Company or any successor corporation of any material provision of this Agreement; (iv) the failure of any acquirer or successor to the Company or any affiliate of such affiliate or successor to assume or otherwise continue the obligations under this Agreement; or (v) the Company (or its successor) conditions Employee’s continued service on Employee being transferred to a site of employment that would increase Employee’s one-way commute by more than 30 miles from Employee’s then principal residence. In order for Employee to resign for Good Reason, Employee must provide written notice to the Company of the existence of the Good Reason condition within 90 days of the initial existence of such Good Reason condition. Upon receipt of such notice, the Company will have 30 days during which it may remedy the Good Reason condition and not be required to provide the payments or benefits described herein as a result of such proposed resignation. If the Good Reason condition is not remedied within such 30-day period, Employee may resign based on the Good Reason condition specified in the notice effective no later than 60 days following the expiration of the 30-day cure period.

 

6.4. Employee Resignation. If Employee resigns from Employee’s employment for any reason other than for Good Reason, Employee’s resignation shall be considered a material breach of this Agreement. Notwithstanding the foregoing, in such event, only the following shall apply: (i) Company shall pay Employee Employee’s Accrued Amounts on the Date of Termination, (ii) all other Company obligations to Employee hereunder, and all Employee’s obligations to Company hereunder, shall be automatically terminated and completely extinguished, (iii) this Agreement shall be automatically terminated, and (iv) each party shall have no claims against or liability to the other party under this Agreement. Further notwithstanding the foregoing, during the Initial Term, Employee may only resign after first providing 120 days’ prior written notice to the Company.

 

6.5. No Further Obligations. The amounts and benefits provided for in this Section shall be in lieu of any termination or severance payments or benefits for which Employee may be eligible or entitled, now or in the future, under any of the plans, policies, or programs of Company or any of its subsidiaries or affiliates. In addition, the amounts and benefits provided for in this Section shall be inclusive of all statutory severance payable or otherwise provided to Employee in relation to Employee’s employment by Company and the termination of Employee’s employment under this Agreement and compensation for all required notice periods. Except as otherwise expressly set forth in this Section, from and after the date of such termination, Employee shall (i) have no right to receive any further compensation (including salary or bonus) hereunder, and, (ii) except to the extent required by law, cease to be covered under or be permitted to actively participate in any benefits plans or programs.

 

6.6. Resignation from Officer Positions. If Employee’s employment with Company terminates for any reason, Employee shall be deemed to have resigned at that time from any and all positions that Employee may have held with Company or any of its affiliates, as designated by Company, or any other positions that Employee held on behalf of Company. If, for any reason, this Section is deemed insufficient to effectuate such resignation, following a reasonable opportunity to review, Employee hereby authorizes Company to execute any documents or instruments consistent herewith which Company may deem necessary or desirable to effectuate such resignation or resignations, and to act as Employee’s attorney-in-fact. Company will provide Employee with a copy of such documents.

 

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6.7. Section 409A. Certain payments and benefits payable under this Agreement are intended to be exempt from, or comply with, Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the Treasury Regulations and Internal Revenue Service guidance thereunder. To the extent the payments and benefits under the Agreement are subject to Section 409A of the Code, the Agreement shall be interpreted, construed and administered in a manner that satisfies the requirements of Sections 409A (a) (2), (3) and (4) of the Code and the Treasury Regulations and Internal Revenue Service guidance thereunder. Each payment and benefit payable under this Agreement is intended to constitute a separate payment for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations. If the parties determine that any payments or benefits payable under this Agreement subject to Section 409A of the Code do not comply with Section 409A of the Code, Company and Employee agree to amend this Agreement, or take such other actions as Company and Employee reasonably deem necessary or appropriate, to comply with the requirements of Section 409A of the Code, while preserving benefits that are, in the aggregate, no less favorable than the benefits as provided to Employee under this Agreement. If any provision of this Agreement would cause such payments or benefits to fail to so comply, such provision shall not be effective and shall be null and void with respect to such payments or benefits, and such provision shall otherwise remain in full force and effect.

 

7. Noncompetition and Nonsolicitation.

 

7.1. Noncompetition. During the Term and until the later of either: (i) one (1) year after the termination or expiration of this Agreement, and (ii) two (2) years after the Effective Date (the “Restricted Period”), Employee shall not, directly or indirectly (whether as a principal, agent, independent contractor, employee, partner, member, owner, or in any other similar capacity), own, manage, operate, control, participate in, perform services for, be employed by, or otherwise carry on, a business similar to or competitive with the Company’s business anywhere in the United States or Latin America in which the Company, during the Term, is engaged or intends to become engaged in the Company’s business. Notwithstanding the foregoing, Employee shall not be prohibited from owning not more than one percent of the voting stock of any publicly traded entity that competes with the Company.

 

7.2. Nonsolicitation of Company Employees. During the Restricted Period, Employee shall not, directly or indirectly, recruit, solicit, induce, or influence (or seek to induce or influence) any person who is employed by, hired by, affiliated with, or acts as a consultant, independent contractor, or salesperson for, HUMBL or the Company to terminate or alter his/her relationship with the Company or HUMBL.

 

7.3. Nonsolicitation of Customers. During the Restricted Period, Employee shall not, directly or indirectly, without the prior written consent of the Company, solicit, encourage or take any other action which is intended to induce or encourage, or has the effect of inducing or encouraging, any customer, client or supplier who or which is, or had been within the prior two years, a customer or potential customer, or supplier or potential supplier, of the Company or HUMBL to terminate or alter in any way such customer’s, client’s, or supplier’s relationship with the Company or HUMBL, nor shall Employee call on or solicit any such customers, clients or suppliers with respect to or on behalf of any business similar to or competitive with the Company’s or HUMBL’s business.

 

7.4. Remedies; Liquidated Damages. Employee expressly agrees and acknowledges that the covenant not to compete and the nonsolicitation covenants contained in this Section 7 are for the Company’s protection because of the nature and scope of the Company’s business and Employee’s position with and the scope of the duties, responsibilities and obligations delegated to Employee by the Company hereby. If any of the covenants or agreements contained in this Section 7 are violated or breached by Employee, Employee agrees and acknowledges that any such violation or threatened violation or breach or threatened breach will cause irreparable injury to the Company and that the remedy at law for any such violation or threatened violation or breach or threatened breach will be inadequate and that the Company will be entitled to injunctive relief and other equitable remedies without the necessity of proving actual damages or posting a bond. The noncompetition and nonsolicitation provisions set forth in Sections 7.1, 7.2, and 7.3 hereof, respectively, shall be extended by any period of time during which Employee is in violation or breach of this Section 7. In addition to the injunctive relief and other remedies previously described, Employee and the Company agree that the amount of damage resulting to the Company from a violation of Sections 7.1 and 7.3 hereof is difficult to ascertain and quantify, and therefore Employee acknowledges and agrees that the Company shall be entitled to liquidated damages from Employee in the amount of any money received by Employee from any competitive business or any client or customer of the Company multiplied by two. Such damages shall be paid by Employee within ten (10) days after receipt of written demand from the Company, and if not so paid may be offset against any amounts owed by the Company to Employee. Employee and the Company agree that such liquidated damages shall not be deemed a penalty and are a good faith approximation of the damages to the Company as a result of any violation of Sections 7.1 and 7.3.

 

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7.5. Interpretation. It is the intention of the parties hereto that the noncompetition and nonsolicitation covenants contained in this Section 7 be enforced to the greatest extent (but to no greater extent) in time, scope, and degree of participation as is permitted by applicable law. To this end, the parties hereto agree that such covenants shall be construed to extend in time and territory and with respect to degree of participation only so far as they may be enforced, and that such covenants are to that end hereby declared divisible and severable because it is a purpose of this Agreement to govern competition by Employee anywhere in the United States and Latin America in which the Company, during the Restricted Period, is engaged or intends to become engaged in the Company’s business.

 

7.6. Employee Acknowledgement. Employee acknowledges that Employee’s covenants and agreements in this Section 7 are reasonable and necessary to protect the Company’s legitimate interest in its proprietary information and goodwill. Employee acknowledges that this Section 7 is not so broad as to prevent Employee from earning a livelihood or practicing Employee’s chosen profession after termination or expiration of this Agreement. Employee further acknowledges that the covenants and agreements in this Section 7 shall remain enforceable if the Company terminates Employee’s relationship with the Company under this Agreement. Employee further acknowledges and agrees that without such restrictions, the Company would not have entered into this Agreement.

 

8. Confidentiality Agreement. Employee agrees to execute a Confidential Information, Invention Assignment, and Arbitration Agreement in substantially the form attached hereto as Exhibit A (the “Confidentiality Agreement”).

 

9. Miscellaneous.

 

9.1. Severability. If any court determines that any provision of this Agreement or any part thereof is invalid or unenforceable, the remainder of this Agreement shall be given full force and effect without regard to the invalid portions. If any court determines that any provision of this Agreement or any part thereof is unenforceable because of the duration or geographic scope of such provision, such court shall have the power to reduce the duration or scope of such provision, as the case may be and in its reduced form such provision shall then be enforceable.

 

9.2. Notices. Any notice required or permitted hereunder to be given by either party shall be in writing and shall be delivered personally or sent by certified or registered mail, postage prepaid, or by overnight courier, or by facsimile or email to the party to the address the party may designate from time to time. A notice delivered personally shall be effective upon receipt. A notice sent by facsimile or email shall be effective twenty-four (24) hours after the dispatch thereof. A notice delivered by mail or by overnight courier shall be effective on the earlier of the date delivered (or delivery refused) or the third day after the day of mailing.

 

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9.3. Attorneys’ Fees. In the event of any action at law or in equity to enforce or interpret the terms of this Agreement, the parties agree that the prevailing party shall be entitled to an additional award of the full amount of the attorneys’ fees and expenses paid by such prevailing party in connection with the litigation and/or dispute without reduction or apportionment based upon the individual claims or defenses giving rise to the fees and expenses. Nothing herein shall restrict or impair a court’s power to award fees and expenses for frivolous or bad faith pleading.

 

9.4. Successors and Assigns. The rights and obligations of the Company under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Company. This Agreement is for the unique personal services of Employee, and Employee shall not be entitled to assign any of his rights or obligations hereunder.

 

9.5. Entire Agreement. This Agreement and any exhibits hereto constitute the entire agreement between the parties with respect to the employment of Employee. This Agreement can be amended or modified only in a writing signed by Employee and an authorized representative of the Company.

 

9.6. Counterparts. This Agreement may be executed in counterparts and by facsimile or electronic delivery of signature pages, each of which shall be deemed an original and all of which together shall be considered one and the same agreement.

 

9.7. Governing Law; Consent to Personal Jurisdiction. This Agreement will be governed by the laws of the State of California without regard to California’s conflicts-of-law, except that any dispute regarding the enforceability of the arbitration section of this Agreement shall be governed by the FAA. To the extent that any lawsuit is permitted under this Agreement, Employee hereby expressly consents to the personal and exclusive jurisdiction and venue of the state and federal courts located in San Diego County, California for any lawsuit filed against Employee by the Company.

 

9.8. Arbitration. This Agreement shall be subject to the arbitration provisions set forth in Section 10 of the Confidentiality Agreement.

 

9.9. Further Assurances. Each party agrees to execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken all such further or other actions as are reasonably necessary or desirable upon the request of any other party to more fully effectuate the purposes and intent of this Agreement.

 

9.10. Modification. No provision of this Agreement shall be amended, waived or modified except by an instrument in writing signed by all of the parties hereto.

 

9.11. Waiver. The waiver by either party of a breach by the other party of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach.

 

9.12. Advice of Counsel. Employee hereby acknowledges that he has been, and hereby is, advised to seek legal counsel and to review this document with legal counsel of Employee’s choice. Employee acknowledges that this Agreement is written in a manner understandable to Employee.

 

9.13. Voluntary Execution. Employee represents and warrants that he has signed this Agreement voluntarily and of his own free will and that he has not been subjected to duress or undue influence from any source.

 

9.14. Waiver of Jury Trial. as a specifically bargained inducement for each of the parties to enter into this agreement (each party having had opportunity to consult counsel), each party expressly WAIVES THE RIGHT TO TRIAL BY JURY IN ANY PROCEEDING RELATING TO OR ARISING IN ANY WAY FROM THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT.

 

[Remainder of page intentionally left blank; signature page to follow]

 

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In witness whereof, the parties hereto have executed this Employment Agreement as of the date first written above.

 

  COMPANY:
     
 

TICKERI, INC.

     
  By:       
  Printed Name:  
  Title:  
     
  EMPLOYEE:
   
  Juan Gonzalez, an individual

 

[Signature Page to Employment Agreement]

 

 

 

 

EXHIBIT A

 

CONFIDENTIAL INFORMATION, INVENTION ASSIGNMENT, AND ARBITRATION AGREEMENT

 

 

 

 

Exhibit 10.32

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (this “Agreement”) is entered into by and between HUMBL, Inc., a Delaware corporation (the “Company”), and Javier Gonzalez, an individual (“Employee”), effective as of June 3, 2021 (the “Effective Date”).

 

In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereof agree as follows:

 

1. Employment. The Company hereby employs Employee, and Employee hereby accepts such employment, on the terms and conditions of this Agreement.

 

2. Term. By signing this Agreement, Employee reiterates his intention to remain employed with the Company for a period of time beginning on the Effective Date and ending on the date that is eighteen (18) months from the Effective Date (the “Initial Term”), unless earlier terminated pursuant to Section 6 below. Following the Initial Term, this Agreement will remain in effect until terminated by either party with fifteen (15) days’ prior written notice (the time during which Employee is employed by the Company is referred to hereinafter as the “Term”).

 

3. Duties.

 

3.1. General Duties. Employee shall be employed as the Chief Technology Officer of the Company, and shall have such duties, responsibilities and obligations as are established by the Company or are generally required of persons employed in similar positions. Employee shall also perform such other services and duties for the Company which are appropriate and customary to the offices and positions held by Employee and assigned or delegated to him from time to time by the Company. Employee shall report directly to the Company’s Chief Executive Officer, Brian Foote.

 

3.2. Performance. To the best of his ability and experience, Employee will at all times during the Term loyally and conscientiously perform all duties, and discharge all responsibilities and obligations, required of and from him pursuant to the express and implicit terms hereof, and to the reasonable satisfaction of the Company. Employee shall devote substantially all his business time, energy, skill and attention to the business of the Company, and the Company shall be entitled to all of the benefits and profits arising from or incident to all such work, services, and advice of Employee rendered to the Company during the Term.

 

4. Compensation and Benefits.

 

4.1. Salary. The Company shall pay to Employee an annual base salary of $150,000.00 (“Annual Base Salary”). Employee’s Annual Base Salary, which shall be prorated for any partial employment period, will be payable in equal bi-weekly installments or at such other intervals as may be established for the Company’s customary payroll schedule, less all applicable federal, state and local income and employment tax withholdings required by law.

 

4.2. Employee Benefits. During the Term, Employee will be entitled to participate in the employee benefit plans currently and hereafter maintained by the Company of general applicability to other similarly situated employees of the Company. The Company reserves the right to cancel or change the benefit plans and programs it offers to its employees at any time.

 

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4.3. Vacation. Employee will be entitled to fifteen (15) days of paid vacation per year, with the timing and duration of specific vacations mutually and reasonably agreed to by the parties hereto. Unused vacation days shall not be carried forward from year to year, nor shall Employee be compensated for any unused vacation days.

 

4.4. Expenses. The Company will reimburse Employee for reasonable travel, entertainment or other expenses incurred by Employee in the furtherance of or in connection with the performance of Employee’s duties hereunder, provided that such expenses are pre-approved in writing by the Company, are not in excess of any travel/expense budget provided to Employee, and Employee provides all receipts and other supporting documentation as may be requested by the Company.

 

4.5. Bonus. In the Company’s discretion and depending on various factors, including without limitation the profitability of the Company, Employee may be eligible for certain bonuses, which Company may pay in such amounts and at such times as it deems appropriate.

 

5. Restrictions.

 

5.1. No Use of Company Property for Personal Use. No Company property may be used for personal purposes by Employee without the prior written consent of the Company. Additionally, no personal expenses are to be paid for with Company funds.

 

5.2. Corporate Opportunity Doctrine. As an employee of the Company, Employee hereby acknowledges and agrees that the “corporate opportunity” doctrine applies to Employee with respect to his fiduciary duties to the Company. As a result, Employee agrees to provide the Company with a right to review and accept various business opportunities that may be complimentary to the Company’s business operations. Any business opportunity that is rejected by the Company in writing will then be excluded from the restrictions otherwise applicable to Employee under this Section 5.2.

 

6. Termination of Employment.

 

6.1. Death or Disability. If Employee’s employment shall terminate due to his/her death or Disability (defined below), Employee (or his/her estate) shall be paid, in lieu of all other payments hereunder, the following: (1) accrued and unpaid salary through the effective date of the termination of Employee’s employment with Company (“Date of Termination”); and (2) reimbursement for all actual and previously unreimbursed out-of-pocket business expenses properly incurred to the Date of Termination in accordance with Company’s standard business expense reimbursement policies (collectively, the “Accrued Amounts”). The Accrued Amounts shall be paid to Employee’s surviving spouse, if any, or otherwise to Employee’s estate, in a single lump sum payment within thirty (30) days of Employee’s death, or, if otherwise provided in an applicable employee benefit plan, in accordance with the time and form of payment provisions of such plan, in accordance with applicable law. For purposes of this Agreement “Disability” shall mean that Employee has been prevented from working for more than a continuous period of twelve (12) weeks, or for shorter periods aggregating more than ninety (90) days in any consecutive twelve (12) month period, because of physical or mental incapacity or other disability for which Employee has been provided all legally required leaves of absence and reasonable accommodations.

 

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6.2. Termination Without Cause or Resignation for Good Reason. If (1) Company terminates Employee’s employment during the Initial Term other than (a) due to Employee’s death or Disability or (b) for Cause (as defined below); or (2) if Employee resigns from Employee’s employment for Good Reason (as defined below) during the Initial Term, Employee shall receive the Accrued Amounts on the Date of Termination and, in addition, subject to the Severance Conditions below, (i) Company shall provide a severance payment equal to three (3) months of Employee’s salary as of the Date of Termination (the “Severance Payment”), divided and paid in equal installments over a period of three (3) months in accordance with Company’s regular payroll practices starting on the first regular payday occurring after the effective date of the Release (as defined below), and (ii) the Company will reimburse Employee for COBRA premiums (at the coverage levels and at the Company-paid rate in effect immediately prior to such termination) for Employee and Employee’s covered dependents until the earliest of (A) the date that is three (3) months following the Date of Termination, (B) the date that Employee (or Employee’s spouse or dependents, as applicable) are no longer eligible for COBRA coverage or (C) the date when Employee receives substantially equivalent health insurance coverage in connection with new employment (the “COBRA Benefit”). Company’s obligation to pay Employee the Severance Payment and COBRA Benefit shall be conditioned on Employee’s satisfaction of the following (the “Severance Conditions”): (1) Employee must first sign, and allow to become effective, a Company-approved separation agreement, which shall include a full general release in a form acceptable to Company, releasing all claims, known or unknown, that Employee may have against Company arising out of or any way related to Employee’s employment or termination of employment with Company (the “Release”); and (2) on or before the effective date of the Release, Employee must have (i) reconfirmed Employee’s agreement to abide by all of the surviving provisions of this Agreement and any other agreement between Employee and Company, (ii) agreed to cooperate in the transition of Employee’s employment; and (iii) agreed not to make any voluntary statements, written or oral, or cause or encourage others to make any such statements that defame, disparage, or in any way criticize the personal and/or business reputations, practices, or conduct of the Company or any of its affiliates. All other Company obligations to Employee will be automatically terminated and completely extinguished.

 

6.3. Termination for Cause. Company shall have the right at any time, upon written notice to Employee, to terminate Employee’s employment immediately for Cause. If Company terminates Employee’s employment for Cause, Employee shall have no right to receive any further compensation other than the Accrued Amounts. In the event that Company terminates Employee’s employment for Cause, Company shall pay Employee Employee’s Accrued Amounts on the Date of Termination.

 

As used herein “Cause” shall mean: (a) conviction or entry of a plea of nolo contendere for any felony; (b) embezzlement, misappropriation, fraud, dishonesty, unethical business conduct, or breach of fiduciary duty to Company or any affiliate (other than those acts that are curable without damage to the Company and/or its affiliates, in which case Employee will have ten (10) days to cure such breach following written notice thereof to Employee by Company, and other than those acts that do not result in material harm to the Company); (c) inability or refusal to substantially perform Employee’s duties hereunder and Employee’s failure to cure such condition within 30 days after receiving written notice thereof by the Company; (d) failure to follow reasonable and lawful directions from the persons to whom Employee report and Employee’s failure to cure such condition within 30 days after receiving written notice thereof by the Company; (e) use of alcohol or use of illegal drugs, interfering with performance of Employee’s obligations to Company or any affiliate, continuing after written warning; (f) commission of any willful or intentional act which materially injures or could reasonably be expected to materially injure the reputation, business or business relationships of Company, any affiliate, Employee or other employees of Company or any affiliates; (g) willful disregard or violation of Company’s or any affiliate’s written policies regarding harassment or discrimination, or any other material violation of Company’s or any affiliate’s written policies as in effect from time to time and Employee’s failure to cure such breach within 30 days after receiving written notice thereof by the Company; (h) gross negligence or willful misconduct in the performance Employee’s duties or with regard to the assets, business or employees of Company or any affiliates; (i) material breach of Employee’s obligations to Company or any affiliate (other than those acts that are curable without damage to the Company and/or its affiliates, in which case Employee will have ten (10) days to cure such breach following written notice thereof to Employee by Company); (j) usurpation of a corporate opportunity; or (k) misappropriation, unauthorized use or disclosure of Proprietary Information that results in a material breach of this Agreement.

 

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As used herein “Good Reason” shall mean Employee’s resignation due to the occurrence of any of the following conditions which occurs without Employee’s written consent, provided that the requirements regarding advance notice and an opportunity to cure set forth below are satisfied: (i) a material reduction of Employee’s duties, authority, responsibilities or reporting relationship relative to Employee’s duties, authority, responsibilities or reporting relationship as in effect immediately prior to such reduction; (ii) a 10% or more reduction in Employee’s then-current salary; (iii) any material breach by the Company or any successor corporation of any material provision of this Agreement; (iv) the failure of any acquirer or successor to the Company or any affiliate of such affiliate or successor to assume or otherwise continue the obligations under this Agreement; or (v) the Company (or its successor) conditions Employee’s continued service on Employee being transferred to a site of employment that would increase Employee’s one-way commute by more than 30 miles from Employee’s then principal residence. In order for Employee to resign for Good Reason, Employee must provide written notice to the Company of the existence of the Good Reason condition within 90 days of the initial existence of such Good Reason condition. Upon receipt of such notice, the Company will have 30 days during which it may remedy the Good Reason condition and not be required to provide the payments or benefits described herein as a result of such proposed resignation. If the Good Reason condition is not remedied within such 30-day period, Employee may resign based on the Good Reason condition specified in the notice effective no later than 60 days following the expiration of the 30-day cure period.

 

6.4. Employee Resignation. If Employee resigns from Employee’s employment for any reason other than for Good Reason, Employee’s resignation shall be considered a material breach of this Agreement. Notwithstanding the foregoing, in such event, only the following shall apply: (i) Company shall pay Employee Employee’s Accrued Amounts on the Date of Termination, (ii) all other Company obligations to Employee hereunder, and all Employee’s obligations to Company hereunder, shall be automatically terminated and completely extinguished, (iii) this Agreement shall be automatically terminated, and (iv) each party shall have no claims against or liability to the other party under this Agreement. Further notwithstanding the foregoing, during the Initial Term, Employee may only resign after first providing 120 days’ prior written notice to the Company.

 

6.5. No Further Obligations. The amounts and benefits provided for in this Section shall be in lieu of any termination or severance payments or benefits for which Employee may be eligible or entitled, now or in the future, under any of the plans, policies, or programs of Company or any of its subsidiaries or affiliates. In addition, the amounts and benefits provided for in this Section shall be inclusive of all statutory severance payable or otherwise provided to Employee in relation to Employee’s employment by Company and the termination of Employee’s employment under this Agreement and compensation for all required notice periods. Except as otherwise expressly set forth in this Section, from and after the date of such termination, Employee shall (i) have no right to receive any further compensation (including salary or bonus) hereunder, and, (ii) except to the extent required by law, cease to be covered under or be permitted to actively participate in any benefits plans or programs.

 

6.6. Resignation from Officer Positions. If Employee’s employment with Company terminates for any reason, Employee shall be deemed to have resigned at that time from any and all positions that Employee may have held with Company or any of its affiliates, as designated by Company, or any other positions that Employee held on behalf of Company. If, for any reason, this Section is deemed insufficient to effectuate such resignation, following a reasonable opportunity to review, Employee hereby authorizes Company to execute any documents or instruments consistent herewith which Company may deem necessary or desirable to effectuate such resignation or resignations, and to act as Employee’s attorney-in-fact. Company will provide Employee with a copy of such documents.

 

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6.7. Section 409A. Certain payments and benefits payable under this Agreement are intended to be exempt from, or comply with, Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the Treasury Regulations and Internal Revenue Service guidance thereunder. To the extent the payments and benefits under the Agreement are subject to Section 409A of the Code, the Agreement shall be interpreted, construed and administered in a manner that satisfies the requirements of Sections 409A (a) (2), (3) and (4) of the Code and the Treasury Regulations and Internal Revenue Service guidance thereunder. Each payment and benefit payable under this Agreement is intended to constitute a separate payment for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations. If the parties determine that any payments or benefits payable under this Agreement subject to Section 409A of the Code do not comply with Section 409A of the Code, Company and Employee agree to amend this Agreement, or take such other actions as Company and Employee reasonably deem necessary or appropriate, to comply with the requirements of Section 409A of the Code, while preserving benefits that are, in the aggregate, no less favorable than the benefits as provided to Employee under this Agreement. If any provision of this Agreement would cause such payments or benefits to fail to so comply, such provision shall not be effective and shall be null and void with respect to such payments or benefits, and such provision shall otherwise remain in full force and effect.

 

7. Noncompetition and Nonsolicitation.

 

7.1. Noncompetition. During the Term and until the later of either: (i) one (1) year after the termination or expiration of this Agreement, and (ii) two (2) years after the Effective Date (the “Restricted Period”), Employee shall not, directly or indirectly (whether as a principal, agent, independent contractor, employee, partner, member, owner, or in any other similar capacity), own, manage, operate, control, participate in, perform services for, be employed by, or otherwise carry on, a business similar to or competitive with Tickeri, Inc.’s (“Tickeri”) business anywhere in the United States or Latin America in which Tickeri, during the Term, is engaged or intends to become engaged in Tickeri’s business. Notwithstanding the foregoing, Employee shall not be prohibited from owning not more than one percent of the voting stock of any publicly traded entity that competes with Tickeri.

 

7.2. Nonsolicitation of Company Employees. During the Restricted Period, Employee shall not, directly or indirectly, recruit, solicit, induce, or influence (or seek to induce or influence) any person who is employed by, hired by, affiliated with, or acts as a consultant, independent contractor, or salesperson for, the Company or Tickeri to terminate or alter his/her relationship with the Company.

 

7.3. Nonsolicitation of Customers. During the Restricted Period, Employee shall not, directly or indirectly, without the prior written consent of the Company, solicit, encourage or take any other action which is intended to induce or encourage, or has the effect of inducing or encouraging, any customer, client or supplier who or which is, or had been within the prior two years, a customer or potential customer, or supplier or potential supplier, of the Company or Tickeri to terminate or alter in any way such customer’s, client’s, or supplier’s relationship with the Company or Tickeri, nor shall Employee call on or solicit any such customers, clients or suppliers with respect to or on behalf of any business similar to or competitive with the Company’s or Tickeri’s business.

 

7.4. Remedies; Liquidated Damages. Employee expressly agrees and acknowledges that the covenant not to compete and the nonsolicitation covenants contained in this Section 7 are for the Company’s protection because of the nature and scope of the Company’s business and Employee’s position with and the scope of the duties, responsibilities and obligations delegated to Employee by the Company hereby. If any of the covenants or agreements contained in this Section 7 are violated or breached by Employee, Employee agrees and acknowledges that any such violation or threatened violation or breach or threatened breach will cause irreparable injury to the Company and that the remedy at law for any such violation or threatened violation or breach or threatened breach will be inadequate and that the Company will be entitled to injunctive relief and other equitable remedies without the necessity of proving actual damages or posting a bond. The noncompetition and nonsolicitation provisions set forth in Sections 7.1, 7.2, and 7.3 hereof, respectively, shall be extended by any period of time during which Employee is in violation or breach of this Section 7. In addition to the injunctive relief and other remedies previously described, Employee and the Company agree that the amount of damage resulting to the Company from a violation of Sections 7.1 and 7.3 hereof is difficult to ascertain and quantify, and therefore Employee acknowledges and agrees that the Company shall be entitled to liquidated damages from Employee in the amount of any money received by Employee from any competitive business or any client or customer of the Company multiplied by two. Such damages shall be paid by Employee within ten (10) days after receipt of written demand from the Company, and if not so paid may be offset against any amounts owed by the Company to Employee. Employee and the Company agree that such liquidated damages shall not be deemed a penalty and are a good faith approximation of the damages to the Company as a result of any violation of Sections 7.1 and 7.3.

 

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7.5. Interpretation. It is the intention of the parties hereto that the noncompetition and nonsolicitation covenants contained in this Section 7 be enforced to the greatest extent (but to no greater extent) in time, scope, and degree of participation as is permitted by applicable law. To this end, the parties hereto agree that such covenants shall be construed to extend in time and territory and with respect to degree of participation only so far as they may be enforced, and that such covenants are to that end hereby declared divisible and severable because it is a purpose of this Agreement to govern competition by Employee anywhere in the United States and Latin America in which the Company, during the Restricted Period, is engaged or intends to become engaged in the Company’s business.

 

7.6. Employee Acknowledgement. Employee acknowledges that Employee’s covenants and agreements in this Section 7 are reasonable and necessary to protect the Company’s legitimate interest in its proprietary information and goodwill. Employee acknowledges that this Section 7 is not so broad as to prevent Employee from earning a livelihood or practicing Employee’s chosen profession after termination or expiration of this Agreement. Employee further acknowledges that the covenants and agreements in this Section 7 shall remain enforceable if the Company terminates Employee’s relationship with the Company under this Agreement. Employee further acknowledges and agrees that without such restrictions, the Company would not have entered into this Agreement.

 

8. Confidentiality Agreement. Employee agrees to execute a Confidential Information, Invention Assignment, and Arbitration Agreement in substantially the form attached hereto as Exhibit A (the “Confidentiality Agreement”).

 

9. Miscellaneous.

 

9.1. Severability. If any court determines that any provision of this Agreement or any part thereof is invalid or unenforceable, the remainder of this Agreement shall be given full force and effect without regard to the invalid portions. If any court determines that any provision of this Agreement or any part thereof is unenforceable because of the duration or geographic scope of such provision, such court shall have the power to reduce the duration or scope of such provision, as the case may be and in its reduced form such provision shall then be enforceable.

 

9.2. Notices. Any notice required or permitted hereunder to be given by either party shall be in writing and shall be delivered personally or sent by certified or registered mail, postage prepaid, or by overnight courier, or by facsimile or email to the party to the address the party may designate from time to time. A notice delivered personally shall be effective upon receipt. A notice sent by facsimile or email shall be effective twenty-four (24) hours after the dispatch thereof. A notice delivered by mail or by overnight courier shall be effective on the earlier of the date delivered (or delivery refused) or the third day after the day of mailing.

 

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9.3. Attorneys’ Fees. In the event of any action at law or in equity to enforce or interpret the terms of this Agreement, the parties agree that the prevailing party shall be entitled to an additional award of the full amount of the attorneys’ fees and expenses paid by such prevailing party in connection with the litigation and/or dispute without reduction or apportionment based upon the individual claims or defenses giving rise to the fees and expenses. Nothing herein shall restrict or impair a court’s power to award fees and expenses for frivolous or bad faith pleading.

 

9.4. Successors and Assigns. The rights and obligations of the Company under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Company. This Agreement is for the unique personal services of Employee, and Employee shall not be entitled to assign any of his rights or obligations hereunder.

 

9.5. Entire Agreement. This Agreement and any exhibits hereto constitute the entire agreement between the parties with respect to the employment of Employee. This Agreement can be amended or modified only in a writing signed by Employee and an authorized representative of the Company.

 

9.6. Counterparts. This Agreement may be executed in counterparts and by facsimile or electronic delivery of signature pages, each of which shall be deemed an original and all of which together shall be considered one and the same agreement.

 

9.7. Governing Law; Consent to Personal Jurisdiction. This Agreement will be governed by the laws of the State of California without regard to California’s conflicts-of-law, except that any dispute regarding the enforceability of the arbitration section of this Agreement shall be governed by the FAA. To the extent that any lawsuit is permitted under this Agreement, Employee hereby expressly consents to the personal and exclusive jurisdiction and venue of the state and federal courts located in San Diego County, California for any lawsuit filed against Employee by the Company.

 

9.8. Arbitration. This Agreement shall be subject to the arbitration provisions set forth in Section 10 of the Confidentiality Agreement.

 

9.9. Further Assurances. Each party agrees to execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken all such further or other actions as are reasonably necessary or desirable upon the request of any other party to more fully effectuate the purposes and intent of this Agreement.

 

9.10. Modification. No provision of this Agreement shall be amended, waived or modified except by an instrument in writing signed by all of the parties hereto.

 

9.11. Waiver. The waiver by either party of a breach by the other party of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach.

 

9.12. Advice of Counsel. Employee hereby acknowledges that he has been, and hereby is, advised to seek legal counsel and to review this document with legal counsel of Employee’s choice. Employee acknowledges that this Agreement is written in a manner understandable to Employee.

 

9.13. Voluntary Execution. Employee represents and warrants that he has signed this Agreement voluntarily and of his own free will and that he has not been subjected to duress or undue influence from any source.

 

9.14. Waiver of Jury Trial. as a specifically bargained inducement for each of the parties to enter into this agreement (each party having had opportunity to consult counsel), each party expressly WAIVES THE RIGHT TO TRIAL BY JURY IN ANY PROCEEDING RELATING TO OR ARISING IN ANY WAY FROM THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT.

 

[Remainder of page intentionally left blank; signature page to follow]

 

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In witness whereof, the parties hereto have executed this Employment Agreement as of the date first written above.

 

  COMPANY:
     
  HUMBL, Inc.
     
  By:       
  Printed Name:  
  Title:  
     
  EMPLOYEE:
   
  Javier Gonzalez, an individual

 

[Signature Page to Employment Agreement]

 

 

 

 

EXHIBIT A

 

CONFIDENTIAL INFORMATION, INVENTION ASSIGNMENT, AND ARBITRATION AGREEMENT

 

 

 

 

Exhibit 10.33

 

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

 

CONVERTIBLE PROMISSORY NOTE

 

Effective Date: June 21, 2021 U.S. $382,500.00

 

FOR VALUE RECEIVED, HUMBL, Inc., a Delaware corporation (“Borrower”), promises to pay to the order of Infinity Block Investments, LLC, a Delaware limited liability company, or its successors or assigns (“Lender”), $382,500.00 and any interest accrued hereunder on the date that is twenty-two (22) months from the Effective Date (the “Maturity Date”) in accordance with the terms set forth herein and to pay interest on the outstanding balance at the rate of eight percent (8%) per annum from the Effective Date until the same is paid in full. This Convertible Promissory Note (this “Note”) is issued and made effective as of June 21, 2021 (the “Effective Date”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.

 

1. Payment; Prepayment.

 

1.1. Payment. All payments owing hereunder shall be in lawful money of the United States of America or Conversion Shares (as defined below), as provided for herein, and delivered to Lender at the address or bank account furnished to Borrower for that purpose. All payments shall be applied first to (a) costs of collection, if any, then to (b) fees and charges, if any, then to (c) accrued and unpaid interest, and thereafter, to (d) principal.

 

1.2. Prepayment. Borrower may not prepay this Note without Lender’s prior written consent. Notwithstanding the forgoing, this Note may be prepaid immediately prior to the consummation of a Change of Control, provided that the Borrower provided prior written notice of such Change of Control to the Lender pursuant to Section 14.

 

2. Security. This Note is unsecured.

 

3. Lender Optional Conversion.

 

3.1. Conversions. Lender has the right at any time after the Effective Date until the outstanding balance has been paid in full, at its election, to convert (“Conversion”) all or any portion of the outstanding balance into shares (“Conversion Shares”) of fully paid and non-assessable common stock, $0.00001 par value per share (“Common Stock”), of Borrower as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the “Conversion Amount”) divided by the Conversion Price (as defined below). Conversion notices in the form attached hereto as Exhibit A (each, a “Conversion Notice”) may be delivered from time to time by Lender to Borrower, and all Conversions shall be cashless and not require further payment from Lender. Borrower shall deliver the Conversion Shares from any Conversion to Lender in accordance with Section 7 below.

 

 
 

 

3.2. Conversion Price. The price at which Lender has the right to convert all or any portion of the outstanding balance, including accrued but unpaid interest, into Common Stock is $1.00 per share of Common Stock (the “Conversion Price”). The Conversion Price will automatically be adjusted in the event Borrower consummates a stock split, stock combination or other similar change to the number of outstanding shares of Common Stock.

 

4. Defaults and Remedies.

 

4.1. Defaults. The following are events of default under this Note (each, an “Event of Default”): (a) Borrower fails to pay any principal, interest, fees, charges, or any other amount when due and payable hereunder; (b) Borrower fails to deliver any Conversion Shares in accordance with the terms hereof; (c) a receiver, trustee or other similar official shall be appointed over Borrower or a material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed or discharged within sixty (60) days; (d) Borrower makes a general assignment for the benefit of creditors; (e) Borrower files a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); or (f) an involuntary bankruptcy proceeding is commenced or filed against Borrower. Notwithstanding the foregoing, the occurrence of any of the foregoing events will not be considered an Event of Default unless Borrower fails to cure such event within ten (10) Trading Days of its receipt of written notice from Lender.

 

4.2. Remedies. Following an Event of Default, Lender may accelerate this Note by written notice to Borrower with the outstanding balance becoming immediately due and payable. Nothing herein shall limit Lender’s right to pursue any other remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to Borrower’s failure to timely deliver Conversion Shares upon Conversion of the Note as required pursuant to the terms hereof.

 

5. Unconditional Obligation; No Offset. Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset, deduction or counterclaim of any kind. Borrower hereby waives any rights of offset it now has or may have hereafter against Lender, its successors and assigns, and agrees to make the payments or Conversions called for herein in accordance with the terms of this Note.

 

6. Waiver. No waiver of any provision of this Note shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.

 

7. Method of Conversion Share Delivery. On or before the close of business on the seventh (7th) Trading Day following the date of delivery of a Conversion Notice (the “Delivery Date”), Borrower shall, provided it is DWAC Eligible at such time, deliver or cause its transfer agent to deliver the applicable Conversion Shares electronically via DWAC to the account designated by Lender in the applicable Conversion Notice. If Borrower is not DWAC Eligible, it shall deliver to Lender or its broker (as designated in the Conversion Notice), via reputable overnight courier, a certificate representing the number of shares of Common Stock equal to the number of Conversion Shares to which Lender shall be entitled, registered in the name of Lender or its designee.

 

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8. Ownership Limitation. Notwithstanding anything to the contrary contained in this Note or the other Transaction Documents, Borrower shall not effect any conversion of this Note to the extent that after giving effect to such conversion would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance). For purposes of this section, beneficial ownership of Common Stock will be determined pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended.

 

9. Opinion of Counsel. In the event that an opinion of counsel is needed for any matter related to this Note, Lender shall have such opinion provided by its counsel.

 

10. Governing Law; Venue. This Note shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and wholly performed in that jurisdiction. Each party hereto submits to the exclusive jurisdiction of any state or federal court sitting in San Diego County, California in any proceeding arising out of or relating to this Note and agrees that all claims in respect of the proceeding may be heard and determined in any such court and hereby expressly submits to the personal jurisdiction and venue of such court for the purposes hereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum. Each party hereto hereby irrevocably consents to the service of process of any of the aforementioned courts in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to its address as set forth herein, such service to become effective ten (10) days after such mailing. The parties expressly and irrevocably waive the right to a trial by jury in any and all actions or proceedings brought with respect to this Note and with respect to any claims arising out of or related to this Note.

 

11. Cancellation. After repayment or conversion of the entire outstanding balance, this Note shall be deemed paid in full, shall automatically be deemed canceled, and shall not be reissued.

 

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

 

13. Assignments. Neither party may assign this Note without the consent of the other party. Any assignment or assumption in connection with a Change of Control is subject to Lender’s approval, unless this Note is paid in full in connection with such Change of Control.

 

14. Notices. Whenever notice is required to be given under this Note, such notice shall be given to such address as has been provided to the other party. Borrower shall provide Lender with prompt written notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, Borrower will give written notice to Lender (i) as soon as practicable upon each adjustment of the Conversion Price and the number of Conversion Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, or (B) for determining rights to vote with respect to any Change of Control, dissolution or liquidation, provided in each case that such information, and (iii) at least ten (10) Trading Days prior to the consummation of any Change of Control.

 

15. Severability. If any part of this Note is construed to be in violation of any law, such part shall be modified to achieve the objective of Borrower and Lender to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect.

 

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

 

3
 

 

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

 

      BORROWER:
       
      HUMBL, Inc.
       
      By:  
        Brian Foote, CEO
         
ACKNOWLEDGED, ACCEPTED AND AGREED:      
       
LENDER:      
       
Infinity Block Investments, LLC      
                                          
By:        
  Jordan Smith, Manager      

 

[Signature Page to Convertible Promissory Note]

 

 
 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

A1. “DTC” means the Depository Trust Company or any successor thereto.

 

A2. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A3. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A4. “DWAC Eligible” means that (a) Borrower’s Common Stock is eligible at DTC for full services pursuant to DTC’s operational arrangements, including without limitation transfer through DTC’s DWAC system; (b) Borrower has been approved (without revocation) by DTC’s underwriting department; (c) Borrower’s transfer agent is approved as an agent in the DTC/FAST Program; (d) the Conversion Shares are otherwise eligible for delivery via DWAC; and (e) Borrower’s transfer agent does not have a policy prohibiting or limiting delivery of the Conversion Shares via DWAC.

 

A5. “Trading Day” means any day on which Borrower’s market is open for trading.

 

A6. “Change of Control” means a merger or consolidation with another entity in which the Company’s stockholders do not own more than 50% of the outstanding voting power of the surviving entity, or the disposition of all or substantially all of the Company’s assets.

 

[Remainder of page intentionally left blank]

 

Attachment 1 to Convertible Promissory Note, Page 1
 

 

EXHIBIT A

 

Infinity Block Investments, LLC

 

HUMBL, Inc. Date: ________________
Attn: Brian Foote    
600 B. Street, Suite 300    
San Diego, California 92101    

 

CONVERSION NOTICE

 

The above-captioned Lender hereby gives notice to HUMBL, Inc., a Delaware corporation (the “Borrower”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on June 21, 2021 (the “Note”), that Lender elects to convert the portion of the Note balance set forth below into fully paid and non-assessable shares of Common Stock of Borrower as of the date of conversion specified below. Said conversion shall be based on the Conversion Price set forth below. In the event of a conflict between this Conversion Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of Conversion Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.

 

  A. Date of Conversion: ____________
  B. Conversion #: ____________
  C. Conversion Amount: ____________
  D. Conversion Price: __________
  E. Conversion Shares: _______________ (C divided by D)
  F. Remaining Outstanding Balance of Note: ____________

 

Please transfer the Conversion Shares electronically (via DWAC) to the following account:

 

Broker: __________________________   Address: ________________________
DTC#: __________________________     ________________________
Account #: _______________________     ________________________
Account Name: ___________________      

 

To the extent the Conversion Shares are not able to be delivered to Lender electronically via the DWAC system, deliver all such certificated shares to Lender via reputable overnight courier after receipt of this Conversion Notice (by facsimile transmission or otherwise) to:

 

_____________________________________

_____________________________________

_____________________________________

 

Sincerely,

 

Lender:  
   
By:    
  Jordan Smith, Manager  

 

Exhibit A to Convertible Promissory Note, Page 1

 

 

 

 

Exhibit 10.34

 

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF THIS WARRANT OR SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THIS WARRANT OR SUCH SECURITIES, AS APPLICABLE, MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS.

 

HUMBL, INC.

 

WARRANT TO PURCHASE SHARES OF COMMON STOCK

 

1. Issuance. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by HUMBL, Inc., a Delaware corporation, its successors and assigns (“Company”), Infinity Block Investments, LLC, a Delaware limited liability company, its successors and/or registered assigns (“Investor”), is hereby granted the right to purchase at any time on or after the Issue Date (as defined below) until June 23, 2023 (the “Expiration Date”), 750,000 fully paid and non-assessable shares (the “Warrant Shares”) of Company’s common stock, par value $0.00001 per share (the “Common Stock”), as such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant to Purchase Shares of Common Stock (this “Warrant”).

 

This Warrant is being issued pursuant to the terms of that certain Securities Purchase Agreement dated June 21, 2021, to which Company and Investor are parties (as the same may be amended from time to time, the “Purchase Agreement”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference. This Warrant was issued to Investor on June 21, 2021 (the “Issue Date”).

 

2. Exercise of Warrant.

 

2.1. General.

 

(a) This Warrant is exercisable in whole or in part at any time and from time to time commencing on the Issue Date and ending on the Expiration Date. Such exercise shall be effectuated by submitting to Company (either by delivery to Company or by email or facsimile transmission) a completed and signed Notice of Exercise substantially in the form attached to this Warrant as Exhibit A (the “Notice of Exercise”). The date a Notice of Exercise is delivered to Company shall be the “Exercise Date,” provided that, if such exercise represents the full exercise of the outstanding balance of this Warrant, Investor shall tender this Warrant to Company within five (5) Trading Days thereafter, but only if the Warrant Shares to be delivered pursuant to the Notice of Exercise have been delivered to Investor as of such date. The Notice of Exercise shall be executed by Investor and shall indicate the number of Warrant Shares to be issued pursuant to such exercise

 

 
 

 

(b) The Exercise Price per share of Common Stock for the Warrant Shares shall be payable, at the election of Investor, in cash or by certified or official bank check or by wire transfer in accordance with instructions provided by Company at the request of Investor.

 

(c) Upon the appropriate payment to Company of the Exercise Price for the Warrant Shares, Company shall promptly, but in no case later than the date that is ten (10) Trading Days following the date the Exercise Price is paid to Company (the “Delivery Date”), deliver or cause Company’s Transfer Agent to deliver the applicable Warrant Shares electronically via the DWAC system to the account designated by Investor on the Notice of Exercise. If for any reason Company is not able to so deliver the Warrant Shares via the DWAC system, Company shall instead, on or before the applicable date set forth above in this subsection, issue and deliver to Investor or its broker (as designated in the Notice of Exercise), via reputable overnight courier, a certificate, registered in the name of Investor or its designee, representing the applicable number of Warrant Shares.

 

(d) In no event may this Warrant be net cash settled.

 

2.2. Ownership Limitation. Notwithstanding anything to the contrary contained in this Warrant, if at any time Lender shall or would be issued shares of Common Stock under this Warrant, but such issuance would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance) (the “Maximum Percentage”), then Borrower shall not issue to Lender shares of Common Stock which would exceed the Maximum Percentage. The ownership limitation is enforceable, unconditional and non-waivable and shall apply to all affiliates and assigns of Lender.

 

3. Mutilation or Loss of Warrant. Upon receipt by Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, Company will execute and deliver to Investor a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void.

 

4. Rights of Investor. Investor shall not, by virtue of this Warrant alone, be entitled to any rights of a stockholder in Company, either at law or in equity, and the rights of Investor with respect to or arising under this Warrant are limited to those expressed in this Warrant and are not enforceable against Company except to the extent set forth herein

 

5. Adjustments. If Company shall issue any shares of Common Stock as a stock dividend or subdivide the number of outstanding shares of Common Stock into a greater number of shares, then, in either such case, the Exercise Price in effect before such dividend or subdivision shall be proportionately reduced and the number of Warrant Shares at that time issuable pursuant to the exercise of this Warrant shall be proportionately increased; and, conversely, if Company shall contract the number of outstanding shares of Common Stock by combining such shares into a smaller number of shares, then the Exercise Price in effect before such combination shall be proportionately increased and the number of Warrant Shares at that time issuable pursuant to the exercise or conversion of this Warrant shall be proportionately decreased. Each adjustment in the number of shares of Warrant Stock issuable shall be to the nearest whole share.

 

6. Certificate as to Adjustments. In the case of any adjustment in the Exercise Price or Warrant Shares, Company will promptly give written notice to Investor in the form of a certificate, certified and confirmed by an officer of the Company, setting forth the adjustment in reasonable detail.

 

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7. Transfer to Comply with the Securities Act. This Warrant and the Warrant Shares have not been registered under the Securities Act of 1933, as amended (the “1933 Act”). The Warrant Shares may not be sold, transferred, pledged or hypothecated without (a) an effective registration statement under the 1933 Act relating to such security or (b) an opinion of counsel reasonably satisfactory to Company that registration is not required under the 1933 Act. Until such time as registration has occurred under the 1933 Act, each certificate for this Warrant and any Warrant Shares shall contain a legend, in form and substance satisfactory to counsel for Company, setting forth the restrictions on transfer contained in this Section 7. This Warrant may be transferred by Investor so long as such transfer is done in compliance with applicable securities laws. Upon receipt of a duly executed assignment of this Warrant, Company shall register the transferee thereon as the new holder on the books and records of Company and such transferee shall be deemed a “registered holder” or “registered assign” for all purposes hereunder, and shall have all the rights of Investor under this Warrant. Until this Warrant is transferred on the books of Company, Company may treat Investor as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary

 

8. Registration. Company agrees to register the Warrant Shares on a Form S-1 Registration Statement and to file such Registration Statement within ninety (90) days of the Issue Date.

 

9. Notices. Any notice required or permitted hereunder shall be given in the manner provided in the subsection titled “Notices” in the Purchase Agreement, the terms of which are incorporated herein by reference. Company shall provide Investor with prompt written notice of all actions taken pursuant to this Warrant, including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, Company will give written notice to Investor (i) as soon as practicable upon each adjustment of the Exercise Price and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, or (B) for determining rights to vote with respect to any Change of Control, dissolution or liquidation, provided in each case that such information, and (iii) at least ten (10) Trading Days prior to the consummation of any Change of Control.

 

10. Supplements and Amendments; Whole Agreement. This Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant, together with the Purchase Agreement, contains the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings with respect to the subject matter hereof and thereof other than as expressly contained herein and therein.

 

11. Governing Law; Venue. This Warrant shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of Delaware. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state and federal courts in San Diego County, California. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The prevailing party in any dispute arising under this Agreement shall be entitled to recover from the other party its reasonable attorney’s fees and costs.

 

12. Waiver of Jury Trial. EACH OF COMPANY AND INVESTOR IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS WARRANT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, COMPANY ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY.

 

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13. Counterparts. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Electronic signatures shall be considered original signatures for all purposes hereof.

 

14. Attorneys’ Fees. In the event of any litigation or dispute arising from this Warrant, the parties agree that the prevailing party shall be entitled to an additional award of the full amount of the reasonable attorneys’ fees and expenses paid by said prevailing party in connection with litigation or dispute.

 

15. Severability. Whenever possible, each provision of this Warrant shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be invalid or unenforceable in any jurisdiction, such provision shall be modified to achieve the objective of the parties to the fullest extent permitted and such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Warrant or the validity or enforceability of this Warrant in any other jurisdiction.

 

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

 

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IN WITNESS WHEREOF, Company has caused this Warrant to be duly executed as of the Issue Date.

 

  COMPANY:
   
  HUMBL, Inc.
     
  By:  
    Brian Foote, CEO

 

[Signature Page to Warrant]

 

 
 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

A1. “DTC” means the Depository Trust Company or any successor thereto.

 

A2. “DTC Eligible” means, with respect to the Common Stock, that such Common Stock is eligible to be deposited in certificate form at the DTC, cleared and converted into electronic shares by the DTC and held in the name of the clearing firm servicing Investor’s brokerage firm for the benefit of Investor.

 

A3. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A4. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A5. “Exercise Price” means $1.00 per share of Common Stock, as the same may be adjusted from time to time pursuant to the terms and conditions of this Warrant.

 

A6. “Trading Day” means any day the New York Stock Exchange is open for trading.

 

A7. “Change of Control” means a merger or consolidation with another entity in which the Company’s stockholders do not own more than 50% of the outstanding voting power of the surviving entity, or the disposition of all or substantially all of the Company’s assets.

 

Attachment 1 to Warrant, Page 1
 

 

EXHIBIT A

 

NOTICE OF EXERCISE OF WARRANT

 

TO: HUMBL, INC.
  ATTN: _______________
  VIA FAX TO: (     )______________ EMAIL: ______________

 

The undersigned hereby irrevocably elects to exercise the right, represented by the Warrant to Purchase Shares of Common Stock dated as of June 21, 2021 (the “Warrant”), to purchase shares of the common stock, $0.00001 par value (“Common Stock”), of HUMBL, Inc., and tenders herewith payment in accordance with Section 2 of the Warrant, as follows:

 

Warrant Shares: _______________________

 

Exercise Price: $_______________________

 

Purchase Price: $___________________ = (Exercise Price x Warrant Shares)

 

Payment is being made by:

 

  _____ enclosed check
  _____ wire transfer
_____ other

 

Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Warrant.

 

It is the intention of Investor to comply with the provisions of Section 2.2 of the Warrant regarding certain limits on Investor’s right to receive shares thereunder. Investor believes this exercise complies with the provisions of such Section 2.2. Nonetheless, to the extent that, pursuant to the exercise effected hereby, Investor would receive more shares of Common Stock than permitted under Section 2.2, Company shall not be obligated and shall not issue to Investor such excess shares until such time, if ever, that Investor could receive such excess shares without violating, and in full compliance with, Section 2.2 of the Warrant.

 

As contemplated by the Warrant, this Notice of Exercise is being sent by email to the officer indicated above.

 

If this Notice of Exercise represents the full exercise of the entire Warrant, Investor will surrender (or cause to be surrendered) the Warrant to Company at the address indicated above by express courier within five (5) Trading Days after the Warrant Shares to be delivered pursuant to this Notice of Exercise have been delivered to Investor.

 

To the extent the Warrant Shares are not able to be delivered to Investor via the DWAC system, please deliver certificates representing the Warrant Shares to Investor via reputable overnight courier after receipt of this Notice of Exercise (by facsimile transmission or otherwise) to:

 

_____________________________________

_____________________________________

_____________________________________

 

Dated:            
   
   
[Name of Investor]  

 

By:    

 

Exhibit A to Warrant, Page 1

 

 

Exhibit 10.35

 

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

 

CONVERTIBLE PROMISSORY NOTE

 

Effective Date: June 21, 2021 U.S. $382,500.00

 

FOR VALUE RECEIVED, HUMBL, Inc., a Delaware corporation (“Borrower”), promises to pay to the order of Murtaugh Group LLC, a Delaware limited liability company, or its successors or assigns (“Lender”), $382,500.00 and any interest accrued hereunder on the date that is twenty-two (22) months from the Effective Date (the “Maturity Date”) in accordance with the terms set forth herein and to pay interest on the outstanding balance at the rate of eight percent (8%) per annum from the Effective Date until the same is paid in full. This Convertible Promissory Note (this “Note”) is issued and made effective as of June 21, 2021 (the “Effective Date”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.

 

1. Payment; Prepayment.

 

1.1. Payment. All payments owing hereunder shall be in lawful money of the United States of America or Conversion Shares (as defined below), as provided for herein, and delivered to Lender at the address or bank account furnished to Borrower for that purpose. All payments shall be applied first to (a) costs of collection, if any, then to (b) fees and charges, if any, then to (c) accrued and unpaid interest, and thereafter, to (d) principal.

 

1.2. Prepayment. Borrower may not prepay this Note without Lender’s prior written consent. Notwithstanding the forgoing, this Note may be prepaid immediately prior to the consummation of a Change of Control, provided that the Borrower is provided prior written notice of such Change of Control to the Lender pursuant to Section 14.

 

2. Security. This Note is unsecured.

 

3. Lender Optional Conversion.

 

3.1. Conversions. Lender has the right at any time after the Effective Date until the outstanding balance has been paid in full, at its election, to convert (“Conversion”) all or any portion of the outstanding balance into shares (“Conversion Shares”) of fully paid and non-assessable common stock, $0.00001 par value per share (“Common Stock”), of Borrower as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the “Conversion Amount”) divided by the Conversion Price (as defined below). Conversion notices in the form attached hereto as Exhibit A (each, a “Conversion Notice”) may be delivered from time to time by Lender to Borrower, and all Conversions shall be cashless and not require further payment from Lender. Borrower shall deliver the Conversion Shares from any Conversion to Lender in accordance with Section 7 below.

 

 
 

 

3.2. Conversion Price. The price at which Lender has the right to convert all or any portion of the outstanding balance, including accrued but unpaid interest, into Common Stock is $1.00 per share of Common Stock (the “Conversion Price”). The Conversion Price will automatically be adjusted in the event Borrower consummates a stock split, stock combination or other similar change to the number of outstanding shares of Common Stock.

 

4. Defaults and Remedies.

 

4.1. Defaults. The following are events of default under this Note (each, an “Event of Default”): (a) Borrower fails to pay any principal, interest, fees, charges, or any other amount when due and payable hereunder; (b) Borrower fails to deliver any Conversion Shares in accordance with the terms hereof; (c) a receiver, trustee or other similar official shall be appointed over Borrower or a material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed or discharged within sixty (60) days; (d) Borrower makes a general assignment for the benefit of creditors; (e) Borrower files a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); or (f) an involuntary bankruptcy proceeding is commenced or filed against Borrower. Notwithstanding the foregoing, the occurrence of any of the foregoing events will not be considered an Event of Default unless Borrower fails to cure such event within ten (10) Trading Days of its receipt of written notice from Lender.

 

4.2. Remedies. Following an Event of Default, Lender may accelerate this Note by written notice to Borrower with the outstanding balance becoming immediately due and payable. Nothing herein shall limit Lender’s right to pursue any other remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to Borrower’s failure to timely deliver Conversion Shares upon Conversion of the Note as required pursuant to the terms hereof.

 

5. Unconditional Obligation; No Offset. Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset, deduction or counterclaim of any kind. Borrower hereby waives any rights of offset it now has or may have hereafter against Lender, its successors and assigns, and agrees to make the payments or Conversions called for herein in accordance with the terms of this Note.

 

6. Waiver. No waiver of any provision of this Note shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.

 

7. Method of Conversion Share Delivery. On or before the close of business on the seventh (7th) Trading Day following the date of delivery of a Conversion Notice (the “Delivery Date”), Borrower shall, provided it is DWAC Eligible at such time, deliver or cause its transfer agent to deliver the applicable Conversion Shares electronically via DWAC to the account designated by Lender in the applicable Conversion Notice. If Borrower is not DWAC Eligible, it shall deliver to Lender or its broker (as designated in the Conversion Notice), via reputable overnight courier, a certificate representing the number of shares of Common Stock equal to the number of Conversion Shares to which Lender shall be entitled, registered in the name of Lender or its designee.

 

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8. Ownership Limitation. Notwithstanding anything to the contrary contained in this Note or the other Transaction Documents, Borrower shall not effect any conversion of this Note to the extent that after giving effect to such conversion would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance). For purposes of this section, beneficial ownership of Common Stock will be determined pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended.

 

9. Opinion of Counsel. In the event that an opinion of counsel is needed for any matter related to this Note, Lender shall have such opinion provided by its counsel.

 

10. Governing Law; Venue. This Note shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and wholly performed in that jurisdiction. Each party hereto submits to the exclusive jurisdiction of any state or federal court sitting in San Diego County, California in any proceeding arising out of or relating to this Note and agrees that all claims in respect of the proceeding may be heard and determined in any such court and hereby expressly submits to the personal jurisdiction and venue of such court for the purposes hereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum. Each party hereto hereby irrevocably consents to the service of process of any of the aforementioned courts in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to its address as set forth herein, such service to become effective ten (10) days after such mailing. The parties expressly and irrevocably waive the right to a trial by jury in any and all actions or proceedings brought with respect to this Note and with respect to any claims arising out of or related to this Note.

 

11. Cancellation. After repayment or conversion of the entire outstanding balance, this Note shall be deemed paid in full, shall automatically be deemed canceled, and shall not be reissued.

 

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

 

13. Assignments. Neither party may assign this Note without the consent of the other party. Any assignment or assumption in connection with a Change of Control is subject to Lender’s approval, unless this Note is paid in full in connection with such Change of Control.

 

14. Notices. Whenever notice is required to be given under this Note, such notice shall be given to such address as has been provided to the other party. Borrower shall provide Lender with prompt written notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, Borrower will give written notice to Lender (i) as soon as practicable upon each adjustment of the Conversion Price and the number of Conversion Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, or (B) for determining rights to vote with respect to any Change of Control, dissolution or liquidation, provided in each case that such information, and (iii) at least ten (10) Trading Days prior to the consummation of any Change of Control.

 

15. Severability. If any part of this Note is construed to be in violation of any law, such part shall be modified to achieve the objective of Borrower and Lender to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect.

 

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

 

3
 

 

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

 

      BORROWER:
       
      HUMBL, Inc.
       
      By:  
        Brian Foote, CEO
         
ACKNOWLEDGED, ACCEPTED AND AGREED:      
       
LENDER:      
       
Murtaugh Group LLC      
                                          
By:        
  Rebecca Williams, Manager      

 

[Signature Page to Convertible Promissory Note]

 

 
 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

A1. “DTC” means the Depository Trust Company or any successor thereto.

 

A2. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A3. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A4. “DWAC Eligible” means that (a) Borrower’s Common Stock is eligible at DTC for full services pursuant to DTC’s operational arrangements, including without limitation transfer through DTC’s DWAC system; (b) Borrower has been approved (without revocation) by DTC’s underwriting department; (c) Borrower’s transfer agent is approved as an agent in the DTC/FAST Program; (d) the Conversion Shares are otherwise eligible for delivery via DWAC; and (e) Borrower’s transfer agent does not have a policy prohibiting or limiting delivery of the Conversion Shares via DWAC.

 

A5. “Trading Day” means any day on which Borrower’s market is open for trading.

 

A6. “Change of Control” means a merger or consolidation with another entity in which the Company’s stockholders do not own more than 50% of the outstanding voting power of the surviving entity, or the disposition of all or substantially all of the Company’s assets.

 

[Remainder of page intentionally left blank]

 

Attachment 1 to Convertible Promissory Note, Page 1
 

 

EXHIBIT A

 

Murtaugh Group LLC

 

HUMBL, Inc. Date: ________________
Attn: Brian Foote    
600 B. Street, Suite 300    
San Diego, California 92101    

 

CONVERSION NOTICE

 

The above-captioned Lender hereby gives notice to HUMBL, Inc., a Delaware corporation (the “Borrower”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on June 21, 2021 (the “Note”), that Lender elects to convert the portion of the Note balance set forth below into fully paid and non-assessable shares of Common Stock of Borrower as of the date of conversion specified below. Said conversion shall be based on the Conversion Price set forth below. In the event of a conflict between this Conversion Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of Conversion Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.

 

  A. Date of Conversion: ____________
  B. Conversion #: ____________
  C. Conversion Amount: ____________
  D. Conversion Price: __________
  E. Conversion Shares: _______________ (C divided by D)
  F. Remaining Outstanding Balance of Note: ____________

 

Please transfer the Conversion Shares electronically (via DWAC) to the following account:

 

Broker: __________________________   Address: ________________________
DTC#: __________________________     ________________________
Account #: _______________________     ________________________
Account Name: ___________________      

 

To the extent the Conversion Shares are not able to be delivered to Lender electronically via the DWAC system, deliver all such certificated shares to Lender via reputable overnight courier after receipt of this Conversion Notice (by facsimile transmission or otherwise) to:

 

_____________________________________

_____________________________________

_____________________________________

 

Sincerely,

 

Lender:  
   
By:    
  Rebecca Williams, Manager  

 

Exhibit A to Convertible Promissory Note, Page 1

 

 

 

Exhibit 10.36

 

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

 

HUMBL, INC.

 

WARRANT TO PURCHASE SHARES OF COMMON STOCK

 

1. Issuance. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by HUMBL, Inc., a Delaware corporation, its successors and assigns (“Company”), Murtaugh Group LLC, a Delaware limited liability company, its successors and/or registered assigns (“Investor”), is hereby granted the right to purchase at any time on or after the Issue Date (as defined below) until June 21, 2023 (the “Expiration Date”), 750,000 fully paid and non-assessable shares (the “Warrant Shares”) of Company’s common stock, par value $0.00001 per share (the “Common Stock”), as such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant to Purchase Shares of Common Stock (this “Warrant”).

 

This Warrant is being issued pursuant to the terms of that certain Securities Purchase Agreement dated June 21, 2021, to which Company and Investor are parties (as the same may be amended from time to time, the “Purchase Agreement”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference. This Warrant was issued to Investor on June 21, 2021 (the “Issue Date”).

 

2. Exercise of Warrant.

 

2.1. General.

 

(a) This Warrant is exercisable in whole or in part at any time and from time to time commencing on the Issue Date and ending on the Expiration Date. Such exercise shall be effectuated by submitting to Company (either by delivery to Company or by email or facsimile transmission) a completed and signed Notice of Exercise substantially in the form attached to this Warrant as Exhibit A (the “Notice of Exercise”). The date a Notice of Exercise is delivered to Company shall be the “Exercise Date,” provided that, if such exercise represents the full exercise of the outstanding balance of this Warrant, Investor shall tender this Warrant to Company within five (5) Trading Days thereafter, but only if the Warrant Shares to be delivered pursuant to the Notice of Exercise have been delivered to Investor as of such date. The Notice of Exercise shall be executed by Investor and shall indicate the number of Warrant Shares to be issued pursuant to such exercise.

 

 
 

 

(b) The Exercise Price per share of Common Stock for the Warrant Shares shall be payable, at the election of Investor, in cash or by certified or official bank check or by wire transfer in accordance with instructions provided by Company at the request of Investor.

 

(c) Upon the appropriate payment to Company of the Exercise Price for the Warrant Shares, Company shall promptly, but in no case later than the date that is ten (10) Trading Days following the date the Exercise Price is paid to Company (the “Delivery Date”), deliver or cause Company’s Transfer Agent to deliver the applicable Warrant Shares electronically via the DWAC system to the account designated by Investor on the Notice of Exercise. If for any reason Company is not able to so deliver the Warrant Shares via the DWAC system, Company shall instead, on or before the applicable date set forth above in this subsection, issue and deliver to Investor or its broker (as designated in the Notice of Exercise), via reputable overnight courier, a certificate, registered in the name of Investor or its designee, representing the applicable number of Warrant Shares.

 

(d) In no event may this Warrant be net cash settled.

 

2.2. Ownership Limitation. Notwithstanding anything to the contrary contained in this Warrant, if at any time Lender shall or would be issued shares of Common Stock under this Warrant, but such issuance would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance) (the “Maximum Percentage”), then Borrower shall not issue to Lender shares of Common Stock which would exceed the Maximum Percentage. The ownership limitation is enforceable, unconditional and non-waivable and shall apply to all affiliates and assigns of Lender.

 

3. Mutilation or Loss of Warrant. Upon receipt by Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, Company will execute and deliver to Investor a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void.

 

4. Rights of Investor. Investor shall not, by virtue of this Warrant alone, be entitled to any rights of a stockholder in Company, either at law or in equity, and the rights of Investor with respect to or arising under this Warrant are limited to those expressed in this Warrant and are not enforceable against Company except to the extent set forth herein

 

5. Adjustments. If Company shall issue any shares of Common Stock as a stock dividend or subdivide the number of outstanding shares of Common Stock into a greater number of shares, then, in either such case, the Exercise Price in effect before such dividend or subdivision shall be proportionately reduced and the number of Warrant Shares at that time issuable pursuant to the exercise of this Warrant shall be proportionately increased; and, conversely, if Company shall contract the number of outstanding shares of Common Stock by combining such shares into a smaller number of shares, then the Exercise Price in effect before such combination shall be proportionately increased and the number of Warrant Shares at that time issuable pursuant to the exercise or conversion of this Warrant shall be proportionately decreased. Each adjustment in the number of shares of Warrant Stock issuable shall be to the nearest whole share.

 

6. Certificate as to Adjustments. In the case of any adjustment in the Exercise Price or Warrant Shares, Company will promptly give written notice to Investor in the form of a certificate, certified and confirmed by an officer of the Company, setting forth the adjustment in reasonable detail.

 

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7. Transfer to Comply with the Securities Act. This Warrant and the Warrant Shares have not been registered under the Securities Act of 1933, as amended (the “1933 Act”). The Warrant Shares may not be sold, transferred, pledged or hypothecated without (a) an effective registration statement under the 1933 Act relating to such security or (b) an opinion of counsel reasonably satisfactory to Company that registration is not required under the 1933 Act. Until such time as registration has occurred under the 1933 Act, each certificate for this Warrant and any Warrant Shares shall contain a legend, in form and substance satisfactory to counsel for Company, setting forth the restrictions on transfer contained in this Section 7. This Warrant may be transferred by Investor so long as such transfer is done in compliance with applicable securities laws. Upon receipt of a duly executed assignment of this Warrant, Company shall register the transferee thereon as the new holder on the books and records of Company and such transferee shall be deemed a “registered holder” or “registered assign” for all purposes hereunder, and shall have all the rights of Investor under this Warrant. Until this Warrant is transferred on the books of Company, Company may treat Investor as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary

 

8. Registration. Company agrees to register the Warrant Shares on a Form S-1 Registration Statement and to file such Registration Statement within ninety (90) days of the Issue Date.

 

9. Notices. Any notice required or permitted hereunder shall be given in the manner provided in the subsection titled “Notices” in the Purchase Agreement, the terms of which are incorporated herein by reference. Company shall provide Investor with prompt written notice of all actions taken pursuant to this Warrant, including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, Company will give written notice to Investor (i) as soon as practicable upon each adjustment of the Exercise Price and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, or (B) for determining rights to vote with respect to any Change of Control, dissolution or liquidation, provided in each case that such information, and (iii) at least ten (10) Trading Days prior to the consummation of any Change of Control.

 

10. Supplements and Amendments; Whole Agreement. This Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant, together with the Purchase Agreement, contains the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings with respect to the subject matter hereof and thereof other than as expressly contained herein and therein.

 

11. Governing Law; Venue. This Warrant shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of Delaware. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state and federal courts in San Diego County, California. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The prevailing party in any dispute arising under this Agreement shall be entitled to recover from the other party its reasonable attorney’s fees and costs.

 

12. Waiver of Jury Trial. EACH OF COMPANY AND INVESTOR IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS WARRANT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, COMPANY ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY.

 

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13. Counterparts. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Electronic signatures shall be considered original signatures for all purposes hereof.

 

14. Attorneys’ Fees. In the event of any litigation or dispute arising from this Warrant, the parties agree that the prevailing party shall be entitled to an additional award of the full amount of the reasonable attorneys’ fees and expenses paid by said prevailing party in connection with litigation or dispute.

 

15. Severability. Whenever possible, each provision of this Warrant shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be invalid or unenforceable in any jurisdiction, such provision shall be modified to achieve the objective of the parties to the fullest extent permitted and such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Warrant or the validity or enforceability of this Warrant in any other jurisdiction.

 

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

 

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IN WITNESS WHEREOF, Company has caused this Warrant to be duly executed as of the Issue Date.

 

  COMPANY:
   
  HUMBL, Inc.
     
  By:  
    Brian Foote, CEO

 

[Signature Page to Warrant]

 

 
 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

A1. “DTC” means the Depository Trust Company or any successor thereto.

 

A2. “DTC Eligible” means, with respect to the Common Stock, that such Common Stock is eligible to be deposited in certificate form at the DTC, cleared and converted into electronic shares by the DTC and held in the name of the clearing firm servicing Investor’s brokerage firm for the benefit of Investor.

 

A3. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A4. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A5. “Exercise Price” means $1.00 per share of Common Stock, as the same may be adjusted from time to time pursuant to the terms and conditions of this Warrant.

 

A6. “Trading Day” means any day the New York Stock Exchange is open for trading.

 

A7. “Change of Control” means a merger or consolidation with another entity in which the Company’s stockholders do not own more than 50% of the outstanding voting power of the surviving entity, or the disposition of all or substantially all of the Company’s assets.

 

Attachment 1 to Warrant, Page 1
 

 

EXHIBIT A

 

NOTICE OF EXERCISE OF WARRANT

 

TO: HUMBL, INC.
  ATTN: _______________
  VIA FAX TO: (     )______________ EMAIL: ______________

 

The undersigned hereby irrevocably elects to exercise the right, represented by the Warrant to Purchase Shares of Common Stock dated as of June 21, 2021 (the “Warrant”), to purchase shares of the common stock, $0.00001 par value (“Common Stock”), of HUMBL, Inc., and tenders herewith payment in accordance with Section 2 of the Warrant, as follows:

 

Warrant Shares: _______________________

 

Exercise Price: $_______________________

 

Purchase Price: $___________________ = (Exercise Price x Warrant Shares)

 

Payment is being made by:

 

  _____ enclosed check
  _____ wire transfer
_____ other

 

Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Warrant.

 

It is the intention of Investor to comply with the provisions of Section 2.2 of the Warrant regarding certain limits on Investor’s right to receive shares thereunder. Investor believes this exercise complies with the provisions of such Section 2.2. Nonetheless, to the extent that, pursuant to the exercise effected hereby, Investor would receive more shares of Common Stock than permitted under Section 2.2, Company shall not be obligated and shall not issue to Investor such excess shares until such time, if ever, that Investor could receive such excess shares without violating, and in full compliance with, Section 2.2 of the Warrant.

 

As contemplated by the Warrant, this Notice of Exercise is being sent by email to the officer indicated above.

 

If this Notice of Exercise represents the full exercise of the entire Warrant, Investor will surrender (or cause to be surrendered) the Warrant to Company at the address indicated above by express courier within five (5) Trading Days after the Warrant Shares to be delivered pursuant to this Notice of Exercise have been delivered to Investor.

 

To the extent the Warrant Shares are not able to be delivered to Investor via the DWAC system, please deliver certificates representing the Warrant Shares to Investor via reputable overnight courier after receipt of this Notice of Exercise (by facsimile transmission or otherwise) to:

 

_____________________________________

_____________________________________

_____________________________________

 

Dated:            
   
   
[Name of Investor]  

 

By:    

 

Exhibit A to Warrant, Page 1

 

 

 

Exhibit 10.37

 

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF THIS WARRANT OR SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THIS WARRANT OR SUCH SECURITIES, AS APPLICABLE, MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS.

 

HUMBL, INC.

 

WARRANT TO PURCHASE SHARES OF COMMON STOCK

 

1. Issuance. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by HUMBL, Inc., a Delaware corporation, its successors and assigns (“Company”), Athletes First, LLC, a Delaware limited liability company, its successors and/or registered assigns (“Holder”), is hereby granted the right to purchase at any time on or after the Issue Date (as defined below) until May 21, 2026 (the “Expiration Date”), 25,000,000 fully paid and non-assessable shares (the “Warrant Shares”) of Company’s common stock, par value $0.00001 per share (the “Common Stock”), as such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant to Purchase Shares of Common Stock (this “Warrant”).

 

This Warrant is being issued pursuant to the terms of that certain Consulting Agreement dated May 21, 2021, to which Company and Holder are parties (as the same may be amended from time to time, the “Consulting Agreement”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference. This Warrant was issued to Holder on May 21, 2021 (the “Issue Date”).

 

2. Exercise of Warrant.

 

2.1. General.

 

(a) This Warrant is exercisable in whole or in part at any time and from time to time commencing on the Issue Date and ending on the Expiration Date. Such exercise shall be effectuated by submitting to Company (either by delivery to Company or by email or facsimile transmission) a completed and signed Notice of Exercise substantially in the form attached to this Warrant as Exhibit A (the “Notice of Exercise”). The date a Notice of Exercise is delivered to Company shall be the “Exercise Date,” provided that, if such exercise represents the full exercise of the outstanding balance of this Warrant, Holder shall tender this Warrant to Company within five (5) Trading Days thereafter, but only if the Warrant Shares to be delivered pursuant to the Notice of Exercise have been delivered to Holder as of such date. The Notice of Exercise shall be executed by Holder and shall indicate (i) the number of Warrant Shares to be issued pursuant to such exercise, and (ii) if applicable (as provided below), whether the exercise is a cashless exercise.

 

 
 

 

(b) Holder may elect a “cashless” exercise of this Warrant for any Warrant Shares, in which event the Company shall issue to Holder a number of Warrant Shares computed using the following formula:

 

X = Y (A-B)

A

 

  Where X = the number of Warrant Shares to be issued to Holder.
     
    Y = the number of Warrant Shares that the Holder elects to purchase under this Warrant (at the date of such calculation).
     
    A = the Closing Trade Price (on the date two Trading Days prior to the Exercise Date).
     
    B = Exercise Price (as adjusted to the date of such calculation).

 

(c) If the Notice of Exercise form elects a “cash” exercise, the Exercise Price per share of Common Stock for the Warrant Shares shall be payable, at the election of Holder, in cash or by certified or official bank check or by wire transfer in accordance with instructions provided by Company at the request of Holder.

 

(d) Upon the appropriate payment to Company of the Exercise Price for the Warrant Shares, Company shall promptly, but in no case later than the date that is ten (10) Trading Days following the date the Exercise Price is paid to Company (the “Delivery Date”), deliver or cause Company’s Transfer Agent to deliver the applicable Warrant Shares electronically via the DWAC system to the account designated by Holder on the Notice of Exercise. If for any reason Company is not able to so deliver the Warrant Shares via the DWAC system, Company shall instead, on or before the applicable date set forth above in this subsection, issue and deliver to Holder or its broker (as designated in the Notice of Exercise), via reputable overnight courier, a certificate, registered in the name of Holder or its designee, representing the applicable number of Warrant Shares.

 

2.2. Ownership Limitation. Notwithstanding anything to the contrary contained in this Warrant, if at any time Holder shall or would be issued shares of Common Stock under this Warrant, but such issuance would cause Holder (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance) (the “Maximum Percentage”), then Company shall not issue to Holder shares of Common Stock which would exceed the Maximum Percentage. The ownership limitation is enforceable, unconditional and non-waivable and shall apply to all affiliates and assigns of Holder.

 

3. Vesting. Holder may not exercise this Warrant with respect to any Warrant Shares that have not first vested. The Warrant Shares will vest in accordance with the following schedule so long as the Consulting Agreement is still in full force and effect on each applicable date: (a) 5,000,000 Warrant Shares on the date that is six (6) months from the Issue Date; (b) 5,000,000 Warrant Shares on the date that is nine (9) months from the Issue Date; (c) 5,000,000 Warrant Shares on the date that is twelve (12) months from the issue date; (d) 5,000,000 Warrant Shares on the date this fifteen (15) months from the Issue Date; and (e) 5,000,000 Warrant Shares on the date that is eighteen (18) months from the Issue Date. In the event Company terminates the Consulting Agreement other than for a breach of the Consulting Agreement by Athletes First, then all Warrant Shares shall immediately vest.

 

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4. Mutilation or Loss of Warrant. Upon receipt by Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, Company will execute and deliver to Holder a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void.

 

5. Rights of Holder. Holder shall not, by virtue of this Warrant alone, be entitled to any rights of a stockholder in Company, either at law or in equity, and the rights of Holder with respect to or arising under this Warrant are limited to those expressed in this Warrant and are not enforceable against Company except to the extent set forth herein

 

6. Adjustments. If Company shall issue any shares of Common Stock as a stock dividend or subdivide the number of outstanding shares of Common Stock into a greater number of shares, then, in either such case, the Exercise Price in effect before such dividend or subdivision shall be proportionately reduced and the number of Warrant Shares at that time issuable pursuant to the exercise of this Warrant shall be proportionately increased; and, conversely, if Company shall contract the number of outstanding shares of Common Stock by combining such shares into a smaller number of shares, then the Exercise Price in effect before such combination shall be proportionately increased and the number of Warrant Shares at that time issuable pursuant to the exercise or conversion of this Warrant shall be proportionately decreased. Each adjustment in the number of shares of Warrant Stock issuable shall be to the nearest whole share.

 

7. Transfer to Comply with the Securities Act. This Warrant and the Warrant Shares have not been registered under the Securities Act of 1933, as amended (the “1933 Act”). The Warrant Shares may not be sold, transferred, pledged or hypothecated without (a) an effective registration statement under the 1933 Act relating to such security or (b) an opinion of counsel reasonably satisfactory to Company that registration is not required under the 1933 Act. Until such time as registration has occurred under the 1933 Act, each certificate for this Warrant and any Warrant Shares shall contain a legend, in form and substance satisfactory to counsel for Company, setting forth the restrictions on transfer contained in this Section 7. This Warrant may be transferred by Holder so long as such transfer is done in compliance with applicable securities laws. Upon receipt of a duly executed assignment of this Warrant, Company shall register the transferee thereon as the new holder on the books and records of Company and such transferee shall be deemed a “registered holder” or “registered assign” for all purposes hereunder, and shall have all the rights of Holder under this Warrant. Until this Warrant is transferred on the books of Company, Company may treat Holder as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary.

 

8. Notices. Company shall provide Holder with prompt written notice of all actions taken pursuant to this Warrant, including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, Company will give written notice to Holder (i) as soon as practicable upon each adjustment of the Exercise Price and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, or (B) for determining rights to vote with respect to any Change of Control, dissolution or liquidation, provided in each case that such information, and (iii) at least ten (10) Trading Days prior to the consummation of any Change of Control.

 

9. Supplements and Amendments; Whole Agreement. This Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant, together with the Consulting Agreement, contains the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings with respect to the subject matter hereof and thereof other than as expressly contained herein and therein.

 

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10. Governing Law; Venue. This Warrant shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of Delaware. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state and federal courts in San Diego County, California. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The prevailing party in any dispute arising under this Agreement shall be entitled to recover from the other party its reasonable attorney’s fees and costs.

 

11. Waiver of Jury Trial. EACH OF COMPANY AND INVESTOR IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS WARRANT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, COMPANY ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY.

 

12. Counterparts. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Electronic signatures shall be considered original signatures for all purposes hereof.

 

13. Attorneys’ Fees. In the event of any litigation or dispute arising from this Warrant, the parties agree that the prevailing party shall be entitled to an additional award of the full amount of the reasonable attorneys’ fees and expenses paid by said prevailing party in connection with litigation or dispute.

 

14. Severability. Whenever possible, each provision of this Warrant shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be invalid or unenforceable in any jurisdiction, such provision shall be modified to achieve the objective of the parties to the fullest extent permitted and such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Warrant or the validity or enforceability of this Warrant in any other jurisdiction.

 

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

 

4
 

 

IN WITNESS WHEREOF, Company has caused this Warrant to be duly executed as of the Issue Date.

 

  COMPANY:
   
  HUMBL, Inc.
     
  By:  
    Brian Foote, CEO

 

[Signature Page to Warrant]

 

 
 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

A1. “Bloomberg” means Bloomberg L.P. (or if that service is not then reporting the relevant information regarding the Common Stock, a comparable reporting service of national reputation selected by Holder and reasonably satisfactory to Company).

 

A2. “Closing Bid Price” and “Closing Trade Price” means the last closing bid price and last closing trade price, respectively, for the Common Stock on its principal market, as reported by Bloomberg, or, if its principal market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of the Common Stock prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if its principal market is not the principal securities exchange or trading market for the Common Stock, the last closing bid price or last trade price, respectively, of the Common Stock on the principal securities exchange or trading market where the Common Stock is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of the Common Stock in the over-the-counter market on the electronic bulletin board for the Common Stock as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for the Common Stock by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for the Common Stock as reported by OTC Markets Group, Inc., and any successor thereto. If the Closing Bid Price or the Closing Trade Price cannot be calculated for the Common Stock on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Trade Price (as the case may be) of the Common Stock on such date shall be the fair market value as mutually determined by Holder and Company. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

 

A3. “Change of Control” means a merger or consolidation with another entity in which the Company’s stockholders do not own more than 50% of the outstanding voting power of the surviving entity, or the disposition of all or substantially all of the Company’s assets.

 

A4. “DTC” means the Depository Trust Company or any successor thereto.

 

A5. “DTC Eligible” means, with respect to the Common Stock, that such Common Stock is eligible to be deposited in certificate form at the DTC, cleared and converted into electronic shares by the DTC and held in the name of the clearing firm servicing Holder’s brokerage firm for the benefit of Holder.

 

A6. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A7. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A8. “Exercise Price” means $0.91 per share of Common Stock, as the same may be adjusted from time to time pursuant to the terms and conditions of this Warrant.

 

A9. “Trading Day” means any day the New York Stock Exchange is open for trading.

 

Attachment 1 to Warrant, Page 1

 

 
 

 

EXHIBIT A

 

NOTICE OF EXERCISE OF WARRANT

 

TO: HUMBL, INC.
  ATTN: _______________
  VIA FAX TO: ( )______________ EMAIL: ______________

 

The undersigned hereby irrevocably elects to exercise the right, represented by the Warrant to Purchase Shares of Common Stock dated as of May 21, 2021 (the “Warrant”), to purchase shares of the common stock, $0.00001 par value (“Common Stock”), of HUMBL, Inc., and tenders herewith payment in accordance with Section 2 of the Warrant, as follows:

 

_______ CASH: $__________________________ = (Exercise Price x Warrant Shares)
   
_______ Payment is being made by:
  _____ enclosed check
  _____ wire transfer
  _____ other
     
_______ CASHLESS EXERCISE:
   
  Net number of Warrant Shares to be issued to Investor: ______*

 

* X = Y (A-B)

A

 

  Where X = the number of Warrant Shares to be issued to Investor.
     
    Y = the number of Warrant Shares that the Investor elects to purchase under this Warrant (at the date of such calculation).
     
    A = the Closing Price (on the date two Trading Days prior to the Exercise Date).
     
    B = Exercise Price (as adjusted to the date of such calculation).

 

Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Warrant.

 

It is the intention of Holder to comply with the provisions of Section 2.2 of the Warrant regarding certain limits on Holder’s right to receive shares thereunder. Holder believes this exercise complies with the provisions of such Section 2.2. Nonetheless, to the extent that, pursuant to the exercise effected hereby, Holder would receive more shares of Common Stock than permitted under Section 2.2, Company shall not be obligated and shall not issue to Holder such excess shares until such time, if ever, that Holder could receive such excess shares without violating, and in full compliance with, Section 2.2 of the Warrant.

 

As contemplated by the Warrant, this Notice of Exercise is being sent by email to the officer indicated above.

 

Exhibit A to Warrant, Page 1

 

 
 

 

If this Notice of Exercise represents the full exercise of the entire Warrant, Holder will surrender (or cause to be surrendered) the Warrant to Company at the address indicated above by express courier within five (5) Trading Days after the Warrant Shares to be delivered pursuant to this Notice of Exercise have been delivered to Holder.

 

To the extent the Warrant Shares are not able to be delivered to Holder via the DWAC system, please deliver certificates representing the Warrant Shares to Holder via reputable overnight courier after receipt of this Notice of Exercise (by facsimile transmission or otherwise) to:

 

 

 

 

 

 

 

Dated:    
     
   
[Name of Holder]  
     
By:    

 

Exhibit A to Warrant, Page 2

 

 

 

 

Exhibit 10.38

 

MEMBERSHIP INTEREST PURCHASE AGREEMENT

 

THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT (this “Agreement”) is entered into effective as of June 30, 2021 (the “Effective Date”), by and among HUMBL, Inc., a Delaware corporation (the “Buyer”), on one hand, and Phantom Power, LLC, a California limited liability company (“Phantom Power”), and Kevin Childress, an individual (“Kevin,” and together with Phantom Power, the “Sellers”), on the other hand. Each of the Buyer and the Sellers are referred to herein individually as a “Party” and collectively as the “Parties.”

 

A. Phantom Power owns an 87% membership interest in Monster Creative, LLC, a California limited liability company (the “Company”), and Kevin owns a 13% membership interest in the Company (collectively, the “Monster Interests”).

 

B. Upon the terms and subject to the conditions set forth herein, the Buyer desires to purchase from the Sellers and the Sellers desire to sell to the Buyer, the Monster Interests (the “Purchase”).

 

NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the Parties agree as follows:

 

ARTICLE I
PURCHASE AND SALE OF MONSTER INTERESTS

 

1.1. Purchase of Monster Interests; Purchase Price. On the terms and subject to the conditions of this Agreement, the Buyer agrees to purchase from the Sellers, and the Sellers agree to sell to the Buyer, the Monster Interests, free and clear of all claims, liens, pledges, hypothecations, charges, mortgages, security interests, assessments, preemptive rights, rights of first refusal, or other encumbrances or restrictions of any nature, whether arising by agreement, operation of law or otherwise (each, an “Encumbrance”), except for those Encumbrances imposed by applicable federal and state securities laws, in exchange for the amount of $8,000,000.00 (the “Purchase Price”), payable in the manner set forth in Section 1.2 below.

 

1.2. Payment of the Purchase Price. The Purchase Price shall be paid pursuant to: (i) the terms and conditions of a Promissory Note in the form attached hereto as Exhibit A made by the Buyer in favor of Phantom Power in the principal amount of $6,525,000.00, and the terms and conditions of a Promissory Note in the form attached hereto as Exhibit B made by the Buyer in favor of Phantom Power in the principal amount of $435,000.00 (collectively, the “Phantom Power Notes”); and (ii) the terms and conditions of a Promissory Note in the form attached hereto as Exhibit A made by the Buyer in favor of Childress in the principal amount of $975,000, and the terms and conditions of a Promissory Note in the form attached hereto as Exhibit B made by the Buyer in favor of Childress in the principal amount of $65,000 (collectively, the “Childress Notes”) and together with the Phantom Power Notes, the “Notes”). This Agreement, the Notes and the other documents contemplated hereby and thereby, other than the Employment Agreements (as defined below), shall be referred herein as the “Transaction Documents”.

 

 
 

 

1.3. Closing. The closing of the sale and purchase of the Monster Interests (the “Closing”) shall take place at 11:59 PM PT on the Effective Date. The date on which the Closing occurs shall be referred to herein as the “Closing Date.”

 

1.4. Deliveries. At the time of the Closing, (a) the sale and transfer of the Monster Interests to Buyer will be effected by delivery by the Sellers to the Buyer of Membership Interest Assignments in the form attached hereto as Exhibit C; (b) the Buyer will execute and deliver to the Sellers the Notes; and (c) the Sellers will execute and deliver to the Buyer the Employment Agreements (as defined below).

 

ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS

 

As a material inducement to the Buyer to enter into this Agreement, each Seller represents and warrants severally, but not jointly, to the Buyer, as of the Closing Date, as follows:

 

2.1. Organization. Such Seller has full power, authority and legal right and capacity to enter into and perform such Seller’s obligations under this Agreement and each other document contemplated hereby to which he or it is or will be a party and to consummate the transactions contemplated hereby and thereby.

 

2.2. Binding Obligation. This Agreement and the other documents contemplated hereby to which such Seller is a party have been duly executed and delivered by such Seller and are legal, valid and binding obligations of such Seller, enforceable against such Seller in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights in general.

 

2.3. No Violation to Result. Except as provided in Section 5.15, the execution, delivery and performance by such Seller of this Agreement and the other documents contemplated hereby and the consummation by such Seller of the transactions contemplated hereby and thereby, do not and will not, directly or indirectly (with or without notice or lapse of time): (i) violate, breach, conflict with, constitute a default under, accelerate or permit the acceleration of the performance required by (x) any note, debt instrument, security agreement, mortgage or any other Contract (defined below) to which such Seller is a party or by which he or it is bound or (y) any law, judgment, decree, order, rule, regulation, permit, license or other legal requirement of any nation, state or other instrumentality or political subdivision thereof (including any county or city), or any entity exercising executive, legislative, judicial, military, regulatory or administrative functions pertaining to any government (each, a “Government Authority”) which is applicable to such Seller; (ii) give any person, limited liability company, partnership, trust, unincorporated organization, corporation, association, joint stock company, business group, Government Authority or other entity (each, a “Person”) the right to challenge any of the transactions contemplated by this Agreement; or (iii) result in the creation or imposition of any Encumbrance or restriction in favor of any Person upon any of the Monster Interests or any of the properties or assets of the Company. Except for the PPP Loan (as defined below), no notice to, filing with, or consent of, any Person is necessary in connection with, nor is any “change of control” provision triggered by, the execution, delivery or performance by such Seller of this Agreement and the other documents contemplated hereby nor the consummation by such Seller of the transactions contemplated hereby or thereby.

 

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2.4. Ownership of Monster Interests. Such Seller is the sole owner of its Monster Interest and has good and marketable title thereto, and its Monster Interest is free and clear of all Encumbrances except for those imposed by applicable federal and state securities laws. There are no voting trusts or proxies with respect to the voting of its Monster Interest.

 

2.5. Entire Interest. The Monster Interest owned by each Seller constitutes such Seller’s entire interest in the equity of the Company and, upon the Closing, such Seller will have no claim, right or interest in or to any membership interest or other equity of the Company whatsoever.

 

2.6. Brokers. No Person has or will have, as a result of the transactions contemplated by this Agreement, any right, interest or claim against or upon any of the Parties for any commission, fee or other compensation payable as a finder or broker because of any act or omission by such Seller.

 

2.7. Litigation and Known Claims. No litigation, including any arbitration, investigation or other proceeding of or before any court, arbitrator or governmental or regulatory official, body or authority, is pending or, to Seller’s actual knowledge without a duty to investigate (“Seller’s Knowledge”), threatened against such Seller or which relates to the Monster Interests or the transactions contemplated by this Agreement, nor to Seller’s Knowledge is there any reasonably likely basis for any such litigation, arbitration, investigation or proceeding, the result of which could materially adversely affect such Seller, the Monster Interests, or the transactions contemplated hereby. As of the Closing Date, such Seller is not a party to or subject to the provisions of any judgment, order, writ, injunction, settlement, decree or award of any court, arbitrator or governmental or regulatory official, body or authority which affects such Seller, the Monster Interests, or the transactions contemplated hereby.

 

2.8. Bankruptcy. Such Seller has not made any assignment for the benefit of creditors, filed any petition in bankruptcy, been adjudicated insolvent or bankrupt, or petitioned or applied to any tribunal for any receiver, conservator or trustee of such Seller or any of such Seller’s property or assets.

 

2.9. Information. Such Seller believes he has received all the information he or it considers necessary or appropriate for deciding whether to enter into this Agreement and perform the obligations set forth herein. Such Seller hereby acknowledges that any future sale of shares of the Company’s capital stock could be at a premium or a discount to the Purchase Price, and such sale could occur at any time or not at all. Such Seller hereby acknowledges that he or it has not relied on any representation or statement of the Buyer or the Company, other than those set forth in this Agreement, in making his or its investment decision to sell the Monster Interests.

 

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2.10. Valuation of Monster Interests. Such Seller acknowledges that (i) the per interest conversion price pursuant to the Notes is not based on an independent valuation of the Monster Interests or on any other commonly used valuation method and may not reflect the fair market value of the Monster Interests and (ii) such Seller has had the opportunity to make inquiries of the Buyer and the Company and its officers regarding the Company’s and Buyer’s business affairs and financial condition and already has or has acquired sufficient information about the Company and Buyer to reach an informed and knowledgeable decision prior to entering into this Agreement. Such Seller acknowledges that at any time the Company may sell equity, be acquired or elect to liquidate its assets and pay available proceeds to the holders of its capital stock, and/or one or more of the Company’s shareholders may transfer membership interests in a transaction that values the Company’s membership interests at a higher valuation per share than the Purchase Price. In entering into this Agreement and consummating the sale of the Monster Interests contemplated hereby, such Seller assumes the risk that the Purchase Price may not reflect the fair market value of the Monster Interests or the value of the Monster Interests pursuant to any other valuation basis. Such Seller acknowledges that the Purchase Price was determined through an arm’s length negotiation between such Seller and the Buyer, and that such Seller did not rely on the Buyer or any other Person to determine the value of the Monster Interests.

 

2.11. Taxes. Such Seller has reviewed with his or its own tax and legal advisors the federal, state, local and foreign tax consequences, including, but not limited to, capital gains treatment and other related tax provisions that may be applicable to the transaction contemplated by this Agreement. Such Seller relies solely on such advisors and not on any statements or representations of the Buyer or any of its agents, officers, directors, shareholders or employees for the federal, state, local and foreign tax consequences to such Seller that may result from the transaction contemplated by this Agreement. Such Seller understands that, except as otherwise provided in this Agreement, he or it (and not the Buyer) shall be responsible for any tax liability that may arise as a result of the transaction contemplated by this Agreement.

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY

 

As a material inducement to the Buyer to enter into this Agreement, each Seller represents and warrants to the Buyer as of the Closing Date, as follows:

 

3.1. Indebtedness and Guaranties. Except as otherwise disclosed by Sellers, the Company is not a guarantor or otherwise liable for any liability (including indebtedness) of any other Person other than any liability that arises in the ordinary course of business consistent with past practice.

 

3.2. Real Property. The Company does not own, nor has ever owned, any real property. Sellers have provided to Buyer a complete list (the “Real Property List”) of all of the real property and interests therein leased, subleased or otherwise occupied or used by the Company (with all easements and other rights appurtenant to such property, the “Real Property”) and a copy of the Sublease (as defined below). The Real Property constitutes all interests in real property currently used in connection with the business necessary to conduct the business in the ordinary course of business.

 

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3.3. Transactions with Related Persons. Except for the Friends and Family Indebtedness (as defined below) and the Company Limited Liability Company Operating Agreement, dated as of December 18, 2018 (the “Operating Agreement”), neither any member, manager, officer or employee of the Company nor any Related Person of any of the foregoing (i) is a party to any Contract with, or has any claim or right against, the Company or (ii) has any indebtedness owing to the Company. Except for the Friends and Family Indebtedness, the Company does not have (A) any claim or right against any shareholder, officer, director or employee of the Company or any Related Person of any of the foregoing or (B) any indebtedness owing to any shareholder, officer, director or employee of the Company or any Related Person of any of the foregoing. For purposes of this Section, “Related Person” means (a) with respect to a specified individual, any member of such individual’s Family and any affiliate of any member of such individual’s Family, and (b) with respect to a specified person other than an individual, any affiliate of such person and any member of the Family of any such affiliates that are individuals. The “Family” of a specified individual means the individual, such individual’s spouse and former spouses, any other individual who is related to the specified individual or such individual’s spouse or former spouse within the third degree, and any other individual who resides with the specified individual.

 

3.4. Employees. Sellers have provided to Buyer a complete list (the “Employee List”) of all of the Company’s employees and independent contractors, if any. All former employees and independent contractors have been paid in full any and all compensation due and owing to such persons. To Seller’s Knowledge, the Company has complied in all material respects with all applicable federal and state laws related to employment, including those related to wage, hours, worker classification and the payment and withholding of taxes and other sums as required by law. To Seller’s Knowledge, the Company has withheld and paid to the appropriate governmental entity all material amounts required to be withheld from employees of the Company and, to Sellers’ Knowledge, the Company is not liable for any arrears of wages, taxes, penalties, or other sums for failure to comply with any of the foregoing. To Seller’s Knowledge, no employee has indicated they will not remain employed by the Company after Closing. To Seller’s Knowledge, neither the Company nor Seller has committed any act which would be considered discriminatory or would constitute sexual harassment towards any employees of the Company.

 

3.5. Contracts. Sellers have provided to Buyer a copy of all material contracts or agreements to which the Company is a party or by which the Company or any of its material assets, businesses or operations are bound or affected (the “Contracts”). Sellers have also provided to Buyer a brief description of all unwritten or verbal material contracts, agreements, arrangements and commitments to which the Company is a party or by which the Company or any of its assets, businesses or operations are bound or affected. Except as otherwise disclosed to Buyer, including the PPP Loan as described in Section 5.15, the Company is not a party to or bound by any material contract or agreement, including, without limitation, any material contract, agreement, arrangement or commitment which would require the consent of the other party for the Company to enter into this Agreement. Sellers have disclosed to Buyer that the Company does not have all of the insurance coverage, or limits on coverage, required under the services agreements the Company has entered into with its customers, the failure of which is, in each case, a breach of such services agreements. Except as otherwise disclosed to Buyer, the Company is not a party to or bound by any contract, agreement, arrangement or commitment relating to:

 

(a) the employment of any person other than personnel employed at the pleasure of the Company in the ordinary course of business at rates of compensation and on terms consistent with past business practice;

 

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(b) collective bargaining with, or any representation of any employees by, any labor union or association;

 

(c) the acquisition of services, supplies, equipment or other personal property or the sale of personal property (including, without limitation, sales of inventory in the ordinary course of business), which is not terminable by the Company upon 30 days’ notice or less without obligation on the part of the Company;

 

(d) lease of personal property as lessor or lessee or sublessor or sublessee;

 

(e) distribution, agency, public relations, advertising, printing, construction, accounting or legal services;

 

(f) bonuses, vacations, vacation pay, pensions, profit sharing, retirement, stock options, stock purchase, employee discounts or other employee benefits;

 

(g) lending or advancing of funds other than the extension of credit to trade purchasers in the ordinary course of business consistent with past business practice;

 

(h) borrowing of funds or receipt of credit other than in the ordinary course of business consistent with past practice and except for trade accounts payable in amounts and on terms consistent with past practice;

 

(i) incurring of any obligation or liability except for transactions in the ordinary course of business consistent with past practice; or

 

(j) the sale of personal property (other than sales of inventory in the ordinary course of business consistent with past practice) or services under which payments due after the date hereof will exceed $10,000.

 

3.6. Legal Compliance; Permits.

 

(a) To Seller’s Knowledge, the Company is in compliance in all material respects with all applicable laws and Permits (subject in each case to compliance with any change in control provisions of such Permits). To Seller’s Knowledge, no proceeding is pending, nor since January 1, 2020, has been filed or commenced, against the Company alleging any failure to comply with any applicable law or Permit. The Company has not received any written notice or other written communication from any person regarding any actual, alleged or potential violation by the Company of any law or Permit or any cancellation, termination or failure to renew any Permit held by the Company.

 

(b) Sellers have provided to Buyer a complete and accurate list of each Permit (the “Permit List”) held by the Company. Each Permit listed or required to be listed on the Permit List is valid and in full force and effect (subject in each case to compliance with any change in control provisions of such Permits). To Seller’s Knowledge, the Permits listed on the Permit List constitute all of the material Permits necessary to allow the Company to lawfully conduct and operate its business as currently conducted and operated and to own and use its assets as currently owned and used. For purposes of this Agreement, “Permit” means any permit, license or Consent issued by any governmental body or pursuant to any law.

 

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3.7. Financial Statements. Sellers have provided to Buyer the following financial statements (collectively, the “Financial Statements”): (i) unaudited balance sheets of the Company as of December 31 for each of the years 2019 to 2020, and statements of income, changes in stockholders’ equity, and cash flow for each of the fiscal years then ended; and (ii) an unaudited, consolidated balance sheet (the “Interim Balance Sheet”) of the Company as of May 31, 2021 (the “Interim Balance Sheet Date”), and the interim statements of income, changes in stockholders’ equity, and cash flow for the 5-month period then ended for the Company. Except as otherwise provided herein, the Financial Statements have been prepared on a cash basis method of accounting, applied on a consistent basis throughout the periods covered thereby, and present fairly the financial condition of the Company as of and for their respective dates and periods covered thereby; provided, however, the interim financial statements described in clause (ii) above are subject to normal, recurring year-end adjustments (which will not be, individually or in the aggregate, materially adverse) and lack notes; and provided further that the Financial Statements reflect in all material respects the liabilities of the Company, except (A) liabilities incurred in connection with this Agreement and the transactions contemplated by this Agreement, and (B) liabilities incurred in the ordinary course of business of the Company after the Interim Balance Sheet Date. The Financial Statements have been prepared from and are in all material respects in accordance with the books and records of the Company.

 

3.8. Title to and Sufficiency of Assets. To Seller’s Knowledge, the Company has good and marketable title to, or a valid leasehold interest in, every property or asset used by it, located on its premises, purported to be owned by it, or shown on the Financial Statements or acquired by the Company that are reasonably necessary for conducting the Company’s business in all material respects as currently conducted (the “Assets”), free and clear of any Encumbrances except for (1) properties and assets disposed of in the ordinary course of business and for valuable consideration, (2) Permitted Encumbrances and (3) use of the Premises (as described in further detail below under Section 5.16). The Assets include (a) all tangible and intangible property and assets in all material respects necessary for the continued conduct of the business and the provision of services therewith as of the Closing in the same manner as conducted prior to the Closing and in compliance in all material respects with all applicable laws, Contracts and Permits as of the Closing and (b) all property and assets reasonably necessary to generate the results of operations for the business reflected in the Financial Statements and to perform under the Contracts. For purposes of this Agreement, “Permitted Encumbrances” means (i) statutory liens for taxes not yet due and payable or the validity or amount of which is being contested in good faith by appropriate proceedings and for which adequate reserves have been established on the Financial Statements; (ii) mechanics’, carriers’, workers’, repairers’ and other similar liens arising or incurred in the ordinary course of business of the Company and securing sums that are not yet due and payable or the validity or amount of which is being contested in good faith by appropriate proceedings, and for which adequate reserves have been established on the Financial Statements and do not otherwise constitute a breach of or an event of default under any lease; (iii) zoning, entitlement, building and other land use regulations imposed by governmental agencies having jurisdiction over the Real Property that are not violated by the current use or occupancy of such or the operation of the business thereon; (iv) covenants, conditions, restrictions, easements and other similar matters of record affecting title to the Real Property which do not or would not materially impair the occupancy or use of the Real Property for the purposes for which it is currently used in connection with the Company’s business; and (v) liens arising under equipment leases with third parties entered into in the ordinary course of business which are not, individually or in the aggregate, material to the business of the Company.

 

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3.9. Intellectual Property. To Seller’s Knowledge, the Company has sole title to and ownership of, or possesses legally enforceable rights to use under valid and subsisting written license agreements, all applicable material Company Intellectual Property Rights (as defined below). To Seller’s Knowledge, the Company has not misappropriated, is not in conflict with and is not infringing upon the Intellectual Property Rights of others. To Seller’s Knowledge, none of the Company Intellectual Property Rights is being infringed by activities, products or services of, or is being misappropriated by, any third party.

 

(a) The Company has made available to Buyer correct and complete copies of all registrations and applications and all licenses, sublicenses and agreements relating to the Company’s applicable material Company Intellectual Property Rights, each as amended to date. The Company is not a party to any oral license, sublicense or other agreement.

 

(b) With respect to each item of material Third Party Intellectual Property Rights (as defined below), there are no royalty, commission or other executory payment agreements, arrangements or understandings relating to such item.

 

(c) The term “Company Intellectual Property Rights” means the Intellectual Property Rights used in the conduct of the Business of the Company as currently conducted.

 

(d) The term “Intellectual Property Rights” means all (i) patents, patent applications, patent disclosures (ii) trademarks, service marks, trade dress, trade names, logos and corporate names and registrations and applications for registration thereof together with all of the goodwill associated therewith, (iii) copyrights (registered or unregistered) and copyrightable works and registrations and applications for registration thereof, together with all authors’ and moral rights, (iv) mask works and registrations and applications for registration thereof, (v) computer software (including source code, object code, macros, scripts, objects, routines, modules and other components), data, data bases and documentation thereof, (vi) trade secrets and other confidential information (including ideas, formulas, compositions, inventions (whether patentable or unpatentable and whether or not reduced to practice), know-how, products, processes, techniques, methods, research and development information and results, drawings, specifications, designs, plans, proposals, technical data, marketing plans and customer, prospect and supplier lists and information), (vii) other intellectual property rights, (viii) “technical data” as defined in 48 Code of Federal Regulations, Chapter 1, and (ix) copies and tangible embodiments thereof (in whatever form or medium means the Intellectual Property Rights used in the conduct of the Business of the Company as currently conducted.

 

(e) The term “Third Party Intellectual Property Rights” means any Company Intellectual Property Rights specifically not owned by the Company.

 

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3.10. Employee Benefit Plans. The Company has made no promises (whether through an employee benefit plan or otherwise) to provide medical, life or disability benefits for periods after an employee’s termination of employment or a director’s, independent contractor’s or consultant’s end of service to the Company, except as required by the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”). All employee benefit plans are and have always been maintained, funded and administered in material compliance with all applicable laws, and there are no audits, inquiries or proceedings pending or, to the knowledge of such Seller, threatened by any governmental agency or authority. The Company has complied with the notice and benefit obligations regarding any employee benefit plan mandated by COBRA. All contributions, premiums or payments required to be made with respect to any employee benefit plan have been made on or before their due dates. No action, claim or lawsuit is pending or threatened with respect to any employee benefit plan (other than claims for benefits in the ordinary course). The Company has no commitment (a) to create, incur liability with respect to or cause to exist, any other employee benefit plan, program or arrangement, (b) to enter into any contract or agreement to provide compensation or benefits to any individual, or (c) to modify, change or terminate any employee benefit plan, other than with respect to a modification, change or termination required by applicable Law.

 

3.11. Taxes. The Company has duly filed all material federal, state, county, local and other excise, franchise, property, payroll, income, capital stock, sales and use, and other tax returns which are required to be filed by it, and such returns are true and correct in all material respects. The Company is not currently the beneficiary of any extension of time within which to file a tax return (other than extensions granted automatically by operation of law). The Company has paid all taxes (including any penalties or interest) which have become due or have been assessed against it (other than taxes being contested in good faith). There are no material tax deficiencies or written claims presently being asserted against the Company. Neither the Company nor Seller has granted any waiver currently in effect of the statute of limitations with respect to any such taxes or assessments. The Company has complied in all material respects with all applicable laws, rules, and regulations relating to the payment and withholding of taxes and has, within the time and in the manner prescribed by law, withheld from employee wages and paid over to the proper governmental authorities all material amounts required to be so withheld and paid over under all applicable laws.

 

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER

 

The Buyer represents and warrants to the Sellers, as of the Closing Date, as follows:

 

4.1. Organization. The Buyer is a corporation, duly organized, validly existing and in good standing under the laws of the State of Delaware, and is qualified to do business and in good standing in each jurisdiction where the character or location of its assets or properties owned, leased or operated by it or the nature of its activities makes such qualification necessary.

 

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4.2. Authority for Agreement. The Buyer has full power, authority and legal right to enter into and perform its obligations under this Agreement and the other documents contemplated hereby to which the Buyer is or will be a party and to consummate the transactions contemplated hereby and thereby. The Buyer has duly approved this Agreement and the other documents contemplated hereby and the transactions contemplated hereby and thereby and has authorized the execution, delivery and performance of this Agreement and the other documents contemplated hereby and the consummation of the transactions contemplated hereby and thereby. No other proceedings on the part of the Buyer are necessary to approve and authorize the execution, delivery and performance of this Agreement and the other documents contemplated hereby and the consummation of the transactions contemplated hereby and thereby. This Agreement and the other documents contemplated hereby to which the Buyer is a party have been duly executed and delivered by the Buyer and are legal, valid and binding obligations of the Buyer, enforceable against the Buyer in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights in general.

 

4.3. No Violation to Result. The execution, delivery and performance by the Buyer of this Agreement and the other documents contemplated hereby and the consummation by the Buyer of the transactions contemplated hereby and thereby, do not and will not, directly or indirectly (with or without notice or lapse of time): (i) violate, breach, conflict with, constitute a default under, accelerate or permit the acceleration of the performance required by (x) any of the terms of the bylaws, articles of organization or other governing documents of the Buyer or any resolution adopted by the shareholders of the Buyer, (y) any note, debt instrument, security agreement, mortgage or any other contract to which the Buyer is a party or by which it is bound or (z) any law, judgment, decree, order, rule, regulation, permit, license or other legal requirement of any Government Authority applicable to the Buyer; (ii) give any Government Authority or other Person the right to challenge any of the transactions contemplated by this Agreement; or (iii) result in the creation or imposition of any Encumbrance, possibility of Encumbrance, or restriction in favor of any Person upon any of the properties or assets of the Buyer. No notice to, filing with, or consent of, any Person is necessary in connection with the execution, delivery or performance by the Buyer of this Agreement and the other documents contemplated hereby nor the consummation by the Buyer of the transactions contemplated hereby or thereby.

 

4.4. Brokers. No Person has or will have, as a result of the transactions contemplated by this Agreement, any right, interest or claim against or upon any of the Parties for any commission, fee or other compensation payable as a finder or broker because of any act or omission by the Buyer.

 

4.5. Litigation and Known Claims. No litigation, including any arbitration, investigation or other proceeding of or before any court, arbitrator or governmental or regulatory official, body or authority, is pending or, to Buyer’s actual knowledge without a duty to investigate, threatened against the Buyer or which relates to the transactions contemplated by this Agreement, nor to Buyer’s actual knowledge without a duty to investigate is there any reasonably likely basis for any such litigation, arbitration, investigation or proceeding, the result of which could materially adversely affect Buyer or the transactions contemplated hereby. As of the Closing Date, the Buyer is not a party to or subject to the provisions of any judgment, order, writ, injunction, settlement, decree or award of any court, arbitrator or governmental or regulatory official, body or authority which affects Buyer or the transactions contemplated hereby.

 

4.6. Bankruptcy. The Buyer has not made any assignment for the benefit of creditors, filed any petition in bankruptcy, been adjudicated insolvent or bankrupt, or petitioned or applied to any tribunal for any receiver, conservator or trustee of the Buyer or any of Buyer’s property or assets.

 

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4.7. Financial Ability. The Buyer will have sufficient cash funds to make the payments required to be made by Buyer in connection with the transactions contemplated by this Agreement and the Transaction Documents and to perform its obligations with respect to the transactions contemplated by this Agreement and the Transaction Documents in connection with such payments and obligations at all such other times when such payments and obligations are due and arise.

 

4.8. Acquisition for Investment. The Buyer is acquiring the Monster Interests hereunder for investment for its own account and not with a view to, or for sale in connection with, any distribution thereof. The Buyer does not have any present intent to resell or distribute all or any part of the Monster Interests being acquired by Buyer hereunder.

 

4.9. Buyer Investigation. The Buyer is an informed and sophisticated participant in the transactions contemplated by this Agreement and the Transaction Documents. The Buyer has undertaken an investigation of the Company, the Monster Interests, the management, operations, and finances of the Company and the Sellers, and has been provided with and has evaluated and relied upon certain documents and information provided by the Sellers and the Company to assist the Buyer in making an informed decision with respect to this Agreement and the purchase of the Monster Interests. The Buyer shall accept the Company as it exists on the Closing Date based on Buyer’s inspection, examination, and determination, subject only to the express representations, warranties, covenants, and indemnities provided in this Agreement. Buyer is not relying on any other representation or warranty of any nature, whether in writing, orally, or otherwise, made by or on behalf of Sellers, except as expressly set forth in this Agreement, and Buyer hereby expressly disclaims reliance on any other such representation or warranty of any nature. Any claim that the Buyer or any other Buyer Indemnified Parties may have for breach of representation or warranty shall be based solely on the representations and warranties of Sellers set forth in Article II and Article III. Any representations and warranties other than those expressly set forth in Article II and Article III are disclaimed by Sellers.

 

ARTICLE V
ADDITIONAL AGREEMENTS

 

5.1. Tax Matters.

 

(a) Transfer Taxes. All transfer taxes incurred in connection with the transactions contemplated by this Agreement shall be paid by the Party incurring such taxes under applicable law when due. The responsible Party shall, at its own expense, file all necessary tax returns and other documentation with respect to all such transfer taxes.

 

(b) Tax Treatment. The Sellers and the Buyer acknowledge that the sale and purchase of the Monster Interests contemplated by this Agreement is intended to be treated for U.S. federal income tax purposes and any relevant state or local income tax purposes as a sale of the Monster Interests by Sellers and a purchase of the assets of the Company by the Buyer in accordance with Revenue Ruling 99-6, 1999-1 C.B. 432 (Situation 2) (the “Intended Tax Treatment”), and the Sellers and the Buyer agree (i) to report such sale and purchase consistent with the Intended Tax Treatment and (ii) that none of the parties hereto or their affiliates will take any position on any tax return or with any taxing authority or otherwise that is inconsistent with the Intended Tax Treatment, unless required to do so pursuant to a final “determination” as defined in Section 1313(a) of the Internal Revenue Code of 1986, as amended (the “Code”) (or corresponding provision of state, local, or foreign law).

 

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(c) Purchase Price Allocation. The Purchase Price (along with any other items that are treated as additional consideration for U.S. federal and applicable state and local income tax purposes (including, for the avoidance of doubt, any liabilities that, for U.S. federal and applicable state and local income Tax purposes, are treated as assumed by Buyer)) shall be allocated among the assets of the Company in accordance with the methodology set forth on Schedule 5.1(c) (the “Allocation”). The Parties further agree that for all income tax purposes, they shall allocate, to the greatest extent permitted by applicable law, (x) (A) any amounts payable pursuant to Section 5.19 and (B) the Phantom Power Note in the principal amount of $435,000 and the Childress Note in the principal amount of $65,000 to the assets of the Company that do not qualify for installment sale reporting pursuant to Section 453 of the Code (to the extent Purchase Price is allocated to such assets and in such order), and (y) the Phantom Power Note in the principal amount of $6,525,000 and the Childress Note in the principal amount of $975,000, and any other consideration remaining after the application of clause (x) to the assets of the Company that qualify for installment sale reporting pursuant to Section 453 of the Code (the “Consideration Allocation”). The Allocation and the Consideration Allocation shall be binding on the Buyer, the Company, the Sellers, and their affiliates and none of them will take any position on any tax return or with any taxing authority or otherwise that is inconsistent this Section 5.1(c), unless required to do so pursuant to a final “determination” as defined in Code Section 1313(a) (or corresponding provision of state, local, or foreign law). Sellers shall provide the Allocation to Buyer upon the completion of the company’s financial statements for the period ending on the Closing Date.

 

(d) Tax Returns. The Sellers shall prepare or cause to be prepared, and timely file or cause to be timely filed, all tax returns for the Company for all periods ending on or prior to the Closing Date (a “Pre-Closing Tax Period”) which are filed after the Closing Date. Any tax returns filed pursuant hereto shall be prepared in a manner consistent with the past custom and practice of the Company unless otherwise required by applicable law. No later than 20 days prior to filing, the Sellers shall: (A) deliver or cause to be delivered to the Buyer all such tax returns; (B) permit the Buyer to review and comment on each such tax return; and (C) take into consideration in good faith any comments made by the Buyer. To the extent that any tax returns of the Company relate to a period beginning on or before the Closing Date and ending after the Closing Date (a “Straddle Period”), the Buyer shall prepare, or cause to be prepared, such tax returns in a manner consistent with the past custom and practice of the Company unless otherwise required by applicable law, and timely file or cause to be timely filed any such tax returns. No later than 20 days prior to filing, the Buyer shall: (A) deliver or cause to be delivered to the Sellers all such tax returns; (B) permit the Sellers to review and comment on each such tax return; and (C) make such revisions to such tax returns as are reasonably requested by the Sellers.

 

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(e) Tax Apportionment. In the case of any Straddle Period, (i) the amount of any taxes based on or measured by income, receipts, or payroll of the Company for the pre-Closing portion of such Straddle Period shall be determined based on an interim closing of the books as of the close of business on the Closing Date, and (ii) the amount of any other taxes (including, without limitation, personal property taxes, real property taxes, and similar ad valorem obligations) of the Company for a Straddle Period that relates to the pre-Closing portion of such Straddle Period shall be deemed to be the amount of such tax for the entire taxable period multiplied by a fraction the numerator of which is the number of days in the taxable period ending on the Closing Date and the denominator of which is the number of days in such Straddle Period. The Sellers, on the one hand, and the Buyer, on the other hand, shall provide reimbursement to the other party as necessary to give effect to this Section 5.1(e).

 

(f) Tax Contests. If, following the Closing Date, the Buyer or any of its affiliates receives from any tax authority written notice of any claim, audit, or proceeding with respect to taxes (a “Tax Contest”) with respect to which the Sellers may reasonably have any liability for pre-Closing taxes (including pursuant to any indemnification provisions under this Agreement) or for which the Sellers or any direct or indirect equity holder thereof may have liability on a flow-through basis, the Buyer shall promptly provide a copy of such notice to the Sellers. The Sellers shall have the right, at their expense, to control, manage and be responsible for any Tax Contest to the extent that such Tax Contest relates to a Pre-Closing Tax Period. The Buyer may, at the Buyer’s expense, participate in such Tax Contest and the Sellers shall not settle, compromise or otherwise resolve such Tax Contest without the consent of the Buyer, which consent will not be unreasonably withheld, conditioned or delayed. The Sellers shall keep the Buyer informed of the progress of all such Tax Contests and shall provide the Buyer with copies of all written communications with any taxing authority related to such Tax Contests. the Buyer shall, at its expense, control, manage and be responsible for any Tax Contest that is not controlled by the Sellers. To the extent any such Tax Contest controlled by the Buyer could result in a liability of the Sellers for pre-Closing taxes (including pursuant to any indemnification provisions under this Agreement) or could result in a liability of the Sellers or any direct or indirect equity holder of the Sellers on a flow-through basis, (i) the Sellers may, at the Sellers’ expense, participate in such Tax Contest, (ii) the Buyer shall keep the Sellers informed of the progress of such Tax Contest and shall provide the Sellers with copies of all written communications with any taxing authority related to such Tax Contest and (iii) the Buyer shall not settle, compromise or otherwise resolve such Tax Contest without the consent of the Sellers, which consent will not be unreasonably withheld, conditioned or delayed.

 

(g) Tax Refunds. Any Tax refund that is received by the Company, the Buyer, or any of the Buyer’s affiliates, and any amount credited against Taxes to which the Company, the Buyer, or any of the Buyer’s affiliates becomes entitled, that relates to a Pre-Closing Tax Period or the pre-Closing portion of a Straddle Period shall be for the account of the Sellers, and the Buyer shall pay over to the Sellers any such refund or the amount of any such credit within ten (10) days after receipt thereof or entitlement thereto.

 

(h) Cooperation. The Buyer and the Sellers agree to furnish or cause to be furnished to the other, upon the reasonable request of the other, and as promptly as reasonably practicable, such information and assistance relating to the Company, including access to books and records, as is reasonably necessary for the filing of all tax returns by the Buyer or the Sellers, the making of any tax elections, the preparation for any audit by any tax authority and the prosecution or defense of any claim, suit or proceeding relating to any taxes. Each of the Buyer and each Seller shall retain, or cause to be retained, all books and records with respect to taxes pertaining to the Company as required under applicable law. Any expenses incurred in providing information or assistance pursuant to this Section 5.1(h) shall be borne by the party requesting it.

 

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5.2. Further Assurances. Each Party will, either at or after the Closing, execute such further documents, deeds, bills of sale, assignments and assurances and take such further actions as may reasonably be required by the other Party to consummate the Purchase and to effect the other purposes of this Agreement.

 

5.3. Ownership of Intellectual Property. Each Seller acknowledges that all discoveries, concepts, ideas, inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports, patent applications, copyrightable work and mask work (whether or not including any Buyer Confidential Information (as defined in Section 5.5 below)) and all registrations or applications related thereto, all other proprietary information and all similar or related information (whether or not patentable) which relate to the Company’s actual business, research and development, currently existing or currently anticipated future products or services and which were conceived, developed or made by each Seller (whether above or jointly with others) prior to the Closing Date, belong to the Buyer. In furtherance of the foregoing, each Seller shall perform all actions reasonably requested by the Buyer to establish and confirm such ownership (including, without limitation, assignments, consents, powers of attorney and other instruments).

 

5.4. Release of Claims. Each Seller, together with such Seller’s heirs, representatives and assigns, hereby fully and completely releases and waives any and all claims, complaints, causes of action or demands of whatever kind which he has or may have against the Buyer and the Company, their respective officers, employees, members or managers, arising out of any actions, conduct, decisions, behavior or events occurring prior to the Closing Date, including without limitation claims related to such Seller’s ownership of the Monster Interests or any other equity or claim thereto of the Company. Each Seller understands and accepts that this release specifically covers but is not limited to any and all claims, complaints, causes of action or demands which each Seller has or may have against the above-referenced released parties. Notwithstanding the foregoing, nothing in this Section 5.4 shall be deemed to constitute a release by any Seller of any right by any Seller under the Transaction Documents (including, but not limited to, the rights to indemnification under Article VIII) and any Employment Agreement.

 

5.5. Confidentiality. To the extent that the Sellers have obtained Buyer Confidential Information prior to the execution of this Agreement, for a period of two (2) years after the date of this Agreement, each Seller agrees to hold such Buyer Confidential Information in the strictest confidence, and covenants and agrees not to disclose, duplicate, lecture upon or publish any of the Buyer Confidential Information after the Closing Date. For purposes of this Agreement, “Buyer Confidential Information” shall mean any and all confidential and/or proprietary knowledge, know-how, data or information of the Buyer, including, but not limited to, ideas, concepts, processes, designs, techniques, budgets, financials, products, marketing, selling and business plans, prices, costs, supplier, vendor, customer, membership or similar lists or contact information other than those previously identified and originated by the Sellers and any other agreements of the Buyer, and all other similar information pertaining to the Buyer.

 

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5.6. Nondisparagement. By execution below, each Party hereto agrees not to disparage or defame the other Parties or any Buyer or Company products or services. In addition, each Party agrees not to counsel or assist any attorneys or their clients in the presentation or prosecution of any disputes, differences, grievances, claims, charges or complaints by any third party against the other Parties and/or any officer, manager, employee, agent, representative, member or attorney of such other Parties, unless under a subpoena or other court order to do so or pursuant to violations of agreements entered into between any of the Parties after the execution of this Agreement.

 

5.7. Employment Agreements. The Buyer and Doug Brandt (“Brandt”) and the Buyer and Childress shall enter into Employment Agreements in a form substantially similar to those attached hereto as Exhibit D (the “Employment Agreements”), incorporated herein by reference.

 

5.8. Capitalization. Within one (1) business day after the Closing Date, Buyer shall capitalize the Company with Five Hundred Thousand Dollars ($500,000) in immediately available funds in order to fund Company operations including, but not limited to, repayment of any Friends and Family Indebtedness that is not repaid prior to the Closing Date.

 

5.9. Access to Information. Customers of the Company provide the Company certain confidential information and intellectual property in connection with the services that the Company performs for its customers (the “Customer Confidential Information”). The Buyer acknowledges and agrees, on behalf of itself and its affiliates, representatives and agents (other than the Company and Company employees), that it shall not demand access to, or otherwise have a right to access, certain Customer Confidential Information, as may be reasonably determined by Brandt and/or Childress, and that the restriction to such Customer Confidential Information shall not be a breach of any obligation that Brandt and/or Childress may have to Buyer or any of its affiliates in the Transaction Documents, the Employment Agreements, or any other agreement or understanding with Buyer or any of its affiliates.

 

5.10. Friends and Family Indebtedness. The Parties acknowledge and agree that the Company is indebted to Richard Brandt in the principal amount of $250,000 pursuant to that certain Amended and Restated Standard Promissory Note, and Douglas Childress in the principal amount of $200,000 pursuant to that certain Amended and Restated Standard Promissory Note (collectively, the “Friends and Family Indebtedness”). The Parties further acknowledge and agree that the aggregate outstanding balance of all principal and accrued but unpaid interest of the Friends and Family Indebtedness as of immediately after the Closing Date is $486,250. At such time as the Sellers may determine, but in no event later than eighteen (18) months after Closing, the Company shall, and the Buyer shall cause the Company to, repay the aggregate outstanding balance of all principal and accrued but unpaid interest of the Friends and Family Indebtedness in immediately available funds.

 

5.11. Employee-Related Matters. The Parties acknowledge and agree that the Company maintains a 401(k) plan administered by Guideline, Inc. (the “401(k) Plan”) as of the Closing Date. The Parties agree that the 401(k) Plan will not be amended to adversely affect 401(k) Plan participants or terminated after the Closing without the prior written consent of the Sellers; provided, however, the Company shall be entitled to terminate the 401(k) Plan and replace it with a 401(k) plan provided by the Company, Buyer or any affiliate of the Buyer which shall provide substantially similar or better benefits to employees of the Company as those provided by the 401(k) Plan without the prior written consent of the Seller. The Parties further acknowledge and agree that Company employees have accrued vacation as of the Closing Date and such employees shall retain all such accrued vacation immediately after the Closing Date (the “Retained Accrued Vacation”).

 

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5.12. Intercompany Services and Payments. Buyer shall, on behalf of itself and its affiliates, pay or cause to be paid all amounts required to be paid to the Company for services performed by the Company to Buyer or any of Buyer’s affiliates whether before or after the Closing Date at rates and on other terms and conditions that are no worse than those received by the Company from third parties as may be reasonably determined by Sellers. The Company and Phantom Power initially contemplate, and from time to time may agree, to provide each other services on market terms and conditions or as otherwise may be agreed by the Company and Phantom Power in good faith.

 

5.13. Director and Officer Liability and Indemnification.

 

(a) Buyer agrees that all contractual rights to indemnification, advancement of expenses and exculpation by the Company now existing in favor of each person who, as of the Closing Date, was an officer, director, employee, manager, or member (or similar position) of the Company (collectively with such individuals heirs, executors or administrators, the “Covered Representatives”), shall survive the Closing Date and shall continue in full force and effect for a period of not less than six (6) years from the Closing Date, and the provisions with respect to indemnification and limitations on liability set forth in the Company’ governing documents (including the Operating Agreement) shall not be amended, repealed or otherwise modified. Neither Buyer nor the Company, following the Closing, shall settle, compromise or consent to the entry of judgment in any action, claim, demand or proceeding or threatened action, claim, demand or proceeding without the written consent of such Covered Representative.

 

(b) From and after the Closing Date, Buyer agrees to cause the Company to indemnify (solely to the extent covered by the applicable insurance) each Covered Representative with respect to all acts and omissions arising out of such individuals’ services as directors, managers, officers, employees, agents or representatives of the Company, occurring prior to the Closing Date.

 

(c) Notwithstanding any other provisions hereof, the obligations of Buyer and the Company under this Section 5.13 shall be binding upon the respective successors and assigns of Buyer and the Company. In the event Buyer or the Company, or any of their successors or assigns, (i) consolidates with or merges into any other person or entity, or (ii) transfers all or substantially all of its properties or assets to any person or entity, proper provision shall be made so that the successors and assigns of Buyer or the Company honor the indemnification and other obligations set forth in this Section 5.13.

 

(d) Buyer covenants, for itself, the Company, and their respective successors and assigns, that it and they shall not institute any action in any court or before any administrative agency or before any other tribunal against any of the current members or managers of the Company, in their capacity as such, with respect to any liabilities, actions or causes of action, judgments, claims or demands of any nature or description (consequential, compensatory, punitive or otherwise), in each such case to the extent resulting from their approval of this Agreement or the transactions contemplated hereby.

 

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(e) In the event that either Brandt or Childress is no longer employed by the Company at any time prior to the three (3) year anniversary of the Closing Date, then the Company shall cancel its EPLI coverage and purchase extended EPLI coverage (otherwise known as an “optional extension period”) covering those persons who are currently covered by the Company’s then current EPLI coverage (the “Insured Representatives”) on terms no less favorable than such existing insurance coverage for a period of three (3) years following the Closing Date or twelve (12) months after termination of the EPLI coverage, whichever period is longer and permitted by the insurance carrier; provided, that in the event that any claim is brought under such policy, the insurance policy shall be maintained until final disposition of such claim. The cost of such policy shall be paid by the Company. With respect to any Losses incurred by Seller or the Company for which Seller would be entitled to assert, or cause the Company to assert, a claim for recovery under such extended coverage, at the written request of the Seller, Buyer shall, and shall cause the Company, to act in good faith and assert, or assist Seller in asserting, one or more claims under such extended coverage (and otherwise assist Seller to pursue such claims and recover proceeds under the terms of such extended coverage) if Seller is not himself entitled to assert such claim but the Buyer or the Company is so entitled. The provisions of this Section 5.13(e) are intended to be for the benefit of, and shall be enforceable by, each of the Insured Representatives, including their heirs and legal representatives. The rights of the Insured Representatives under this Section 5.13(e) shall be in addition to any rights such Insured Representatives may have under the governing documents as set forth under this Section 5.13.

 

5.14. Attorney-Client Privilege. Each Party agrees that it shall take all steps necessary to ensure that any privilege attaching as a result of Nevers, Palazzo, Packard, Wildermuth & Wynner, PC or other counsel from time to time retained by the Company prior to the Closing (collectively, “Prior Company Counsel”) in connection with the transactions contemplated herein (the “Prior Representation”), shall survive the Closing and shall remain in effect; provided that from and after the Closing such privilege shall be controlled by Sellers and not the Company or Buyer. In addition, each party waives, and agrees to cause the Company and its Affiliates to waive, any conflicts that may arise in connection with (i) Prior Company Counsel representing Sellers after the Closing solely to the extent as a result of the Prior Representation and (ii) the communication by Prior Company Counsel to Sellers, with respect to the Prior Representation, of any fact known to Prior Company Counsel, in connection with any negotiation, arbitration, mediation, litigation or other proceeding in any way related to a dispute with Buyer, the Company or Sellers following the Closing solely to the extent related to the Prior Representation, and the disclosure of any such fact in connection with any process undertaken for the resolution of such dispute. In addition, all communications between Sellers, the Company, Buyer and their respective affiliates, on the one hand, and Prior Company Counsel, on the other hand, exclusively related to the transactions contemplated herein shall be deemed to be attorney-client confidences that belong solely to Sellers (and not the Company) (the “Seller Pre-Closing Communications”). Accordingly, the Company shall not be transferred ownership any such Seller Pre-Closing Communications or the files of Prior Company Counsel relating to such engagement from and after the Closing, and all books, records and other materials of the Company in any medium (including electronic copies) constituting or solely containing or reflecting Seller Pre-Closing Communications or the work product of legal counsel with respect thereto, including any related summaries, drafts or analyses, and all rights with respect to any of the foregoing, are hereby assigned and transferred to Seller effective as of the Closing. From and after the Closing, Buyer and the Company shall maintain the confidentiality of all such material and information. Each Party acknowledges that it has had the opportunity to discuss and obtain adequate information concerning the significance and material risks of, and reasonable available alternatives to, the waivers, permissions and other provisions of this Agreement, including the opportunity to consult with counsel other than Prior Company Counsel. Notwithstanding the foregoing, in the event that a dispute arises between Buyer or the Company, on the one hand, and a Person other than a party to this Agreement, on the other hand, after the Closing, Buyer may assert any such confidences or protection to prevent disclosure to such third-party of confidential communications.

 

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5.15. PPP Loan.

 

(a) Seller has provided Buyer that certain Note (the “PPP Note”), dated May 5, 2020, made by the Company in favor of Customers Bank (the “PPP Lender”) in the original principal amount of $66,117.00 (the “PPP Loan”). The Parties acknowledge and agree that Sellers and/or their agents have made repeated attempts to contact the PPP Lender (and/or its partners) in order to: (a) obtain the PPP Lender’s written consent to the transactions contemplated by this Agreement prior to the Closing Date, and (b) comply with the “change of ownership” requirements set forth in SBA Procedural Notice 5000-20057, Paycheck Protection Program Loans and Changes of Ownership, effective October 2, 2020 (as amended or further clarified, the “SBA Consent Guidance”) prior to the Closing Date (collectively, (a) and (b), the “PPP Consents”), and that the PPP Lender and its partners have not made themselves available for any discussion with Sellers. The Parties further acknowledge and agree that the consummation of the transactions contemplated by this Agreement (y) will be an event of default under the PPP Loan because the PPP Lender (or its partners) will not have consented to the change of ownership of the Company prior to the Closing Date and (z) do not comply with requirements set forth in the SBA Consent Guidelines and thus such transactions will be a breach of such SBA Consent Guidelines (including failure to obtain SBA consent to the transactions contemplated herein).

 

(b) The Buyer shall retain sole right and authority to pursue any appeal or other action in respect of or in response to any limitation or denial of forgiveness in respect of the total amount that is due and outstanding under the PPP Loan, including the total principal and all accrued interest and any fees due thereon (the “PPP Escrow Amount”). From and after the Closing Date, the Buyer shall, and shall cause its affiliates (including, the Company after the Closing) to, execute and deliver true, accurate and complete additional documents, instruments, conveyances and assurances and take such further actions as may be reasonably necessary to comply with the Paycheck Protection Program administered by the U.S. Small Business Administration (the “PPP”) in connection with the PPP Loan and effectuate the forgiveness of the PPP Loan (“PPP Loan Forgiveness”) in accordance with the requirements of the PPP and any related or applicable laws (including with respect to any audit, review or investigation by the SBA or the PPP Lender (or its partners)). The Buyer shall keep the Sellers promptly informed of, and promptly provide the Sellers with all documentation and correspondence with respect to, all material activity concerning compliance with the PPP as it relates to the PPP Loan and PPP Loan Forgiveness. The Buyer shall cause the Company to comply with any requirements of this Agreement, the PPP and any related or applicable laws to effectuate the intention of the parties as set forth in this Section 5.15.

 

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(c) Other than the inability to obtain, or comply with, the PPP Consents in connection to the consummation of the transactions contemplated by this Agreement prior to the Closing Date, the Parties otherwise intend to maintain compliance with guidance issued by the SBA, as set forth in SBA Consent Guidance. To the extent that any terms of this Agreement are reasonably determined to be non-compliant with the SBA Consent Guidance, the Parties shall promptly confer and agree to any amendment or other modification of this Agreement to the extent necessary and reasonably practicable in order to ensure compliance with the SBA Consent Guidance to the greatest extent possible (including that Buyer shall place into an escrow account controlled by the PPP Lender (or its partners) any PPP Loan amounts directed by the PPP Lender (or its partners) or SBA by written notice to Buyer to be so placed). The Parties agree that the Company will remain subject to all obligations under the PPP Loan until such PPP Loan is terminated in accordance with its respective terms and any surviving obligations thereof have expired pursuant to the PPP (or any related or applicable laws or guidance). The Parties agree not to use any proceeds of the PPP Loans for any unauthorized use. To the extent that the Buyer or any affiliate (other than the Company) has a loan under the PPP, the Buyer further agrees and covenants that from and after the Closing the Buyer is responsible for segregating and delineating the PPP funds that it or any of its affiliates have received and its expenses and providing documentation to demonstrate compliance with PPP requirements by each of the Company and the Buyer (and any affiliate of the Buyer).

 

(d) In the event the Company is required to repay any portion of the PPP Loan to the PPP Lender (or its partners) or the SBA, or otherwise make any other payment to the PPP Lender (or its partners) or the SBA (collectively, the “PPP Repayment Amount”) as a result of (i) consummating the transactions contemplated by this Agreement without the PPP Consents, or (ii) non-compliance by Buyer with the PPP or any related or applicable laws in connection with the PPP Loan, then, within three (3) business days after the Company has been informed of its obligation to pay the PPP Repayment Amount, Buyer shall capitalize the Company with an amount in immediately available funds equal to the PPP Repayment Amount and Buyer shall remit such amounts to the PPP Lender (or its partners) and/or the SBA as directed by the SBA and/or the PPP Lender (or its partners).

 

5.16. Sublease. The Parties acknowledge and agree that (a) the Company utilizes the premises located at 1441 4th Street, Santa Monica, CA 90401 (the “Premises”) that is subject to that certain AIRCRE Standard Sublease Multi-Tenant, dated as of October 18, 2018, between Phantom Power and Transit, LLC, as amended (the “Sublease”); (b) the Sublease is scheduled to expire on November 14, 2021; (c) Phantom Power has not obtained the prior written consent of the Master Landlord (as such term is defined in the Sublease) in order to sublease the Premises to the Company; and (d) the Company’s use of the Premises is not authorized under the Sublease. Notwithstanding the foregoing, after the Closing Date, the Company shall continue to use the Premises after the Closing Date in a manner consistent with the Company’s use of the Premises prior to the Closing Date, and the Company shall assume and undertake to pay or satisfy all liabilities of Phantom Power under the Sublease had such Sublease been assigned to the Company from Phantom Power at Closing, including, but limited to, payment for all rent and other costs and expenses required to be paid by Phantom Power under the Sublease (or the reimbursement of Phantom Power thereof), and reimbursement of Phantom Power for any portion of the $45,000 security deposit that is not returned to Phantom Power upon expiration or prior termination of the Sublease. The information contained in this Section 5.16 is included solely for purposes of this Agreement, and no information contained in this Section 5.16 shall be deemed to be an admission by Phantom Power to any third party of any matter whatsoever (including, without limitation, any breach of contract).

 

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5.17. Right of First Refusal. For a period of five (5) years following Closing Date, Sellers shall have a right of first refusal on (i) the sale of any equity interests in the Company, (ii) a sale, merger or other similar transaction of the Company, and (iii) the sale or transfer, in any single transaction or series of transactions, of all or substantially all of the assets of the Company.

 

5.18. Employee Stock. Buyer shall make available to the Company at least 1,000,000 shares of the Buyer’s common stock for the Company to grant to its employees and consultants as a form of compensation from time to time.

 

5.19. Accounts Receivables and Work In Progress. Sellers shall be entitled (on a pro rata basis based on their respective ownership of the Company immediately prior to the Closing Date) to one hundred percent (100%) of all accounts receivables and completed portions of purchase order requests (the “AR and WIP”), in connection with services rendered by the Company during the time period prior to the Closing Date. In the event the Company receives any payment for the AR and WIP after the Closing Date, the Company shall transmit to Sellers (on a pro rata basis based on their respective ownership of the Company immediately prior to the Closing Date) such payments within one (1) business day after the Company receives such payments. Any amounts payable pursuant to this Section 5.19 shall be treated as additional consideration for the Monster Interests for income tax purposes.

 

ARTICLE VI
CONDITIONS TO SELLER’S OBLIGATIONS TO CLOSE

 

The Sellers’ obligation to sell, transfer and convey the Monster Interests at the Closing is subject to the fulfillment on or before the Closing of the following conditions, unless waived in writing by the Sellers:

 

6.1. Representations and Warranties. The representations and warranties made by the Buyer in Article IV shall be true and correct in all material respects when made and as of the date of the Closing.

 

6.2. Covenants. All covenants, agreements and conditions contained in this Agreement to be performed by the Buyer on or prior to the Closing Date shall have been performed or complied with in all material respects as of the Closing Date.

 

6.3. Closing Deliveries. At the Closing, the Buyer shall deliver those items for which Buyer is responsible set forth in Section 1.4 above.

 

ARTICLE VII
CONDITIONS TO BUYER’S OBLIGATIONS TO CLOSE

 

The Buyer’s obligation to purchase the Monster Interests, and issue the Note and HUMBL Shares at the Closing is subject to the fulfillment on or before the Closing of each of the following conditions (the “Buyer Closing Conditions”), unless waived by the Buyer:

 

7.1. Representations and Warranties. The representations and warranties made by the Sellers in Article II and Article III shall be true and correct in all material respects when made and as of the Closing Date.

 

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7.2. Covenants. All covenants, agreements and conditions contained in this Agreement to be performed by the Sellers on or prior to the Closing shall have been performed or complied with in all material respects.

 

7.3. Due Diligence. The Sellers shall have delivered to the Buyer or its counsel, a copy of the Company’s Operating Agreement and all other documents the Buyer shall reasonably request. The Sellers shall have provided the Buyer access to such information as the Buyer shall have reasonably requested in connection with its due diligence review and the Buyer shall have concluded its due diligence review of the Monster Interests and all financial, business, tax, accounting, technical, and legal aspects of the Company to the Buyer’s sole satisfaction.

 

7.4. No Material Adverse Effect. From the date of this Agreement through the consummation of the Closing, no Material Adverse Effect (as defined below) shall have occurred. For purposes of this Agreement, “Material Adverse Effect” means any circumstance, change in or effect on the Buyer or the Company that, individually or in the aggregate with all other circumstances, changes in or effects on the Buyer or the Company, is or is reasonably likely to be materially adverse to the business, operations, assets, financial condition, prospects or liabilities of the Buyer or the Company taken as a whole.

 

7.5. Closing Deliveries. At the Closing, the Sellers shall deliver those items for which the Sellers are responsible set forth in Section 1.4 above.

 

ARTICLE VIII
INDEMNIFICATION

 

8.1. Survival of Representations, Warranties and Covenants. Each covenant and agreement contained in this Agreement and the Transaction Documents shall survive the Closing and be enforceable until such covenant or agreement has been fully performed, or as otherwise specified. All representations and warranties of the Parties contained in this Agreement and the Transaction Documents shall survive the Closing for eighteen (18) months (the “Survival Termination Date”).

 

8.2. Indemnification by Buyer. Buyer shall indemnify Sellers and their respective heirs, administrators, executors, trustees, beneficiaries, agents and representatives (the “Seller Indemnified Parties”) against and agrees to hold each of them harmless from any and all Losses resulting from, arising out of or in connection with and of the following: (a) any breach of any representation or warranty made by Buyer contained in or made pursuant to Article IV of this Agreement, (b) any breach of or failure by Buyer to perform any covenant or obligation of Buyer contained in this Agreement or the Transaction Documents, (c) any breach of or failure by Company to perform any covenant or obligation of the Company in this Agreement or the Transaction Documents requiring performance by the Company after the Closing, (d) the PPP Loan and the PPP Repayment Amount (including, but not limited to, any repayment thereof), the failure to obtain, or comply with, the PPP Consents, and Buyer’s non-compliance with the PPP or any related or applicable laws in connection with the PPP Loan, and (e) the enforcement of this indemnification obligation. All payments under this Section 8.2 shall be treated by the Parties as an adjustment to the proceeds received by Sellers pursuant to Article I, to the extent permitted by applicable law.

 

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8.3. Indemnification by the Sellers. Subject to the limitations set forth in Section 8.4 below, each Seller hereby agree severally and not jointly to indemnify Buyer and the Company (only with respect to any period after the Closing) and their respective officers, managers, directors, employees, agents and representatives (the “Buyer Indemnified Parties”) against, and agrees to hold each of them harmless from, any and all Losses resulting from, arising out of or in connection with any of the following: (a) any breach of any representation or warranty made by a Seller contained in or made pursuant to Article II or Article III of this Agreement, (b) any breach of or failure by a Seller to perform any covenant or obligation of Sellers contained in this Agreement or the Transaction Documents, and (c) the enforcement of this indemnification obligation. All payments under this Section 8.3 shall be treated by the Parties as an adjustment to the proceeds received by Sellers pursuant to Article I, to the extent permitted by applicable law.

 

With respect to any liability for Losses pursuant to Article III and Section 5.1, and subject to the limitations set forth in this Article VIII, each Seller shall be obligated to indemnify the Buyer Indemnified Parties for the portion of such indemnifiable Losses that are allocable to such Seller according to a percentage, which shall be an amount equal to (i) 100, multiplied by (ii) a fraction, the numerator of which is the amount of Purchase Price received by such Seller, and the denominator of which is the aggregate amount of Purchase Price received by all Sellers.

 

8.4. Limitations. Notwithstanding any other provision hereof: (i) no Seller Indemnifying Party shall have any indemnification obligations under Section 8.3 unless and until the aggregate amount of Losses that may be claimed under such clause (but for operation of this paragraph) exceed the sum of $100,000 (the “Threshold”), in which case such Seller Indemnifying Party shall be liable for all Losses exceeding the Threshold up to a cap in the amount equal to ten percent (10%) multiplied by the portion of the Purchase Price received by the Seller Indemnifying Party (the “Cap”); provided, however, the foregoing limitations shall not apply to (i) breaches of Sections 2.1, 2.2, 2.4 or 2.5, which shall be capped at an amount equal to the portion of the Purchase Price received by the Seller Indemnifying Party, or (ii) actual and intentional fraud, which shall have no limit.

 

8.5. Expiration of Claims. The ability of Sellers to receive indemnification under Section 8.2(a), and the ability of Buyer to receive indemnification under Section 8.3(a), shall terminate on the Survival Termination Date, unless Sellers or Buyer, as applicable, shall have made a claim for indemnification pursuant to Section 8.2(a) or Section 8.3(a), prior to the Survival Termination Date. If Sellers or Buyer, as applicable, made a claim for indemnification pursuant to Section 8.2(a) or Section 8.3(a) prior to the Survival Termination Date, such claim, if then unresolved, shall not be extinguished by the passage of the Survival Termination Date.

 

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8.6. Procedures Relating to Indemnification.

 

(a) A party entitled to indemnification hereunder shall herein be referred to as an “Indemnified Party.” A party obligated to indemnify an Indemnified Party hereunder shall herein be referred to as an “Indemnifying Party.” As soon as is reasonable after an Indemnified Party either (i) receives notice of any claim or the commencement of any action by any third party which such Indemnified Party reasonably believes may give rise to a claim for indemnification from an Indemnifying Party hereunder (a “Third Party Claim”) or (ii) sustains any Loss not involving a Third Party Claim or action which such Indemnified Party reasonably believes may give rise to a claim for indemnification from an Indemnifying Party hereunder, such Indemnified Party shall, if a claim in respect thereof is to be made against an Indemnifying Party under this Article VIII notify such Indemnifying Party in writing of such claim, action or Loss, as the case may be; provided, however, that failure to notify Indemnifying Party shall not relieve Indemnifying Party of its indemnity obligation, except to the extent Indemnifying Party is actually prejudiced in its defense of the action by such failure. Any such notification must be in writing and must state in reasonable detail the nature and basis of the claim, action or Loss, to the extent known. Except as provided in this Section 8.6, Indemnifying Party shall have the right to contest, defend, litigate or settle any such Third Party Claim which involves solely monetary damages; provided that the Indemnifying Party shall have notified the Indemnified Party in writing of its intention to do so within 15 days of the Indemnified Party having given notice of the Third Party Claim to the Indemnifying Party; provided, that the Indemnifying Party shall diligently contest the Third Party Claim. The Indemnified Party shall have the right to participate in, and to be represented by counsel (at its own expense) in any such contest, defense, litigation or settlement conducted by the Indemnifying Party; provided, that the Indemnified Party shall be entitled to reimbursement thereafter if the Indemnifying Party shall lose its right to contest, defend, litigate and settle the Third Party Claim or if representation of the Indemnifying Party and the Indemnified Party by the same counsel would, in the reasonable opinion of such counsel, constitute a conflict of interest that cannot be waived under applicable standards of professional conduct.

 

(b) The Indemnifying Party, if it shall have assumed the defense of any Third Party Claim as provided in this Agreement, shall not consent to a settlement of, or the entry of any judgment arising from, any such Third Party Claim without the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld, conditioned or delayed). The Indemnifying Party shall not, without the prior written consent of the Indemnified Party, enter into any compromise or settlement which commits the Indemnified Party to take, or to forbear to take, any action or which does not provide for a complete release by such third party of the Indemnified Party. The Indemnified Party shall have the sole and exclusive right to settle any Third Party Claim, on such terms and conditions as it deems reasonably appropriate, to the extent such Third Party Claim involves equitable or other non-monetary relief. All expenses (including attorneys’ fees) incurred by the Indemnifying Party in connection with the foregoing shall be paid by the Indemnifying Party.

 

(c) If an Indemnified Party is entitled to indemnification against a Third Party Claim, and the Indemnifying Party fails to accept a tender of, or assume the defense of, a Third Party Claim pursuant to this Section 8.6 the Indemnifying Party shall not be entitled, and shall lose its right, to contest, defend, litigate and settle such a Third Party Claim, and the Indemnified Party shall have the right, without prejudice to its right of indemnification hereunder, in its discretion exercised in good faith, to contest, defend and litigate such Third Party Claim, and may settle such Third Party Claim either before or after the initiation of litigation, at such time and upon such terms as the Indemnified Party deems fair and reasonable, provided that at least ten (10) days prior to any such settlement, written notice of its intention to settle is given to the Indemnifying Party.

 

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8.7. Determination of Loss Amount; No Circular Recovery.

 

(a) Any Losses claimed hereunder shall be net of any insurance proceeds actually recovered less any costs of recovery by an Indemnified Party hereunder. In the event that an insurance or other recovery is made by any such Indemnified Party with respect to any Loss for which any such Indemnified Party has been indemnified or otherwise recovered hereunder, then a refund equal to the aggregate net amount of the recovery shall be made promptly to the Indemnifying Party.

 

(b) All Losses sought by an Indemnified Party hereunder shall be net of any amounts actually received by such Indemnified Party under indemnification, contribution, reimbursement or similar contracts with respect to such indemnification claim (net of any costs of recovery). If any such proceeds are received by an Indemnified Party (or any of its Affiliates) with respect to any Losses after an Indemnifying Party has made a payment to the Indemnified Party with respect thereto, the Indemnified Party (or such Affiliate) shall promptly pay to the Indemnifying Party the amount of such proceeds, benefits or recoveries (up to the amount of the Indemnifying Party’s payment).

 

(c) Notwithstanding anything to the contrary contained in this Agreement, neither the Company nor Sellers shall be liable or responsible under this Article VIII to any Buyer Indemnified Party for any inaccuracy in or breach of any representation or warranty of the Sellers contained in this Agreement if any Buyer Indemnified Party had, on or prior to the date of this Agreement, actual knowledge of the inaccuracy in or breach of, or of any facts or circumstances constituting or resulting in the inaccuracy in or breach of, such representation or warranty.

 

(d) Promptly after an Indemnified Party becomes aware of any event or circumstance that could reasonably be expected to constitute or give rise to any inaccuracy in or breach of any representation, warranty or covenant of an Indemnifying Party set forth in this Agreement, such Indemnified Party shall take all reasonable steps to mitigate Losses that may result from such inaccuracy or breach. The Indemnified Party shall seek, and shall cause each of its Affiliates to seek, full recovery under all insurance policies and third party contracts covering of any Losses to the same extent as they would if such Losses were not subject to indemnification hereunder.

 

8.8. Manner of Payment. Any indemnification payment pursuant to this Article VIII shall be effected by wire transfer of immediately available funds to an account designated by the Sellers or the Buyer, as the case may be, within three (3) business days after the determination of the amount thereof, whether pursuant to a final judgment, settlement or agreement among the Parties. Any indemnification obligation incurred by a Seller hereunder may be satisfied by such Seller, in such Seller’s reasonable discretion, through the offset of the Losses against amounts owing under the such Seller’s Notes.

 

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8.9. Exclusive Remedy. The Parties hereto hereby agree that, from and after the Closing Date, the indemnification provisions set forth in this Article VIII are the exclusive provisions in this Agreement with respect to the liability of the Sellers or the Buyer for the breach, inaccuracy or nonfulfillment of any representation or warranty or any covenants, agreements or other obligations contained in this Agreement and the sole remedy of the Buyer Indemnified Parties and the Seller Indemnified Parties for any claims for breach of representation or warranty or covenants, agreements or other obligations arising out of this Agreement or any law or legal theory applicable thereto; provided that nothing herein shall preclude any Party from (a) seeking any remedy based upon actual and intentional fraud or (b) enforcing its right to specific performance of covenants, agreements or other obligations pursuant to Section 9.15.

 

8.10. Losses. “Losses” mean means any losses, liability, tax, cost, claim, damage, penalty or expense, including attorneys’ fees, extra-judicial fees and costs, accountants, expert fees and other similar fees and expenses; provided that “Losses” are the natural, foreseeable and probable consequence of any breach and will not include (a) exemplary or punitive damages, lost profits or diminution in value, or (b) damages to the extent that they would not be recoverable under applicable laws in an action for breach of contract, except if and to the extent that any such damages referenced in subsection (b) are recovered against, or otherwise required to be paid by, an Indemnified Party pursuant to a third-party claim.

 

ARTICLE IX
MISCELLANEOUS

 

9.1. Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the Sellers and their respective heirs, executors, administrators, legal representatives, successors and assigns. This Agreement or any of the severable rights and obligations inuring to the benefit of or to be performed by the Buyer hereunder may be assigned by the Buyer to a third party, including its financing sources, in whole or in part; provided, however, that any such assignment shall not relieve the Buyer of its obligations under this Agreement.

 

9.2. Governing Law; Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and wholly performed in that jurisdiction, without regard to conflict of law principles. The Sellers hereby expressly consent to the personal jurisdiction of the state and federal courts located in or about San Diego County, State of California, for any action or proceeding arising from or relating to this Agreement, waives any argument that venue in any such forum is not convenient, and agrees that any such action or proceeding shall only be venued in such courts.

 

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

 

9.4. Amendment. This Agreement may be amended, supplemented or modified only by execution of an instrument in writing signed by the Buyer and the Sellers.

 

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9.5. Waiver. Any Party hereto may to the extent permitted by applicable law (i) extend the time for the performance of any of the obligations or other acts of the other Parties hereto, (ii) waive any inaccuracies in the representations and warranties of the other Parties hereto contained herein or in any document delivered pursuant hereto or (iii) waive compliance with any of the agreements of the other Parties hereto contained herein. No such extension or waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the Party extending the time of performance or waiving any such inaccuracy or non-compliance. No waiver by any Party of any term of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term of this Agreement on any future occasion.

 

9.6. Notices. All notices, requests, consents, waivers, and other communications required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given (a) if personally delivered, upon delivery or refusal of delivery; (b) if mailed by registered or certified United States mail, return receipt requested, postage prepaid, upon delivery or refusal of delivery; or (c) if sent by a nationally recognized overnight delivery service, upon delivery or refusal of delivery. All notices, consents, waivers, or other communications required or permitted to be given hereunder shall be addressed as follows:

 

If to the Buyer:

 

HUMBL, Inc.

Attn: Jeff Hinshaw

600 B Street, Suite 300

San Diego, California 92101

 

If to Phantom Power:

 

Phantom Power, LLC

c/o Doug Brandt

 

If to Childress:

 

Kevin Childress

 

If to Phantom Power or Childress, a copy to (which shall not constitute notice):

 

Nevers, Palazzo, Packard, Wildermuth & Wynner, PC
Attn: Donald J. Palazzo, Esq.
31248 Oak Crest Drive, Suite 200
Westlake Village, CA 91361

 

or at such other address or addresses as the Party addressed may from time to time designate in writing pursuant to notice given in accordance with this section.

 

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9.7. Expenses. Unless otherwise expressly provided herein, all legal fees incident to the negotiations and preparations of this Agreement and the transactions contemplated hereby, shall be borne and paid by the respective Parties.

 

9.8. Complete Agreement. This Agreement, including those documents expressly referred to herein and all Exhibits hereto, embody the complete agreement and understanding between the Parties and supersede and preempt any prior understandings, agreements or representation by or between the Parties, written or oral, which may have related to the subject matter herein.

 

9.9. Absence of Third-Party Beneficiary Rights. Except for the provisions in Article VIII with respect to Indemnified Parties, no provision of this Agreement is intended, nor will be interpreted, to provide or create any third-party beneficiary rights or any other rights of any kind in any client, customer, affiliate, equityholder, employee or partner of any Party hereto or any other Person.

 

9.10. Mutual Drafting. This Agreement is the mutual product of the Parties, and each provision hereof has been subject to the mutual consultation, negotiation and agreement of each of the Parties, and shall not be construed for or against any Party hereto.

 

9.11. Further Representations. Each Party to this Agreement acknowledges and represents that it has been represented by its own legal counsel in connection with the transaction contemplated by this Agreement, with the opportunity to seek advice as to its legal rights from such counsel.

 

9.12. Headings. The headings in this Agreement are intended solely for convenience of reference and shall be given no effect in the construction or interpretation of this Agreement.

 

9.13. Counterparts. This Agreement may be executed in two or more counterparts, each of which when executed and delivered shall be deemed an original and all of which, taken together, shall constitute the same agreement. This Agreement and any document required hereby may be executed by facsimile or email signature which shall be considered legally binding for all purposes.

 

9.14. Attorneys’ Fees. In the event that any dispute among the Parties should result in litigation, the prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of such prevailing party under or with respect to this Agreement, including without limitation, such reasonable fees and expenses of attorneys, which shall include, without limitation, all fees, costs and expenses of appeals.

 

9.15. Equitable Relief. The Parties agree that irreparable damage would occur in the event that, at any time, any of the provisions of this Agreement or any Transaction Document were not performed by Buyer, Sellers, or the Company, as applicable, in accordance with their specific terms or were otherwise breached by Buyer, Sellers, or the Company, as applicable. Each of the Parties shall be entitled to (a) an injunction or injunctions to prevent breaches of this Agreement or any Transaction Document by any of Buyer, Sellers, or the Company, as applicable, and (b) enforce specifically the terms and provisions hereof against Buyer, Sellers, or the Company, as applicable, in each case at any time and without proof of Losses or otherwise, these being in addition to any other remedy to which the Parties may otherwise be entitled at law or in equity. No Party seeking equitable remedies to prevent breaches of this Agreement or any Transaction Document and to enforce specifically the terms and provisions of this Agreement or any Transaction Document in accordance with this Section 9.15 shall be required to provide any bond or other security in connection with any such equitable remedy.

 

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9.16. Waiver of Jury Trial. THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A JURY TRIAL IN ANY AND ALL DISPUTES WHETHER ARISING HEREUNDER OR UNDER ANY OTHER AGREEMENTS, NOTES, PAPERS, INSTRUMENTS OR DOCUMENTS HERETOFORE OR HEREAFTER EXECUTED WHETHER SIMILAR OR DISSIMILAR.

 

9.17. Use of Certain Terms. As used in this Agreement, the words “herein,” “hereof,” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular section, subsection or other subdivision. The words “delivered”, “made available”, “disclosed”, and “provided” to the Buyer shall mean that such documents or materials were provided by Sellers, the Company, or Company’s counsel to Buyer or Buyer’s counsel prior to the Closing Date by electronic mail, access to a shared dropbox, or otherwise. Any information disclosed in this Agreement shall be deemed to be disclosed and incorporated in any section of Article II and/or Article III to the extent the relevance of such information to such other section would be reasonably apparent to a reader of such information.

 

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, each Party hereto has caused this Membership Interest Purchase Agreement to be duly executed effective as of the date first above written.

 

  BUYER:
     
 

HUMBL, INC.

     
  By:  
    Brian Foote, CEO

 

  SELLERS:
     
 

PHANTOM POWER, LLC 

   
  By:  
    Doug Brandt, Manager
     
   
  Kevin Childress

 

[Signature page to Membership Interest Purchase Agreement]

 

 
 

 

SCHEDULE 5.1(c)

 

PURCHASE PRICE ALLOCATION

 

The Purchase Price (and any other items that are treated as additional consideration for U.S. federal income tax purposes) (collectively, the “Tax Consideration”) shall be allocated among the assets of the Company deemed sold for all purposes (including federal, state, local and foreign tax purposes and financial accounting purposes), based on the fair market value of the assets, consistent with Code Sections 751 and 755, and using the residual method set forth in Treasury Regulation Section 1.755-1, in the following manner:

 

Asset Class   Allocation
Class I Assets (Cash and Deposits)   Amount on hand as of the Closing
Class II Assets (Actively Traded Personal Property & Certificates of Deposit)   Book value as of the Closing
Class III Assets (Accounts Receivable)   Book value as of the Closing
Class IV Assets (Stock in Trade (Inventory))   Tax basis as of the Closing
Class V Assets (Furniture, Fixtures, Vehicles, etc.)   Tax basis as of the Closing
Class VI assets (Intangibles other than goodwill and going concern value)   Tax basis as of the Closing
Class VII assets (goodwill and going concern value)   All remaining consideration

 

Other Methods, Principles and Acknowledgements:

 

(i) each “Class” shall be determined consistently with the corresponding asset class set forth in the provisions of Section 338 of the Code and related Treasury Regulations, (ii) the values of any assets not accounted for in the above shall be equal to the adjusted tax basis of such assets immediately before the Closing, (iii) the parties to the Agreement agree that the above values represent fair market values and were determined on an arm’s-length basis, and (iv) no consideration shall be allocated to any restrictive covenants set forth in any of the transaction documents.

 

SCH 5.1(c) - 1

 

 

EXHIBIT A

 

NOTES

 

EX A - 1

 

 

EXHIBIT B

 

NOTES

 

EX B - 1

 

 

EXHIBIT C

 

ASSIGNMENT OF MEMBERSHIP INTEREST

 

FOR VALUE RECEIVED, Phantom Power, LLC, does hereby sell, assign and transfer unto HUMBL, Inc., a Delaware corporation, an 87% membership interest in Monster Creative, LLC (the “Company”), standing in the undersigned’s name on the books of the Company, and does hereby irrevocably constitute and appoint the Company’s attorney to transfer said shares on the books of the Company with full power of substitution in the premises.

 

Effective as of June 30, 2021   PHANTOM POWER, LLC
     
    By:  
      Doug Brandt, Manager

 

EX C - 1

 

 

ASSIGNMENT OF MEMBERSHIP INTEREST

 

FOR VALUE RECEIVED, Kevin Childress, does hereby sell, assign and transfer unto HUMBL, Inc., a Delaware corporation, a 13% membership interest in Monster Creative, LLC (the “Company”), standing in the undersigned’s name on the books of the Company, and does hereby irrevocably constitute and appoint the Company’s attorney to transfer said shares on the books of the Company with full power of substitution in the premises.

 

Effective as of June 30, 2021

     
  Kevin Childress

 

EX C - 2

 

 

EXHIBIT D

 

EMPLOYMENT AGREEMENTS

 

EX D - 1

 

Exhibit 10.39

 

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

 

CONVERTIBLE PROMISSORY NOTE

 

Effective Date: June 30, 2021 U.S. $6,525,000.00

 

FOR VALUE RECEIVED, HUMBL, Inc., a Delaware corporation (“Borrower”), promises to pay to the order of Phantom Power, LLC, a California limited liability company, or its successors or assigns (“Lender”), $6,525,000.00 and any interest accrued hereunder on the date that is eighteen (18) months from the Effective Date (the “Maturity Date”) in accordance with the terms set forth herein and to pay interest on the outstanding balance at the rate of five percent (5%) per annum from the Effective Date until the same is paid in full. This Convertible Promissory Note (this “Note”) is issued and made effective as of June 30, 2021 (the “Effective Date”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.

 

1. Payment; Prepayment.

 

1.1. Payment. All payments owing hereunder shall be in lawful money of the United States of America or Conversion Shares (as defined below), as provided for herein, and delivered to Lender at the address or bank account furnished to Borrower for that purpose. All payments shall be applied first to (a) costs of collection, if any, then to (b) fees and charges, if any, then to (c) accrued and unpaid interest, and thereafter, to (d) principal.

 

1.2. Prepayment. Borrower shall not have the right to prepay any portion of the outstanding balance without Lender’s prior written consent, which Lender may provide in its sole discretion.

 

2. Security. This Note is unsecured.

 

3. Lender Optional Conversion.

 

3.1. Conversions. Lender has the right at any time after the twelve (12) month anniversary of the Effective Date (the “Initial Conversion Date”) until the outstanding balance has been paid in full, at its election, to convert (“Conversion”) all or any portion of the outstanding balance into shares (“Conversion Shares”) of fully paid and non-assessable common stock, $0.00001 par value per share (“Common Stock”), of Borrower as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the “Conversion Amount”) divided by the Conversion Price (as defined below). Conversion notices in the form attached hereto as Exhibit A (each, a “Conversion Notice”) may be delivered from time to time by Lender to Borrower after the Initial Conversion Date, and all Conversions shall be cashless and not require further payment from Lender. Borrower shall deliver the Conversion Shares from any Conversion to Lender in accordance with Section 7 below.

 

 
 

 

3.2. Conversion Price. The price at which Lender has the right to convert all or any portion of the outstanding balance into Common Stock is $1.20 per share of Common Stock (the “Conversion Price”). The Conversion Price will automatically be adjusted in the event Borrower consummates a stock split, stock combination or other similar change to the number of outstanding shares of Common Stock.

 

3.3. Securities Laws

 

(a) No Shell Company. Borrower represents and warrants to Lender that Borrower (including its predecessor, Tesoro Enterprises, Inc.) is not and has never been a “shell company” (as that term is defined in SEC Rule 144(i)(1)(i)-(ii)).

 

(b) Registration Statement. Borrower shall file a Form S-1 registration statement with the SEC no later than ninety (90) days from the Effective Date (the “Registration Statement”).

 

(c) Reports Under Exchange Act. With a view to making available to Lender the benefits of SEC Rule 144 and any other rule or regulation of the SEC that may at any time permit Lender to sell Conversion Shares to the public without registration, Borrower shall:

 

(i) make and keep available adequate current public information, as those terms are understood and defined in SEC Rule 144, at all times after the effective date of the Registration Statement;

 

(ii) use commercially reasonable efforts to file with the SEC in a timely manner all reports and other documents required of Borrower under the Securities Act and the Exchange Act (at any time after Borrower has become subject to such reporting requirements); and

 

(iii) furnish to Lender, forthwith upon request (A) to the extent accurate, a written statement by Borrower that it has complied with the reporting requirements of SEC Rule 144 (at any time after the Initial Conversion Date), the Securities Act, and the Exchange Act (at any time after Borrower has become subject to such reporting requirements); and (B) such other information as may be reasonably requested in availing Borrower of any rule or regulation of the SEC that permits the selling of any Conversion Shares without registration (at any time after Borrower has become subject to the reporting requirements under the Exchange Act).

 

4. Defaults and Remedies.

 

4.1. Defaults. Except as otherwise provided in Section 4.3, the following are events of default under this Note (each, an “Event of Default”): (a) Borrower fails to pay any principal, interest, fees, charges, or any other amount when due and payable hereunder; (b) Borrower fails to deliver any Conversion Shares in accordance with the terms hereof; (c) a receiver, trustee or other similar official shall be appointed over Borrower or a material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed or discharged within sixty (60) days; (d) Borrower makes a general assignment for the benefit of creditors; (e) Borrower files a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); or (f) an involuntary bankruptcy proceeding is commenced or filed against Borrower. Notwithstanding the foregoing, the occurrence of any of the foregoing events will not be considered an Event of Default unless Borrower fails to cure such event within ten (10) Trading Days of delivery of written notice from Lender to the address set forth below Borrower’s signature (but only if such event is capable of being cured during such period of time).

 

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4.2. Remedies. Following an Event of Default, Lender may accelerate this Note by written notice to Borrower with the outstanding balance becoming immediately due and payable. Nothing herein shall limit Lender’s right to pursue any other remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to Borrower’s failure to timely deliver Conversion Shares upon Conversion of the Note as required pursuant to the terms hereof.

 

4.3. Breach of Section 3.3. In the event Borrower breaches any representation, warranty or obligation under Section 3.3, and as a result of such breach, Lender does not qualify to sell any or all of the Conversion Shares without registration pursuant to SEC Rule 144 at any time on or after the Initial Conversion Date, then until the earlier of the Maturity Date or such time that Lender qualifies to sell all of the Conversion Shares without registration pursuant to SEC Rule 144, Lender may by written notice to Borrower immediately declare default under this Note. Upon such default under this Note, the Special Default Payment shall be immediately due and payable. The “Special Default Payment” shall be an amount of cash equal to (i) the number of Conversion Shares, multiplied by (ii) the Borrower Common Stock VWAP as of the date of such written notice to Borrower declaring default under this Note pursuant to this Section 4.3.

 

5. Unconditional Obligation; No Offset. Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset, deduction or counterclaim of any kind. Borrower hereby waives any rights of offset it now has or may have hereafter against Lender, its successors and assigns, and agrees to make the payments or Conversions called for herein in accordance with the terms of this Note.

 

6. Waiver. No waiver of any provision of this Note shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.

 

7. Method of Conversion Share Delivery. On or before the close of business on the seventh (7th) Trading Day following the date of delivery of a Conversion Notice (the “Delivery Date”), Borrower shall, provided it is DWAC Eligible at such time, deliver or cause its transfer agent to deliver the applicable Conversion Shares electronically via DWAC to the account designated by Lender in the applicable Conversion Notice. If Borrower is not DWAC Eligible, it shall deliver to Lender or its broker (as designated in the Conversion Notice), via reputable overnight courier, a certificate representing the number of shares of Common Stock equal to the number of Conversion Shares to which Lender shall be entitled, registered in the name of Lender or its designee.

 

8. Ownership Limitation. Notwithstanding anything to the contrary contained in this Note, Borrower shall not effect any conversion of this Note to the extent that after giving effect to such conversion would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance). For purposes of this section, beneficial ownership of Common Stock will be determined pursuant to Section 13(d) of the Exchange Act.

 

3
 

 

9. Governing Law; Venue. This Note shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and wholly performed in that jurisdiction. Each party hereto submits to the exclusive jurisdiction of any state or federal court sitting in San Diego County, California in any proceeding arising out of or relating to this Note and agrees that all claims in respect of the proceeding may be heard and determined in any such court and hereby expressly submits to the personal jurisdiction and venue of such court for the purposes hereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum. Each party hereto hereby irrevocably consents to the service of process of any of the aforementioned courts in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to its address as set forth herein, such service to become effective ten (10) days after such mailing. The parties expressly and irrevocably waive the right to a trial by jury in any and all actions or proceedings brought with respect to this Note and with respect to any claims arising out of or related to this Note.

 

10. Cancellation. After repayment or conversion of the entire outstanding balance, or the payment of the Special Default Payment, as the case may be, this Note shall be deemed paid in full, shall automatically be deemed canceled, and shall not be reissued.

 

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

 

12. Assignments. Neither party may assign this Note without the consent of the other party.

 

13. Notices. Whenever notice is required to be given under this Note, such notice shall be given to such address as has been provided to the other party.

 

14. Severability. If any part of this Note is construed to be in violation of any law, such part shall be modified to achieve the objective of Borrower and Lender to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect.

 

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

 

4
 

 

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

 

  BORROWER:
     
  HUMBL, INC.
     
  By:  
    Brian Foote, CEO
     
  Address:
   
  600 B. Street, Suite 300
  San Diego, California 92101

 

ACKNOWLEDGED, ACCEPTED AND AGREED:

 

LENDER:

 

Phantom Power, LLC

 

By:    
  Doug Brandt, Manager  

 

[Signature Page to Convertible Promissory Note]

 

 
 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

A1. “DTC” means the Depository Trust Company or any successor thereto.

 

A2. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A3. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A4. “DWAC Eligible” means that (a) Borrower’s Common Stock is eligible at DTC for full services pursuant to DTC’s operational arrangements, including without limitation transfer through DTC’s DWAC system; (b) Borrower has been approved (without revocation) by DTC’s underwriting department; (c) Borrower’s transfer agent is approved as an agent in the DTC/FAST Program; (d) the Conversion Shares are otherwise eligible for delivery via DWAC; and (e) Borrower’s transfer agent does not have a policy prohibiting or limiting delivery of the Conversion Shares via DWAC.

 

A5. “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

A6. “SEC” means the Securities and Exchange Commission.

 

A7. “SEC Rule 144” means Rule 144 promulgated by the SEC under the Securities Act.

 

A8. “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

A9. “Trading Day” means any day on which Borrower’s principal trading market is open for trading.

 

A10. “Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange (or any successors to any of the foregoing).

 

A11. “VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if the Common Stock is quoted on the OTCQB or OTCQX but is not listed on a Trading Market, the volume weighted average price of a share of Common Stock for such date (or the nearest preceding date) on the OTCQB or OTCQX as applicable, (c) if Common Stock is not then listed or quoted for trading on the OTCQB or OTCQX and if prices for Common Stock are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of Common Stock so reported, or (d) in all other cases, the fair market value of the Common Stock as determined by an independent appraiser selected in good faith by Lender and reasonably acceptable to Borrower, the fees and expenses of which shall be paid by Borrower.

 

[Remainder of page intentionally left blank]

 

Attachment 1 to Convertible Promissory Note, Page 1

 

 
 

 

EXHIBIT A

 

Phantom Power, LLC

________________

_________________

 

HUMBL, Inc. Date:______________
Attn: Brian Foote  
600 B. Street, Suite 300  
San Diego, California 92101  

 

CONVERSION NOTICE

 

The above-captioned Lender hereby gives notice to HUMBL, Inc., a Delaware corporation (the “Borrower”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on June __, 2021 (the “Note”), that Lender elects to convert the portion of the Note balance set forth below into fully paid and non-assessable shares of Common Stock of Borrower as of the date of conversion specified below. Said conversion shall be based on the Conversion Price set forth below. In the event of a conflict between this Conversion Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of Conversion Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.

 

  A. Date of Conversion: ____________
  B. Conversion #: ____________
  C. Conversion Amount: ____________
  D. Conversion Price: __________
  E. Conversion Shares: _______________ (C divided by D)

  F. Remaining Outstanding Balance of Note: ____________

 

Please transfer the Conversion Shares electronically (via DWAC) to the following account:

 

Broker: ______________________   Address:  _________________________
DTC#: ______________________      _________________________
Account #: __________________      _________________________
Account Name: _______________      

 

To the extent the Conversion Shares are not able to be delivered to Lender electronically via the DWAC system, deliver all such certificated shares to Lender via reputable overnight courier after receipt of this Conversion Notice (by facsimile transmission or otherwise) to:

_____________________________________

_____________________________________

_____________________________________

 

Sincerely,

 

Lender:

 

By:    
  Doug Brandt, Manager  

 

Exhibit A to Convertible Promissory Note, Page 1

 

 

 

Exhibit 10.40

 

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

 

CONVERTIBLE PROMISSORY NOTE

 

Effective Date: June 30, 2021 U.S. $975,000.00

 

FOR VALUE RECEIVED, HUMBL, Inc., a Delaware corporation (“Borrower”), promises to pay to the order of Kevin Childress, or his assigns (“Lender”), $975,000.00 and any interest accrued hereunder on the date that is eighteen (18) months from the Effective Date (the “Maturity Date”) in accordance with the terms set forth herein and to pay interest on the outstanding balance at the rate of five percent (5%) per annum from the Effective Date until the same is paid in full. This Convertible Promissory Note (this “Note”) is issued and made effective as of June 30, 2021 (the “Effective Date”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.

 

1. Payment; Prepayment.

 

1.1. Payment. All payments owing hereunder shall be in lawful money of the United States of America or Conversion Shares (as defined below), as provided for herein, and delivered to Lender at the address or bank account furnished to Borrower for that purpose. All payments shall be applied first to (a) costs of collection, if any, then to (b) fees and charges, if any, then to (c) accrued and unpaid interest, and thereafter, to (d) principal.

 

1.2. Prepayment. Borrower shall not have the right to prepay any portion of the outstanding balance without Lender’s prior written consent, which Lender may provide in its sole discretion.

 

2. Security. This Note is unsecured.

 

3. Lender Optional Conversion.

 

3.1. Conversions. Lender has the right at any time after the twelve (12) month anniversary of the Effective Date (the “Initial Conversion Date”) until the outstanding balance has been paid in full, at its election, to convert (“Conversion”) all or any portion of the outstanding balance into shares (“Conversion Shares”) of fully paid and non-assessable common stock, $0.00001 par value per share (“Common Stock”), of Borrower as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the “Conversion Amount”) divided by the Conversion Price (as defined below). Conversion notices in the form attached hereto as Exhibit A (each, a “Conversion Notice”) may be delivered from time to time by Lender to Borrower after the Initial Conversion Date, and all Conversions shall be cashless and not require further payment from Lender. Borrower shall deliver the Conversion Shares from any Conversion to Lender in accordance with Section 7 below.

 

 
 

 

3.2. Conversion Price. The price at which Lender has the right to convert all or any portion of the outstanding balance into Common Stock is $1.20 per share of Common Stock (the “Conversion Price”). The Conversion Price will automatically be adjusted in the event Borrower consummates a stock split, stock combination or other similar change to the number of outstanding shares of Common Stock.

 

3.3. Securities Laws

 

(a) No Shell Company. Borrower represents and warrants to Lender that Borrower (including its predecessor, Tesoro Enterprises, Inc.) is not and has never been a “shell company” (as that term is defined in SEC Rule 144(i)(1)(i)-(ii)).

 

(b) Registration Statement. Borrower shall file a Form S-1 registration statement with the SEC no later than ninety (90) days from the Effective Date (the “Registration Statement”).

 

(c) Reports Under Exchange Act. With a view to making available to Lender the benefits of SEC Rule 144 and any other rule or regulation of the SEC that may at any time permit Lender to sell Conversion Shares to the public without registration, Borrower shall:

 

(i) make and keep available adequate current public information, as those terms are understood and defined in SEC Rule 144, at all times after the effective date of the Registration Statement;

 

(ii) use commercially reasonable efforts to file with the SEC in a timely manner all reports and other documents required of Borrower under the Securities Act and the Exchange Act (at any time after Borrower has become subject to such reporting requirements); and

 

(iii) furnish to Lender, forthwith upon request (A) to the extent accurate, a written statement by Borrower that it has complied with the reporting requirements of SEC Rule 144 (at any time after the Initial Conversion Date), the Securities Act, and the Exchange Act (at any time after Borrower has become subject to such reporting requirements); and (B) such other information as may be reasonably requested in availing Borrower of any rule or regulation of the SEC that permits the selling of any Conversion Shares without registration (at any time after Borrower has become subject to the reporting requirements under the Exchange Act).

 

4. Defaults and Remedies.

 

4.1. Defaults. Except as otherwise provided in Section 4.3, the following are events of default under this Note (each, an “Event of Default”): (a) Borrower fails to pay any principal, interest, fees, charges, or any other amount when due and payable hereunder; (b) Borrower fails to deliver any Conversion Shares in accordance with the terms hereof; (c) a receiver, trustee or other similar official shall be appointed over Borrower or a material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed or discharged within sixty (60) days; (d) Borrower makes a general assignment for the benefit of creditors; (e) Borrower files a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); or (f) an involuntary bankruptcy proceeding is commenced or filed against Borrower. Notwithstanding the foregoing, the occurrence of any of the foregoing events will not be considered an Event of Default unless Borrower fails to cure such event within ten (10) Trading Days of delivery of written notice from Lender to the address set forth below Borrower’s signature (but only if such event is capable of being cured during such period of time).

 

2
 

 

4.2. Remedies. Following an Event of Default, Lender may accelerate this Note by written notice to Borrower with the outstanding balance becoming immediately due and payable. Nothing herein shall limit Lender’s right to pursue any other remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to Borrower’s failure to timely deliver Conversion Shares upon Conversion of the Note as required pursuant to the terms hereof.

 

4.3. Breach of Section 3.3. In the event Borrower breaches any representation, warranty or obligation under Section 3.3, and as a result of such breach, Lender does not qualify to sell any or all of the Conversion Shares without registration pursuant to SEC Rule 144 at any time on or after the Initial Conversion Date, then until the earlier of the Maturity Date or such time that Lender qualifies to sell all of the Conversion Shares without registration pursuant to SEC Rule 144, Lender may by written notice to Borrower immediately declare default under this Note. Upon such default under this Note, the Special Default Payment shall be immediately due and payable. The “Special Default Payment” shall be an amount of cash equal to (i) the number of Conversion Shares, multiplied by (ii) the Borrower Common Stock VWAP as of the date of such written notice to Borrower declaring default under this Note pursuant to this Section 4.3.

 

5. Unconditional Obligation; No Offset. Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset, deduction or counterclaim of any kind. Borrower hereby waives any rights of offset it now has or may have hereafter against Lender, its successors and assigns, and agrees to make the payments or Conversions called for herein in accordance with the terms of this Note.

 

6. Waiver. No waiver of any provision of this Note shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.

 

7. Method of Conversion Share Delivery. On or before the close of business on the seventh (7th) Trading Day following the date of delivery of a Conversion Notice (the “Delivery Date”), Borrower shall, provided it is DWAC Eligible at such time, deliver or cause its transfer agent to deliver the applicable Conversion Shares electronically via DWAC to the account designated by Lender in the applicable Conversion Notice. If Borrower is not DWAC Eligible, it shall deliver to Lender or its broker (as designated in the Conversion Notice), via reputable overnight courier, a certificate representing the number of shares of Common Stock equal to the number of Conversion Shares to which Lender shall be entitled, registered in the name of Lender or its designee.

 

8. Ownership Limitation. Notwithstanding anything to the contrary contained in this Note, Borrower shall not effect any conversion of this Note to the extent that after giving effect to such conversion would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance). For purposes of this section, beneficial ownership of Common Stock will be determined pursuant to Section 13(d) of the Exchange Act.

 

3
 

 

9. Governing Law; Venue. This Note shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and wholly performed in that jurisdiction. Each party hereto submits to the exclusive jurisdiction of any state or federal court sitting in San Diego County, California in any proceeding arising out of or relating to this Note and agrees that all claims in respect of the proceeding may be heard and determined in any such court and hereby expressly submits to the personal jurisdiction and venue of such court for the purposes hereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum. Each party hereto hereby irrevocably consents to the service of process of any of the aforementioned courts in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to its address as set forth herein, such service to become effective ten (10) days after such mailing. The parties expressly and irrevocably waive the right to a trial by jury in any and all actions or proceedings brought with respect to this Note and with respect to any claims arising out of or related to this Note.

 

10. Cancellation. After repayment or conversion of the entire outstanding balance, or the payment of the Special Default Payment, as the case may be, this Note shall be deemed paid in full, shall automatically be deemed canceled, and shall not be reissued.

 

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

 

12. Assignments. Neither party may assign this Note without the consent of the other party.

 

13. Notices. Whenever notice is required to be given under this Note, such notice shall be given to such address as has been provided to the other party.

 

14. Severability. If any part of this Note is construed to be in violation of any law, such part shall be modified to achieve the objective of Borrower and Lender to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect.

 

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

 

4
 

 

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

 

  BORROWER:
     
  HUMBL, Inc.
     
  By:
    Brian Foote, CEO
     
  Address:
   
  600 B. Street, Suite 300
  San Diego, California 92101

 

ACKNOWLEDGED, ACCEPTED AND AGREED:  
LENDER:    
     
Kevin Childress    

 

[Signature Page to Convertible Promissory Note]

 

 
 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

A1. “DTC” means the Depository Trust Company or any successor thereto.

 

A2. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A3. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A4. “DWAC Eligible” means that (a) Borrower’s Common Stock is eligible at DTC for full services pursuant to DTC’s operational arrangements, including without limitation transfer through DTC’s DWAC system; (b) Borrower has been approved (without revocation) by DTC’s underwriting department; (c) Borrower’s transfer agent is approved as an agent in the DTC/FAST Program; (d) the Conversion Shares are otherwise eligible for delivery via DWAC; and (e) Borrower’s transfer agent does not have a policy prohibiting or limiting delivery of the Conversion Shares via DWAC.

 

A5. “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

A6. “SEC” means the Securities and Exchange Commission.

 

A7. “SEC Rule 144” means Rule 144 promulgated by the SEC under the Securities Act.

 

A8. “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

A9. “Trading Day” means any day on which Borrower’s principal trading market is open for trading.

 

A10. “Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange (or any successors to any of the foregoing).

 

A11. “VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if the Common Stock is quoted on the OTCQB or OTCQX but is not listed on a Trading Market, the volume weighted average price of a share of Common Stock for such date (or the nearest preceding date) on the OTCQB or OTCQX as applicable, (c) if Common Stock is not then listed or quoted for trading on the OTCQB or OTCQX and if prices for Common Stock are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of Common Stock so reported, or (d) in all other cases, the fair market value of the Common Stock as determined by an independent appraiser selected in good faith by Lender and reasonably acceptable to Borrower, the fees and expenses of which shall be paid by Borrower.

 

[Remainder of page intentionally left blank]

 

Attachment 1 to Convertible Promissory Note, Page 1

 

 
 

 

EXHIBIT A

 

Kevin Childress

                              

                              

 

HUMBL, Inc.   Date:                               
Attn: Brian Foote    
600 B. Street, Suite 300    
San Diego, California 92101    

 

CONVERSION NOTICE

 

The above-captioned Lender hereby gives notice to HUMBL, Inc., a Delaware corporation (the “Borrower”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on June __, 2021 (the “Note”), that Lender elects to convert the portion of the Note balance set forth below into fully paid and non-assessable shares of Common Stock of Borrower as of the date of conversion specified below. Said conversion shall be based on the Conversion Price set forth below. In the event of a conflict between this Conversion Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of Conversion Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.

 

  A. Date of Conversion:                                    
     
  B. Conversion #:                               
     
  C. Conversion Amount:                                      
     
  D. Conversion Price: __________
     
  E. Conversion Shares: _______________ (C divided by D)
     
  F. Remaining Outstanding Balance of Note: ____________

 

Please transfer the Conversion Shares electronically (via DWAC) to the following account:

 

Broker:                                        Address:                                                  
DTC#:                                                                                           
Account #:                                                                                           
Account Name:                                           

 

To the extent the Conversion Shares are not able to be delivered to Lender electronically via the DWAC system, deliver all such certificated shares to Lender via reputable overnight courier after receipt of this Conversion Notice (by facsimile transmission or otherwise) to:

 

  _____________________________________
   
  _____________________________________
   
                                                                                       

 

Sincerely,  
   
Lender:  
   
Kevin Childress  
   

 

Exhibit A to Convertible Promissory Note, Page 1

 

 

 

 

 

Exhibit 10.41

 

PROMISSORY NOTE

 

Effective Date: June 30, 2021 U.S. $435,000.00

 

FOR VALUE RECEIVED, HUMBL, Inc., a Delaware corporation (“Borrower”), promises to pay to the order of Phantom Power, LLC, a California limited liability company, or its successors or assigns (“Lender”), $435,000.00 and any interest accrued hereunder on April 1, 2022 (the “Maturity Date”) in accordance with the terms set forth herein and to pay interest on the outstanding balance at the rate of five percent (5%) per annum from the Effective Date until the same is paid in full. This Promissory Note (this “Note”) is issued and made effective as of June 30, 2021 (the “Effective Date”).

 

1. Payment; Prepayment.

 

1.1. Payment. All payments owing hereunder shall be in lawful money of the United States of America and delivered to Lender at the address or bank account furnished to Borrower for that purpose. All payments shall be applied first to (a) costs of collection, if any, then to (b) fees and charges, if any, then to (c) accrued and unpaid interest, and thereafter, to (d) principal.

 

1.2. Prepayment. Borrower shall have the right to prepay all or any portion of the outstanding balance without penalty.

 

2. Security. This Note is unsecured.

 

3. Defaults and Remedies.

 

3.1. Defaults. The following are events of default under this Note (each, an “Event of Default”): (a) Borrower fails to pay any principal, interest, fees, charges, or any other amount when due and payable hereunder; (b) a receiver, trustee or other similar official shall be appointed over Borrower or a material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed or discharged within sixty (60) days; (c) Borrower makes a general assignment for the benefit of creditors; (d) Borrower files a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); or (e) an involuntary bankruptcy proceeding is commenced or filed against Borrower. Notwithstanding the foregoing, the occurrence of any of the foregoing events will not be considered an Event of Default unless Borrower fails to cure such event within ten (10) business days of delivery of written notice from Lender to the address set forth below Borrower’s signature (but only if such event is capable of being cured during such period of time).

 

3.2. Remedies. Following an Event of Default, Lender may accelerate this Note by written notice to Borrower with the outstanding balance becoming immediately due and payable.

 

4. Unconditional Obligation; No Offset. Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset, deduction or counterclaim of any kind. Borrower hereby waives any rights of offset it now has or may have hereafter against Lender, its successors and assigns, and agrees to make the payments called for herein in accordance with the terms of this Note.

 

 
 

 

5. Waiver. No waiver of any provision of this Note shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.

 

6. Governing Law; Venue. This Note shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and wholly performed in that jurisdiction. Each party hereto submits to the exclusive jurisdiction of any state or federal court sitting in San Diego County, California in any proceeding arising out of or relating to this Note and agrees that all claims in respect of the proceeding may be heard and determined in any such court and hereby expressly submits to the personal jurisdiction and venue of such court for the purposes hereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum. Each party hereto hereby irrevocably consents to the service of process of any of the aforementioned courts in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to its address as set forth herein, such service to become effective ten (10) days after such mailing. The parties expressly and irrevocably waive the right to a trial by jury in any and all actions or proceedings brought with respect to this Note and with respect to any claims arising out of or related to this Note.

 

7. Cancellation. After repayment of the entire outstanding balance, this Note shall be deemed paid in full, shall automatically be deemed canceled, and shall not be reissued.

 

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

 

9. Assignments. Neither party may assign this Note without the consent of the other party.

 

10. Notices. Whenever notice is required to be given under this Note, such notice shall be given to such address as has been provided to the other party.

 

11. Severability. If any part of this Note is construed to be in violation of any law, such part shall be modified to achieve the objective of Borrower and Lender to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect.

 

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

 

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

 

  BORROWER:
   
  HUMBL, Inc.
     
  By:  
    Brian Foote, CEO
     
  Address:
   
  600 B. Street, Suite 300
  San Diego, California 92101

 

ACKNOWLEDGED, ACCEPTED AND AGREED:

 

LENDER:

 

Phantom Power, LLC

 

By:    
  Doug Brandt, Manager  

 

[Signature Page to Promissory Note]

 

 

 

Exhibit 10.42

 

PROMISSORY NOTE

 

Effective Date: June 30, 2021 U.S. $65,000.00

 

FOR VALUE RECEIVED, HUMBL, Inc., a Delaware corporation (“Borrower”), promises to pay to the order of Kevin Childress, or his assigns (“Lender”), $65,000.00 and any interest accrued hereunder on April 1, 2022 (the “Maturity Date”) in accordance with the terms set forth herein and to pay interest on the outstanding balance at the rate of five percent (5%) per annum from the Effective Date until the same is paid in full. This Promissory Note (this “Note”) is issued and made effective as of June 30, 2021 (the “Effective Date”).

 

1. Payment; Prepayment.

 

1.1. Payment. All payments owing hereunder shall be in lawful money of the United States of America and delivered to Lender at the address or bank account furnished to Borrower for that purpose. All payments shall be applied first to (a) costs of collection, if any, then to (b) fees and charges, if any, then to (c) accrued and unpaid interest, and thereafter, to (d) principal.

 

1.2. Prepayment. Borrower shall have the right to prepay all or any portion of the outstanding balance without penalty.

 

2. Security. This Note is unsecured.

 

3. Defaults and Remedies.

 

3.1. Defaults. The following are events of default under this Note (each, an “Event of Default”): (a) Borrower fails to pay any principal, interest, fees, charges, or any other amount when due and payable hereunder; (b) a receiver, trustee or other similar official shall be appointed over Borrower or a material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed or discharged within sixty (60) days; (c) Borrower makes a general assignment for the benefit of creditors; (d) Borrower files a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); or (e) an involuntary bankruptcy proceeding is commenced or filed against Borrower. Notwithstanding the foregoing, the occurrence of any of the foregoing events will not be considered an Event of Default unless Borrower fails to cure such event within ten (10) business days of delivery of written notice from Lender to the address set forth below Borrower’s signature (but only if such event is capable of being cured during such period of time).

 

3.2. Remedies. Following an Event of Default, Lender may accelerate this Note by written notice to Borrower with the outstanding balance becoming immediately due and payable.

 

4. Unconditional Obligation; No Offset. Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset, deduction or counterclaim of any kind. Borrower hereby waives any rights of offset it now has or may have hereafter against Lender, its successors and assigns, and agrees to make the payments called for herein in accordance with the terms of this Note.

 

 
 

 

5. Waiver. No waiver of any provision of this Note shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.

 

6. Governing Law; Venue. This Note shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and wholly performed in that jurisdiction. Each party hereto submits to the exclusive jurisdiction of any state or federal court sitting in San Diego County, California in any proceeding arising out of or relating to this Note and agrees that all claims in respect of the proceeding may be heard and determined in any such court and hereby expressly submits to the personal jurisdiction and venue of such court for the purposes hereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum. Each party hereto hereby irrevocably consents to the service of process of any of the aforementioned courts in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to its address as set forth herein, such service to become effective ten (10) days after such mailing. The parties expressly and irrevocably waive the right to a trial by jury in any and all actions or proceedings brought with respect to this Note and with respect to any claims arising out of or related to this Note.

 

7. Cancellation. After repayment of the entire outstanding balance, this Note shall be deemed paid in full, shall automatically be deemed canceled, and shall not be reissued.

 

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

 

9. Assignments. Neither party may assign this Note without the consent of the other party.

 

10. Notices. Whenever notice is required to be given under this Note, such notice shall be given to such address as has been provided to the other party.

 

11. Severability. If any part of this Note is construed to be in violation of any law, such part shall be modified to achieve the objective of Borrower and Lender to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect.

 

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

 

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

 

  BORROWER:
   
  HUMBL, Inc.
     
  By:  
    Brian Foote, CEO
     
  Address:
   
  600 B. Street, Suite 300
  San Diego, California 92101

 

ACKNOWLEDGED, ACCEPTED AND AGREED:

 

LENDER:

 

   
Kevin Childress  

 

[Signature Page to Promissory Note]

 

 

 

Exhibit 10.43

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (this “Agreement”) is entered into by and between Monster Creative, LLC, a California limited liability company (the “Company”), and Doug Brandt, an individual (“Employee”), effective as of July 1, 2021 (the “Effective Date”).

 

In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1. Employment. The Company hereby employs Employee, and Employee hereby accepts such employment, on the terms and conditions of this Agreement.

 

2. Term. By signing this Agreement, Employee reiterates his intention to remain employed with the Company for a period of time beginning on the Effective Date and ending on the date that is thirty six (36) months from the Effective Date (the “Initial Term”), unless earlier terminated pursuant to Section 6 below. Following the Initial Term, this Agreement will remain in effect until terminated by either party with fifteen (15) days’ prior written notice (the time during which Employee is employed by the Company is referred to hereinafter as the “Term”).

 

3. Duties.

 

3.1. General Duties. Employee shall be employed as the Chief Executive Officer and Creative Director of the Company, and shall have such duties, responsibilities and obligations as are established by the Company or are generally required of persons employed in similar positions. Employee shall also perform such other services and duties for the Company which are appropriate and customary to the offices and positions held by Employee and assigned or delegated to him from time to time by the Company. Employee shall report directly to HUMBL, Inc.’s (“HUMBL”) Chief Executive Officer, Brian Foote. Employee shall be eligible for any indemnification rights in connection with or as a result of Employee’s service as an officer or director in accordance with the Company’s Operating Agreement, and as required by law.

 

3.2. Performance. To the best of his ability and experience, Employee will at all times during the Term loyally and conscientiously perform all duties, and discharge all responsibilities and obligations, required of and from him pursuant to the express and implicit terms hereof, and to the reasonable satisfaction of the Company. Except as set forth in Section 3.3 below, Employee shall devote substantially all his business time, energy, skill and attention to the business of the Company, and the Company shall be entitled to all of the benefits and profits arising from or incident to all such work, services, and advice of Employee rendered to the Company during the Term.

 

3.3. Side Projects. Employee may devote a reasonable amount of time to the following activities (e.g., a few hours a week), so long as such activities do not individually or in the aggregate inhibit or prohibit the performance of Employee’s duties under this Agreement, or conflict with the Company’s business: (a) own, operate, and provide limited services to Phantom Power, LLC (“Phantom Power”), which do not directly compete with the Company’s projects; (b) develop creative entertainment projects on a personal basis or through Employee’s separately-owned companies, including, without limitation, movie ideas, show concepts, music, and scripts, which do not directly compete with the Company’s projects; and (c) the supervision of his and his family’s personal passive investments and other uncompensated activities involving professional, charitable, community, educational, and religious organizations (including membership on the boards of such organizations).

 

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4. Compensation and Benefits.

 

4.1. Salary. The Company shall pay to Employee an annual base salary of $500,000.00 (“Annual Base Salary”). Employee’s Annual Base Salary, which shall be prorated for any partial employment period, will be payable in equal bi-weekly installments or at such other intervals as may be established for the Company’s customary payroll schedule, less all applicable federal, state and local income and employment tax withholdings required by law.

 

4.2. Employee Benefits. During the Term, Employee will be entitled to participate in the employee benefit plans currently and hereafter maintained by the Company of general applicability to other similarly situated employees of the Company, including, without limitation, medical, dental, vision, life, and disability insurance coverage, 401(k) plan, and other fringe benefit plans and programs. The Company reserves the right to cancel or change the benefit plans and programs it offers to its employees at any time.

 

4.3. Vacation. Employee will be entitled to fifteen (15) days of paid vacation per year, with the timing and duration of specific vacations mutually and reasonably agreed to by the parties hereto. Employee may accrue up to a maximum cap of twenty-five (25) vacation days.

 

4.4. Expenses. The Company will reimburse Employee for reasonable travel, entertainment or other expenses incurred by Employee in the furtherance of or in connection with the performance of Employee’s duties hereunder, provided that such expenses are pre-approved in writing by the Company, are not in excess of any travel/expense budget provided to Employee, and Employee provides all receipts and other supporting documentation as may be requested by the Company. The Company will reimburse Employee for business class airfare for all work-related flights of four (4) hours or more.

 

4.5. Annual Performance Bonus. The Company and Employee shall work diligently and in good faith to establish the annual performance bonuses to which Employee shall be eligible by no later than October 1, 2021, which shall be based on the following: (i) an annual performance bonus based on the amount of the excess by which the performance of the Company exceeds certain metrics, as may be mutually agreed upon by the Company and Employee; and (ii) in the event the Company performs services for any affiliate or third party for which payment of the services is not based on an hourly rate schedule and is paid in an amount that is not immediately available funds (e.g,. securities), then Employee shall be entitled to participate in the ownership of such funds in a manner and amount that is mutually agreed upon by the Company and Employee. Any such annual performance bonuses shall be determined to the extent reasonably practical on or before December 31 of each year and paid on or before January 31 of the following year; provided, however, in the event any portion of the annual performance bonus is not immediately available funds (e.g., securities), then the Company shall provide Employee reasonable evidence of a right to such portion of the annual performance bonus and upon such time as such portion of annual performance bonus becomes immediately available funds, provide, deliver and pay such bonus to Employee in immediately available funds.

 

5. Restrictions.

 

5.1. No Use of Company Property for Personal Use. No Company property may be used for personal purposes by Employee without the prior written consent of the Company. Additionally, no personal expenses are to be paid for with Company funds.

 

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5.2. Corporate Opportunity Doctrine. As an employee of the Company, Employee hereby acknowledges and agrees that the “corporate opportunity” doctrine applies to Employee with respect to his fiduciary duties to the Company. As a result, Employee agrees to provide the Company with a right to review and accept various business opportunities that may be complimentary to the Company’s business operations, except as set forth in Section 3.3. Any business opportunity that is rejected by the Company in writing will then be excluded from the restrictions otherwise applicable to Employee under this Section 5.2.

 

6. Termination of Employment.

 

6.1. Death or Disability. If Employee’s employment shall terminate due to his death or Disability (defined below), Employee (or his/her estate) shall be paid, in lieu of all other payments hereunder, the following: (1) accrued and unpaid salary through the effective date of the termination of Employee’s employment with Company (“Date of Termination”); (2) accrued and unused vacation through the Date of Termination; (3) a pro-rated portion of any bonuses, including without limitation, performance bonuses, based on Employee’s performance through the Date of Termination; (4) vested benefits and other amounts due to Employee under any plan, program, policy or other agreement with the Company; and (5) reimbursement for all actual and previously unreimbursed out-of-pocket business expenses properly incurred to the Date of Termination in accordance with Company’s standard business expense reimbursement policies (collectively, the “Accrued Amounts”). The Accrued Amounts shall be paid to Employee or Employee’s surviving spouse, if any, or otherwise to Employee’s estate, in a single lump sum payment within thirty (30) days of Employee’s death or Disability, or, if otherwise provided in an applicable employee benefit plan, in accordance with the time and form of payment provisions of such plan, in accordance with applicable law. For purposes of this Agreement “Disability” shall mean that Employee has been prevented from working for more than a continuous period of six (6) months, or for shorter periods aggregating more than six (6) months in any consecutive twelve (12) month period, because of physical or mental incapacity or other disability for which Employee has been provided all legally required leaves of absence and reasonable accommodations.

 

6.2. Termination Without Cause or Resignation for Good Reason. If (1) Company terminates Employee’s employment during the Initial Term other than (a) due to Employee’s death or Disability or (b) for Cause (as defined below); or (2) if Employee resigns from Employee’s employment for Good Reason (as defined below) during the Initial Term, Employee shall receive the Accrued Amounts on the Date of Termination and, in addition, subject to the Severance Conditions below, (i) Company shall provide a severance payment equal to three (3) months of Employee’s salary as of the Date of Termination (the “Severance Payment”), divided and paid in equal installments over a period of three (3) months in accordance with Company’s regular payroll practices starting on the first regular payday occurring after the effective date of the Release (as defined below), and (ii) the Company will reimburse Employee for COBRA premiums (at the coverage levels and at the Company-paid rate in effect immediately prior to such termination) for Employee and Employee’s covered dependents until the earliest of (A) the date that is three (3) months following the Date of Termination, (B) the date that Employee (or Employee’s spouse or dependents, as applicable) are no longer eligible for COBRA coverage or (C) the date when Employee receives substantially equivalent health insurance coverage in connection with new employment (the “COBRA Benefit”). Company’s obligation to pay Employee the Severance Payment and COBRA Benefit shall be conditioned on Employee’s satisfaction of the following (the “Severance Conditions”): (1) Employee must first sign, and allow to become effective, a mutually-approved separation agreement, which shall include a full general release in a form acceptable to Company, releasing all claims, known or unknown, that Employee may have against Company arising out of or any way related to Employee’s employment or termination of employment with Company (the “Release”); and (2) on or before the effective date of the Release, Employee must have (i) reconfirmed Employee’s agreement to abide by all of the surviving provisions of this Agreement and any other agreement between Employee and Company, (ii) agreed to cooperate in the transition of Employee’s employment; and (iii) agreed not to make any voluntary statements, written or oral, that defame or disparage the personal and/or business reputations, practices, or conduct of the Company or any of its affiliates, except for any statements that constitute protected or privileged conduct under applicable law. All other Company obligations to Employee will be automatically terminated and completely extinguished except as provided by law. In the event that Employee is terminated without Cause or Employee terminates his employment without Good Reason, Employee shall be under no obligation to mitigate any damages.

 

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6.3. Termination for Cause. Company shall have the right at any time, upon written notice to Employee, to terminate Employee’s employment immediately for Cause. If Company terminates Employee’s employment for Cause, Employee shall have no right to receive any further compensation other than the Accrued Amounts. In the event that Company terminates Employee’s employment for Cause, Company shall pay Employee Employee’s Accrued Amounts on the Date of Termination.

 

As used herein “Cause” shall mean: (a) conviction or entry of a plea of nolo contendere for any felony; (b) embezzlement, misappropriation, fraud, dishonesty, unethical business conduct, or breach of fiduciary duty to Company or any affiliate (other than those acts that are curable without damage to the Company and/or its affiliates, in which case Employee will have ten (10) days to cure such breach following written notice thereof to Employee by Company, and other than those acts that do not result in material harm to the Company); (c) inability or refusal to substantially perform Employee’s duties hereunder and Employee’s failure to cure such condition within 30 days after receiving written notice thereof by the Company; (d) failure to follow reasonable and lawful directions from the persons to whom Employee reports and Employee’s failure to cure such condition within 30 days after receiving written notice thereof by the Company; (e) excessive use of alcohol or illegal drugs that materially interferes with performance of Employee’s obligations to Company or any affiliate, continuing after written warning; (f) commission of any willful or intentional act which materially injures the reputation, business or business relationships of Company, any affiliate, Employee or other employees of Company or any affiliates; (g) willful disregard or violation of Company’s or any affiliate’s written policies regarding harassment or discrimination, or any other material violation of Company’s or any affiliate’s written policies as in effect from time to time and Employee’s failure to cure such breach within 30 days after receiving written notice thereof by the Company; (h) gross negligence or willful misconduct in the performance of Employee’s duties or with regard to the assets, business or employees of Company or any affiliates; (i) intentional usurpation of a material corporate opportunity; or (j) intentional misappropriation, unauthorized use or disclosure of Proprietary Information that results in a material breach of this Agreement.

 

As used herein “Good Reason” shall mean Employee’s resignation due to the occurrence of any of the following conditions which occurs without Employee’s written consent, provided that the requirements regarding advance notice and an opportunity to cure set forth below are satisfied: (i) a material reduction of Employee’s duties, authority, responsibilities or reporting relationship relative to Employee’s duties, authority, responsibilities or reporting relationship as in effect immediately prior to such reduction; (ii) a reduction in Employee’s then-current salary; (iii) any material breach by the Company or any successor company of any material provision of this Agreement and the Transaction Documents (as such term is defined in the Membership Purchase Agreement); (iv) any material breach by HUMBL or any successor company of any material provision of this Agreement and the Transaction Documents, including, without limitation, its promissory note obligations to Phantom Power; (v) the failure of any acquirer or successor to the Company or any affiliate of such affiliate or successor to assume or otherwise continue the obligations under this Agreement; (vi) the Company (or its successor) conditions Employee’s continued service on Employee being transferred to a site of employment that would increase Employee’s one-way commute by more than 5 miles from Employee’s then principal residence; (vii) commission of any willful or intentional act, including, without limitation, harassment or discrimination, by HUMBL or its officers or directors which materially injures the reputation, business or business relationships of Company, any affiliate, Employee or other employees of Company or any affiliates; or (viii) intentional misappropriation, unauthorized use or disclosure of Proprietary Information belonging to the Company’s clients that results in a breach of the Company’s agreements. In order for Employee to resign for Good Reason, Employee must provide written notice to the Company of the existence of the Good Reason condition within 90 days of the initial existence of such Good Reason condition. Upon receipt of such notice, the Company will have 30 days during which it may remedy the Good Reason condition, Employee may suspend work for the Company, and the Company will not be required to provide the termination payments or benefits described herein as a result of such proposed resignation. If the Good Reason condition is not remedied within such 30-day period, Employee may resign based on the Good Reason condition specified in the notice effective no later than 60 days following the expiration of the 30-day cure period.

 

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6.4. Employee Resignation. If Employee resigns from Employee’s employment for any reason other than for Good Reason during the Initial Term, Employee’s resignation shall be considered a material breach of this Agreement. Notwithstanding the foregoing, in such event, only the following shall apply: (i) Company shall pay Employee Employee’s Accrued Amounts on the Date of Termination, (ii) all other Company obligations to Employee hereunder, and all Employee’s obligations to Company hereunder, shall be automatically terminated and completely extinguished, (iii) this Agreement shall be automatically terminated, and (iv) each party shall have no claims against or liability to the other party under this Agreement. Further notwithstanding the foregoing, during the Initial Term, Employee may only resign after first providing 30 days’ prior written notice to the Company.

 

6.5. No Further Obligations. The amounts and benefits provided for in this Section shall be in lieu of any termination or severance payments or benefits for which Employee may be eligible or entitled, now or in the future, under any of the plans, policies, or programs of Company or any of its subsidiaries or affiliates. In addition, the amounts and benefits provided for in this Section shall be inclusive of all statutory severance payable or otherwise provided to Employee in relation to Employee’s employment by Company and the termination of Employee’s employment under this Agreement and compensation for all required notice periods. Except as otherwise expressly set forth in this Section, from and after the date of such termination, Employee shall (i) have no right to receive any further compensation (including salary or bonus) hereunder, and, (ii) except to the extent required by law, cease to be covered under or be permitted to actively participate in any benefits plans or programs.

 

6.6. Resignation from Officer Positions. If Employee’s employment with Company terminates for any reason, Employee shall be deemed to have resigned at that time from any and all positions that Employee may have held with Company or any of its affiliates, as designated by Company, or any other positions that Employee held on behalf of Company. If, for any reason, this Section is deemed insufficient to effectuate such resignation, following a reasonable opportunity to review, Employee hereby authorizes Company to execute any documents or instruments consistent herewith which Company may deem necessary or desirable to effectuate such resignation or resignations, and to act as Employee’s attorney-in-fact. Company will provide Employee with a copy of such documents.

 

6.7. Section 409A. Certain payments and benefits payable under this Agreement are intended to be exempt from, or comply with, Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the Treasury Regulations and Internal Revenue Service guidance thereunder. To the extent the payments and benefits under the Agreement are subject to Section 409A of the Code, the Agreement shall be interpreted, construed and administered in a manner that satisfies the requirements of Sections 409A (a) (2), (3) and (4) of the Code and the Treasury Regulations and Internal Revenue Service guidance thereunder. Each payment and benefit payable under this Agreement is intended to constitute a separate payment for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations. If the parties determine that any payments or benefits payable under this Agreement subject to Section 409A of the Code do not comply with Section 409A of the Code, Company and Employee agree to amend this Agreement, or take such other actions as Company and Employee reasonably deem necessary or appropriate, to comply with the requirements of Section 409A of the Code, while preserving benefits that are, in the aggregate, no less favorable than the benefits as provided to Employee under this Agreement. If any provision of this Agreement would cause such payments or benefits to fail to so comply, such provision shall not be effective and shall be null and void with respect to such payments or benefits, and such provision shall otherwise remain in full force and effect.

 

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7. Noncompetition and Nonsolicitation with the Company’s NFT Business.

 

7.1. Noncompetition with the Company’s NFT Business. During a period of time beginning on the Effective Date and ending on the earlier of (i) the date that is thirty six (36) months from the Effective Date, or (ii) the occurrence of an “Event of Default” pursuant to Section 4.1, or a breach of Section 4.3, of the Convertible Promissory Note, dated June 30, 2021, issued by HUMBL to Phantom Power (the “Restricted Period”), and with respect to the Company’s NFT business only, Employee shall not, directly or indirectly (whether as a principal, agent, independent contractor, employee, partner, member, owner, or in any other similar capacity), own, manage, operate, control, participate in, perform services for, be employed by, or otherwise carry on, a business similar to or competitive with the Company’s NFT business anywhere in the United States or location in which the Company, during the Term, is engaged or intends to become engaged in the Company’s NFT business. Notwithstanding the foregoing, Employee shall not be prohibited from owning not more than one percent of the voting stock of any publicly traded entity that competes with the Company. However, the Company hereby acknowledges Employee’s ownership of Phantom Power, and expressly agrees that such ownership by Employee, and/or the provisions of service by Employee to Phantom Power under Section 3.3, shall not be deemed competitive or otherwise in breach of Employee’s obligations to the Company, provided that during the Term, Phantom Power does not expand into areas that it did not operate prior to the Closing Date (as defined below). Employee shall be permitted during the Term to cause Phantom Power to provide its services offered prior to the Closing Date to competitors of the Company. Additionally, this Section 7.1 shall not apply to, and during the Restricted Period, Employee shall be entitled to freely engaged in, any or all business or other activity relating to the business engaged in, and services performed, by the Company prior to the Closing Date (the “Pre-Closing Business”). During the Restricted Period, Employee shall be permitted to work in any business or industry in which the Company operated prior to the Closing Date, including without limitation, the entertainment industry. For purposes of this Agreement, “Closing Date” shall have the meaning given to it in that certain Membership Interest Purchase Agreement, dated as of June 30, 2021, among HUMBL, Inc, Phantom Power, LLC and Kevin Childress (the “Membership Purchase Agreement”)

 

7.1.1 Resignation During the Initial Term Without Good Reason. If Employee resigns from Employee’s employment for any reason other than for Good Reason during the Initial Term, during the Restricted Period, Employee shall not, directly or indirectly, own, manage, operate, control, participate in, perform services for, be employed by, or otherwise carry on, a business similar to or competitive with the Company’s business anywhere in the United States or location in which the Company, during the Initial Term, is engaged or intends to become engaged in the Company’s business. However, during the Restricted Period, Employee may continue to own and operate Phantom Power, provided that Phantom Power does not expand into areas that it did not operate prior to the Closing Date.

 

7.2. Nonsolicitation of Company Employees. During the Restricted Period, Employee shall not, directly or indirectly, recruit, solicit, induce, or influence (or seek to induce or influence) any person who is employed by, hired by, affiliated with, or acts as a consultant, independent contractor, or salesperson for, HUMBL or the Company to terminate or alter his/her relationship with HUMBL or the Company. Notwithstanding the forgoing, the prohibition in this Section 7.2 shall not restrict Employee or its designee from soliciting for employment or engagement, offering to hire or engage and/or hiring or engaging any person (i) who responds to general solicitation of employment or engagement (including through the use of advertisements or recruiting firms), or (ii) who ceases to be employed or engaged by the Company prior to any discussion regarding employment, engagement or other contact between Consultant or its designee and such person.

 

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7.3. Nonsolicitation of Customers for NFT Business. With respect to the Company’s NFT business only, during the Restricted Period, Employee shall not, directly or indirectly, without the prior written consent of the Company, solicit, encourage or take any other action which is intended to induce or encourage, or has the effect of inducing or encouraging, any customer, client or supplier who or which is, or had been within the prior two (2) years, a customer or potential customer, or supplier or potential supplier, of the Company or HUMBL to terminate or alter in any way such customer’s, client’s, or supplier’s relationship with the Company or HUMBL, nor shall Employee call on or solicit any such customers, clients or suppliers with respect to or on behalf of any business similar to or competitive with the Company’s or HUMBL’s NFT business. However, this Section 7.3 shall not apply to the Company’s Pre-Closing Business, and during the Restricted Period, Employee shall be permitted to solicit any customer, client, or supplier with respect to work in any business or industry in which the Company operated prior to the Closing Date, including without limitation, the entertainment industry.

 

7.3.1 Resignation During the Initial Term Without Good Reason. If Employee resigns from Employee’s employment for any reason other than for Good Reason during the Initial Term, during the Restricted Period, Employee shall not, directly or indirectly, without the prior written consent of the Company, solicit, encourage or take any other action which is intended to induce or encourage, or has the effect of inducing or encouraging, any customer, client or supplier who or which is, or had been within the prior two (2) years, a customer or potential customer, or supplier or potential supplier, of the Company or HUMBL to terminate or alter in any way such customer’s, client’s, or supplier’s relationship with the Company or HUMBL, nor shall Employee call on or solicit any such customers, clients or suppliers with respect to or on behalf of any business similar to or competitive with the Company’s or HUMBL’s NFT business.

 

7.4. Remedies. Employee expressly agrees and acknowledges that the covenant not to compete and the nonsolicitation covenants contained in this Section 7 are for the Company’s protection because of the nature and scope of the Company’s business and Employee’s position with and the scope of the duties, responsibilities and obligations delegated to Employee by the Company hereby. If any of the covenants or agreements contained in this Section 7 are materially violated or breached by Employee, Employee agrees and acknowledges that any such material violation or breach will cause irreparable injury to the Company and that the remedy at law for any such material violation or breach will be inadequate and that the Company will be entitled to injunctive relief and other equitable remedies. The noncompetition and nonsolicitation provisions set forth in Sections 7.1, 7.2, and 7.3 hereof, respectively, shall be extended by any period of time during which Employee is in material violation or breach of this Section 7.

 

7.5. Interpretation. It is the intention of the parties hereto that the noncompetition and nonsolicitation covenants contained in this Section 7 be enforced to the greatest extent (but to no greater extent) in time, scope, and degree of participation as is permitted by applicable law. To this end, the parties hereto agree that such covenants shall be construed to extend in time and territory and with respect to degree of participation only so far as they may be enforced, and that such covenants are to that end hereby declared divisible and severable because it is a purpose of this Agreement to govern competition by Employee anywhere in the United States in which the Company, during the Restricted Period, is engaged or intends to become engaged in the Company’s business.

 

7.6. Employee Acknowledgement. Employee acknowledges that Employee’s covenants and agreements in this Section 7 are reasonable and necessary to protect the Company’s legitimate interest in its proprietary information and goodwill. Employee acknowledges that this Section 7 is not so broad as to prevent Employee from earning a livelihood or practicing Employee’s chosen profession after termination or expiration of this Agreement. Employee further acknowledges that the covenants and agreements in this Section 7 shall remain enforceable if the Company terminates Employee’s relationship with the Company under this Agreement. Employee further acknowledges and agrees that without such restrictions, the Company would not have entered into this Agreement.

 

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8. Confidentiality Agreement. Employee agrees to execute a Confidential Information, Invention Assignment, and Arbitration Agreement in substantially the form attached hereto as Exhibit A (the “Confidentiality Agreement”).

 

9. Miscellaneous.

 

9.1. Severability. If any court determines that any provision of this Agreement or any part thereof is invalid or unenforceable, the remainder of this Agreement shall be given full force and effect without regard to the invalid portions. If any court determines that any provision of this Agreement or any part thereof is unenforceable because of the duration or geographic scope of such provision, such court shall have the power to reduce the duration or scope of such provision, as the case may be and in its reduced form such provision shall then be enforceable.

 

9.2. Notices. Any notice required or permitted hereunder to be given by either party shall be in writing and shall be delivered personally or sent by certified or registered mail, postage prepaid, or by overnight courier, or by facsimile or email to the party to the address the party may designate from time to time. A notice delivered personally shall be effective upon receipt. A notice sent by facsimile or email shall be effective twenty-four (24) hours after the dispatch thereof. A notice delivered by mail or by overnight courier shall be effective on the earlier of the date delivered (or delivery refused) or the third day after the day of mailing.

 

9.3. Successors and Assigns. The rights and obligations of the Company under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Company. This Agreement is for the unique personal services of Employee, and Employee shall not be entitled to assign any of his rights or obligations hereunder, except that Employee may assign his rights to payment under the Agreement.

 

9.4. Entire Agreement. This Agreement and any exhibits hereto constitute the entire agreement between the parties with respect to the employment of Employee. This Agreement can be amended or modified only in a writing signed by Employee and an authorized representative of the Company.

 

9.5. Counterparts. This Agreement may be executed in counterparts and by facsimile or electronic delivery of signature pages, each of which shall be deemed an original and all of which together shall be considered one and the same agreement.

 

9.6. Governing Law; Consent to Personal Jurisdiction. This Agreement will be governed by the laws of the State of California without regard to California’s conflicts-of-law. To the extent that any lawsuit is permitted under this Agreement, the parties hereby expressly consent to the personal and exclusive jurisdiction and venue of the state and federal courts located in Los Angeles County, California for any lawsuit filed between Employee and the Company.

 

9.7. Arbitration. This Agreement shall be subject to the arbitration provisions set forth in Section 10 of the Confidentiality Agreement.

 

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9.8. Further Assurances. Each party agrees to execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken all such further or other actions as are reasonably necessary or desirable upon the request of any other party to more fully effectuate the purposes and intent of this Agreement.

 

9.9. Modification. No provision of this Agreement shall be amended, waived or modified except by an instrument in writing signed by all of the parties hereto.

 

9.10. Waiver. The waiver by either party of a breach by the other party of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach.

 

9.11. Advice of Counsel. Employee hereby acknowledges that he has been, and hereby is, advised to seek legal counsel and to review this document with legal counsel of Employee’s choice. Employee acknowledges that this Agreement is written in a manner understandable to Employee.

 

9.12. Voluntary Execution. Employee represents and warrants that he has signed this Agreement voluntarily and of his own free will and that he has not been subjected to duress or undue influence from any source.

 

9.13. Waiver of Jury Trial. as a specifically bargained inducement for each of the parties to enter into this agreement (each party having had opportunity to consult counsel), each party expressly WAIVES THE RIGHT TO TRIAL BY JURY IN ANY PROCEEDING RELATING TO OR ARISING IN ANY WAY FROM THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT.

 

[Remainder of page intentionally left blank; signature page to follow]

 

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In witness whereof, the parties hereto have executed this Employment Agreement as of the date first written above.

 

  COMPANY:
     
  Monster Creative, LLC
     
  By:           
     
  Printed Name:          
     
  Title:  
     
  EMPLOYEE:
   
  Doug Brandt, an individual

 

[Signature Page to Employment Agreement]

 

 

 

 

EXHIBIT A

 

CONFIDENTIAL INFORMATION, INVENTION ASSIGNMENT, AND ARBITRATION AGREEMENT

 

 

 

 

 

Exhibit 10.44

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (this “Agreement”) is entered into by and between Monster Creative, LLC, a California limited liability company (the “Company”), and Kevin Childress, an individual (“Employee”), effective as of July 1, 2021 (the “Effective Date”).

 

In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1. Employment. The Company hereby employs Employee, and Employee hereby accepts such employment, on the terms and conditions of this Agreement.

 

2. Term. By signing this Agreement, Employee reiterates his intention to remain employed with the Company for a period of time beginning on the Effective Date and ending on the date that is thirty six (36) months from the Effective Date (the “Initial Term”), unless earlier terminated pursuant to Section 6 below. Following the Initial Term, this Agreement will remain in effect until terminated by either party with fifteen (15) days’ prior written notice (the time during which Employee is employed by the Company is referred to hereinafter as the “Term”).

 

3. Duties.

 

3.1. General Duties. Employee shall be employed as the President and Creative Director of the Company, and shall have such duties, responsibilities and obligations as are established by the Company or are generally required of persons employed in similar positions. Employee shall also perform such other services and duties for the Company which are appropriate and customary to the offices and positions held by Employee and assigned or delegated to him from time to time by the Company. Employee shall report directly to the Company’s Chief Executive Officer, Doug Brandt. Employee shall be eligible for any indemnification rights in connection with or as a result of Employee’s service as an officer or director in accordance with the Company’s Operating Agreement, and as required by law.

 

3.2. Performance. To the best of his ability and experience, Employee will at all times during the Term loyally and conscientiously perform all duties, and discharge all responsibilities and obligations, required of and from him pursuant to the express and implicit terms hereof, and to the reasonable satisfaction of the Company. Except as set forth in Section 3.3 below, Employee shall devote substantially all his business time, energy, skill and attention to the business of the Company, and the Company shall be entitled to all of the benefits and profits arising from or incident to all such work, services, and advice of Employee rendered to the Company during the Term.

 

3.3. Side Projects. Employee may devote a reasonable amount of time to the following activities (e.g., a few hours a week), so long as such activities do not individually or in the aggregate inhibit or prohibit the performance of Employee’s duties under this Agreement, or conflict with the Company’s business: (a) develop creative entertainment projects on a personal basis or through Employee’s separately-owned companies, including, without limitation, movie ideas, show concepts, music, and scripts, which do not directly compete with the Company’s projects; and (b) the supervision of his and his family’s personal passive investments and other uncompensated activities involving professional, charitable, community, educational, and religious organizations (including membership on the boards of such organizations).

 

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4. Compensation and Benefits.

 

4.1. Salary. The Company shall pay to Employee an annual base salary of $400,000.00 (“Annual Base Salary”). Employee’s Annual Base Salary, which shall be prorated for any partial employment period, will be payable in equal bi-weekly installments or at such other intervals as may be established for the Company’s customary payroll schedule, less all applicable federal, state and local income and employment tax withholdings required by law.

 

4.2. Employee Benefits. During the Term, Employee will be entitled to participate in the employee benefit plans currently and hereafter maintained by the Company of general applicability to other similarly situated employees of the Company, including, without limitation, medical, dental, vision, life, and disability insurance coverage, 401(k) plan, and other fringe benefit plans and programs. The Company reserves the right to cancel or change the benefit plans and programs it offers to its employees at any time.

 

4.3. Vacation. Employee will be entitled to fifteen (15) days of paid vacation per year, with the timing and duration of specific vacations mutually and reasonably agreed to by the parties hereto. Employee may accrue up to a maximum cap of twenty-five (25) vacation days.

 

4.4. Expenses. The Company will reimburse Employee for reasonable travel, entertainment or other expenses incurred by Employee in the furtherance of or in connection with the performance of Employee’s duties hereunder, provided that such expenses are pre-approved in writing by the Company, are not in excess of any travel/expense budget provided to Employee, and Employee provides all receipts and other supporting documentation as may be requested by the Company. The Company will reimburse Employee for business class airfare for all work-related flights of four (4) hours or more.

 

4.5. Annual Performance Bonus. The Company and Employee shall work diligently and in good faith to establish the annual performance bonuses to which Employee shall be eligible by no later than October 1, 2021, which shall be based on the following: (i) an annual performance bonus based on the amount of the excess by which the performance of the Company exceeds certain metrics, as may be mutually agreed upon by the Company and Employee; and (ii) in the event the Company performs services for any affiliate or third party for which payment of the services is not based on an hourly rate schedule and is paid in an amount that is not immediately available funds (e.g,. securities), then Employee shall be entitled to participate in the ownership of such funds in a manner and amount that is mutually agreed upon by the Company and Employee. Any such annual performance bonuses shall be determined to the extent reasonably practical on or before December 31 of each year and paid on or before January 31 of the following year; provided, however, in the event any portion of the annual performance bonus is not immediately available funds (e.g., securities), then the Company shall provide Employee reasonable evidence of a right to such portion of the annual performance bonus and upon such time as such portion of annual performance bonus becomes immediately available funds, provide, deliver and pay such bonus to Employee in immediately available funds.

 

5. Restrictions.

 

5.1. No Use of Company Property for Personal Use. No Company property may be used for personal purposes by Employee without the prior written consent of the Company. Additionally, no personal expenses are to be paid for with Company funds.

 

5.2. Corporate Opportunity Doctrine. As an employee of the Company, Employee hereby acknowledges and agrees that the “corporate opportunity” doctrine applies to Employee with respect to his fiduciary duties to the Company. As a result, Employee agrees to provide the Company with a right to review and accept various business opportunities that may be complimentary to the Company’s business operations, except as set forth in Section 3.3. Any business opportunity that is rejected by the Company in writing will then be excluded from the restrictions otherwise applicable to Employee under this Section 5.2.

 

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6. Termination of Employment.

 

6.1. Death or Disability. If Employee’s employment shall terminate due to his death or Disability (defined below), Employee (or his/her estate) shall be paid, in lieu of all other payments hereunder, the following: (1) accrued and unpaid salary through the effective date of the termination of Employee’s employment with Company (“Date of Termination”); (2) accrued and unused vacation through the Date of Termination; (3) a pro-rated portion of any bonuses, including without limitation, performance bonuses, based on Employee’s performance through the Date of Termination; (4) vested benefits and other amounts due to Employee under any plan, program, policy or other agreement with the Company; and (5) reimbursement for all actual and previously unreimbursed out-of-pocket business expenses properly incurred to the Date of Termination in accordance with Company’s standard business expense reimbursement policies (collectively, the “Accrued Amounts”). The Accrued Amounts shall be paid to Employee or Employee’s surviving spouse, if any, or otherwise to Employee’s estate, in a single lump sum payment within thirty (30) days of Employee’s death or Disability, or, if otherwise provided in an applicable employee benefit plan, in accordance with the time and form of payment provisions of such plan, in accordance with applicable law. For purposes of this Agreement “Disability” shall mean that Employee has been prevented from working for more than a continuous period of six (6) months, or for shorter periods aggregating more than six (6) months in any consecutive twelve (12) month period, because of physical or mental incapacity or other disability for which Employee has been provided all legally required leaves of absence and reasonable accommodations.

 

6.2. Termination Without Cause or Resignation for Good Reason. If (1) Company terminates Employee’s employment during the Initial Term other than (a) due to Employee’s death or Disability or (b) for Cause (as defined below); or (2) if Employee resigns from Employee’s employment for Good Reason (as defined below) during the Initial Term, Employee shall receive the Accrued Amounts on the Date of Termination and, in addition, subject to the Severance Conditions below, (i) Company shall provide a severance payment equal to three (3) months of Employee’s salary as of the Date of Termination (the “Severance Payment”), divided and paid in equal installments over a period of three (3) months in accordance with Company’s regular payroll practices starting on the first regular payday occurring after the effective date of the Release (as defined below), and (ii) the Company will reimburse Employee for COBRA premiums (at the coverage levels and at the Company-paid rate in effect immediately prior to such termination) for Employee and Employee’s covered dependents until the earliest of (A) the date that is three (3) months following the Date of Termination, (B) the date that Employee (or Employee’s spouse or dependents, as applicable) are no longer eligible for COBRA coverage or (C) the date when Employee receives substantially equivalent health insurance coverage in connection with new employment (the “COBRA Benefit”). Company’s obligation to pay Employee the Severance Payment and COBRA Benefit shall be conditioned on Employee’s satisfaction of the following (the “Severance Conditions”): (1) Employee must first sign, and allow to become effective, a mutually-approved separation agreement, which shall include a full general release in a form acceptable to Company, releasing all claims, known or unknown, that Employee may have against Company arising out of or any way related to Employee’s employment or termination of employment with Company (the “Release”); and (2) on or before the effective date of the Release, Employee must have (i) reconfirmed Employee’s agreement to abide by all of the surviving provisions of this Agreement and any other agreement between Employee and Company, (ii) agreed to cooperate in the transition of Employee’s employment; and (iii) agreed not to make any voluntary statements, written or oral, that defame or disparage the personal and/or business reputations, practices, or conduct of the Company or any of its affiliates, except for any statements that constitute protected or privileged conduct under applicable law. All other Company obligations to Employee will be automatically terminated and completely extinguished except as provided by law. In the event that Employee is terminated without Cause or Employee terminates his employment without Good Reason, Employee shall be under no obligation to mitigate any damages.

 

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6.3. Termination for Cause. Company shall have the right at any time, upon written notice to Employee, to terminate Employee’s employment immediately for Cause. If Company terminates Employee’s employment for Cause, Employee shall have no right to receive any further compensation other than the Accrued Amounts. In the event that Company terminates Employee’s employment for Cause, Company shall pay Employee Employee’s Accrued Amounts on the Date of Termination.

 

As used herein “Cause” shall mean: (a) conviction or entry of a plea of nolo contendere for any felony; (b) embezzlement, misappropriation, fraud, dishonesty, unethical business conduct, or breach of fiduciary duty to Company or any affiliate (other than those acts that are curable without damage to the Company and/or its affiliates, in which case Employee will have ten (10) days to cure such breach following written notice thereof to Employee by Company, and other than those acts that do not result in material harm to the Company); (c) inability or refusal to substantially perform Employee’s duties hereunder and Employee’s failure to cure such condition within 30 days after receiving written notice thereof by the Company; (d) failure to follow reasonable and lawful directions from the persons to whom Employee reports and Employee’s failure to cure such condition within 30 days after receiving written notice thereof by the Company; (e) excessive use of alcohol or illegal drugs that materially interferes with performance of Employee’s obligations to Company or any affiliate, continuing after written warning; (f) commission of any willful or intentional act which materially injures the reputation, business or business relationships of Company, any affiliate, Employee or other employees of Company or any affiliates; (g) willful disregard or violation of Company’s or any affiliate’s written policies regarding harassment or discrimination, or any other material violation of Company’s or any affiliate’s written policies as in effect from time to time and Employee’s failure to cure such breach within 30 days after receiving written notice thereof by the Company; (h) gross negligence or willful misconduct in the performance of Employee’s duties or with regard to the assets, business or employees of Company or any affiliates; (i) intentional usurpation of a material corporate opportunity; or (j) intentional misappropriation, unauthorized use or disclosure of Proprietary Information that results in a material breach of this Agreement.

 

As used herein “Good Reason” shall mean Employee’s resignation due to the occurrence of any of the following conditions which occurs without Employee’s written consent, provided that the requirements regarding advance notice and an opportunity to cure set forth below are satisfied: (i) a material reduction of Employee’s duties, authority, responsibilities or reporting relationship relative to Employee’s duties, authority, responsibilities or reporting relationship as in effect immediately prior to such reduction; (ii) a reduction in Employee’s then-current salary; (iii) any material breach by the Company or any successor company of any material provision of this Agreement and the Transaction Documents (as such term is defined in the Membership Purchase Agreement); (iv) any material breach by HUMBL, Inc. (“HUMBL”) or any successor company of any material provision of this Agreement and the Transaction Documents, including, without limitation, its promissory note obligations to Employee; (v) the failure of any acquirer or successor to the Company or any affiliate of such affiliate or successor to assume or otherwise continue the obligations under this Agreement; (vi) the Company (or its successor) conditions Employee’s continued service on Employee being transferred to a site of employment that would increase Employee’s one-way commute by more than 5 miles from Employee’s then principal residence; (vii) commission of any willful or intentional act, including, without limitation, harassment or discrimination, by HUMBL or its officers or directors which materially injures the reputation, business or business relationships of Company, any affiliate, Employee or other employees of Company or any affiliates; or (viii) intentional misappropriation, unauthorized use or disclosure of Proprietary Information belonging to the Company’s clients that results in a breach of the Company’s agreements. In order for Employee to resign for Good Reason, Employee must provide written notice to the Company of the existence of the Good Reason condition within 90 days of the initial existence of such Good Reason condition. Upon receipt of such notice, the Company will have 30 days during which it may remedy the Good Reason condition, Employee may suspend work for the Company, and the Company will not be required to provide the termination payments or benefits described herein as a result of such proposed resignation. If the Good Reason condition is not remedied within such 30-day period, Employee may resign based on the Good Reason condition specified in the notice effective no later than 60 days following the expiration of the 30-day cure period.

 

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6.4. Employee Resignation. If Employee resigns from Employee’s employment for any reason other than for Good Reason during the Initial Term, Employee’s resignation shall be considered a material breach of this Agreement. Notwithstanding the foregoing, in such event, only the following shall apply: (i) Company shall pay Employee Employee’s Accrued Amounts on the Date of Termination, (ii) all other Company obligations to Employee hereunder, and all Employee’s obligations to Company hereunder, shall be automatically terminated and completely extinguished, (iii) this Agreement shall be automatically terminated, and (iv) each party shall have no claims against or liability to the other party under this Agreement. Further notwithstanding the foregoing, during the Initial Term, Employee may only resign after first providing 30 days’ prior written notice to the Company.

 

6.5. No Further Obligations. The amounts and benefits provided for in this Section shall be in lieu of any termination or severance payments or benefits for which Employee may be eligible or entitled, now or in the future, under any of the plans, policies, or programs of Company or any of its subsidiaries or affiliates. In addition, the amounts and benefits provided for in this Section shall be inclusive of all statutory severance payable or otherwise provided to Employee in relation to Employee’s employment by Company and the termination of Employee’s employment under this Agreement and compensation for all required notice periods. Except as otherwise expressly set forth in this Section, from and after the date of such termination, Employee shall (i) have no right to receive any further compensation (including salary or bonus) hereunder, and, (ii) except to the extent required by law, cease to be covered under or be permitted to actively participate in any benefits plans or programs.

 

6.6. Resignation from Officer Positions. If Employee’s employment with Company terminates for any reason, Employee shall be deemed to have resigned at that time from any and all positions that Employee may have held with Company or any of its affiliates, as designated by Company, or any other positions that Employee held on behalf of Company. If, for any reason, this Section is deemed insufficient to effectuate such resignation, following a reasonable opportunity to review, Employee hereby authorizes Company to execute any documents or instruments consistent herewith which Company may deem necessary or desirable to effectuate such resignation or resignations, and to act as Employee’s attorney-in-fact. Company will provide Employee with a copy of such documents.

 

6.7. Section 409A. Certain payments and benefits payable under this Agreement are intended to be exempt from, or comply with, Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the Treasury Regulations and Internal Revenue Service guidance thereunder. To the extent the payments and benefits under the Agreement are subject to Section 409A of the Code, the Agreement shall be interpreted, construed and administered in a manner that satisfies the requirements of Sections 409A (a) (2), (3) and (4) of the Code and the Treasury Regulations and Internal Revenue Service guidance thereunder. Each payment and benefit payable under this Agreement is intended to constitute a separate payment for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations. If the parties determine that any payments or benefits payable under this Agreement subject to Section 409A of the Code do not comply with Section 409A of the Code, Company and Employee agree to amend this Agreement, or take such other actions as Company and Employee reasonably deem necessary or appropriate, to comply with the requirements of Section 409A of the Code, while preserving benefits that are, in the aggregate, no less favorable than the benefits as provided to Employee under this Agreement. If any provision of this Agreement would cause such payments or benefits to fail to so comply, such provision shall not be effective and shall be null and void with respect to such payments or benefits, and such provision shall otherwise remain in full force and effect.

 

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7. Noncompetition and Nonsolicitation with the Company’s NFT Business.

 

7.1. Noncompetition with the Company’s NFT Business. During a period of time beginning on the Effective Date and ending on the earlier of (i) the date that is thirty six (36) months from the Effective Date, or (ii) the occurrence of an “Event of Default” pursuant to Section 4.1, or a breach of Section 4.3, of the Convertible Promissory Note, dated June 30, 2021, issued by HUMBL to Employee (the “Restricted Period”), and with respect to the Company’s NFT business only, Employee shall not, directly or indirectly (whether as a principal, agent, independent contractor, employee, partner, member, owner, or in any other similar capacity), own, manage, operate, control, participate in, perform services for, be employed by, or otherwise carry on, a business similar to or competitive with the Company’s NFT business anywhere in the United States or location in which the Company, during the Term, is engaged or intends to become engaged in the Company’s NFT business. Notwithstanding the foregoing, Employee shall not be prohibited from owning not more than one percent of the voting stock of any publicly traded entity that competes with the Company. This Section 7.1 shall not apply to, and during the Restricted Period, Employee shall be entitled to freely engaged in, any or all business or other activity relating to the business engaged in, and services performed, by the Company prior to the Closing Date (the “Pre-Closing Business”). During the Restricted Period, Employee shall be permitted to work in any business or industry in which the Company operated prior to the Closing Date, including without limitation, the entertainment industry. For purposes of this Agreement, “Closing Date” shall have the meaning given to it in that certain Membership Interest Purchase Agreement, dated as of June 30, 2021, among HUMBL, Inc, Phantom Power, LLC and Kevin Childress (the “Membership Purchase Agreement”)

 

7.1.1 Resignation During the Initial Term Without Good Reason. If Employee resigns from Employee’s employment for any reason other than for Good Reason during the Initial Term, during the Restricted Period, Employee shall not, directly or indirectly, own, manage, operate, control, participate in, perform services for, be employed by, or otherwise carry on, a business similar to or competitive with the Company’s business anywhere in the United States or location in which the Company, during the Initial Term, is engaged or intends to become engaged in the Company’s business.

 

7.2. Nonsolicitation of Company Employees. During the Restricted Period, Employee shall not, directly or indirectly, recruit, solicit, induce, or influence (or seek to induce or influence) any person who is employed by, hired by, affiliated with, or acts as a consultant, independent contractor, or salesperson for, HUMBL or the Company to terminate or alter his/her relationship with HUMBL or the Company. Notwithstanding the forgoing, the prohibition in this Section 7.2 shall not restrict Employee or its designee from soliciting for employment or engagement, offering to hire or engage and/or hiring or engaging any person (i) who responds to general solicitation of employment or engagement (including through the use of advertisements or recruiting firms), or (ii) who ceases to be employed or engaged by the Company prior to any discussion regarding employment, engagement or other contact between Consultant or its designee and such person.

 

7.3. Nonsolicitation of Customers for NFT Business. With respect to the Company’s NFT business only, during the Restricted Period, Employee shall not, directly or indirectly, without the prior written consent of the Company, solicit, encourage or take any other action which is intended to induce or encourage, or has the effect of inducing or encouraging, any customer, client or supplier who or which is, or had been within the prior two (2) years, a customer or potential customer, or supplier or potential supplier, of the Company or HUMBL to terminate or alter in any way such customer’s, client’s, or supplier’s relationship with the Company or HUMBL, nor shall Employee call on or solicit any such customers, clients or suppliers with respect to or on behalf of any business similar to or competitive with the Company’s or HUMBL’s NFT business. However, this Section 7.3 shall not apply to the Company’s Pre-Closing Business, and during the Restricted Period, Employee shall be permitted to solicit any customer, client, or supplier with respect to work in any business or industry in which the Company operated prior to the Closing Date, including without limitation, the entertainment industry.

 

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7.3.1 Resignation During the Initial Term Without Good Reason. If Employee resigns from Employee’s employment for any reason other than for Good Reason during the Initial Term, during the Restricted Period, Employee shall not, directly or indirectly, without the prior written consent of the Company, solicit, encourage or take any other action which is intended to induce or encourage, or has the effect of inducing or encouraging, any customer, client or supplier who or which is, or had been within the prior two (2) years, a customer or potential customer, or supplier or potential supplier, of the Company or HUMBL to terminate or alter in any way such customer’s, client’s, or supplier’s relationship with the Company or HUMBL, nor shall Employee call on or solicit any such customers, clients or suppliers with respect to or on behalf of any business similar to or competitive with the Company’s or HUMBL’s NFT business.

 

7.4. Remedies. Employee expressly agrees and acknowledges that the covenant not to compete and the nonsolicitation covenants contained in this Section 7 are for the Company’s protection because of the nature and scope of the Company’s business and Employee’s position with and the scope of the duties, responsibilities and obligations delegated to Employee by the Company hereby. If any of the covenants or agreements contained in this Section 7 are materially violated or breached by Employee, Employee agrees and acknowledges that any such material violation or breach will cause irreparable injury to the Company and that the remedy at law for any such material violation or breach will be inadequate and that the Company will be entitled to injunctive relief and other equitable remedies. The noncompetition and nonsolicitation provisions set forth in Sections 7.1, 7.2, and 7.3 hereof, respectively, shall be extended by any period of time during which Employee is in material violation or breach of this Section 7.

 

7.5. Interpretation. It is the intention of the parties hereto that the noncompetition and nonsolicitation covenants contained in this Section 7 be enforced to the greatest extent (but to no greater extent) in time, scope, and degree of participation as is permitted by applicable law. To this end, the parties hereto agree that such covenants shall be construed to extend in time and territory and with respect to degree of participation only so far as they may be enforced, and that such covenants are to that end hereby declared divisible and severable because it is a purpose of this Agreement to govern competition by Employee anywhere in the United States in which the Company, during the Restricted Period, is engaged or intends to become engaged in the Company’s business.

 

7.6. Employee Acknowledgement. Employee acknowledges that Employee’s covenants and agreements in this Section 7 are reasonable and necessary to protect the Company’s legitimate interest in its proprietary information and goodwill. Employee acknowledges that this Section 7 is not so broad as to prevent Employee from earning a livelihood or practicing Employee’s chosen profession after termination or expiration of this Agreement. Employee further acknowledges that the covenants and agreements in this Section 7 shall remain enforceable if the Company terminates Employee’s relationship with the Company under this Agreement. Employee further acknowledges and agrees that without such restrictions, the Company would not have entered into this Agreement.

 

8. Confidentiality Agreement. Employee agrees to execute a Confidential Information, Invention Assignment, and Arbitration Agreement in substantially the form attached hereto as Exhibit A (the “Confidentiality Agreement”).

 

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9. Miscellaneous.

 

9.1. Severability. If any court determines that any provision of this Agreement or any part thereof is invalid or unenforceable, the remainder of this Agreement shall be given full force and effect without regard to the invalid portions. If any court determines that any provision of this Agreement or any part thereof is unenforceable because of the duration or geographic scope of such provision, such court shall have the power to reduce the duration or scope of such provision, as the case may be and in its reduced form such provision shall then be enforceable.

 

9.2. Notices. Any notice required or permitted hereunder to be given by either party shall be in writing and shall be delivered personally or sent by certified or registered mail, postage prepaid, or by overnight courier, or by facsimile or email to the party to the address the party may designate from time to time. A notice delivered personally shall be effective upon receipt. A notice sent by facsimile or email shall be effective twenty-four (24) hours after the dispatch thereof. A notice delivered by mail or by overnight courier shall be effective on the earlier of the date delivered (or delivery refused) or the third day after the day of mailing.

 

9.3. Successors and Assigns. The rights and obligations of the Company under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Company. This Agreement is for the unique personal services of Employee, and Employee shall not be entitled to assign any of his rights or obligations hereunder, except that Employee may assign his rights to payment under the Agreement.

 

9.4. Entire Agreement. This Agreement and any exhibits hereto constitute the entire agreement between the parties with respect to the employment of Employee. This Agreement can be amended or modified only in a writing signed by Employee and an authorized representative of the Company.

 

9.5. Counterparts. This Agreement may be executed in counterparts and by facsimile or electronic delivery of signature pages, each of which shall be deemed an original and all of which together shall be considered one and the same agreement.

 

9.6. Governing Law; Consent to Personal Jurisdiction. This Agreement will be governed by the laws of the State of California without regard to California’s conflicts-of-law. To the extent that any lawsuit is permitted under this Agreement, the parties hereby expressly consent to the personal and exclusive jurisdiction and venue of the state and federal courts located in Los Angeles County, California for any lawsuit filed between Employee and the Company.

 

9.7. Arbitration. This Agreement shall be subject to the arbitration provisions set forth in Section 10 of the Confidentiality Agreement.

 

9.8. Further Assurances. Each party agrees to execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken all such further or other actions as are reasonably necessary or desirable upon the request of any other party to more fully effectuate the purposes and intent of this Agreement.

 

9.9. Modification. No provision of this Agreement shall be amended, waived or modified except by an instrument in writing signed by all of the parties hereto.

 

9.10. Waiver. The waiver by either party of a breach by the other party of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach.

 

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9.11. Advice of Counsel. Employee hereby acknowledges that he has been, and hereby is, advised to seek legal counsel and to review this document with legal counsel of Employee’s choice. Employee acknowledges that this Agreement is written in a manner understandable to Employee.

 

9.12. Voluntary Execution. Employee represents and warrants that he has signed this Agreement voluntarily and of his own free will and that he has not been subjected to duress or undue influence from any source.

 

9.13. Waiver of Jury Trial. as a specifically bargained inducement for each of the parties to enter into this agreement (each party having had opportunity to consult counsel), each party expressly WAIVES THE RIGHT TO TRIAL BY JURY IN ANY PROCEEDING RELATING TO OR ARISING IN ANY WAY FROM THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT.

 

[Remainder of page intentionally left blank; signature page to follow]

 

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In witness whereof, the parties hereto have executed this Employment Agreement as of the date first written above.

 

  COMPANY:
     
  Monster Creative, LLC
     
  By:  
     
  Printed Name:  
     
  Title:  
     
  EMPLOYEE:
   
  Kevin Childress, an individual

 

[Signature Page to Employment Agreement]

 

 

 

 

EXHIBIT A

 

CONFIDENTIAL INFORMATION, INVENTION ASSIGNMENT, AND ARBITRATION AGREEMENT

 

 

 

 

 

Exhibit 10.45

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (this “Agreement”) is entered into by and between HUMBL, Inc., a Delaware corporation (the “Company”), and Brian Foote, an individual (“Employee”), effective as of July 13, 2021 (the “Effective Date”).

 

In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1. Employment. The Company hereby employs Employee, and Employee hereby accepts such employment, on the terms and conditions of this Agreement.

 

2. Term. By signing this Agreement, Employee reiterates his intention to remain employed with the Company for a period of time beginning on the Effective Date and ending on the date that is eighteen (18) months from the Effective Date (the “Initial Term”), unless earlier terminated pursuant to Section 6 below. Following the Initial Term, this Agreement will remain in effect until terminated by either party with fifteen (15) days’ prior written notice (the time during which Employee is employed by the Company is referred to hereinafter as the “Term”).

 

3. Duties.

 

3.1. General Duties. Employee shall be employed as the President and Chief Executive Officer of the Company, and shall have such duties, responsibilities and obligations as are established by the Company or are generally required of persons employed in similar positions. Employee shall also perform such other services and duties for the Company which are appropriate and customary to the offices and positions held by Employee and assigned or delegated to him from time to time by the Company.

 

3.2. Performance. To the best of his ability and experience, Employee will at all times during the Term loyally and conscientiously perform all duties, and discharge all responsibilities and obligations, required of and from him pursuant to the express and implicit terms hereof, and to the reasonable satisfaction of the Company. Employee shall devote substantially all his business time, energy, skill and attention to the business of the Company, and the Company shall be entitled to all of the benefits and profits arising from or incident to all such work, services, and advice of Employee rendered to the Company during the Term.

 

4. Compensation and Benefits.

 

4.1. Salary. The Company shall pay to Employee an annual base salary of $1.00 (“Annual Base Salary”). Employee’s Annual Base Salary, which shall be prorated for any partial employment period, will be payable in equal bi-weekly installments or at such other intervals as may be established for the Company’s customary payroll schedule, less all applicable federal, state and local income and employment tax withholdings required by law.

 

4.2. Employee Benefits. During the Term, Employee will be entitled to participate in the employee benefit plans currently and hereafter maintained by the Company of general applicability to other similarly situated employees of the Company. The Company reserves the right to cancel or change the benefit plans and programs it offers to its employees at any time.

 

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4.3. Vacation. Employee will be entitled to fifteen (15) days of paid vacation per year, with the timing and duration of specific vacations mutually and reasonably agreed to by the parties hereto. Unused vacation days shall not be carried forward from year to year, nor shall Employee be compensated for any unused vacation days.

 

4.4. Expenses. The Company will reimburse Employee for reasonable travel, entertainment or other expenses incurred by Employee in the furtherance of or in connection with the performance of Employee’s duties hereunder, provided that such expenses are pre-approved in writing by the Company, are not in excess of any travel/expense budget provided to Employee, and Employee provides all receipts and other supporting documentation as may be requested by the Company.

 

4.5. Bonus. In the Company’s discretion and depending on various factors, including without limitation the profitability of the Company, Employee may be eligible for certain bonuses, which Company may pay in such amounts and at such times as it deems appropriate.

 

5. Restrictions.

 

5.1. No Use of Company Property for Personal Use. No Company property may be used for personal purposes by Employee without the prior written consent of the Company. Additionally, no personal expenses are to be paid for with Company funds.

 

5.2. Corporate Opportunity Doctrine. As an employee of the Company, Employee hereby acknowledges and agrees that the “corporate opportunity” doctrine applies to Employee with respect to his fiduciary duties to the Company. As a result, Employee agrees to provide the Company with a right to review and accept various business opportunities that may be complimentary to the Company’s business operations. Any business opportunity that is rejected by the Company in writing will then be excluded from the restrictions otherwise applicable to Employee under this Section 5.2.

 

6. Termination of Employment.

 

6.1. Death or Disability. If Employee’s employment shall terminate due to his/her death or Disability (defined below), Employee (or his/her estate) shall be paid, in lieu of all other payments hereunder, the following: (1) accrued and unpaid salary through the effective date of the termination of Employee’s employment with Company (“Date of Termination”); and (2) reimbursement for all actual and previously unreimbursed out-of-pocket business expenses properly incurred to the Date of Termination in accordance with Company’s standard business expense reimbursement policies (collectively, the “Accrued Amounts”). The Accrued Amounts shall be paid to Employee’s surviving spouse, if any, or otherwise to Employee’s estate, in a single lump sum payment within thirty (30) days of Employee’s death, or, if otherwise provided in an applicable employee benefit plan, in accordance with the time and form of payment provisions of such plan, in accordance with applicable law. For purposes of this Agreement “Disability” shall mean that Employee has been prevented from working for more than a continuous period of twelve (12) weeks, or for shorter periods aggregating more than ninety (90) days in any consecutive twelve (12) month period, because of physical or mental incapacity or other disability for which Employee has been provided all legally required leaves of absence and reasonable accommodations.

 

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6.2. Termination Without Cause or Resignation for Good Reason. If (1) Company terminates Employee’s employment during the Initial Term other than (a) due to Employee’s death or Disability or (b) for Cause (as defined below); or (2) if Employee resigns from Employee’s employment for Good Reason (as defined below) during the Initial Term, Employee shall receive the Accrued Amounts on the Date of Termination and, in addition, subject to the Severance Conditions below, (i) Company shall provide a severance payment equal to three (3) months of Employee’s salary as of the Date of Termination (the “Severance Payment”), divided and paid in equal installments over a period of three (3) months in accordance with Company’s regular payroll practices starting on the first regular payday occurring after the effective date of the Release (as defined below), and (ii) the Company will reimburse Employee for COBRA premiums (at the coverage levels and at the Company-paid rate in effect immediately prior to such termination) for Employee and Employee’s covered dependents until the earliest of (A) the date that is three (3) months following the Date of Termination, (B) the date that Employee (or Employee’s spouse or dependents, as applicable) are no longer eligible for COBRA coverage or (C) the date when Employee receives substantially equivalent health insurance coverage in connection with new employment (the “COBRA Benefit”). Company’s obligation to pay Employee the Severance Payment and COBRA Benefit shall be conditioned on Employee’s satisfaction of the following (the “Severance Conditions”): (1) Employee must first sign, and allow to become effective, a Company-approved separation agreement, which shall include a full general release in a form acceptable to Company, releasing all claims, known or unknown, that Employee may have against Company arising out of or any way related to Employee’s employment or termination of employment with Company (the “Release”); and (2) on or before the effective date of the Release, Employee must have (i) reconfirmed Employee’s agreement to abide by all of the surviving provisions of this Agreement and any other agreement between Employee and Company, (ii) agreed to cooperate in the transition of Employee’s employment; and (iii) agreed not to make any voluntary statements, written or oral, or cause or encourage others to make any such statements that defame, disparage, or in any way criticize the personal and/or business reputations, practices, or conduct of the Company or any of its affiliates. All other Company obligations to Employee will be automatically terminated and completely extinguished.

 

6.3. Termination for Cause. Company shall have the right at any time, upon written notice to Employee, to terminate Employee’s employment immediately for Cause. If Company terminates Employee’s employment for Cause, Employee shall have no right to receive any further compensation other than the Accrued Amounts. In the event that Company terminates Employee’s employment for Cause, Company shall pay Employee Employee’s Accrued Amounts on the Date of Termination.

 

As used herein “Cause” shall mean: (a) conviction or entry of a plea of nolo contendere for any felony; (b) embezzlement, misappropriation, fraud, dishonesty, unethical business conduct, or breach of fiduciary duty to Company or any affiliate (other than those acts that are curable without damage to the Company and/or its affiliates, in which case Employee will have ten (10) days to cure such breach following written notice thereof to Employee by Company, and other than those acts that do not result in material harm to the Company); (c) inability or refusal to substantially perform Employee’s duties hereunder and Employee’s failure to cure such condition within 30 days after receiving written notice thereof by the Company; (d) failure to follow reasonable and lawful directions from the persons to whom Employee report and Employee’s failure to cure such condition within 30 days after receiving written notice thereof by the Company; (e) use of alcohol or use of illegal drugs, interfering with performance of Employee’s obligations to Company or any affiliate, continuing after written warning; (f) commission of any willful or intentional act which materially injures or could reasonably be expected to materially injure the reputation, business or business relationships of Company, any affiliate, Employee or other employees of Company or any affiliates; (g) willful disregard or violation of Company’s or any affiliate’s written policies regarding harassment or discrimination, or any other material violation of Company’s or any affiliate’s written policies as in effect from time to time and Employee’s failure to cure such breach within 30 days after receiving written notice thereof by the Company; (h) gross negligence or willful misconduct in the performance Employee’s duties or with regard to the assets, business or employees of Company or any affiliates; (i) material breach of Employee’s obligations to Company or any affiliate (other than those acts that are curable without damage to the Company and/or its affiliates, in which case Employee will have ten (10) days to cure such breach following written notice thereof to Employee by Company); (j) usurpation of a corporate opportunity; or (k) misappropriation, unauthorized use or disclosure of Proprietary Information that results in a material breach of this Agreement.

 

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As used herein “Good Reason” shall mean Employee’s resignation due to the occurrence of any of the following conditions which occurs without Employee’s written consent, provided that the requirements regarding advance notice and an opportunity to cure set forth below are satisfied: (i) a material reduction of Employee’s duties, authority, responsibilities or reporting relationship relative to Employee’s duties, authority, responsibilities or reporting relationship as in effect immediately prior to such reduction; (ii) a 10% or more reduction in Employee’s then-current salary; (iii) any material breach by the Company or any successor corporation of any material provision of this Agreement; (iv) the failure of any acquirer or successor to the Company or any affiliate of such affiliate or successor to assume or otherwise continue the obligations under this Agreement; or (v) the Company (or its successor) conditions Employee’s continued service on Employee being transferred to a site of employment that would increase Employee’s one-way commute by more than 30 miles from Employee’s then principal residence. In order for Employee to resign for Good Reason, Employee must provide written notice to the Company of the existence of the Good Reason condition within 90 days of the initial existence of such Good Reason condition. Upon receipt of such notice, the Company will have 30 days during which it may remedy the Good Reason condition and not be required to provide the payments or benefits described herein as a result of such proposed resignation. If the Good Reason condition is not remedied within such 30-day period, Employee may resign based on the Good Reason condition specified in the notice effective no later than 60 days following the expiration of the 30-day cure period.

 

6.4. Employee Resignation. If Employee resigns from Employee’s employment for any reason other than for Good Reason, Employee’s resignation shall be considered a material breach of this Agreement. Notwithstanding the foregoing, in such event, only the following shall apply: (i) Company shall pay Employee Employee’s Accrued Amounts on the Date of Termination, (ii) all other Company obligations to Employee hereunder, and all Employee’s obligations to Company hereunder, shall be automatically terminated and completely extinguished, (iii) this Agreement shall be automatically terminated, and (iv) each party shall have no claims against or liability to the other party under this Agreement. Further notwithstanding the foregoing, during the Initial Term, Employee may only resign after first providing 120 days’ prior written notice to the Company.

 

6.5. No Further Obligations. The amounts and benefits provided for in this Section shall be in lieu of any termination or severance payments or benefits for which Employee may be eligible or entitled, now or in the future, under any of the plans, policies, or programs of Company or any of its subsidiaries or affiliates. In addition, the amounts and benefits provided for in this Section shall be inclusive of all statutory severance payable or otherwise provided to Employee in relation to Employee’s employment by Company and the termination of Employee’s employment under this Agreement and compensation for all required notice periods. Except as otherwise expressly set forth in this Section, from and after the date of such termination, Employee shall (i) have no right to receive any further compensation (including salary or bonus) hereunder, and, (ii) except to the extent required by law, cease to be covered under or be permitted to actively participate in any benefits plans or programs.

 

6.6. Resignation from Officer Positions. If Employee’s employment with Company terminates for any reason, Employee shall be deemed to have resigned at that time from any and all positions that Employee may have held with Company or any of its affiliates, as designated by Company, or any other positions that Employee held on behalf of Company. If, for any reason, this Section is deemed insufficient to effectuate such resignation, following a reasonable opportunity to review, Employee hereby authorizes Company to execute any documents or instruments consistent herewith which Company may deem necessary or desirable to effectuate such resignation or resignations, and to act as Employee’s attorney-in-fact. Company will provide Employee with a copy of such documents.

 

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6.7. Section 409A. Certain payments and benefits payable under this Agreement are intended to be exempt from, or comply with, Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the Treasury Regulations and Internal Revenue Service guidance thereunder. To the extent the payments and benefits under the Agreement are subject to Section 409A of the Code, the Agreement shall be interpreted, construed and administered in a manner that satisfies the requirements of Sections 409A (a) (2), (3) and (4) of the Code and the Treasury Regulations and Internal Revenue Service guidance thereunder. Each payment and benefit payable under this Agreement is intended to constitute a separate payment for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations. If the parties determine that any payments or benefits payable under this Agreement subject to Section 409A of the Code do not comply with Section 409A of the Code, Company and Employee agree to amend this Agreement, or take such other actions as Company and Employee reasonably deem necessary or appropriate, to comply with the requirements of Section 409A of the Code, while preserving benefits that are, in the aggregate, no less favorable than the benefits as provided to Employee under this Agreement. If any provision of this Agreement would cause such payments or benefits to fail to so comply, such provision shall not be effective and shall be null and void with respect to such payments or benefits, and such provision shall otherwise remain in full force and effect.

 

7. Confidentiality Agreement. Employee agrees to execute a Confidential Information, Invention Assignment, and Arbitration Agreement in substantially the form attached hereto as Exhibit A (the “Confidentiality Agreement”).

 

8. Miscellaneous.

 

8.1. Severability. If any court determines that any provision of this Agreement or any part thereof is invalid or unenforceable, the remainder of this Agreement shall be given full force and effect without regard to the invalid portions. If any court determines that any provision of this Agreement or any part thereof is unenforceable because of the duration or geographic scope of such provision, such court shall have the power to reduce the duration or scope of such provision, as the case may be and in its reduced form such provision shall then be enforceable.

 

8.2. Notices. Any notice required or permitted hereunder to be given by either party shall be in writing and shall be delivered personally or sent by certified or registered mail, postage prepaid, or by overnight courier, or by facsimile or email to the party to the address the party may designate from time to time. A notice delivered personally shall be effective upon receipt. A notice sent by facsimile or email shall be effective twenty-four (24) hours after the dispatch thereof. A notice delivered by mail or by overnight courier shall be effective on the earlier of the date delivered (or delivery refused) or the third day after the day of mailing.

 

8.3. Attorneys’ Fees. In the event of any action at law or in equity to enforce or interpret the terms of this Agreement, the parties agree that the prevailing party shall be entitled to an additional award of the full amount of the attorneys’ fees and expenses paid by such prevailing party in connection with the litigation and/or dispute without reduction or apportionment based upon the individual claims or defenses giving rise to the fees and expenses. Nothing herein shall restrict or impair a court’s power to award fees and expenses for frivolous or bad faith pleading.

 

8.4. Successors and Assigns. The rights and obligations of the Company under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Company. This Agreement is for the unique personal services of Employee, and Employee shall not be entitled to assign any of his rights or obligations hereunder.

 

8.5. Entire Agreement. This Agreement and any exhibits hereto constitute the entire agreement between the parties with respect to the employment of Employee. This Agreement can be amended or modified only in a writing signed by Employee and an authorized representative of the Company.

 

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8.6. Counterparts. This Agreement may be executed in counterparts and by facsimile or electronic delivery of signature pages, each of which shall be deemed an original and all of which together shall be considered one and the same agreement.

 

8.7. Governing Law; Consent to Personal Jurisdiction. This Agreement will be governed by the laws of the State of California without regard to California’s conflicts-of-law, except that any dispute regarding the enforceability of the arbitration section of this Agreement shall be governed by the FAA. To the extent that any lawsuit is permitted under this Agreement, Employee hereby expressly consents to the personal and exclusive jurisdiction and venue of the state and federal courts located in San Diego County, California for any lawsuit filed against Employee by the Company.

 

8.8. Arbitration. This Agreement shall be subject to the arbitration provisions set forth in Section 10 of the Confidentiality Agreement.

 

8.9. Further Assurances. Each party agrees to execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken all such further or other actions as are reasonably necessary or desirable upon the request of any other party to more fully effectuate the purposes and intent of this Agreement.

 

8.10. Modification. No provision of this Agreement shall be amended, waived or modified except by an instrument in writing signed by all of the parties hereto.

 

8.11. Waiver. The waiver by either party of a breach by the other party of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach.

 

8.12. Advice of Counsel. Employee hereby acknowledges that he has been, and hereby is, advised to seek legal counsel and to review this document with legal counsel of Employee’s choice. Employee acknowledges that this Agreement is written in a manner understandable to Employee.

 

8.13. Voluntary Execution. Employee represents and warrants that he has signed this Agreement voluntarily and of his own free will and that he has not been subjected to duress or undue influence from any source.

 

8.14. Waiver of Jury Trial. as a specifically bargained inducement for each of the parties to enter into this agreement (each party having had opportunity to consult counsel), each party expressly WAIVES THE RIGHT TO TRIAL BY JURY IN ANY PROCEEDING RELATING TO OR ARISING IN ANY WAY FROM THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT.

 

[Remainder of page intentionally left blank; signature page to follow]

 

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In witness whereof, the parties hereto have executed this Employment Agreement as of the date first written above.

 

  COMPANY:
     
  HUMBL, Inc.
     
  By:                   
  Printed Name:
  Title:  
     
  EMPLOYEE:
     
   
  Brian Foote, an individual

 

[Signature Page to Employment Agreement]

 

 
 

 

EXHIBIT A

 

CONFIDENTIAL INFORMATION, INVENTION ASSIGNMENT, AND ARBITRATION

AGREEMENT

 

 

 

 

 

Exhibit 10.46

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (this “Agreement”) is entered into by and between HUMBL, Inc., a Delaware corporation (the “Company”), and Jeffrey Hinshaw, an individual (“Employee”), effective as of July 13, 2021 (the “Effective Date”).

 

In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1. Employment. The Company hereby employs Employee, and Employee hereby accepts such employment, on the terms and conditions of this Agreement.

 

2. Term. By signing this Agreement, Employee reiterates his intention to remain employed with the Company for a period of time beginning on the Effective Date and ending on the date that is eighteen (18) months from the Effective Date (the “Initial Term”), unless earlier terminated pursuant to Section 6 below. Following the Initial Term, this Agreement will remain in effect until terminated by either party with fifteen (15) days’ prior written notice (the time during which Employee is employed by the Company is referred to hereinafter as the “Term”).

 

3. Duties.

 

3.1. General Duties. Employee shall be employed as the Chief Operating Officer, Chief Financial Officer and Corporate Secretary of the Company, and shall have such duties, responsibilities and obligations as are established by the Company or are generally required of persons employed in similar positions. Employee shall also perform such other services and duties for the Company which are appropriate and customary to the offices and positions held by Employee and assigned or delegated to him from time to time by the Company.

 

3.2. Performance. To the best of his ability and experience, Employee will at all times during the Term loyally and conscientiously perform all duties, and discharge all responsibilities and obligations, required of and from him pursuant to the express and implicit terms hereof, and to the reasonable satisfaction of the Company. Employee shall devote substantially all his business time, energy, skill and attention to the business of the Company, and the Company shall be entitled to all of the benefits and profits arising from or incident to all such work, services, and advice of Employee rendered to the Company during the Term.

 

4. Compensation and Benefits.

 

4.1. Salary. The Company shall pay to Employee an annual base salary of $90,000.00 (“Annual Base Salary”). Employee’s Annual Base Salary, which shall be prorated for any partial employment period, will be payable in equal bi-weekly installments or at such other intervals as may be established for the Company’s customary payroll schedule, less all applicable federal, state and local income and employment tax withholdings required by law.

 

4.2. Employee Benefits. During the Term, Employee will be entitled to participate in the employee benefit plans currently and hereafter maintained by the Company of general applicability to other similarly situated employees of the Company. The Company reserves the right to cancel or change the benefit plans and programs it offers to its employees at any time.

 

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4.3. Vacation. Employee will be entitled to fifteen (15) days of paid vacation per year, with the timing and duration of specific vacations mutually and reasonably agreed to by the parties hereto. Unused vacation days shall not be carried forward from year to year, nor shall Employee be compensated for any unused vacation days.

 

4.4. Expenses. The Company will reimburse Employee for reasonable travel, entertainment or other expenses incurred by Employee in the furtherance of or in connection with the performance of Employee’s duties hereunder, provided that such expenses are pre-approved in writing by the Company, are not in excess of any travel/expense budget provided to Employee, and Employee provides all receipts and other supporting documentation as may be requested by the Company.

 

4.5. Bonus. In the Company’s discretion and depending on various factors, including without limitation the profitability of the Company, Employee may be eligible for certain bonuses, which Company may pay in such amounts and at such times as it deems appropriate.

 

5. Restrictions.

 

5.1. No Use of Company Property for Personal Use. No Company property may be used for personal purposes by Employee without the prior written consent of the Company. Additionally, no personal expenses are to be paid for with Company funds.

 

5.2. Corporate Opportunity Doctrine. As an employee of the Company, Employee hereby acknowledges and agrees that the “corporate opportunity” doctrine applies to Employee with respect to his fiduciary duties to the Company. As a result, Employee agrees to provide the Company with a right to review and accept various business opportunities that may be complimentary to the Company’s business operations. Any business opportunity that is rejected by the Company in writing will then be excluded from the restrictions otherwise applicable to Employee under this Section 5.2.

 

6. Termination of Employment.

 

6.1. Death or Disability. If Employee’s employment shall terminate due to his/her death or Disability (defined below), Employee (or his/her estate) shall be paid, in lieu of all other payments hereunder, the following: (1) accrued and unpaid salary through the effective date of the termination of Employee’s employment with Company (“Date of Termination”); and (2) reimbursement for all actual and previously unreimbursed out-of-pocket business expenses properly incurred to the Date of Termination in accordance with Company’s standard business expense reimbursement policies (collectively, the “Accrued Amounts”). The Accrued Amounts shall be paid to Employee’s surviving spouse, if any, or otherwise to Employee’s estate, in a single lump sum payment within thirty (30) days of Employee’s death, or, if otherwise provided in an applicable employee benefit plan, in accordance with the time and form of payment provisions of such plan, in accordance with applicable law. For purposes of this Agreement “Disability” shall mean that Employee has been prevented from working for more than a continuous period of twelve (12) weeks, or for shorter periods aggregating more than ninety (90) days in any consecutive twelve (12) month period, because of physical or mental incapacity or other disability for which Employee has been provided all legally required leaves of absence and reasonable accommodations.

 

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6.2. Termination Without Cause or Resignation for Good Reason. If (1) Company terminates Employee’s employment during the Initial Term other than (a) due to Employee’s death or Disability or (b) for Cause (as defined below); or (2) if Employee resigns from Employee’s employment for Good Reason (as defined below) during the Initial Term, Employee shall receive the Accrued Amounts on the Date of Termination and, in addition, subject to the Severance Conditions below, (i) Company shall provide a severance payment equal to three (3) months of Employee’s salary as of the Date of Termination (the “Severance Payment”), divided and paid in equal installments over a period of three (3) months in accordance with Company’s regular payroll practices starting on the first regular payday occurring after the effective date of the Release (as defined below), and (ii) the Company will reimburse Employee for COBRA premiums (at the coverage levels and at the Company-paid rate in effect immediately prior to such termination) for Employee and Employee’s covered dependents until the earliest of (A) the date that is three (3) months following the Date of Termination, (B) the date that Employee (or Employee’s spouse or dependents, as applicable) are no longer eligible for COBRA coverage or (C) the date when Employee receives substantially equivalent health insurance coverage in connection with new employment (the “COBRA Benefit”). Company’s obligation to pay Employee the Severance Payment and COBRA Benefit shall be conditioned on Employee’s satisfaction of the following (the “Severance Conditions”): (1) Employee must first sign, and allow to become effective, a Company-approved separation agreement, which shall include a full general release in a form acceptable to Company, releasing all claims, known or unknown, that Employee may have against Company arising out of or any way related to Employee’s employment or termination of employment with Company (the “Release”); and (2) on or before the effective date of the Release, Employee must have (i) reconfirmed Employee’s agreement to abide by all of the surviving provisions of this Agreement and any other agreement between Employee and Company, (ii) agreed to cooperate in the transition of Employee’s employment; and (iii) agreed not to make any voluntary statements, written or oral, or cause or encourage others to make any such statements that defame, disparage, or in any way criticize the personal and/or business reputations, practices, or conduct of the Company or any of its affiliates. All other Company obligations to Employee will be automatically terminated and completely extinguished.

 

6.3. Termination for Cause. Company shall have the right at any time, upon written notice to Employee, to terminate Employee’s employment immediately for Cause. If Company terminates Employee’s employment for Cause, Employee shall have no right to receive any further compensation other than the Accrued Amounts. In the event that Company terminates Employee’s employment for Cause, Company shall pay Employee Employee’s Accrued Amounts on the Date of Termination.

 

As used herein “Cause” shall mean: (a) conviction or entry of a plea of nolo contendere for any felony; (b) embezzlement, misappropriation, fraud, dishonesty, unethical business conduct, or breach of fiduciary duty to Company or any affiliate (other than those acts that are curable without damage to the Company and/or its affiliates, in which case Employee will have ten (10) days to cure such breach following written notice thereof to Employee by Company, and other than those acts that do not result in material harm to the Company); (c) inability or refusal to substantially perform Employee’s duties hereunder and Employee’s failure to cure such condition within 30 days after receiving written notice thereof by the Company; (d) failure to follow reasonable and lawful directions from the persons to whom Employee report and Employee’s failure to cure such condition within 30 days after receiving written notice thereof by the Company; (e) use of alcohol or use of illegal drugs, interfering with performance of Employee’s obligations to Company or any affiliate, continuing after written warning; (f) commission of any willful or intentional act which materially injures or could reasonably be expected to materially injure the reputation, business or business relationships of Company, any affiliate, Employee or other employees of Company or any affiliates; (g) willful disregard or violation of Company’s or any affiliate’s written policies regarding harassment or discrimination, or any other material violation of Company’s or any affiliate’s written policies as in effect from time to time and Employee’s failure to cure such breach within 30 days after receiving written notice thereof by the Company; (h) gross negligence or willful misconduct in the performance Employee’s duties or with regard to the assets, business or employees of Company or any affiliates; (i) material breach of Employee’s obligations to Company or any affiliate (other than those acts that are curable without damage to the Company and/or its affiliates, in which case Employee will have ten (10) days to cure such breach following written notice thereof to Employee by Company); (j) usurpation of a corporate opportunity; or (k) misappropriation, unauthorized use or disclosure of Proprietary Information that results in a material breach of this Agreement.

 

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As used herein “Good Reason” shall mean Employee’s resignation due to the occurrence of any of the following conditions which occurs without Employee’s written consent, provided that the requirements regarding advance notice and an opportunity to cure set forth below are satisfied: (i) a material reduction of Employee’s duties, authority, responsibilities or reporting relationship relative to Employee’s duties, authority, responsibilities or reporting relationship as in effect immediately prior to such reduction; (ii) a 10% or more reduction in Employee’s then-current salary; (iii) any material breach by the Company or any successor corporation of any material provision of this Agreement; (iv) the failure of any acquirer or successor to the Company or any affiliate of such affiliate or successor to assume or otherwise continue the obligations under this Agreement; or (v) the Company (or its successor) conditions Employee’s continued service on Employee being transferred to a site of employment that would increase Employee’s one-way commute by more than 30 miles from Employee’s then principal residence. In order for Employee to resign for Good Reason, Employee must provide written notice to the Company of the existence of the Good Reason condition within 90 days of the initial existence of such Good Reason condition. Upon receipt of such notice, the Company will have 30 days during which it may remedy the Good Reason condition and not be required to provide the payments or benefits described herein as a result of such proposed resignation. If the Good Reason condition is not remedied within such 30-day period, Employee may resign based on the Good Reason condition specified in the notice effective no later than 60 days following the expiration of the 30-day cure period.

 

6.4. Employee Resignation. If Employee resigns from Employee’s employment for any reason other than for Good Reason, Employee’s resignation shall be considered a material breach of this Agreement. Notwithstanding the foregoing, in such event, only the following shall apply: (i) Company shall pay Employee Employee’s Accrued Amounts on the Date of Termination, (ii) all other Company obligations to Employee hereunder, and all Employee’s obligations to Company hereunder, shall be automatically terminated and completely extinguished, (iii) this Agreement shall be automatically terminated, and (iv) each party shall have no claims against or liability to the other party under this Agreement. Further notwithstanding the foregoing, during the Initial Term, Employee may only resign after first providing 120 days’ prior written notice to the Company.

 

6.5. No Further Obligations. The amounts and benefits provided for in this Section shall be in lieu of any termination or severance payments or benefits for which Employee may be eligible or entitled, now or in the future, under any of the plans, policies, or programs of Company or any of its subsidiaries or affiliates. In addition, the amounts and benefits provided for in this Section shall be inclusive of all statutory severance payable or otherwise provided to Employee in relation to Employee’s employment by Company and the termination of Employee’s employment under this Agreement and compensation for all required notice periods. Except as otherwise expressly set forth in this Section, from and after the date of such termination, Employee shall (i) have no right to receive any further compensation (including salary or bonus) hereunder, and, (ii) except to the extent required by law, cease to be covered under or be permitted to actively participate in any benefits plans or programs.

 

6.6. Resignation from Officer Positions. If Employee’s employment with Company terminates for any reason, Employee shall be deemed to have resigned at that time from any and all positions that Employee may have held with Company or any of its affiliates, as designated by Company, or any other positions that Employee held on behalf of Company. If, for any reason, this Section is deemed insufficient to effectuate such resignation, following a reasonable opportunity to review, Employee hereby authorizes Company to execute any documents or instruments consistent herewith which Company may deem necessary or desirable to effectuate such resignation or resignations, and to act as Employee’s attorney-in-fact. Company will provide Employee with a copy of such documents.

 

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6.7. Section 409A. Certain payments and benefits payable under this Agreement are intended to be exempt from, or comply with, Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the Treasury Regulations and Internal Revenue Service guidance thereunder. To the extent the payments and benefits under the Agreement are subject to Section 409A of the Code, the Agreement shall be interpreted, construed and administered in a manner that satisfies the requirements of Sections 409A (a) (2), (3) and (4) of the Code and the Treasury Regulations and Internal Revenue Service guidance thereunder. Each payment and benefit payable under this Agreement is intended to constitute a separate payment for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations. If the parties determine that any payments or benefits payable under this Agreement subject to Section 409A of the Code do not comply with Section 409A of the Code, Company and Employee agree to amend this Agreement, or take such other actions as Company and Employee reasonably deem necessary or appropriate, to comply with the requirements of Section 409A of the Code, while preserving benefits that are, in the aggregate, no less favorable than the benefits as provided to Employee under this Agreement. If any provision of this Agreement would cause such payments or benefits to fail to so comply, such provision shall not be effective and shall be null and void with respect to such payments or benefits, and such provision shall otherwise remain in full force and effect.

 

7. Confidentiality Agreement. Employee agrees to execute a Confidential Information, Invention Assignment, and Arbitration Agreement in substantially the form attached hereto as Exhibit A (the “Confidentiality Agreement”).

 

8. Miscellaneous.

 

8.1. Severability. If any court determines that any provision of this Agreement or any part thereof is invalid or unenforceable, the remainder of this Agreement shall be given full force and effect without regard to the invalid portions. If any court determines that any provision of this Agreement or any part thereof is unenforceable because of the duration or geographic scope of such provision, such court shall have the power to reduce the duration or scope of such provision, as the case may be and in its reduced form such provision shall then be enforceable.

 

8.2. Notices. Any notice required or permitted hereunder to be given by either party shall be in writing and shall be delivered personally or sent by certified or registered mail, postage prepaid, or by overnight courier, or by facsimile or email to the party to the address the party may designate from time to time. A notice delivered personally shall be effective upon receipt. A notice sent by facsimile or email shall be effective twenty-four (24) hours after the dispatch thereof. A notice delivered by mail or by overnight courier shall be effective on the earlier of the date delivered (or delivery refused) or the third day after the day of mailing.

 

8.3. Attorneys’ Fees. In the event of any action at law or in equity to enforce or interpret the terms of this Agreement, the parties agree that the prevailing party shall be entitled to an additional award of the full amount of the attorneys’ fees and expenses paid by such prevailing party in connection with the litigation and/or dispute without reduction or apportionment based upon the individual claims or defenses giving rise to the fees and expenses. Nothing herein shall restrict or impair a court’s power to award fees and expenses for frivolous or bad faith pleading.

 

8.4. Successors and Assigns. The rights and obligations of the Company under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Company. This Agreement is for the unique personal services of Employee, and Employee shall not be entitled to assign any of his rights or obligations hereunder.

 

8.5. Entire Agreement. This Agreement and any exhibits hereto constitute the entire agreement between the parties with respect to the employment of Employee. This Agreement can be amended or modified only in a writing signed by Employee and an authorized representative of the Company.

 

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8.6. Counterparts. This Agreement may be executed in counterparts and by facsimile or electronic delivery of signature pages, each of which shall be deemed an original and all of which together shall be considered one and the same agreement.

 

8.7. Governing Law; Consent to Personal Jurisdiction. This Agreement will be governed by the laws of the State of California without regard to California’s conflicts-of-law, except that any dispute regarding the enforceability of the arbitration section of this Agreement shall be governed by the FAA. To the extent that any lawsuit is permitted under this Agreement, Employee hereby expressly consents to the personal and exclusive jurisdiction and venue of the state and federal courts located in San Diego County, California for any lawsuit filed against Employee by the Company.

 

8.8. Arbitration. This Agreement shall be subject to the arbitration provisions set forth in Section 10 of the Confidentiality Agreement.

 

8.9. Further Assurances. Each party agrees to execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken all such further or other actions as are reasonably necessary or desirable upon the request of any other party to more fully effectuate the purposes and intent of this Agreement.

 

8.10. Modification. No provision of this Agreement shall be amended, waived or modified except by an instrument in writing signed by all of the parties hereto.

 

8.11. Waiver. The waiver by either party of a breach by the other party of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach.

 

8.12. Advice of Counsel. Employee hereby acknowledges that he has been, and hereby is, advised to seek legal counsel and to review this document with legal counsel of Employee’s choice. Employee acknowledges that this Agreement is written in a manner understandable to Employee.

 

8.13. Voluntary Execution. Employee represents and warrants that he has signed this Agreement voluntarily and of his own free will and that he has not been subjected to duress or undue influence from any source.

 

8.14. Waiver of Jury Trial. as a specifically bargained inducement for each of the parties to enter into this agreement (each party having had opportunity to consult counsel), each party expressly WAIVES THE RIGHT TO TRIAL BY JURY IN ANY PROCEEDING RELATING TO OR ARISING IN ANY WAY FROM THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT.

 

[Remainder of page intentionally left blank; signature page to follow]

 

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In witness whereof, the parties hereto have executed this Employment Agreement as of the date first written above.

 

  COMPANY:
   
  HUMBL, Inc.
                 
  By:  
  Printed Name:  
  Title:  

 

  EMPLOYEE:
   
   
  Jeffrey Hinshaw, an individual

 

[Signature Page to Employment Agreement]

 

 
 

 

EXHIBIT A

 

CONFIDENTIAL INFORMATION, INVENTION ASSIGNMENT, AND ARBITRATION AGREEMENT

 

 

 

Exhibit 10.47

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (this “Agreement”) is entered into by and between HUMBL, Inc., a Delaware corporation (the “Company”), and Michele Rivera, an individual (“Employee”), effective as of July 13, 2021 (the “Effective Date”).

 

In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1. Employment. The Company hereby employs Employee, and Employee hereby accepts such employment, on the terms and conditions of this Agreement.

 

2. Term. By signing this Agreement, Employee reiterates her intention to remain employed with the Company for a period of time beginning on the Effective Date and ending on the date that is eighteen (18) months from the Effective Date (the “Initial Term”), unless earlier terminated pursuant to Section 6 below. Following the Initial Term, this Agreement will remain in effect until terminated by either party with fifteen (15) days’ prior written notice (the time during which Employee is employed by the Company is referred to hereinafter as the “Term”).

 

3. Duties.

 

3.1. General Duties. Employee shall be employed as the Vice President, Global Partnerships of the Company, and shall have such duties, responsibilities and obligations as are established by the Company or are generally required of persons employed in similar positions. Employee shall also perform such other services and duties for the Company which are appropriate and customary to the offices and positions held by Employee and assigned or delegated to him from time to time by the Company.

 

3.2. Performance. To the best of her ability and experience, Employee will at all times during the Term loyally and conscientiously perform all duties, and discharge all responsibilities and obligations, required of and from him pursuant to the express and implicit terms hereof, and to the reasonable satisfaction of the Company. Employee shall devote substantially all her business time, energy, skill and attention to the business of the Company, and the Company shall be entitled to all of the benefits and profits arising from or incident to all such work, services, and advice of Employee rendered to the Company during the Term.

 

4. Compensation and Benefits.

 

4.1. Salary. The Company shall pay to Employee an annual base salary of $90,000.00 (“Annual Base Salary”). Employee’s Annual Base Salary, which shall be prorated for any partial employment period, will be payable in equal bi-weekly installments or at such other intervals as may be established for the Company’s customary payroll schedule, less all applicable federal, state and local income and employment tax withholdings required by law.

 

4.2. Employee Benefits. During the Term, Employee will be entitled to participate in the employee benefit plans currently and hereafter maintained by the Company of general applicability to other similarly situated employees of the Company. The Company reserves the right to cancel or change the benefit plans and programs it offers to its employees at any time.

 

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4.3. Vacation. Employee will be entitled to fifteen (15) days of paid vacation per year, with the timing and duration of specific vacations mutually and reasonably agreed to by the parties hereto. Unused vacation days shall not be carried forward from year to year, nor shall Employee be compensated for any unused vacation days.

 

4.4. Expenses. The Company will reimburse Employee for reasonable travel, entertainment or other expenses incurred by Employee in the furtherance of or in connection with the performance of Employee’s duties hereunder, provided that such expenses are pre-approved in writing by the Company, are not in excess of any travel/expense budget provided to Employee, and Employee provides all receipts and other supporting documentation as may be requested by the Company.

 

4.5. Bonus. In the Company’s discretion and depending on various factors, including without limitation the profitability of the Company, Employee may be eligible for certain bonuses, which Company may pay in such amounts and at such times as it deems appropriate.

 

5. Restrictions.

 

5.1. No Use of Company Property for Personal Use. No Company property may be used for personal purposes by Employee without the prior written consent of the Company. Additionally, no personal expenses are to be paid for with Company funds.

 

5.2. Corporate Opportunity Doctrine. As an employee of the Company, Employee hereby acknowledges and agrees that the “corporate opportunity” doctrine applies to Employee with respect to her fiduciary duties to the Company. As a result, Employee agrees to provide the Company with a right to review and accept various business opportunities that may be complimentary to the Company’s business operations. Any business opportunity that is rejected by the Company in writing will then be excluded from the restrictions otherwise applicable to Employee under this Section 5.2.

 

6. Termination of Employment.

 

6.1. Death or Disability. If Employee’s employment shall terminate due to her/her death or Disability (defined below), Employee (or her/her estate) shall be paid, in lieu of all other payments hereunder, the following: (1) accrued and unpaid salary through the effective date of the termination of Employee’s employment with Company (“Date of Termination”); and (2) reimbursement for all actual and previously unreimbursed out-of-pocket business expenses properly incurred to the Date of Termination in accordance with Company’s standard business expense reimbursement policies (collectively, the “Accrued Amounts”). The Accrued Amounts shall be paid to Employee’s surviving spouse, if any, or otherwise to Employee’s estate, in a single lump sum payment within thirty (30) days of Employee’s death, or, if otherwise provided in an applicable employee benefit plan, in accordance with the time and form of payment provisions of such plan, in accordance with applicable law. For purposes of this Agreement “Disability” shall mean that Employee has been prevented from working for more than a continuous period of twelve (12) weeks, or for shorter periods aggregating more than ninety (90) days in any consecutive twelve (12) month period, because of physical or mental incapacity or other disability for which Employee has been provided all legally required leaves of absence and reasonable accommodations.

 

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6.2. Termination Without Cause or Resignation for Good Reason. If (1) Company terminates Employee’s employment during the Initial Term other than (a) due to Employee’s death or Disability or (b) for Cause (as defined below); or (2) if Employee resigns from Employee’s employment for Good Reason (as defined below) during the Initial Term, Employee shall receive the Accrued Amounts on the Date of Termination and, in addition, subject to the Severance Conditions below, (i) Company shall provide a severance payment equal to three (3) months of Employee’s salary as of the Date of Termination (the “Severance Payment”), divided and paid in equal installments over a period of three (3) months in accordance with Company’s regular payroll practices starting on the first regular payday occurring after the effective date of the Release (as defined below), and (ii) the Company will reimburse Employee for COBRA premiums (at the coverage levels and at the Company-paid rate in effect immediately prior to such termination) for Employee and Employee’s covered dependents until the earliest of (A) the date that is three (3) months following the Date of Termination, (B) the date that Employee (or Employee’s spouse or dependents, as applicable) are no longer eligible for COBRA coverage or (C) the date when Employee receives substantially equivalent health insurance coverage in connection with new employment (the “COBRA Benefit”). Company’s obligation to pay Employee the Severance Payment and COBRA Benefit shall be conditioned on Employee’s satisfaction of the following (the “Severance Conditions”): (1) Employee must first sign, and allow to become effective, a Company-approved separation agreement, which shall include a full general release in a form acceptable to Company, releasing all claims, known or unknown, that Employee may have against Company arising out of or any way related to Employee’s employment or termination of employment with Company (the “Release”); and (2) on or before the effective date of the Release, Employee must have (i) reconfirmed Employee’s agreement to abide by all of the surviving provisions of this Agreement and any other agreement between Employee and Company, (ii) agreed to cooperate in the transition of Employee’s employment; and (iii) agreed not to make any voluntary statements, written or oral, or cause or encourage others to make any such statements that defame, disparage, or in any way criticize the personal and/or business reputations, practices, or conduct of the Company or any of its affiliates. All other Company obligations to Employee will be automatically terminated and completely extinguished.

 

6.3. Termination for Cause. Company shall have the right at any time, upon written notice to Employee, to terminate Employee’s employment immediately for Cause. If Company terminates Employee’s employment for Cause, Employee shall have no right to receive any further compensation other than the Accrued Amounts. In the event that Company terminates Employee’s employment for Cause, Company shall pay Employee Employee’s Accrued Amounts on the Date of Termination.

 

As used herein “Cause” shall mean: (a) conviction or entry of a plea of nolo contendere for any felony; (b) embezzlement, misappropriation, fraud, dishonesty, unethical business conduct, or breach of fiduciary duty to Company or any affiliate (other than those acts that are curable without damage to the Company and/or its affiliates, in which case Employee will have ten (10) days to cure such breach following written notice thereof to Employee by Company, and other than those acts that do not result in material harm to the Company); (c) inability or refusal to substantially perform Employee’s duties hereunder and Employee’s failure to cure such condition within 30 days after receiving written notice thereof by the Company; (d) failure to follow reasonable and lawful directions from the persons to whom Employee report and Employee’s failure to cure such condition within 30 days after receiving written notice thereof by the Company; (e) use of alcohol or use of illegal drugs, interfering with performance of Employee’s obligations to Company or any affiliate, continuing after written warning; (f) commission of any willful or intentional act which materially injures or could reasonably be expected to materially injure the reputation, business or business relationships of Company, any affiliate, Employee or other employees of Company or any affiliates; (g) willful disregard or violation of Company’s or any affiliate’s written policies regarding harassment or discrimination, or any other material violation of Company’s or any affiliate’s written policies as in effect from time to time and Employee’s failure to cure such breach within 30 days after receiving written notice thereof by the Company; (h) gross negligence or willful misconduct in the performance Employee’s duties or with regard to the assets, business or employees of Company or any affiliates; (i) material breach of Employee’s obligations to Company or any affiliate (other than those acts that are curable without damage to the Company and/or its affiliates, in which case Employee will have ten (10) days to cure such breach following written notice thereof to Employee by Company); (j) usurpation of a corporate opportunity; or (k) misappropriation, unauthorized use or disclosure of Proprietary Information that results in a material breach of this Agreement.

 

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As used herein “Good Reason” shall mean Employee’s resignation due to the occurrence of any of the following conditions which occurs without Employee’s written consent, provided that the requirements regarding advance notice and an opportunity to cure set forth below are satisfied: (i) a material reduction of Employee’s duties, authority, responsibilities or reporting relationship relative to Employee’s duties, authority, responsibilities or reporting relationship as in effect immediately prior to such reduction; (ii) a 10% or more reduction in Employee’s then-current salary; (iii) any material breach by the Company or any successor corporation of any material provision of this Agreement; (iv) the failure of any acquirer or successor to the Company or any affiliate of such affiliate or successor to assume or otherwise continue the obligations under this Agreement; or (v) the Company (or its successor) conditions Employee’s continued service on Employee being transferred to a site of employment that would increase Employee’s one-way commute by more than 30 miles from Employee’s then principal residence. In order for Employee to resign for Good Reason, Employee must provide written notice to the Company of the existence of the Good Reason condition within 90 days of the initial existence of such Good Reason condition. Upon receipt of such notice, the Company will have 30 days during which it may remedy the Good Reason condition and not be required to provide the payments or benefits described herein as a result of such proposed resignation. If the Good Reason condition is not remedied within such 30-day period, Employee may resign based on the Good Reason condition specified in the notice effective no later than 60 days following the expiration of the 30-day cure period.

 

6.4. Employee Resignation. If Employee resigns from Employee’s employment for any reason other than for Good Reason, Employee’s resignation shall be considered a material breach of this Agreement. Notwithstanding the foregoing, in such event, only the following shall apply: (i) Company shall pay Employee Employee’s Accrued Amounts on the Date of Termination, (ii) all other Company obligations to Employee hereunder, and all Employee’s obligations to Company hereunder, shall be automatically terminated and completely extinguished, (iii) this Agreement shall be automatically terminated, and (iv) each party shall have no claims against or liability to the other party under this Agreement. Further notwithstanding the foregoing, during the Initial Term, Employee may only resign after first providing 120 days’ prior written notice to the Company.

 

6.5. No Further Obligations. The amounts and benefits provided for in this Section shall be in lieu of any termination or severance payments or benefits for which Employee may be eligible or entitled, now or in the future, under any of the plans, policies, or programs of Company or any of its subsidiaries or affiliates. In addition, the amounts and benefits provided for in this Section shall be inclusive of all statutory severance payable or otherwise provided to Employee in relation to Employee’s employment by Company and the termination of Employee’s employment under this Agreement and compensation for all required notice periods. Except as otherwise expressly set forth in this Section, from and after the date of such termination, Employee shall (i) have no right to receive any further compensation (including salary or bonus) hereunder, and, (ii) except to the extent required by law, cease to be covered under or be permitted to actively participate in any benefits plans or programs.

 

6.6. Resignation from Officer Positions. If Employee’s employment with Company terminates for any reason, Employee shall be deemed to have resigned at that time from any and all positions that Employee may have held with Company or any of its affiliates, as designated by Company, or any other positions that Employee held on behalf of Company. If, for any reason, this Section is deemed insufficient to effectuate such resignation, following a reasonable opportunity to review, Employee hereby authorizes Company to execute any documents or instruments consistent herewith which Company may deem necessary or desirable to effectuate such resignation or resignations, and to act as Employee’s attorney-in-fact. Company will provide Employee with a copy of such documents.

 

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6.7. Section 409A. Certain payments and benefits payable under this Agreement are intended to be exempt from, or comply with, Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the Treasury Regulations and Internal Revenue Service guidance thereunder. To the extent the payments and benefits under the Agreement are subject to Section 409A of the Code, the Agreement shall be interpreted, construed and administered in a manner that satisfies the requirements of Sections 409A (a) (2), (3) and (4) of the Code and the Treasury Regulations and Internal Revenue Service guidance thereunder. Each payment and benefit payable under this Agreement is intended to constitute a separate payment for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations. If the parties determine that any payments or benefits payable under this Agreement subject to Section 409A of the Code do not comply with Section 409A of the Code, Company and Employee agree to amend this Agreement, or take such other actions as Company and Employee reasonably deem necessary or appropriate, to comply with the requirements of Section 409A of the Code, while preserving benefits that are, in the aggregate, no less favorable than the benefits as provided to Employee under this Agreement. If any provision of this Agreement would cause such payments or benefits to fail to so comply, such provision shall not be effective and shall be null and void with respect to such payments or benefits, and such provision shall otherwise remain in full force and effect.

 

7. Confidentiality Agreement. Employee agrees to execute a Confidential Information, Invention Assignment, and Arbitration Agreement in substantially the form attached hereto as Exhibit A (the “Confidentiality Agreement”).

 

8. Miscellaneous.

 

8.1. Severability. If any court determines that any provision of this Agreement or any part thereof is invalid or unenforceable, the remainder of this Agreement shall be given full force and effect without regard to the invalid portions. If any court determines that any provision of this Agreement or any part thereof is unenforceable because of the duration or geographic scope of such provision, such court shall have the power to reduce the duration or scope of such provision, as the case may be and in its reduced form such provision shall then be enforceable.

 

8.2. Notices. Any notice required or permitted hereunder to be given by either party shall be in writing and shall be delivered personally or sent by certified or registered mail, postage prepaid, or by overnight courier, or by facsimile or email to the party to the address the party may designate from time to time. A notice delivered personally shall be effective upon receipt. A notice sent by facsimile or email shall be effective twenty-four (24) hours after the dispatch thereof. A notice delivered by mail or by overnight courier shall be effective on the earlier of the date delivered (or delivery refused) or the third day after the day of mailing.

 

8.3. Attorneys’ Fees. In the event of any action at law or in equity to enforce or interpret the terms of this Agreement, the parties agree that the prevailing party shall be entitled to an additional award of the full amount of the attorneys’ fees and expenses paid by such prevailing party in connection with the litigation and/or dispute without reduction or apportionment based upon the individual claims or defenses giving rise to the fees and expenses. Nothing herein shall restrict or impair a court’s power to award fees and expenses for frivolous or bad faith pleading.

 

8.4. Successors and Assigns. The rights and obligations of the Company under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Company. This Agreement is for the unique personal services of Employee, and Employee shall not be entitled to assign any of her rights or obligations hereunder.

 

8.5. Entire Agreement. This Agreement and any exhibits hereto constitute the entire agreement between the parties with respect to the employment of Employee. This Agreement can be amended or modified only in a writing signed by Employee and an authorized representative of the Company.

 

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8.6. Counterparts. This Agreement may be executed in counterparts and by facsimile or electronic delivery of signature pages, each of which shall be deemed an original and all of which together shall be considered one and the same agreement.

 

8.7. Governing Law; Consent to Personal Jurisdiction. This Agreement will be governed by the laws of the State of California without regard to California’s conflicts-of-law, except that any dispute regarding the enforceability of the arbitration section of this Agreement shall be governed by the FAA. To the extent that any lawsuit is permitted under this Agreement, Employee hereby expressly consents to the personal and exclusive jurisdiction and venue of the state and federal courts located in San Diego County, California for any lawsuit filed against Employee by the Company.

 

8.8. Arbitration. This Agreement shall be subject to the arbitration provisions set forth in Section 10 of the Confidentiality Agreement.

 

8.9. Further Assurances. Each party agrees to execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken all such further or other actions as are reasonably necessary or desirable upon the request of any other party to more fully effectuate the purposes and intent of this Agreement.

 

8.10. Modification. No provision of this Agreement shall be amended, waived or modified except by an instrument in writing signed by all of the parties hereto.

 

8.11. Waiver. The waiver by either party of a breach by the other party of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach.

 

8.12. Advice of Counsel. Employee hereby acknowledges that she has been, and hereby is, advised to seek legal counsel and to review this document with legal counsel of Employee’s choice. Employee acknowledges that this Agreement is written in a manner understandable to Employee.

 

8.13. Voluntary Execution. Employee represents and warrants that she has signed this Agreement voluntarily and of her own free will and that she has not been subjected to duress or undue influence from any source.

 

8.14. Waiver of Jury Trial. as a specifically bargained inducement for each of the parties to enter into this agreement (each party having had opportunity to consult counsel), each party expressly WAIVES THE RIGHT TO TRIAL BY JURY IN ANY PROCEEDING RELATING TO OR ARISING IN ANY WAY FROM THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT.

 

[Remainder of page intentionally left blank; signature page to follow]

 

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In witness whereof, the parties hereto have executed this Employment Agreement as of the date first written above.

 

  COMPANY:
     
  HUMBL, Inc.
     
  By:               

  Printed Name:  

  Title:  
             
  EMPLOYEE:
     
     
  Michele Rivera, an individual

 

[Signature Page to Employment Agreement]

 

 
 

 

EXHIBIT A

 

CONFIDENTIAL INFORMATION, INVENTION ASSIGNMENT, AND ARBITRATION

AGREEMENT

 

 

 

 

 

Exhibit 10.48

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (this “Agreement”) is entered into by and between HUMBL, Inc., a Delaware corporation (the “Company”), and Karen Garcia, an individual (“Employee”), effective as of July 13, 2021 (the “Effective Date”).

 

In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1. Employment. The Company hereby employs Employee, and Employee hereby accepts such employment, on the terms and conditions of this Agreement.

 

2. Term. By signing this Agreement, Employee reiterates her intention to remain employed with the Company for a period of time beginning on the Effective Date and ending on the date that is eighteen (18) months from the Effective Date (the “Initial Term”), unless earlier terminated pursuant to Section 6 below. Following the Initial Term, this Agreement will remain in effect until terminated by either party with fifteen (15) days’ prior written notice (the time during which Employee is employed by the Company is referred to hereinafter as the “Term”).

 

3. Duties.

 

3.1. General Duties. Employee shall be employed as the Vice President, Major Accounts of the Company, and shall have such duties, responsibilities and obligations as are established by the Company or are generally required of persons employed in similar positions. Employee shall also perform such other services and duties for the Company which are appropriate and customary to the offices and positions held by Employee and assigned or delegated to him from time to time by the Company.

 

3.2. Performance. To the best of her ability and experience, Employee will at all times during the Term loyally and conscientiously perform all duties, and discharge all responsibilities and obligations, required of and from him pursuant to the express and implicit terms hereof, and to the reasonable satisfaction of the Company. Employee shall devote substantially all her business time, energy, skill and attention to the business of the Company, and the Company shall be entitled to all of the benefits and profits arising from or incident to all such work, services, and advice of Employee rendered to the Company during the Term.

 

4. Compensation and Benefits.

 

4.1. Salary. The Company shall pay to Employee an annual base salary of $90,000.00 (“Annual Base Salary”). Employee’s Annual Base Salary, which shall be prorated for any partial employment period, will be payable in equal bi-weekly installments or at such other intervals as may be established for the Company’s customary payroll schedule, less all applicable federal, state and local income and employment tax withholdings required by law.

 

4.2. Employee Benefits. During the Term, Employee will be entitled to participate in the employee benefit plans currently and hereafter maintained by the Company of general applicability to other similarly situated employees of the Company. The Company reserves the right to cancel or change the benefit plans and programs it offers to its employees at any time.

 

4.3. Vacation. Employee will be entitled to fifteen (15) days of paid vacation per year, with the timing and duration of specific vacations mutually and reasonably agreed to by the parties hereto. Unused vacation days shall not be carried forward from year to year, nor shall Employee be compensated for any unused vacation days.

 

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4.4. Expenses. The Company will reimburse Employee for reasonable travel, entertainment or other expenses incurred by Employee in the furtherance of or in connection with the performance of Employee’s duties hereunder, provided that such expenses are pre-approved in writing by the Company, are not in excess of any travel/expense budget provided to Employee, and Employee provides all receipts and other supporting documentation as may be requested by the Company.

 

4.5. Bonus. In the Company’s discretion and depending on various factors, including without limitation the profitability of the Company, Employee may be eligible for certain bonuses, which Company may pay in such amounts and at such times as it deems appropriate.

 

5. Restrictions.

 

5.1. No Use of Company Property for Personal Use. No Company property may be used for personal purposes by Employee without the prior written consent of the Company. Additionally, no personal expenses are to be paid for with Company funds.

 

5.2. Corporate Opportunity Doctrine. As an employee of the Company, Employee hereby acknowledges and agrees that the “corporate opportunity” doctrine applies to Employee with respect to her fiduciary duties to the Company. As a result, Employee agrees to provide the Company with a right to review and accept various business opportunities that may be complimentary to the Company’s business operations. Any business opportunity that is rejected by the Company in writing will then be excluded from the restrictions otherwise applicable to Employee under this Section 5.2.

 

6. Termination of Employment.

 

6.1. Death or Disability. If Employee’s employment shall terminate due to her/her death or Disability (defined below), Employee (or her/her estate) shall be paid, in lieu of all other payments hereunder, the following: (1) accrued and unpaid salary through the effective date of the termination of Employee’s employment with Company (“Date of Termination”); and (2) reimbursement for all actual and previously unreimbursed out-of-pocket business expenses properly incurred to the Date of Termination in accordance with Company’s standard business expense reimbursement policies (collectively, the “Accrued Amounts”). The Accrued Amounts shall be paid to Employee’s surviving spouse, if any, or otherwise to Employee’s estate, in a single lump sum payment within thirty (30) days of Employee’s death, or, if otherwise provided in an applicable employee benefit plan, in accordance with the time and form of payment provisions of such plan, in accordance with applicable law. For purposes of this Agreement “Disability” shall mean that Employee has been prevented from working for more than a continuous period of twelve (12) weeks, or for shorter periods aggregating more than ninety (90) days in any consecutive twelve (12) month period, because of physical or mental incapacity or other disability for which Employee has been provided all legally required leaves of absence and reasonable accommodations.

 

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6.2. Termination Without Cause or Resignation for Good Reason. If (1) Company terminates Employee’s employment during the Initial Term other than (a) due to Employee’s death or Disability or (b) for Cause (as defined below); or (2) if Employee resigns from Employee’s employment for Good Reason (as defined below) during the Initial Term, Employee shall receive the Accrued Amounts on the Date of Termination and, in addition, subject to the Severance Conditions below, (i) Company shall provide a severance payment equal to three (3) months of Employee’s salary as of the Date of Termination (the “Severance Payment”), divided and paid in equal installments over a period of three (3) months in accordance with Company’s regular payroll practices starting on the first regular payday occurring after the effective date of the Release (as defined below), and (ii) the Company will reimburse Employee for COBRA premiums (at the coverage levels and at the Company-paid rate in effect immediately prior to such termination) for Employee and Employee’s covered dependents until the earliest of (A) the date that is three (3) months following the Date of Termination, (B) the date that Employee (or Employee’s spouse or dependents, as applicable) are no longer eligible for COBRA coverage or (C) the date when Employee receives substantially equivalent health insurance coverage in connection with new employment (the “COBRA Benefit”). Company’s obligation to pay Employee the Severance Payment and COBRA Benefit shall be conditioned on Employee’s satisfaction of the following (the “Severance Conditions”): (1) Employee must first sign, and allow to become effective, a Company-approved separation agreement, which shall include a full general release in a form acceptable to Company, releasing all claims, known or unknown, that Employee may have against Company arising out of or any way related to Employee’s employment or termination of employment with Company (the “Release”); and (2) on or before the effective date of the Release, Employee must have (i) reconfirmed Employee’s agreement to abide by all of the surviving provisions of this Agreement and any other agreement between Employee and Company, (ii) agreed to cooperate in the transition of Employee’s employment; and (iii) agreed not to make any voluntary statements, written or oral, or cause or encourage others to make any such statements that defame, disparage, or in any way criticize the personal and/or business reputations, practices, or conduct of the Company or any of its affiliates. All other Company obligations to Employee will be automatically terminated and completely extinguished.

 

6.3. Termination for Cause. Company shall have the right at any time, upon written notice to Employee, to terminate Employee’s employment immediately for Cause. If Company terminates Employee’s employment for Cause, Employee shall have no right to receive any further compensation other than the Accrued Amounts. In the event that Company terminates Employee’s employment for Cause, Company shall pay Employee Employee’s Accrued Amounts on the Date of Termination.

 

As used herein “Cause” shall mean: (a) conviction or entry of a plea of nolo contendere for any felony; (b) embezzlement, misappropriation, fraud, dishonesty, unethical business conduct, or breach of fiduciary duty to Company or any affiliate (other than those acts that are curable without damage to the Company and/or its affiliates, in which case Employee will have ten (10) days to cure such breach following written notice thereof to Employee by Company, and other than those acts that do not result in material harm to the Company); (c) inability or refusal to substantially perform Employee’s duties hereunder and Employee’s failure to cure such condition within 30 days after receiving written notice thereof by the Company; (d) failure to follow reasonable and lawful directions from the persons to whom Employee report and Employee’s failure to cure such condition within 30 days after receiving written notice thereof by the Company; (e) use of alcohol or use of illegal drugs, interfering with performance of Employee’s obligations to Company or any affiliate, continuing after written warning; (f) commission of any willful or intentional act which materially injures or could reasonably be expected to materially injure the reputation, business or business relationships of Company, any affiliate, Employee or other employees of Company or any affiliates; (g) willful disregard or violation of Company’s or any affiliate’s written policies regarding harassment or discrimination, or any other material violation of Company’s or any affiliate’s written policies as in effect from time to time and Employee’s failure to cure such breach within 30 days after receiving written notice thereof by the Company; (h) gross negligence or willful misconduct in the performance Employee’s duties or with regard to the assets, business or employees of Company or any affiliates; (i) material breach of Employee’s obligations to Company or any affiliate (other than those acts that are curable without damage to the Company and/or its affiliates, in which case Employee will have ten (10) days to cure such breach following written notice thereof to Employee by Company); (j) usurpation of a corporate opportunity; or (k) misappropriation, unauthorized use or disclosure of Proprietary Information that results in a material breach of this Agreement.

 

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As used herein “Good Reason” shall mean Employee’s resignation due to the occurrence of any of the following conditions which occurs without Employee’s written consent, provided that the requirements regarding advance notice and an opportunity to cure set forth below are satisfied: (i) a material reduction of Employee’s duties, authority, responsibilities or reporting relationship relative to Employee’s duties, authority, responsibilities or reporting relationship as in effect immediately prior to such reduction; (ii) a 10% or more reduction in Employee’s then-current salary; (iii) any material breach by the Company or any successor corporation of any material provision of this Agreement; (iv) the failure of any acquirer or successor to the Company or any affiliate of such affiliate or successor to assume or otherwise continue the obligations under this Agreement; or (v) the Company (or its successor) conditions Employee’s continued service on Employee being transferred to a site of employment that would increase Employee’s one-way commute by more than 30 miles from Employee’s then principal residence. In order for Employee to resign for Good Reason, Employee must provide written notice to the Company of the existence of the Good Reason condition within 90 days of the initial existence of such Good Reason condition. Upon receipt of such notice, the Company will have 30 days during which it may remedy the Good Reason condition and not be required to provide the payments or benefits described herein as a result of such proposed resignation. If the Good Reason condition is not remedied within such 30-day period, Employee may resign based on the Good Reason condition specified in the notice effective no later than 60 days following the expiration of the 30-day cure period.

 

6.4. Employee Resignation. If Employee resigns from Employee’s employment for any reason other than for Good Reason, Employee’s resignation shall be considered a material breach of this Agreement. Notwithstanding the foregoing, in such event, only the following shall apply: (i) Company shall pay Employee Employee’s Accrued Amounts on the Date of Termination, (ii) all other Company obligations to Employee hereunder, and all Employee’s obligations to Company hereunder, shall be automatically terminated and completely extinguished, (iii) this Agreement shall be automatically terminated, and (iv) each party shall have no claims against or liability to the other party under this Agreement. Further notwithstanding the foregoing, during the Initial Term, Employee may only resign after first providing 120 days’ prior written notice to the Company.

 

6.5. No Further Obligations. The amounts and benefits provided for in this Section shall be in lieu of any termination or severance payments or benefits for which Employee may be eligible or entitled, now or in the future, under any of the plans, policies, or programs of Company or any of its subsidiaries or affiliates. In addition, the amounts and benefits provided for in this Section shall be inclusive of all statutory severance payable or otherwise provided to Employee in relation to Employee’s employment by Company and the termination of Employee’s employment under this Agreement and compensation for all required notice periods. Except as otherwise expressly set forth in this Section, from and after the date of such termination, Employee shall (i) have no right to receive any further compensation (including salary or bonus) hereunder, and, (ii) except to the extent required by law, cease to be covered under or be permitted to actively participate in any benefits plans or programs.

 

6.6. Resignation from Officer Positions. If Employee’s employment with Company terminates for any reason, Employee shall be deemed to have resigned at that time from any and all positions that Employee may have held with Company or any of its affiliates, as designated by Company, or any other positions that Employee held on behalf of Company. If, for any reason, this Section is deemed insufficient to effectuate such resignation, following a reasonable opportunity to review, Employee hereby authorizes Company to execute any documents or instruments consistent herewith which Company may deem necessary or desirable to effectuate such resignation or resignations, and to act as Employee’s attorney-in-fact. Company will provide Employee with a copy of such documents.

 

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6.7. Section 409A. Certain payments and benefits payable under this Agreement are intended to be exempt from, or comply with, Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the Treasury Regulations and Internal Revenue Service guidance thereunder. To the extent the payments and benefits under the Agreement are subject to Section 409A of the Code, the Agreement shall be interpreted, construed and administered in a manner that satisfies the requirements of Sections 409A (a) (2), (3) and (4) of the Code and the Treasury Regulations and Internal Revenue Service guidance thereunder. Each payment and benefit payable under this Agreement is intended to constitute a separate payment for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations. If the parties determine that any payments or benefits payable under this Agreement subject to Section 409A of the Code do not comply with Section 409A of the Code, Company and Employee agree to amend this Agreement, or take such other actions as Company and Employee reasonably deem necessary or appropriate, to comply with the requirements of Section 409A of the Code, while preserving benefits that are, in the aggregate, no less favorable than the benefits as provided to Employee under this Agreement. If any provision of this Agreement would cause such payments or benefits to fail to so comply, such provision shall not be effective and shall be null and void with respect to such payments or benefits, and such provision shall otherwise remain in full force and effect.

 

7. Confidentiality Agreement. Employee agrees to execute a Confidential Information, Invention Assignment, and Arbitration Agreement in substantially the form attached hereto as Exhibit A (the “Confidentiality Agreement”).

 

8. Miscellaneous.

 

8.1. Severability. If any court determines that any provision of this Agreement or any part thereof is invalid or unenforceable, the remainder of this Agreement shall be given full force and effect without regard to the invalid portions. If any court determines that any provision of this Agreement or any part thereof is unenforceable because of the duration or geographic scope of such provision, such court shall have the power to reduce the duration or scope of such provision, as the case may be and in its reduced form such provision shall then be enforceable.

 

8.2. Notices. Any notice required or permitted hereunder to be given by either party shall be in writing and shall be delivered personally or sent by certified or registered mail, postage prepaid, or by overnight courier, or by facsimile or email to the party to the address the party may designate from time to time. A notice delivered personally shall be effective upon receipt. A notice sent by facsimile or email shall be effective twenty-four (24) hours after the dispatch thereof. A notice delivered by mail or by overnight courier shall be effective on the earlier of the date delivered (or delivery refused) or the third day after the day of mailing.

 

8.3. Attorneys’ Fees. In the event of any action at law or in equity to enforce or interpret the terms of this Agreement, the parties agree that the prevailing party shall be entitled to an additional award of the full amount of the attorneys’ fees and expenses paid by such prevailing party in connection with the litigation and/or dispute without reduction or apportionment based upon the individual claims or defenses giving rise to the fees and expenses. Nothing herein shall restrict or impair a court’s power to award fees and expenses for frivolous or bad faith pleading.

 

8.4. Successors and Assigns. The rights and obligations of the Company under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Company. This Agreement is for the unique personal services of Employee, and Employee shall not be entitled to assign any of her rights or obligations hereunder.

 

8.5. Entire Agreement. This Agreement and any exhibits hereto constitute the entire agreement between the parties with respect to the employment of Employee. This Agreement can be amended or modified only in a writing signed by Employee and an authorized representative of the Company.

 

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8.6. Counterparts. This Agreement may be executed in counterparts and by facsimile or electronic delivery of signature pages, each of which shall be deemed an original and all of which together shall be considered one and the same agreement.

 

8.7. Governing Law; Consent to Personal Jurisdiction. This Agreement will be governed by the laws of the State of California without regard to California’s conflicts-of-law, except that any dispute regarding the enforceability of the arbitration section of this Agreement shall be governed by the FAA. To the extent that any lawsuit is permitted under this Agreement, Employee hereby expressly consents to the personal and exclusive jurisdiction and venue of the state and federal courts located in San Diego County, California for any lawsuit filed against Employee by the Company.

 

8.8. Arbitration. This Agreement shall be subject to the arbitration provisions set forth in Section 10 of the Confidentiality Agreement.

 

8.9. Further Assurances. Each party agrees to execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken all such further or other actions as are reasonably necessary or desirable upon the request of any other party to more fully effectuate the purposes and intent of this Agreement.

 

8.10. Modification. No provision of this Agreement shall be amended, waived or modified except by an instrument in writing signed by all of the parties hereto.

 

8.11. Waiver. The waiver by either party of a breach by the other party of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach.

 

8.12. Advice of Counsel. Employee hereby acknowledges that she has been, and hereby is, advised to seek legal counsel and to review this document with legal counsel of Employee’s choice. Employee acknowledges that this Agreement is written in a manner understandable to Employee.

 

8.13. Voluntary Execution. Employee represents and warrants that she has signed this Agreement voluntarily and of her own free will and that she has not been subjected to duress or undue influence from any source.

 

8.14. Waiver of Jury Trial. as a specifically bargained inducement for each of the parties to enter into this agreement (each party having had opportunity to consult counsel), each party expressly WAIVES THE RIGHT TO TRIAL BY JURY IN ANY PROCEEDING RELATING TO OR ARISING IN ANY WAY FROM THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT.

 

[Remainder of page intentionally left blank; signature page to follow]

 

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In witness whereof, the parties hereto have executed this Employment Agreement as of the date first written above.

 

  COMPANY:
   
  HUMBL, Inc.
                   
  By:  

  Printed Name:  

  Title:  
                       
  EMPLOYEE:
   
   
  Karen Garcia, an individual

 

[Signature Page to Employment Agreement]

 

 

 

 

Exhibit 10.49

 

DEVELOPMENT SERVICES AGREEMENT

 

This Development Services Agreement (this “Agreement”) is entered into as of July 29, 2021 (the “Effective Date”), by and between HUMBL, Inc., a Delaware corporation (“HUMBL”), and Red Rock Development Group, LLC, an Arizona limited liability company (“Red Rock”). The parties hereto may be referred to hereinafter individually as a “Party” and collectively as the “Parties.”

 

A. HUMBL desires to retain Red Rock to advise HUMBL with respect to the development, operation and tokenization of certain real estate assets.

 

B. Red Rock desires to provide such services to HUMBL.

 

NOW, THEREFORE, in consideration of the covenants and agreements set forth herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties agree as follows:

 

1. Services. Red Rock will advise HUMBL on: (a) the purchase and development of a portfolio of real estate assets (the “Portfolio”); (b) the operation of the Portfolio; and (c) the potential tokenization of the Portfolio in a legally compliant manner (collectively, the “Services”).

 

2. Share Issuance; Vesting. In consideration for the Services, HUMBL agrees to issue 3,000,000 shares of its common stock to Red Rock (the “Shares”) within forty-five (45) days of the Effective Date. The Shares will be subject to the following vesting schedule: (a) 1,500,000 of the Shares will vest on the issuance date of the Shares; and (b) 125,000 of the Shares will vest on the first day of each month for the next twelve (12) months.

 

3. Representations and Warranties. Each Party hereto hereby represents and warrants to the other as of the date hereof that:

 

3.1. It is a duly and validly organized and existing business entity in good standing under the laws of the jurisdiction of its formation, and that it is legally qualified to do business in each jurisdiction in which its activities require such qualification.

 

3.2. The performance of this Agreement and the consummation of the transactions contemplated herein will not result in any violation of any law, rule, or regulation, or any breach, conflict or violation of any terms or provisions of, or constitute a default under, its formation or governing documents, or any material agreement or instrument to which it is a party, by which it is bound, or to which any of its property is subject.

 

3.3. All requisite company action has been taken for the due authorization, execution, delivery, and performance of this Agreement by it, and this Agreement constitutes a legally binding obligation, enforceable against such Party, in accordance with its terms, except insofar as enforceability may be limited by bankruptcy, insolvency, reorganization, or similar laws affecting the rights of creditors generally and by general equity principles, including judicial principles affecting the availability of injunctive relief and specific performance.

 

 

 

 

4. Term; Termination. The term of this Agreement will be for a period of two (2) years beginning on the Effective Date. Either Party may terminate this Agreement upon thirty (30) days’ written notice to the other Party.

 

5. Publicity. HUMBL may issue a press release announcing this Agreement and the relationship of the Parties.

 

6. Confidentiality. Each Party acknowledges that in the course of performing this Agreement it may receive information from the other Party that is marked confidential or that, given the nature of the information or the circumstances surrounding its disclosure, reasonably should be considered as confidential, including without limitation intellectual property, code, trade secrets, proprietary information, technical information, agreements, pricing, or customer information (hereinafter “Confidential Information”). If a Party has any reasonable doubt as to whether information is Confidential Information, the Party shall treat such information as Confidential Information until the other Party makes clear in writing that the information in question is not Confidential Information. During the Term and forever thereafter, each Party shall maintain the confidentiality of the other Party’s Confidential Information and shall not sell, license, publish, display, distribute, disclose or otherwise make available such Confidential Information to any third Party nor use such Confidential Information except as authorized by this Agreement. Upon the expiration or termination of this Agreement, each Party shall return all of the Confidential Information of the other Party back to such Party. Notwithstanding the foregoing, the following information shall not be considered Confidential Information within the meaning of this Agreement, and therefore the above restrictions on use and disclosure of Confidential Information will not apply to any of the following information and neither Party shall be liable for disclosure or use of any of the following information: (a) information which was available to the public or was in the public domain at the time it was disclosed, or information which subsequently becomes publicly available or in the public domain through means other than through breach of the confidentiality provisions of this Agreement; (b) information shown by clear and convincing documentary evidence to be previously known or independently developed by the receiving Party prior to its receipt, or information otherwise known to the receiving Party at the time of receipt, or information acquired from a third party who is not in breach of an agreement to keep such information confidential; (c) information which the receiving Party at any time lawfully obtains without restriction on its use and disclosure; (d) information disclosed with the prior written consent of the disclosing Party; or (e) information publicly released, in the absence of a protective order or confidentiality agreement, in response to a subpoena, court order or other legal process.

 

7. Independent Contractor. Each Party is acting and performing as an independent contractor and nothing in this Agreement shall be deemed to create a joint venture or partnership between the Parties.

 

 

 

 

8. Miscellaneous.

 

8.1. Governing Law; Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and wholly performed in that jurisdiction. Notwithstanding the foregoing, the Parties hereby exclusively and irrevocably submit to, and waive any objection against, the exclusive jurisdiction and venue of any state or federal court sitting in San Diego County, California over any proceeding arising out of or relating to this Agreement.

 

8.2. Entire Agreement; Amendment. The terms and provisions contained in this Agreement constitute the entire understanding of the Parties with respect to the transactions and matters contemplated hereby and supersede all previous communications, representations, agreements and understandings relating to the subject matter hereof and shall also supersede any invoices or purchase orders of either Party. No agreement or understanding amending, supplementing or extending this Agreement shall be binding upon either Party unless it is in writing and signed by each Party.

 

8.3. Notices. Unless otherwise provided herein, any notice, report, payment or document to be given by one Party to the other will be in writing and will be deemed given when delivered personally or mailed by certified or registered mail, postage prepaid (such mailed notice to be effective on the date which is two (2) business days after the date of mailing), or sent by nationally recognized overnight courier (such notice sent by courier to be effective when actually delivered), or sent by telefax or electronic mail (such notice sent by telefax or electronic mail to be effective when sent, if confirmed by certified or registered mail or overnight courier as aforesaid) to the address designated to the other party from time to time.

 

8.4. Waiver. Except as otherwise expressly set forth herein, no provision of or right under this Agreement shall be deemed to have been waived by any act or acquiescence on the part of any Party, its agents or employees, except by an instrument in writing signed by an authorized officer of each Party hereto. No waiver by any Party of any breach of this Agreement by the other Party shall be effective as to any other breach, whether of the same or any other term or condition and whether occurring before or after the date of such waiver.

 

8.5. Assignment. Neither this Agreement, nor any rights under this Agreement, may be assigned or otherwise transferred by either Party, in whole or in part, whether voluntary, or by operation of law, without the prior written consent of the other Party; however, either Party may assign, without such consent, all its rights and obligations under this Agreement to a wholly owned subsidiary, or to an entity that succeeds to substantially all of the business or assets of such Party through merger, acquisition, or similar transaction provided the other Party is notified in writing of the transaction no later than five (5) calendar days prior to the consummation of the transaction. If an assignment by either Party is made pursuant to a merger, acquisition or similar transaction to a competitor of either Party, the other Party shall have the right to terminate this Agreement within thirty (30) days of such transaction. If the non-assigning Party fails to terminate within the time period provided above, this Agreement shall continue in full force and effect and shall inure to the benefit of the assignee.

 

8.6. Successors and Assigns. This Agreement shall bind and inure to the benefit of the Parties hereto and their respective successors and permitted assigns.

 

 

 

 

8.7. Severability. In the event any provision of this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other term or provision hereof. The Parties agree that they will negotiate in good faith or will permit a court to replace any provision hereof so held invalid, illegal or unenforceable with a valid provision which is as similar as possible in substance to the invalid, illegal or unenforceable provision.

 

8.8. Attorneys’ Fees. In the event that any dispute among the Parties to this Agreement should result in litigation, the prevailing Party in such dispute shall be entitled to recover from the losing Party all fees, costs and expenses of enforcing any right of such prevailing Party under or with respect to this Agreement, including without limitation, such reasonable fees and expenses of attorneys, which shall include, without limitation, all fees, costs and expenses of appeals.

 

8.9. Counterparts. This Agreement may be executed in multiple counterparts and by electronic signature, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

8.10. Further Assurances. Each Party covenants and agrees that, subsequent to the execution and delivery of this Agreement and without any additional consideration, it will execute and deliver any further legal instruments and perform any acts which are or may become reasonably necessary to effectuate the purposes of this Agreement.

 

 

 

 

IN WITNESS WHEREOF, this Agreement is hereby executed by the Parties hereto effective as of the date first set forth above.

 

  HUMBL:
     
  HUMBL, Inc.
     
  By:  
    Brian Foote, CEO
     
  Red Rock:
     
     
  Red Rock Development Group, LLC
   
  By:  
    Brian Innes, Manager

 

 

 

 

AMENDMENT TO DEVELOPMENT SERVICES AGREEMENT

 

This Amendment to Development Services Agreement (this “Amendment”) is entered into as of November 15, 2021, by and between HUMBL, Inc., a Delaware corporation (“HUMBL”), and Red Rock Development Group, LLC, an Arizona limited liability company (“Red Rock”).

 

HUMBL

 

A. and Red Rock are parties to that certain Development Services Agreement dated July 29, 2021 (the “Development Agreement”).

 

B. As result of a decline in HUMBL’s stock price, HUMBL and Red Rock have agreed, subject to the terms, conditions and understandings expressed in this Amendment, to increase the number of shares to be issued under the Development Agreement and revise the vesting schedule.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

 

1. Recitals. Each of the parties hereto acknowledges and agrees that the recitals set forth above in this Amendment are true and accurate and are hereby incorporated into and made a part of this Amendment.

 

2. Amendment. Section 2 of the Development Agreement is hereby deleted in its entirety and replaced with the following:

 

“2. Share Issuance; Vesting. In consideration for the Services, HUMBL agrees to issue 5,000,000 shares of its common stock to Red Rock. The Shares will be subject to the following vesting schedule: (a) 2,500,000 of the Shares will vest on December 15, 2021; and (b) 2,500,000 of the Shares will vest on January 15, 2022. The applicable Shares will be deemed fully earned on the applicable vesting date.”

 

3. Other Terms Unchanged. The Development Agreement, as amended by this Amendment remains and continues in full force and effect, constitutes legal, valid, and binding obligations of each of the parties, and is in all respects agreed to, ratified, and confirmed. Any reference to the Development Agreement after the date of this Amendment is deemed to be a reference to the Development Agreement as amended by this Amendment. If there is a conflict between the terms of this Amendment and the Development Agreement, the terms of this Amendment shall control.

 

4. No Reliance. Red Rock acknowledges and agrees that neither HUMBL nor any of its officers, directors, representatives or agents has made any representations or warranties to Red Rock or any of its agents, representatives, officers, directors, members, managers or employees except as expressly set forth in this Amendment and, in making its decision to enter into the transactions contemplated by this Amendment, Red Rock is not relying on any representation, warranty, covenant or promise of HUMBL or its officers, directors, equity holders, agents or representatives other than as set forth in this Amendment.

 

5. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument. The parties hereto confirm that any electronic copy of another party’s executed counterpart of this Amendment (or such party’s signature page thereof) will be deemed to be an executed original thereof.

 

6. Further Assurances. Each party shall do and perform or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Amendment and the consummation of the transactions contemplated hereby.

 

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date set forth above.

 

  HUMBL:
     
  HUMBL, Inc.
     
  By:  
    Brian Foote, CEO
     
  RED ROCK:
     
  Red Rock Development Group, LLC
     
  By:  
    Brian Innes, Manager

 

 

 

 

AMENDMENT #2 TO DEVELOPMENT SERVICES AGREEMENT

 

This Amendment #2 to Development Services Agreement (this “Amendment”) is entered into as of December 30, 2021, by and between HUMBL, Inc., a Delaware corporation (“HUMBL”), and Red Rock Development Group, LLC, an Arizona limited liability company (“Red Rock”).

 

A. HUMBL and Red Rock are parties to that certain Development Services Agreement dated July 29, 2021 (the “Development Agreement”).

 

B. Red Rock has not yet completed some of the services under the Development Services that were anticipated to be completed by December 15, 2021, HUMBL and Red Rock have agreed, subject to the terms, conditions and understandings expressed in this Amendment, to revise the vesting schedule.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

 

1. Recitals. Each of the parties hereto acknowledges and agrees that the recitals set forth above in this Amendment are true and accurate and are hereby incorporated into and made a part of this Amendment.

 

2. Amendment. Section 2 of the Development Agreement is hereby deleted in its entirety and replaced with the following:

 

“2. Share Issuance; Vesting. In consideration for the Services, HUMBL agrees to issue 5,000,000 shares of its common stock to Red Rock (the “Shares”). The Shares will vest on January 15, 2022 (the “Vesting Date”). Red Rock agrees that it will forfeit the Shares in the event this Agreement is terminated prior to the Vesting Date. The Shares will be deemed fully earned on the Vesting Date.”

 

3. Other Terms Unchanged. The Development Agreement, as amended by this Amendment remains and continues in full force and effect, constitutes legal, valid, and binding obligations of each of the parties, and is in all respects agreed to, ratified, and confirmed. Any reference to the Development Agreement after the date of this Amendment is deemed to be a reference to the Development Agreement as amended by this Amendment. If there is a conflict between the terms of this Amendment and the Development Agreement, the terms of this Amendment shall control.

 

4. No Reliance. Red Rock acknowledges and agrees that neither HUMBL nor any of its officers, directors, representatives or agents has made any representations or warranties to Red Rock or any of its agents, representatives, officers, directors, members, managers or employees except as expressly set forth in this Amendment and, in making its decision to enter into the transactions contemplated by this Amendment, Red Rock is not relying on any representation, warranty, covenant or promise of HUMBL or its officers, directors, equity holders, agents or representatives other than as set forth in this Amendment.

 

5. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument. The parties hereto confirm that any electronic copy of another party’s executed counterpart of this Amendment (or such party’s signature page thereof) will be deemed to be an executed original thereof.

 

6. Further Assurances. Each party shall do and perform or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Amendment and the consummation of the transactions contemplated hereby.

 

[Remainder of page intentionally left blank]

 

 

 

 

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date set forth above.

 

  HUMBL:
     
  HUMBL, Inc.
     
  By:  
    Brian Foote, CEO
     
  RED ROCK:
     
  Red Rock Development Group, LLC
     
  By:  
    Brian Innes, Manager

 

 

 

 

AMENDMENT #3 TO DEVELOPMENT SERVICES AGREEMENT

 

This Amendment #3 to Development Services Agreement (this “Amendment”) is entered into effective as of February 12, 2022, by and between HUMBL, Inc., a Delaware corporation (“HUMBL”), and Red Rock Development Group, LLC, an Arizona limited liability company (“Red Rock”).

 

C. HUMBL and Red Rock are parties to that certain Development Services Agreement dated July 29, 2021 (the “Development Agreement”).

 

D. As result of a decline in HUMBL’s stock price, HUMBL and Red Rock have agreed, subject to the terms, conditions and understandings expressed in this Amendment, to increase the number of shares to be issued under the Development Agreement and revise the vesting schedule.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

 

1. Recitals. Each of the parties hereto acknowledges and agrees that the recitals set forth above in this Amendment are true and accurate and are hereby incorporated into and made a part of this Amendment.

 

2. Amendment. Section 2 of the Development Agreement is hereby deleted in its entirety and replaced with the following:

 

“2. Share Issuance; Vesting. In consideration for the Services, HUMBL agrees to issue 10,000,000 shares of its common stock to Red Rock. The Shares will vest on April 15, 2022. The Shares will be deemed fully earned on the applicable vesting date.”

 

3. Other Terms Unchanged. The Development Agreement, as amended by this Amendment remains and continues in full force and effect, constitutes legal, valid, and binding obligations of each of the parties, and is in all respects agreed to, ratified, and confirmed. Any reference to the Development Agreement after the date of this Amendment is deemed to be a reference to the Development Agreement as amended by this Amendment. If there is a conflict between the terms of this Amendment and the Development Agreement, the terms of this Amendment shall control.

 

4. No Reliance. Red Rock acknowledges and agrees that neither HUMBL nor any of its officers, directors, representatives or agents has made any representations or warranties to Red Rock or any of its agents, representatives, officers, directors, members, managers or employees except as expressly set forth in this Amendment and, in making its decision to enter into the transactions contemplated by this Amendment, Red Rock is not relying on any representation, warranty, covenant or promise of HUMBL or its officers, directors, equity holders, agents or representatives other than as set forth in this Amendment.

 

5. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument. The parties hereto confirm that any electronic copy of another party’s executed counterpart of this Amendment (or such party’s signature page thereof) will be deemed to be an executed original thereof.

 

6. Further Assurances. Each party shall do and perform or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Amendment and the consummation of the transactions contemplated hereby.

 

[Remainder of page intentionally left blank]

 

 

 

 

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date set forth above.

 

  HUMBL:
     
  HUMBL, Inc.
     
  By:  
    Brian Foote, CEO
     
  RED ROCK:
     
  Red Rock Development Group, LLC
     
  By:  
    Brian Innes, Manager

 

 

 

 

Exhibit 10.50

 

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

 

CONVERTIBLE PROMISSORY NOTE

 

Effective Date: August 30, 2021 U.S. $153,000.00

 

FOR VALUE RECEIVED, HUMBL, Inc., a Delaware corporation (“Borrower”), promises to pay to the order of Hahanakai, LLC, a Hawaii limited liability company, or its successors or assigns (“Lender”), $153,000.00 and any interest accrued hereunder on the date that is twenty-two (22) months from the Effective Date (the “Maturity Date”) in accordance with the terms set forth herein and to pay interest on the outstanding balance at the rate of eight percent (8%) per annum from the Effective Date until the same is paid in full. This Convertible Promissory Note (this “Note”) is issued and made effective as of August 30, 2021 (the “Effective Date”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.

 

1. Payment; Prepayment.

 

1.1. Payment. All payments owing hereunder shall be in lawful money of the United States of America or Conversion Shares (as defined below), as provided for herein, and delivered to Lender at the address or bank account furnished to Borrower for that purpose. All payments shall be applied first to (a) costs of collection, if any, then to (b) fees and charges, if any, then to (c) accrued and unpaid interest, and thereafter, to (d) principal.

 

 

 

 

1.2. Prepayment. Borrower may not prepay this Note without Lender’s prior written consent. Notwithstanding the forgoing, this Note may be prepaid immediately prior to the consummation of a Change of Control, provided that the Borrower provided prior written notice of such Change of Control to the Lender pursuant to Section 14.

 

2. Security. This Note is unsecured.

 

3. Lender Optional Conversion.

 

3.1. Conversions. Lender has the right at any time after the Effective Date until the outstanding balance has been paid in full, at its election, to convert (“Conversion”) all or any portion of the outstanding balance into shares (“Conversion Shares”) of fully paid and non-assessable common stock, $0.00001 par value per share (“Common Stock”), of Borrower as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the “Conversion Amount”) divided by the Conversion Price (as defined below). Conversion notices in the form attached hereto as Exhibit A (each, a “Conversion Notice”) may be delivered from time to time by Lender to Borrower, and all Conversions shall be cashless and not require further payment from Lender. Borrower shall deliver the Conversion Shares from any Conversion to Lender in accordance with Section 7 below.

 

3.2. Conversion Price. The price at which Lender has the right to convert all or any portion of the outstanding balance, including accrued but unpaid interest, into Common Stock is $0.90 per share of Common Stock (the “Conversion Price”). The Conversion Price will automatically be adjusted in the event Borrower consummates a stock split, stock combination or other similar change to the number of outstanding shares of Common Stock.

 

4. Defaults and Remedies.

 

4.1. Defaults. The following are events of default under this Note (each, an “Event of Default”): (a) Borrower fails to pay any principal, interest, fees, charges, or any other amount when due and payable hereunder; (b) Borrower fails to deliver any Conversion Shares in accordance with the terms hereof; (c) a receiver, trustee or other similar official shall be appointed over Borrower or a material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed or discharged within sixty (60) days; (d) Borrower makes a general assignment for the benefit of creditors; (e) Borrower files a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); or (f) an involuntary bankruptcy proceeding is commenced or filed against Borrower. Notwithstanding the foregoing, the occurrence of any of the foregoing events will not be considered an Event of Default unless Borrower fails to cure such event within ten (10) Trading Days of its receipt of written notice from Lender.

 

4.2. Remedies. Following an Event of Default, Lender may accelerate this Note by written notice to Borrower with the outstanding balance becoming immediately due and payable. Nothing herein shall limit Lender’s right to pursue any other remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to Borrower’s failure to timely deliver Conversion Shares upon Conversion of the Note as required pursuant to the terms hereof.

 

5. Unconditional Obligation; No Offset. Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset, deduction or counterclaim of any kind. Borrower hereby waives any rights of offset it now has or may have hereafter against Lender, its successors and assigns, and agrees to make the payments or Conversions called for herein in accordance with the terms of this Note.

 

6. Waiver. No waiver of any provision of this Note shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.

 

 

 

 

7. Method of Conversion Share Delivery. On or before the close of business on the seventh (7th) Trading Day following the date of delivery of a Conversion Notice (the “Delivery Date”), Borrower shall, provided it is DWAC Eligible at such time, deliver or cause its transfer agent to deliver the applicable Conversion Shares electronically via DWAC to the account designated by Lender in the applicable Conversion Notice. If Borrower is not DWAC Eligible, it shall deliver to Lender or its broker (as designated in the Conversion Notice), via reputable overnight courier, a certificate representing the number of shares of Common Stock equal to the number of Conversion Shares to which Lender shall be entitled, registered in the name of Lender or its designee.

 

8. Ownership Limitation. Notwithstanding anything to the contrary contained in this Note or the other Transaction Documents, Borrower shall not effect any conversion of this Note to the extent that after giving effect to such conversion would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance). For purposes of this section, beneficial ownership of Common Stock will be determined pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended.

 

9. Opinion of Counsel. In the event that an opinion of counsel is needed for any matter related to this Note, Lender shall have such opinion provided by its counsel.

 

10. Governing Law; Venue. This Note shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and wholly performed in that jurisdiction. Each party hereto submits to the exclusive jurisdiction of any state or federal court sitting in San Diego County, California in any proceeding arising out of or relating to this Note and agrees that all claims in respect of the proceeding may be heard and determined in any such court and hereby expressly submits to the personal jurisdiction and venue of such court for the purposes hereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum. Each party hereto hereby irrevocably consents to the service of process of any of the aforementioned courts in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to its address as set forth herein, such service to become effective ten (10) days after such mailing. The parties expressly and irrevocably waive the right to a trial by jury in any and all actions or proceedings brought with respect to this Note and with respect to any claims arising out of or related to this Note.

 

11. Cancellation. After repayment or conversion of the entire outstanding balance, this Note shall be deemed paid in full, shall automatically be deemed canceled, and shall not be reissued.

 

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

13. Assignments. Neither party may assign this Note without the consent of the other party. Any assignment or assumption in connection with a Change of Control is subject to Lender’s approval, unless this Note is paid in full in connection with such Change of Control.

 

14. Notices. Whenever notice is required to be given under this Note, such notice shall be given to such address as has been provided to the other party. Borrower shall provide Lender with prompt written notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, Borrower will give written notice to Lender (i) as soon as practicable upon each adjustment of the Conversion Price and the number of Conversion Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, or (B) for determining rights to vote with respect to any Change of Control, dissolution or liquidation, provided in each case that such information, and (iii) at least ten (10) Trading Days prior to the consummation of any Change of Control.

 

15. Severability. If any part of this Note is construed to be in violation of any law, such part shall be modified to achieve the objective of Borrower and Lender to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect.

 

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

 

 

 

 

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

 

  BORROWER:
  HUMBL, Inc.
     
  By:
    Brian Foote, CEO

 

ACKNOWLEDGED, ACCEPTED AND AGREED:

 

LENDER:

 

Hahanakai, LLC  
     
By:    
  Cathleen S. Peters, Member-Manager  

 

 

 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

A1. “DTC” means the Depository Trust Company or any successor thereto.

 

A2. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A3. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A4. “DWAC Eligible” means that (a) Borrower’s Common Stock is eligible at DTC for full services pursuant to DTC’s operational arrangements, including without limitation transfer through DTC’s DWAC system; (b) Borrower has been approved (without revocation) by DTC’s underwriting department; (c) Borrower’s transfer agent is approved as an agent in the DTC/FAST Program; (d) the Conversion Shares are otherwise eligible for delivery via DWAC; and (e) Borrower’s transfer agent does not have a policy prohibiting or limiting delivery of the Conversion Shares via DWAC.

 

A5. “Trading Day” means any day on which Borrower’s market is open for trading.

 

A6. “Change of Control” means a merger or consolidation with another entity in which the Company’s stockholders do not own more than 50% of the outstanding voting power of the surviving entity, or the disposition of all or substantially all of the Company’s assets.

 

[Remainder of page intentionally left blank]

 

EXHIBIT A

 

Hahanakai, LLC

 

HUMBL, Inc. Date:

Attn: Brian Foote

600 B. Street, Suite 300

San Diego, California 92101

 

 

 

 

CONVERSION NOTICE

 

The above-captioned Lender hereby gives notice to HUMBL, Inc., a Delaware corporation (the “Borrower”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on August 30, 2021 (the “Note”), that Lender elects to convert the portion of the Note balance set forth below into fully paid and non-assessable shares of Common Stock of Borrower as of the date of conversion specified below. Said conversion shall be based on the Conversion Price set forth below. In the event of a conflict between this Conversion Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of Conversion Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.

 

A. Date of Conversion: ____________

B. Conversion #: ____________

C. Conversion Amount: ____________

D. Conversion Price: __________

E. Conversion Shares: _______________ (C divided by D)

F. Remaining Outstanding Balance of Note: ____________

 

Please transfer the Conversion Shares electronically (via DWAC) to the following account:

 

Broker: ____________________   Address:  
DTC#: _____________________      
Account #: __________________      
Account Name: _______________      

 

To the extent the Conversion Shares are not able to be delivered to Lender electronically via the DWAC system, deliver all such certificated shares to Lender via reputable overnight courier after receipt of this Conversion Notice (by facsimile transmission or otherwise) to:

_____________________________________

_____________________________________

_____________________________________

 

Sincerely,

 

Lender:

 

By:    
Cathleen S. Peters, Member-Manager  

 

 

 

Exhibit 10.51

 

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF THIS WARRANT OR SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THIS WARRANT OR SUCH SECURITIES, AS APPLICABLE, MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS.

HUMBL, INC.

 

WARRANT TO PURCHASE SHARES OF COMMON STOCK

 

1. Issuance. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by HUMBL, Inc., a Delaware corporation, its successors and assigns (“Company”), Hahanakai, LLC, a Hawaii limited liability company, its successors and/or registered assigns (“Investor”), is hereby granted the right to purchase at any time on or after the Issue Date (as defined below) until the two-year anniversary of the Issue Date (as defined below) (the “Expiration Date”), 375,000 fully paid and non-assessable shares (the “Warrant Shares”) of Company’s common stock, par value $0.00001 per share (the “Common Stock”), as such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant to Purchase Shares of Common Stock (this “Warrant”).

 

This Warrant is being issued pursuant to the terms of that certain Securities Purchase Agreement dated August 30, 2021, to which Company and Investor are parties (as the same may be amended from time to time, the “Purchase Agreement”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference. This Warrant was issued to Investor on August 30, 2021 (the “Issue Date”).

 

2. Exercise of Warrant.

 

2.1. General.

 

(a) This Warrant is exercisable in whole or in part at any time and from time to time commencing on the Issue Date and ending on the Expiration Date. Such exercise shall be effectuated by submitting to Company (either by delivery to Company or by email or facsimile transmission) a completed and signed Notice of Exercise substantially in the form attached to this Warrant as Exhibit A (the “Notice of Exercise”). The date a Notice of Exercise is delivered to Company shall be the “Exercise Date,” provided that, if such exercise represents the full exercise of the outstanding balance of this Warrant, Investor shall tender this Warrant to Company within five (5) Trading Days thereafter, but only if the Warrant Shares to be delivered pursuant to the Notice of Exercise have been delivered to Investor as of such date. The Notice of Exercise shall be executed by Investor and shall indicate the number of Warrant Shares to be issued pursuant to such exercise

 

(b) The Exercise Price per share of Common Stock for the Warrant Shares shall be payable, at the election of Investor, in cash or by certified or official bank check or by wire transfer in accordance with instructions provided by Company at the request of Investor.

 

(c) Upon the appropriate payment to Company of the Exercise Price for the Warrant Shares, Company shall promptly, but in no case later than the date that is ten (10) Trading Days following the date the Exercise Price is paid to Company (the “Delivery Date”), deliver or cause Company’s Transfer Agent to deliver the applicable Warrant Shares electronically via the DWAC system to the account designated by Investor on the Notice of Exercise. If for any reason Company is not able to so deliver the Warrant Shares via the DWAC system, Company shall instead, on or before the applicable date set forth above in this subsection, issue and deliver to Investor or its broker (as designated in the Notice of Exercise), via reputable overnight courier, a certificate, registered in the name of Investor or its designee, representing the applicable number of Warrant Shares.

 

(d) In no event may this Warrant be net cash settled.

 

2.2. Ownership Limitation. Notwithstanding anything to the contrary contained in this Warrant, if at any time Lender shall or would be issued shares of Common Stock under this Warrant, but such issuance would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance) (the “Maximum Percentage”), then Borrower shall not issue to Lender shares of Common Stock which would exceed the Maximum Percentage. The ownership limitation is enforceable, unconditional and non-waivable and shall apply to all affiliates and assigns of Lender.

 

 

 

 

3. Mutilation or Loss of Warrant. Upon receipt by Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, Company will execute and deliver to Investor a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void.

 

4. Rights of Investor. Investor shall not, by virtue of this Warrant alone, be entitled to any rights of a stockholder in Company, either at law or in equity, and the rights of Investor with respect to or arising under this Warrant are limited to those expressed in this Warrant and are not enforceable against Company except to the extent set forth herein

 

5. Adjustments. If Company shall issue any shares of Common Stock as a stock dividend or subdivide the number of outstanding shares of Common Stock into a greater number of shares, then, in either such case, the Exercise Price in effect before such dividend or subdivision shall be proportionately reduced and the number of Warrant Shares at that time issuable pursuant to the exercise of this Warrant shall be proportionately increased; and, conversely, if Company shall contract the number of outstanding shares of Common Stock by combining such shares into a smaller number of shares, then the Exercise Price in effect before such combination shall be proportionately increased and the number of Warrant Shares at that time issuable pursuant to the exercise or conversion of this Warrant shall be proportionately decreased. Each adjustment in the number of shares of Warrant Stock issuable shall be to the nearest whole share.

 

6. Certificate as to Adjustments. In the case of any adjustment in the Exercise Price or Warrant Shares, Company will promptly give written notice to Investor in the form of a certificate, certified and confirmed by an officer of the Company, setting forth the adjustment in reasonable detail.

 

7. Transfer to Comply with the Securities Act. This Warrant and the Warrant Shares have not been registered under the Securities Act of 1933, as amended (the “1933 Act”). The Warrant Shares may not be sold, transferred, pledged or hypothecated without (a) an effective registration statement under the 1933 Act relating to such security or (b) an opinion of counsel reasonably satisfactory to Company that registration is not required under the 1933 Act. Until such time as registration has occurred under the 1933 Act, each certificate for this Warrant and any Warrant Shares shall contain a legend, in form and substance satisfactory to counsel for Company, setting forth the restrictions on transfer contained in this Section 7. This Warrant may be transferred by Investor so long as such transfer is done in compliance with applicable securities laws. Upon receipt of a duly executed assignment of this Warrant, Company shall register the transferee thereon as the new holder on the books and records of Company and such transferee shall be deemed a “registered holder” or “registered assign” for all purposes hereunder, and shall have all the rights of Investor under this Warrant. Until this Warrant is transferred on the books of Company, Company may treat Investor as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary

 

8. Notices. Any notice required or permitted hereunder shall be given in the manner provided in the subsection titled “Notices” in the Purchase Agreement, the terms of which are incorporated herein by reference. Company shall provide Investor with prompt written notice of all actions taken pursuant to this Warrant, including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, Company will give written notice to Investor (i) as soon as practicable upon each adjustment of the Exercise Price and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, or (B) for determining rights to vote with respect to any Change of Control, dissolution or liquidation, provided in each case that such information, and (iii) at least ten (10) Trading Days prior to the consummation of any Change of Control.

 

9. Supplements and Amendments; Whole Agreement. This Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant, together with the Purchase Agreement, contains the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings with respect to the subject matter hereof and thereof other than as expressly contained herein and therein.

 

 

 

 

10. Governing Law; Venue. This Warrant shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of Delaware. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state and federal courts in San Diego County, California. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The prevailing party in any dispute arising under this Agreement shall be entitled to recover from the other party its reasonable attorney’s fees and costs.

 

11. Waiver of Jury Trial. EACH OF COMPANY AND INVESTOR IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS WARRANT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, COMPANY ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY.

 

12. Counterparts. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Electronic signatures shall be considered original signatures for all purposes hereof.

 

13. Attorneys’ Fees. In the event of any litigation or dispute arising from this Warrant, the parties agree that the prevailing party shall be entitled to an additional award of the full amount of the reasonable attorneys’ fees and expenses paid by said prevailing party in connection with litigation or dispute.

 

14. Severability. Whenever possible, each provision of this Warrant shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be invalid or unenforceable in any jurisdiction, such provision shall be modified to achieve the objective of the parties to the fullest extent permitted and such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Warrant or the validity or enforceability of this Warrant in any other jurisdiction.

 

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

 

IN WITNESS WHEREOF, Company has caused this Warrant to be duly executed as of the Issue Date.

 

  COMPANY:
   
  HUMBL, Inc.
     
  By:  
    Brian Foote, CEO

 

ATTACHMENT 1

DEFINITIONS

 

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

A7. “Change of Control” means a merger or consolidation with another entity in which the Company’s stockholders do not own more than 50% of the outstanding voting power of the surviving entity, or the disposition of all or substantially all of the Company’s assets.

 

A8. “DTC” means the Depository Trust Company or any successor thereto.

 

 

 

 

A9. “DTC Eligible” means, with respect to the Common Stock, that such Common Stock is eligible to be deposited in certificate form at the DTC, cleared and converted into electronic shares by the DTC and held in the name of the clearing firm servicing Investor’s brokerage firm for the benefit of Investor.

 

A10. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A11. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A12. “Exercise Price” means $0.90 per share of Common Stock, as the same may be adjusted from time to time pursuant to the terms and conditions of this Warrant.

 

A13. “Trading Day” means any day the New York Stock Exchange is open for trading.

 

EXHIBIT A

 

NOTICE OF EXERCISE OF WARRANT

 

TO: HUMBL, INC.  
  ATTN: _______________
  VIA FAX TO: ( )______________ EMAIL: ______________

 

The undersigned hereby irrevocably elects to exercise the right, represented by the Warrant to Purchase Shares of Common Stock dated as of August 30, 2021 (the “Warrant”), to purchase shares of the common stock, $0.00001 par value (“Common Stock”), of HUMBL, Inc., and tenders herewith payment in accordance with Section 2 of the Warrant, as follows:

 

Warrant Shares: _______________________

 

Exercise Price: $_______________________

 

Purchase Price: $___________________ = (Exercise Price x Warrant Shares)

 

Payment is being made by:

 

_____         enclosed check

_____         wire transfer

_____         other

 

Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Warrant.

 

It is the intention of Investor to comply with the provisions of Section 2.2 of the Warrant regarding certain limits on Investor’s right to receive shares thereunder. Investor believes this exercise complies with the provisions of such Section 2.2. Nonetheless, to the extent that, pursuant to the exercise effected hereby, Investor would receive more shares of Common Stock than permitted under Section 2.2, Company shall not be obligated and shall not issue to Investor such excess shares until such time, if ever, that Investor could receive such excess shares without violating, and in full compliance with, Section 2.2 of the Warrant.

 

As contemplated by the Warrant, this Notice of Exercise is being sent by email to the officer indicated above.

 

If this Notice of Exercise represents the full exercise of the entire Warrant, Investor will surrender (or cause to be surrendered) the Warrant to Company at the address indicated above by express courier within five (5) Trading Days after the Warrant Shares to be delivered pursuant to this Notice of Exercise have been delivered to Investor.

 

To the extent the Warrant Shares are not able to be delivered to Investor via the DWAC system, please deliver certificates representing the Warrant Shares to Investor via reputable overnight courier after receipt of this Notice of Exercise (by facsimile transmission or otherwise) to:

 

_____________________________________

_____________________________________

_____________________________________

 

Dated: _____________________

 

___________________________

[Name of Investor]

 

By:________________________

 

 

 

 

 

Exhibit 10.52

 

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

 

CONVERTIBLE PROMISSORY NOTE

 

 

Effective Date: November 12, 2021 U.S. $306,000.00

 

FOR VALUE RECEIVED, HUMBL, Inc., a Delaware corporation (“Borrower”), promises to pay to the order of Joy Corbin, an individual, or her successors or assigns (“Lender”), $306,000.00 and any interest accrued hereunder on the date that is twenty-two (22) months from the Effective Date (the “Maturity Date”) in accordance with the terms set forth herein and to pay interest on the outstanding balance at the rate of eight percent (8%) per annum from the Effective Date until the same is paid in full. This Convertible Promissory Note (this “Note”) is issued and made effective as of November 12, 2021 (the “Effective Date”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.

 

1. Payment; Prepayment.

 

1.1. Payment. All payments owing hereunder shall be in lawful money of the United States of America or Conversion Shares (as defined below), as provided for herein, and delivered to Lender at the address or bank account furnished to Borrower for that purpose. All payments shall be applied first to (a) costs of collection, if any, then to (b) fees and charges, if any, then to (c) accrued and unpaid interest, and thereafter, to (d) principal.

 

1.2. Prepayment. Borrower may not prepay this Note without Lender’s prior written consent. Notwithstanding the forgoing, this Note may be prepaid immediately prior to the consummation of a Change of Control, provided that Borrower is provided prior written notice of such Change of Control to the Lender pursuant to Section 14.

 

 

 

 

2. Security. This Note is unsecured.

 

3. Lender Optional Conversion.

3.1. Conversions. Lender has the right at any time after the Effective Date until the outstanding balance has been paid in full, at its election, to convert (“Conversion”) all or any portion of the outstanding balance into shares (“Conversion Shares”) of fully paid and non-assessable common stock, $0.00001 par value per share (“Common Stock”), of Borrower as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the “Conversion Amount”) divided by the Conversion Price (as defined below). Conversion notices in the form attached hereto as Exhibit A (each, a “Conversion Notice”) may be delivered from time to time by Lender to Borrower, and all Conversions shall be cashless and not require further payment from Lender. Borrower shall deliver the Conversion Shares from any Conversion to Lender in accordance with Section 7 below.

 

3.2. Conversion Price. The price at which Lender has the right to convert all or any portion of the outstanding balance, including accrued but unpaid interest, into Common Stock is $0.60 per share of Common Stock (the “Conversion Price”). The Conversion Price will automatically be adjusted in the event Borrower consummates a stock split, stock combination or other similar change to the number of outstanding shares of Common Stock.

 

4. Defaults and Remedies.

 

4.1. Defaults. The following are events of default under this Note (each, an “Event of Default”): (a) Borrower fails to pay any principal, interest, fees, charges, or any other amount when due and payable hereunder; (b) Borrower fails to deliver any Conversion Shares in accordance with the terms hereof; (c) a receiver, trustee or other similar official shall be appointed over Borrower or a material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed or discharged within sixty (60) days; (d) Borrower makes a general assignment for the benefit of creditors; (e) Borrower files a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); or (f) an involuntary bankruptcy proceeding is commenced or filed against Borrower. Notwithstanding the foregoing, the occurrence of any of the foregoing events will not be considered an Event of Default unless Borrower fails to cure such event within ten (10) Trading Days of its receipt of written notice from Lender.

 

4.2. Remedies. Following an Event of Default, Lender may accelerate this Note by written notice to Borrower with the outstanding balance becoming immediately due and payable. Nothing herein shall limit Lender’s right to pursue any other remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to Borrower’s failure to timely deliver Conversion Shares upon Conversion of the Note as required pursuant to the terms hereof.

 

5. Unconditional Obligation; No Offset. Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset, deduction or counterclaim of any kind. Borrower hereby waives any rights of offset it now has or may have hereafter against Lender, its successors and assigns, and agrees to make the payments or Conversions called for herein in accordance with the terms of this Note.

 

6. Waiver. No waiver of any provision of this Note shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.

 

7. Method of Conversion Share Delivery. On or before the close of business on the seventh (7th) Trading Day following the date of delivery of a Conversion Notice (the “Delivery Date”), Borrower shall, provided it is DWAC Eligible at such time, deliver or cause its transfer agent to deliver the applicable Conversion Shares electronically via DWAC to the account designated by Lender in the applicable Conversion Notice. If Borrower is not DWAC Eligible, it shall deliver to Lender or its broker (as designated in the Conversion Notice), via reputable overnight courier, a certificate representing the number of shares of Common Stock equal to the number of Conversion Shares to which Lender shall be entitled, registered in the name of Lender or its designee.

 

 

 

 

8. Ownership Limitation. Notwithstanding anything to the contrary contained in this Note or the other Transaction Documents, Borrower shall not effect any conversion of this Note to the extent that after giving effect to such conversion would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance). For purposes of this section, beneficial ownership of Common Stock will be determined pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended.

 

9. Opinion of Counsel. In the event that an opinion of counsel is needed for any matter related to this Note, Lender shall have such opinion provided by its counsel.

 

10. Governing Law; Venue. This Note shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and wholly performed in that jurisdiction. Each party hereto submits to the exclusive jurisdiction of any state or federal court sitting in San Diego County, California in any proceeding arising out of or relating to this Note and agrees that all claims in respect of the proceeding may be heard and determined in any such court and hereby expressly submits to the personal jurisdiction and venue of such court for the purposes hereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum. Each party hereto hereby irrevocably consents to the service of process of any of the aforementioned courts in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to its address as set forth herein, such service to become effective ten (10) days after such mailing. The parties expressly and irrevocably waive the right to a trial by jury in any and all actions or proceedings brought with respect to this Note and with respect to any claims arising out of or related to this Note.

 

11. Cancellation. After repayment or conversion of the entire outstanding balance, this Note shall be deemed paid in full, shall automatically be deemed canceled, and shall not be reissued.

 

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

 

13. Assignments. Neither party may assign this Note without the consent of the other party. Any assignment or assumption in connection with a Change of Control is subject to Lender’s approval, unless this Note is paid in full in connection with such Change of Control.

 

14. Notices. Whenever notice is required to be given under this Note, such notice shall be given to such address as has been provided to the other party. Borrower shall provide Lender with prompt written notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, Borrower will give written notice to Lender (i) as soon as practicable upon each adjustment of the Conversion Price and the number of Conversion Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, or (B) for determining rights to vote with respect to any Change of Control, dissolution or liquidation, provided in each case that such information, and (iii) at least ten (10) Trading Days prior to the consummation of any Change of Control.

 

15. Severability. If any part of this Note is construed to be in violation of any law, such part shall be modified to achieve the objective of Borrower and Lender to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect.

 

[Remainder of page intentionally left blank; signature page follows

 

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

 

  BORROWER:
   
  HUMBL, Inc.
     
  By:  
    Brian Foote, CEO

 

ACKNOWLEDGED, ACCEPTED AND AGREED:

 

LENDER:

 

By:    
  Joy Corbin, an individual  

 

ATTACHMENT 1

DEFINITIONS

 

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

 

A14. “DTC” means the Depository Trust Company or any successor thereto.

 

A15. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A16. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A17. “DWAC Eligible” means that (a) Borrower’s Common Stock is eligible at DTC for full services pursuant to DTC’s operational arrangements, including without limitation transfer through DTC’s DWAC system; (b) Borrower has been approved (without revocation) by DTC’s underwriting department; (c) Borrower’s transfer agent is approved as an agent in the DTC/FAST Program; (d) the Conversion Shares are otherwise eligible for delivery via DWAC; and (e) Borrower’s transfer agent does not have a policy prohibiting or limiting delivery of the Conversion Shares via DWAC.

 

A18. “Trading Day” means any day on which Borrower’s market is open for trading.

 

A19. “Change of Control” means a merger or consolidation with another entity in which the Company’s stockholders do not own more than 50% of the outstanding voting power of the surviving entity, or the disposition of all or substantially all of the Company’s assets.

 

[Remainder of page intentionally left blank]

 

EXHIBIT A

 

Joy Corbin

 

HUMBL, Inc. Date:

Attn: Brian Foote

600 B. Street, Suite 300

San Diego, California 92101

 

CONVERSION NOTICE

 

The above-captioned Lender hereby gives notice to HUMBL, Inc., a Delaware corporation (the “Borrower”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on November 12, 2021 (the “Note”), that Lender elects to convert the portion of the Note balance set forth below into fully paid and non-assessable shares of Common Stock of Borrower as of the date of conversion specified below. Said conversion shall be based on the Conversion Price set forth below. In the event of a conflict between this Conversion Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of Conversion Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.

 

 

 

 

A. Date of Conversion: ____________

B. Conversion #: ____________

C. Conversion Amount: ____________

D. Conversion Price: __________

E. Conversion Shares: _______________ (C divided by D)

F. Remaining Outstanding Balance of Note: ____________

 

Please transfer the Conversion Shares electronically (via DWAC) to the following account:

 

Broker: ____________________   Address:  
DTC#: _____________________      
Account #: __________________      
Account Name: _______________      

 

To the extent the Conversion Shares are not able to be delivered to Lender electronically via the DWAC system, deliver all such certificated shares to Lender via reputable overnight courier after receipt of this Conversion Notice (by facsimile transmission or otherwise) to:

 

_____________________________________

_____________________________________

_____________________________________

 

Sincerely,    
Lender:    
By:    
Joy Corbin  

 

 

 

Exhibit 10.53

 

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF THIS WARRANT OR SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THIS WARRANT OR SUCH SECURITIES, AS APPLICABLE, MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS.

 

HUMBL, INC.

 

WARRANT TO PURCHASE SHARES OF COMMON STOCK

 

1. Issuance. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by HUMBL, Inc., a Delaware corporation, its successors and assigns (“Company”), Joy Corbin, an individual, her successors and/or registered assigns (“Investor”), is hereby granted the right to purchase at any time on or after the Issue Date (as defined below) until the two-year anniversary of the Issue Date (as defined below) (the “Expiration Date”), 1,000,000 fully paid and non-assessable shares (the “Warrant Shares”) of Company’s common stock, par value $0.00001 per share (the “Common Stock”), as such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant to Purchase Shares of Common Stock (this “Warrant”).

 

This Warrant is being issued pursuant to the terms of that certain Securities Purchase Agreement dated November 12, 2021, to which Company and Investor are parties (as the same may be amended from time to time, the “Purchase Agreement”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference. This Warrant was issued to Investor on November 12, 2021 (the “Issue Date”).

 

2. Exercise of Warrant.

 

2.1. General.

 

(a) This Warrant is exercisable in whole or in part at any time and from time to time commencing on the Issue Date and ending on the Expiration Date. Such exercise shall be effectuated by submitting to Company (either by delivery to Company or by email or facsimile transmission) a completed and signed Notice of Exercise substantially in the form attached to this Warrant as Exhibit A (the “Notice of Exercise”). The date a Notice of Exercise is delivered to Company shall be the “Exercise Date,” provided that, if such exercise represents the full exercise of the outstanding balance of this Warrant, Investor shall tender this Warrant to Company within five (5) Trading Days thereafter, but only if the Warrant Shares to be delivered pursuant to the Notice of Exercise have been delivered to Investor as of such date. The Notice of Exercise shall be executed by Investor and shall indicate the number of Warrant Shares to be issued pursuant to such exercise

 

 
 

 

(b) The Exercise Price per share of Common Stock for the Warrant Shares shall be payable, at the election of Investor, in cash or by certified or official bank check or by wire transfer in accordance with instructions provided by Company at the request of Investor.

 

(c) Upon the appropriate payment to Company of the Exercise Price for the Warrant Shares, Company shall promptly, but in no case later than the date that is ten (10) Trading Days following the date the Exercise Price is paid to Company (the “Delivery Date”), deliver or cause Company’s Transfer Agent to deliver the applicable Warrant Shares electronically via the DWAC system to the account designated by Investor on the Notice of Exercise. If for any reason Company is not able to so deliver the Warrant Shares via the DWAC system, Company shall instead, on or before the applicable date set forth above in this subsection, issue and deliver to Investor or its broker (as designated in the Notice of Exercise), via reputable overnight courier, a certificate, registered in the name of Investor or its designee, representing the applicable number of Warrant Shares.

 

(d) In no event may this Warrant be net cash settled.

 

2.2. Ownership Limitation. Notwithstanding anything to the contrary contained in this Warrant, if at any time Lender shall or would be issued shares of Common Stock under this Warrant, but such issuance would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance) (the “Maximum Percentage”), then Borrower shall not issue to Lender shares of Common Stock which would exceed the Maximum Percentage. The ownership limitation is enforceable, unconditional and non-waivable and shall apply to all affiliates and assigns of Lender.

 

3. Mutilation or Loss of Warrant. Upon receipt by Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, Company will execute and deliver to Investor a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void.

 

4. Rights of Investor. Investor shall not, by virtue of this Warrant alone, be entitled to any rights of a stockholder in Company, either at law or in equity, and the rights of Investor with respect to or arising under this Warrant are limited to those expressed in this Warrant and are not enforceable against Company except to the extent set forth herein

 

5. Adjustments. If Company shall issue any shares of Common Stock as a stock dividend or subdivide the number of outstanding shares of Common Stock into a greater number of shares, then, in either such case, the Exercise Price in effect before such dividend or subdivision shall be proportionately reduced and the number of Warrant Shares at that time issuable pursuant to the exercise of this Warrant shall be proportionately increased; and, conversely, if Company shall contract the number of outstanding shares of Common Stock by combining such shares into a smaller number of shares, then the Exercise Price in effect before such combination shall be proportionately increased and the number of Warrant Shares at that time issuable pursuant to the exercise or conversion of this Warrant shall be proportionately decreased. Each adjustment in the number of shares of Warrant Stock issuable shall be to the nearest whole share.

 

 
 

 

6. Certificate as to Adjustments. In the case of any adjustment in the Exercise Price or Warrant Shares, Company will promptly give written notice to Investor in the form of a certificate, certified and confirmed by an officer of the Company, setting forth the adjustment in reasonable detail.

 

7. Transfer to Comply with the Securities Act. This Warrant and the Warrant Shares have not been registered under the Securities Act of 1933, as amended (the “1933 Act”). The Warrant Shares may not be sold, transferred, pledged or hypothecated without (a) an effective registration statement under the 1933 Act relating to such security or (b) an opinion of counsel reasonably satisfactory to Company that registration is not required under the 1933 Act. Until such time as registration has occurred under the 1933 Act, each certificate for this Warrant and any Warrant Shares shall contain a legend, in form and substance satisfactory to counsel for Company, setting forth the restrictions on transfer contained in this Section 7. This Warrant may be transferred by Investor so long as such transfer is done in compliance with applicable securities laws. Upon receipt of a duly executed assignment of this Warrant, Company shall register the transferee thereon as the new holder on the books and records of Company and such transferee shall be deemed a “registered holder” or “registered assign” for all purposes hereunder, and shall have all the rights of Investor under this Warrant. Until this Warrant is transferred on the books of Company, Company may treat Investor as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary

 

8. Notices. Any notice required or permitted hereunder shall be given in the manner provided in the subsection titled “Notices” in the Purchase Agreement, the terms of which are incorporated herein by reference. Company shall provide Investor with prompt written notice of all actions taken pursuant to this Warrant, including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, Company will give written notice to Investor (i) as soon as practicable upon each adjustment of the Exercise Price and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, or (B) for determining rights to vote with respect to any Change of Control, dissolution or liquidation, provided in each case that such information, and (iii) at least ten (10) Trading Days prior to the consummation of any Change of Control.

 

9. Supplements and Amendments; Whole Agreement. This Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant, together with the Purchase Agreement, contains the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings with respect to the subject matter hereof and thereof other than as expressly contained herein and therein.

 

10. Governing Law; Venue. This Warrant shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of Delaware. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state and federal courts in San Diego County, California. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The prevailing party in any dispute arising under this Agreement shall be entitled to recover from the other party its reasonable attorney’s fees and costs.

 

11. Waiver of Jury Trial. EACH OF COMPANY AND INVESTOR IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS WARRANT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, COMPANY ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY.

 

12. Counterparts. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Electronic signatures shall be considered original signatures for all purposes hereof.

 

13. Attorneys’ Fees. In the event of any litigation or dispute arising from this Warrant, the parties agree that the prevailing party shall be entitled to an additional award of the full amount of the reasonable attorneys’ fees and expenses paid by said prevailing party in connection with litigation or dispute.

 

14. Severability. Whenever possible, each provision of this Warrant shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be invalid or unenforceable in any jurisdiction, such provision shall be modified to achieve the objective of the parties to the fullest extent permitted and such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Warrant or the validity or enforceability of this Warrant in any other jurisdiction.

 

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

 

IN WITNESS WHEREOF, Company has caused this Warrant to be duly executed as of the Issue Date.

 

  COMPANY:
     
  HUMBL, INC.
     
  By:  
    Brian Foote, CEO

 

 
 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

A1. “Change of Control” means a merger or consolidation with another entity in which the Company’s stockholders do not own more than 50% of the outstanding voting power of the surviving entity, or the disposition of all or substantially all of the Company’s assets.

 

A2. “DTC” means the Depository Trust Company or any successor thereto.

 

A3. “DTC Eligible” means, with respect to the Common Stock, that such Common Stock is eligible to be deposited in certificate form at the DTC, cleared and converted into electronic shares by the DTC and held in the name of the clearing firm servicing Investor’s brokerage firm for the benefit of Investor.

 

A4. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A5. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A6. “Exercise Price” means $0.60 per share of Common Stock, as the same may be adjusted from time to time pursuant to the terms and conditions of this Warrant.

 

A7. “Trading Day” means any day the New York Stock Exchange is open for trading.

 

 
 

 

EXHIBIT A

 

NOTICE OF EXERCISE OF WARRANT

 

TO: HUMBL, INC.
  ATTN: _______________
  VIA FAX TO: ( )______________ EMAIL: ______________

 

The undersigned hereby irrevocably elects to exercise the right, represented by the Warrant to Purchase Shares of Common Stock dated as of November 12, 2021 (the “Warrant”), to purchase shares of the common stock, $0.00001 par value (“Common Stock”), of HUMBL, Inc., and tenders herewith payment in accordance with Section 2 of the Warrant, as follows:

 

Warrant Shares: _______________________

 

Exercise Price: $_______________________

 

Purchase Price: $___________________ = (Exercise Price x Warrant Shares)

 

Payment is being made by:

  _____ enclosed check
  _____ wire transfer
  _____ other

 

Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Warrant.

 

It is the intention of Investor to comply with the provisions of Section 2.2 of the Warrant regarding certain limits on Investor’s right to receive shares thereunder. Investor believes this exercise complies with the provisions of such Section 2.2. Nonetheless, to the extent that, pursuant to the exercise effected hereby, Investor would receive more shares of Common Stock than permitted under Section 2.2, Company shall not be obligated and shall not issue to Investor such excess shares until such time, if ever, that Investor could receive such excess shares without violating, and in full compliance with, Section 2.2 of the Warrant.

 

As contemplated by the Warrant, this Notice of Exercise is being sent by email to the officer indicated above.

 

If this Notice of Exercise represents the full exercise of the entire Warrant, Investor will surrender (or cause to be surrendered) the Warrant to Company at the address indicated above by express courier within five (5) Trading Days after the Warrant Shares to be delivered pursuant to this Notice of Exercise have been delivered to Investor.

 

To the extent the Warrant Shares are not able to be delivered to Investor via the DWAC system, please deliver certificates representing the Warrant Shares to Investor via reputable overnight courier after receipt of this Notice of Exercise (by facsimile transmission or otherwise) to:

 

_____________________________________

_____________________________________

_____________________________________

 

Dated: _____________________

 

___________________________

[Name of Investor]

 

By:________________________

 

 

 

 

Exhibit 10.54

 

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF THIS WARRANT OR SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THIS WARRANT OR SUCH SECURITIES, AS APPLICABLE, MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS.

 

HUMBL, INC.

 

WARRANT TO PURCHASE SHARES OF COMMON STOCK

 

1. Issuance. For good and valuable consideration as set forth in the Purchase Agreement (as defined below), including without limitation the Purchase Price (as defined in the Purchase Agreement), the receipt and sufficiency of which are hereby acknowledged by HUMBL, Inc., a Delaware corporation, its successors and/or assigns (“Company”), Charger Corporation, an Ontario corporation, its successors and/or registered assigns (“Investor”), is hereby granted the right to purchase at any time on or after the Issue Date (as defined below) until December 31, 2023 (the “Expiration Date”), 94,000,000 fully paid and non-assessable shares (the “Warrant Shares”) of Company’s common stock, par value $0.00001 per share (the “Common Stock”), as such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant to Purchase Shares of Common Stock (this “Warrant”).

 

This Warrant is a reissuance of that certain Warrant to Purchase Common Shares issued by Company to Investor on December 4, 2020 (the “Original Warrant”). The Original Warrant was issued pursuant to the terms of that certain Warrant Purchase Agreement dated December 4, 2020 between Company and Investor (as the same may be amended from time to time, the “Purchase Agreement”). This Warrant is being reissued to reflect certain Warrant transfers and exercises made by Investor. This Warrant shall supersede and replace the Original Warrant. This Warrant is issued on November 22, 2021 (the “Issue Date”) but shall maintain the original issue date of the Original Warrant of December 4, 2020. Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.

 

2. Exercise of Warrant.

 

2.1. General.

 

(a) This Warrant is exercisable in whole or in part at any time and from time to time commencing on the Issue Date and ending on the Expiration Date. Such exercise shall be effectuated by submitting to Company (either by delivery to Company or by email or facsimile transmission) a completed and signed Notice of Exercise substantially in the form attached to this Warrant as Exhibit A (the “Notice of Exercise”). The date a Notice of Exercise is delivered to Company shall be the “Exercise Date,” provided that, if such exercise represents the full exercise of the outstanding balance of this Warrant, Investor shall tender this Warrant to Company within five (5) Trading Days thereafter, but only if the Warrant Shares to be delivered pursuant to the Notice of Exercise have been delivered to Investor as of such date. The Notice of Exercise shall be executed by Investor and shall indicate the number of Warrant Shares to be issued pursuant to such exercise

 

 
 

 

(b) The Exercise Price per share of Common Stock for the Warrant Shares shall be payable, at the election of Investor, in cash or by certified or official bank check or by wire transfer in accordance with instructions provided by Company at the request of Investor.

 

(c) Upon the appropriate payment to Company of the Exercise Price for the Warrant Shares, Company shall promptly, but in no case later than the date that is ten (10) Trading Days following the date the Exercise Price is paid to Company (the “Delivery Date”), deliver or cause Company’s Transfer Agent to deliver the applicable Warrant Shares electronically via the DWAC system to the account designated by Investor on the Notice of Exercise. If for any reason Company is not able to so deliver the Warrant Shares via the DWAC system, Company shall instead, on or before the applicable date set forth above in this subsection, issue and deliver to Investor or its broker (as designated in the Notice of Exercise), via reputable overnight courier, a certificate, registered in the name of Investor or its designee, representing the applicable number of Warrant Shares.

 

(d) In no event may this Warrant be net cash settled.

 

2.2. Ownership Limitation. Notwithstanding anything to the contrary contained in this Warrant, if at any time Lender shall or would be issued shares of Common Stock under this Warrant, but such issuance would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance) (the “Maximum Percentage”), then Borrower shall not issue to Lender shares of Common Stock which would exceed the Maximum Percentage. The ownership limitation is enforceable, unconditional and non-waivable and shall apply to all affiliates and assigns of Lender.

 

3. Mutilation or Loss of Warrant. Upon receipt by Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, Company will execute and deliver to Investor a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void.

 

4. Rights of Investor. Investor shall not, by virtue of this Warrant alone, be entitled to any rights of a stockholder in Company, either at law or in equity, and the rights of Investor with respect to or arising under this Warrant are limited to those expressed in this Warrant and are not enforceable against Company except to the extent set forth herein

 

5. Adjustments. If Company shall issue any shares of Common Stock as a stock dividend or subdivide the number of outstanding shares of Common Stock into a greater number of shares, then, in either such case, the Exercise Price in effect before such dividend or subdivision shall be proportionately reduced and the number of Warrant Shares at that time issuable pursuant to the exercise of this Warrant shall be proportionately increased; and, conversely, if Company shall contract the number of outstanding shares of Common Stock by combining such shares into a smaller number of shares, then the Exercise Price in effect before such combination shall be proportionately increased and the number of Warrant Shares at that time issuable pursuant to the exercise or conversion of this Warrant shall be proportionately decreased. Each adjustment in the number of shares of Warrant Stock issuable shall be to the nearest whole share.

 

6. Certificate as to Adjustments. In the case of any adjustment in the Exercise Price or Warrant Shares, Company will promptly give written notice to Investor in the form of a certificate, certified and confirmed by an officer of the Company, setting forth the adjustment in reasonable detail.

 

7. Transfer to Comply with the Securities Act. This Warrant and the Warrant Shares have not been registered under the Securities Act of 1933, as amended (the “1933 Act”). Neither this Warrant nor the Warrant Shares may be sold, transferred, pledged or hypothecated without (a) an effective registration statement under the 1933 Act relating to such security or (b) an opinion of counsel reasonably satisfactory to Company that registration is not required under the 1933 Act. Until such time as registration has occurred under the 1933 Act, each certificate for this Warrant and any Warrant Shares shall contain a legend, in form and substance satisfactory to counsel for Company, setting forth the restrictions on transfer contained in this Section 7.

 

 
 

 

8. Notices. Any notice required or permitted hereunder shall be given in the manner provided in the subsection titled “Notices” in the Purchase Agreement, the terms of which are incorporated herein by reference.

 

9. Supplements and Amendments; Whole Agreement. This Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant, together with the Purchase Agreement, contains the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings with respect to the subject matter hereof and thereof other than as expressly contained herein and therein.

 

10. Governing Law; Venue. This Warrant shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of Delaware. The provisions set forth in the Purchase Agreement to determine the proper venue for any disputes are incorporated herein by this reference.

 

11. Waiver of Jury Trial. EACH OF COMPANY AND INVESTOR IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS WARRANT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, COMPANY ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY.

 

12. Counterparts. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Electronic signatures shall be considered original signatures for all purposes hereof.

 

13. Attorneys’ Fees. In the event of any litigation or dispute arising from this Warrant, the parties agree that the prevailing party shall be entitled to an additional award of the full amount of the reasonable attorneys’ fees and expenses paid by said prevailing party in connection with litigation or dispute.

 

14. Severability. Whenever possible, each provision of this Warrant shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be invalid or unenforceable in any jurisdiction, such provision shall be modified to achieve the objective of the parties to the fullest extent permitted and such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Warrant or the validity or enforceability of this Warrant in any other jurisdiction.

 

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

 

IN WITNESS WHEREOF, Company has caused this Warrant to be duly executed as of the Issue Date.

 

  COMPANY:
     
  HUMBL, INC.
     
  By:  
    Brian Foote, CEO

 

 
 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

A8. “DTC” means the Depository Trust Company or any successor thereto.

 

A9. “DTC Eligible” means, with respect to the Common Stock, that such Common Stock is eligible to be deposited in certificate form at the DTC, cleared and converted into electronic shares by the DTC and held in the name of the clearing firm servicing Investor’s brokerage firm for the benefit of Investor.

 

A10. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A11. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A12. “Exercise Price” means $0.20 per share of Common Stock, as the same may be adjusted from time to time pursuant to the terms and conditions of this Warrant.

 

A13. “Trading Day” means any day the New York Stock Exchange is open for trading.

 

EXHIBIT A

 

NOTICE OF EXERCISE OF WARRANT

 

TO: HUMBL, INC.
  ATTN: _______________
  VIA FAX TO: ( )______________ EMAIL: ______________

 

The undersigned hereby irrevocably elects to exercise the right, represented by the Warrant to Purchase Shares of Common Stock dated as of December 4, 2020 (the “Warrant”), to purchase shares of the common stock, $0.00001 par value (“Common Stock”), of HUMBL, Inc., and tenders herewith payment in accordance with Section 2 of the Warrant, as follows:

 

Warrant Shares: _______________________

 

Exercise Price: $_______________________

 

Purchase Price: $___________________ = (Exercise Price x Warrant Shares)

 

Payment is being made by:

  _____ enclosed check
  _____ wire transfer
  _____ other

 

Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Warrant.

 

It is the intention of Investor to comply with the provisions of Section 2.2 of the Warrant regarding certain limits on Investor’s right to receive shares thereunder. Investor believes this exercise complies with the provisions of such Section 2.2. Nonetheless, to the extent that, pursuant to the exercise effected hereby, Investor would receive more shares of Common Stock than permitted under Section 2.2, Company shall not be obligated and shall not issue to Investor such excess shares until such time, if ever, that Investor could receive such excess shares without violating, and in full compliance with, Section 2.2 of the Warrant.

 

As contemplated by the Warrant, this Notice of Exercise is being sent by email to the officer indicated above.

 

If this Notice of Exercise represents the full exercise of the entire Warrant, Investor will surrender (or cause to be surrendered) the Warrant to Company at the address indicated above by express courier within five (5) Trading Days after the Warrant Shares to be delivered pursuant to this Notice of Exercise have been delivered to Investor.

 

To the extent the Warrant Shares are not able to be delivered to Investor via the DWAC system, please deliver certificates representing the Warrant Shares to Investor via reputable overnight courier after receipt of this Notice of Exercise (by facsimile transmission or otherwise) to:

 

_____________________________________

_____________________________________

_____________________________________

 

Dated: _____________________

 

___________________________

[Name of Investor]

 

By:________________________

 

 

 

 

Exhibit 10.55

 

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF THIS WARRANT OR SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THIS WARRANT OR SUCH SECURITIES, AS APPLICABLE, MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS.

 

HUMBL, INC.

 

WARRANT TO PURCHASE SHARES OF COMMON STOCK

 

1. Issuance. For good and valuable consideration as set forth in the Purchase Agreement (as defined below), including without limitation the Purchase Price (as defined in the Purchase Agreement), the receipt and sufficiency of which are hereby acknowledged by HUMBL, Inc., a Delaware corporation, its successors and/or assigns (“Company”), Konop Enterprises Inc., an Ontario corporation, its successors and/or registered assigns (“Investor”), is hereby granted the right to purchase at any time on or after the Issue Date (as defined below) until December 31, 2023 (the “Expiration Date”), 5,000,000 fully paid and non-assessable shares (the “Warrant Shares”) of Company’s common stock, par value $0.00001 per share (the “Common Stock”), as such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant to Purchase Shares of Common Stock (this “Warrant”).

 

This Warrant is issued pursuant to a transfer and assignment of 5,000,000 warrant shares from that certain Warrant to Purchase Shares of Common Stock issued by Company to Charger Corporation, an Ontario corporation (“Charger”), on December 4, 2020 (the “Original Warrant”). The Original Warrant was issued pursuant to the terms of that certain Warrant Purchase Agreement dated December 4, 2020 between Company and Charger (as the same may be amended from time to time, the “Purchase Agreement”). This Warrant is issued on November 22, 2021 (the “Issue Date”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.

 

2. Exercise of Warrant.

 

2.1. General.

 

(a) This Warrant is exercisable in whole or in part at any time and from time to time commencing on the Issue Date and ending on the Expiration Date. Such exercise shall be effectuated by submitting to Company (either by delivery to Company or by email or facsimile transmission) a completed and signed Notice of Exercise substantially in the form attached to this Warrant as Exhibit A (the “Notice of Exercise”). The date a Notice of Exercise is delivered to Company shall be the “Exercise Date,” provided that, if such exercise represents the full exercise of the outstanding balance of this Warrant, Investor shall tender this Warrant to Company within five (5) Trading Days thereafter, but only if the Warrant Shares to be delivered pursuant to the Notice of Exercise have been delivered to Investor as of such date. The Notice of Exercise shall be executed by Investor and shall indicate the number of Warrant Shares to be issued pursuant to such exercise

 

 
 

 

(b) The Exercise Price per share of Common Stock for the Warrant Shares shall be payable, at the election of Investor, in cash or by certified or official bank check or by wire transfer in accordance with instructions provided by Company at the request of Investor.

 

(c) Upon the appropriate payment to Company of the Exercise Price for the Warrant Shares, Company shall promptly, but in no case later than the date that is ten (10) Trading Days following the date the Exercise Price is paid to Company (the “Delivery Date”), deliver or cause Company’s Transfer Agent to deliver the applicable Warrant Shares electronically via the DWAC system to the account designated by Investor on the Notice of Exercise. If for any reason Company is not able to so deliver the Warrant Shares via the DWAC system, Company shall instead, on or before the applicable date set forth above in this subsection, issue and deliver to Investor or its broker (as designated in the Notice of Exercise), via reputable overnight courier, a certificate, registered in the name of Investor or its designee, representing the applicable number of Warrant Shares.

 

(d) In no event may this Warrant be net cash settled.

 

2.2. Ownership Limitation. Notwithstanding anything to the contrary contained in this Warrant, if at any time Lender shall or would be issued shares of Common Stock under this Warrant, but such issuance would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance) (the “Maximum Percentage”), then Borrower shall not issue to Lender shares of Common Stock which would exceed the Maximum Percentage. The ownership limitation is enforceable, unconditional and non-waivable and shall apply to all affiliates and assigns of Lender.

 

3. Mutilation or Loss of Warrant. Upon receipt by Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, Company will execute and deliver to Investor a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void.

 

4. Rights of Investor. Investor shall not, by virtue of this Warrant alone, be entitled to any rights of a stockholder in Company, either at law or in equity, and the rights of Investor with respect to or arising under this Warrant are limited to those expressed in this Warrant and are not enforceable against Company except to the extent set forth herein

 

5. Adjustments. If Company shall issue any shares of Common Stock as a stock dividend or subdivide the number of outstanding shares of Common Stock into a greater number of shares, then, in either such case, the Exercise Price in effect before such dividend or subdivision shall be proportionately reduced and the number of Warrant Shares at that time issuable pursuant to the exercise of this Warrant shall be proportionately increased; and, conversely, if Company shall contract the number of outstanding shares of Common Stock by combining such shares into a smaller number of shares, then the Exercise Price in effect before such combination shall be proportionately increased and the number of Warrant Shares at that time issuable pursuant to the exercise or conversion of this Warrant shall be proportionately decreased. Each adjustment in the number of shares of Warrant Stock issuable shall be to the nearest whole share.

 

 
 

 

6. Certificate as to Adjustments. In the case of any adjustment in the Exercise Price or Warrant Shares, Company will promptly give written notice to Investor in the form of a certificate, certified and confirmed by an officer of the Company, setting forth the adjustment in reasonable detail.

 

7. Transfer to Comply with the Securities Act. This Warrant and the Warrant Shares have not been registered under the Securities Act of 1933, as amended (the “1933 Act”). Neither this Warrant nor the Warrant Shares may be sold, transferred, pledged or hypothecated without (a) an effective registration statement under the 1933 Act relating to such security or (b) an opinion of counsel reasonably satisfactory to Company that registration is not required under the 1933 Act. Until such time as registration has occurred under the 1933 Act, each certificate for this Warrant and any Warrant Shares shall contain a legend, in form and substance satisfactory to counsel for Company, setting forth the restrictions on transfer contained in this Section 7.

 

8. Notices. Any notice required or permitted hereunder shall be given in the manner provided in the subsection titled “Notices” in the Purchase Agreement, the terms of which are incorporated herein by reference.

 

9. Supplements and Amendments; Whole Agreement. This Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant, together with the Purchase Agreement, contains the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings with respect to the subject matter hereof and thereof other than as expressly contained herein and therein.

 

10. Governing Law; Venue. This Warrant shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of Delaware. The provisions set forth in the Purchase Agreement to determine the proper venue for any disputes are incorporated herein by this reference.

 

11. Waiver of Jury Trial. EACH OF COMPANY AND INVESTOR IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS WARRANT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, COMPANY ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY.

 

12. Counterparts. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Electronic signatures shall be considered original signatures for all purposes hereof.

 

13. Attorneys’ Fees. In the event of any litigation or dispute arising from this Warrant, the parties agree that the prevailing party shall be entitled to an additional award of the full amount of the reasonable attorneys’ fees and expenses paid by said prevailing party in connection with litigation or dispute.

 

14. Severability. Whenever possible, each provision of this Warrant shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be invalid or unenforceable in any jurisdiction, such provision shall be modified to achieve the objective of the parties to the fullest extent permitted and such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Warrant or the validity or enforceability of this Warrant in any other jurisdiction.

 

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

 

IN WITNESS WHEREOF, Company has caused this Warrant to be duly executed as of the Issue Date.

 

  COMPANY:
     
  HUMBL, INC.
     
  By:  
    Brian Foote, CEO

 

 
 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

A14. “DTC” means the Depository Trust Company or any successor thereto.

 

A15. “DTC Eligible” means, with respect to the Common Stock, that such Common Stock is eligible to be deposited in certificate form at the DTC, cleared and converted into electronic shares by the DTC and held in the name of the clearing firm servicing Investor’s brokerage firm for the benefit of Investor.

 

A16. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A17. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A18. “Exercise Price” means $0.20 per share of Common Stock, as the same may be adjusted from time to time pursuant to the terms and conditions of this Warrant.

 

A19. “Trading Day” means any day the New York Stock Exchange is open for trading.

 

EXHIBIT A

 

NOTICE OF EXERCISE OF WARRANT

 

TO: HUMBL, INC.
  ATTN: _______________
  VIA FAX TO: ( )______________ EMAIL: ______________

 

The undersigned hereby irrevocably elects to exercise the right, represented by the Warrant to Purchase Shares of Common Stock dated as of December 4, 2020 (the “Warrant”), to purchase shares of the common stock, $0.00001 par value (“Common Stock”), of HUMBL, Inc., and tenders herewith payment in accordance with Section 2 of the Warrant, as follows:

 

Warrant Shares: _______________________

 

Exercise Price: $_______________________

 

Purchase Price: $___________________ = (Exercise Price x Warrant Shares)

 

Payment is being made by:

  _____ enclosed check
  _____ wire transfer
  _____ other

 

 
 

 

Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Warrant.

 

It is the intention of Investor to comply with the provisions of Section 2.2 of the Warrant regarding certain limits on Investor’s right to receive shares thereunder. Investor believes this exercise complies with the provisions of such Section 2.2. Nonetheless, to the extent that, pursuant to the exercise effected hereby, Investor would receive more shares of Common Stock than permitted under Section 2.2, Company shall not be obligated and shall not issue to Investor such excess shares until such time, if ever, that Investor could receive such excess shares without violating, and in full compliance with, Section 2.2 of the Warrant.

 

As contemplated by the Warrant, this Notice of Exercise is being sent by email to the officer indicated above.

 

If this Notice of Exercise represents the full exercise of the entire Warrant, Investor will surrender (or cause to be surrendered) the Warrant to Company at the address indicated above by express courier within five (5) Trading Days after the Warrant Shares to be delivered pursuant to this Notice of Exercise have been delivered to Investor.

 

To the extent the Warrant Shares are not able to be delivered to Investor via the DWAC system, please deliver certificates representing the Warrant Shares to Investor via reputable overnight courier after receipt of this Notice of Exercise (by facsimile transmission or otherwise) to:

 

_____________________________________

_____________________________________

_____________________________________

 

Dated: _____________________

 

___________________________

[Name of Investor]

 

By:________________________

 

 

 

 

Exhibit 10.56

 

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF THIS WARRANT OR SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THIS WARRANT OR SUCH SECURITIES, AS APPLICABLE, MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS.

 

HUMBL, INC.

 

WARRANT TO PURCHASE SHARES OF COMMON STOCK

 

1. Issuance. For good and valuable consideration as set forth in the Purchase Agreement (as defined below), including without limitation the Purchase Price (as defined in the Purchase Agreement), the receipt and sufficiency of which are hereby acknowledged by HUMBL, Inc., a Delaware corporation, its successors and/or assigns (“Company”), Adel Wakil, an individual, his successors and/or registered assigns (“Investor”), is hereby granted the right to purchase at any time on or after the Issue Date (as defined below) until December 31, 2023 (the “Expiration Date”), 4,000,000 fully paid and non-assessable shares (the “Warrant Shares”) of Company’s common stock, par value $0.00001 per share (the “Common Stock”), as such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant to Purchase Shares of Common Stock (this “Warrant”).

 

This Warrant is issued pursuant to a transfer and assignment of 4,000,000 warrant shares from that certain Warrant to Purchase Shares of Common Stock issued by Company to Charger Corporation, an Ontario corporation (“Charger”), on December 4, 2020 (the “Original Warrant”). The Original Warrant was issued pursuant to the terms of that certain Warrant Purchase Agreement dated December 4, 2020 between Company and Charger (as the same may be amended from time to time, the “Purchase Agreement”). This Warrant is issued on November 22, 2021 (the “Issue Date”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.

 

2. Exercise of Warrant.

 

2.1. General.

 

(a) This Warrant is exercisable in whole or in part at any time and from time to time commencing on the Issue Date and ending on the Expiration Date. Such exercise shall be effectuated by submitting to Company (either by delivery to Company or by email or facsimile transmission) a completed and signed Notice of Exercise substantially in the form attached to this Warrant as Exhibit A (the “Notice of Exercise”). The date a Notice of Exercise is delivered to Company shall be the “Exercise Date,” provided that, if such exercise represents the full exercise of the outstanding balance of this Warrant, Investor shall tender this Warrant to Company within five (5) Trading Days thereafter, but only if the Warrant Shares to be delivered pursuant to the Notice of Exercise have been delivered to Investor as of such date. The Notice of Exercise shall be executed by Investor and shall indicate the number of Warrant Shares to be issued pursuant to such exercise

 

 
 

 

(b) The Exercise Price per share of Common Stock for the Warrant Shares shall be payable, at the election of Investor, in cash or by certified or official bank check or by wire transfer in accordance with instructions provided by Company at the request of Investor.

 

(c) Upon the appropriate payment to Company of the Exercise Price for the Warrant Shares, Company shall promptly, but in no case later than the date that is ten (10) Trading Days following the date the Exercise Price is paid to Company (the “Delivery Date”), deliver or cause Company’s Transfer Agent to deliver the applicable Warrant Shares electronically via the DWAC system to the account designated by Investor on the Notice of Exercise. If for any reason Company is not able to so deliver the Warrant Shares via the DWAC system, Company shall instead, on or before the applicable date set forth above in this subsection, issue and deliver to Investor or its broker (as designated in the Notice of Exercise), via reputable overnight courier, a certificate, registered in the name of Investor or its designee, representing the applicable number of Warrant Shares.

 

(d) In no event may this Warrant be net cash settled.

 

2.2. Ownership Limitation. Notwithstanding anything to the contrary contained in this Warrant, if at any time Lender shall or would be issued shares of Common Stock under this Warrant, but such issuance would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance) (the “Maximum Percentage”), then Borrower shall not issue to Lender shares of Common Stock which would exceed the Maximum Percentage. The ownership limitation is enforceable, unconditional and non-waivable and shall apply to all affiliates and assigns of Lender.

 

3. Mutilation or Loss of Warrant. Upon receipt by Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, Company will execute and deliver to Investor a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void.

 

4. Rights of Investor. Investor shall not, by virtue of this Warrant alone, be entitled to any rights of a stockholder in Company, either at law or in equity, and the rights of Investor with respect to or arising under this Warrant are limited to those expressed in this Warrant and are not enforceable against Company except to the extent set forth herein

 

5. Adjustments. If Company shall issue any shares of Common Stock as a stock dividend or subdivide the number of outstanding shares of Common Stock into a greater number of shares, then, in either such case, the Exercise Price in effect before such dividend or subdivision shall be proportionately reduced and the number of Warrant Shares at that time issuable pursuant to the exercise of this Warrant shall be proportionately increased; and, conversely, if Company shall contract the number of outstanding shares of Common Stock by combining such shares into a smaller number of shares, then the Exercise Price in effect before such combination shall be proportionately increased and the number of Warrant Shares at that time issuable pursuant to the exercise or conversion of this Warrant shall be proportionately decreased. Each adjustment in the number of shares of Warrant Stock issuable shall be to the nearest whole share.

 

 
 

 

6. Certificate as to Adjustments. In the case of any adjustment in the Exercise Price or Warrant Shares, Company will promptly give written notice to Investor in the form of a certificate, certified and confirmed by an officer of the Company, setting forth the adjustment in reasonable detail.

 

7. Transfer to Comply with the Securities Act. This Warrant and the Warrant Shares have not been registered under the Securities Act of 1933, as amended (the “1933 Act”). Neither this Warrant nor the Warrant Shares may be sold, transferred, pledged or hypothecated without (a) an effective registration statement under the 1933 Act relating to such security or (b) an opinion of counsel reasonably satisfactory to Company that registration is not required under the 1933 Act. Until such time as registration has occurred under the 1933 Act, each certificate for this Warrant and any Warrant Shares shall contain a legend, in form and substance satisfactory to counsel for Company, setting forth the restrictions on transfer contained in this Section 7.

 

8. Notices. Any notice required or permitted hereunder shall be given in the manner provided in the subsection titled “Notices” in the Purchase Agreement, the terms of which are incorporated herein by reference.

 

9. Supplements and Amendments; Whole Agreement. This Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant, together with the Purchase Agreement, contains the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings with respect to the subject matter hereof and thereof other than as expressly contained herein and therein.

 

10. Governing Law; Venue. This Warrant shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of Delaware. The provisions set forth in the Purchase Agreement to determine the proper venue for any disputes are incorporated herein by this reference.

 

11. Waiver of Jury Trial. EACH OF COMPANY AND INVESTOR IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS WARRANT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, COMPANY ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY.

 

12. Counterparts. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Electronic signatures shall be considered original signatures for all purposes hereof.

 

13. Attorneys’ Fees. In the event of any litigation or dispute arising from this Warrant, the parties agree that the prevailing party shall be entitled to an additional award of the full amount of the reasonable attorneys’ fees and expenses paid by said prevailing party in connection with litigation or dispute.

 

14. Severability. Whenever possible, each provision of this Warrant shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be invalid or unenforceable in any jurisdiction, such provision shall be modified to achieve the objective of the parties to the fullest extent permitted and such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Warrant or the validity or enforceability of this Warrant in any other jurisdiction.

 

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

 

IN WITNESS WHEREOF, Company has caused this Warrant to be duly executed as of the Issue Date.

 

  COMPANY:
     
  HUMBL, INC.
     
  By:  
    Brian Foote, CEO

 

 
 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

A20. “DTC” means the Depository Trust Company or any successor thereto.

 

A21. “DTC Eligible” means, with respect to the Common Stock, that such Common Stock is eligible to be deposited in certificate form at the DTC, cleared and converted into electronic shares by the DTC and held in the name of the clearing firm servicing Investor’s brokerage firm for the benefit of Investor.

 

A22. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A23. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A24. “Exercise Price” means $0.20 per share of Common Stock, as the same may be adjusted from time to time pursuant to the terms and conditions of this Warrant.

 

A25. “Trading Day” means any day the New York Stock Exchange is open for trading.

 

EXHIBIT A

 

NOTICE OF EXERCISE OF WARRANT

 

TO: HUMBL, INC.
  ATTN: _______________
  VIA FAX TO: ( )______________ EMAIL: ______________

 

The undersigned hereby irrevocably elects to exercise the right, represented by the Warrant to Purchase Shares of Common Stock dated as of December 4, 2020 (the “Warrant”), to purchase shares of the common stock, $0.00001 par value (“Common Stock”), of HUMBL, Inc., and tenders herewith payment in accordance with Section 2 of the Warrant, as follows:

 

Warrant Shares: _______________________

 

Exercise Price: $_______________________

 

Purchase Price: $___________________ = (Exercise Price x Warrant Shares)

 

Payment is being made by:

  _____ enclosed check
  _____ wire transfer
  _____ other

 

Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Warrant.

 

It is the intention of Investor to comply with the provisions of Section 2.2 of the Warrant regarding certain limits on Investor’s right to receive shares thereunder. Investor believes this exercise complies with the provisions of such Section 2.2. Nonetheless, to the extent that, pursuant to the exercise effected hereby, Investor would receive more shares of Common Stock than permitted under Section 2.2, Company shall not be obligated and shall not issue to Investor such excess shares until such time, if ever, that Investor could receive such excess shares without violating, and in full compliance with, Section 2.2 of the Warrant.

 

As contemplated by the Warrant, this Notice of Exercise is being sent by email to the officer indicated above.

 

If this Notice of Exercise represents the full exercise of the entire Warrant, Investor will surrender (or cause to be surrendered) the Warrant to Company at the address indicated above by express courier within five (5) Trading Days after the Warrant Shares to be delivered pursuant to this Notice of Exercise have been delivered to Investor.

 

To the extent the Warrant Shares are not able to be delivered to Investor via the DWAC system, please deliver certificates representing the Warrant Shares to Investor via reputable overnight courier after receipt of this Notice of Exercise (by facsimile transmission or otherwise) to:

 

_____________________________________

_____________________________________

_____________________________________

 

Dated: _____________________

 

___________________________

[Name of Investor]

 

By:________________________

 

 

 

 

Exhibit 10.57

 

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF THIS WARRANT OR SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THIS WARRANT OR SUCH SECURITIES, AS APPLICABLE, MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS.

HUMBL, INC.

 

WARRANT TO PURCHASE SHARES OF COMMON STOCK

 

1. Issuance. For good and valuable consideration as set forth in the Purchase Agreement (as defined below), including without limitation the Purchase Price (as defined in the Purchase Agreement), the receipt and sufficiency of which are hereby acknowledged by HUMBL, Inc., a Delaware corporation, its successors and/or assigns (“Company”), Antonio Dutra, an individual, his successors and/or registered assigns (“Investor”), is hereby granted the right to purchase at any time on or after the Issue Date (as defined below) until December 31, 2023 (the “Expiration Date”), 2,000,000 fully paid and non-assessable shares (the “Warrant Shares”) of Company’s common stock, par value $0.00001 per share (the “Common Stock”), as such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant to Purchase Shares of Common Stock (this “Warrant”).

 

This Warrant is issued pursuant to a transfer and assignment of 2,000,000 warrant shares from that certain Warrant to Purchase Shares of Common Stock issued by Company to Charger Corporation, an Ontario corporation (“Charger”), on December 4, 2020 (the “Original Warrant”). The Original Warrant was issued pursuant to the terms of that certain Warrant Purchase Agreement dated December 4, 2020 between Company and Charger (as the same may be amended from time to time, the “Purchase Agreement”). This Warrant is issued on November 22, 2021 (the “Issue Date”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.

 

2. Exercise of Warrant.

 

2.1. General.

 

(a) This Warrant is exercisable in whole or in part at any time and from time to time commencing on the Issue Date and ending on the Expiration Date. Such exercise shall be effectuated by submitting to Company (either by delivery to Company or by email or facsimile transmission) a completed and signed Notice of Exercise substantially in the form attached to this Warrant as Exhibit A (the “Notice of Exercise”). The date a Notice of Exercise is delivered to Company shall be the “Exercise Date,” provided that, if such exercise represents the full exercise of the outstanding balance of this Warrant, Investor shall tender this Warrant to Company within five (5) Trading Days thereafter, but only if the Warrant Shares to be delivered pursuant to the Notice of Exercise have been delivered to Investor as of such date. The Notice of Exercise shall be executed by Investor and shall indicate the number of Warrant Shares to be issued pursuant to such exercise

 

 
 

 

(b) The Exercise Price per share of Common Stock for the Warrant Shares shall be payable, at the election of Investor, in cash or by certified or official bank check or by wire transfer in accordance with instructions provided by Company at the request of Investor.

 

(c) Upon the appropriate payment to Company of the Exercise Price for the Warrant Shares, Company shall promptly, but in no case later than the date that is ten (10) Trading Days following the date the Exercise Price is paid to Company (the “Delivery Date”), deliver or cause Company’s Transfer Agent to deliver the applicable Warrant Shares electronically via the DWAC system to the account designated by Investor on the Notice of Exercise. If for any reason Company is not able to so deliver the Warrant Shares via the DWAC system, Company shall instead, on or before the applicable date set forth above in this subsection, issue and deliver to Investor or its broker (as designated in the Notice of Exercise), via reputable overnight courier, a certificate, registered in the name of Investor or its designee, representing the applicable number of Warrant Shares.

 

(d) In no event may this Warrant be net cash settled.

 

2.2. Ownership Limitation. Notwithstanding anything to the contrary contained in this Warrant, if at any time Lender shall or would be issued shares of Common Stock under this Warrant, but such issuance would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance) (the “Maximum Percentage”), then Borrower shall not issue to Lender shares of Common Stock which would exceed the Maximum Percentage. The ownership limitation is enforceable, unconditional and non-waivable and shall apply to all affiliates and assigns of Lender.

 

3. Mutilation or Loss of Warrant. Upon receipt by Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, Company will execute and deliver to Investor a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void.

 

4. Rights of Investor. Investor shall not, by virtue of this Warrant alone, be entitled to any rights of a stockholder in Company, either at law or in equity, and the rights of Investor with respect to or arising under this Warrant are limited to those expressed in this Warrant and are not enforceable against Company except to the extent set forth herein

 

5. Adjustments. If Company shall issue any shares of Common Stock as a stock dividend or subdivide the number of outstanding shares of Common Stock into a greater number of shares, then, in either such case, the Exercise Price in effect before such dividend or subdivision shall be proportionately reduced and the number of Warrant Shares at that time issuable pursuant to the exercise of this Warrant shall be proportionately increased; and, conversely, if Company shall contract the number of outstanding shares of Common Stock by combining such shares into a smaller number of shares, then the Exercise Price in effect before such combination shall be proportionately increased and the number of Warrant Shares at that time issuable pursuant to the exercise or conversion of this Warrant shall be proportionately decreased. Each adjustment in the number of shares of Warrant Stock issuable shall be to the nearest whole share.

 

 
 

 

6. Certificate as to Adjustments. In the case of any adjustment in the Exercise Price or Warrant Shares, Company will promptly give written notice to Investor in the form of a certificate, certified and confirmed by an officer of the Company, setting forth the adjustment in reasonable detail.

 

7. Transfer to Comply with the Securities Act. This Warrant and the Warrant Shares have not been registered under the Securities Act of 1933, as amended (the “1933 Act”). Neither this Warrant nor the Warrant Shares may be sold, transferred, pledged or hypothecated without (a) an effective registration statement under the 1933 Act relating to such security or (b) an opinion of counsel reasonably satisfactory to Company that registration is not required under the 1933 Act. Until such time as registration has occurred under the 1933 Act, each certificate for this Warrant and any Warrant Shares shall contain a legend, in form and substance satisfactory to counsel for Company, setting forth the restrictions on transfer contained in this Section 7.

 

8. Notices. Any notice required or permitted hereunder shall be given in the manner provided in the subsection titled “Notices” in the Purchase Agreement, the terms of which are incorporated herein by reference.

 

9. Supplements and Amendments; Whole Agreement. This Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant, together with the Purchase Agreement, contains the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings with respect to the subject matter hereof and thereof other than as expressly contained herein and therein.

 

10. Governing Law; Venue. This Warrant shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of Delaware. The provisions set forth in the Purchase Agreement to determine the proper venue for any disputes are incorporated herein by this reference.

 

11. Waiver of Jury Trial. EACH OF COMPANY AND INVESTOR IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS WARRANT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, COMPANY ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY.

 

12. Counterparts. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Electronic signatures shall be considered original signatures for all purposes hereof.

 

13. Attorneys’ Fees. In the event of any litigation or dispute arising from this Warrant, the parties agree that the prevailing party shall be entitled to an additional award of the full amount of the reasonable attorneys’ fees and expenses paid by said prevailing party in connection with litigation or dispute.

 

14. Severability. Whenever possible, each provision of this Warrant shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be invalid or unenforceable in any jurisdiction, such provision shall be modified to achieve the objective of the parties to the fullest extent permitted and such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Warrant or the validity or enforceability of this Warrant in any other jurisdiction.

 

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

 

IN WITNESS WHEREOF, Company has caused this Warrant to be duly executed as of the Issue Date.

 

  COMPANY:
     
  HUMBL, INC.
     
  By:  
    Brian Foote, CEO

 

 
 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

A26. “DTC” means the Depository Trust Company or any successor thereto.

 

A27. “DTC Eligible” means, with respect to the Common Stock, that such Common Stock is eligible to be deposited in certificate form at the DTC, cleared and converted into electronic shares by the DTC and held in the name of the clearing firm servicing Investor’s brokerage firm for the benefit of Investor.

 

A28. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A29. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A30. “Exercise Price” means $0.20 per share of Common Stock, as the same may be adjusted from time to time pursuant to the terms and conditions of this Warrant.

 

A31. “Trading Day” means any day the New York Stock Exchange is open for trading.

 

EXHIBIT A

 

NOTICE OF EXERCISE OF WARRANT

 

TO: HUMBL, INC.
  ATTN: _______________
  VIA FAX TO: ( )______________ EMAIL: ______________

 

The undersigned hereby irrevocably elects to exercise the right, represented by the Warrant to Purchase Shares of Common Stock dated as of December 4, 2020 (the “Warrant”), to purchase shares of the common stock, $0.00001 par value (“Common Stock”), of HUMBL, Inc., and tenders herewith payment in accordance with Section 2 of the Warrant, as follows:

 

Warrant Shares: _______________________

 

Exercise Price: $_______________________

 

Purchase Price: $___________________ = (Exercise Price x Warrant Shares)

 

Payment is being made by:

  _____ enclosed check
  _____ wire transfer
  _____ other

 

Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Warrant.

 

It is the intention of Investor to comply with the provisions of Section 2.2 of the Warrant regarding certain limits on Investor’s right to receive shares thereunder. Investor believes this exercise complies with the provisions of such Section 2.2. Nonetheless, to the extent that, pursuant to the exercise effected hereby, Investor would receive more shares of Common Stock than permitted under Section 2.2, Company shall not be obligated and shall not issue to Investor such excess shares until such time, if ever, that Investor could receive such excess shares without violating, and in full compliance with, Section 2.2 of the Warrant.

 

As contemplated by the Warrant, this Notice of Exercise is being sent by email to the officer indicated above.

 

If this Notice of Exercise represents the full exercise of the entire Warrant, Investor will surrender (or cause to be surrendered) the Warrant to Company at the address indicated above by express courier within five (5) Trading Days after the Warrant Shares to be delivered pursuant to this Notice of Exercise have been delivered to Investor.

 

To the extent the Warrant Shares are not able to be delivered to Investor via the DWAC system, please deliver certificates representing the Warrant Shares to Investor via reputable overnight courier after receipt of this Notice of Exercise (by facsimile transmission or otherwise) to:

 

_____________________________________

_____________________________________

_____________________________________

 

Dated: _____________________

 

___________________________

[Name of Investor]

 

By:________________________

 

 

 

 

Exhibit 10.58

 

ENGAGEMENT AGREEMENT FOR ADVISORY SERVICES

 

This Engagement Agreement (this “Agreement”) is entered into between Humbl, Inc. (“Client”) and George Sharp (“Consultant”), collectively the “Parties”, as of November 18, 2021, in San Diego, California.

 

1. Scope And Duties. Client hereby retains Consultant to provide advice in connection with the business of the Client. The Client is interested achieving a listing on the NASDAQ Stock Market, in maintaining its good standing with regulators, OTC Markets Group, Inc. and the general public. In addition, the Client is interested in advice and guidance on the dissemination of public statements, including press releases; or the filing of any disclosure with the Secretary of State for the State of Delaware, United States Securities and Exchange Commission (“SEC”), OTC Markets Group, Inc. (“OTCM”), NASDAQ Stock Market (“NASDAQ”) and the Financial Industry Regulatory Authority (“FINRA”). In summary, the Consultant will advise on the logistical requirements of maintaining a public company and shall not be responsible for the day to day operations of the Client’s business.

 

Client agrees to keep Consultant informed of key developments regarding the Client and to abide by this Agreement. Client agrees not to participate in any business activities that are not ethical. Client shall not cause any disruption or interfere with the Consultant’s obligation to perform his duties and vice versa.

 

Client understands and agrees that the Consultant is not a licensed member of any state bar, does not possess any license to provide financial services or investment advice and nor does he provide any specific expertise. The scope of the services rendered shall be at the Consultant’s discretion, but he will do his best to respond to specific inquiries by the Client. The Consultant cannot and does not provide any warranty of his services to the Client. Client recognizes that this is in no way an exclusive agreement, and that Consultant may perform similar or other services to other clients, at his discretion.

 

 
 

 

2. Remuneration.

 

(1)Client will pay Consultant for services at a rate of $30,000 per month by transferring this payment into a nominee bank account of the Consultant. This fee shall be paid semi-annually, in advance of the commencement of each quarter, with the first payment of $180,000 to be paid on January 3, 2022 and the second payment to be paid on July 3, 2022.

 

(2)Client shall issue to Consultant an aggregate total of 7.5 million shares of its common stock, currently quoted on OTC Market Group’s “OTC Link” platform under the symbol “HMBL”. These shares shall be vested as follows: (a) 5 million shares shall be vested on January 3, 2022 and will be referenced on the Client’s current “S-1” Registration Statement, now before the SEC with the intention of having these shares registered for sale upon the Registration Statement being deemed effective; (b) 2.5 million shares shall be vested on July 3, 2022 and will be referenced on the Client’s subsequent “S-1” Registration Statement which will be filed with the SEC within 90 days of the deemed effectiveness of the initial “S-1” Registration Statement.

 

(3)Client shall pay a performance bonus to Consultant of $250,000 upon achieving a NASDAQ listing, even if the milestone is achieved after the expiration/termination of this contract, such bonus shall be paid to Consultant within 14 days of the achievement of that milestone.

 

(4)The Client will reimburse the Consultant for pre-approved business expenses.

 

4. Term and Obligations. The service period under this Agreement shall commence on January 3, 2022 and conclude on January 2, 2023. This Agreement may be thereafter extended by mutual written consent.

 

5. Limited Right of Disclosure of Agreement. Client recognizes that there is an intangible value of having an association with Consultant. As such, Consultant agrees that Client may announce that Consultant has contracted to be an Advisor in a public statement, such as a press release, upon approval by the Consultant of the content of that statement. Other than this right , the Parties agree that the terms of this Agreement and of the Agreement itself, are to be maintained in the strictest confidence, except as may be required by law, regulations, or necessary for purposes of accounting and public disclosure reporting requirements. Client will not list Consultant as an Advisor in its Business Plan nor on its profile page within OTCM’s website. In no way is the Client to be identified or assumed to perform the duties of an Officer or Director of the Client.

 

6. Termination and/or Conclusion of Consultant’s Services By Client. The Client may terminate this Agreement for any reason, at any time, however, the Client shall remain responsible for remunerating the Consultant for the entire term of this Agreement. Remuneration shall be due immediately upon termination of the Agreement by the Client. Termination of this Agreement shall in no way entitle Client to reimbursement of fees and retainers, and Client accepts forfeiture of such fees and retainers, paid or unpaid, upon termination.

 

7. Suspension or Termination and/or Conclusion of Services By Consultant. The Consultant may, at its own discretion, suspend or terminate this Agreement at any time, if there is a reasonable suspicion of unethical, illegal, or contra-regulatory activities undertaken by the Client. The Consultant may also terminate this Agreement if the Consultant is in breach of the Agreement itself.

 

Unethical activities shall include, but are not limited to, the proffering of misinformation by the Client either to the public or to Consultant; the grossly unreasonable divesture/dilution of common stock, so as to counteract the Consultant’s ability to fulfill its duties in a manner mutually beneficial to the Client and the investing public; any conduct by the Client that is in breach of this Agreement; and/or, such activities or conduct undertaken by the Client that cast the Consultant in a false light.

 

The Client shall remain responsible for remunerating the Consultant for the entire term of this Agreement, if the Consultant terminates the Agreement under this clause. Termination of this Agreement under this clause shall in no way entitle Client to reimbursement of fees and retainers and Client accepts forfeiture of such fees and retainers, paid or unpaid, upon termination.

 

 
 

 

8. Limitation of Liability. The Client agrees, to the fullest extent permitted by law, to hold Consultant harmless from any liability of Consultant to the Client for any and all claims, losses, costs, damages of any nature whatsoever. In no event shall Consultant be responsible for any consequential damages or contingent liability as a result of its performance or non-performance of its duties under this contract. The consultant agrees not to engage in any litigation against the Client, except to enforce this Agreement, should it be necessary.

 

9. Hold Harmless and Indemnification. To the extent permitted by law: Client shall indemnify, defend, and hold harmless Consultant against and in respect of any and all third party claims, demands, losses, costs, expenses, obligations, liabilities, damages, recoveries, and deficiencies, including interest, penalties, and reasonable attorneys’ fees, that Consultant shall incur or suffer, that arise, result from, or relate to any breach of, or failure by Client to perform, any of its obligations in this Agreement or in any way related to the scope of work to be performed under this Agreement except those caused by Consultant’s sole and active negligence.

 

10. Confidentiality/Non-Disclosure Agreement. The Parties intend to prevent the unauthorized disclosure of Confidential Information. For purposes of this Agreement, “Confidential Information” shall include all information or material that has or could have commercial value or other utility in the business in which Client is engaged. Consultant shall hold and maintain the Confidential Information in strictest confidence for the sole and exclusive benefit of the Client. Consultant shall carefully restrict access to Confidential Information to third parties as is reasonably required. Consultant shall not, without prior written approval of Client, use for Consultant’s own benefit, publish, copy, or otherwise disclose to others, or permit the use by others for their benefit or to the detriment of Client, any Confidential Information. Consultant shall return to Client any and all records, notes, and other written, printed, or tangible materials in his possession pertaining to Confidential Information immediately if Client requests it in writing. Consultant’s obligations under this Agreement do not extend to information that is publicly known at the time of disclosure or subsequently becomes publicly known through no fault of the Consultant.

 

11. Non-Disparagement. The parties agree to treat each other respectfully and professionally and not disparage the other party, and the other party’s officers, directors, employees, shareholders and agents, in any manner likely to be harmful to them or their business, business reputation or personal reputation; provided that both Consultant and the Client will respond accurately and fully to any question, inquiry or request for information when required by the legal process.

 

12. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument.

 

13. Entire Agreement; Modification; Waiver; Severability. This Agreement constitutes the entire Agreement between the Parties pertaining to the subject matter contained in it and supersedes all outstanding terms of prior and contemporaneous Agreements, representations, and understandings of the Parties, except for other Agreements expressly referenced with this Agreement. No supplement, modification, or amendment of this agreement shall be binding unless executed in writing and signed by all the Parties. No waiver of any of the provisions of this agreement shall be deemed, or shall constitute, a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver. No waiver shall be binding unless executed in writing by the party making the waiver. The provisions of this Agreement are separate and divisible, and if any of those provisions, or portions thereof are held to be unenforceable or invalid by any court of competent jurisdiction, the validity and enforceability of the remain provisions, or portions thereof, shall not be affected and shall remain in full force.

 

14. One Year Limitation on Actions. The Parties to this Agreement agree that any action based upon the services performed in this contract, any alleged breach of this contract, or any breach of any duty assumed by this contract, shall be commenced within one (1) year of the alleged breach. It is the intention of the Parties by this provision to shorten the four (4) year statute of limitations provided for in California Code of Civil Procedure section 337.

 

 
 

 

15. Attorney’s Fees and Costs. The Parties agree that in an action for a breach of this agreement, that the Prevailing Party will be entitled to reasonable attorneys’ fees, costs and expert witness fees in addition to any other relief to which that party may be entitled. Costs shall include all costs and not be limited to the recoverable costs set forth in the Code of Civil Procedure. For purposes of this provision, the Prevailing Party shall mean a plaintiff who receives any monetary recovery or a defendant who receives a defense verdict.

 

16. Opportunity to Review Agreement. Each party to this Agreement has been given an opportunity to fully review and analyze this Agreement and further have had the opportunity to seek legal counsel and to have legal counsel review and analyze this Agreement. Each party has fully read and understands each provision of this contract and all Parties understand their respective duties under this Agreement. Consultant and Client agree to use of the particular language of the provisions of this Agreement, and any questions of doubtful interpretation will not be resolved by any rule providing for interpretation against the party who causes the uncertainty to exist as both Parties agree to be considered the drafter of this Agreement.

 

17. Governing Law/Forum Selection. This Agreement shall be construed in accordance with, and governed by, the laws of the State of California as applied to contracts that are executed and performed entirely in California. The sole forum for any action or proceeding brought by Consultant or Client arising of or in any way related to this Agreement, whether such action is in law or equity, will be a court of competent jurisdiction or arbitration forum in the County of San Diego, State of California.

 

IN WITNESS WHEREOF, the Parties to this Agreement have duly executed it on the day and year first above written.

 

  “CONSULTANT”:
     
DATED: November 18, 2021 By:  
    George Sharp

 

Client has read and understands the foregoing terms and have agreed to them, as of the date Consultant first provided services.

 

  “CLIENT”:
     
DATED: November 18, 2021 By:  
    Brian Foote
    President
    Humbl, Inc.

 

 

 

 

Exhibit 10.59

 

ASSET PURCHASE AGREEMENT

 

AMONG

 

BIZSECURE, INC.

 

(as Seller)

 

and

 

HUMBL, INC.

 

(as Buyer)

 

and

 

ALFONSO ARANA

 

and

 

ALFONSO RODRIGUEZ-ARANA

 

and

 

CLEMENT DANISH

 

(as Stockholders of Seller)

 

Dated February 12, 2022

 

 

 

 

TABLE OF CONTENTS

 

      Page
       
Article I Purchase and Sale of Assets 1
  1.1 Purchase and Sale of Acquired Assets 1
  1.2 Assets Being Retained by Seller 1
  1.3 Assumption of Liabilities 2
       
Article II Consideration Payable by Buyer 2
  2.1 Purchase Price 2
  2.2 Payment of Purchase Price 2
  2.3 Allocation of Purchase Price 2
       
Article III The Closing 2
  3.1 Closing 2
  3.2 Seller’s Obligations at Closing 2
  3.3 Buyer’s Obligations at Closing 3
  3.4 Closing Prorations and Closing Costs
  3.5 Employment Matters 4
       
Article IV Covenants and Obligations of the Parties 4
  4.1 Covenants of Seller and Stockholders. 4
  4.2 Covenants of Parties Regarding Brokers and Expenses 6
  4.3 Sales and Use Taxes
       
Article V Representations and Warranties 6
  5.1 Representations and Warranties of Seller and Stockholders 5
  5.2 Representations and Warranties of Buyer 11
       
Article VI Indemnification 12
  6.1 Indemnification 12
  6.2 Indemnification Procedures 13
  6.3 Cooperation of the Parties 13
  6.4 Termination of Indemnification Obligations 13
       
Article VII Miscellaneous Provisions 14
  7.1 Governing Law, Jurisdiction and Venue 14
  7.2 Assignment; Binding Upon Successors and Assigns 14
  7.3 Severability 14
  7.4 Counterparts 14
  7.5 Amendment and Waivers 14
  7.6 Attorneys’ Fees 14
  7.7 Notices 15
  7.8 Construction of Agreement 16
  7.9 Further Assurances 16
  7.10 Expenses 16
  7.11 Entire Agreement 16

 

i

 

 

List of Exhibits

 

Exhibit A List of Acquired Assets
Exhibit B List of Excluded Assets
Exhibit C Allocation of Purchase Price
Exhibit D Form of Bill of Sale
Exhibit E Employment Agreements

 

ii

 

 

ASSET PURCHASE AGREEMENT

 

THIS ASSET PURCHASE AGREEMENT (this “Agreement”) is made and entered into effective as of February 12, 2022 (the “Effective Date”), by and among BizSecure, Inc., a Delaware corporation (“Seller”); Alfonso Arana, an individual (“Arana Sr.”); Alfonso Rodriguez-Arana, an individual (“Arana Jr.”); Clement Danish, an individual (“Danish”, and together with Arana Sr. and Arana Jr., the “Stockholders”); and HUMBL, Inc., a Delaware corporation (“Buyer”). Seller, Stockholders and Buyer are sometimes referred to collectively herein as the “Parties,” and individually as a “Party.”

 

A. Seller operates a platform that issues and verifies digital credentials commonly referred to as Self-Sovereign Identity (the “Business”).

 

B. On the terms and subject to the conditions set forth in this Agreement, Buyer desires to acquire from Seller, and Seller is willing to sell to Buyer, substantially all of the assets utilized in and required for the operation of the Business.

 

C. As an incentive and inducement to Buyer to acquire the assets of the Business, and as a condition thereto, Seller and Stockholders are willing to make various covenants and agreements with Buyer, as set forth below.

 

D. The Parties desire to enter into this Agreement in order to set forth and establish their rights and obligations with respect to the transactions contemplated hereby.

 

NOW, THEREFORE, intending to be legally bound, and in consideration of the above-recited premises and the mutual promises, covenants and conditions contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto agree as follows:

 

Purchase and Sale of Assets

 

Purchase and Sale of Acquired Assets.

 

ARTICLE 1. Subject to the terms and conditions of this Agreement, at the Closing (as defined below), Seller shall sell, convey, transfer, assign and deliver to Buyer, and Buyer shall purchase, acquire and accept from Seller, all of the tangible and intangible assets used in the operation of the Business as listed in Exhibit A attached hereto, but excluding those items referenced in Section 1.2 below (the “Acquired Assets”).

 

Assets Being Retained by Seller.

 

ARTICLE 2. Notwithstanding any provision to the contrary contained in this Agreement, the Acquired Assets will not include, and Seller will retain all rights and interests in, and all obligations with respect to, those items referenced in Exhibit B attached hereto (the “Excluded Assets”).

 

1

 

 

Assumption of Liabilities.

 

ARTICLE 3. Buyer will not assume any of the obligations, liabilities or indebtedness of Seller, Stockholders or the Business of any nature whatsoever, whether or not reflected on any financial statements or records of Seller, Stockholders or the Business, except as otherwise specifically provided in this Agreement. Any product liability, quality or other claims relating to products of the Business, if any, sold prior to the Closing or services of the Business performed prior to the Closing shall be the responsibility of Seller, and Seller and Stockholders jointly and severally agree to indemnify and hold harmless Buyer with respect to any such claims.

 

Consideration Payable by Buyer

 

Purchase Price.

 

ARTICLE 4. The consideration payable by Buyer for the Acquired Assets and for the other covenants and agreements of Seller hereunder (the “Purchase Price”) will be the sum of $6,800,000.00, payable and as may be adjusted in the manner set forth in Section 2.2 below.

 

Payment of Purchase Price.

 

ARTICLE 5. Buyer will pay the Purchase Price by delivery to Seller of 13,200,000 shares of common stock of Buyer, par value $0.00001 (the “Shares”), and 26,800,000 restricted stock units (the “RSUs”). The Shares will be fully vested on the Closing Date (as defined below). The RSUs will vest as set forth in Section 2.3 below.

 

RSU Vesting.

 

20,1000,000 of the RSUs will vest in eight equal quarterly installments on the last day of each quarter over the next two years, beginning with the quarter commencing on April 1, 2022, based on the continued employment with Buyer of Arana Jr. 6,700,000 of the RSUs will vest in eight equal quarterly installments on the last day of each quarter over the next two years, beginning with the quarter commencing on April 1, 2022, based on the continued employment with Buyer of Danish. In the event Arana Jr. or Danish’s employment is terminated without Cause (as defined in their employment agreements) or resigns with Good Reason (as defined in their employment agreements), the remaining unvested RSUs associated with such individual shall automatically vest. In the event Buyer terminates Arana Jr. or Danish with Cause or Arana Jr. or Danish resigns without Good Reason, the remaining unvested RSUs associated with such individual shall automatically be cancelled.

 

Registration.

 

Buyer agrees to include the Shares on a Form S-1 registration statement filed within ninety (90) days of the effectiveness of Buyer’s Form S-1 registration statement currently pending before the SEC.

 

Allocation of Purchase Price.

 

ARTICLE 6. Buyer and Seller have allocated the Purchase Price among the Assets after taking into account the applicable Treasury Regulations and the fair market value of such items. Buyer shall prepare for filing all of the tax returns, information returns and statements (“Returns”) that may be required with respect to the transaction provided for herein pursuant to Section 1060 of the Internal Revenue Code of 1986, as amended (the “Code”), any Treasury Regulations promulgated thereunder, any other similar provision of the Code and any other similar, applicable foreign, state or local tax law or regulation. Seller shall provide information that may be required by Buyer for the purpose of preparing such Returns, execute and file such Returns as requested by Buyer and file all other returns and tax information on a basis that is consistent with such Returns prepared by Buyer.

 

2

 

 

The Closing

 

Closing.

 

ARTICLE 7. Subject to the provisions hereof, the purchase and sale of the Acquired Assets and the other transactions contemplated by this Agreement will be consummated on the date hereof (the “Closing”) contemporaneously with the Parties’ execution of this Agreement. The date on which the Closing actually occurs is hereinafter called the “Closing Date.”

 

Seller’s Obligations at Closing.

 

ARTICLE 8. At the Closing, Seller and Stockholders will take the actions and deliver the documents and instruments referenced below:

 

Bill of Sale.

 

Seller will deliver to Buyer an executed Assignment and Bill of Sale in the form attached hereto as Exhibit C (the “Bill of Sale”), conveying to Buyer good, legal and marketable title in and to the Acquired Assets, and all rights, title and interests of Seller with respect thereto, free and clear of all liens, claims, charges and encumbrances.

 

Possession of Acquired Assets.

 

Simultaneously with delivery of the Bill of Sale, Seller and Stockholders will take such reasonable steps as may be necessary to put Buyer in possession and operating control of the Acquired Assets and the Business, including delivering all title certificates, keys, and other documents as may be reasonably necessary or required by Buyer to put Buyer in possession of the Acquired Assets.

 

Employment Agreements.

 

Seller will cause Arana Jr. and Danish to execute and deliver to Buyer employment agreements in the form attached hereto as Exhibit D.

 

BLOCKS Tokens.

 

Seller will return all BLOCKS tokens held by Seller to the BLOCKS treasury.

 

Other Items.

 

Seller and Stockholders will execute and deliver to Buyer all other documents and instruments required or contemplated by this Agreement, or reasonably requested by Buyer, to enable Buyer to fully utilize the Acquired Assets and carry on the Business, including such documents as may be required to assign and transfer to Buyer all rights to all names utilized in the Business, or to vest in Buyer all rights and interests in and to the Acquired Assets, free and clear of all liens, claims, charges and encumbrances. All of such documents and instruments shall be in form and substance reasonably approved by Seller and Buyer and their respective legal counsel. Seller and Stockholders will also deliver to Buyer at or prior to the Closing any information required for Buyer to complete any tax reporting documents relating to the transactions contemplated herein.

 

Buyer’s Obligations at Closing.

 

ARTICLE 9. At the Closing, Buyer shall deliver to Seller the following:

 

Bill of Sale.

 

Buyer will deliver to Seller an executed copy of the Bill of Sale.

 

Share and RSU Issuance.

 

Upon consummation of this Agreement, Buyer will issue the Shares and the RSUs.

 

3

 

 

Employment Matters.

 

ARTICLE 10. Seller shall be responsible for all liabilities for employee or independent contractor compensation and benefits accrued or otherwise arising out of services rendered to Seller by Seller’s employees, managers and independent contractors prior to and (if applicable) after Closing (including without limitation all health insurance or other insurance/benefit premiums and contributions to retirement plans) or arising by reason of actual, constructive or deemed termination of their service relationship with Seller at Closing. No provision of this Section 3.4 shall create any third-party beneficiary or other rights in any employee of Seller or former employee of Seller in respect of continued or resumed employment in the Business, or with Buyer, and no provision of this Section 3.4 shall create any rights in any such persons in respect of any benefits that may be provided under any plan or arrangement which may be established by Buyer. Nothing herein shall cause or be deemed to cause Seller to be responsible for any employee or independent contractor compensation, benefits, or any other liabilities accruing or otherwise arising out of services rendered to for the benefit of Buyer after Closing.

 

Covenants and Obligations of the Parties

 

Covenants of Seller and Stockholders.

 

Covenant Not to Compete.

 

As a condition and inducement to Buyer’s execution of, and performance of its obligations under, this Agreement, and for the consideration provided herein, each of Seller and Stockholders agrees that it or he, as the case may be, will not directly or indirectly compete with the Business for a period of three (3) years from the Closing Date (the “Restrictive Period”). The phrase “directly or indirectly compete” shall include: (i) other than pursuant to and in accordance with a separate written agreement between the Stockholder and Buyer concerning the Stockholder’s provision of services to or for the Business, and except as otherwise provided herein, owning, managing, operating, controlling or participating in the ownership, management, operation or control of, or being connected with or having any interest in, as an owner, director, officer, employee, contractor, agent, advisor, sole proprietor or otherwise in any business offering any products for sale sold by Seller during the two (2) year period prior to Closing, or otherwise competitive with the Business, anywhere in the United States; and (ii) interfering in any way with the relationships Buyer or its successor may have with any employees, suppliers, clients, or customers of the Business. If any of the provisions of this Section 4.1.1 is held to be unenforceable, the remaining provisions shall nevertheless remain enforceable, and the court making such determination shall modify, among other things, the scope, duration or geographic area of this covenant to preserve the enforceability hereof to the maximum extent then permitted by law. The enforceability of this covenant is subject to the injunctive and other equitable powers of a court of competent jurisdiction. Notwithstanding the foregoing, the passive ownership of less than five (5%) percent of the outstanding stock or equity of any publicly-traded corporation or other entity shall not be deemed, solely by reason thereof, a violation of this Agreement. Each of Seller and Stockholders represents and warrants that no other individual or entity (other than those listed on Schedule 4.1.1 attached hereto) has been employed or relied upon by Seller to materially handle customer and client relations, or, to Seller and Stockholders Knowledge (as defined in Section 5.1), has had access to the confidential information of the Business or been given its customer and client lists. Notwithstanding anything to the contrary, this Section 4.1.1 shall not prohibit Seller or Shareholders from owning or engaging in the business known as Great Foods 2 Go, which includes utilizing a program known as 1Delivery block chain technology and cryptocurrency, or engaging in the continued operations of Blank Slate Solution LLC, so long as any of the foregoing operations of either entity do not conflict with Arana Jr.’s and Danish’s obligations as employees of Buyer and are not competitive with Buyer’s Blockchain Services division.

 

4

 

 

Covenant Not to Solicit.

 

During the Restrictive Period, each of Seller and Stockholders agrees that he or it, as the case may be, will not (i) solicit the business of any of the individuals or entities who are or have been customers or clients of the Business during the Restrictive Period or the twelve (12) month period prior to the Closing; (ii) request, induce or attempt to influence, directly or indirectly, any employee of Buyer or the Business or any affiliate of Buyer to leave the employ of Buyer or such affiliate, or in any way intentionally interfere in any material respect with the relationship between Buyer or any such affiliate and any employee thereof; or (iii) employ any person who as of the date of this Agreement is, or after such date is or was within the preceding one-year period, an employee of Buyer or any affiliate of Buyer engaged in the Business.

 

Confidentiality.

 

From and after the Closing Date, each of Seller and Stockholders will hold in strict confidence and will not divulge, communicate or use in any way, any business plans or strategies, customer or client lists, financial data, know-how, trade secrets or other information included within the Acquired Assets or related to the Business (“Confidential Information”); provided, however, that the foregoing provisions of this sentence shall not include any information that (i) is or becomes generally available to, or known by, the public, other than as a result of disclosure in violation hereof, (ii) is or becomes available to Seller or Stockholders on a non-confidential basis from a source other than Buyer, or (iii) has been or is subsequently independently conceived or developed by Seller or a Stockholder without use of or reference to any of such Confidential Information. Furthermore, neither Seller nor any Stockholder shall be prohibited from disclosing Confidential Information if requested or required pursuant to any legal action, court order, interrogatory, subpoena, civil investigative demand, or similar process. Seller and Stockholders agree to notify the Buyer of any such request in order to allow Buyer to seek, at its sole cost and expense, an appropriate protective order; provided, however, that even if Buyer is seeking a protective order, Seller and Stockholders may disclose such Confidential Information if, on the advice of counsel, Seller or Stockholders determine that they are legally required to disclose the Confidential Information to the requesting authority.

 

Discontinue Use of Business Name and Information.

 

From and after the Closing, Seller will discontinue all use of the items included in the Acquired Assets, and (except as provided herein) will discontinue use of all tradenames, and other proprietary or business information transferred to Seller hereunder. Promptly following the Closing, Seller will change its corporate name and take any other actions Buyer deems to be reasonably necessary to allow Buyer the exclusive right to and use of such names (or a similar name as determined by Buyer in its sole discretion) and shall execute any documents Buyer deems necessary to allow Buyer to use such names. Notwithstanding the foregoing, for a period of one (1) year following the Closing, Seller may use the BizSecure name (and/or any other tradename used by Seller during the period prior to Closing), solely in connection with its post-Closing affairs including with respect to the handling of any retained liabilities and Excluded Assets, or defending and prosecuting claims (if any), in each case solely to the extent such use is reasonably necessary.

 

5

 

 

Announcements.

 

Seller and Stockholders agree that they will reasonably cooperate in the preparation and dissemination of any announcements to customers and clients of the Business as Buyer may determine to be appropriate, regarding the change in ownership and management of the Business, to facilitate a smooth transition. All such announcements will be subject to the reasonable prior approval of each party to this Agreement.

 

Injunctive Relief.

 

The enforceability of this Section 4.1 is subject to the injunctive and other equitable powers of a court of competent jurisdiction.

 

Covenants of Parties Regarding Brokers; Legal Expenses.

 

ARTICLE 11. Each Party represents and acknowledges to the others that it is not obligated to pay any fee or commission to any broker, finder or intermediary in connection with the transactions contemplated by this Agreement. Buyer agrees to pay $30,000 to Seller for legal fees incurred in connection with this transaction.

 

Additional BLOCKS Grants.

 

ARTICLE 12. During the Restrictive Period, neither Seller nor Stockholders shall seek any additional BLOCKS tokens grants without the prior written consent of Buyer.

 

Representations and Warranties

 

Representations and Warranties of Seller.

 

ARTICLE 13. Seller and each Stockholder hereby jointly and severally represents and warrants to Buyer that, as of the Closing, each of the following statements is true and correct. As used herein, “Knowledge” as it pertains to Seller means the actual personal knowledge (and not imputed, implied, or constructive knowledge) of Arana Jr. and Danish, and as it pertains to each Stockholder means the actual personal knowledge (and not imputed, implied, or constructive knowledge) of such Stockholder.

 

Authorization and Validity; Consents.

 

Seller is duly organized and in good standing under the laws of the State of Delaware, has the full power and authority to enter into and perform its obligations under this Agreement, and has obtained the necessary approval. Seller and Stockholders have full legal capacity and authority to enter into and perform their obligations under this Agreement. Seller and each Stockholder is duly authorized to enter into all other agreements and instruments contemplated hereby to which such Party is or is intended to be a party.

 

This Agreement has been duly and validly executed and delivered by Seller and Stockholders and constitutes a valid and binding obligation of Seller and Stockholders, enforceable against them in accordance with its terms.

 

To its Knowledge, Seller is duly licensed to conduct the Business.

 

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Neither the execution nor delivery of this Agreement including all Schedules and Exhibits hereto, nor the performance by Seller of the transactions contemplated hereby and thereby, conflicts with, or constitutes a material breach of or a default under (i) the Certificate of Incorporation or Bylaws of Seller; (ii) any applicable law, rule, judgment, order, writ, injunction, or decree of any court, currently in effect; (iii) any applicable rule or regulation of any administrative agency or other governmental authority currently in effect; or (iv) any agreement, indenture, contract or instrument to which Seller is a party or by which any of Seller’s assets are bound.

 

No authorization, consent, approval, license, exemption by, filing or registration with any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, is or will be necessary in connection with the execution, delivery and performance of this Agreement by Seller

 

Representations Regarding Acquired Assets.

 

Except as otherwise specifically provided herein, the Acquired Assets include all of the assets required for, or utilized by Seller in, the operation of the Business as such Business is conducted as of the Closing. Except as otherwise specifically provided herein, the Acquired Assets are in good working order and repair and usable in the ordinary course of the Business as such Business is conducted as of the Closing, except as otherwise indicated in Schedule 5.1.2. Seller is the sole owner of the Acquired Assets. At the Closing, Seller will transfer good and marketable title to the Acquired Assets to Buyer, free and clear of all liens, claims and encumbrances. The Acquired Assets are freely transferable by Seller and are not subject to any right of first refusal, right of purchase, or any other right in favor of a third party.

 

Contracts Related to Business;

 

Third Party Consents. Seller is not a party to any written or verbal contracts or agreements relating to the operation of the Business, except as referenced in Schedule 5.1.3. Seller does not have any written contract with any suppliers or customers, except as have been delivered to Buyer and are listed on Schedule 5.1.3. Transfer of the Acquired Assets does not require any consent or agreement by any third party, except as set forth on Schedule 5.1.3.

 

Products Offered By Business.

 

Seller has provided Buyer with a listing of all products offered through the Business as of Closing. Seller and Stockholders have not been advised of any changes in such products, or the terms or prices on which any products sold by the Business are acquired, and are unaware of any conditions which would impair Buyer’s ability to continue to provide its products in accordance with such arrangements and at such prices and terms.

 

Accuracy of Information Provided; Disclosure.

 

The financial and business data provided to Buyer by Seller and Stockholders are materially complete and accurate. The financial information provided by Seller, including unaudited financial statements for the period ended December 31, 2021, accurately and materially reflects the financial position of Seller as of such date and for the period then ended. Seller and Stockholders have provided Buyer with all of the information that Buyer has requested for the purpose of conducting its due diligence review of the Acquired Assets and the Business. Notwithstanding the above, Seller and Stockholders make no representation or warranty concerning the BLOCKS tokens, including the impact of the BLOCKS tokens on the financial condition or liability of the Seller.

 

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Taxes.

 

Seller has paid all taxes and filed all tax returns required with respect to the Business for all periods as of the Effective Date.

 

Absence of Certain Changes or Events.

 

Except as disclosed to Buyer in writing, Seller and Stockholders are not aware of any current or anticipated facts, conditions or events (including, without limitation, facts regarding product availability or quality, or relationships with customers and vendors) that would be likely to have a material adverse effect on the Business. There have been no material adverse changes in the Business or the Acquired Assets since December 31, 2021 (the date of the financial information provided by Seller to Buyer). Since December 31, 2021, the Business has not been conducted outside the ordinary course.

 

Buyer Ability to Continue Business.

 

Except as otherwise set forth in this Agreement, the Exhibits, and the Schedules, Seller and Stockholders are not aware of any conditions or events which would prohibit Buyer from continuing to operate the Business as presently conducted from and after the Closing, for the foreseeable future; provided, however, that nothing herein shall constitute or be deemed a representation or warranty regarding the effect or potential effect of (a) changes or developments generally affecting the industries in which the Business operates, or the economy or the financial or securities markets, in the United States or globally, (b) the outbreak or escalation of hostilities or any acts of war, sabotage or terrorism in the United States or any other country or region in the world, or (c) earthquakes, hurricanes, tsunamis, tornadoes, floods, mudslides, wild fires or other natural disasters or calamities, weather conditions, pandemics or epidemics, and other force majeure events in the United States or any other country or region in the world.

 

Compliance with Law.

 

Seller is in compliance in all material respects with all laws, regulations and orders applicable to the Business. Seller has not received any notification that it is in violation of such laws, regulations or orders and no such violation exists.

 

Litigation.

 

There is no legal, administrative, arbitration or other proceeding, claim or action of any nature or investigation pending or, to the Knowledge of Seller and Stockholders, threatened against or involving Seller, Stockholders or the Acquired Assets or which questions or challenges the validity of this Agreement or any action taken or to be taken by Seller or Stockholders pursuant to this Agreement or in connection with the transactions contemplated hereby; and neither Seller nor Stockholders has Knowledge of any valid basis for any such legal, administrative, arbitration or other proceeding, claim, or action of any nature or investigation.

 

Permits.

 

Except as otherwise expressly provided in this Agreement and its Exhibits and Schedules, no Permits (as defined below) are required to use and/or maintain any of the Acquired Assets or to conduct the Business and operations as presently conducted. For purposes of this Agreement, “Permits” shall mean any and all permits, rights, approvals, licenses, authorizations, accreditations, legal status, or orders under any legal requirement or otherwise granted by any governmental authority.

 

No Undisclosed Liabilities.

 

There are no liabilities of Seller or the Business that affect the Acquired Assets, whether accrued, contingent, absolute, determined, determinable or otherwise, and to Seller’s and Stockholders’ Knowledge there is no existing condition, situation or set of circumstances which could reasonably be expected to result in such a liability.

 

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Relationships.

 

To Seller’s and Stockholders’ Knowledge, none of Seller’s suppliers, customers, clients, employees, independent contractors or sales representatives have any intention to terminate or modify in a manner adverse to Company any of such relationships. To Seller’s and Stockholders’ Knowledge, no material adverse change in relations with suppliers, customers, clients, employees, independent contractors or sales representatives shall occur as a result of the announcement or consummation of the transactions contemplated by this Agreement.

 

Clients.

 

Except as has been disclosed to Buyer in writing, no material customer or client of Seller has ceased or materially reduced the services it purchases from Seller since December 31, 2021, and to Seller’s and Stockholders’ Knowledge, no customer or client has threatened to cease or materially reduce such services after the date hereof. Except as has been disclosed to Buyer in writing, to Seller’s and Stockholders’ Knowledge, no such customer or client is threatened with bankruptcy or insolvency.

 

Employees.

 

Except as has been disclosed to Buyer in writing, the employment of all employees of Seller are terminable at will. To Seller’s Knowledge, no employee or independent contractor of Seller has any plan to terminate his, her or its employment or relationship with Seller. Except as has been disclosed to Buyer in writing: (a) Seller is not bound by any collective bargaining agreement or other labor union contract covering any of its employees, and there exists no organizational effort presently being made or threatened by or on behalf of any labor union with respect to the employees, and no such efforts have been made within the past three (3) years; (ii) Seller has not and is not engaged in any unfair labor practice or other unlawful employment practice, and there are no charges of any unfair labor practice or other unlawful employment practice pending against Seller before the National Labor Relations Board, the Equal Opportunity Commission, the Occupational Safety and Health Review Commission, the Department of Labor or any other Governmental Authority; and (iii) Seller has not experienced any strikes, grievances, claims of unfair labor practices, or other collective bargaining disputes or other labor disputes or controversies and, to Seller’s and Stockholders’ Knowledge, none of the foregoing are threatened. Except as disclosed in writing to Buyer, there are no outstanding amounts owed to employees or independent contractors of Seller other than salaries and compensation in the ordinary course of its Business.

 

Contracts.

 

Schedule 5.1.16 lists all material contracts to which Seller is a party or by which Seller, the Business, or any of the Acquired Assets is bound as of the Closing Date, including any oral contract or contract that is not in writing, true and correct copies of which have been provided to Buyer prior to the Closing Date (the “Contracts”). Seller has performed all of the material obligations required to be performed by it and is entitled to all benefits under, and Seller has not received notice of any allegation that Seller is in default in respect of any Contract. Each of the Contracts is valid and binding and in full force and effect, and there exists no default or event of default or event, occurrence, condition or act, with respect to Seller, or to Seller’s Knowledge, with respect to the other contracting party, which, with the giving of notice, the lapse of the time or the happening of any other event or condition, would become a default or event of default under any Contract. Seller has not received written or oral notice of cancellation, modification or termination of any Contract. To Seller’s Knowledge, none of the parties to any Contract intends to terminate or alter the provisions thereof by reason of the Buyer’s acquisition of the Acquired Assets. Seller has not waived any right under any Contract, amended or extended any Contract or failed to renew (or received notice of termination or failure to renew with respect to) any Contract.

 

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Books and Records.

 

All books of account and other financial books and records of Seller directly relating to the Business (the “Books and Records”) are true, correct and complete and have been made available to Buyer. All of the Books and Records have been prepared and maintained in material compliance with all applicable laws. There are no material inaccuracies or discrepancies contained or reflected in the Books and Records. The Books and Records fairly and accurately reflect the current financial position of the Business, are not misleading, and are free from all material errors. Notwithstanding the above, Seller and Stockholders make no representation or warranty concerning the BLOCKS tokens, including the impact of the BLOCKS tokens on the financial condition or liability of the Seller.

 

Affiliate Transactions.

 

Except as has been disclosed to Buyer in Schedule 5.1.18, no affiliate of Seller nor any stockholder, officer, director, partner, manager, member, or employee of any thereof, is as of the Closing Date a party to any transaction with Seller, including any contract or arrangement providing for the furnishing of services to or by, providing for rental of real property, tangible personal property or intellectual property to or from, or otherwise requiring payments to or from Seller, or any affiliate thereof.

 

Privacy.

 

Neither Seller nor any Stockholder has any Knowledge of any breach by Seller or any of its affiliates of any duty under any applicable law related to the disclosure or security of personal information provided by any client to Seller. Seller is, and has always been, in material compliance with each of Seller’s privacy policies and any applicable laws relating to the collection, receipt, use, or storage of the information of its clients or customers. Seller has commercially reasonable security measures in place to protect the client or customer information Seller receives through any Seller websites or otherwise or which it stores in its computer systems from illegal use by third parties or use by third parties in a manner violating the privacy rights of consumers or customers. The execution, delivery, and performance by Seller of this Agreement will comply with all applicable laws relating to privacy and with Seller’s privacy policies. Seller has not received any written complaint regarding Seller’s collection, use, or disclosure of personally identifiable information.

 

BLOCKS Tokens.

 

Neither Seller nor Stockholder has transferred or otherwise disposed of any BLOCKS tokens from the date of execution of the Term Sheet between the Parties and the Effective Date.

 

No Other Representations or Warranties.

 

Except for the representations and warranties set forth in this Article V (the “Express Warranties”), Buyer acknowledges and agrees that neither Seller or Stockholders has made or is making any other representation or warranty, written or oral, statutory, express or implied, at common law, by statute, or otherwise, whatsoever. Other than as set forth in this Article V, Seller and Stockholders each hereby disclaim and renounce any and all representations and warranties other than the Express Warranties.

 

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Representations and Warranties of Buyer.

 

ARTICLE 14. Buyer hereby represents and warrants to Seller that each of the following representations, warranties and statements is true and correct:

 

Organization.

 

Buyer is a corporation duly organized, validly existing and in good standing under the laws of Delaware; Buyer has full power and authority to carry on its business as it is now being conducted and to own, lease or operate its properties and assets.

 

Authorization, Etc.

 

Buyer has full power and authority to enter into this Agreement and to carry out the transactions contemplated hereby. Buyer has taken all action required by law, its Certificate of Incorporation, its Bylaws or otherwise to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby. This Agreement is a valid and binding obligation of Buyer enforceable in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights, as well as general principles of equity.

 

No Violation.

 

Neither the execution and delivery of this Agreement nor its performance and the consummation of the transactions contemplated hereby will (a) violate any provision of the Certificate of Incorporation or Bylaws of Buyer; (b) violate or be in conflict with, or constitute a default (or an event which, with or without due notice or lapse of time, or both, would constitute a default) under, or result in the modification or termination of, or cause or permit the acceleration of the maturity of any debt, obligation, contract or commitment or other agreement to which Buyer is a party or by which it may be bound; (c) result in the creation or imposition of any mortgage, pledge, lien, security interest, encumbrance, restriction, charge or limitation of any kind, upon Buyer; or (d) violate any statute or law or any judgment, decree, order, regulation or rule of any court or governmental authority.

 

Consents and Approvals of Government Authorities.

 

No consent, approval or authorization of, or declaration, filing or registration with, any governmental or regulatory authority is required in connection with the execution, delivery and performance of this Agreement by Buyer or the consummation of the transactions contemplated thereby, except where such action has been taken prior to the Closing.

 

5.2.5. Litigation. There is no legal, administrative, arbitration or other proceeding, claim or action of any nature or investigation pending or, to the knowledge of Buyer, threatened against or involving Buyer or which questions or challenges the validity of this Agreement or any action taken or to be taken by Buyer pursuant to this Agreement or in connection with the transactions contemplated hereby; and Buyer has no knowledge of any valid basis for any such legal, administrative, arbitration or other proceeding, claim, or action of any nature or investigation.

 

5.2.6 Compliance. Buyer is in compliance in all material respects with all requirements of federal and state securities laws as they pertain to the issuance of the Shares and award of the RSUs pursuant to this Agreement. Without limitation, all filings required to be made under applicable securities laws with regard to the issuance of the Shares and award of the RSUs have been made or shall be made in a timely manner as required under applicable securities laws and the rules and regulations thereunder.

 

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Indemnification

 

Indemnification.

 

ARTICLE 15.

 

Indemnification by Buyer. Subject to the limitations and other provisions of this Agreement, Buyer agrees to defend, indemnify and hold harmless Seller and Stockholders (the “Seller Indemnified Parties”), from and against each claim, loss, liability, cost and expense (including without limitation, interest, penalties, costs of preparation and investigation, and the reasonable fees, disbursements and expenses of attorneys, accountants and other professional advisors) (collectively “Losses”), directly or indirectly relating to, resulting from or arising out of any untrue representation, misrepresentation, breach of warranty or non-fulfillment of any covenant, agreement or other obligation by or of Buyer pursuant to this Agreement or any other transaction document related hereto.

 

Indemnification by Seller. Subject to the limitations and other provisions of this Agreement, Seller and Stockholders agree to defend, indemnify and hold harmless Buyer (the “Buyer Indemnified Parties”), from and against all Losses, directly or indirectly relating to, resulting from or arising out of any untrue representation, misrepresentation, breach of warranty or non-fulfillment of any covenant, agreement or other obligation by or of Seller and Stockholders pursuant to this Agreement or any other transaction document related hereto.

 

Limitations on Indemnity.

 

6.1.3.1 Except in the case of fraud as found by a final order of a court of competent jurisdiction, the Indemnifying Party (as defined below) shall not have any obligation to indemnify the Indemnified Parties pursuant to this Article VI until the aggregate dollar amount of all Losses that would otherwise be indemnifiable pursuant to this Article VI exceeds $250,000 (the “Deductible”), after which and subject to the other limitations set forth in this Agreement, the Indemnified Parties shall be entitled only to recover in excess of the Deductible.

 

6.1.3.2 Except in the case of fraud as found by a final order of a court of competent jurisdiction, Seller and Stockholders shall not have any obligation to indemnify the Buyer Indemnified Parties pursuant to this Article VI in an amount in excess of the Purchase Price.

 

6.1.3.3 Except in the case of fraud as found by a final order of a court of competent jurisdiction, Buyer shall not have any obligation to indemnify the Seller Indemnified Parties in excess of an amount equal to twenty percent (20%) multiplied by the value of the Shares on the issuance date plus twenty percent (20%) multiplied by the value of all vested RSUs on the applicable vesting date.

 

6.1.3.4 Any claim by the Buyer for indemnity pursuant to this Article VI shall first be satisfied by cancelling the Seller’s RSUs in an amount equal to the indemnity claim. In the event that the Seller has insufficient RSUs to cover the indemnity obligation, Buyer’s claim for indemnity shall next be satisfied by the redemption of the Shares, including any RSUs of Seller that have vested into shares of Buyer.

 

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Indemnification Procedures.

 

ARTICLE 16. Each Party obligated to indemnify the other Party under this Agreement is referred to as an “Indemnifying Party” and each Party entitled to indemnity under this Agreement is referred to herein as an “Indemnified Party”). An Indemnified Party shall promptly notify an Indemnifying Party of any claim, demand, action or proceeding for which indemnification will be sought under Section 6.1 above and, if such claim, demand, action or proceeding is a third-party claim, demand, action or proceeding, the Indemnifying Party will have the right at its expense to assume the defense thereof using counsel reasonably acceptable to the Indemnified Party. The Indemnified Party shall have the right to participate, at its own expense, with respect to any such third-party claim, demand, action or proceeding. In connection with any such third-party claim, demand, action or proceeding, the Indemnifying Party and Indemnified Party shall cooperate with each other and provide each other with access to relevant books and records in their possession. No such third-party claim, demand, action or proceeding shall be settled without the prior written consent of the Indemnified Party. If a firm written offer is made to settle any such third-party claim, demand, action or proceeding and the Indemnifying Party proposes to accept such settlement and Indemnified Party refuses to consent to such settlement, then: (a) the Indemnifying Party shall be excused from, and the Indemnified Party shall be solely responsible for, all further defense of such third-party claim, demand, action or proceeding; and (b) the maximum liability of the Indemnifying Party relating to such third-party claim, demand, action or proceeding shall be the amount of the proposed settlement if the amount thereafter recovered from the Indemnified Party on such third-party claim, demand, action or proceeding is greater than the amount of the proposed settlement. Whether or not an Indemnifying Party shall have assumed the defense of any such third-party claim, action, demand or proceeding, no Indemnified Party shall admit any liability with respect to, or settle, compromise or discharge, any such claim, demand, action or proceeding without the Indemnifying Party’s prior written consent, which shall not be unreasonably withheld. If Buyer is entitled to indemnification as provided herein, Buyer shall be entitled to deduct and offset any Losses incurred by Buyer against any payments owing to Seller pursuant to Section 2.2 above.

 

Cooperation of the Parties.

 

ARTICLE 17. The Parties shall cooperate with each other in the resolution of any claim or liability with respect to which an Indemnifying Party is obligated to indemnify any Indemnified Party hereunder, including by making commercially reasonable efforts to mitigate or resolve any such claim or liability. In the event that an Indemnified Party shall fail to make such commercially reasonable efforts to mitigate or resolve any claim or liability, then notwithstanding anything else to the contrary herein, the Indemnifying Party shall not be required to indemnify any person for any losses that could reasonably be expected to have been avoided if the Indemnified Party had made such efforts.

 

Termination of Indemnification Obligations.

 

ARTICLE 18. The indemnification obligations set forth in this Article VI shall terminate on the date which is three (3) years following the Closing; provided that such obligations shall not terminate as to any item as to which the Indemnified Party shall have, before the expiration of such three (3) year period, previously made a claim by delivering a notice of such claim (stating in reasonable detail the basis of such claim) to the Indemnifying Party. All of the representations and warranties of the parties contained in this Agreement shall survive the Closing for a period of three (3) years.

 

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Miscellaneous Provisions

 

Governing Law, Jurisdiction and Venue.

 

ARTICLE 19. The internal laws of the State of Delaware will govern the validity of this Agreement, the construction of its terms, and the interpretation and enforcement of the rights and duties of the Parties hereto. In the event of any claim or dispute arising hereunder, the Parties consent to the exclusive jurisdiction and venue of the court of San Diego, California.

 

Assignment; Binding Upon Successors and Assigns.

 

ARTICLE 20. No Party hereto may assign any of its rights or obligations hereunder without the prior written consent of the other Parties hereto; provided, however, that Buyer may assign its rights and obligations hereunder to any affiliate or subsidiary without the need to obtain Seller’s consent to such assignment. This Agreement will be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.

 

Severability.

 

ARTICLE 21. If any provision of this Agreement, or the application thereof, will for any reason and to any extent be invalid or unenforceable, the remainder of this Agreement will remain in full force and effect and the application of such provisions to other persons or circumstances will be interpreted so as reasonably to effect the intent of the Parties hereto. The Parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of the void or unenforceable provision.

 

Counterparts.

 

ARTICLE 22. This Agreement may be executed by email, facsimile, and other electronic means, in any number of counterparts, each of which will be an original as regards any Party whose signature appears thereon and all of which together will constitute one and the same instrument. This Agreement will become binding when one or more counterparts hereof, individually or taken together, will bear the signatures of each of the Parties reflected hereon as signatories.

 

Amendment and Waivers.

 

ARTICLE 23. Any term or provision of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a writing signed by the Party or Parties to be bound thereby. The waiver by a Party of any breach hereof or default in the performance hereof will not be deemed to constitute a waiver of any other default or any succeeding breach or default.

 

Attorneys’ Fees.

 

ARTICLE 24. Should suit be brought to enforce or interpret any part of this Agreement or any other Agreement referenced herein, the prevailing Party will be entitled to recover, as an element of the costs of suit and not as damages, reasonable attorneys’ fees to be fixed by the court (including without limitation, costs, expenses and fees on any appeal).

 

14

 

 

Notices.

 

ARTICLE 25. Any notice or other communications pursuant to this Agreement will be in writing and will be deemed given if delivered personally, telecopied, sent by nationally-recognized overnight courier or mailed by registered or certified mail (return receipt requested), postage prepaid, to the Parties at the following addresses (or at such other address for a Party as will be specified by like notice):

 

If to Seller:

 

BizSecure Inc.

Attn: Alfonso Rodriguez-Arana

270 E. Douglas Ave., #35

El Cajon, CA 92020

 

With a copy to (which shall not constitute notice):

 

Ferguson Case Orr Paterson LLP

Attn: Michael A. Velthoen, Esq.

1150 South Kimball Road

Ventura, CA 93004

 

If to Stockholders:

 

270 E. Douglas Ave., #35

El Cajon, CA 92020

 

With a copy to (which shall not constitute notice):

 

Ferguson Case Orr Paterson LLP

Attn: Michael A. Velthoen, Esq.

1150 South Kimball Road

Ventura, CA 93004

 

If to Buyer:

 

HUMBL, Inc.

Attn: Brian M. Foote

600 B. Street

San Diego, California 92101

 

With a copy to (which shall not constitute notice):

 

Hansen Black Anderson Ashcraft PLLC

Attn: Brian Innes

3051 West Maple Loop Drive, Suite 325

Lehi, Utah 84043

 

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All such notices and other communications will be deemed to have been received (a) in the case of personal delivery, on the date of such delivery, (b) in the case of a telecopy, when the Party receiving such copy will have confirmed receipt of the communication, (c) in the case of delivery by nationally-recognized courier, on the business day following dispatch by overnight courier service (on the third business day following dispatch in the case of international deliveries), and (d) in the case of mailing, on the third business day following such mailing.

 

Construction of Agreement.

 

ARTICLE 26. This Agreement has been negotiated by the respective Parties hereto and their attorneys and the language hereof will not be construed for or against either Party. A reference to a Section or an Exhibit will mean a Section in, or Exhibit to, this Agreement unless otherwise explicitly set forth. The titles and headings herein are for reference purposes only and will not in any manner limit the construction of this Agreement which will be considered as a whole.

 

Further Assurances.

 

ARTICLE 27. Each Party agrees to cooperate fully with each other Party and to execute such further instruments, documents and agreements and to give such further written assurances as may be reasonably requested by such other Party to evidence and reflect the transactions described herein and contemplated hereby and to carry into effect the intents and purposes of this Agreement.

 

Expenses.

 

ARTICLE 28. Each Party shall bear its own expenses incurred in the preparation of this Agreement and all agreements and transactions contemplated hereby.

 

Entire Agreement.

 

ARTICLE 29. This Agreement and the Exhibits hereto constitute the entire understanding and agreement of the Parties hereto with respect to the subject matter hereof and supersede all prior and contemporaneous agreements or understandings, inducements or conditions, express or implied, written or oral, between the parties with respect hereto. The express terms hereof control and supersede any course of performance or usage of the trade inconsistent with any of the terms hereof.

 

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the Effective Date.

 

SELLER:   BUYER:
     
BIZSECURE INC.   HUMBL, INC.
         
By:     By:  
  Alfonso Rodriguez-Arana, CEO     Brian Foote, President and CEO
         
STOCKHOLDERS:      
       
       
Alfonso Arana      
       
       
Alfonso Rodriguez-Arana      
       
       
Clement Danish      

 

[Signature Page to Asset Purchase Agreement]

 

 

 

 

EXHIBIT A

 

LIST OF ASSETS TO BE ACQUIRED BY BUYER

 

The Acquired Assets to be transferred by Seller to Buyer at the Closing are to include the following assets used in the operation of the Business:

 

All trade names, trademarks and logos used in or associated with the Business, including the names “BizSecure” and all intellectual property rights with respect thereto.

 

The Self Sovereign Identity Wallet including all aspects of the BizSecure digital wallet. This SSI platform was built on open standards with some components being open source to ensure adoption and compliance with local and federal government authorities.

 

The front end, backend, and all digital files to include Figma and White Papers.

 

All technology, specification sheets, product design information, code, algorithms, website design and other intellectual property and intangibles relating to the Business.

 

All books and records relating to the Business, except for Seller’s organizational documents.

 

All customer and client lists, records and databases relating to the Business, and all vendor and supplier lists, records and databases, including the terms on which business has been conducted with such customers, vendors and suppliers.

 

All goodwill associated with the Business.

 

All rights to any websites relating to the Business.

 

All Contracts between Seller and any of its customers or clients necessary or related to the operation of the Business. Seller will make reasonable commercial efforts to cause the Dexter Air Force contract to be novated to Buyer promptly after Closing. As a prerequisite to novation, Buyer shall be required to register in the federal government System for Award Management and receive a CAGE Code authorization from the Defense Logistics Agency. Final novation approval is subject to the United States Air Force at its sole discretion. Closing shall not be contingent on Air Force approval.

 

 

 

 

EXHIBIT B

 

LIST OF EXCLUDED ASSETS

 

The Acquired Assets will not include the following items, which will be retained by Seller:

 

1. All cash of Seller.

 

2. Accounts Receivable.

 

3. BLOCKS Tokens.

 

4. Seller’s business licenses and permits that are non-transferable.

 

5. Seller’s charters, minute books, stock books, stock ledgers, and tax records.

 

6. Seller’s checking accounts and bank accounts, including without limitation all accounts of Seller on deposit or held for investment with any financial institution.

 

7. Tax refunds or credits to the extent attributable to the ownership or operation of the Business or the Acquired Assets prior to Closing.

 

8. Rights, claims or causes of action against third persons to the extent arising in connection with the discharge by Seller of the Excluded Liabilities.

 

9. All records and documents to the extent relating to the Excluded Assets or Excluded Liabilities (provided that Buyer shall have access to those records and documents as provided elsewhere in this Agreement).

 

10. Seller’s rights under this Agreement and the other agreements and instruments executed and delivered by Seller in connection with this Agreement and the transactions contemplated therein.

 

11. Seller shall retain all right, title, and interest in and to any and all electronic mail (including attachments) stored on the Seller’s servers included as Acquired Assets prior to the Closing (“the Retained Email”). Buyer acknowledges and agrees that Seller will remove and delete the Retained Email from Seller’s servers included as Acquired Assets prior to the Closing, and will store and archive the Retained Email on a separate server or servers owned and maintained by Seller. Buyer agrees to make no attempt to restore or recover the Retained Email from any servers included as Acquired Assets under this Agreement. As soon as reasonably possible after request by Buyer, Seller shall make available to Buyer any Retained Email that is reasonably related to the operation of Buyer’s business; provided, however, that Buyer shall not be entitled to any email that is protected by the attorney-client privilege, discusses the negotiation or drafting of this Agreement, or contains personal or private information of Seller or Seller’s shareholders, officers, or employees.

 

 

 

 

EXHIBIT C

 

FORM OF

 

BILL OF SALE

 

[attached]

 

 

 

 

BILL OF SALE

 

Pursuant to the terms of that certain Asset Purchase Agreement entered into by and among BizSecure Inc., a Delaware corporation (“Seller”), Alfonso Arana, an individual (“Arana Sr.”) Alfonso Rodriguez-Arana, an individual (“Arana Jr.”), Clement Danish, an individual (“Danish,” and together with Arana Sr. and Arana Jr., the “Stockholders”), and HUMBL, Inc., a Delaware corporation (“Buyer”), dated as of February __, 2022 (the “Purchase Agreement”), and for the consideration specified therein, Seller does hereby grant, bargain, transfer, sell, assign, convey and deliver to Buyer), all of the Acquired Assets as defined in the Purchase Agreement, and all of Seller’s rights, title and interests with respect thereto, including, without limitation, those items referenced in Exhibit A attached to the Purchase Agreement.

 

Seller and Stockholders hereby warrant that Seller is the sole legal owner of the Acquired Assets and that the Acquired Assets are free from all liens, claims and encumbrances. Seller and Stockholders warrant and agree to defend Buyer’s title to the Acquired Assets against the claims and demands of all persons. Seller and Stockholders make the additional representations and warranties with respect to the Acquired Assets as set forth in the Purchase Agreement. Seller and Stockholders, for themselves and their successors and assigns, hereby covenant and agree that, at any time and from time to time forthwith upon the written request of Buyer, Seller and Stockholders will do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered, each and all of such further acts, deeds, assignments, transfers, conveyances, powers of attorney and assurances as may reasonably be required by Buyer in order to assign, transfer, set over, convey, assure and confirm unto and vest in Buyer, its successors and assigns, title to the Acquired Assets sold, conveyed, transferred and delivered by this Bill of Sale.

 

This Bill of Sale may be executed in one or more counterparts (and by different parties or separate counterparts), each of which shall be deemed an original and all of which, when taken together, shall constitute one instrument. Digital copies of counterpart signature pages will be conclusive evidence of execution.

 

[Remainder of page intentionally left blank]

 

 

 

 

Effective as of the date first set forth above.

 

  SELLER:
   
  BIZSECURE INC.
     
  By:  
    Alfonso Rodriguez-Arana, CEO
     
  STOCKHOLDERS:
     
   
  Alfonso Arana
   
   
  Alfonso Rodriguez-Arana
   
   
  Clement Danish
     
  Accepted:
   
  BUYER:
   
  HUMBL, INC.
     
  By:
    Brian Foote, President and CEO

 

 

 

 

EXHIBIT D

 

EMPLOYMENT AGREEMENTS

 

 

 

Exhibit 10.60

 

PROMISSORY NOTE

 

Effective Date: February 22, 2022 U.S. $3,000,000.00

 

FOR VALUE RECEIVED, HUMBL, Inc., a Delaware corporation (“Borrower”), promises to pay to Sartorii, LLC, a Delaware limited liability company, or its successors or assigns (“Lender”), $3,000,000.00 and any interest, fees, charges, and late fees accrued hereunder on the date that is thirty-six (36) months after the Purchase Price Date (the “Maturity Date”) in accordance with the terms set forth herein and to pay interest on the Outstanding Balance at the rate of four percent (4%) per annum simple interest from the Purchase Price Date until the same is paid in full. This Promissory Note (this “Note”) is issued and made effective as of February 22, 2022 (the “Effective Date”). This Note is issued pursuant to that certain Note Purchase Agreement dated February 22, 2022, as the same may be amended from time to time, by and between Borrower and Lender (the “Purchase Agreement”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.

 

Payment; Prepayment.

 

Payment. All payments owing hereunder shall be in lawful money of the United States of America, as provided for herein, and delivered to Lender at the address or bank account furnished to Borrower for that purpose. All payments shall be applied first to (a) costs of collection, if any, then to (b) fees and charges, if any, then to (c) accrued and unpaid interest, and thereafter, to (d) principal.

 

Prepayment. Notwithstanding the foregoing, Borrower shall have the right to prepay all or any portion of the Outstanding Balance before it is due without penalty.

 

Security. This Note is unsecured.

 

Defaults and Remedies.

 

Defaults. The following are events of default under this Note (each, an “Event of Default”): 3. Borrower fails to pay any principal, interest, fees, charges, or any other amount when due and payable hereunder; 4. a receiver, trustee or other similar official shall be appointed over Borrower or a material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed or discharged within sixty (60) days; 5. Borrower becomes insolvent or generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any; 6. Borrower makes a general assignment for the benefit of creditors; 7. Borrower files a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); 8. an involuntary bankruptcy proceeding is commenced or filed against Borrower; 9. any representation, warranty or other statement made or furnished by Borrower to Lender herein, in any Transaction Document, is false, incorrect, incomplete or misleading in any material respect when made or furnished; 10. the occurrence of a Fundamental Transaction without Lender’s prior written consent; 11. any money judgment, writ or similar process is entered or filed against Borrower or any subsidiary of Borrower or any of its property or other assets for more than $1,000,000.00, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) calendar days unless otherwise consented to by Lender; or 12. Borrower fails to observe or perform any covenant set forth in any Transaction Document.

 

 

 

 

Remedies. At any time and from time to time after Lender becomes aware of the occurrence of any Event of Default (so long as such Event of Default has not been cured by Borrower), Lender may accelerate this Note by written notice to Borrower, with the Outstanding Balance becoming immediately due and payable. Notwithstanding the foregoing, upon the occurrence of any Event of Default described in clauses (b), (c), (d), (e) or (f) of Section 3.1, the Outstanding Balance as of the date of acceleration shall become immediately and automatically due and payable, without any written notice required by Lender. At any time following the occurrence of any Event of Default, upon written notice given by Lender to Borrower, interest shall accrue on the Outstanding Balance beginning on the date the applicable Event of Default occurred at an interest rate equal to the lesser of eight (8%) per annum or the maximum rate permitted under applicable law (“Default Interest”). In connection with acceleration described herein, Lender need not provide, and Borrower hereby waives, any presentment, demand, protest or other notice of any kind, and Lender may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Lender at any time prior to payment hereunder and Lender shall have all rights as a holder of the Note until such time, if any, as Lender receives full payment pursuant to this Section 3.2. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

 

Unconditional Obligation; No Offset. Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset, deduction or counterclaim of any kind. Borrower hereby waives any rights of offset it now has or may have hereafter against Lender, its successors and assigns, and agrees to make the payments called for herein in accordance with the terms of this Note.

 

Waiver. No waiver of any provision of this Note shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.

 

Governing Law; Venue. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware. The provisions set forth in the Purchase Agreement to determine the proper venue for any disputes are incorporated herein by this reference.

 

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

 

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

 

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

 

Notices. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with the subsection of the Purchase Agreement titled “Notices.”

 

Liquidated Damages. Lender and Borrower agree that in the event Borrower fails to comply with any of the terms or provisions of this Note, Lender’s damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties’ inability to predict future interest rates, future share prices, future trading volumes and other relevant factors. Accordingly, Lender and Borrower agree that any fees, balance adjustments, Default Interest or other charges assessed under this Note are not penalties but instead are intended by the parties to be, and shall be deemed, liquidated damages.

 

Severability. If any part of this Note is construed to be in violation of any law, such part shall be modified to achieve the objective of Borrower and Lender to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect.

 

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

 

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

 

      BORROWER:
       
      HUMBL, Inc.
         
      By:
        Jeffrey Hinshaw, CFO
         
ACKNOWLEDGED, ACCEPTED AND AGREED:
 
LENDER:      
       
Sartorii, LLC      
       
By:        
  Stephen Foote, Manager      

 

[Signature Page to Promissory Note]

 

 

 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

Fundamental Transaction” means that (a) (i) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, consolidate or merge with or into (whether or not Borrower or any of its subsidiaries is the surviving corporation) any other person or entity, or (ii) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its respective properties or assets to any other person or entity, or (iii) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, allow any other person or entity to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of voting stock of Borrower (not including any shares of voting stock of Borrower held by the person or persons making or party to, or associated or affiliated with the persons or entities making or party to, such purchase, tender or exchange offer), or (iv) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other person or entity whereby such other person or entity acquires more than 50% of the outstanding shares of voting stock of Borrower (not including any shares of voting stock of Borrower held by the other persons or entities making or party to, or associated or affiliated with the other persons or entities making or party to, such stock or share purchase agreement or other business combination), or (v) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, reorganize, recapitalize or reclassify the Common Stock, other than an increase in the number of authorized shares of Borrower’s Common Stock, or (b) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding voting stock of Borrower.

 

Outstanding Balance” means as of any date of determination, the Purchase Price, as reduced or increased, as the case may be, pursuant to the terms hereof for payment, offset, or otherwise, accrued but unpaid interest, collection and enforcements costs (including attorneys’ fees) incurred by Lender, and any other fees or charges incurred under this Note.

 

Purchase Price” means $3,000,000.00.

 

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

 

[Remainder of page intentionally left blank]

 

 

 

Exhibit 10.61

 

STOCK PURCHASE AGREEMENT

 

THIS STOCK PURCHASE AGREEMENT (this “Agreement”) is entered into effective as of March 3, 2022, by and between HUMBL, Inc., a Delaware corporation (the “Buyer”), on one hand, and Gustavo Moya Ortiz, an individual (the “Seller”) on the other hand. Each of the Buyer and the Seller are referred to herein individually as a “Party” and collectively as the “Parties.”

 

A. The Seller owns forty-eight (48) shares Series A stock (the “48 Shares”) and will obtain the remaining two (2) shares of Series A stock (the “2 Shares”, and together with the 48 Shares, the “Shares”) of Ixaya Business SA de CV, a Mexican corporation (the “Company”).

 

B. Upon the terms and subject to the conditions set forth herein, the Buyer desires to purchase from the Seller and the Seller desires to sell to the Buyer, the Shares (the “Purchase”).

 

NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the Parties agree as follows:

 

ARTICLE I
PURCHASE AND SALE OF SHARES

 

1.1. Purchase of Shares; Purchase Price. On the terms and subject to the conditions of this Agreement, the Buyer agrees to purchase from the Seller, and the Seller agrees to sell to the Buyer, the Shares, free and clear of all claims, liens, pledges, hypothecations, charges, mortgages, security interests, assessments, preemptive rights, rights of first refusal, or other encumbrances or restrictions of any nature, whether arising by agreement, operation of law or otherwise (each, an “Encumbrance”), in exchange for the amount of $1,650,000.00 (the “Purchase Price”), payable in the manner set forth in Section 1.2 below.

 

1.2. Payment of the Purchase Price. The Purchase Price shall be paid as follows: (i) USD $150,000.00 payable via wire transfer of immediately available funds; and (ii) the issuance by Buyer to Seller of 8,962,036 shares of Common Stock of the Buyer (the “HUMBL Shares”).

 

1.3. Closing. The closing of the sale and purchase of the Shares (the “Closing”) shall take place at the Buyer’s office concurrently with the execution of this Agreement, or at such other time as the Buyer and the Seller may agree upon in writing. The date on which the Closing occurs shall be referred to herein as the “Closing Date.”

 

1.4. Deliveries. At the time of the Closing, (a) the sale and transfer of the Shares to Buyer will be effected by delivery by the Seller to the Buyer of an Assignment of Stock in the form attached hereto as Exhibit A and all certificates in the Seller’s possession representing the Seller’s ownership of the Shares; and 2.2. the issuance of the HUMBL Shares by Buyer to Seller will be effected by an electronic deposit of the HUMBL Shares into Seller’s account with Buyer’s transfer agent.

 

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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER

 

As a material inducement to the Buyer to enter into this Agreement, the Seller represents and warrants to the Buyer individually as the Seller as follows:

 

2.1. Organization. The Seller is an individual and has full power, authority and legal right and capacity to enter into and perform the Seller’s obligations under this Agreement and each other document contemplated hereby to which he is or will be a party and to consummate the transactions contemplated hereby and thereby.

 

2.2 Binding Obligation. This Agreement and the other documents contemplated hereby to which the Seller is a party have been duly executed and delivered by the Seller and are legal, valid and binding obligations of the Seller, enforceable against the Seller in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights in general.

 

2.3. No Violation to Result. The execution, delivery and performance by the Seller of this Agreement and the other documents contemplated hereby and the consummation by the Seller of the transactions contemplated hereby and thereby, do not and will not, directly or indirectly (with or without notice or lapse of time): (i) violate, breach, conflict with, constitute a default under, accelerate or permit the acceleration of the performance required by (x) any note, debt instrument, security agreement, mortgage or any other Contract (defined below) to which the Seller is a party or by which he is bound or (y) any law, judgment, decree, order, rule, regulation, permit, license or other legal requirement of any nation, state or other instrumentality or political subdivision thereof (including any county or city), or any entity exercising executive, legislative, judicial, military, regulatory or administrative functions pertaining to any government (each, a “Government Authority”) which is applicable to the Seller; (ii) give any person, limited liability company, partnership, trust, unincorporated organization, corporation, association, joint stock company, business group, Government Authority or other entity (each, a “Person”) the right to challenge any of the transactions contemplated by this Agreement; or (iii) result in the creation or imposition of any Encumbrance, possibility of Encumbrance, or restriction in favor of any Person upon any of the Shares or any of the properties or assets of the Company. No notice to, filing with, or consent of, any Person is necessary in connection with, nor is any “change of control” provision triggered by, the execution, delivery or performance by the Seller of this Agreement and the other documents contemplated hereby nor the consummation by the Seller of the transactions contemplated hereby or thereby.

 

2.4. Ownership of Shares. The Seller is the sole owner of the 48 Shares and has good and marketable title thereto, and the Shares are free and clear of all Encumbrances except for those imposed by applicable federal and state securities laws. Upon consummation of the transfer of the 2 Shares, the Seller will be the sole owner of the 2 shares and will have good and marketable tile thereto, and 2 Shares will be free and clear of all Encumbrances except for those imposed by applicable federal and state securities laws. There are no voting trusts or proxies with respect to the voting of the Shares.

 

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2.5. Restricted Securities. The Seller understands that the HUMBL Shares are characterized as “restricted securities” under the Securities Act of 1933, as amended (the “Securities Act”), and inasmuch as they are being acquired from the Buyer in a transaction not involving a public offering and that under the Securities Act and applicable regulations thereunder such securities may be resold without registration under the Securities Act only in certain limited circumstances. Further, the Seller represents that he is familiar with Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act. The Seller understands that the Buyer is under no obligation to register the HUMBL Shares.

 

2.6. Stockholders. The Shares represent all of the outstanding equity interests of the Company. Seller is the 100% owner of the 48 Shares.

 

2.7. Entire Interest. The Shares constitute the Seller’s entire interest in the equity of the Company and, upon the Closing, the Seller will have no claim, right or interest in or to any shares of stock or other equity of the Company whatsoever.

 

2.8. Brokers. No Person has or will have, as a result of the transactions contemplated by this Agreement, any right, interest or claim against or upon any of the Parties for any commission, fee or other compensation payable as a finder or broker because of any act or omission by the Seller.

 

2.9. Disclosure. To the actual knowledge of the Seller (or the knowledge that the Seller would obtain upon reasonable inquiry and investigation), no representation or warranty by the Seller contained in this Agreement contains any untrue statement of a material fact or omits to state any material fact necessary to make any statement herein or therein not misleading.

 

2.10. Litigation and Known Claims. No litigation, including any arbitration, investigation or other proceeding of or before any court, arbitrator or governmental or regulatory official, body or authority, is pending or, to the best of the Seller’s knowledge, threatened against the Seller or which relates to the Shares or the transactions contemplated by this Agreement, nor does the Seller know of any reasonably likely basis for any such litigation, arbitration, investigation or proceeding, the result of which could adversely affect the Seller, the Shares, or the transactions contemplated hereby. As of the Closing Date, the Seller is not a party to or subject to the provisions of any judgment, order, writ, injunction, settlement, decree or award of any court, arbitrator or governmental or regulatory official, body or authority which affects the Seller, the Shares, or the transactions contemplated hereby.

 

2.11. Bankruptcy. The Seller has not made any assignment for the benefit of creditors, filed any petition in bankruptcy, been adjudicated insolvent or bankrupt, or petitioned or applied to any tribunal for any receiver, conservator or trustee of the Seller or any of the Seller’s property or assets.

 

2.12. Information. The Seller believes he has received all the information he considers necessary or appropriate for deciding whether to enter into this Agreement and perform the obligations set forth herein. The Seller hereby acknowledges that any future sale of shares of the Company’s capital stock could be at a premium or a discount to the Purchase Price, and such sale could occur at any time or not at all. The Seller acknowledges that the price of the HUMBL Shares may decrease before the Seller is able to resell them. The Seller hereby acknowledges that he has not relied on any representation or statement of the Buyer or the Company, other than those set forth in this Agreement, in making his investment decision to sell the Shares and receive the HUMBL Shares as part of the Purchase Price.

 

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2.13. Valuation of Shares. The Seller acknowledges that (i) the per share Purchase Price is not based on an independent valuation of the Shares or on any other commonly used valuation method and may not reflect the fair market value of the Shares and (ii) he has had the opportunity to make inquiries of the Buyer and the Company and its officers regarding the Company’s and Buyer’s business affairs and financial condition and already has or has acquired sufficient information about the Company and Buyer to reach an informed and knowledgeable decision prior to entering into this Agreement. The Seller acknowledges that at any time the Company may sell equity, be acquired or elect to liquidate its assets and pay available proceeds to the holders of its capital stock, and/or one or more of the Company’s shareholders may transfer shares of capital stock in each case in a transaction that values the Company’s capital stock at a higher valuation per share than the Purchase Price. In entering into this Agreement and consummating the sale of the Shares contemplated hereby, the Seller assumes the risk that the Purchase Price may not reflect the fair market value of the Shares or the value of the Shares pursuant to any other valuation basis. The Seller acknowledges that the Purchase Price was determined through an arm’s length negotiation between the Seller and the Buyer, and that the Seller did not rely on the Buyer or any other Person to determine the value of the Shares.

 

2.14. Taxes. The Seller has reviewed with his own tax and legal advisors the federal, state, local and foreign tax consequences, including, but not limited to, capital gains treatment and other related tax provisions that may be applicable to the transaction contemplated by this Agreement. The Seller relies solely on such advisors and not on any statements or representations of the Buyer or any of its agents, officers, directors, shareholders or employees for the federal, state, local and foreign tax consequences to the Seller that may result from the transaction contemplated by this Agreement. The Seller understands that he (and not the Buyer) shall be responsible for any tax liability that may arise as a result of the transaction contemplated by this Agreement. The Company has duly filed all federal, state, county, local and other excise, franchise, property, payroll, income, capital stock, sales and use, and other tax returns which are required to be filed by it, and such returns are true and correct in all respects. The Company is not currently the beneficiary of any extension of time within which to file a tax return. The Company has paid all taxes which have become due or have been assessed against it and all taxes, penalties and interest. There are no tax deficiencies or claims presently being asserted against the Company and Seller knows of no basis for such claims or deficiencies. Neither the Company nor Seller has granted any waiver currently in effect of the statute of limitations with respect to any such taxes or assessments. The Company has complied in all respects with all applicable laws, rules, and regulations relating to the payment and withholding of taxes and have, within the time and in the manner prescribed by law, withheld from employee wages and paid over to the proper governmental authorities all amounts required to be so withheld and paid over under all applicable laws.

 

2.15. Indebtedness and Guaranties. Except as otherwise disclosed by the Seller, the Company is not a guarantor or otherwise liable for any liability (including indebtedness) of any other Person.

 

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2.16. Real Property. The Company does not own, nor has ever owned, any real property. The Seller has provided to the Buyer a list of all of the real property and interests therein leased, subleased or otherwise occupied or used by the Company (with all easements and other rights appurtenant to such property, the “Real Property”). The Real Property constitutes all interests in real property currently used in connection with the business necessary to conduct the business in the ordinary course of business.

 

2.17. Transactions with Related Persons. For the past three (3) years, neither any shareholder, officer, director or employee of the Company nor any Related Person of any of the foregoing has (a) owned any interest in any asset used in the business, (b) been involved in any business or transaction with the Company or (c) engaged in competition with the Company. Neither any shareholder, officer, director or employee of the Company nor any Related Person of any of the foregoing (i) is a party to any Contract with, or has any claim or right against, the Company or (ii) has any indebtedness owing to the Company. The Company does not have (A) any claim or right against any shareholder, officer, director or employee of the Company or any Related Person of any of the foregoing or (B) any indebtedness owing to any shareholder, officer, director or employee of the Company or any Related Person of any of the foregoing. For purposes of this Section, “Related Person” means (a) with respect to a specified individual, any member of such individual’s Family and any affiliate of any member of such individual’s Family, and (b) with respect to a specified person other than an individual, any affiliate of such person and any member of the Family of any such affiliates that are individuals. The “Family” of a specified individual means the individual, such individual’s spouse and former spouses, any other individual who is related to the specified individual or such individual’s spouse or former spouse within the third degree, and any other individual who resides with the specified individual.

 

2.18. Environmental and Safety. The Company has complied and is in compliance with all Environmental Laws (as defined below). No Permits are required pursuant to any Environmental Law for the occupation of the facilities or operation of the business. The Company has not received any written or oral notice, report or other information regarding any actual or alleged violation of any Environmental Law, or any liabilities or potential liabilities, including any investigatory, remedial or corrective obligations, relating to it or its facilities arising under any Environmental Law. None of the following now exists or at any time in the past existed at any property or facility currently leased or operated by the Company, and none of the following existed at any property or facility previously owned, leased or operated by the Company at or before the time the Company ceased to own or operate such property or facility: (a) underground storage tanks, (b) asbestos-containing material in any form or condition, (c) materials or equipment containing polychlorinated biphenyls, or (d) landfills, surface impoundments or disposal areas. The Company has not treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled or released any substance, or owned or operated any property or facility (and no such property or facility is contaminated by any such substance) in a manner that has given or would give rise to any liability, including any liability for response costs, corrective action costs, personal injury, property damage, natural resources damages or attorney fees, pursuant to any Environmental Law. Further, the Company expressly represents that it has not at any time done anything at any location at which it has performed cleaning or restoration services that has given or would give rise to any liability, including any liability for response costs, corrective action costs, personal injury, property damage, natural resources damages or attorney fees, pursuant to any Environmental Law. Neither this Agreement nor the transactions contemplated hereby will result in any liability for site investigation or cleanup, or notification to or consent of any person, pursuant to any “transaction-triggered” or “responsible property transfer” Environmental Laws. The Company has not, either expressly or by operation of law, assumed or undertaken any liability, including any obligation for corrective or remedial action, of any other person relating to any Environmental Law. For purposes of this Agreement, “Environmental Law” means any law relating to the environment, health or safety, including any law relating to the presence, use, production, generation, handling, management, transportation, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control or cleanup of any material, substance or waste limited or regulated by any governmental body.

 

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2.19. Employees. Seller has provided to Buyer a complete list (the “Employee List”) of all of the Company’s employees and independent contractors, if any. All former employees and independent contractors have been paid in full any and all compensation due and owing to such persons. The Company has complied with all applicable federal, state and local laws related to employment, including those related to wage, hours, worker classification and the payment and withholding of taxes and other sums as required by law. The Company has withheld and paid to the appropriate governmental entity all amounts required to be withheld from employees of the Company and is not liable for any arrears of wages, taxes, penalties, or other sums for failure to comply with any of the foregoing. Seller has no knowledge of any employee indicating they will not remain employed by the Company after Closing. To the best of Seller’s knowledge, neither the Company nor Seller has committed any act which would be considered discriminatory or would constitute sexual harassment towards any employees of the Company.

 

2.20. Contracts. Seller has provided to Buyer a copy of all material contracts or agreements to which the Company is a party or by which the Company or any of its assets, businesses or operations are bound or affected (the “Contracts”). Seller has also provided to Buyer a brief description of all unwritten or verbal contracts, agreements, arrangements and commitments to which the Company is a party or by which the Company or any of its assets, businesses or operations are bound or affected. Except as otherwise disclosed to Buyer, the Company is not a party to or bound by any contract or agreement, including, without limitation, any contract, agreement, arrangement or commitment which would require the consent of the other party for the Company to enter into this Agreement. Except as otherwise disclosed to Buyer, the Company is not a party to or bound by any contract or agreement, including, without limitation, any contract, agreement, arrangement or commitment relating to:

 

(a) the employment of any person other than personnel employed at the pleasure of the Company in the ordinary course of business at rates of compensation and on terms consistent with past business practice;

 

(b) collective bargaining with, or any representation of any employees by, any labor union or association;

 

(c) the acquisition of services, supplies, equipment or other personal property or the sale of personal property (including, without limitation, sales of inventory in the ordinary course of business), which is not terminable by the Company upon 30 days’ notice or less without obligation on the part of the Company;

 

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(d) the purchase or sale of real property;

 

(e) lease of real or personal property as lessor or lessee or sublessor or sublessee;

 

(f) distribution, agency, public relations, advertising, printing, construction, accounting or legal services;

 

(g) bonuses, vacations, vacation pay, pensions, profit sharing, retirement, stock options, stock purchase, employee discounts or other employee benefits;

 

(h) lending or advancing of funds other than the extension of credit to trade purchasers in the ordinary course of business consistent with past business practice;

 

(i) borrowing of funds or receipt of credit other than in the ordinary course of business consistent with past practice and except for trade accounts payable in amounts and on terms consistent with past practice;

 

(j) incurring of any obligation or liability except for transactions in the ordinary course of business consistent with past practice;

 

(k) the sale of personal property (other than sales of inventory in the ordinary course of business consistent with past practice) or services under which payments due after the date hereof will exceed $1,000; or

 

(l) any matter or transaction not in the ordinary course of the business of the Company consistent with past practice.

 

2.21. Legal Compliance; Permits.

 

(a) The Company is, and since January 1, 2020, has been, in compliance in all material respects with all applicable laws and Permits. No proceeding is pending, nor since January 1, 2020, has been filed or commenced, against the Company alleging any failure to comply with any applicable law or Permit. No event has occurred or circumstance exists that (with or without notice or lapse of time) may constitute or result in a violation by the Company of any law or Permit. The Company has not received any notice or other communication from any person regarding any actual, alleged or potential violation by the Company of any law or Permit or any cancellation, termination or failure to renew any Permit held by the Company.

 

(b) Seller has provided to Buyer a complete and accurate list of each Permit (the “Permit List”) held by the Company or that otherwise relates to the business or any asset owned or leased by the Company and states whether each such Permit is transferable. Each Permit listed or required to be listed on the Permit List is valid and in full force and effect. Each Permit listed or required to be listed on the Permit List is renewable for no more than a nominal fee and, to the Seller’s knowledge, there is no reason why such Permit will not be renewed. The Permits listed on the Permit List constitute all of the Permits necessary to allow the Company to lawfully conduct and operate its business as currently conducted and operated and to own and use its assets as currently owned and used. For purposes of this Agreement, “Permit” means any permit, license or Consent issued by any governmental body or pursuant to any law.

 

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2.22. Financial Statements.

 

(a) Seller has provided to Buyer the following financial statements (collectively, the “Financial Statements”): unaudited balance sheet of the Company as of December 31, 2021, and statements of income, changes in stockholders’ equity, and cash flow for each of the fiscal years then ended. The Financial Statements have been prepared on a consistent basis throughout the periods covered thereby, and present fairly the financial condition of the Company as of and for their respective dates and periods covered thereby.

 

(b) The Company’s books and records (including all financial records, business records, customer lists, and records pertaining to products or services delivered to customers) (i) are complete and correct in all material respects and all transactions to which it is or has been a party are accurately reflected therein in all material respects on an accrual basis, (ii) reflect all discounts, returns and allowances granted by it with respect to the periods covered thereby, (iii) have been maintained in accordance with customary and sound business practices in its industry, (iv) form the basis for the Financial Statements with respect to the Company and (v) reflect in all material respects the assets, liabilities, financial position, results of operations and cash flows of it on an accrual basis. All computer-generated reports and other computer output included in its books and records are complete and correct in all material respects and were prepared in accordance with sound business practices based upon authentic data. The Company’s management information systems are adequate for the preservation of relevant information and the preparation of accurate reports.

 

2.23. Title to and Sufficiency of Assets. The Company has good and marketable title to, or a valid leasehold interest in, every property or asset used by it, located on its premises, purported to be owned by it, or shown on the Financial Statements or acquired by the Company (the “Assets”), free and clear of any Encumbrances except for properties and assets disposed of in the ordinary course of business and for valuable consideration. The Assets include (a) all tangible and intangible property and assets necessary for the continued conduct of the business and the provision of services therewith as of the Closing in the same manner as conducted prior to the Closing and in compliance in all material respects with all applicable laws, Contracts and Permits as of the Closing; (b) all property and assets necessary to generate the results of operations for the business reflected in the Financial Statements and to perform under the Contracts; and (c) all software, applications and other technology developed or created by the Company, including, but not limited to, the following products and technologies: (i) yoPago, (ii) Atenda, (iii) La Cocina, (iv) Cook & Serve; (v) La Caja; and (vi) La Carta.

 

2.24. Intellectual Property.

 

(a) The Company has sole title to and ownership of, or possesses legally enforceable rights to use under valid and subsisting written license agreements, all applicable material Company Intellectual Property Rights (as defined below), and to the knowledge of the Seller, the Company has not misappropriated, is not in conflict with and is not infringing upon the Intellectual Property Rights of others. The Company is the sole and exclusive owner of all Company Intellectual Property Rights free and clear of any Encumbrances or other rights or claims of others. To the knowledge of the Seller, none of the Company Intellectual Property Rights is being infringed by activities, products or services of, or is being misappropriated by, any third party.

 

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(b) The Company has made available to Buyer correct and complete copies of all registrations and applications and all licenses, sublicenses and agreements relating to the Company’s applicable material Company Intellectual Property Rights, each as amended to date. The Company is not a party to any oral license, sublicense or other agreement.

 

(c) With respect to each item of material Third Party Intellectual Property Rights (as defined below), there are no royalty, commission or other executory payment agreements, arrangements or understandings relating to such item.

 

(d) The Company has used reasonable efforts to protect and enforce its trade secrets and otherwise to safeguard and maintain the secrecy and confidentiality of all applicable material Company Intellectual Property Rights. To the knowledge of the Seller, no current or prior officers, employees or consultants of the Company have claimed any ownership interest in any material Company Intellectual Property Rights as a result of having been involved in the development of such property while employed by or consulting to the Company, or otherwise. To the knowledge of the Seller, there has been no violation of any trade secrets program or any confidentiality or nondisclosure agreement relating to the Company’s Intellectual Property Rights. Except for the Third Party Intellectual Property Rights, all Company Intellectual Property Rights have been developed by employees of the Company, within the course and scope of their employment.

 

(e) The term “Company Intellectual Property Rights” means the Intellectual Property Rights used in the conduct of the Business of the Company as currently conducted.

 

(f) The term “Intellectual Property Rights” means all (i) patents, patent applications, patent disclosures (ii) trademarks, service marks, trade dress, trade names, logos and corporate names and registrations and applications for registration thereof together with all of the goodwill associated therewith, (iii) copyrights (registered or unregistered) and copyrightable works and registrations and applications for registration thereof, together with all authors’ and moral rights, (iv) mask works and registrations and applications for registration thereof, (v) computer software (including source code, object code, macros, scripts, objects, routines, modules and other components), data, data bases and documentation thereof, (vi) trade secrets and other confidential information (including ideas, formulas, compositions, inventions (whether patentable or unpatentable and whether or not reduced to practice), know-how, products, processes, techniques, methods, research and development information and results, drawings, specifications, designs, plans, proposals, technical data, marketing plans and customer, prospect and supplier lists and information), (vii) other intellectual property rights, (viii) “technical data” as defined in 48 Code of Federal Regulations, Chapter 1, (ix) copies and tangible embodiments thereof (in whatever form or medium means the Intellectual Property Rights used in the conduct of the Business of the Company as currently conducted, and (x) the following products and technologies: (1) yoPago, (2) Atenda, (3) La Cocina, (4) Cook & Serve; (5) La Caja; and (6) La Carta.

 

(g) The term “Third Party Intellectual Property Rights” means any Company Intellectual Property Rights specifically not owned by the Company.

 

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2.25. Employee Benefit Plans. The Company has made no promises (whether through an employee benefit plan or otherwise) to provide medical, life or disability benefits for periods after an employee’s termination of employment or a director’s, independent contractor’s or consultant’s end of service to the Company, except as required by the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”). All employee benefit plans are and have always been maintained, funded and administered in material compliance with all applicable laws, and there are no audits, inquiries or proceedings pending or, to the knowledge of the Seller, threatened by any governmental agency or authority. The Company has complied with the notice and benefit obligations regarding any employee benefit plan mandated by COBRA. All contributions, premiums or payments required to be made with respect to any employee benefit plan have been made on or before their due dates. No action, claim or lawsuit is pending or threatened with respect to any employee benefit plan (other than claims for benefits in the ordinary course). The Company has no commitment (a) to create, incur liability with respect to or cause to exist, any other employee benefit plan, program or arrangement, (b) to enter into any contract or agreement to provide compensation or benefits to any individual, or (c) to modify, change or terminate any employee benefit plan, other than with respect to a modification, change or termination required by applicable Law.

 

2.26. Undisclosed Liabilities and Obligations. Except for those items set forth on the Financial Statements or otherwise disclosed to Buyer, the Company has no unpaid debt, obligations or liability, accrued, contingent or otherwise (asserted or unasserted), as of the date hereof.

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER

 

The Buyer represents and warrants to the Seller, as of the Closing Date, as follows:

 

3.1. Organization. The Buyer is a corporation, duly organized, validly existing and in good standing under the laws of the State of Delaware, and is qualified to do business and in good standing in each jurisdiction where the character or location of its assets or properties owned, leased or operated by it or the nature of its activities makes such qualification necessary.

 

3.2. Authority for Agreement. The Buyer has full power, authority and legal right to enter into and perform its obligations under this Agreement and the other documents contemplated hereby to which the Buyer is or will be a party and to consummate the transactions contemplated hereby and thereby. The Buyer has duly approved this Agreement and the other documents contemplated hereby and the transactions contemplated hereby and thereby and has authorized the execution, delivery and performance of this Agreement and the other documents contemplated hereby and the consummation of the transactions contemplated hereby and thereby. No other proceedings on the part of the Buyer are necessary to approve and authorize the execution, delivery and performance of this Agreement and the other documents contemplated hereby and the consummation of the transactions contemplated hereby and thereby. This Agreement and the other documents contemplated hereby to which the Buyer is a party have been duly executed and delivered by the Buyer and are legal, valid and binding obligations of the Buyer, enforceable against the Buyer in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights in general.

 

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3.3. No Violation to Result. The execution, delivery and performance by the Buyer of this Agreement and the other documents contemplated hereby and the consummation by the Buyer of the transactions contemplated hereby and thereby, do not and will not, directly or indirectly (with or without notice or lapse of time): (i) violate, breach, conflict with, constitute a default under, accelerate or permit the acceleration of the performance required by (x) any of the terms of the bylaws, articles of incorporation or other governing documents of the Buyer or any resolution adopted by the shareholders of the Buyer, (y) any note, debt instrument, security agreement, mortgage or any other contract to which the Buyer is a party or by which it is bound or (z) any law, judgment, decree, order, rule, regulation, permit, license or other legal requirement of any Government Authority applicable to the Buyer; (ii) give any Government Authority or other Person the right to challenge any of the transactions contemplated by this Agreement; or (iii) result in the creation or imposition of any Encumbrance, possibility of Encumbrance, or restriction in favor of any Person upon any of the properties or assets of the Buyer. No notice to, filing with, or consent of, any Person is necessary in connection with the execution, delivery or performance by the Buyer of this Agreement and the other documents contemplated hereby nor the consummation by the Buyer of the transactions contemplated hereby or thereby.

 

ARTICLE IV
ADDITIONAL AGREEMENTS

 

4.1. Transfer Taxes, Etc. All transfer taxes incurred in connection with the transactions contemplated by this Agreement shall be paid by the Party incurring such taxes under applicable law when due. The responsible Party shall, at its own expense, file all necessary tax returns and other documentation with respect to all such transfer taxes.

 

4.2. Further Assurances. Each Party will, either at or after the Closing, execute such further documents, deeds, bills of sale, assignments and assurances and take such further actions as may reasonably be required by the other Party to consummate the Purchase and to effect the other purposes of this Agreement.

 

4.3. Survival of Representations, Warranties and Covenants. Each covenant and agreement contained in this Agreement or in any agreement or other document delivered pursuant hereto shall survive the Closing and be enforceable until such covenant or agreement has been fully performed, or as otherwise specified. All representations and warranties of the Parties contained in this Agreement or in any other agreement or document executed and delivered pursuant hereto shall survive the Closing for the lesser of (x) indefinitely and (y) the expiration of the applicable statute of limitations.

 

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4.4. Indemnification. Seller shall indemnify, defend, save and hold harmless the Buyer, and its affiliates, agents and representatives, from and against any and all costs, losses, liabilities, damages, lawsuits, claims and expenses (whether or not arising out of third-party claims), including without limitation court costs, reasonable attorneys’ fees and disbursements and all amounts paid in investigation, defense or settlement of any of the foregoing (“Damages”), incurred in connection with or arising out of or resulting from (a) any material breach of any covenant or warranty, or any inaccuracy in any representation made by the Seller in or pursuant to this Agreement; (b) the material failure by the Seller to perform or observe any term, provision or covenant of this Agreement; (c) any liability of the Company or Seller asserted against Buyer or affiliates, including any third-party claims arising from the act or omission of the Company or Seller, or the Company’s officers, directors, employees, agents, or affiliates relating to the Company or any liability arising out of the ownership or operation of the Company prior to the Closing; (d) the enforcement of this indemnification obligation; or (e) all taxes payable by the Company that are allocable to taxable period, or portions thereof, ending on or before the Closing Date. This indemnification obligation shall survive for three (3) years from the date hereof. Any indemnification obligation incurred by Seller hereunder may be satisfied by Seller, in Seller’s reasonable discretion, either through: (i) the transfer and conveyance by Seller to Buyer of a number of HUMBL Shares equal in value to the amount of the Damages, or (ii) the offset of the Damages against amounts owing under the Note.

 

4.5. Covenant Not to Compete. The Seller agrees that for a period of three (3) years after the Closing Date (the “Restricted Period”), with respect to any area in which the Company, during the Restricted Period, is engaged or intends to become engaged in the Company’s business, he shall not, alone, together or in association with others, as owner, shareholder, member, officer, director, manager, partner, lender, investor, consultant, principal, agent, independent consultant, co-venturer, or in any other capacity, directly or indirectly engage in, have a financial interest in, or be in any way connected or affiliated with or render advice or service to, any person, firm, business or enterprise which is in competition with the business of the Company. The Seller acknowledges and agrees that the duration and area for which the covenant not to compete set forth above is to be effective are fair and reasonable and are reasonably required for the protection of the Buyer, and the Seller hereby waives any objections to or defenses in respect thereof. In the event that any court determines that such time period or area, or both, are unreasonable, and that such covenant is to that extent unenforceable, each of the Buyer and the Seller agrees that this paragraph shall be deemed amended to delete such provisions or portions adjudicated to be unenforceable so that the covenant shall remain in full force and effect for the greatest time period and in the greatest geographic area that would not render it unenforceable.

 

4.6. Ownership of Intellectual Property. The Seller acknowledges that all discoveries, concepts, ideas, inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports, patent applications, copyrightable work and mask work (whether or not including any Buyer Confidential Information (as defined in Section 4.8 below)) and all registrations or applications related thereto, all other proprietary information and all similar or related information (whether or not patentable) which relate to the Company’s actual business, research and development, currently existing or currently anticipated future products or services and which were conceived, developed or made by the Seller (whether above or jointly with others) prior to the Closing Date, belong to the Buyer. In furtherance of the foregoing, the Seller shall perform all actions reasonably requested by the Buyer to establish and confirm such ownership (including, without limitation, assignments, consents, powers of attorney and other instruments).

 

4.7. Release of Claims. The Seller, together with the Seller’s heirs, representatives and assigns, hereby fully and completely releases and waives any and all claims, complaints, causes of action or demands of whatever kind which he has or may have against the Buyer and the Company, their respective officers, employees, members or managers, arising out of any actions, conduct, decisions, behavior or events occurring prior to the Closing Date, including without limitation claims related to the Seller’s ownership of the Shares or any other equity or claim thereto of the Company. The Seller understands and accepts that this release specifically covers but is not limited to any and all claims, complaints, causes of action or demands which the Seller has or may have against the above-referenced released parties.

 

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4.8. Confidentiality. To the extent that the Seller has obtained Buyer Confidential Information prior to the execution of this Agreement, during the Restricted Period, the Seller agrees to hold such Buyer Confidential Information in the strictest confidence, and covenants and agrees not to disclose, duplicate, lecture upon or publish any of the Buyer Confidential Information after the Closing Date. For purposes of this Agreement, “Buyer Confidential Information” shall mean any and all confidential and/or proprietary knowledge, know-how, data or information of the Buyer, including, but not limited to, ideas, concepts, processes, designs, techniques, budgets, financials, products, marketing, selling and business plans, prices, costs, supplier, vendor, customer, membership or similar lists or contact information other than those previously identified and originated by the Seller and any other agreements of the Buyer, and all other similar information pertaining to the Buyer.

 

4.9. Nondisparagement. By execution below, the Seller agrees not to disparage or defame the Buyer or their products or services. In addition, the Seller agrees not to counsel or assist any attorneys or their clients in the presentation or prosecution of any disputes, differences, grievances, claims, charges or complaints by any third party against the Buyer and/or any officer, manager, employee, agent, representative, member or attorney of the Buyer, unless under a subpoena or other court order to do so or pursuant to violations of agreements entered into between any of the Parties after the execution of this Agreement.

 

4.10. Transfer of the Shares. The Seller will take whatever steps are necessary with any local, state or federal Mexican government authorities to effectuate and finalize the transfer of the Shares to the Buyer within thirty (30) days of the Closing Date.

 

ARTICLE V

CONDITIONS TO SELLER’S OBLIGATIONS TO CLOSE

 

The Seller’s obligation to sell, transfer and convey the Shares at the Closing is subject to the fulfillment on or before the Closing of the following conditions, unless waived in writing by the Seller:

 

5.1. Representations and Warranties. The representations and warranties made by the Buyer in Article III shall be true and correct in all material respects when made and as of the date of the Closing.

 

5.2. Covenants. All covenants, agreements and conditions contained in this Agreement to be performed by the Buyer on or prior to the Closing Date shall have been performed or complied with in all material respects as of the Closing Date.

 

5.3. Closing Deliveries. At the Closing, the Buyer shall deliver those items for which Buyer is responsible set forth in Section 1.4 above.

 

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ARTICLE VI
CONDITIONS TO BUYER’S OBLIGATIONS TO CLOSE

 

The Buyer’s obligation to purchase the Shares, and issue the Note and HUMBL Shares at the Closing is subject to the fulfillment on or before the Closing of each of the following conditions (the “Buyer Closing Conditions”), unless waived by the Buyer:

 

6.2. Representations and Warranties . The representations and warranties made by the Seller in Article II shall be true and correct in all material respects when made and as of the Closing Date.

 

6.3. Covenants. All covenants, agreements and conditions contained in this Agreement to be performed by the Seller on or prior to the Closing shall have been performed or complied with in all material respects.

 

6.4. Due Diligence. The Seller shall have delivered to the Buyer or its counsel, copies of all stock certificates and other documents the Buyer shall reasonably request. The Seller shall have provided the Buyer access to such information as the Buyer shall have reasonably requested in connection with its due diligence review and the Buyer shall have concluded its due diligence review of the Shares and all financial, business, tax, accounting, technical, and legal aspects of the Company to the Buyer’s sole satisfaction.

20.

 

6.5. No Material Adverse Effect. From the date of this Agreement through the consummation of the Closing, no Material Adverse Effect (as defined below) shall have occurred. For purposes of this Agreement, “Material Adverse Effect” means any circumstance, change in or effect on the Buyer or the Company that, individually or in the aggregate with all other circumstances, changes in or effects on the Buyer or the Company, is or is reasonably likely to be materially adverse to the business, operations, assets, financial condition, prospects or liabilities of the Buyer or the Company taken as a whole.

 

6.6. Closing Deliveries. At the Closing, the Seller shall deliver those items for which Seller is responsible set forth in Section 1.4 above.

 

ARTICLE VII
MISCELLANEOUS

 

7.1. Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the Seller and his respective heirs, executors, administrators, legal representatives, successors and assigns. This Agreement or any of the severable rights and obligations inuring to the benefit of or to be performed by the Buyer hereunder may be assigned by the Buyer to a third party, including its financing sources, in whole or in part; provided, however, that any such assignment shall not relieve the Buyer of its obligations under this Agreement.

 

7.2. Governing Law; Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and wholly performed in that jurisdiction, without regard to conflict of law principles. The Seller hereby expressly consents to the personal jurisdiction of the state and federal courts located in or about San Diego County, State of California, for any action or proceeding arising from or relating to this Agreement, waives any argument that venue in any such forum is not convenient, and agrees that any such action or proceeding shall only be venued in such courts.

 

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

 

7.4. Amendment. This Agreement may be amended, supplemented or modified only by execution of an instrument in writing signed by the Buyer and the Seller.

 

7.5. Waiver. Any Party hereto may to the extent permitted by applicable law (i) extend the time for the performance of any of the obligations or other acts of the other Parties hereto, (ii) waive any inaccuracies in the representations and warranties of the other Parties hereto contained herein or in any document delivered pursuant hereto or (iii) waive compliance with any of the agreements of the other Parties hereto contained herein. No such extension or waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the Party extending the time of performance or waiving any such inaccuracy or non-compliance. No waiver by any Party of any term of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term of this Agreement on any future occasion.

 

7.6. Notices. All notices, requests, consents, waivers, and other communications required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given (a) if personally delivered, upon delivery or refusal of delivery; (b) if mailed by registered or certified United States mail, return receipt requested, postage prepaid, upon delivery or refusal of delivery; or (c) if sent by a nationally recognized overnight delivery service, upon delivery or refusal of delivery. All notices, consents, waivers, or other communications required or permitted to be given hereunder shall be addressed as follows:

 

(a) If to the Buyer:

 

HUMBL, Inc.

Attn: Brian Foote

600 B Street, Suite 300

San Diego, California 92101

 

(b) If to the Seller:

 

Gustavo Moya Ortiz

__________________

__________________

 

or at such other address or addresses as the Party addressed may from time to time designate in writing pursuant to notice given in accordance with this section.

 

7.7. Expenses. Each party shall pay its own legal and other fees incident to the negotiations and preparations of this Agreement and the transactions contemplated hereby.

 

7.8. Complete Agreement. This Agreement, including those documents expressly referred to herein and all Exhibits hereto, embody the complete agreement and understanding between the Parties and supersede and preempt any prior understandings, agreements or representation by or between the Parties, written or oral, which may have related to the subject matter herein.

 

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7.9. Absence of Third-Party Beneficiary Rights. No provision of this Agreement is intended, nor will be interpreted, to provide or create any third-party beneficiary rights or any other rights of any kind in any client, customer, affiliate, equityholder, employee or partner of any Party hereto or any other Person.

 

7.10. Mutual Drafting. This Agreement is the mutual product of the Parties, and each provision hereof has been subject to the mutual consultation, negotiation and agreement of each of the Parties, and shall not be construed for entire or against any Party hereto.

 

7.11. Further Representations. Each Party to this Agreement acknowledges and represents that it has been represented by its own legal counsel in connection with the transaction contemplated by this Agreement, with the opportunity to seek advice as to its legal rights from such counsel.

 

7.12. Headings. The headings in this Agreement are intended solely for convenience of reference and shall be given no effect in the construction or interpretation of this Agreement.

 

7.13. Counterparts. This Agreement may be executed in two or more counterparts, each of which when executed and delivered shall be deemed an original and all of which, taken together, shall constitute the same agreement. This Agreement and any document required hereby may be executed by facsimile or email signature which shall be considered legally binding for all purposes.

 

7.14. Attorneys’ Fees. In the event that any dispute among the Parties should result in litigation, the prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of such prevailing party under or with respect to this Agreement, including without limitation, such reasonable fees and expenses of attorneys, which shall include, without limitation, all fees, costs and expenses of appeals.

 

7.15. Waiver of Jury Trial. THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A JURY TRIAL IN ANY AND ALL DISPUTES WHETHER ARISING HEREUNDER OR UNDER ANY OTHER AGREEMENTS, NOTES, PAPERS, INSTRUMENTS OR DOCUMENTS HERETOFORE OR HEREAFTER EXECUTED WHETHER SIMILAR OR DISSIMILAR.

 

7.16. Use of Certain Terms. As used in this Agreement, the words “herein,” “hereof,” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular section, subsection or other subdivision.

 

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, each Party hereto has caused this Stock Purchase Agreement to be duly executed effective as of the date first above written.

 

  BUYER:
   
  HUMBL, INC.
     
  By:  
    Brian Foote, CEO
     
  SELLER:
   
   
  Gustavo Moya Ortiz

 

[Signature Page to Stock Purchase Agreement]

 

 

 

 

EXHIBIT A

 

ASSIGNMENT OF SHARES

 

ASSIGNMENT OF COMMON STOCK SEPARATE FROM CERTIFICATE

 

FOR VALUE RECEIVED, Gustavo Moya Ortiz, does hereby sell, assign and transfer unto HUMBL, Inc., a Delaware corporation, forty-eight (48) Series A shares of Ixaya Business SA de CV, a Mexican corporation (the “Company”), standing in the undersigned’s name on the books of the Company, and does hereby irrevocably constitute and appoint the Company’s attorney to transfer said shares on the books of the Company with full power of substitution in the premises.

 

Effective as of March 3, 2022

 

   
  Gustavo Moya Ortiz

 

 

 

Exhibit 10.62

 

THE EXCHANGE CONTEMPLATED HEREIN IS INTENDED TO COMPORT WITH THE REQUIREMENTS OF SECTION 3(a)(9) OF THE SECURITIES ACT OF 1933, AS AMENDED.

 

EXCHANGE AGREEMENT

 

This Exchange Agreement (this “Agreement”) is entered into as of March __, 2022 (the “Effective Date”) by and between [_______], an individual (“Investor”), and HUMBL, Inc., a Delaware corporation (“Company”).

 

A. Company issued to Investor that certain Convertible Promissory Note in the original principal amount of $[______] on [________] (the “Note”).

 

B. Company and Investor desire to exchange (such exchange is referred to as the “Note Exchange”) the Note for [________] shares of Company’s common stock (the “Exchange Shares”) according to the terms and conditions of this Agreement.

 

C. The Note Exchange will consist of Investor surrendering the Note in exchange for the Exchange Shares.

 

D. Other than the surrender of the Note, no consideration of any kind whatsoever will be given by Investor to Company in connection with this Agreement.

 

E. Investor and Company now desire to exchange the Note for the Exchange Shares on the terms and conditions set forth herein.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1. Recitals and Definitions. Each of the parties hereto acknowledges and agrees that the recitals set forth above in this Agreement are true and accurate, are contractual in nature, and are hereby incorporated into and made a part of this Agreement.

 

2. Issuance of Shares. The Note Exchange will occur with Investor surrendering the Note to Company on the Effective Date and Company issuing the Exchange Shares to Investor.

 

3. Section 3(a)(9). The transaction contemplated hereby and all other documents associated with this transaction comport with the requirements of Section 3(a)(9) of the Securities Act of 1933, as amended. The Exchange Shares are being issued in substitution of and exchange for and not in satisfaction of the Note. The Exchange Shares shall not constitute a novation or satisfaction and accord of the Note.

 

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4. Company’s Representations, Warranties and Agreements. In order to induce Investor to enter into this Agreement, Company, for itself, and for its affiliates, successors and assigns, hereby acknowledges, represents, warrants and agrees as follows: (a) Company has full power and authority to enter into this Agreement and to incur and perform all obligations and covenants contained herein, all of which have been duly authorized by all proper and necessary action, (b) no consent, approval, filing or registration with or notice to any governmental authority is required as a condition to the validity of this Agreement or the performance of any of the obligations of Company hereunder, (c) the issuance of the Exchange Shares is duly authorized by all necessary corporate action and the Exchange Shares are validly issued, fully paid and non-assessable, free and clear of all taxes, liens, claims, pledges, mortgages, restrictions, obligations, security interests and encumbrances of any kind, nature and description, (d) Company has not received any consideration in any form whatsoever for entering into this Agreement, other than the surrender of the Note, (e) Company has taken no action which would give rise to any claim by any person for a brokerage commission, placement agent or finder’s fee or other similar payment by Company related to this Agreement, and (f) Company will include the Exchange Shares in the next amended Form S-1 registration statement it files with the SEC.

 

5. Investor’s Representations, Warranties and Agreements. In order to induce Company to enter into this Agreement, Investor, for himself, and for his affiliates, successors and assigns, hereby acknowledges, represents, warrants and agrees as follows: (a) Investor has full power and authority to enter into this Agreement and to incur and perform all obligations and covenants contained herein, all of which have been duly authorized by all proper and necessary action, (b) no consent, approval, filing or registration with or notice to any governmental authority is required as a condition to the validity of this Agreement or the performance of any of the obligations of Investor hereunder, and (c) Investor has taken no action which would give rise to any claim by any person for a brokerage commission, placement agent or finder’s fee or other similar payment by Company related to this Agreement.

 

6. Governing Law; Venue. This Agreement shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Agreement shall be governed by, the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware. Each party hereto hereby (i) consents to and expressly submits to the exclusive personal jurisdiction of any state or federal court sitting in San Diego County, California, (ii) expressly submits to the exclusive venue of any such court for the purposes hereof, and (iii) waives any claim of improper venue and any claim or objection that such courts are an inconvenient forum or any other claim, defense or objection to the bringing of any such proceeding in such jurisdiction or to any claim that such venue of the suit, action or proceeding is improper. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

7. Counterparts. This Agreement may be executed in any number of counterparts with the same effect as if all signing parties had signed the same document. All counterparts shall be construed together and constitute the same instrument. The exchange of copies of this Agreement and of signature pages using electronic signatures shall constitute effective execution and delivery of this Agreement as to the parties and may be used in lieu of the original Agreement for all purposes. Signatures of the parties transmitted by electronic transmission (including email) shall be deemed to be their original signatures for all purposes.

 

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8. Attorneys’ Fees. In the event of any action at law or in equity to enforce or interpret the terms of this Agreement, the parties agree that the prevailing party shall be awarded the full amount of the attorneys’ fees and expenses paid by such prevailing party in connection with the litigation and/or dispute without reduction or apportionment based upon the individual claims or defenses giving rise to the fees and expenses.

 

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

 

10. Entire Agreement. This Agreement supersedes all other prior oral or written agreements between Company, Investor, his affiliates and persons acting on his behalf with respect to the matters discussed herein, and this Agreement contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither Investor nor Company makes any representation, warranty, covenant or undertaking with respect to such matters.

 

11. Amendments. This Agreement may be amended, modified, or supplemented only by written agreement of the parties. No provision of this Agreement may be waived except in writing signed by the party against whom such waiver is sought to be enforced.

 

12. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns.

 

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

 

14. Further Assurances. Each party shall do and perform or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first set forth above.

 

  COMPANY:
   
  HUMBL, INC.
     
  By:  
    Jeffrey Hinsahw, COO
     
  INVESTOR:
     
  By:  
    [________], an individual

 

 

 

 

Exhibit 10.63

 

PROMISSORY NOTE

 

Effective Date: March 30, 2022 U.S. $1,500,000.00

 

FOR VALUE RECEIVED, HUMBL, Inc., a Delaware corporation (“Borrower”), promises to pay to Sartorii, LLC, a Delaware limited liability company, or its successors or assigns (“Lender”), $1,500,000.00 and any interest, fees, charges, and late fees accrued hereunder on the date that is thirty-six (36) months after the Purchase Price Date (the “Maturity Date”) in accordance with the terms set forth herein and to pay interest on the Outstanding Balance at the rate of four percent (4%) per annum simple interest from the Purchase Price Date until the same is paid in full. This Promissory Note (this “Note”) is issued and made effective as of March 30, 2022 (the “Effective Date”). This Note is issued pursuant to that certain Note Purchase Agreement dated March 30, 2022, as the same may be amended from time to time, by and between Borrower and Lender (the “Purchase Agreement”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.

 

1. Payment; Prepayment.

 

Payment. All payments owing hereunder shall be in lawful money of the United States of America, as provided for herein, and delivered to Lender at the address or bank account furnished to Borrower for that purpose. All payments shall be applied first to (a) costs of collection, if any, then to (b) fees and charges, if any, then to (c) accrued and unpaid interest, and thereafter, to (d) principal.

 

Prepayment. Notwithstanding the foregoing, Borrower shall have the right to prepay all or any portion of the Outstanding Balance before it is due without penalty.

 

 

 

 

Security. This Note is unsecured.

 

Defaults and Remedies.

 

Defaults. The following are events of default under this Note (each, an “Event of Default”): 2. Borrower fails to pay any principal, interest, fees, charges, or any other amount when due and payable hereunder; 3. a receiver, trustee or other similar official shall be appointed over Borrower or a material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed or discharged within sixty (60) days; 4. Borrower becomes insolvent or generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any; 5. Borrower makes a general assignment for the benefit of creditors; 6. Borrower files a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); 7. an involuntary bankruptcy proceeding is commenced or filed against Borrower; 8. any representation, warranty or other statement made or furnished by Borrower to Lender herein, in any Transaction Document, is false, incorrect, incomplete or misleading in any material respect when made or furnished; 9. the occurrence of a Fundamental Transaction without Lender’s prior written consent; 10. any money judgment, writ or similar process is entered or filed against Borrower or any subsidiary of Borrower or any of its property or other assets for more than $1,000,000.00, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) calendar days unless otherwise consented to by Lender; or 11. Borrower fails to observe or perform any covenant set forth in any Transaction Document.

 

Remedies. At any time and from time to time after Lender becomes aware of the occurrence of any Event of Default (so long as such Event of Default has not been cured by Borrower), Lender may accelerate this Note by written notice to Borrower, with the Outstanding Balance becoming immediately due and payable. Notwithstanding the foregoing, upon the occurrence of any Event of Default described in clauses (b), (c), (d), (e) or (f) of Section 3.1, the Outstanding Balance as of the date of acceleration shall become immediately and automatically due and payable, without any written notice required by Lender. At any time following the occurrence of any Event of Default, upon written notice given by Lender to Borrower, interest shall accrue on the Outstanding Balance beginning on the date the applicable Event of Default occurred at an interest rate equal to the lesser of eight (8%) per annum or the maximum rate permitted under applicable law (“Default Interest”). In connection with acceleration described herein, Lender need not provide, and Borrower hereby waives, any presentment, demand, protest or other notice of any kind, and Lender may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Lender at any time prior to payment hereunder and Lender shall have all rights as a holder of the Note until such time, if any, as Lender receives full payment pursuant to this Section 3.2. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

 

Unconditional Obligation; No Offset. Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset, deduction or counterclaim of any kind. Borrower hereby waives any rights of offset it now has or may have hereafter against Lender, its successors and assigns, and agrees to make the payments called for herein in accordance with the terms of this Note.

 

 

 

 

Waiver. No waiver of any provision of this Note shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.

 

Governing Law; Venue. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware. The provisions set forth in the Purchase Agreement to determine the proper venue for any disputes are incorporated herein by this reference.

 

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

 

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

 

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

 

Notices. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with the subsection of the Purchase Agreement titled “Notices.”

 

Liquidated Damages. Lender and Borrower agree that in the event Borrower fails to comply with any of the terms or provisions of this Note, Lender’s damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties’ inability to predict future interest rates, future share prices, future trading volumes and other relevant factors. Accordingly, Lender and Borrower agree that any fees, balance adjustments, Default Interest or other charges assessed under this Note are not penalties but instead are intended by the parties to be, and shall be deemed, liquidated damages.

 

Severability. If any part of this Note is construed to be in violation of any law, such part shall be modified to achieve the objective of Borrower and Lender to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect.

 

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

 

      BORROWER:
       
      HUMBL, Inc.
       
      By:  
        Jeffrey Hinshaw, CFO
         
ACKNOWLEDGED, ACCEPTED AND AGREED:
 
LENDER:
 
Sartorii, LLC
         
By:        
  Stephen Foote, Manager      

 

[Signature Page to Promissory Note]

 

 

 

 

ATTACHMENT 1

DEFINITIONS

 

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

 

Fundamental Transaction” means that (a) (i) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, consolidate or merge with or into (whether or not Borrower or any of its subsidiaries is the surviving corporation) any other person or entity, or (ii) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its respective properties or assets to any other person or entity, or (iii) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, allow any other person or entity to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of voting stock of Borrower (not including any shares of voting stock of Borrower held by the person or persons making or party to, or associated or affiliated with the persons or entities making or party to, such purchase, tender or exchange offer), or (iv) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other person or entity whereby such other person or entity acquires more than 50% of the outstanding shares of voting stock of Borrower (not including any shares of voting stock of Borrower held by the other persons or entities making or party to, or associated or affiliated with the other persons or entities making or party to, such stock or share purchase agreement or other business combination), or (v) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, reorganize, recapitalize or reclassify the Common Stock, other than an increase in the number of authorized shares of Borrower’s Common Stock, or (b) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding voting stock of Borrower.

 

Outstanding Balance” means as of any date of determination, the Purchase Price, as reduced or increased, as the case may be, pursuant to the terms hereof for payment, offset, or otherwise, accrued but unpaid interest, collection and enforcements costs (including attorneys’ fees) incurred by Lender, and any other fees or charges incurred under this Note.

 

Purchase Price” means $1,500,000.00.

 

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

 

[Remainder of page intentionally left blank]

 

 

 

 

Exhibit 10.64

 

AMENDMENT TO CONVERTIBLE PROMISSORY NOTE

 

This Amendment to Convertible Promissory Note (this “Amendment”) is entered into as of June 10, 2022, by and between Brighton Capital Partners, LLC, a Texas limited liability company (“Lender”), and HUMBL, Inc., a Delaware corporation (“Borrower”). Capitalized terms used herein but not otherwise defined shall have the meanings set forth in the Note (as defined below).

 

A. Borrower previously issued to Lender that certain Convertible Promissory Note dated April 14, 2021 in the principal amount of $3,300,000.00 (the “Note”).

 

B. Borrower has requested that Lender extend the Maturity Date of the Note and reduce the Floor Price.

 

C. Lender has agreed, subject to the terms, amendments, conditions and understandings expressed in this Amendment, to extend the Maturity Date and reduce the Floor Price.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

 

1. Recitals. Each of the parties hereto acknowledges and agrees that the recitals set forth above in this Amendment are true and accurate and are hereby incorporated into and made a part of this Amendment.

 

2. Extension. The Maturity Date is hereby extended until December 31, 2022.

 

3. Floor Price Reduction. The Floor Price is hereby reduced to $0.05.

 

4. Other Terms Unchanged. The Note, as amended by this Amendment, remains and continues in full force and effect, constitutes legal, valid, and binding obligations of each of the parties, and is in all respects agreed to, ratified, and confirmed. Any reference to the Note after the date of this Amendment is deemed to be a reference to the Note as amended by this Amendment. If there is a conflict between the terms of this Amendment and the Note, the terms of this Amendment shall control.

 

5. No Reliance. Lender acknowledges and agrees that neither Borrower nor any of its officers, directors, members, managers, equity holders, representatives or agents has made any representations or warranties to Lender or any of its agents, representatives, officers, directors, or employees except as expressly set forth in this Amendment and the Note and, in making its decision to enter into the transactions contemplated by this Amendment, Lender is not relying on any representation, warranty, covenant or promise of Borrower or its officers, directors, members, managers, equity holders, agents or representatives other than as set forth in this Amendment.

 

6. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument. The parties hereto confirm that any electronic copy of another party’s executed counterpart of this Amendment (or such party’s signature page thereof) will be deemed to be an executed original thereof.

 

7. Further Assurances. Each party shall do and perform or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Amendment and the consummation of the transactions contemplated hereby.

 

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IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date set forth above.

 

  LENDER:
   
  Brighton Capital Partners, LLC
     
  By:  
    Lucas Hales, Manager
     
  BORROWER:
   
  HUMBL, Inc.
     
  By:  
    Brian Foote, CEO

 

 

 

 

 

 

Exhibit 21.1

 

HUMBL, Inc.

List of Subsidiaries

 

Subsidiary   State or Jurisdiction of Incorporation   Percentage Owned  
Tickeri, Inc.   Delaware     100 %
Monster Creative, LLC   California     100 %
Ixaya Business SA de CV   Mexico     100 %

 

 

 

Exhibit 23.1

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We hereby consent to the incorporation in this Registration Statement on Form S-1 Amendment #7 of our report dated March 31, 2022, relating to the financial statements of HUMBL, Inc. as of December 31, 2021 and 2020, our report dated November 10, 2021 relating to the financial statements of Tickeri, Inc. for the period January 2, 2020 through December 31, 2020 and our report dated November 10, 2021 relating to the financial statements of Monster Creative, LLC for the years ended December 31, 2020 and 2019 and to all references to our firm included in this Registration Statement.

 

/S/ BF Borgers CPA PC

BF Borgers CPA PC

 

Certified Public Accountants

Lakewood, CO

July 20, 2022

 

 

 

 

Exhibit 107

 

CALCULATION OF REGISTRATION FEE

 

 

Title of each Class of
Securities to be Registered

 

 

 

 

Shares to be
Registered(1)

   Proposed Maximum
Aggregate Offering
Price Per Share
  

 

 

Maximum Aggregate
Offering Price(2)

  

 

 

 

Amount of
Registration Fee

 
Shares of Common Stock, par value $0.00001   101,157,466   $0.10    10,115,747    937.73 
Shares of Common Stock issuable upon exercise of warrants   114,275,000   $0.10    11,427,500    1,059.33 
Shares of Common Stock issuable upon conversion of Series B Preferred Stock   77,450,000   $0.10    7,745,000    717.96 
Shares of Common Stock issuable upon conversion of convertible notes   76,200,000   $0.10    7,620,000    706.38 
Total number of securities to be registered   369,082,466   $0.10    36,908,247    3,421.40 

 

  (1) Pursuant to Rule 416 under the Securities Act, this registration statement shall be deemed to cover additional securities (i) to be offered or issued in connection with any provision of any securities purported to be registered hereby pursuant to terms which provide for a change in the amount of securities being offered or issued to prevent dilution resulting from stock splits, stock dividends, or similar transactions and (ii) of the same class as the securities covered by this registration statement issued or issuable prior to completion of the distribution of the securities covered by this registration statement as a result of a split of, or a stock dividend on, the registered securities.
     
  (2) Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(o) promulgated under the Securities Act of 1933, as amended.